Carlos Herrera, Executive Director, ProInversión: Interview

Interview:  Carlos Herrera

What can be done to expand the government’s capacity to approve and evaluate new public-private partnership (PPP) schemes?

CARLOS HERRERA: In September 2015 the Ministry of Economy and Finance published Legislative Decree No. 1224, seeking to reform and simplify the current legal framework for PPPs. It includes the implementation of the “PPP multi-year investment report” that will contribute to a better control of long-term commitments, signalling the market about future priorities and budgetary capacity of the economy.

How is the government streamlining the permit processes for mining and energy projects?

HERRERA: Under President Ollanta Humala’s administration, Congress has granted powers to the cabinet to streamline the process of getting a permit and reduce waiting times for businesses. In the mining sector, these measures helped expedite the implementation of the environmental impact study (EIS), as well as the other authorisations required during the construction phase. There has also been greater involvement by the local government and rural communities, to coordinate social agreements surrounding these projects.

What policies can be implemented to incentivise mining companies to invest in additional downstream and value-added industries in Peru?

HERRERA: Until October 2015, the mining project portfolio was divided into four stages: exploration (39.61%), EIS approval (42.16%), extensions (16.33%) and EIS issuance (1.9%). It is important for the Peruvian economy to introduce a regulation that promotes the creation and development of downstream and value-added industries, including processing facilities for metal refining. There are at present only three processing plants here, located in Ilo, Cajamarquilla, and La Oroya. The state should also promote the establishment of the metal-mechanic industry to supply both local and regional markets, which are expanding due to the development of infrastructure projects and the real estate market. This will require a further strengthening of infrastructure to enhance competitiveness, and the implementation of an investment facilitation programme, in order to reduce bureaucratic barriers.

Given the slowdown in the mining sector and subsequent oversupply of power generation, what opportunities exist for exporting electricity?

HERRERA: The slowdown in the mining sector responds to the behaviour of a normal business cycle. To take advantage of electricity exports, we should develop an integrated plan that does not depend on the demand from the mining sector. For example, we must promote productive diversification based on our competitive advantages and leveraging from the FTAs signed by the government. In addition, in order to facilitate electricity exports, we need to break the barriers that prevent the electric integration with the countries that Peru has signed electrical integration agreements with, such as Brazil and Ecuador. These include differences between regulation within the countries, high initial costs and the differences in the electricity structure. That will require the evaluation and development of an appropriate regulation system and cooperation mechanisms.

How can private investors complement the Red Dorsal (Backbone Network) project?

HERRERA: To complement the Backbone Network, the state has been promoting the development of optical fibre projects in 21 regions. Four private companies have been granted eight projects covering eight regions. The awardees come from Spain, Israel, the US and Peru. We are also working on three projects in the Ica, Amazonas and Lima regions.