Argentine construction sector can't stop downward spiral

The Javier Milei administration has made a bad situation for Argentina's construction sector worse, BNamericas was told.

The sector has grappled with rampant inflation, but “Milei’s government hasn’t given signals that inflation can be reversed in the short or medium term. In fact, the country had inflation that will likely surpass 40% in January compared to December, which is reflected in our industry,” said Pablo Catalini, general coordinator of Mendoza-based trade group Red Edificar.

Last year inflation was 211%, according to statistics office Indec. Construction sector inflation in Greater Buenos Aires reached 223% and 355% in Mendoza, Red Edificar said. 

January inflation figures have not yet been released. Catalini said Red Edificar estimates that construction inflation for December and January reached 52%.

The scenario has led to lower spending by investors and consumers, Catalini said. Indec reported that construction activity fell 12.2% year-on-year and 8% month-on-month in December.

“The current government has caused a generalized price increase, but it hasn’t thought about improving workers' incomes yet,” Catalini said, referring to the devaluation of the peso.

Milei has also drastically cut public infrastructure investment, aiming to reduce public works to a minimum and let the private sector step in.

Catalini said a lot of private infrastructure investors were present in Mendoza, but a lack of mortgages has led to a reduced number of projects.

“On the other hand, the total paralysis of public works caused by the government has affected construction material sales and the activity of construction firms,” he added.

In December, asphalt sales plummeted 51% year-on-year, according to Indec. Milei took office on December 10.

Mendoza’s governor, Alfredo Cornejo, has pledged to sustain public works by using provincial funds, although they have also been affected by federal austerity.

“We are confident that our local construction chamber can push this forward and activate the industry, but from the get-go the federal decision to suspend public works is very harmful and paralyzes such a fundamental growth and development engine for any country,” Catalini said.

Construction chamber Camarco recently declared a national emergency due to the halting of public works, saying that the risk of mass layoffs was rising.