2013-02-25 10:05:46 - New Construction market report from Business Monitor International: "Peru Infrastructure Report 2013"
BMI View: Peru is planning to oversee US$20.5bn in infrastructure investment between 2011 and 2016. Peru's construction sector experienced strong growth over the first half of 2012, prompting us to revise up our full-year 2012 real growth estimate to 12% year-on-year. High value investment plans to expand Peru's infrastructure over the next few years should continue to drive strong growth; however, cracks in the business environment cannot be ignored and may erode growth potential over the medium term.
Over 2012, protests, which were often violent, were growing in frequency across a number of strategic industries, opposing projects ranging from new mines to power plants. Nevertheless, strong demand for infrastructure, which will be crucial to Peru's future economic growth, has resulted in
strong government support for infrastructure investment. Peru has been very keen, in particular, to attract private investment into the country. Between 2013 and 2017, we are forecasting annual average construction growth of 8.2%.
Full Report Details at
The key trends and developments in Peru's Infrastructure sector are:
* The populist mandate of new Presidential Ollanta Humala had threatened to damage Peru's business environment, which has made great strides in recent years. However, Humala has moved further right since coming to power, in 2011, and has engaged with the private sector in a positive way. Therefore the immediate concerns in the aftermath of his election have mostly receded.
* Billions of dollars is being ploughed into Peru's mining sector, putting pressure on the country's existing infrastructure and creating huge demand for new capacity. Mining is typically both electricity- and water-intensive; this is placing a strain on existing infrastructure, which in turn is threatening mining activity. Therefore investment into desalination plants, expanded electricity supply and more reliable transmission and distribution is crucial to the sector, as well as the country's economy.
* Peru has a large concession pipeline, orchestrated by private investment agency ProInversion. The agency has a significant pipeline of infrastructure concession due to come to market, including four ports, airports, power infrastructure and desalination plants. The agency in itself is a good omen for the potential to attract investors.
* Increased interest is seen in renewables, with wind power and biomass, in particular, attracting attention. As developed markets cut back subsidies and incentives, Latin America is seeing growing interest from renewable developers. Peru desperately needs to diversify its electricity mix away from hydropower, and renewable seems to be a popular choice. In October 2012, it was announced that Chinese solar photovoltaic module manufacturer Yingli Green Energy has supplied 40 megawatts of solar PV modules to a solar project in Peru. The project's two parts are located in the Tacna and Moqueua regions in southern Peru. They cover an area of 120 hectares (ha) and 123ha respectively. Both sections were expected to begin operations by end-2012.
* Power sector investments in Peru reached US$1.32bn in H112. Out of the total investment, US$786mn was spent on power generation. Private investment accounted for US$775mn, while the state invested US$10.5mn. Enersur topped the list, with US$270mn investment. A total of US$60.7mn was invested by the ministry's rural electrification department (DGER) in that period. Transmission attracted US$306mn from private firms, while US$226mn was spent on the distribution front, with private and public investment accounting for US$78.5mn and US$148mn respectively. DGER is expected to invest US$155mn and US$319m in 2012 and 2013 respectively.
* Tied to the President's mandate will be the focus on poverty reduction and improving the distribution of wealth. Although this is most likely to see government expenditure pick up, with a focus on social handouts, it could also see GDP per capita grow in a more equitable way, which would boost demand for basic utilities. Improving rural electrification and access to water will drive industry value creation.
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