ProInversión continues to drive private funding of Peruvian infrastructure

By offering technical assistance and well informed expertise, ProInversión is successfully connecting private investment to public sector projects in order to plug Peru’s billion-dollar infrastructure gap

Peru offers secure macroeconomic conditions and a reliable regulatory framework for private investors looking to invest in public sector projects
Peru offers secure macroeconomic conditions and a reliable regulatory framework for private investors looking to invest in public sector projects 

Over the past decade or so, the Peruvian economy has provided plenty of reasons to be optimistic. Driven by huge revenues from the mining industry, the country quickly became one of the fastest-growing in Latin America. Now, under new President Martín Vizcarra, there is an expectation that further business-friendly reforms are on the way.

Peru’s investment climate is already well established, with opportunities in sectors such as energy, mining, water and sanitation, transport infrastructure, ports, roads, railways and irrigation projects. ProInversión, the country’s private investment promotion agency, has played a key role in making Peru an attractive place for investment.

Although its main office is located in Lima, ProInversión has a presence nationwide and possesses a detailed understanding of international investment issues. By encouraging private support for public infrastructure and state activities, the efficiency of government investments can be increased and execution risks can be shared. It’s for these reasons that public-private partnerships (PPP) are gaining popularity all over the world.

In addition to the wide-ranging and diversified investment portfolio offered by ProInversión, Peru offers private investors a solid macroeconomic framework that has been tested and proven to work in recent years, along with a regulatory framework aimed at fostering private investment.

Under the Peruvian constitution, foreign and local investors receive equal treatment. Peru also guarantees the free flow of capital. This openness to foreign trade has created a truly globalised economy, with preferential access to the largest markets in the world. World Finance spoke to Alberto Ñecco Tello, Executive Director at ProInversión, about the reasons why partnerships between the public and private sectors are so important, as well as some of the exciting projects that his company is working on.

A project leader
As a public agency operating under the authority of the Ministry of Economy and Finance, ProInversión is engaged in promoting a portfolio of 50 projects worth in excess of $10.8bn between now and 2020. What’s more, this figure is set to increase significantly over the following months with additional mandates in transport, energy, water and sanitation. By offering information and guidance to investors, both domestic and international, the agency ensures that public sector works have access to the funds they need. Infrastructural projects in particular are a key focus for the organisation.

With such a broad spectrum of projects currently being designed for the Peruvian market, investors are sure to find one that suits their expertise and funding level

“The most significant infrastructure projects in ProInversión’s portfolio are linked to the improvement of water and sanitation services,” Ñecco explained. “These include a $600m development to build and operate major parts of Lima’s potable waterworks, a $304m wastewater treatment system in the Lake Titicaca basin, and a $90m wastewater treatment plant in central Peru. At present, the Titicaca project is expected to be awarded at the end of 2018.”

Among its many energy projects, ProInversión is also promoting an expansion plan for the use of natural gas in the south and centre of the country – something that will require an investment of $350m. Furthermore, the agency is supporting six electricity transmission projects that will benefit northern and eastern Peru.

In the telecommunications sector, there are broadband projects in Ancash, Arequipa, Huánuco, La Libertad, Pasco and San Martín totalling $359m. In addition, the Colca and Jalaoca mining projects are already attracting the attention of world-class mining operators.

Another potential development is the iconic 1,000km Longitudinal de la Sierra highway that stretches along the Andes mountain range, which will come at an estimated cost of $464m. Further, three specialised hospitals will be built in Lima, Piura and Chimbote.

One of the most important projects to be awarded recently is the Michiquillay copper deposit project that was granted to the Southern Perú Copper Corporation in February this year. To win this project, the Southern Perú Copper Corporation did not simply bid the most – it also included a number of vital sustainability clauses in its tender. Where possible, local employees will be recruited and community projects will be supported.

“With such a broad spectrum of projects currently being designed for the Peruvian market, investors are sure to find one that suits their expertise and funding level,” Ñecco said. “What’s more, the government-backed proposals that we highlight at ProInversión promise benefits not only for funders, but also for the broader Peruvian society.”

Putting on a show
ProInversión has started a busy 2018 by designing a robust international campaign to promote the most attractive investment opportunities in Peru. All this kicked off with a bilateral meetings agenda in Mexico and a road show in Asia, which took place in May.

In recognition of the size of European markets and the role they play at the international investment level, a ProInversión delegation travelled to Zurich, Paris and London in June to hold meetings with local equity and debt investors. This included conferences to update local counterparts on the latest opportunities in energy, telecoms, sanitation and infrastructure, among other sectors in Peru.

This road show was an excellent opportunity to announce facts and figures relating to the Peruvian economy, which is one of the most stable in Latin America. Informing audiences of Peru’s robust legal frameworks, especially with regard to PPP deals, was also on the agenda.

Previous events hosted by ProInversión have proven successful: the conclusion of the agency’s Roadshow Asia 2017 in Tokyo attracted the interest of more than 80 individuals representing the continent’s most important companies. It led to bilateral meetings with important private investors. The roadshow also included stops in Seoul and Beijing.

With the long-term infrastructure gap in Peru estimated at around $160bn, the need for external investment is as pressing as ever. By meeting face to face with investors from around the world at its road show events, ProInversión can build relationships and extol the virtues of the Peruvian investment climate.

“In addition to the diversified investment portfolio offered by ProInversión, Peru offers private investors a solid macroeconomic framework”

Promoting private investment
As a developing country, Peru promises enticing returns for investors – particularly with GDP growth averaging more than five percent between 2000 and 2016. Despite this rapid growth, however, Peru remains developed enough to offer stability to investors. The principles of transparency, good governance and sustainability are well entrenched in the country. Still, even with such a favourable economic climate, prospective investors from overseas are likely to benefit from local knowledge.

At ProInversión, the management team is willing to provide advice to clients whenever necessary. To maintain the highest possible standards of support, the agency has identified four strategic pillars that are extremely important for its long and short-term work. The first of these aims to turn ProInversión into an institution renowned for its high-quality operations.

“We must strive to become a hub of excellence so we can advise the government on the structuring and preparation of PPP projects,” Ñecco explained. “To achieve this aim, it is critical that we have the best advisors in the market, as well as standard contracts that provide the market with a degree of predictability.”

The organisation’s second major focus is social and environmental management. ProInversión has identified that a key factor of efficient social and environmental management is working on sustainable projects that are beneficial to society as a whole, while remaining profitable for investors.

The third point concerns commercial strategy. By applying a structured, organised methodology to identify, attract and sort potential investors, ProInversión ensures that it only engages with private funders that have long-term, reputable aims. By continuing to participate in local and international road shows and other promotional events, the company is able to keep attracting first-rate investors who are highly committed to the Peruvian economy.

Lastly, ProInversión continues to work at the organisational level to offer high-quality working conditions and attract the best human capital to its organisation. By ensuring that it only recruits the highest-quality candidates, ProInversión is not only able to deliver on its promises to investors, it is also able to maintain high standards of social responsibility.

If the company’s ambition is to be recognised by investors and the wider population as an effective strategic ally for the development of investment in Peru, then its mission is to promote sustainable private investment with efficiency, quality and transparency. “We invite investors to take a chance on Peru,” Ñecco said. “At ProInversión, we will do everything within its power to make sure the experience of investing in PPP projects and asset-based projects is a highly positive one. Seize the opportunity now and invest in a reliable country: invest in Peru.”