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Peru will extend privatization to seaports and airports
Development Business / October 31, 1998

By Larry Luxner

LIMA -- Having generated over $8 billion from the sale of Peru's state-owned telecom firms, electric utilities, mines, fisheries and banks since 1991, the Fujimori government now plans to privatize all operations at the nation's major ports by next year.

Jorge Gonzalez Izquierdo, Peru's minister of labor and president of state privatization agency COPRI, says the process will begin by Dec. 15 with the concessioning of operations at the southern ports of Ilo and Matarani. These two ports, which together account for less than 3% of total sea traffic, see their future primarily as a Pacific outlet to landlocked Bolivia.

"Since 1990, there has been growing participation of the private sector in the terminals' complementing services, in preperation for their privatization," says a fact sheet issued in mid-August by state-owned Empresa Nacional de Puertos S.A. (ENAPU). "Today, activities such as pilotage, tugging and stevedoring are carried out by ENAPU and by private-sector companies, which set their own prices. Nevertheless, ENAPU's prices are still determined by government regulation. Additionally, several companies offer warehouse services outside of the terminals' area."

Together, Ilo and Matarani are expected to generate $160 million in investment. Other ports will later be included in the process, including Paita, Salaverry, Chimbote, Callao and General San Martin -- which together account for 99% of Peru's cargo traffic.

"These two will be privatized by year's end," says Gustavo Caillaux, Peru's minister of industry, commerce and tourism. "These ports could be the main ports for Bolivia, and we're going to finish the 80-kilometer road between Ilo and the Peruvian-Bolivian border at Desaguaderos." Chief commodities expected from Bolivia include soybeans, timber and minerals.

Caillaux disputed arguments that the privatization would mean layoffs at Ilo and Matarani, explaining that "the ports will move more than now, so they'll end up with more employees than before."

Jaime Garcia, general manager of the American Chamber of Commerce of Peru, says it's about time the government took this crucial step.

"We are in a better situation than five years ago, but compared with our neighbors, we still need to improve," he said. "It's not enough to talk about the past, which is what all the politicians do. They've been talking about this for seven years."

Last year, according to COPRI, Peru's seven ports handled a combined 13.9 million metric tons of cargo, led by Callao (9.06 million tons), San Martin (1.46 million tons) and Matarani (1.07 million tons). In 1997, Callao handled 321,567 TEUs of containerized traffic, or 86% of Peru's total, while Ilo (with 12,783 TEUs in 1997) has seen a 66.4% growth in containerized traffic during the last five years.

Undoubtedly, Callao is the big prize -- and experts say it will need at least $300 million in port infrastructure investment. Principal commodities exported through Callao include metals, minerals, fishmeal, general cargo and containerized goods, while leading imports are grains, petroleum, chemicals, fertilizers and containerized cargo.

Separately, the Peruvian government plans to begin transferring the operation of the country's main airports to the private sector by year's end.

At present, Corporacion Peruana de Aeropuertos y Aviacion Comerical (Corpac) oversees 33 airports and 28 aerodromes. With 1,600 workers (900 in Lima and 700 elsewhere), Corpac's main airports are Aeropuerto Internacional Jorge Chavez in Lima, adn international airports in Arequipa, Cuzco and Iquitos; Corpac's total capacity is 7.5 million passengers, 200,000 flights and 120,000 metric tons of cargo per year. In 1997, the agency had income of $90 million, and handled 5.68 million passengers and 59,724 tons of cargo.

Planned investment at Lima airport alone is $150 million to $200 million. Projects to be developed include main building improvement, aircraft fueling systems, freight warehouses and runways. Jorge Chavez International Airport accounts for 97% of Peru's total international passenger traffic, and 99% of its air-cargo business.

Parsons Latin America has been selected as engineering consultants to prepare the basis for 30-year concession. Total expected investment could reach $500 million.

The Fujimori government is also offering concessions in other sectors of the economy. Last month, it signed a contract with Deutsche Morgan Grenfell to handle privatization of three state-owned refineries: Talara, Conchan and Iquitos.

Talara, to be sold off early next year, refines 62 million barrels of oil a year, supplying 40% of Peru's local market demand; 85% of its production ends up as kerosene, gas, LFP, Turbo A-1 and diesel fuel. Conchan, located within Lima city limits, produces 80% of Peru's asphalt demand, and exports asphaltic cement to Bolivia. The third refinery, in Iquitos, satisfies fuel demand for the departments of Loreto and San Martin, and exports some fuel to Brazil and Colombia.

It will also give 6,800 kilometers of roads in concession, representing 41.4% of the nation's total highway system. Initial investment could reach $800 million, with $650 million coming from the private sector and $150 million from government funds. Bidders who win concessions -- ranging from 10 to 30 years -- will be able to recover their investments and carry out road maintenance by charging tolls.

Three railway lines belonging to state-owned Empresa Nacional de Ferrocarriles (Enafer) are also up for grabs: the 589-km Central Railroad, the 915-kilometer Southern Railroad and the 185-km Southeastern Railroad. Concessions will last 40 to 50 years.

Finally, the Fujimori government wants to sell 30% of the shares of four state regional electric companies -- Electro Noroeste S.A., Electro Norte S.A., Hidrandina S.A. and Electro Centro S.A. -- to interested Peruvian and foreign investors. A percentage of the remaining 70% of shares will be included in the state citizen's participation program and the rest offered to company workers. A key advantage of investing in these power companies is that it gives winning firms the chance to invest -- within the areas given in concession -- in water and gas distribution, phone, cable TV and other utilities. Current electrification in the concession areas is only 40%, compared to 68% for Peru as a whole.

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