Andina

Peru: Infrastructure investment to benefit from legislation

00:02 | New York City (U.S.), Nov. 2.

Peru’s infrastructure investment will benefit from legislation passed this year that aims to tackle corruption and streamline processes of public and private investment to speed the pace of project execution, Moody’s Investors Services has affirmed.


"However, we do not expect the political fallout to have a significant impact on economic performance in the coming months," the credit rating agency indicated.

"Moreover, we expect investment will continue to recover and only be minimally affected in 2019," it added. 

That said, in order to address its estimated US$160 billion infrastructure gap, Peru must continue to take steps toward strengthening its institutions, similar to the four key political reforms President Vizcarra proposed, which were approved by Congress and will be included in a referendum on December 9.

Peru —the sixth-largest economy in Latin America— was until 2016 one of the most active markets in the region and one of the leading public-private partnership (PPP) markets in Latin America. But corruption scandals —fueling an already volatile political environment, in addition to last year's floods from Coastal El Niñoput the brakes on progress

In 2018, investment began to recover, and this will develop further with key new projects in the transport and energy sectors, as well as reconstruction in the wake of El Niño phenomenon. 

"These trends are credit positive for a number of our rated entities in infrastructure industries, which we see benefiting from new business opportunities as more projects are tendered," Moody's expressed. 

Public-private partnerships through 2020

On the other hand, the Inca country is set to launch over 40 public-private partnerships through 2020, totaling investments of around US$6 billion. This includes seven electricity transmission projects that will be tendered, with an estimated investment of US$519 million, which could benefit companies in the transmission business sector.

In addition, a US$400 million gas distribution project for Peru's southeast region will be launched. 

"While these investments will likely require debt funding, which could increase leverage, we expect affected companies to maintain an adequate credit risk profile," Moody's said. 

This is primarily because they operate in a regulated sector where tariffs are set such that companies earn a return on their investments.

(END) NDP/DTK/MVB

Published: 11/2/2018