TBY talks to Carlos Herrera, Executive Director of ProInversión, on the country's performance, promoting PPPs, and the attractiveness of the Peruvian market for FDI.

Carlos Herrera
Before his current position, Carlos Herrera served as the Director of Investor Services, also for ProInversión. He studied economics at the Universidad San Martín de Porres, with an emphasis on the management of foreign investment and the development of strategies for the promotion of investment. He served as a functionary at the Ministry of Economy and Finance from 1973, with the prominent role of Secretary General of the National Commission for Foreign Investment and Technology (CONITE) from 1991 to 2002. He is an expert in international negotiation, and has led investment discussions with the US, Canada, Mexico, Japan, Korea, and for the Trans-Pacific Partnership agreement.

How would you describe Peru's economic performance in 2015?

Last year was not a good year for the global economy; nonetheless, Peru's performance was above most other Latin American countries despite only having 3% growth. That was an improvement on the country's 2.4% growth in 2014. What is significant is that this 3% was achieved because in 2H2015 there was a clear increase in the growth rate, especially in the last month of the year. In 2016, growth of 3.5 to 4% is expected, driven by the implementation of major infrastructure projects and the entry into production of new mines. The importance of commodities in our exports and the strong relationship with certain markets, such as China, has a huge influence on the performance of the economy. This is something that has to be solved over the coming years. Promoting the diversification of our economy is one of the challenges for the incoming administration.

How does ProInversión work to create and reinforce the synergies between the private and public sectors, and to promote projects based on the PPP model?

Over the past few years we have awarded more than USD15 billion in different projects. These have mainly been in infrastructure. Currently, we are also working in education and health. The idea is to continue that trend. The Peruvian government has recently improved the regulations on PPPs in order to incorporate best practices recommended by the OECD's Principles for the Public Governance of PPP, to consolidate a clear, predictable, and legitimate institutional framework supported by competent and well-resourced authorities, to ground the selection of PPP partnerships in value for money, and to use the budgetary process transparently to minimize fiscal risks and ensure the integrity of the procurement process.

What are the main challenges a foreign direct investor faces when coming to Peru?

Peru has no external barriers to FDI and has an open economy. We have established an attractive investment policy dating back to the 1990s. We have consolidated this policy with our free trade agreements. There are almost no restrictions on any kinds of economic activity, just a few on some professional services, but they are not important restrictions. We allow for the free movement of capital. Foreign investors have the same rights and obligations as local investors under our national treatment principle. We have to work on investment facilitation to eliminate the red tape that still exists, especially at the local government level. This is particularly the case in the interior of the country, where we need to improve governance. We have to work with them to review the procedures for licenses and permits. We are looking to everyone in the world who wants to assume the challenge of Peruvian development. We do not have a geographical preference regarding the origin of our investors; we are open to everyone, but we want the best. We want the best operators for our PPP projects and the top companies for each activity. This is the only way we can return to 5-6% growth levels. Peru will be able to recover this level of growth in the coming years, most likely after 2016. There is a strong macroeconomic basis for this growth because Peru's fiscal policy is clear and it will not change regardless of who is in power. The way forward for us is clear and there will not be any dramatic changes. Foreign companies can set up facilities in Peru in order to turn the country into a hub and an export platform in order to reach the markets that are opened up through our free trade agreements, now including the TPP.