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Peru Freight Transport Report Q3 2007Product Type: Market Research ReportPublished by: Business Monitor International Published: September 2007 Product Code: R302-1490 Description Although President Alan García, who took office in mid-2006, did not deliberately highlight the freighttransport 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. Table of Contents
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