Peru Freight Transport Report Q4 2009

Development of Peru's most important freight railway network was set to commence in May at an estimated cost of more than US$40mn, according to Peruvian news source Andina. The Ferrovias Central Andina, which links the capital, Lima, to the country's largest port, Callao, as well as the regions of Junin, Huancavelica and Pasco, has been operated under a concession leased since 1999 by the Peruvian government to the company Ferrocaril Central Andino SA (FCCA). The railway currently carries 4.5mn tonnes of cargo per year, less than half of the volume transported by road across the same route.

The investment, funded by FCCA, is expected to increase the capacity of the railroad to 30mn tonnes per year. BMI notes that the route covered by the FCCA represents one of the country's most important freight corridors, linking the Port of Callao with both the capital and with the Andean interior.

Despite concern over inadequate infrastructure and an adverse international economic climate, BMI's newly released Peru Freight Transport Report remains reasonably bullish over freight prospects in the country, highlighting the construction of the inter-oceanic highway connecting Peru to Brazil, Pacific coast port development, and the complex of natural gas pipelines and LNG facilities associated with ongoing development of the Camisea deposits. These three projects underpin BMI's view that Peruvian freight-transport turnover, measured in million-tonne-km (mntkm) will grow by an annual average of 5.1% in 2009-2013. By value, the transport and communications sector will grow to be worth US$2.7bn in 2013, representing 8.6% of total GDP.

BMI's view is that freight transport has a critical role to play in Peru's development over the next few years. Much will depend not only on the management of concrete projects, but also on the quality of the business environment in this sector. BMI gives Peru an overall freight rating of 57.6, placing it in the middling range relative to its peers. There is room for improvement in infrastructure development and the regulatory environment. Among the risks facing our forecasts are political uncertainty and the possibility of further falls in the price of Peru's commodity exports, leading to downward revision of predicted growth rates.

On balance, despite the possibility of turbulence in the airfreight sector (traditionally volatile in recent Peruvian experience) and slower growth in rail freight, BMI is projecting an encouraging future for the country's freight sector.