Peru proposes new infrastructure ministry to tackle project bottlenecks
Peruvian President Dina Boluarte announced the creation of the Ministry of Infrastructure (MINFRA, as per its Spanish acronym) during her Message to the Nation on July 28, 2024. MINFRA aims to address the country's substantial deficit and simplify and improve the implementation of relevant public projects nationwide.
As of June 2024, 1,965 investment projects had lost their viability declaration at the national level, and 372 had their tender documents become outdated, emphasizing the need for more cost-efficient management. The MINFRA initiative is seen as a significant step in streamlining these processes.
Legislative framework
The proposed bill outlines integrating existing public entities under a centralized entity, with an initial budget exceeding USD4.355 billion. MINFRA's mission is to plan, coordinate, formulate, execute, and supervise public infrastructure management on a national scale.
State agencies to be absorbed
MINFRA will consolidate several key entities, each with its respective budget:
- National Infrastructure Authority (ANIN), tasked with prevention and protection projects against natural disasters and other common woes, such as those derived from climate change: USD1.468 billion
- Agency for the Study and Design of Investment Projects (OEDI): USD3.471 million
- Special Legacy Project (Sports infrastructure): USD73.681 million
- Agrarian Rural Productive Development Program (AGRORURAL): USD101.965 million
- Subsectorial Irrigation Program (PSI): USD96.804 million
- National Health Investment Program (PRONIS): USD259.990 million
- National Educational Infrastructure Program (PRONIED): USD302.610 million
- Safe Water Program for Lima and Callao (PASLC): USD110.003 million
- National Urban Sanitation Program (PNSU), tasked with water and sewerage projects in cities: USD223.012 million
- National Rural Sanitation Program (PNSR), tasked with water and sewerage projects in rural communities: USD147.703 million
- National Fisheries Development Fund (FONDEPES): USD29.790 million
- National Provías (national highways): USD1.133 billion
- Decentralized Provías (national and rural roads): USD440.550 million
The goal is to centralize and optimize resource use, enhancing the efficiency and coordination of infrastructure projects.
Drawing inspiration from international models
The MINFRA proposal is inspired by international models, such as Chile's Ministry of Public Works, known for its concession management and private sector participation; the UK's Department for Transport, which oversees transportation policy and infrastructure regulation; and Argentina's Ministry of Public Works, which was tasked with promoting inclusive development before being absorbed by other entities.
Three-phased implementation
The establishment of MINFRA will unfold in three stages, each focusing on specific actions to ensure a smooth and efficient transition:
1. Transfer phase (90 business days)
A committee will oversee transferring functions, assets, resources, personnel, and materials from the merging entities. A comprehensive report will be submitted to the Prime Minister's Office, and the Organization and Functions Regulations (ROF, as per its Spanish acronym) and other management documents for MINFRA will be reviewed and approved.
2. Execution phase (24 months)
MINFRA will be implemented following the ROF's approval, and the Supreme Decree will pass the National Infrastructure Plan with the Council of Ministers' approval.
3. Consolidation phase
The transferred entities will continue their functions under existing management documents until the ROF is approved. This phase will focus on the centralized and efficient management of the projects.
Key challenges
If approved, MINFRA will likely face several significant challenges. One issue will be to understand the various steps of each specific project, eg, land title clearing or the implementation of public services in a school or hospital. How will MINFRA address such bottlenecks?
Another probable challenge is how the ministry will, in a coordinated fashion, establish cross-sectional decision making among the highly specialized teams it will incorporate. This hurdle may prove significant, especially if the aim is to unify the design and execution of infrastructure into a single entity.
For MINFRA to operate efficiently, it will likely need to establish criteria for prioritizing bids and awards. Project transfers would likely benefit from being transparent and orderly, ensuring continuity without delays to maintain the confidence of current and future investors. Additionally, with the centralization of a large budget, integrity and anticorruption measures, including internal preventive controls, may be necessary.
How MINFRA will impact infrastructure projects in Peru
Companies operating in Peru, especially in the construction and infrastructure sectors, are encouraged to closely follow the creation of MINFRA to verify whether this constitutes an opportunity to improve the current infrastructure deficit.
Currently, situations such as high official turnover, deficiencies in technical files, and pending controversies, among others, contribute to the existence of a long list of paralyzed projects. Their negative consequences often directly impact the creation of a favorable climate for investment and confidence in the national economy.
On the other hand, companies are encouraged to monitor how MINFRA will prioritize investment in public services in health, sanitation, irrigation, agriculture, education, transportation, and disaster prevention.
A long legislative road ahead
As it first enters Congress for evaluation and debate, the bill to establish MINFRA still has a long road ahead. The proposal is expected to undergo thorough analysis with input sought from various industry groups and the relevant ministries.
Contact information
For more details on the legislative proposal and its implications, please get in touch with the authors or another member of DLA Piper Peru’s Projects and Infrastructure team.
