The CAF in Peru: permanent and timely backing

Like the other Andean countries, the CAF is Peru’s main source of multilateral financing. The country receives permanent and timely support from the Corporation, which has become one of the mainstays in achieving macroeconomic stability, and a fundamental partner in strategies to combat poverty and generate development.

At the end of 2003, the CAF loan portfolio recorded a balance of US$1.40 billion. Total loans and capital investments with Peru for the 1999-2003 period grew 43%, including the portfolio managed for account of third parties. This amount was equivalent to US$983 million in 1998.

At the end of 2003, Peru’s share of the Corporation’s direct portfolio was 21%, second among shareholder countries.

Peru’s strength: infrastructure

At December 2003, almost 75% of the CAF loan portfolio in Peru was invested in infrastructure, 8% in public administration (including support for competitiveness and governance programs, among others). Manufacturing received 2.8%, mining 1.8%, commercial banks 0.7% and the remaining 11.7% went to other sectors.

Public-sector clients received 96% of the loans and capital investments portfolio, while 4% was granted in loans to the Peruvian private sector (companies and banks), which reflects the important role that Peru has assigned to the public sector, especially in recent years.

Over 95% of the CAF’s Peruvian portfolio is for operations to finance medium- and long-term investment programs and projects, directly or through loans granted to local development and commercial banks, which reflects the multilateral’s efforts to provide Peru the funds needed to finance long-term projects.

The major infrastructure projects financed by CAF include the Ilo-Desaguadero Highway, one of the key sections of the physical interconnection between Bolivia, Brazil and Peru, for an amount of US$80 million. The rehabilitation of the Rioja-Tarapoto Highway in San Martín department (US$50 million), support for the National Highway Rehabilitation And Maintenance Program (US$50 million).

Lastly, a US$172-million loan for the Transport Sector Development Program will be allocated to the following areas: strategic development of transport to improve and conserve the national, departmental, rural and port road infrastructure; strengthening of the Ministry of Transport and Communications, and support for reform of the sector.

The National Road Network consists of the major roads and trunk corridors linking departmental capitals, major cities, productive areas, ports and borders, which carry approximately 90% of cargo and 80% of passenger traffic between provinces.

Infrastructure loans were also made finance public investment projects, for example, US$110 million for Chavimochic, Libertad department, to prepare an immense area of irrigation and agroindustrial investment, destined for agro-exports, including support for construction of irrigation works etc.

A US$25-million loan was granted to complete the San Gabán hydroelectricity plant in Puno department on the Bolivian border, which supplies electricity to a large part of the Andean “trapezoid” in the south of the country.

Another important operation was the US$25-million loan for the Lima public sanitation company (SEDAPAL) for expansion of a project to lay water and sewage networks in marginal urban areas of the capital and in the Callao constitutional province.

Camisea and Yuncán: energy development and interconnection

Funding was approved for two private infrastructure projects. The utility Transportadora de Gas del Perú (up to US$75 million) was granted a loan for works to transport the gas produced in Camisea, Cuzco department, to the coast for distribution in Lima and other cities, and for export to the United States and/or Mexico.

The funds will be used for construction and installation of a two-pipeline system to transport gas and its liquids from the Camisea fields to Lima and El Callao.

The Camisea project, with a total cost of US$1.60 billion, is one of the most important investments in the history of Peru given its broad impact on the economy. The substitution of coal and imported oil products for Camisea gas will reduce environmental pollution, cut electricity costs, improve the balance of payments, generate important tax revenue and, in general, raise the country's economic competitiveness.

In the second operation, the CAF granted Peru a US$50-million guarantee for construction of a 130-MW installed capacity hydroelectricity plant in the Paucartambo and Huachón river basins, Pasco province, 340 kilometers northeast of Lima.

The guarantee covers the State’s commitments to the winner of the contract for completion of the Yuncán hydroelectricity plant, which the government is carrying out through an innovative scheme to involve private investment and relieve pressure on State funds.

Another loan for US$220 million was approved for the "Competitiveness, Governance and Social Investment Support Program." This program has three independent but complementary components, whose objective is to stimulate the growth of the economy at sustainable rates, generating employment and reducing poverty.