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Home > Business/Finance > Diversified Services > Shipping & Logistics
Peru Freight Transport Report Q3 2007
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Although President Alan García, who took office in mid-2006, did not deliberately highlight the freight
transport sector in his policy platform, he has since underlined its importance, and we believe that the
success of his administration will depend at least in part on three key freight-related areas. BMI’s newly
released Peru Freight Transport Report identifies the three as the construction of the inter-oceanic
highway connecting Peru to Brazil, Pacific coast port development and the complex of natural gas
pipelines and liquefied natural gas (LNG) facilities associated with ongoing development of the Camisea
deposits. These three projects underpin BMI’s view that Peruvian freight transport turnover, measured in
million-tonne-km (mntkm) will grow by an annual average of 7.3% in 2007-2011, ahead of annual GDP
expansion of 4.9% in the same period. By value, the transport and communications sector will grow to be
worth US$2.95bn in 2011, representing 9.7% of total GDP.
The new president faces demands to make Peru more socially inclusive. A particular problem is posed by
conditions in the impoverished Quechua-speaking south of the country. It is here that accelerating the
construction of the inter-oceanic highway, intended to give Brazilian exporters an outlet to the Pacific,
could help boost regional development and raise living standards. Work on the highway, valued at over
US$1bn, began in mid-2005. Port development is another potentially critical element in future policy. The
outgoing administration of President Alejandro Toledo finally signed a 30-year concession for the
operation of Peru’s main port at Callao. In a US$617mn deal, the port is being run by Dubai Ports
World (DPW) and local partners; encouragingly the new operator plans to cut port charges, allowing
Callao to compete more effectively with Chilean and Ecuadorean Pacific coast rivals. Finally, despite a
series of controversies over its impact on the environment and on the rights of Indian communities, the
massive Camisea natural gas project is another development pole. Significant new Camisea deals were
signed this year with Suez Energy of France, Petrobras, and Chicago Bridge & Iron. Success depends
on building effective pipelines (first-phase pipelines have leaked with alarming frequency) and a modern
LNG coastal terminal, to facilitate exports by sea to Mexico and the US.
BMI’s view is that freight transport has a critical role to play in Peru’s development over the next few
years. Much will depend not only on the management of concrete projects, but also on the quality of the
business environment in this sector. BMI gives Peru a score of 42 (out of 70) in its freight transport
business environment, placing it just above average among its peers (39), behind Mexico and Brazil.
There is room for improvement in infrastructure development and the regulatory environment. Among the
risks facing our forecasts are political uncertainty (though much reduced after the recent elections) and
the possibility of a fall in the price of Peru’s commodity exports, leading to downward revision of
predicted growth rates.
On balance then, and despite the possibility of turbulence in the airfreight sector (traditionally volatile in
recent Peruvian experience) and slower growth in rail freight, BMI is projecting an encouraging future
for the country’s freight sector.
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