Flooding in 2017 spurs further investment in Peru's transport infrastructure

Damage caused by severe flooding in the first half of 2017 is being used as an opportunity by the government of President Pedro Pablo Kuczynski to improve infrastructure in Peru. The government has unveiled a three-year, $9bn plan known as Reconstruction with Change (Reconstrucción con Cambio, RCC) to rebuild infrastructure and re-energise the economy. In April 2017 Congress approved the framework for the RCC, having added several clauses, including an insistence on tighter anti-corruption and resolution clauses in works contracts, and stricter oversight by the comptroller general’s office, which will assign 250 auditors to the scheme. With congressional approval of the RCC framework secured, the budgeting for the plan can now be completed. The final plan is due by July 2017 and will also require congressional approval.

According To Plan

The RCC scheme, worth around 5% of GDP, will be administered by a new RCC Authority, which is to be led by Pablo Alfredo de la Flor Belaunde. De la Flor was chief executive of Banco de Créditor and has served as a minister under previous presidents. Of the $9bn estimated cost of the plan, approximately one-third will be allocated to immediate repair needs, which corresponds to the government’s $3bn estimate for flood damage. Another two-thirds is to be put towards strengthening, and in some cases relocating, infrastructure so as to better prepare Peru against the growing challenges of climate change. The government has made clear that re-building will not be permitted in zones deemed unsafe, or where risk cannot be mitigated and that standards for working conditions will apply equally to private and public construction work.

In many ways, the RCC dovetails with Kuczynski’s pledge during 2016 election campaign to overhaul Peru’s national infrastructure. The plan of his government included the goal of paving the country’s entire 26,702-km road network by 2021. To date, Peru has paved 19,898 km, or 75% of the total. The plan also aims to build 1000 bridges in the same period, as well as upgrade ports and provincial airports. Upon taking office, Prime Minister Fernando Zavala pledged to eliminate the bureaucratic obstacles that have delayed $18bn worth of infrastructure projects within six months, including Line 2 of the Lima Metro and expansion of Lima’s Jorge Chávez International Airport.

Project Delays

These pledges, however, were thrown off balance by the breaking of the Odebrecht scandal in late 2016, when it emerged that the Brazilian construction firm had made $29bn in irregular payments to officials in three successive governments in Peru during the period from 2001 to 2015 to secure major works contracts. Cancelled or delayed projects include the consortium for Gasoducto Sur Peruano and the Ruta del Sol 2 Highway. In addition, the reconstruction task in the wake of the floods is substantial.

According to May 2017 report released by the National Institute for Civil Defence, the flooding affected over 1m people. Over 17,765 homes collapsed, 205,640 were damaged and 16,093 have been deemed uninhabitable. More than 2000 schools are in need of serious repairs or must be rebuilt altogether, while 675 bridges have been damaged and/or collapsed, placing greater stress on national transport networks. Addressing Congress in May 2017, Martín Vizcarra, then minister of transport and communications and current vice-president, put the total cost of required repairs to roads and bridges at PEN7.7bn ($2.3bn) over four years. He further broke the figure down to PEN1.2bn ($355.7m) for 2017, rising to PEN3.1bn ($918.8m) in 2018, PEN2.7bn ($800.3m) in 2019 and PEN748m ($221.7m) in 2020. The Ministry of Transport and Communications (Ministerio de Transportes y Comunicaciones, MTC) is aiming to repair 464 km of national highways and 64 bridges by the end of 2017. Vizcarra also said that in 2018 the target is to repair 284 bridges, followed by 265 bridges in 2019. Indicative of the priority, the 2017 budget for bridges alone is set at PEN3.7bn ($1.1bn). The budget for road repairs is an estimated PEN2.9bn ($859.6m), of which PEN582m ($172.5m) will go towards the Ancash region in northern Peru and PEN576m ($170.7m) to Lima, the two regions with the most roads damage. Vizcarra also said that by 2020 the MTC aims to repair or restore 2138 km of roads, of which 398.5 km are in Lima Province. According to the Lima Chamber of Commerce (La Cámara de Comercio de Lima, CCL), 95% of Peru’s cargo moves by roads, underlining the urgency of the task. A 2016 report from the Association for the Development of National Infrastructure estimated the national transport infrastructure deficit to reach $57.5bn by 2025. Of this, it calculated that 55.4% corresponded to roads, 29.5% to rail, 10.9% to ports and 4.1% to airports. In the World Economic Forum’s “Global Competitiveness Report 2016-17”, the quality of Peru’s overall infrastructure was characterised as stagnant, with little or no progress in the ranking of its road, port and air infrastructure. Nevertheless, it is worth mentioning that Peru ranked 67th out of 138 countries in the same report.

Working Together

Peru’s long-standing infrastructure challenges are not new, and are common to many fast-growing emerging economies. Such was the pace of Peru’s boom in the decade up to 2013 that the country’s infrastructure became overloaded. The challenge for the Peruvian government is less one of financing than of capacity, and the public sector is not capable of efficiently delivering everything that the country needs. The consensus is that public-private partnerships (PPPs) are thus the most practical and efficient method to bridge the infrastructure gap.

A May 2017 World Bank report emphasised that PPPs are vital to improving infrastructure quality in Latin America. Jorge Familiar, vice-president of the World Bank for Latin America and the Caribbean, noted, “Combining public and private capital and taking advantage of the efficiency and innovation of the private sector can make a huge difference. When well designed, PPPs bring greater efficiency and sustainability to public services. As the region emerges from six years of economic slowdown, PPPs can help it boost infrastructure investments and strengthen the momentum for growth.”

The report also noted that Peru, along with Colombia, has recently made “significant innovations” in its PPP framework, increasing its appeal for private sector financing. It also made the point that the transport sector is particularly suited to PPPs, due to the presence of economies of scale, the possibility of charging fees and the possibility of enforcing quality of service.

In its investment portfolio report for the 2016-21 period, the CCL identified a potential $22.56bn in transport investment pledges. It has urged the government to accelerate a number of existing schemes and continue working to promote further investment.

Cost Competitive

The cost of moving goods is competitive in Peru when compared to other countries in the region. The country’s geography has helped enable relatively low logistic costs, and the main port at Callao is located on the coast and near Lima, the country’s capital and economic centre. The port of Callao handles an estimated 71% of Peru’s total public cargo, according to figures from the National Port Authority ( Autoridad Portuaria Nacional, APN). Javier Lancha, general manager of APM Terminals Callao, told OBG, “The port of Callao is the largest natural port in western South America, and has the potential to be the best in the same region.” According to the most recent available World Bank data, shipping an outbound container cost $890 in 2014, compared to an average of $1287 in Latin American and Caribbean countries and $1070 in OECD countries. However, importing that same container into Peru cost $1010, lower than the average $1666 in Latin American and Caribbean countries and slightly less than OECD average of $1111. In the World Bank’s “Doing Business 2017” report, Peru ranked 86th out of 190 nations for the ease of cross-border trade, the same position it held in the 2016 report.

The government established a commission to evaluate port operations at Callao and determine how to improve them. Among other achievements, the MTC finalised the construction of the Gambetta tunnel, a 960-metre underground road that will be fully open to transit in June 2017 and is expected to alleviate in and outbound traffic from the port significantly. Additionally, local press reported in September 2016 that plans to build an elevated viaduct over the tunnel are under way, with the goal of separating truck and light vehicle transit. In sum, Peruvian logistics remain more competitive than some of its immediate neighbours.

Ground Links

Linking port areas with the country’s hinterland can also be difficult. Proper road expansion has traditionally faced challenges due to the difficult jungle and mountainous terrain. As of May 2017, 16 out of 31 signed transport infrastructure concession deals were for road development and renovation. These received $3.6bn in investment out of a total committed amount of $4.8bn in both public and private capital. One of the region’s most strategic road links, the Pan-American Highway, links Peru’s seafront cities to major seaports. The highway is divided between its northern and southern sections, which then connect to the rest of the country through 20 logistics corridors. These corridors comprise over 25,700 km of road links, according to statistics from the state investment promotion agency ProInversión.

Overall, Peru’s coastal highway extends for 2635 km from north to south, and its operation has been divided into five different private concession contracts. Additionally, two remaining sections of the Pan-American Highway are expected to be tendered soon. A private proposal to revamp and manage the section of road between Ica, Nazca and Quilca had been presented to the MTC. The government is also considering a proposed private initiative for the northern section of the Pan-American Highway to revamp and operate the section from Sullana to Tumbes and the border with Ecuador. Both of these proposals are self-sufficient, which means that the projects do not require any amount of state financing. Transport authorities are still evaluating these proposals, but they are expected to give their consent to a declaration of interest. In accordance with the private initiative procedures, the declarations of interest will be published with the purpose of allowing interested third parties to submit their proposals related to the project.

Linking Up

Partly financed by the Inter-American Development Bank (IDB), the Initiative for the Integration of Regional Infrastructure of South America (Iniciativa para la Integración de la Infraestructura Regional Suramericana, IIRSA) has channelled funds and expertise into the development of continental road projects to link Peru and neighbouring Brazil. Under the scheme, which was launched in 2000, Peru has been building three inter-oceanic roads: IIRSA Norte, IIRSA Centro and IIRSA Sur. These roads will link the country’s Pacific Ocean ports to Brazil and, eventually, the Atlantic Ocean. The contract to construct and operate both the north and south highway links had been awarded to Odebrecht, which the company still owns. IIRSA Norte is a 955-km highway linking the port of Paita and Bayóvar to the river port city of Yurimaguas in the Loreto region, which has access to Brazil via the Amazon River. The IIRSA Sur Highway, meanwhile, links the Peruvian coastal areas of San Juan de Marcona, Matarani and Puerto Ilo all the way to Iñapari, on the Brazilian border. The route then continues to the Atlantic ports of Santos and Paranguá, on the Brazilian coast.

Disagreements between the concession holder and transport authorities in one of these corridors, IIRSA Centro, led to delays in previous years in much needed revamp work along one of the country’s most strategic road axis, the Carretera Central. However, all projects were halted after Odebrecht scandal was made public in 2016. In May 2017 the Brazilian company was assessing the possibility of selling its stakes in the IIRSA Norte and Sur concessions (see Construction chapter).

Serving as a central link between Lima and the Peruvian hinterland, Carretera Central is the country’s most crowded thoroughfare. The contract to improve and operate this section of road, included within section two of IIRSA Centro, was attributed to the Colombia-based Deviandes consortium in 2010. However, disagreements over the financing and design of the initial contract led to a four-year stoppage of rehabilitation work that is expected to cost over $100m. In 2015 the project was unblocked after amendments to the initial contract, which led to a re-start of renovation work. Another strategic project in terms of road development is the rehabilitation of the Longitudinal de la Sierra Highway, which connects the interior to the north and south of the country. Work on the 3503-km development has been divided into five sections. Section one will be undertaken as public works projects managed by the MTC, while section two was awarded to a consortium formed by Spain’s Sacyr Concesiones and Constructora Malaga Hnos. The remaining three sections are to be constructed as PPP concession deals, and tenders should be awarded by the end of 2017.

New Investments

According to October 2015 figures from the APN, Peruvian public ports have attracted around $1.2bn in investments between 2000 and 2015, while an additional $650m has been injected into private ports in the past seven years. According to the APN, the San Martín General Port Terminal will receive the largest investment, estimated at $12.1m, followed by the Chancay Port Terminal, with investments totalling $95.5m. The port of Callao, through its Northern and Southern Dock Terminals, will also receive $33.7m. Finally, $7.5m have been allocated to the Paita Port in northern Peru. Furthermore, the sector is expected to receive more than $148m in investments in 2017 alone, directed at improving infrastructure and port equipment in ports across the country.

Annual APN figures for 2016 show a 7.4% increase in the total moved cargo through the country’s public ports to 2.3m twenty-foot-equivalent units (TEUs), in comparison with 2015. Containerised cargo, meanwhile, saw a 4.4% increase over the same period. In 2016 the public ports’ network moved a total of 44.2m tonnes of cargo, compared to 42.3m tonnes in 2015. The biggest port in the country, the port of Callao, is divided between three private concession holders. APM Terminals manages the port’s northern area, while the southern area is managed by Dubai Ports World. The third concession holder is Mineral Concentrate Terminal, managed by Consorcio Transportadora Callao. Overall, the country’s most important facility handled 1.99m TEUs in 2014, according to industry news site Lloyd’s List, representing growth of 7.4% on 2013. However, Lloyd’s List reported a fall of 4.5% in throughput in 2015, to 1.90m TEUs. This reflected the weaker economic performances of China, the US and Latin America, which weighed on international trade flows.

Investment is flowing into regional ports as well. In the southern city of Pisco a renovation project is revamping the infrastructure and expanding the capacity of the Port of General San Martín. The Paracas consortium won the tender in April 2014 and is working on a new port terminal. Total investment is expected to reach $215m, with a concession period of 30 years. “The project is divided into four phases. The first one is mandatory and the other three are dependent on increases in traffic. The concessionaire will finance the whole of phase one and the infrastructure component of the next phases,” Ricardo Guimaray Hernández, director of planning and economic studies at APN, told OBG.

Other private sector initiatives are set to greatly impact port infrastructure. The project to renovate and expand the Port of Salaverry has attracted attention, since the Consorcio Transportadora Salaverry first launched a private sector proposal in 2012 to renovate and manage the facility for 30 years. A competing proposal was subsequently launched by Andino Investment Holding. An additional private sector proposal to construct a container terminal in Chimbote, the largest city in the Ancash region, was also received by transport The plan envisions building a 250-metre quay and the rehabilitation of 10.5 ha of handling space. Another private proposal from 2015 aims to establish a multipurpose terminal in the southern port of Ilo, with the 30-year concession deal involving revamping and operation of the port. Transport authorities are still examining these proposals.

Greater Integration

In addition to expanding regional ports, the authorities are assessing the benefits that could come from scaling up the integration of port activities around Callao. Callao is the best natural port in western South America, but it is stretched to capacity, with cargo queuing for 12-15 hours for entry.

A proposed Callao Port Logistics Activity Area aims to solve a number of these difficulties. To be built on 39 ha of government-owned land, the new facility would include a logistics area, a pre-docking space for trucks, an inspection zone and an administrative building for private and public bodies. The scheme aims to attract a private investor to develop and manage the logistics area, which will be located approximately 2 km from the Port of Callao and 1 km from Jorge Chávez International Airport. ProInversión has estimated a necessary investment of $186m, in conjunction with a 30-year concession deal. Since the land belongs to the Peruvian Navy, the winner of the contract will be required to relocate some navy buildings and pay a fee for using the land. The scheme is still under consideration.

Traffic congestion is not the only hurdle affecting transport costs. A number of industry players have cited another substantial challenge for the international logistics sector working in Peru – the range of bureaucratic procedures involved with passing through the port of Callao, especially where exports are concerned. The inspection procedure for goods often causes cargo companies to prolong their operational timelines, resulting in substantial cost increases.

Taking Off

Sustained economic growth in recent years has led to an increase in both domestic and international air travellers. Air transport is progressively opening up throughout the region, with the number of regional flights and routes also increasing. Traditional tourist destinations are also seeing an increase in domestic non-tourist passengers. Between 2009 and 2016, the number of domestic passengers increased from 4.3m to 10.9m, according to the MTC. First quarter figures for 2017 indicate a 5% year-on-year increase. The Ministry of Foreign Trade and Tourism (Ministerio de Comercio Exterior y Turismo, MCET) estimates that internal tourism will increase by 10% in 2017.

The launch in May 2017 of low-cost carrier Viva Air Perú, a subsidiary of VivaColombia, is expected to propel domestic passenger growth. The airline, which will operate nine different domestic routes initially, with two additional routes being added in 2018, aims to carry 700,000 passengers in its first year and expects number of air passengers in Peru could rise by 40% in that period. William Shaw, CEO of VivaColombia, told local press that Viva Air Perú’s arrival is expected to result in a 50-70% price reduction in flight costs in Peru.

In order to support this growth, a number of infrastructure projects currently in progress are helping to improve capacity at the country’s airports. The capital’s Jorge Chávez International Airport, which receives nearly all of international air traffic into Peru, is undergoing an $850m revamp, which includes a new terminal and runway. Expansion work for the runways and terminals at airports in the cities of Pisco, Tacna, Arequipa and Ayacucho are also under way. Carlos Gutiérrez Laguna, general manager of the Association of International Air Transport Companies, told OBG that the urgency of the expansion works at the Jorge Chávez International Airport, which handled 19m passengers in 2016, is well above its capacity of 10m, and he stressed the need for a new terminal as soon as possible.

In terms of the ambition to consolidate Lima’s airport as a regional hub, he warned that it risks losing traffic to competing airports in Panama City and Bogotá unless it meets its growth challenges soon. For example, he noted that there is not enough capacity to host larger, new aircraft now being used for long haul, and there is also a need for more and larger airport aprons to this end. He told OBG, “Peru’s problem is a growth problem.” The country, having expanded so rapidly in recent years, is now at a crossroads, and the current government needs to take some big decisions to ensure a positive and sustainable outcome moving forward, he added.

New Hub

The long-planned construction of new airport at Chinchero, in the city of Cusco, will eventually allow for another international air transport link into Peru. The project has had some problems, meaning that its completion has been pushed back towards the end of the decade. In May 2017 Vizcarra, the former transport and communications minister, announced that the government had decided to cancel the $520m contract awarded in 2014 to local consortium Kuntur Wasi for the construction of an airport in Chinchero, amid financing and contractual difficulties. President Kuczynski later told local press that the planned airport would go ahead, but under a new contract, and that the project would suffer only minimal delay. Vizcarra, who had attempted to resolve the difficulties with the project, subsequently resigned as transport minister, remaining on as first vice-president, from which position he intends to lead the government’s strategic plans for the development of Peru’s regions.

Aside from revamping smaller airport facilities, government support for more isolated communities is also promoting the use of air transport. In July 2015 the MTC started subsidising plane tickets from the Amazonian city of Iquitos to the more isolated communities of Caballococha, Guepi and Colonia Angamos, in the Loreto region. The subsidised tickets cost 30-50% of the normal market price for the routes.

Looking Abroad

The number of arrivals from overseas is also increasing, having grown from 4.8m in 2009 to 9m in 2016, according to the MTC. During the first quarter of 2017 international air passenger arrivals registered an impressive 13.5% increase over the same period in 2016 to 2.45m, according to figures from the General Directorate of Civil Aviation (Dirección General de Aeronáutica Civil, DGAC). These increases have been supported by robust growth in the tourism sector over the past decade, which saw international arrivals increase from 1.3m in 2004 to 3.7m in 2016, according to figures published by the MCET. Extrapolating from the first quarter figures, international arrivals in 2017 look to be on course for another new record, and will almost certainly breach the 10m-mark in 2018.

This rapid expansion of air transport to and from Peru is closely linked to the dynamism in regional travel. During the first quarter of 2017, for example, the most important source cities for international passenger arrivals included Santiago, which accounted for 16% of total arrivals to Peru with 198,651 passengers, and Buenos Aires, with 8% of arrivals at 98,917 passengers, according to the MTC. They were followed by Bogotá and Miami with roughly 87,000 passengers each. The most relevant European source city, and the fifth most important overall, was Madrid, which contributed 74,188 passengers, or 6% of international arrivals, in the first quarter of 2017.

International airlines are also increasingly aware of Peru’s market potential. In May 2015 the French carrier Air France said that it would increase the number of flights connecting Paris with Lima from three to five weekly flights during the high season, which runs from mid-July to mid-October. Spain-based Iberia Airlines also followed the same strategy in mid-2015, announcing a 40% increase in capacity between Madrid and Lima for the high season. British Airways, meanwhile, began running direct flights between London and Lima in May 2016, which run three times a week from April to October, the airline routing passengers through Madrid during the November-March low season. Demand for direct flights linking Peru and Europe is also being boosted by the Schengen visa waiver for Peruvian citizens.

The North American market is also proving to be prospect for Peruvian airlines. LATAM Perú, which already runs direct flights between Lima and Orlando, Miami, Los Angeles and New York, launched a fifth direct route between Washington, DC and Lima in May 2016. There are currently 20 international airlines linking Peru to South America, Europe, the US and Canada via direct flights. According to May 2017 data from the DGAC, LAN Perú was the market leader in international flights over that period, accounting for 31.3% of all passengers during the first quarter of the year, followed by Taca Perú at 10% and LAN Airlines with 9.6%. Panama City-based Copa was fourth-largest airline in the international market with a 4.9% market share, followed by Colombian airline Avianca, which accounted for approximately 3.5% of all international passengers flying through Peru during the same period.

In addition, private players have taken advantage of new synergies between the aviation and tourism segments despite economic challenges. “The mining and oil crisis has pushed charter companies to target new niche markets. One of these niche sectors is luxury tourism coming from the Chinese, Russian, Japanese and the Middle Eastern markets,” Carlos Cueva, general manager of charter flight provider ATSA, told OBG METROPOLITAN UPGRADE: In-country links are also critical. With an estimated 10m inhabitants in the greater Lima-Callao Metropolitan area, the country’s capital has long suffered from traffic congestion and associated high levels of pollution (see analysis). A survey published in April 2017 by Datum International found that 65% of the city’s population considered public transportation problematic, compared to 69% in 2016. Besides private cars and motorcycles, the city’s transport authorities have been trying to reign in informal taxis, which became a viable work option for people laid off from factories during the economic instability of the 1980s and 1990s. In early 2014 a regulation by the MTC established new licence system for taxis, making it easier for authorities to detect informal taxi-service providers. A programme to retire older taxis has also been under way since 2013. According to local press reports, roughly 180,000 taxis, of which an estimated 40,000 are unregulated, were circulating in Lima in August 2016. Traffic is also being relieved by the continued development of public transport options. One example is the Metropolitano rapid bus transit system, which authorities hope will eventually act as a substitute for the large number of privately operated bus routes.

Urban Connections

Functional since 2012, the capital’s first metro line, which links Villa El Salvador to San Juan del Lurigancho over a 34-km routes, is helping to improve mobility. Although it was built using an elevated structure, a second and third line to cross high-density urban areas is currently being developed to run underground. Work on Lima’s $5.2bn Line 2 also began in the first half of 2015. The line will include some 35 stations, and will run from the Ate district, in Lima’s east, to the Callao Municipality on the seafront, passing through 13 districts. The 34-km route will serve approximately 660,000 daily commuters, and initial operations will employ 42 trains with a capacity for 1200 passengers each, according to local press reports.

The sheer size of the project led to the MTC to decided that underground work will be undertaken on a 24-hour daily schedule. However, and as pointed out in late April 2017 press conference by Edgar Alarcón Tejada, Peru’s general comptroller, only 15.71% of the project has been completed, compared to the planned 41.85% that was to be completed by that date. Delays in the approval of the engineering studies for the project and in the delivery of the concession were signalled as the main causes for these setbacks. Nevertheless, the line is still expected to open in 2020.

So far, the Lima Metro project is the largest to be developed under the country’s PPP scheme and has attracted the attention of international financial institutions. The IDB has pledged $750m in loans to help pay for the expansion of the new system. The funds will be disbursed through a $300m loan to the MTC, and an additional $400m of non-sovereign guaranteed loans directly to the New Metro of Lima consortium. The consortium will also receive an additional $50m loan, managed by the IDB but partly financed by the China Co-financing Fund for Latin America and the Caribbean.

Much is hinging on the new public transit system. Feasibility studies by the MTC have suggested that the economic impact resulting from the new metro line in terms of time saved for commuters, reduced pollution, a decrease in the number of accidents and rising land values around the new line will reach $3.4bn by 2040. Transport authorities also expect that the number of metro users in Lima to increase exponentially. The number of daily riders commuting through the system has reached approximately 300,000 since the completion of the system’s first line, and is expected to climb to 1m with the completion of Line 2, and to 2m once Line 3 becomes operational. Lines 3 and 4 of the Lima metro system are still pending tender.

Boosting Rail

Traditionally, cargo logistics in Peru has largely depended on the country’s crowded road network. However, many private sector operators and public bodies are increasingly looking at railroad development as a way to reduce transport costs. Underinvestment in the national network has led to decay along some sections of the national railway line, but authorities are launching a series of projects to upgrade these areas. Peru has approximately 1906 km of railway lines in total, the majority of which – 1668 km – are public, with some managed by the MTC and others operating under concession agreements. The Ferrocarril Transandino concession, which operates under a 30-year contract, runs a 980-km network that is divided into two separate sections in the southern part of the country. The Ferrocarril Central Andino concession, awarded in 1999 for a 30-year period, operates the Ferrovías Central railway, connecting Callao in Lima to Pasco and Junín. A further 239 km is privately owned and mostly used for cement and mining cargo.

One of the largest projects currently under way is the overhaul of the 128-km railway linking Huancayo to Huancavelica, which runs along the Andes mountains and was tendered in July 2015. The railway has seen a reduction in traffic since its peak in 1998, when it transported around 700,000 passengers and 47,000 tonnes of cargo, according to ProInversión figures. The co-financed concession will last for 30 years and has an estimated cost of $220m. The winning consortium is expected to modernise the line to allow for speeds of up to 64 km per hour, establish new stations, rehabilitate tunnels and bridges, and bring in new carriages. By 2044 authorities expect a refurbished line able to transport 1.2m passengers per year. The concession process is ongoing, with a winning bid due to be announced in the second half of 2017. Authorities are also aiming to improve railway links with neighbouring Bolivia and Chile, as well as implement an inter-oceanic railway line to link the Peruvian Pacific coast with Brazil’s Atlantic Ocean coastline. A number of high-profile meetings regarding this project have already taken place between the Peruvian, Brazilian and Chinese authorities, expressing interest in financing the project.

Outlook

The transport sector will remain a vital aspect of Peru’s economic success, and reducing the current infrastructure deficit is key to sustaining recent positive growth trends. In light of the 2017 flooding crisis, the MTC is now urgently prioritising investment in transport infrastructure so as to restore the minimum conditions for the private sector to operate. This investment will, in turn, deliver an important boost to economic activity across several sectors, creating jobs in the process. To better compete internationally and accelerate the economic growth of its regions, Peru will also have to prioritise reducing its logistics costs.