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The Peruvian government was planning to execute two major transport infrastructure projects in the country, estimated to cost US$6.5bn in total, according to reports in early September. The news came as questions were emerging over how effectively government stimulus funds were filtering through to projects. The two projects had been approved by the cabinet, according to Peru's minister of transport and communications, Enrique Cornejo, as cited by América EconomÃa, and were awaiting congressional approval. The first project is in the roads sector, and envisages creating a road network in the Callao and Lima regions in the west of the country. It is estimated that the project will cost US$5bn, with the opportunity for it to be executed as a public private partnership. Developing a road network in the regions is planned to encourage investment into the area and improve competitiveness, productivity and safety.
The second project is the NorAndino railway project. This is estimated to cost US$1.5bn and will link the rich mining region of Cajamarca with Lambayeque and Piura, where the port of Bayovar is located, thus reducing transit costs and times for mining companies operating in the region. Peru's current infrastructure is presenting an obstacle to the country's competitiveness. Peru is rich in minerals, but poor transport infrastructure is hindering efficiency and increasing the cost of transport for mining companies.
The planned rail project in particular will help to alleviate this problem. According to the World Economic Forum's Global Competitiveness Report for 2008-2009, Peru's infrastructure ranks 113th out of 134 countries assessed. Although roads and rail place slightly higher, 99th and 90th respectively, they still present a competitive disadvantage to the country. The news of the government's plans came as Reuters reported that little evidence of the country's economic stimulus had been seen. In December 2008 President Alan Garcia announced plans to invest US$13.2bn into the economy through the construction of social and transport infrastructure, as well as other projects. However, it appears that little of this has actually materialised, with Reuters noting that less than 1% of what was allocated for the first half of 2009 has been spent.
We have eased back our short-term forecasts for Peruvian GDP growth but remain positive for the medium-term outlook. BMI now puts Peruvian GDP expansion in 2009 at 2.0% (was 3.2%), with stronger improvement next year to 4.4% growth (was 3.8%). Peruvian GDP will grow by an annual average of 4.6% in 2010-2014, weaker than the 7.0% average over the preceding five-year period of 2005-2009, but still healthy. We have broadly maintained earlier adjustments to freight-carried-to-GDP ratios across different modes of transport. However, we have re-set our forecast for maritime freight, linking it to trade volumes (rather than GDP as previously) and noting that the global shipping slowdown will be offsetting new investments going into Callao and other Pacific ports. Pipeline throughput projections have been lifted towards the tail-end of our forecast period as we are expecting the final phases of the Camisea gas project to have a positive effect. Camisea should also support maritime freight, with LNG exports to the western seaboard of North America picking up. Consequently we expect freight carried across all modes, measured in millions of tonnes per km (mntkm), to rise by an annual average of 6.9% across the forecast period, 2.3pps faster than the economy as a whole.
According to our latest estimates, transport and communications GDP will have risen by 2.2% in 2009, ahead of the 2.0% gain for the economy as a whole. For the 2010-2014 forecast period, we expect the transport and communications sector to continue outpacing the economy as a whole by a small margin. It will achieve average annual growth of 4.7%, versus 4.6% for overall GDP. The total value of transport and communications GDP will rise to US$2.76bn in nominal terms by 2014, representing 8.6% of Peru's GDP. The transport and communications sector employed an estimated 742,500 people, or 8.5% of the labour force, in 2009. We see those figures rising to 814,900 and 8.5% by 2014.
In terms of freight carried, measured in mntkm, no accurate statistics have been collected for the roadhaulage sector. However, based on the estimates, we expect that growth in road haulage will be ahead of the rate of expansion of the economy as a whole at 5.7% a year during 2010-2014. As in most developing economies, Peruvian freight-demand tends to run ahead of overall GDP. This is offset, however, by the limitations of the national highway network, which act as a constraint. It should be noted that the completion of the inter-oceanic highway between Peru and Brazil in the forecast period will have a strong positive impact on turnover. Traffic data are collected for the rail sector and here we predict average annual growth of 5.0%.
As far as maritime freight carried is concerned we expect growth to average 8.5% a year. Although the global downturn in trade and shipping pulled this number down in 2009, in the forecast period starting from 2010 we see a recovery on the back of mineral exports, extra investment in the ports as more private operators are brought in and, towards the end of the period, the initiation of significant LNG shipments from the Camisea field. In airfreight we are projecting average annual growth of airfreight tonnage of 5.0%.
Peru Freight Transport Report Q1 2010: http://www.companiesandmarkets.com/r.ashx?id=3181QWWF2169539
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