The underlying political and social current has shifted towards more populist agendas pushing infrastructure onto centre stage.
At the start of 2016, we predicted that political and social uncertainty would rise. Having witnessed Brexit, the recent US election results, the fallout of the Operation Carwash scandal in Brazil and countless other ‘unexpected’ events, it seems we (like many), may have understated the impact.
What is clear is that the underlying current has shifted towards more populist agendas. And that has pushed infrastructure onto centre stage as a form of policy mitigation. Donald Trump is not the only politician to have offered voters a ‘path to greatness’ through infrastructure renewal; governments from Colombia to Canada are also staking their reputations on infrastructure. In many markets, infrastructure is being discussed in the same way it was during the Great Depression. And in Asia, it is being lauded as the path to sustainable prosperity. China has long viewed infrastructure as a panacea to social upheaval (as evidenced by the One Belt One Road project); Vietnam and Myanmar are starting to follow in the same footsteps.
This shift towards populist agendas underpinned by infrastructure will lead to three key ‘sub’ trends.
The first is obvious: infrastructure budgets should swell. However, we expect many projects will be funded on a taxpayer-pay basis and, as a result, it seems almost certain that public deficits will rise.
The second sub-trend is one of protectionism. One can assume that part of the draw of infrastructure is the potential to create local jobs. For various reasons it is unlikely that the US will want to rely on foreign workers and developers as they strive to ‘make America great again’. From concerns about loss of control and national security through to impacts on local labour and consumer protection, various ‘reasons’ will be offered for closing borders to international players. In most markets, the chances of a regulatory ‘sideswipe’ that harms international developers and operators will rise.