While the fall in housing sales and some delays in large-scale infrastructure projects may be slowing construction activity in Peru, the sector is set to be spurred by a new large-scale scheme. In the Lambayeque region of northern Peru, the government is aiming to build a new city and turn it into a development model for other urban areas.

The city is linked to the Olmos irrigation project. To increase water availability to the Olmos Valley, engineers are working to redirect the course of water flowing down from the Andes to the dry plains to the west. The goal is to turn arid desert land into high-yielding agricultural areas. In an initial phase, the new city of Olmos will be erected to support the irrigation project. However, the government hopes that it can become a well-planned urban centre in its own right.

Economic Impact

If properly managed, the associated urban project will boost the construction sector considerably. “The Olmos project is a new city, which will have factories, hospitals, schools and every type of social infrastructure, so it will move considerable sector resources,” Erick Rojas Carlotto, a technical expert at the Peruvian Chamber of Construction, told OBG. The city will be able to house 400,000-500,000 people. Authorities expect the new urban development and agricultural production areas will create 40,000 direct jobs and attract up to $1bn in private capital.

The urban infrastructure for the new city has been planned in detail. The tender for the initial studies of basic infrastructure, including roads, water and sewage links, was launched in August 2015. The housing aspect of the project will begin with the building of an estimated 22,864 homes at a projected cost of up to PEN480m ($153.2m).

Ancient Techniques

The Olmos irrigation and city project is a large-scale adoption of an ancient pre-Incan technique, which channelled water from the Andes mountains to support urban centres close to desert coastal plains.

The irrigation scheme, headed by Brazilian firm Odebrecht, was inaugurated in November 2014. The project is expected to be able to channel 400m cu metres of water annually down from the Andes, through a 20-km tunnel. As of August 2015, nine months after the start of the project, increased water availability led to the cultivation of over 3600 ha of agricultural land, with production targeting export markets.

Power Source

In addition to redirecting water to agricultural fields, the project is also expected to sustain hydroelectric production through a new 50-MW plant. In August 2015 the authorities announced that the land for the hydroelectric unit had been allocated, and that construction would likely begin in early 2016. The energy generated by the plant will be channelled to fuel water pumps and other equipment related to the Olmos irrigation project. The power plant will be built by Sindicato Energético (Sinersa), a Peruvian contractor, and will entail a total investment of $90m, according to local media reports.


Erecting the new city and the associated irrigation scheme will be a major feat. The associated urban development will initially feature housing for the majority of people working on the project. The government forecasts that the nearby agro-industrial development sparked by the irrigation project – coupled with the possibility of promoting urban development in a sustainable manner – will draw investors into the city.

Despite its grand size and ambition, the development of a new city in Olmos has the potential to avoid the effects that unorganised urbanisation has had on other cities across Peru. Nonetheless, the success of the city will ultimately be closely tied to that of the project’s agricultural component.