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Peru Says $9.3 Billion of Construction Works at Risk Amid Probes

  • Banks wary of lending amid corruption probes, minister says
  • Government plans measures to ensure public works go ahead

Peru is readying legislation to prevent corruption scandals from jeopardizing about 30 billion soles ($9.3 billion) in infrastructure investment, Finance Minister Claudia Cooper said.

The country’s infrastructure program and its economy are at risk as a growing number of construction companies implicated in corruption probes find it difficult to obtain bank financing, Cooper told Lima-based Radio Programas on Tuesday. She added the government will publish new legislation as early as this week seeking to “give viability” to construction firms.

“We’re talking about an issue that will affect growth at the macroeconomic level,” she said.

Peru is redoubling efforts to prevent the investigations from hurting the economy as it embarks on a huge rebuilding program following devastating floods last year. A probe into building contracts awarded to Odebrecht SA has stalled some of the country’s biggest infrastructure projects. Prosecutors are separately investigating more than two dozen firms for alleged collusion to win road contracts.

Viable Companies

Coupled with the floods, the Odebrecht scandal had a “dramatic effect” on the economy, Cooper said. Peru’s gross domestic product expanded 2.5 percent last year, down from an initial forecast of close to 5 percent. Economic data for January suggest growth is strengthening, led by domestic demand, she said.

Cooper said the new legislation will replace a government decree published in the wake of the Odebrecht corruption scandal that imposes financial restrictions on companies that were sentenced or confessed to corruption. Congress amended the law to include Odebrecht’s local partners who allegedly participated in the bribery scheme, but the changes were vetoed by the government.

Cooper said that, while those responsible for corruption need to be sanctioned and compensations have to be paid, “we have to make the companies viable.”

Peru’s nine biggest construction firms employ 53,000 people, and their employees have about 1 billion soles of outstanding loans, according to the minister. The new legislation needs to be credible for the financial sector, which is currently fearful of lending to construction firms and approving letters of guarantee, she said.

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