Infrastructure market in Peru

Peru is a strategic partner for Canada in the Americas, with significant commercial opportunities unlocked by the 2009 Canada-Peru Free Trade Agreement. Canada and Peru are mutually committed to long-term partnership in order to expand trade and investment opportunities. Peru is Canada's second largest bilateral trading partner and third largest destination for Canadian direct investment in South and Central America.

Peru's economic growth and investor friendly policies, combined with the Canada-Peru Free Trade Agreement, and both countries' participation in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), encourage Canadian investors to enter the country. Peru's sizable short-term infrastructure gap (approximately CAD$ 43 billion) generate significant opportunities for Canadian firms operating in the infrastructure sector.

Key opportunities for Canadian infrastructure companies in Peru:

There are several Public-Private Partnership (P3) projects that Peru seeks to award in the short term, including:

• San Juan de Marcona Port Terminal (USD 405 million, expected award in 4Q 2023)
• Puerto Maldonado Wastewater Treatment Plant (USD 86 million, expected award in 4Q 2023
• Peripheral Ring Road in Lima (USD 2.4 billion, expected award in 2024)
• Headworks for the provision of water in the city of Lima (USD 300 million, expected award in 2024)
• Trujillo Wastewater Treatment Plant (USD 312 million, expected award in 2024)
• Cajamarca Hospital Operation and Maintenance (USD 176 million, expected award in 2024)
• Schools at Risk in Metropolitan Lima (USD 255 million, expected award in 2024)

Notable challenges for Canadian infrastructure companies in Peru:

• Political uncertainty and public unrest
• Lack of capacities among the public sector to execute 100% of their investment budget
• Complex bidding process with the public sector –exception is P3 projects and government to government contracting

Peruvian business landscape:

Peru launched in 2019 its first National Infrastructure Plan for Competitiveness (PNIC 2019), as the first effort of the Peruvian State to define a vision and objectives for closing infrastructure gaps, prioritizing and articulating investments to boost growth, competitiveness and development in the country. It found a 5-year infrastructure gap of USD 32 billion. In Oct. 2022, an update was launched, prioritizing 72 large infrastructure projects (investment amount of CAD 53 billion). This updated plan includes healthcare and education projects, on top of economic infrastructure projects in roads, railroads, airports, ports, water and sanitation, energy, and others. Out of these 72 prioritized projects, 26 of them are planned to be carried out as P3 projects, with a joint estimated CAPEX of CAD 27 billion. Peru's sizable gaps bring significant opportunities for Canadian firms.

With renewed leadership, ProInversión, the Peruvian National P3 executing agency, has awarded seven P3 projects, from January to July 2023, for a total value of USD 1.1 billion. The remainder of the year, there are 11 projects expected to be awarded, for more than USD 2.5 billion, in sectors of energy, transportation, real estate and sanitation. For the year 2024, ProInversión's pipeline includes projects for more than USD 6.4 billion, in different sectors: transportation, energy, water & sanitation, healthcare, education, and others.

For Canadian companies looking to enter Peru's P3 market, the opportunity to work with ProInversión as a technical, financial or legal advisor offers a low-risk opportunity to learn about how to do business in Peru and to gain deeper insights into its P3 system. Given Canada's clear track record for formulating and executing world class P3 projects, its companies are seen by Peru as industry leaders and its authorities would like to see Canadian companies entering their tendering processes for P3 projects.

Summary

Despite the unfavorable worldwide environment, investors engaged in Peru appreciate its stringent fiscal management, sizeable foreign reserves, integration into international markets, and careful economic management. Following a fall of -11.1% in 2020 due to the pandemic, Peru's GDP grew by 13.6% in 2021 –highest recovery in South America – and 2.7% in 2022. For 2023 and onwards, Peru's economy is expected to grow above the regional average, primarily in construction, Mining and other related sectors.

Peru has been modernizing its framework for P3. It is actively seeking to improve the quality of projects it is putting to market by hiring international financial, technical and legal advisors. It hopes that this strategy will increase competition, diversify the origin of investments and lure better companies to the market. In addition, the Government-to-Government (G2G) modality has been used by Peru to provide major infrastructure since it was first used in 2019 (PanAm Games). It has provided a way to speed up management procedures while boosting innovation and knowledge transfer to the Peruvian government.

The relative openness of its capital markets and its history of strong economic growth make it one of the most attractive markets in South America for private sector investment.

For more information on Infrastructure in the Peruvian market please contact Félix Jiménez (Felix.JiménezCieza@international.gc.ca), Trade Commissioner for the Infrastructure and Transportation sectors, in Peru.