What are the challenges facing gas pipeline construction in the South?
We started working on this project back in 2009 alongside an international partner, but over the years purchased the concession from them. This is a project with an estimated cost of $5 billion, and we have been extremely focused on success over the past few years. Those last few years have been dedicated to completing research studies, acquiring licenses, looking for funding, and starting construction works. We hope to complete financing negotiations with a consortium of 15 banks. The project, awarded by tender at the end of July 2014, constitutes the construction and subsequent operation and maintenance of more than a 600-mile-long gas pipeline, which stretches from the jungle area to the Peruvian coastline, and involves the reinforcing of the current natural gas and liquids transportation system, impacting directly on the development of the regions of Cusco, Arequipa, Moquegua, Puno, Apurímac, and Tacna. The 34-year concession represents the greatest investment in infrastructure in the history of the country. This way, the development of the project was launched, and was long awaited by the population of the southern macro region, especially Cusco. It will generate around 7,000 direct jobs at the construction stage, allowing for the highly anticipated industrialization of the South. The pipeline also boosts the regional economy and promotes decentralization of the Peruvian economy away from Lima. The gas pipeline will unlock many other energy projects in several regions, boosting industrialization. The South has specialized in the energy industry, whereas the North has a stronger focus in the agribusiness sector. Peru has yet to further consolidate itself as key energy player in the Andean region, but this project will allow it to export energy regionally. The Peruvian government works on regional energy integration in Peru and that should boost the role of Peru in the Andean region. There have been several meetings between Ministries to consolidate such regional projects, and Peru has a lot to say thanks to its energy potential, especially in terms of hydro energy.
In Peru, an obstacle to large projects is acquiring a social license from communities and avoiding conflict. Odebrecht has had remarkably limited social conflict throughout its history in Peru. How do you manifest social responsibility?
We always have a close relationship with the communities in which we operate and w make sure they understand that they are a priority for us. Additionally, we have several specific programs to achieve integration and collaboration with and in the community. For example, we offer local training opportunities so that the local populace can participate in our projects. This helps considerably in fostering a close relationship between company and community. It also enhances the role of local people as taxpayers, which contributes to the regional development of infrastructure and services. Over the past few years, Peru has achieved much in terms of regional security, political stability, and flexibility, and we would like to think we, too, have contributed to these achievements through our close ties with regional communities.
How would you assess the development of PPPs in Peru?
Odebrecht Latinvest is a pioneer of PPPs in Peru. The public sector has become much more efficient and flexible since we began our first projects here within the PPP framework. These structures are rather like marriages, being long term in nature. There has also been a notable improvement and development in the funding of PPP structured projects, especially with local and regional authorities, whose power to finance is lower than that of the central government. On top of that, Peru has improved its reputation and attractiveness in the eyes of foreign investors by refining its PPP structure and opening its economy to international investment.
What is Odebrecht's growth strategy in Peru moving forward?
Over the next six months our priority is the gas pipeline. However, we have several ongoing projects in the country besides that one, and there are many other interesting projects on the horizon, like the Metro, for example. At the moment, we have 14 ongoing projects here between concessions, public and private works, and so on, and expect to reach as many as 20 projects over the next couple of years. Our priority is to participate in projects central to national development.
© The Business Year - May 2015