Construction inflation in Argentina trending down, but firms struggling to take advantage

Monthly construction inflation continued to decline in some parts of Argentina during March, although it is unlikely to benefit local infrastructure firms in the short term as activity in the sector has plunged as a consequence of the paralysis in public work projects.

In the case of Córdoba, March construction inflation reached 4.86%, well down on the 11.92% seen in February. Annual inflation last month was nearly 246%, according to the provincial statistics bureau. 

In Mendoza, local construction association Red Edificar reported that costs in the province rose 1.54% in March, down from 3.33% growth in February. While the organization did not report an annual figure, it underlined that cumulative inflation in the first quarter reached 13.2%, down from 19.3% in 1Q23. 

Meanwhile, the Greater Buenos Aires area, which encompasses the federal capital and 24 surrounding municipalities, saw monthly construction inflation accelerate to 8.1% from 6.4% in February.

This, however, is still lower than the 30.1% peak seen in December and is the second month in a row where monthly variation was below 10%, according to national statistics office Indec.

Annual inflation in Greater Buenos Aires was 264%, while the cumulative figure was 32.9%

The mass stoppage of public works projects, due to President Javier Milei’s austerity efforts, has led to a steep drop in activity for local infrastructure firms and plummeting sales of materials. 

Construction activity tumbled 24.6% year-on-year in February, and was down 23.1% in the first two months of the year. March figures have not yet been published.

Asphalt sales have been the worst hit, declining 64.9% year-on-year in February alone, as hundreds of roadworks projects have been halted due to lack of funding.

The only item that saw increased sales in February was paints, which inched up 2% year-on-year.

The situation prompted construction chamber Camarco to declare a nationwide emergency in February.

Camarco's Tucumán branch is drafting a PPP scheme that will be presented to the provincial government later this week, daily La Gaceta reported, adding that it will include housing projects, as well as suggestions for financing and tenders.

Even if the text is accepted by the provincial government, which could also introduce changes of its own, the scheme would also have to go through the local legislature to be implemented. 

Meanwhile in Neuquén province, the government is trying to obtain authorization to issue US$500mn in bonds, of which US$350mn would be used to reactivate public work projects.

Congress is scheduled to vote on the bill on Thursday, after being approved in committees, local daily Minuto Neuquén reported.

There are over 400 projects in Neuquén that are currently stopped due to lack of federal funding, according to governor Rolando Figueroa.