Peru seeks to increase road connectivity at all levels

 

While roads represent 20% of Peru’s infrastructure shortage in terms of quantity, their quality is being questioned as well. Peru was ranked 110th in the quality of its road infrastructure by the World Economic Forum’s “Global Competitiveness Report 2016-17”, down from 102nd in 2014-15. Locally, the Association for the Promotion of National Infrastructure ( Asociación para el Fomento de la Infraestructura Nacional, AFIN) estimated that investments of up to $159.5m would be needed to close the transport infrastructure gap. The road segment is the most in need of that investment and, according to AFIN, is the area with the largest long-term gap. Peru’s highways and secondary roads would need $31.8bn to properly connect the country and, once completed, would reduce transaction costs and boost activity across the region.

Current Road Map

The country’s road system is made up of the national road network, the departmental road network and neighbour roads. The first is the responsibility of the Ministry of Transport and Communications (MTC), while regional and local governments maintain the others. According to MTC figures, of the 26,436 km of national roads in Peru, 13,640-18,420 km was paved during 2011-15, representing nearly 70% of the total. However, when departmental and neighbour roads are taken into account, the percentage of the country’s paved roads stands at only 13.7%. AFIN has strongly suggested increasing the number of concessions operated through public-private partnerships (PPPs), an approach that has also been called for by investment promotion agency ProInversión.

An increase in the number of projects offered for concession is considered vital to improving Peru’s road infrastructure. Of 16 current projects, nine have already exceeded 80% of accumulated investment, leaving little extra room to invest. On top of this, only two projects have been awarded in the last five years. This shortage of PPPs has led AFIN to propose that greater coordination with regional and local governments is necessary for future investment, and road projects for concessions should be prioritised. “One of the main projects for 2017 will be section four of the Andean Longitudinal Road,” Álvaro Quijandría, executive director at ProInversión, told OBG. “In 2018 the focus will be the construction of a second lane for the Ica-Quilca section of the southern Pan-American Highway and the Sierra Road Concession, a 400-km road in the region of Ancash. In Lima, the Peripheral Road Ring project, which will require estimated investments of $2bn, will enhance connectivity between the airport and other parts of the city.”

Potential New Tenders

The widely discussed case of corruption involving Brazilian construction company Odebrecht has left a number of infrastructure development projects on standby throughout Peru. Odebrecht was deeply involved in the development of road projects, meaning that some major planned works may now be on the lookout for new partners and financing. One of these is the Vías de Cusco development, a road improvement project intended to renovate 9.5 km of pedestrian and vehicular road in some of Cusco’s neighbourhoods. The proposals include a 6-km bicycle lane, four pedestrian bridges and six vehicular bridges. It was signed with the regional government of Cusco for PEN297m ($88m).

Odebrecht also had won the concession for the Rutas de Lima, a project comprising of road interchanges, level crossings, pedestrian bridges, stops and auxiliary routes on the Panamericana Norte and Panamericana Sur roads. While the company had sold 57% of its assets in this project by June 2016, it still holds 25% at present. The project has proved controversial, however, when it was revealed that tolls had been introduced before the completion of the works. Another key project seeking new investors is the Via Costa Verde’s Callao section, a PEN302m ($89.5m) development designed to connect the districts of Chorrillos and La Punta in just 25 minutes.

 

 

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The Report: Peru 2017

Construction & Real Estate chapter from The Report: Peru 2017

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