Infra- restructured

Interest in government-to-government agreements is rising in Peru, could the model work elsewhere?

In Issue 6, we highlighted the growing interest in government-to-government (G2G) agreements as a structure to by-pass much of Peru’s cumbersome bureaucracy around infrastructure works. Several members have asked for more colour on this and if a similar model is being contemplated in other geographies in Latin America.

The primary issue facing infrastructure projects in Peru is that the state’s contracting law is overly cumbersome and needs revisiting. A secondary challenge is local corruption, although following Lava Jato most local officials are now paralysed with fear, which is a different problem in terms of decision making.

G2G agreements solve both of these problems. A former director of Proinversión explains, “The state cannot fight itself, [G2G] agreements avoid bureaucratic processes such as hiring laws, pre-feasibility studies and the contracting law. If the government wants to get works out quickly the G2G scheme enables that – it’s a tacit acknowledgement by the government of its own inability.”

“It’s a tacit acknowledgment by the government of its own inability.”

Former Director, Proinversión, Peru

The UK pioneered G2G agreements in Peru with a prime example being the 2019 Pan American Games, as the executive at Proinversión admits, “If it were not for G2G, the Pan American Games would never have happened.”

In light of this, we spoke to a senior official at the UK’s Department for International Trade who has experience of the Peruvian schemes, “G2G is like covering the sun with a finger. It allows Peru to get started but there are so many deficiencies in their system for the execution of works. We are studying solutions to this through a joint infrastructure task force.”

“G2G is like covering the sun with a finger.”

Senior official, Department for International Trade, UK

Is the G2G model likely to persist in Peru? The DIT official reports, “There is interest at the moment because it is the only way projects are coming out, but I hope the task-force will be successful and they will move away from the scheme. The national infrastructure plan has a portfolio of 52 projects totalling USD 30 billion already approved.”

Peru’s adoption of G2G agreements is generating early interest from other countries in Latin American, the DIT official confirms, “We have already spoken to contracting authorities in Colombia and Panama who want to understand what G2G is a how it works.”

If you are interested or concerned about infrastructure in Peru and would like a detailed, balanced and independent perspective on the opportunities and risks for your business, let’s start the conversation.

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