Peruvian PPPs slowed, works-for-taxes increased in 2022

Some Peruvian public-private partnerships have not advanced as expected, while the works-for-taxes mechanism is increasingly popular.

Private investment agency ProInversión is still adding projects to its PPP portfolio, but contract preparation and approval of budgets and bidding processes slowed down in 2022. Meanwhile, especially miners are using the works-for-taxes mechanism.

PPPs

In January-September 2022, a US$60mn educational infrastructure project – involving three new high-performance schools in the regions of Pasco, Cusco and Huancavelica – was awarded to Mexico’s Marhnos, while Acciona Concesiones won a US$19mn concession for the 220kV Reque-Nueva Carhuaquero transmission line and the Nueva Tumbes substation.

In August, ProInversión said the US$217mn Piura-Nueva Frontera transmission line, the US$56mn Ica-Poroma link, the US$74mn ITC Cáclic-Jaén line and the US$59mn Puerto Maldonado wastewater treatment plant would still be awarded in 2022.

But the Piura-Nueva Frontera tender in December failed because only one company submitted a bid. Updates on the other projects were not provided.

Part of the problem stems from budget coordination issues between the economy and finance ministry (MEF) and other entities, Yovanna Ramírez, head of economic studies at infrastructure association AFIN, told newspaper Gestión recently.

Still, the ministry stepped up efforts to tackle the economic fallout caused by social protests that erupted after Pedro Castillo was removed from the presidency. Measures include simplifying budget processes and analyses of projects in advanced structuring stages.

In addition, upon a request from the MEF, former production minister José Antonio Salardi Rodríguez took over as head of ProInversión from Rafael Ugaz, under whose watch PPPs lost attractiveness.

WORKS-FOR-TAXES

The works-for-taxes mechanism – allowing companies to finance certain works in exchange for tax breaks – is more popular. These works are simpler than those carried out as PPPs, require less capital, and private companies are fully in charge.

During 2022, 70 projects totaling 447mn soles (US$118mn) were added – 32 projects awarded and 38 agreements between companies and public entities signed.

Miner Antamina signed three agreements totaling 59mn soles for improvements to potable water, irrigation and sewerage systems in Ancash region.

Hudbay will invest 15mn soles to improve Chumbivilcas’ sanitation system, while Anglo American signed a 12mn-sol contract to improve and expand the coastal boardwalk in Ilo, for which construction is planned to start in March.