Peru to award US$235mn railway project in Q3

Friday, February 9, 2018

Peru's government plans to select the winning bid for the US$235mn Huancayo-Huancavelica railway project in the third quarter as the Andean country seeks to modernize its transport infrastructure.

Proinversión, the state agency in charge of promoting private investment, met with potential investors and investment banks to gather input on the long overdue project, the agency said.

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The 30-year concession involves upgrading the existing railroad and train stations in addition to replacing ageing trains on the central Andean route, the agency said in a statement. Huancavelica, where precious metals miner Buenaventura operates the Julcani mine, is also a major agricultural region.

The railway line will also interconnect with the fourth stretch of the longitudinal Andean highway, to be awarded in 2019, according to the agency.

The railway line, known as the tren macho, is part of President Pedro Pablo Kuczynski's (pictured) drive to rebuild Peru's railway network, much of which has fallen into disuse since the privatization of state railway company Enafer in the 1990s.

Other projects include the US$5bn coastal railway, the 60km Tacna-Arica railway between Peru and Chile, lines 3 and 4 of the Lima metro and the 43km trans-Andean railway tunnel along the Lima-Huancayo railway line. Peru, Brazil, Bolivia, Argentina, Paraguay and Uruguay are also working on studies for the US$20bn bioceanic railway project.

President Kuczynski, the son of a doctor of German-Polish descent and French-Swiss mother who studied at Oxford University, has a passion for railways that stems from his years living in Europe.


In other infrastructure news, the comptroller's office and industry groups backed government legislation that seeks to keep companies functioning even while they are being investigated for links to the corruption case known as lava jato.

The government hopes to replace urgent decree DU-003, which for the past year has blocked accounts of construction firms linked to the Odebrecht scandal, halting about US$10bn in infrastructure projects and bankrupting 169 suppliers.

The opposition-controlled congress, however, has said it needs more time to study the new legislation, which proposes to establish a fund to ensure companies convicted of corruption pay their fines, already estimated at over US$1bn in the case of Odebrecht.

"It's a much better structured proposal that the decree 003, due to the ineffectiveness of this decree," Nelson Shack told state news agency Andina. "The suppliers, professionals and workers aren't necessarily responsible for the incorrect and illegal actions that the heads of these intervened companies presumably carried out."

Over the past three months, the Judiciary has arrested government officials and executives after raiding the offices of over a dozen construction firms from Peru, Brazil, Chile, Spain and Portugal.

Odebrecht, which in December 2016 admitted to paying hundreds of millions of dollars in bribes to secure contracts across Latin America, formed JVs with many of the companies in public-private partnership (PPP) concessions awarded during the governments of Alejandro Toledo (2001-2006), Alan García (2006-2011) and Ollanta Humala (2011-2016).

The impact of the halted infrastructure concessions may strip 1 percentage point from Peru's GDP growth this year, warned the Peruvian economy institute (IPE).

"If this goes wrong and construction companies are completely paralyzed, we're going to paralyze investments in PPPs," IPE director Diego Macera told Lima-based Radioprogramas. "The Pan American Games, the reconstruction of the north and billions of soles will all be paralyzed."

Kuczynski, meanwhile, narrowly escaped impeachment on accusations Odebrecht hired investment funds linked to him while he was a government official a decade ago. The president, a veteran investment banker, denies any wrongdoing.

Kuczynski was already struggling to accelerate US$25bn in infrastructure investment, including infrastructure for the 2019 Pan American Games, in addition to starting up a 26bn-sol (US$8bn) reconstruction program after flooding damaged infrastructure including roads and railroads last year.