Peru Freight Transport Report Q1 2008: Industry Research Report

Peru Freight Transport Report Q1 2008

Published Date: November 2007

Published By: Business Monitor International

Page Count: 47

Order Code: R302-1518

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Peru’s impressive economic growth is benefiting the freight-transport industry, although the politics
remains somewhat turbulent. A rash of strikes and protests in July briefly disrupted air and road traffic.
More positively, mid-2007 also saw advances in the funding of the Peru liquefied natural gas (LNG)
project, designed to liquefy and export natural gas. President Alan García, who took office in mid-2006,
is focusing on three key freight-related priorities 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 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
7.8% in 2007-2011, ahead of annual GDP expansion of 5.2% 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 Co. 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 (38.9), 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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