This content is from: Local Insights

The need for a plan for the development of Peru’s petrochemical industry

Eduardo Guevara
In 2007, Peru's first gas supply agreement for the development of a fertilizer plant was granted through a private bid. This was the first step in the development of the country's petrochemical industry. Simultaneously the Peruvian government granted certain benefits, including tax stability, based on the long-term investment required for the development of this kind of project.

In the following years, new projects appeared for the development of ammonium nitrate plants, as well as an ethane project. Important amounts of investments were announced, and various authorities announced future plants in their regions.

More than five years after these projects were announced, none of them have started to be built. What has happened? Did the Peruvian government not grant the necessary benefits to allow the development of these projects? Have the conditions for their development changed? Why, after five years, are all of these projects still just projects?

The answer appears to be the lack of planification, or even more the fact that the potential of the industry has not been taken seriously. As has been announced, these projects involved important amounts of investment that are required for building state of the art plants that can operate in a competitive market. As with any other long-term investment, these projects require a stable environment in which they can meet their market and production forecasts. There were, however, certain disadvantages for the projects. They lacked the required infrastructure for their development. All the proposed projects had to consider a full range of factors: they require energy, transportation facilities, housing for their employees and qualified personnel. In addition they are competing with other locations around the world in which projects can be installed and where they will find all these facilities.

This should not have been difficult to achieve. What is required is planification, and this has occurred in other countries in which important industrial complexes have been built. In most regions it was understood that these projects required the cooperation of government and private investors. In Korea and Singapore, special regulations were implemented to boost the development of these kinds of projects. It might be necessary for Peru to learn from the Korean and other experiences.

Eduardo Guevara

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