TBY talks to Carlos Herrera, Executive Director of ProInversión, on success in attracting money from abroad, FTAs, and upgrades in the country's credit rating.

Carlos Herrera
Prior to his current position, Carlos Herrera served as director of investor services in the same institution. Other positions have included administrative roles in the Ministry of Economy and Finance from 1973-2002, and secretary general of the National Investment and Imported Technology Commission (CONITE) from 1991-2002. He originally studied economics at the Universidad San Martín de Porres.

Peru is one of South America's top economic performers. How do you attract foreign investment?

Foreign and domestic investment have been some of the main factors behind growth since the early 1990s. The Peruvian economy has been improving since the early 1990s, when economic reforms began to take effect. At that time we embarked on a process to attract foreign investment, outlining the main rules regarding the treatment of foreign investments. Foreign investors are treated in the same way as Peruvian investors, so this attraction of foreign investment began with the privatization process in Peru, when we opened several sectors such as mining, financing, power generation and distribution, and many other sectors that were previously only in the hands of nationals, or even in the hands of the state. This process was improved during the 2000s, when Peru decided to promote the participation of private investment in infrastructure and public services through PPPs. The Peruvian Investment Policy was consolidated by the negotiation of Free Trade Agreements (FTA). The first FTA that Peru concluded was with the US, and with this agreement we just consolidated the open policy for foreign investment and we turned to a stable and predictable policy for foreign investors. The investment chapter of the US-Peru FTA formed the basis of the subsequent 16 additional FTAs that we have negotiated and which are already being enforced. The main reason behind the expansion of foreign investment in Peru is the stability of economic policy and of our investment laws.

Over the past two years alone, both Moody's and Dow Jones have upgraded Peru's credit rating. What new investments are on the horizon?

In recent months we have experienced a slowdown in the economy. In the coming year there will be several important mining projects and some significant infrastructure projects that will also begin the construction phase. Regarding infrastructure, there is an irrigation project being undertaken in the North, a second line of the Lima metro, and a gas pipeline in the southern part of Peru. Regional airports around the country will also be renovated and expanded, probably in the third quarter of the coming year. Two thermal power plants in the south of the country will really expand the dynamics of the economy. We expect a GDP growth rate of about 5.5-6.3% over the coming years, partly due to these projects.

Do you think that in the long-term prices need to return to their former levels in order for Peru to continue growing as before? Can infrastructure fill that gap?

Infrastructure is the foundation of the nation's productive potential. In the future, Peru will not depend as much on the price levels of minerals. A major goal is to diversify the export base and one of the most important areas is agribusiness. The irrigation project of Chavimochic in the northern coastal region of the country will incorporate around 60,000ha of new land for agribusiness. Together with that, in the southern part of the country, there will be a further 35,000ha of land also incorporated through another irrigation project. The gas pipeline being constructed in the southern part of the country will bring gas to two power plant projects that have already been awarded and will provide energy for the development of important mining projects in that zone. In addition, natural gas may also allow for the development of petrochemicals.

Over the coming years Peru is expected to regain its growth rate, at least to some degree. How will Proinversión continue to encourage investors to come to Peru and stay here for the long-term?

We have a particularly stable economic policy that we will continue pursuing. Clear rules allow you for the planning of your business. Something that has helped us hugely is the way we have consolidated all the policies in our FTAs, and have a wide range of investment opportunities, not only in mining, but in food production, tourism, and now petrochemicals. We will probably also talk about forestry in the coming years to promote Peru an export platform, the country is working to be a regional hub to connect the South American region with the Asia Pacific economy.