Construction will be the biggest driver of GDP growth in Peru in 2019, according to the Lima Chamber of Commerce, with the sector expected to grow by 6.7% over the year. Increased investment in infrastructure projects, such as those in mining and the $1.5bn extension of the Jorge Chávez International Airport in Callao, will propel expansion further. Anticipated 2019 growth would outpace that of 2018, during which the sector expanded by 4.6%. Construction will grow despite complications following the Odebrecht case, which resulted in the Brazilian firm pleading guilty to bribing officials in several Latin American countries, including Peru. In the aftermath of the scandal, several large infrastructure projects implemented by the firm in Peru were halted.


Peru has implemented regulatory changes in recent years to improve accountability and quality in the construction sector, and the economy overall. The country strengthened quality control by imposing stricter qualification requirements for professionals in charge of technical inspections. These changes were reflected in the World Bank’s “Doing Business 2019” report, wherein Peru scored 13 out of 15 in its building quality control index, above the regional average of 8.9.

Peru has also worked to improve transparency after a series of scandals rippled through the domestic and regional construction sectors. In March 2018 Peru published Law No. 30737, which stipulates civil damages in corruption cases and lays out rules for asset transfers by construction companies under investigation or those that have been convicted. In the event that a company is declared guilty and attempts to sell an asset or project, 50% of the sale price will be withheld to pay civil reparations and tax liability. The IMF expects the new legislation to reduce investor uncertainty in the sector.

Furthermore, in January 2019 the Ministry of Economy and Finance (Ministerio de Economía y Finanzas, MEF) published criteria to strengthen safeguards for the execution of infrastructure projects. These changes include the supervision of investments to identify risks, ensuring investments are developed in accordance with technical parameters and the streamlining of procedures and processes for multi-year investment programming. The announcement followed the awarding by ProInversión, the government’s investment promotion agency, of a contract to provide consultancy services for the standardisation of public-private partnerships (PPPs) to law firm Hogan Lovells.

“This is an important milestone because it will allow us to have better structured contracts to speed up private investment in the country, making the pre- and post-award processes more efficient,” Alberto Ñecco, ProInversión’s executive director, told local press in January 2019. These measures are likely to shore up investor confidence in Peru’s construction sector, which was undermined by the ongoing investigations into corruption that paralysed development projects.


While the sector expanded by 4.6% in 2018, it fell short of the 6% and 8.5% rates targeted by the Central Reserve Bank of Peru and the MEF, respectively. The gap between the expected and realised growth rates has been attributed to lower activity in real estate, infrastructure and suppliers.

Moving forward, the sector is expected to continue playing a central role in the economy. According to BBVA Research, overall GDP growth will reach 3.9% in 2019, with construction accounting for 5% of the country’s total GDP, down from nearly 6% in 2018 but up from around 2% in 2017. Furthermore, the Ministry of Housing, Construction and Sanitation expects growth in the sector to outpace overall GDP growth. According to the Peruvian Chamber of Construction (Cámara Peruana de la Construcción, CAPECO), $19bn worth of private infrastructure projects are in the pipeline, with half related to mining and a quarter to mega-projects.

Private investment in the sector is expected to grow by 7.5% in 2019 against 2018 figures, driven by largescale mining projects such as Quellaveco and Toromocho, Hugo Perea, then-deputy minister of economy, told local press in November 2018. The authorities are working to increase private investment in infrastructure to 6% of GDP by 2021, up from 4.5% in 2016.

The onus on mineral spending is likely to cause capital concentration in the areas surrounding prominent mines. “The sierra, the mountainous region of the country, has a high number of infrastructure needs, and a high level of investment will be channelled to it in the coming years,” Jorge Reátegui, general manager of scaffolding supplier Layher Peru, told OBG. “However, the current lack of infrastructure is a challenge in itself for all companies wishing to operate in the sierra.”

In the aftermath of the corruption investigations hundreds of projects were halted, with reverberations throughout the economy. In March 2018 Claudia Cooper, then-minister of economy and finance, announced 252 projects were on hold, tying up PEN30bn ($9.1bn) in investment. As of April 2019 several important projects remained stalled, including Metro Line 2 in Lima and several road and irrigation projects across the country.

Building Materials

Cement consumption is projected to grow by 6.5% in 2019, up from 3.7% in 2018. That projected growth rate would be the highest achieved since 2013, according to Scotiabank Perú. Consumption will be fuelled by public and private investment in large-scale infrastructure projects, such as the Port of San Martín and Port of Salaverry expansions, and the resumption of work on Lima’s Metro Line 2. Increased consumption is reflected in increased sales and production. In February 2019 local producer Cementos Pacasmayo announced annual sales grew by 3.5% in 2018 to $379m, up from $366m the year before, the first time in five years the company recorded sales growth. Despite expected increases in cement consumption, overall production in Peru fell to 806,000 tonnes in January 2019, down 0.6% year-on-year (y-o-y), according to the Peru’s Cement Producers’ Association. Cement exports also fell 36% y-o-y to 19,000 tonnes, as did imports, down 82.8% y-o-y to 11,000 tonnes.


Peru has seen an uptick in projects related to reconstruction following the weather pattern El Niño Costero in 2017. Heavy rain, particularly along the northern coast, produced floods and mudslides that caused 162 deaths and affected some 1.5m people. In response, the government approved the Reconstruction Plan with Changes in September of that year to repair and rebuild the affected areas, with additional work planned to take preventative action against future disasters. The programme budget was divided into three categories: PEN19.7bn ($6bn) for reconstruction, PEN5.5bn ($1.7bn) for disaster prevention and PEN450m ($136.2m) for institutional strengthening.

Even with higher budgets, the authorities’ capacity levels have slowed disbursement. According to the Authority for Reconstruction with Changes, as of December 2018 only PEN5.3bn ($1.6bn) of the PEN25.7bn ($7.8bn) allotted for reconstruction had been distributed to the executing ministries and local governments. PEN1.3bn ($393.5m) of that figure went to completed works, with the remaining to projects in progress or in planning stages. Spending was further slowed by municipal and regional elections in October 2018, after which local officials changed. “New regional and local governments took office in late 2018, and it remains to be seen if they will ratify the execution of projects. There are likely to be changes as local administrations shift their priorities,” Francisco Dumler, vice-president of development at consultancy Invertir, told OBG. “We expect to see a period of adjustment over the coming months.” This is especially notable, as the federal government transferred much of the responsibility to local governments for a quicker and more coordinated response. Spending on reconstruction is expected to accelerate in 2019, most notably in the second half of the year. According to the MEF, spending in the hard-hit north of the country is expected to hit $1.2bn in 2019, up from $600m in 2018, and contribute 0.3% to GDP growth.

“The government should define how the private sector can participate more in infrastructure construction,” Dumler told OBG. “Peru’s attractiveness as an investment destination depends on its political and macroeconomic stability. With general elections scheduled for 2020, it is important that the current government demonstrates that the country is stable.”

Demand Drivers

In January 2019 ProInversión published a portfolio of 58 infrastructure projects to be developed between 2018 and 2021 that are open to private investment, either through PPPs or exclusively through private capital. These projects total $10.3bn and are in the energy, mining, transport, communications, health, agriculture, utilities and tourism sectors. Transport and communications account for the largest portion of investment, at 33%; followed by water treatment works, at 20%; and energy and mining, at 13%.

Planned investments in transport and communications infrastructure are likely to fund several high-profile projects. First, a tender is expected to be issued in July 2019 for a $227m upgrade of the Huancayo-Huancavelica rail line through the central Andes. In addition, a $540m contract will be awarded in the latter half of 2019 to build and operate a port facility in San Juan de Marcona to store and export iron and copper. Another $110m contract will be awarded during the same timeframe to design and build a new container port at Chimbote, the capital of the ore-rich region of Ancash.

In the mining and energy sectors the $350m El Algarrobo mining exploration project will be awarded in the third quarter of 2019, while the $400m gas distribution project for seven regions in the country’s central and southern areas is to be awarded in second half. Among the projects to be awarded in the electricity sector in 2019 include a $90m concession for the design, construction, and operation and maintenance (O&M) of a 500-KW Carabayllo-Chimbote-Trujillo transmission line to bolster the country’s grid; a $29m tender for the design, construction and O&M of substations in the country’s north; a $105m project to modernise the state-owned electricity distributor Electronoroeste through a share issuance; and a $144m project to build a transmission line linking La Niña substation in Peru to the Chorrillos substation in Ecuador.

Pan American Games

The 2019 Pan American Games, to be held in Lima in July, have also been a major driver of infrastructure development. The event is expected to bring in PEN4.2bn ($1.3bn) in investment and account for 0.7% of GDP. Major projects have been under way to provide accommodation and sporting infrastructure for 10,000 athletes. These include the Villa Panamericana, a complex of seven 20-storey towers with nearly 1100 apartments, and the flagship Villa Deportiva Nacional (Videna) venue, which will host track and field, badminton, handball, bowling, track cycling, diving, judo, swimming, figure skating, squash and table tennis events. The complex will include an aquatics centre with three additional pools, a 24-lane bowling alley, improvements to the existing track and a roof for the velodrome. The initial budget for Videna was PEN469.4m ($142.1m), but as of March 2019 it reportedly hit PEN678m ($205.2m). Villa Panamericana, which will be sold as private apartments after the event, was also reported to be PEN66m ($20m) over budget, at PEN535m ($161.9m). Local media reported controversies around the financing of both projects. Additionally, Juan Miguel Guerrero Orbegozo, president of the infrastructure and roads commission at Lima’s College of Architects, told local media in March 2019 that the increased expense of Villa Panamericana’s construction means each apartment would have to be sold at a subsidised rate to compete on the local market.


In addition to infrastructure investment, growth in the housing segment – and more specifically social housing – is expected to drive expansion in construction in 2019. The housing deficit highlights room for growth, with official figures showing 150,000 households in Lima search for an apartment each year in a market with a supply of 25,000 units.

“Housing construction growth has outpaced that of overall construction since 2017, but there was a lull in subsidised low-income housing construction in 2018 as a result of political instability,” Alejandro Vera, research analyst at Core Capital in Lima, told OBG. “In 2019 low-income housing construction growth is expected to be around 10%, while the number of mortgages are also expected to increase.”


While political and economic instability have proven challenging to the construction industry in Peru, overall the sector is set for growth in the coming years. An increased supply of social housing to address the continuing deficit and an infusion of investment, combined with infrastructure development around the 2019 Pan American Games, is expected to create the base for further advancement in the sector. Investors are optimistic given the large portfolio of projects announced by the government, but authorities should be sensitive to concerns regarding project slowdown and transparency. “Maintaining government investment will create private investor confidence,” Herles Loayza, economics employee at CAPECO, told OBG. “Public investment needs to return to the 4-5% of GDP levels as seen in previous years as the economy is still at risk.”