NEW REPORT: Energy in Peru - Investors Set Eyes on New Legal Frameworks, But Can the Country Deliver?

Peru is one of Latin America’s best performing economies of the last few decades. Although 2019 was a year of slowdown due to a number of factors – such as lower raw materials prices, delays at mining projects due to socio-environmental problems, reduced public infrastructure investment due to corruption scandals, and climate problems that impacted the fishing industry, economic growth reached 2.4%, well above the 0.1% achieved by Latin America and the Caribbean as a region, as estimated by ECLAC.

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The available forecasts are relatively optimistic, though they were made before the coronavirus outbreak which could affect Peru’s exports this year to its primary market, China. In a January 2020 report, the International Monetary Fund estimated that the country’s economic growth will enter a period of recovery in 2020. While the IMF highlights the threats that could darken the forecast, such as global economic problems and internal political uncertainty, it also outlines Peru’s macroeconomic strengths, like low public sector debt, healthy international reserve levels and a robust financial sector, which partially mitigate those risks.

An important element behind this optimistic outlook is Peru's portfolio of mining projects. Although some of these have been delayed by social and environmental conflicts, the projections are for growth in investments in the sector. According to the Ministry of Energy and Mines, in 2019 there was a 25% increase in mining investment compared to the previous year and it is estimated that it will continue to grow in the coming years, staying above US$6 billion per year.

The growth of the Peruvian economy, and especially of a sector such as mining, intensive in energy consumption, means a sustained increase in energy demand. In the electricity sector, the magic dates are 2023-2024, when "it will be necessary to have new efficient generation capacity to meet demand," according to Brendan Oviedo, president of the Peruvian Society for Renewable Energies (SPR).