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In an effort to close the transport infrastructure gap, estimated to reach $20.9bn by 2021, Peruvian authorities are implementing heavy investment plans and making extensive use of public-private partnerships. With economic growth increasingly exposing the current limitations of Peru’s transport channels, efficiency and progress are key to ensuring sustainable growth in the future. Due to the economy’s heavy reliance on mineral exports, Peru’s links between its hinterland and export gateways on the coast remain essential, and this is encouraging expansion work in major road connections. Private management of port facilities is allowing for fresh investment in new equipment to increase capacity and shorten service times. Growth is also driving development of aviation infrastructure to raise capacity for domestic and international traffic. By land, water and air, the revamping of transportation infrastructure seems set to determine the country’s growth prospects over the medium term. This chapter contains an interview with José Gallardo Ku, Minister of Transport and Communications.

Accounting for around 15% of GDP, the manufacturing sector has recorded strong growth over the past decade. Between 2004 and 2013, value added from manufacturing grew at a compound annual rate of 5.8% in real terms. While growth is uneven among the various manufacturing activities, the sector has been buoyed by strong growth in basic metal products and in non-metallic minerals. The government of President Ollanta Humala is attuned to both the importance that manufacturing will play in Peru’s economic future and to the sector’s shortcomings. In 2014, the government laid out the National Plan for Productive Diversification that aims to promote investment and innovation in manufacturing, and scale back burdensome industrial regulations. As the government attempts to steer the economy towards a more diversified mix of activities, an increased focus on more sophisticated goods with higher added value and less exposure to commodities price volatility should be expected. This chapter contains an interview with Piero Ghezzi, Minister of Production.

Accounting for around 5% of GDP, the Peruvian construction sector continues to see expansion at several levels. The sector grew by 8.9% in 2013 before slowing down to 3.1% year-on-year in the first half of 2014. Activity in the construction sector is being led by the burgeoning need for housing, as well as commercial real estate, both resulting from improved living standards in Peruvian cities. As the country strives to resolve a pending housing deficit, the stable growth of the economy is prompting a new dynamism in the higher segments of the real estate market. This is supporting continued sales of new homes, as well as efforts by builders and promoters to continue to satisfy demand. As the sector matures, rising land prices encouraging a greater concentration of homes, and a lack of available space in Lima and other growing cities throughout Peru, are set to become some of the sector’s most important challenges. This chapter contains interviews with Jesús Blanco, CEO, InGroup; Ernesto Tejeda, President, Obrainsa; and Gonzalo Sarmiento Giove, CEO, Inversiones Centenario.

The growth of the mining sector, driven by a sharp rise in commodity prices, spurred Peru’s economy to the fastest sustained growth rate in Latin America during much of the past decade. The recent fall in commodity prices, however, has led to a significant drop in the value of Peru’s mining exports, and consequently, a slowing of GDP growth in 2014. The central bank lowered its outlook on mining growth for 2015 from an estimate of 9% to 6.5%. The sector is not expected to get an immediate boost in the form of rising production or commodity prices; however, in 2016 and beyond, several large-scale copper projects are expected to come on-line that could double Peru’s production of the mineral and add as much as 1-2% to the country’s GDP growth. The sector is also set to get a boost from zinc, silver and tin, other metals of which Peru has substantial reserves and for which global demand is expected to grow. This chapter contains an interview with José Picasso, Chairman, Volcan Compañía Minera.

Peru’s energy sector is undergoing a period of rapid transformation. Ten years ago energy demand was low and the country depended almost entirely on hydroelectric power in addition to petroleum imports to meet its needs. At that time, Peru had limited oil production, no production of natural gas and little to speak of in terms of energy exports. Today, by contrast, the country is among the leading producers of natural gas in the region, an oil production hub and an important target of investment by foreign energy firms. Though oil production in May 2014 stood at 69,000 barrels per day (bpd) – having declined from 87,500 bpd in 2003 – production of natural gas has grown quickly, reaching 430.8bn cubic feet (bcf) in 2013, compared to 17.7 bcf in 2003. The government is now focused on developing the infrastructure that would be needed to add value to hydrocarbons resources through refining and petrochemical manufacturing. This chapter contains an interview with Eleodoro Mayorga, Minister of Energy and Mines.

With net insurance premium growth of 16% in 2013, the Peruvian insurance sector continues to outperform regional neighbours such as Mexico (11%) and Colombia (8%). Double-digit growth is expected to continue through 2015, propelled by small businesses and the modernisation of mature industries and infrastructure. However, gross premiums to GDP, which stood at 1.5% at the end of 2012 (half the regional average of 3%) demonstrate the weak penetration in Peruvian market. Following the passage of significant domestic regulatory reforms in 2012, Peru’s insurance industry now faces the challenge of modernising its practices in preparation for the Solvency II standards, while also coming up with novel ways to engage first-time customers. The sector’s broader economic significance will persist, with insurance companies collectively constituting the second-largest institutional investor in Peru with approximately $9bn in assets under management.