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Transport and logistics infrastructure in Peru has not kept pace with the high level of economic growth. According to a report released by the Association to Promote National Infrastructure in October 2012, $88bn in investment will be necessary over the period 2012-21 to close the existing infrastructure gap, a move essential for continued economic development. To this end, in 2011 the government launched a plan to invest $20.5bn in infrastructure over the following five years, and major efforts are being made to attract more private investment. In 2013 the government declared the promotion and facilitation of investment in Peru a national priority, with special emphasis on procedures and the issue of permits and licences. Apart from confronting the natural challenges posed by the nation’s rugged and mountainous terrain, the biggest challenge facing the sector in the short term will be pushing investment plans through the lengthy bureaucratic approval processes in a timely fashion.

Like many Latin American countries, Peru is prioritising industrial development, moving away from primary product dependency and working to establish a healthy balance between manufacturing and commodity exports. One of the most important economic activities in Peru, the manufacturing sector contributed 15.98% to GDP in 2012, displaying year-on-year growth of 1.32%, and continued to expand at a rate of 1.42% during the first half of 2013. Despite unfavourable external conditions that have to some extent reduced demand for primary products, the steadiness of non-traditional manufacturing has helped keep overall growth on track, diversifying both products and markets. External trade has proven a successful formula, positioning the country on an international level, while it benefits from strong internal demand due mainly to large-scale development in areas such as construction, mining and energy. A growing middle class is also fuelling internal demand, reflected in the positive performance of fast-moving consumer goods in particular.

The construction sector grew 14.8% in 2012, far more than the 3% recorded in 2011, and continued to expand at a rate of 13.23% in the first half of 2013. Investor confidence remains strong, with investment in current projects rising by 5.79%, most notably in the areas of housing and infrastructure, and public-private partnerships remain the favoured model for developing public works. Likewise, in the real estate sector mortgage credit has continued to expand in recent years. By June 2013, mortgages had grown by 24.7% year-on-year to reach $27.8bn. Though the number of self-built homes has more than doubled, rapid demand is creating a growing housing deficit. A new law to strengthen regulation in the sector and reduce bureaucratic challenges for construction firms should ensure continued growth in the years to come. This chapter contains an interview with René Cornejo Díaz, Minister of Housing, Construction and Sanitation, and José Graña Miro Quesada, Chairman of Graña y Montero.

The mining sector has seen its revenues increase significantly as Peru continues to ride the wave of a commodities “super-cycle”, bringing foreign reserves to an all-time high and sparking large-scale transportation and energy projects as production increases. As of June 2013, the Ministry of Energy and Mines reported an investment portfolio of $57.4bn. With the rich, polymetallic Andes as a source, Peru has an abundance of copper, gold, silver, tin, and zinc, among other deposits. Copper has attracted the majority of new investment in the sector, at some $36.37bn, or 63.36% of the country’s investment portfolio. Gold came a distant second at $7.18bn, or 12.51%, with iron ore close behind at $7.06bn. Long-term sustainable growth will depend on the stability of global commodity prices as well as the effectiveness of government strategies to address social conflict surround mining projects, illegal mining and a large infrastructure gap. This chapter contains an interview with Oscar Gonzalez Rocha, President and CEO of the Southern Copper Corporation.

Although its resource wealth should help to ensure Peru’s long-term energy security, in the short term surging demand continues to put pressure on the sector. A recent influx of investment in hydroelectric power stations and natural gas-fired thermoelectric facilities should be enough to stave off any bottleneck in electricity generation and avert potential power shortages in 2016 and 2017. Within the hydrocarbons subsector, the commercialisation of the giant Camisea field in 2004 changed the country’s energy mix, sparking an increase in exploratory investment. It is estimated that as much as $25bn could be invested in the hydrocarbons sector from 2011-20. Peru currently relies on a single pipeline to provide the gas used to generate more than 40% of electricity, and more broadly, the lack of infrastructure is the main and most pressing challenge facing the industry in the near term.

While the insurance sector has seen sustained growth in premiums over the past several years, rising 10.12% in 2011 and 9.62% in 2012, penetration rates remain among the lowest in the region, with insurance premiums constituting 1.5% of GDP, compared to the regional average of 3%. The government is attempting to address this shortfall through a series of reforms aimed at reducing the cost of insurance and pension fund premiums and commissions. Overall, low market penetration and continued economic growth mean that the insurance industry has a lot of unexploited potential. With the entrance of several new players in 2013, competition is likely to heat up. This increase coupled with stronger regulation and gradual product diversification will help to ensure that citizens benefit the most from international insurers’ newfound interest in the Peruvian market. This chapter includes an interview with Rafael Venegas, CEO of Rimac.