Peru - Country Commercial Guide
Infrastructure Development
Last published date: 2020-10-11

Overview

In 2019, the Peru launched a National Infrastructure Plan (PNIC), highlighting a $104 billion need over the next 20 years to bridge Peru’s long-term infrastructure gap.  The GOP has prioritized 52 infrastructure projects totaling $28.5 billion with a goal for completion by 2025, two thirds of which are in the transportation and communications sectors.  These include clearing the Amazon Waterway, building a ring road around the Lima metropolitan area, expanding Jorge Chavez International Airport, improving broadband access in the Piura region, and enhancing irrigation systems in the La Libertad region.

 

Long-Term Infrastructure Gap (Billions USD)

        Long-Term Infrastructure Gap (Billions USD)

Regulatory hurdles, land access constraints, and weak government capacity slow the implementation of projects, raising questions about whether the GOP will meet its goals for 2025.  Furthermore, the COVID-19 crisis has slowed, if not frozen, progress on many infrastructure projects.  Even in normal times, half-finished infrastructure projects are a common sight in Peru.  Given the potential for degradation of work already completed, relocation of machinery and labor, exposure to bureaucratic and legal processes, and bankruptcy of private contractors, even a temporary halt increases the chances of mid-construction abandonment.

The GOP has three tools it would like to use in the coming decade to close the infrastructure gap.  Outlined in the National Competitiveness and Productivity Plan (PNCP), these are: 1. Building Information Modeling (BIM): The model takes raw data and turns it into important, actionable information, which can help deliver value during each stage of the construction process.  It can predict potential outcomes of various processes during development.  This foresight makes construction safer and more reliable; 2. New Engineering Contract (NEC): This model guides the process for preparing construction projects for concession or management; 3. Project Management Office (PMO).  This model helps to ensure that procedures, practices, and operations are executed properly, on budget, and on time.

The different ministries and agencies within the public sector have also been looking at ways to expand the use of the Taxes for Public Works (Obras por Impuestos - OxI) mechanism for health services.  Of the 402 OxI projects executed since 2009, only twelve have been for health services, including child welfare, tele-health and hospitals.  Antamina has signed two OxI agreements, one in 2016 and another in 2018, with the Health Ministry for construction of hospitals.  The investment promotion agency, ProInversión, has on its docket two hospitals for the Social Security Institute (EsSalud), one in Ancash and the other in Piura.  The two hospitals will be built through public-private projects, requiring $254 million in investment and a 17-month management contract.  ProInversión also has two other hospitals in the works, both in Lima, but details are incomplete.  Those projects are now under review, because EsSalud, as an autonomous government agency, has incurred additional costs as a result of the pandemic, while also losing revenue because workers and their employers have not contributed as forecast.

In 2018, public investment projects to close infrastructure gaps in transportation and communication totaled $4.3 billion; 88 percent of this was invested in roads, followed by telecommunications (5 percent) and road works (3.7 percent).  Meanwhile, private investment commitments in Peru’s transportation sector totaled $15.2 billion.  Notably, investment in railroads increased by 25.8 percent from the year before with the expansion of the Lima metro, whose second line is scheduled to open in 2021.

Peru Paved and Unpaved Roads Chart
Peru Paved and Unpaved Roads

In 2018, the latest year figures are available for, the transportation, storage, mail, and messaging sector accounted for 5.6 percent of Peru’s GDP, while the telecommunications and other information services sector accounted for 4.5 percent.  These represent annual increases of five percent and six percent, respectively.  In 2018, Peru had 175,053 km (108,773 mi) of national, regional, and local roads, representing an increase of 1,708 km (1,061 mi) from 2017.  Peru also registered 128 airfields, 90 ports, and eight active railroad lines covering 1,940 km.  

A Public-Private Partnership (PPP) allows for the participation of private investors in public infrastructure projects and/or services derived from them, either in the construction, operation and maintenance stages of a project or only in the operation and maintenance of existing infrastructure.  Under Peruvian law, the types of PPPs include concession contracts, account participation, contracts for management, shared risk contracts, specialization contracts, joint ventures in addition to other contractual modalities allowed under Peruvian law.   

In the PPP process, the government maintains property rights to the project infrastructure, including any new facilities built by the private investor. At the end of the contract, the property is transferred to the government. A full listing of PPP projects can be viewed at the Peruvian Private Investment Promotion Agency’s (Proinversion) website. Additionally, many governments finance public works projects through borrowing from the Multilateral Development Banks. Please refer to “Project Financing” Section in “Trade and Project Financing” for more information. According to ProInversión, the U.S. represented 3.4 percent of FDI in the transportation sector and less than one percent of FDI in the communications sector in 2019.  Some relevant public-private partnership projects and sectors follow. 

ProInversión Private-Public Partnership Project Portfolio (2020–2021)

Sector

Project

Est. Award Date

Est. Investment

Transportation

Construction of ring road in Lima

Q3/Q4 2021

$2 billion

 

Rehabilitation of the Longitudinal de la Sierra road

Q1/Q2 2021

$464 million

Sanitation

Drinking water supply system for Lima

Q3 2020

$720 million

 

Water treatment plant in Huancayo, Tambo and Chilca

Q2 2021

$90 million

Health

Construction of hospital in Piura

Q1 2021

$144 million

 

Construction of hospitalin Chimbote

Q1 2021

$110 million

Energy

Hydraulic-Mining project in El Algarrobo

Q4 2020

$350 million

 

Expanding use of natural gas in southern Peru

Q2 2021

$100 million

Communications

Radio frequency bands AWS-3 and 2.3 GHz

Q1/Q2 2021

$291 million

 

Transmission line between Piura and Nueva Frontera

Q4 2020

$164 million

Education

Intervention in at-risk schools in Metropolitan Lima

Q1 2021

$227 million

 

Intervention in at-risk schools in Ate and S. Juan Lurigancho

Q1 2021

$148 million

There are 30 telecommunications companies that transmit telephone, internet, and television signals through Peru’s fiber optic network, which spans 13,500 km (3,883 mi).  A further 1,096 entities offer public telecommunications services, representing a seven percent increase from 2009.  Cellphone subscriptions have increased by 33.1 percent in the past five years, while landline internet subscriptions have increased by 45.7 percent. 

Water and waste water treatment is another relevant sub-sector.  According to the National Sanitation Plan for the years 2017- 2021, Peru has the goal to achieve 100 percent of Potable Water Service in urban areas in the year 2021 and 100 percent in rural areas in 2030.  The GOP finances investments in drinking water, sewerage, and wastewater treatment, through transfers (subsidies) to Regional Governments.  Also, the Ministry of Housing Construction and Sanitation uses OxI as a system to attract private investment in water infrastructure as well as PPPs.  The Ministry of Housing is promoting a project portfolio in drinking water, sewerage, and wastewater treatment for more than $3 billion to benefit 20 percent of the Peruvian population.  The main projects will be developed through a PPP and includes design, construction, operation, and maintenance.  Under the framework of the Emergency Decree No. 011-2020, the Ministry of Housing Construction and Sanitation has diversified the mechanisms for the supply of drinking water and wastewater treatment.  The Emergency Decree allows private water providers to supply surface, underground or desalinated water to the Regional Governments in benefit of the population.

Key Industry Events

Excon: hosted by the Peruvian Chamber of Construction (CAPECO).

2020 edition postponed, 2021 TBD

Expo Agua: Main water expo in Peru organized by Water Competency Center

jorge.prado@trade.gov.

Sept. – Oct. 2020 virtual edition, 2021 TBD, Lima, Peru

Web Resources

Business Monitor International Research

Ministerio de Vivienda, Construccion y Saneamiento

National Institute of Statistics and Informatics— INEI (Spanish)

Obras por Impuestos

ProInversión

CAPECO