Written by OBG Admin Interview

Interview: Milton von Hesse

Where do you think the biggest opportunities for foreign investors are at present?

MILTON VON HESSE: The first new project is to increase domestic gas consumption. Peru has invested in the industry for 15 years but most gas is consumed in Lima or exported. The government wants to promote consumption throughout the country. A second area is road infrastructure. We are working together with the transport ministry to define which roads could be open to investment. There are also exciting opportunities in energy production, agriculture, irrigation and telecoms. We are evaluating the whole portfolio.

The economic reforms of the 1990s, which opened the economy to foreign investment and enabled the privatisation of many state-owned enterprises, accelerated the entry of foreign capital. At first, this was concentrated in sectors such as telecoms and mining, but today the dynamic is different.

Now not only are foreign direct investment inflows more diversified, but foreign firms are also investing in a wider range of sectors. Furthermore, the current global economic climate has meant an increasing number of institutional investors are seeking opportunities in emerging markets, among which Peru is a great alternative, particularly in projects related to infrastructure development, mining, petrochemicals and large-scale agribusiness.

Which areas can benefit from increased use of technology and production of value-added goods?

VON HESSE: People think if we produce copper, we should be selling copper pans. That logic is not a sign of development. In mining there has been a lot of development in extraction and refining processes. Production has grown with these new technologies, which are often imported and adapted to local conditions. Also, the service sector related to exporting primary products has grown. In agriculture it is not just about planting something, harvesting it and selling it abroad. A whole chain of logistics and technology is involved. Before you would export asparagus as a canned product but now there is the technology to export it fresh and sell it for a higher price. So these value chains and developments need to be investigated more. This is also related to the fact that trade deals carry specific quality standards.

How do you think the public-private partnership (PPP) process could be improved?

VON HESSE: We are in a transitional phase from one government to another and a shift in priorities is natural. We have been trying lately to create a more developed portfolio of projects. This requires strict quality control at all stages. Furthermore, we work actively with the government.

Our steering committee includes several key ministers from sectors related to infrastructure, and it is chaired by the minister of economy and finance. These are the government organisations that usually entrust the development of their concession processes to ProInversión. We have 25 projects for 2012/13 that are open for private investment of around $10bn, including power generation and transmission, gas transportation and distribution, road concessions and the second metro line.

We are campaigning for the development of Pisco Port, which would send a strong message to the market that there is room for private investment in port projects.

How much external help are you seeking in the effort to improve the education system?

VON HESSE: There have been talks about the need to attract more private investment in this area and about the potential of PPPs. The president also wants to improve the quality of higher education through accreditation. There is at least one project of this type being initiated with the World Bank. An example of an excellent private university is Tecsup, which is connected with top universities around the world, including MIT.