Peru to accelerate mining projects, post-floods reconstruction

Peru is on track to start work on US$10bn in mining projects and a 20bn-sol (US$6bn) post-flooding reconstruction effort as the country seeks to jump start its flagging economy, President Pedro Pablo Kuczynski said.

The government, which has signed contract addenda to speed up line No. 2 of the Lima metro and the US$1bn Lima airport expansion, will also speed up efforts to move forward with the US$7bn southern natural gas pipeline and US$500mn Chinchero airport project, said Kuczynski, who was marking his first year in office on Friday.

The ongoing Odebrecht corruption scandal, which has halted a series of major infrastructure projects, and the destruction caused by the El Niño phenomenon in the first quarter will strip 2 percentage points from Peru's GDP growth this year, Kuczynski said.

"Two events coincided that were beyond our control. I underestimated the titanic effort needed to reactivate growth in a context like this," he said in his state of the nation speech in congress. "Growth will be less than 3% this year, which is totally unacceptable in an emerging economy."

Kuczynski, who won the 2016 elections on pledges to unlock US$25bn in blocked infrastructure investment, in addition to tens of billions of dollars in mining and energy investments, has struggled to accelerate projects in the face of the opposition-controlled congress.

Peru's economy, which needs to create 300,000 jobs a year to absorb a young workforce, will grow 4% in 2018 as public and private investment projects move forward, he said.

The recovery in metals prices, which have helped Peru post 12 consecutive months of steady increases in export revenue, will help fast-track the development of the Quellaveco, Michiquillay and Mina Justa copper projects and the Corani silver property over the next 18 months, the president said.

"Peru has much more potential to grow more than 5%," Roque Benavides, chairman of precious metals producer Buenaventura, told reporters. "Business confidence is improving and there will be much more investment in the second year of this government."

INFRASTRUCTURE

A program dubbed reconstruction with changes aims to provide temporary homes by the end of the year for all those left homeless by El Niño, while construction work will get underway on 8,700km of roads, 2,000 schools, 47,000 homes and 150 health posts, Kuczynski said.

Overflowing rivers and landslides caused by the climate phenomenon left 158 dead and 291,000 homeless and caused over US$3bn in damage to water and power plants, schools, hospitals, housing, bridges, railroads and roads, according to the central bank. Kuczynski has placed a longer term price tag of US$9bn to resettle communities away from vulnerable areas such as gullies and riverbeds.

The government is also working on studies with specialized firms for the Barranca-Ica railway, while another 60bn soles in infrastructure projects are pending approval, he said.

The government will also propose legislation to allow public-private partnerships to build sewerage treatment plants as most of Peru's 50 municipal water companies are undergoing restructuring, Kuczynski said.

The government aims to install potable and sewerage services for 100% of Peru's urban population and 84% of its rural sector by 2021 with a 50bn-sol investment program, he said. Services will be extended to another 710,000 people this year and 8mn by 2021, according to Kuczynski.