Economic View

On addressing the infrastructure deficit to facilitate the growth of the logistics sector 

To what extent does infrastructure have an impact on Peru’s logistics and distribution chains?

RAÚL ALCALDE: The situation is very complex. It is widely understood that Peru’s air and maritime ports of entry and exit are close to capacity, which creates a series of issues that affect the country’s overall competitiveness and makes our exports more expensive in global markets. For Peruvian products to be more attractive than those of other countries we must strengthen every possible advantage. Unfortunately, the country’s current infrastructure deficit gives our competitors a significant edge. 

The distribution chain therefore suffers greatly from hindrances both within and at the country’s borders. Linking all of the country’s corners is a challenge, not only because of the infrastructure deficit but also due to the country’s difficult geography and, at times, inclement climate. The harsh El Niño weather pattern – with its floods and landslides – destroys roads, railways and bridges, and leaves entire cities, towns and regions unreachable. These conditions are difficult to surmount, especially for small and medium-sized exporters that are not able to financially deal with such a level of logistical disruption. As such, the current situation discourages many producers from exporting as the immediate risks outnumber the long-term benefits. 

Lower levels of production endanger the payment chains of certain sectors and consequently illiquidity hits some service providers, as well as producers in indirectly linked industries. What is more, while our infrastructure demand is substantial, it is not met by the necessary amount of public works. As business leaders, we need to maintain optimism and I believe the situation will gradually improve. Indeed, the situation must dramatically change in the near future for Peru to gain back competitiveness lost by the long-standing infrastructure gap. 

How will the large infrastructure projects that were recently announced help solve the country’s transport and logistics needs?

ALCALDE: The expansion of Lima’s Jorge Chavez International Airport, which has been several years in the making, will definitely have a positive impact on the transport and logistics sectors and the economy as a whole. It will help decongest the capital’s international airport, a necessary move to improve overall logistics. The current project, however, will not fully solve the problem and it may have been useful to add another runway in the short term in combination with the planned terminal extension. Additionally, some air cargo could have been diverted to the expanded facility in Pisco, which would have helped agricultural producers reduce export costs. Our regional airports are in need of a thorough upgrade to increase the number and frequency of international routes to tourist destinations. 

Peru’s ports are also affected by infrastructure gaps, a fact that is particularly worrying as the economy is export and commodity based. Our ports should have been able to handle a much large cargo volume by now. There needs to be more urgency around the planned port terminal projects. Customers, producers, business leaders and the government alike need quick solutions for Peru’s infrastructure challenges. The design, planning and execution processes of these projects will take too long, so the country will also need shorter-term solutions to provide immediate relief while the mega-projects are being built. 

In what ways will the entry of global distribution companies in the Peruvian market change the logistics sector?

ALCALDE: The entry of global distribution multinationals will not affect the market per se, but will stimulate local operators to be more prepared to face Amazon or Alibaba’s demands. If properly prepared to meet the requests and needs of such industry giants should they begin operations in Peru, the local sector will be able to profit immensely. The distributors that do not prepare to compete with global retailers will suffer the most. Multinational companies have a deep understanding of markets before they decide to enter; from regulations to infrastructure deficits, they are well aware of local retailers’ challenges in terms of digitalising their customer and shopping experiences.