Risks to Infrastructure Projects in Peru

Risks to Infrastructure Projects in Peru

New Infrastructure Regulation Provides Certainty for Investors, Project Delays Still Prevalent

Peru has had a high level of political uncertainty over the last several months but we think the new law which helps to guarantee payments to suppliers of infrastructure projects will lower the risk going forward. Peru has a $160 billion deficit in transport, energy and other infrastructure. 

 

New Regulations are Positive for Investors

Peru’s recently passed legislation related to the construction sector is positive for investors. The certainty and visibility surrounding vendor and supplier payments in the construction sector will help drive investment and move some projects back to operation.

We expect the government-backed projects in the infrastructure sector, and the relatively high copper price (Peru’s largest export) to continue to support funding for infrastructure in the country. We expect GDP in Peru to be in the 3% to 3.5% range over the next 12 months (driven by mining), but we expect construction activity to be flat, or down 1% or so.

The new legislation limits the risk to further downside in the construction sector in Peru, though projects will be delayed longer than many originally expected. When you include the project delays stemming from the Odebrecht scandal, we don’t expect any meaningful recovery in the infrastructure sector until mid-2019.

 

Construction Sector Should Recover in 2019

We think the construction sector in Peru will rebound in the second half of 2019 as projects continue to move forward, supported by low energy costs in Peru, and a robust and diverse project pipeline. Most of the investment has been going into transportation projects, followed by tourism related infrastructure like hotels.

Please contact Kijana Mack, Senior Consultant for more information or to access the full report.

Kijana Mack

kmack@latamenergyadvisors.com

Please contact us for more information about how to access the infrastructure sector in Peru.