GOING ALL THE WAY

Peru 2015 | TRANSPORT | FOCUS: REGIONAL INFRASTRUCTURE

A lack of interconnectivity has isolated South American markets from each other. Yet over recent decades, a series of road and water links have been created to overcome this obstacle, and trade is ready to take off.

South American regional integration efforts have a long and varied history, tracing back to the end of European colonial rule on the continent, and continuing on through the creation of modern-day organizations such as the Andean Community of Nations (CAN), the Union of South American Nations (UNASUR), and Mercosur (the South American common market). However, one of the main challenges to effective integration in South America has been a lack of physical infrastructure connecting the continent's major markets. Much of this challenge has been the result of geography. The majority of South America's population and economic activity is concentrated in urban centers along the eastern and western coasts, while the more sparsely populated interior of the continent is dominated by the Andes mountain range to the west and the Amazon rainforest in the center and east. These geographical obstacles have made it difficult to develop overland trade links between the major economies of the region.

Peru exemplifies this challenge. The bulk of the country's population and economic activity is to be found along the coast, with only limited road and rail links connecting the country to it's nearest trading partners. As a result, the US, China, and Europe account for more than half of Peru's foreign trade, buying nearly 52% of Peruvian exports, and selling Peru 51% of its imports. Brazil, the world's seventh-largest economy, on the other hand accounts for just 5.4% of Peru's imports, and only 4.1% of exports. Meanwhile, Colombia, the second-largest economy on the continent, barely makes it onto the list of Peru's top 10 trading partners.

Over the past decade and a half, in conjunction with other political and economic integration efforts, South American governments have worked to overcome this infrastructure challenge through the Initiative for the Integration of Regional Infrastructure in South America (IIRSA), created at a summit in Brasilia in 2000. The IIRSA brings together a series of plans to develop transportation, energy, and telecommunications links between South American countries, and is being funded in part by the Development Bank of Latin America (CAF) and the Inter-American Development Bank (IDB).

These include a number of projects to improve connections by road and river between Peru and Brazil, Bolivia, Chile, Ecuador, and Colombia. One of the most significant elements of the IIRSA is a series of east-west Interoceanic roads and river links that will connect Peru and Brazil from coast to coast. The first of these links, IIRSA South, was completed in 2011 and is more commonly known as the Carretera Interoceánica Sur or the Southern Interoceanic Highway. The road, which links the Southern Peruvian port city of San Juan de Marcona to São Paulo in Brazil and on to the Brazilian port of Santos, was the first paved, two-lane road with year-round access to cross the centre of the continent.

The second IIRSA route in Peru is the Northern Interoceanic Route, which combines road and river links to provide Northern Peru with access to Atlantic Ocean via the Amazon River. The project includes a road connection from the Peruvian port of Paita on the Pacific coast, over the Andes, and into the Amazon basin, to the port of Yurimaguas on the Huallaga River in the Peruvian Amazon. At Yurimaguas, a new port is being built to facilitate increased traffic with the Peruvian Amazon and Brazil. The road portion of the project was completed in 2014, and the new port is currently in the works, with completion targeted for end-2016

The third east-west link, the Central Interoceanic Route, functions in conjunction with the Northern and Southern Links. The central link first connects Lima's port, Callao, to the city of Pullacapa on the banks of the Ucayali River in the Peruvian Amazon. From there, cargo can either travel north along the river to merge with the northern IIRSA link, or else along a newly built road crossing the border into Brazil and heading south from Cruzeiro do Sul to Rio Branco where it meets up with the Interoceanic Highway. In addition to the east-west connections, IIRSA projects in Peru also include improved road connections to the north and south connecting Peru to Chile and Ecuador.