Álvaro Quijandría, Executive Director, ProInversión: Interview

Interview: Álvaro Quijandría

What types of infrastructure projects are being given priority in the coming years?

ALVARO VQUIJANDRÍA: The pipeline of projects for 2017-18 includes 39 projects, costing approximately $4.43bn in 2017 and an additional $10.3bn in 2018. These are investments that have either high or medium potential to be completed without facing significant challenges. The bulk of projects in 2017 will be concentrated in the transport and energy sectors. In transport, the main projects will be section four of the Andean Longitudinal Road, the Amazon Waterway, the railroad connecting Huancayo and Huancavelica, and the construction of a port terminal in the south of the country. In energy, investments will focus on increasing coverage and strengthening the system through new transmission lines, as well as the Mantaro and Nueva Yanango link lines, which could draw investments worth $500m.

The most important project of the year will be the Michiquillay deposit in Cajamarca, which will allow Peru to increase its copper production significantly. This undertaking is a public initiative through an international tender. If the project concession is awarded during the last quarter of 2017, production could begin as early as 2020 or 2021, at a time when commodity prices are expected to reach levels similar to those prior to 2013. The investments needed to develop such projects are estimated at approximately $2bn. Once additional exploration is conducted, this amount could increase further.

In telecoms, the goal is to increase the country’s broadband coverage via a $250m project in the Amazonas, Ica and Lima regions. In 2018 investments could total $10.3bn if the Lima Metro Line 3 project is included, which is expected to be awarded by the end of 2018, requiring $6bn in investment. Furthermore, there is a plan to build a network of suburban lines that would connect with the metro. Regarding water projects, a $600m project to transfer water resources to Lima’s basin in order to overcome the capital’s water scarcity is also expected to be awarded in 2018.

In transport, the two main projects will be the construction of a second lane for the Sierra Road Concession, a 400-km road in the region of Ancash. In Lima, the Peripheral Ring Road project, which will require estimated investments of $2bn, will enhance connectivity between the airport and other parts of the city. In the health sector, there are plans to build three hospitals in Piura, Chimbote and Lima. If successful, these projects could open the door to more investments in infrastructure and health. In energy, the South Peruvian Gas Pipeline will be tendered, and the Virtual Pipeline project will be awarded with the intention of enabling the mass use of gas.

What role is the private sector expected to play in bridging the infrastructure gap?

QUIJANDRÍA: It is worth noting that the goal of President Pedro Pablo Kuczynski’s administration is to bridge the infrastructure gap by half by 2021 through public-private partnerships (PPPs), as well as through public investment. The idea is to use the PPP scheme to alleviate the government’s development task. Furthermore, there are a number of projects under the Works for Taxes programme, which allows a private company, individually or in a consortium, to fund and implement public projects chosen by regional and local governments, and then to later recover the total amount of investment from its third-category income tax. In turn, regional and local governments pay funding, interest free, on account of canon and over-canon resources, and royalties.

We expect investments under the Works for Taxes scheme to reach a total of $770m between 2017 and 2018. This amount could increase considering that investments made under this programme are yet to reach the ceiling that has been imposed by regional governments such as in Cusco, Arequipa and Piura.