The grim picture that Argentina’s Q1 construction numbers paint

Argentina’s construction sector registered lost activity worth US$1.53 billion in the first quarter due to the paralysis of thousands of public work projects.

The decision by President Javier Milei to halt federal funding for public works as part of his austerity drive has exacerbated the sector’s crisis.

The Q1 figure represents a 19.7% year-on-year drop and it was the steepest decline among all sectors, according to national statistics bureau Indec. 

The construction sector had a negative impact of 0.65 percentage points on overall GDP, which contracted by 5.09%. 

In terms of employment, local construction chamber Camarco has repeatedly claimed that the freezing of public works have generated a loss of 100,000 direct jobs, and a large number of indirect jobs. 

At the end of March, private construction firms employed 391,637 workers, down 15.7% from a year ago, according to Indec.

Monthly construction inflation, which haunted firms before Milei took office in December, accelerated to 10.8% in May from 4% in April.

The sector’s y-o-y inflation was 263% last month and the figure for January-May was 54%.

Another pre-Milei issue that is hurting construction firms is delayed payments from the public sector.

Camarco president Gustavo Weiss said earlier this week that contractors are owed around US$439mn in terms of works certificates issued in the months before the current administration took office. 

So far, the government has said it will resume funding for projects that are close to completion and those that count with multilateral funding. This will cover less than 15% of the projects that were halted since December, according to public works secretary Luis Giovine.

This means that over 2,000 projects will be discontinued, while 914 will be transferred to the provinces, Giovine said on Tuesday at Camarco’s annual convention.

The latter are part of negotiations between provincial governments and the federal administration. There are however growing doubts about the scheme’s feasibility since provinces rely heavily on federal funding, which was cut by an average of 19% in January-April.