Peru to increase tax swap infrastructure spending

Peru aims to more than double the amount invested in tax swap infrastructure projects this year as the government struggles to get its sluggish economy moving again.

The government has set a 1.600bn-sol (US$485mn) target for the program known as obras por impuestos, up from 715mn soles last year, finance minister Alfredo Thorne said. Proinversión, Peru's agency in charge of promoting private investment, had earlier set a 2017 target of 1bn soles.

The government pushed through modifications to the law governing tax swaps to include rural electrification; the fishing, transport, telecommunications and judiciary sectors, and urban construction and social programs, according to a notice published in state gazette El Peruano.

The new regulations for the law also eliminated a 60.75mn-sol investment ceiling for projects and will enable local and regional governments to jointly build them. The new system will also simplify the evaluation process for infrastructure projects, Thorne told reporters in Lima.

Since 2009, Proinversión has awarded 2.615bn soles in 244 tax swap projects. President Pedro Pablo Kuczynski, who took office in July, is working to eliminate bureaucratic obstacles to US$25bn in infrastructure projects.

PAN AMERICAN GAMES

One of the country's most embarrassingly delayed commitments - to host the 2019 Pan American Games - got a boost as earthworks got underway at the 369mn-sol Pan American Villa in Lima's Villa El Salvador district. Former president Ollanta Humala, who took on the commitment to host the games in 2013, came under criticism for making little progress on the 4bn-sol project since then.

The Peruvian armed forces will help on the four month-program before the government calls for construction bids for the 44.92ha villa with capacity for 9,000 athletes, transport and communications minister Martín Vizcarra said.

The villa, which will include seven 20-story apartment buildings, a clinic, cafeteria, offices, shopping mall, gym, chapel and amphitheater, is due for completion by November 2018.

"This work will be carried out with total transparency, ensuring the correct use of state funds," Vizcarra said in a statement posted on the ministry website. "This will put Peru in the global spotlight."

ODEBRECHT

In other infrastructure news, shares in Peru's largest construction and engineering company Graña y Montero tumbled 33.33% after media reports claimed the company was aware of its partner Odebrecht's plans to bribe government officials in exchange for infrastructure contracts.

Local media cited declarations allegedly made by former Odebrecht country manager Jorge Barata claiming Graña y Montero and fellow Peruvian construction company JJ Camet knew Odebrecht planned to pay US$20mn in bribes to former president Alejandro Toledo to secure a contract for the Inter-Oceanic Highway (IIRSA).

Peru's government has issued an arrest order for Toledo, who has denied the charges. GyM, Odebrecht's partner in the Lima metro, IIRSA and southern Peruvian natural gas pipeline, was unaware of Odebrecht's actions, according to testimony from Graña y Montero CEO Mario Alvarado Pflucker to a congressional panel earlier this month.