Peru makes “aggressive” push for fresh PPP investment — Castilla

Peru makes “aggressive” push for fresh PPP investment — Castilla

Peru Economy & Policy Corporate & Sovereign Strategy

Peru is working "aggressively" to attract private investment into education and healthcare infrastructure, the country's finance minister Luis Miguel Castilla, has told LatinFinance.

The push comes as the government attempts to rebalance the economy away from mineral exports, and secure long-term growth amid a changing economic cycle.

"We have a series of important PPPs in the pipeline in different sectors - transportation, energy, hydrocarbons, ports, roads - that we're in the middle of bidding," he told LatinFinance in an interview.

"Over the next 18 months, we should [put up for] bid at least $13 billion worth of projects in infrastructure. To this we must add a new area, where we're working quite aggressively, which is trying to attract private participation in healthcare and education infrastructure, and the maintenance of such infrastructure, in hospitals and schools."

Sustaining economic growth of around 6% per year despite a slowdown in emerging markets and a changing global monetary cycle is one of the priorities of Ollanta Humala's administration in its final two years, said Castilla. To do so, the country needs to keep foreign investment at high levels. As well as strong financial indicators - a fiscal surplus, low debt and high reserves - the government is trying to open the way for further investment, he told LatinFinance.

"[We're] trying to make it easier for permits and licensing, reducing red tape and bureaucratic obstacles, by simplifying the different processes that are rather costly for firms. Also we're trying to speed up the negotiation of treaties to avoid double taxation. To make sure we add that to our free trade agreements, and to our investment protection agreements as a third [aspect of the] toolkit so that we entice more investment."

The country is working on a double taxation agreement with Qatar, for example, after the Middle Eastern state's investment fund expressed interest in investing in Peru's ports, he said.

Castilla conceded that bidding for infrastructure projects is often delayed, but insisted that this was a result of their increasing size and complexity.

"Before, Peru's average amount of projects was $300m to $500m. Now you're adding an extra zero to that," he said, pointing to the second line of Lima's metro, a project of around $5bn, which is set to be bid for at the end of March.

"So getting the right contracts, where risks are properly allocated between the private sector and the public sector is not an easy task."

He added that the finance ministry had established a "delivery unit", to monitor projects and help if issues arise in the execution phase.

"Perhaps we're doing more projects - that's why there's a sensation of delay, but we're looking at the picture with a horizon of what's going to be achieved by the end of the government. By year-end we'll have bid and granted concessions for projects of close to $13bn. This is a huge amount." LF

See also: Peru Infrastructure - Stop and go