Global Build-Out Presents Emerging Market Infrastructure Opportunities

by Dave

 Seeking Alpha

Goldman Sachs, in a recent report, estimates the aggregate gap between the BRICs and the G6 in electricity, telecoms, and rails as approximately $10 trillion. This is more than twice the BRIC’s current GDP, and the closing of this gap could last 25 years. The four countries are similar only in their need for increased infrastructure spending. Using World Bank data, India appears to be the least developed, lagging the other three in mobile phones, per capita electricity consumption, and access to sanitation facilities.

In addition to the immense need for increased spending, companies within the sector can rely on a portion of their revenues even during harsh economic times. Since a portion of government spending must be budgeted to maintain sanitation and transportation network, the infrastructure space is somewhat insulated from economic volatility. High barriers to entry and often nationalistic favoritism to domestic companies help to argue the case for investment.

Brazil’s build out to host the World Cup in 2014 and the Olympics in 2016 could still drive significant gains in the sector within the country. Thus far, bottlenecks and poor planning have plagued the country’s hopes to be ready. Of the estimated $20.9 billion needed in infrastructure spending, only about $3.3 billion has been invested as of April 2011. To help with the drive, the government has begun a process of privatization for three of the 66 state-owned airports. The three airports: Sao Paulo, Campinas, and Brasilia account for approximately 43% of the estimated airport infrastructure spending needed.

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