ProInversión: Social sustainability is central to Peru’s PPP projects
Alberto Ñecco Tello explains how ProInversión embeds sustainability in its programme of delivering infrastucture investmentsShow transcript
ProInversión is Peru’s private investment promotion agency. It recently completed an international roadshow promoting a portfolio of 50 public private partnership projects, to help plug Peru’s $160bn infrastructure gap. In the third part of our video roadshow, Executive Director Alberto Ñecco Tello explains how ProInversión embeds sustainability into its projects and partner relationships – and how the PPP infrastructure projects planned will help Peru sustain or exceed its recent five percent annual GDP growth. The roadshow started at World Finance with Peru’s macro outlook, and continued on European CEO with a breakdown of ProInversión’s PPP portfolio.
The New Economy: Peru enjoyed five percent average growth from 2000-2016; what does the country need to sustain this development?
Alberto Ñecco Tello: Firstly I believe we need to keep doing what we have been doing, which is being very constant and committed to our macroeconomic policies, keeping an open market, keeping a friendly environment for foreign investors. And also a very strict and disciplined fiscal stance.
Also we need to further develop our infrastructure in Peru. That will help reduce transaction costs and logistic costs, and therefore increase productivity. In that sense we will be able not only to sustain, but actually even grow at a faster rate.
The New Economy: Now give me some examples of how you’re embedding sustainability into your projects.
Alberto Ñecco Tello: We’re doing that through two initiatives. We are really focused on bringing much more prepared and complex structures to the market, that really serve the market needs. We pay really close attention to what the market is looking for; we keep an open dialogue with investors to know exactly what kind of structures we need to bring to the market that will attract investors and bidders.
All of our projects are worked with a team of external advisors, and what we found about a year ago is that in time we had lost our capacity to attract the best advisors in the market – mostly because we didn’t pay much attention to the rules and the regulations around our contracting procedures. We have totally changed that; two months ago I obtained board approval for a new set of rules for contracting advisors, and now we have a much more market-friendly framework that will help us attract better advisors, and therefore also bring best practices to our portfolio and our structures. And also help train and bring knowledge to our teams. In that sense, better structures should help us have better sustainability.
That’s on the market side, but on the other side, we’re working very actively with the communities on the social side, so that we have a very clear – or at least, as clear as possible – read of what the actual sensitivity of the population in the communities affected by these projects. So that we can deal with them properly, or at least that we can make that information available to the bidders, so that they know what the actual situation is.
The New Economy: Social and environmental management as well is core to ProInversión’s mission, so how does that affect your work, and the way that you work with your partners?
Alberto Ñecco Tello: Well, it is central for us. We found that in many projects, most of the concerns for the investors coming into them was social acceptance. And, you know: what was the communities… how were the communities going to be affected by the projects?
So one of the things that we have done recently is that we have totally changed the way we’ve structured our transaction teams. And now every team has one member from our social team doing the groundwork from the beginning. Even before we actually go to the market. When we start just doing the preliminary work on a transaction, we have the social team involved with the communities, measuring the temperature around these projects, so that we know what could be the possible problems with it.
And that also comes with the environmental, because usually social and environmental kind of go hand in hand. Because environmental issues are the ones that mostly concern the communities.
So, one of the things that we’ve found is that around 95 percent of the issues with the communities come from the information asymmetries. So it’s not really that the projects per se will create a negative impact that would create social problems. But it’s mostly the lack of information and communication that leads to these situations.
So, having identified the problem, we are working very intensively on actually bringing this information, and having more acceptance, so projects are more sustainable in time.
The New Economy: What are investors looking for when they speak with you, and what are you looking for in your investors?
Alberto Ñecco Tello: Well, investors are looking for certainty, right? I mean they’re looking for stable frameworks, bankable contracts, and structures that will allow them to actually deliver the service and have the returns they are expecting. And I believe that’s fair – that’s what the market is there for!
What we expect from investors are a long-term commitment. I mean, PPP projects or asset-based projects like mining or concession, as I said: they’re long-term contracts, so they tend to be 20-30 years. And we need investors committed on delivering the services that are required for that period of time. Because at the end of the day, the main objective, the reason why we do this, is to deliver services and quality of life to the population.
The New Economy: Alberto, thank you very much.
Alberto Ñecco Tello: Thank you.