Peru's Infrastructure Investment Guide 2020/2021 for a Comfortable Interactive Experience, We Recommend to Use the Adobe Acrobat App
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Peru's Infrastructure Investment Guide 2020/2021 For a comfortable interactive experience, we recommend to use the Adobe Acrobat app 2 Infrastructure Investment No partGuide of this publication Edited by: may be reproduced, Ernst & Young Consultores SCRL distributed or transmitted in For its publishing trademark: EY any form2020/2021 or by any means, Av. Víctor Andrés Belaunde 171, including photocopying, Urb. El Rosario – San Isidro recording, or other electronic Lima - Peru or mechanical methods, without the prior written Design and layout: permission of the publisher. Carlos Aspiros © All rights reserved Photos: ProInversión, EY, © EY Shutterstock, iStock and Legado © Ernst & Young OficialPE-Flickr. Author(s): First edition - September 2020 Collective work Legal Deposit made at the National Library of Peru N° ISBN: 3 EY PERU OFFICES EY INFRASTRUCTURE TEAM Lima • Manuel Rivera Av. Jorge Basadre 330 Tax Infrastructure Leader San Isidro - Lima [email protected] Phone: +51 1 411 7331 Phone: +51 1 411 4444 • Juan José Cárdenas Av. Víctor Andrés EY Law Projects and Infrastructure Leader Belaunde 171 [email protected] San Isidro - Lima Phone: +51 1 411 3047 Phone: +51 1 411 4444 • Enrique Oliveros Arequipa Strategy and Transactions Lead Partner Head of Investment Banking EY Latam North Region Av. Bolognesi 407 [email protected] Yanahuara - Arequipa Phone: +51 1 411 4417 Phone: +51 54 484 470 • Mauro Ugaz Chiclayo People Advisory Services Partner Av. Federico Villarreal 115, [email protected] Salón Cinto Phone: +51 1 411 7414 Chiclayo - Lambayeque • Valeria Galindo Phone: +51 74 227 424 People Advisory Services Partner [email protected] Trujillo Phone: +51 1 411 7313 Av. El Golf 591, • Giancarlo Riva Urb. Las Flores del Golf III Global Trade Services Partner Víctor Larco Herrera 13009 [email protected] Sede Miguel Ángel Quijano Phone: +51 1 411 4444 Doig, Trujillo - La Libertad • Jorge Leturia Phone: +51 44 608 830 EY Law Environmental Leader [email protected] Phone: +51 1 417 3561 4 insights and explain the key elements for a A NOTE FROM successful expansion by international mining and metals companies into Peru. THE PRESIDENT Within this guide we have examined various aspects usually taken into consideration OF PERU by miners and investors from around the world before making critical decisions on the development of new mining operations. Included in this guide is an overview of Peru's political structure, business environment, macroeconomic profile, key Martín Vizcarra indicators and outlook for the next years, President of Peru geological potential, mining and metals sector trends and recent developments. At the end of 2018, Peru just reported an The guide also provides access to essential uninterrupted growth of 20 years. This information to assist foreign investors in means that our GDP growth was almost understanding the regulations governing 151%, more than doubling our economy investment and in particular the legal, during these two decades. There are taxation and regulatory requirements to three important sectors that should be operate in Peru's mining sector. highlighted, which boost our national economy: mining, agriculture, and tourism. First published in 2010, this guide has Mining represents nearly 10% of GDP, been designed to be easily consulted and the exploitation of minerals is one of the to offer a balanced and objective account foundations of the national economy. of areas of potential interest to foreign mining investors. In this sixth edition, we This is why EY Peru developed this mining have chosen to leave the general structure & investment guide. The first, and still the of the 2017/2018 edition intact. We have, finest, handbook of its kind. This document however, drawn from what we have learned has been structured to serve as an initial from those who have used this reference step in the process of evaluating the mining booklet and from our own experiences, and landscape in Peru. included the most recent data available in January 2019 and some additional As such, it will be useful to those who commentary on a variety of critical contemplate at least the possibility of topics. The aim is to supply international making long-term investments into the exploration and mining companies (majors exploration and development of new mines and juniors) with a fact base and critical in the country. information to facilitate and support their investment-making discussions and This publication has brought together decisions. We hope that this new material several of the mining industry's leading will be useful in the efforts to attract greater professionals from EY Peru, with a mix flows of foreign direct investment and that of legal, tax, economic and accounting the flows in turn benefit the country. backgrounds, to share their unique 5 A NOTE FROM subway and the Central highway), that were slowly progressing in the last years, would THE MINISTRY have a new boost through Government to Government agreements (G2Gs). This agreement was successfully applied for OF FOREIGN the Panamerican Games Lima 2019. Likewise, G2Gs will also be used as part of AFFAIRS an aggressive plan for “packaging” works in strategic sectors as education and health. Moreover, Peru offers a robust and Eduardo Chávarri diversified pipeline in Public-Private General Director of Partnerships (PPPs) detailed in this guide. Economic Promotion, Ministry of Foreign Affairs Peruvian experience in the use of this mechanism is stand out. At a glance, [email protected] Phone: +51 1 204 3360 between 2011 and 2017, 30 PPPs were awarded for a total amount of US$16 billion. I am very excited to introduce this guide It should be highlighted that the focus for stakeholders and potential investors is not developing public infrastructure in the infrastructure field. It is the result itself. There is an extremely large gap in of a joint effort from a diverse team, with essential services, deeply emphasized different background experiences and with the pandemic. Thus each project is perspectives, but mostly with the same a step toward improving quality of life for passion for promoting Peruvian investment citizens. With this clear purpose in mind, opportunities. According to a reliable all the endeavor should be driven to deliver source, Peru's gap in infrastructure, up high quality public services. Even though to 2025, will be US$160 billion therefore great works are expected, operation and we are committed to impulse its prompt maintenance with the highest standard reduction. possible, are also necessary to assure increasing living conditions. We could not have chosen a better timing. Our country is still struggling with COVID-19 From a tax standpoint, Peruvian legislation and its collateral effects in our economy. In offers outstanding benefits that should be this challenging scenario, it is well known considered to determine the profitability that public investment is a great driving of a business. Some examples are: tax force to stimulate the market, in terms of stability agreements by which corporate providing rapidly private companies new income tax and dividend withholding tax options to offer their goods and services, as freeze during the entire period of a project; well as creating new jobs opportunities. foreign currency accounting; special and accelerated tax depreciation and Recently, our President Martín Vizcarra, amortization rates; early recovery of VAT, announced that some of the most attractive among many others. megaprojects (as Lines 3 and 4 of Lima 6 A NOTE I am very glad to introduce the first edition of the EY Peru Infrastructure Guide. It FROM EY has the main purpose of serving as a tool for documentation and evaluation of the infrastructure field in Peru, in order to offer to foreign investors a real and recent view Paulo Pantigoso of such Peruvian market and to encourage Country Managing Partner them to know and take advantage of the EY Peru offered opportunities. in/paulopantigoso Because of COVID-19, we are experiencing extraordinary, dramatic and life changing events. Peruvian economy in particular, aligned with global economy, needs urgently to be energized. To such effect, public and Public investment private investments are fundamental. As “in infrastructure is a first step to do so, nothing better than clear and updated information, as the one a necessary path to included in this publication. stimulate the recovery In this way, EY reaffirms its commitment to contribute to the progress of the country of our economy, and the growth of companies. Our intention is to offer readers a friendly and concise especially in an overview of the economic performance and extraordinary scenario business environment in Peru. as the pandemic. We express our deepest thanks to our President of Peru, to our Ministry of Foreign Affairs and to ProInversión, as well to all my EY team, for the collective collaboration to prepare and offer this guide, which includes the current project pipeline detailed on section 3.4. We invite you to contact us if you have questions and we wish you the best for all the investment opportunities you find in Peru. 7 A NOTE We have chosen a good timing for it. Peru's gap in infrastructure, up to 2025, will be US$110 billion. We are committed to FROM EY impulse its prompt reduction. Moreover, our country is still struggling with COVID-19 and its collateral effects in the economy. In this challenging scenario, it is well known that Manuel Rivera public investment is a great driving force to Tax Infrastructure stimulate the market, in terms of providing Leader rapidly private companies new options to in/manuelriverasilva offer their goods and services, as well as creating new jobs opportunities. Peru has followed this path. Recently, our President Martín Vizcarra, announced that some of the most attractive megaprojects The pandemic (as Lines 3 and 4 of Lima subway and “ the Central highway), that were slowly is revealing the progressing in the last years, would have a new boost through Government to importance of Government agreements (G2Gs).