The Business Year Special Report
Leonie Roca, President, Association for the Promotion of the National Infrastructure (AFIN)
Given the numerous possible projects in Peru including roads, telecommunications, ports, and airports, AFIN believes the country has much to offer foreign investors.
What are your strategies to get the most out of the USD28-billion investment that the government announced for infrastructure development?
We still have many problems in terms of the institutional framework in Peru that would permit a proper execution of that amount of money. Our procurement law will hopefully be changed because we still have many bureaucratic problems with that law. Therefore, we are using the G2G government arrangements to develop and execute the biggest projects. For example, lines 3 and 4 of the metro, the Carretera Central project, and other large projects will be done by G2G arrangements. Success in executing such a large amount of money in infrastructure depends on amendments to the procurement law, the success of G2G arrangements, and in giving Proinversión greater autonomy to handle all PPP projects.
Will improving the regulatory framework enable PPP projects to take off?
We had a fairly successful performance in the past. We had some areas of corruption though not the entire system was corrupted. The problem is that the response to the corruption was to put many institutions in charge of PPP projects to weaken Preinversión, placing a great deal of power into the hands of public servants. The result in the last four years therefore has been mostly nothing. We had such a good performance, and then we stopped, and this is when COVID-19 caught us. We have to do something to return to the times when Preinversión was the leading agency in charge of promoting PPPs, dealing with investors, and giving security to their investments, all of which we had in the past. In that sense, it is not that difficult, as we know where to move toward.
What role can AFIN play to get this agenda moving?
We have two major roles. The first is to protect the investments that are already here, which means facilitating all the procedures and coordinating with public officials. We are a gateway between the government and the companies that are involved. That is a major issue, as there are many regulatory problems. In addition, one of our major roles is to promote the idea that private investment in infrastructure is not only good in terms of having fresh capital but that people will receive a certain quality of service. That should be the major concern for the public sector, as it is heavily focused in terms of infrastructure building and not on the service it is for. We keep sending proposals to congress, though unfortunately we have been defending the processes more than forming new proposals. Even though the last two or three years have been difficult due to the nature of congress and the poor nature of our political system, we still promote laws, decrees, procedures, and ideas. We move more in the space of public opinion and developing webinars with congressmen and political leaders. We have many good examples of how a PPP can work for hospitals, which are an example of how public money can be spent properly and efficiently.
How is AFIN working toward making the sector more sustainable?
We have always been fighting for it, but the companies affiliated with AFIN have concession contracts. If we are thinking about sustainable roads, ports, or telecommunication infrastructure, then companies have to know from the beginning that the investment will be higher, and the payoff will come in time. It will not only come from the infrastructure itself but also because the externalities it will generate will be lower in terms of environmental impact and higher in terms of environmental improvement. The problem comes during the design of projects, whereby the public sector still does not view sustainability as a major issue that has to be prioritized. The way it designs projects and evaluates its economic and social impacts is the way we used to do so 20 years ago, when all the impacts were based on expense. We have to put in great effort to introduce environmental and sustainability issues during the design of projects.