Peru approves $6.7 bn in public investment projects

Jun 08, 2015 12:00 AM

Peru's government approved 21.1bn soles (US$6.7bn) in public investment projects this year through June, mainly focused on infrastructure.

Municipal government projects accounted for 51% of the total at 10.7bn soles, according to a finance ministry report. Approved central government projects totaled 8.10bn soles and regional government projects 2.27bn soles, state news agency Andina said.

Central, regional and municipal government projects have lined up 7,356 viable projects through June 3, according to the news agency.

The government, which aims to invest 8.678bn soles in infrastructure this year, has pledged to award the entire Panamerican highway, longitudinal Andean highway, Line 3 of the Lima metro, ports and regional airports before July 2016.

President Ollanta Humala, who ends his five year mandate following general elections in April 2016, has awarded US$18bn in public-private partnership infrastructure concessions since taking office in July 2011.

FINANCING

Peru needs to increase public spending in infrastructure to solve an US$88bn shortfall, equivalent to 44% of GDP, said Gonzalo Prialé, head of infrastructure association Afin.

Instead of financing infrastructure projects with bond sales and multilateral loans, Peru has slashed its debt-to-GDP ratio to 19.6% from 48.7% in 2003, compared with average 40% ratios in most developing economies, Prialé said.

Peru needs a 10-year, US$80bn plan for PPPs totaling 6.5% of annual GDP, a rate applied in Asian economies in last century, according to Prialé. The plan could be 66% co-financed by the private sector and would spur 2.2% GDP growth, according to Afin.

"The debt structure is reasonable and most of it is long term," Prialé said in a statement. "Given the enormous gap in productive and social infrastructure, low public debt levels and savings equivalent to 16% of GDP, let's see if it's convenient to continue reducing public debt."

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