Moody's underscored that Peru has a solid agenda of Public-Private Partnership (PPP) projects, worth close to US$24 billion, which will favor infrastructure development in the South American country.
The rating agency detailed that these PPP plans are expected to be tendered between 2024 and 2026.
"Its main objective is to close the gap in (terms of) public services, including sewerage, health, transportation, and agricultural development projects," it said in its report "Infrastructure and Project Financing - Latin America and the Caribbean."
Moody's specified that for the first half of 2024, ProInversion had already tendered road infrastructure, port, mining, and transmission projects worth US$5.1 billion.
The 2024 portfolio includes projects linked to: transmission, railway-road infrastructure, health, and industry that might attract an additional US$3.2 billion.
Strategic Initiatives
Moody's considered that there are several strategic initiatives underway in the transportation sector that support the growth of investments in PPPs.
"Peru is carrying out some important road infrastructure projects to enhance regional connections and increase the country's global competitiveness," it underlined.
One of them is the Government's plan that includes investments with neighboring countries Bolivia and Brazil to help them reach Chinese markets through ports and decrease maritime transport time through the Panama Canal.
The new transportation infrastructure might also help reduce shipping and security costs for mining companies in Peru, it added.
Business confidence
Moody's noted that while business confidence remains relatively low compared to pre-pandemic levels, public services and the mining sector continue to generate considerable investments.
"Private investments in electricity and water-sewerage distribution projects continue to grow. Besides, the mining sector is more protected from political and economic fluctuations in Peru, as investment in the sector depends on international prices and commodity demand," it pointed out.
Additionally, the credit rating agency asserted that access to long-term financing is a major obstacle to unblocking forecast investments.
It noted that while Peru's Constitution provides a favorable investment environment, risk aversion and high interest rates have resulted in reduced bond issuance volumes.
Freedom of trade
Moody's stated that the Peruvian Constitution guarantees non-discriminatory treatment towards local and foreign investors, freedom of trade and industry, the right to send remittances abroad, and freely re-export any capital investment.
It also allows for free possession of foreign currencies, unlimited access to local credit market, the right to hire foreign insurers or technology providers, and the means to enter into legal stability agreements with the Government for their investments in Peru, it added.
On the other hand, Moody's said the withdrawals of pension funds at the beginning of 2024 reduced the assets under management, which limited the availability of local financing sources.