Peru: Towards a Model for Developing Public–Private Partnerships in Accordance with International Practices and Standards

This is an Insight article, written by a selected partner as part of Latin Lawyer's co-published content. Read more on Insight

Where we began

the private investment promotion process started in Peru about three decades ago, within the framework of a governmental policy of economic stability and market liberalisation.

With the issuance of the first private investment promotion regulations in 1991 and the enactment of the 1993 Peruvian Constitution, the primary roles of the state and the private sector were clearly defined: the state is mandated to guide the country's development and promote public services and infrastructure, and the private sector is expected to make investments and conduct business activities.

After it was decided to promote investment through structural reforms (by issuing Legislative Decrees 662, 674, 757 and 758) and the legal stability of investments was guaranteed (stability of the tax and labour systems, and free availability of foreign exchange), as well as the equality between Peruvian and foreign investors, free competition, the freedom to set prices, private investment, the access to arbitration in investment matters and the prohibition of discriminatory treatments, the table was set.

In 1996, our country saw a boom in concessions, explained by a legal framework that regulated the delivery in concession of public utility services and infrastructure (the Consolidated Text of Concessions, approved by Supreme Decree 056-96-PCM). Subsequently, in 2003, as part of a public decentralisation policy, the state decided to promote investment on a decentralised basis with a view towards achieving the comprehensive and sustainable development of each region in the country, through a strategic alliance with the regional and local governments, private investment and civil society (Law 28059).

A few years later, in 2008, a rule was enacted expressly regulating the public–private partnerships (PPP) mechanism in Peru. By means of Legislative Decree 1012, which approved the PPP Framework Act, several contractual modalities for the development of public infrastructure and utility services were included in this participatory scheme.

In order to align our PPP legislation with international standards (among them, the Recommendations on Principles for Public Governance on Public–Private Partnerships of the Organisation for Economic Co-operation and Development (OECD) and the valuable recommendations of multilateral organisations such as the World Bank and the Inter-American Development Bank, among others), Legislative Decree 1224 2

of September 2015 established a unified regulatory framework to promote private investment in PPP matters as well as in asset projects, in order to contribute to stimulate the economy, the creation of productive jobs and competitiveness.

In March 2016, Peru became the first non-OECD country to adopt the Recommendations on Principles for Public Governance on Public–Private Partnerships, also known in Latin America as Principles for Public Governance of Public–Private Partnerships. Accordingly, taking into account the best public governance practices embodied therein, our regulations are focused around three fundamental principles:

  • establish a clear, predictable and legitimate institutional framework supported by competent and well-resourced authorities;
  • base the selection of public–private partnerships on value for money; and
  • use the budgetary process transparently to minimise fiscal risks and ensure the integrity of the procurement process.

While it is true that there are always several opinions that bring into question the regulatory changes in one way or the other, we consider that it is indispensable to understand that this particular change seeks to achieve and consolidate a regulatory framework that is consistent with the best international practices concerning the implementation of PPPs, without leaving aside our socio-political reality and legal-administrative culture. We should bear in mind that, to the extent that there is not a 'single PPP framework model', it will likely evolve over time in response to the specific challenges it might face on its path towards consolidation.

Presently, despite the huge amounts invested over the last decades, there is a significant gap in public infrastructure and utility services that must be necessarily bridged. As a matter of fact, according to the estimate made by the Association for the Promotion of National Infrastructure (AFIN) for the 2016–2025 period, the infrastructure gap amounts to US$160 billion approximately. While these estimates are always referential in nature and are subject to modifications depending on different variables, our position as the 89th economy in infrastructure among other 140 global economies according to the Global Competitiveness Report 2015–2016 of the World Economic Forum is a clear indicator that correlates with the above-mentioned estimation and underscores the urgent need to continue developing public infrastructure and utility services projects.

Horizon at which we must aim

Economies with remarkable and significant PPP development, such as the United Kingdom, Australia and Canada, shed light on the main aspects on which a regulatory framework aiming at the full development of a country's infrastructure must be based. Such aspects include:

  • clear public policies articulated within the framework of an adequate management of governmental finances and sustainability in all areas;
  • planning and prioritisation of project strategies by sector;
  • transparent, clear and predictable legal framework; and
  • clear and predictable institutional framework, with defined competencies and jurisdictions, strengths in preparation, bidding, award and monitoring of projects, and fluid communication and coordination capacities at an inter-institutional level.

the above-quoted OECD's Recommendations recognise that PPPs pose particular challenges owing to the usual complexity of these participatory schemes. According to the OECD, these challenges are tackled through (1) the development, at a governmental level, of a number of skills in terms of institutionality and regulatory framework; (2) a robust system of assessing value for money based on prudent public policies and consistent guidelines or methodologies; (3) quantification and contractual transfer of risks to the party that is in a better position to manage them; and (4) capacity to monitor the PPP agreement during its term.

Since 2015, the World Bank has been providing on a timely basis the technical assistance required by the Ministry of Economy and Finance (MEF) for reforming the PPP system. the main objective of this reform is to strengthen the legal, regulatory, institutional and operational framework of PPPs, envisaging to this end the development of Green Books containing guidelines and methodologies for the creation, evaluation, structuring, risk transfer and award of projects, including having a standardised form of PPP agreement, and providing training through workshops and others to the personnel of the different public entities.

Where we are

Taking into account these and other directives, our legislation introduced the following innovations, among others:

  • creation of the national system for promotion of private investment in PPPs and asset projects;
  • empowerment of the investment committees of the ministries, regional governments and local governments, as part of the system;
  • assessment report as the starting point of any project (projects are identified, selected and formulated through a business case described in this report);
  • multi-annual reports on investments in PPP, allowing public entities to better control their commitments and budgets;
  • clear definition of five phases for the development of PPP projects (regardless of their classification into self-financed and co-financed): planning and scheduling, formulation, structuring, transaction and contract performance.

In July 2018, Legislative Decree 1362 was passed regulating the promotion of private investment through PPPs and assets projects. this norm, which will come into force once its respective regulation is approved (it is expected that this will happen before the end of October), will void the aforementioned Legislative Decree 1224.

Without prejudice to the clarifications that said regulation of Legislative Decree 1362 may introduce once it is approved, the following is an overview of the main aspects of the Peruvian PPP regulatory framework.


Under this regulatory framework, all phases of development-related projects must apply the following principles.


Private investment promotion processes encourage competition and equal treatment of bidders, thus preventing anticompetitive or collusive practices.


Under the publicity principle set out in the Transparency and Access to Public Information Act, any and all quantitative and qualitative information, used for decision-making throughout the assessment, development, implementation and accountability stages of any project under the scope of these regulations, is of public knowledge.

Results-oriented approach

In performing their duties, public entities adopt actions that allow them to implement private investments in a timely manner, and identify and report the existing barriers that hinder project development.


through the ministries, the regional governments and the local governments, the state prioritises and guides the orderly development of PPPs and asset projects based on national, sectorial, regional and local priorities, taking into account the country's decentralisation policy.

Budget responsibility

In order to assume financial commitments, whether firm or contingent, arising directly or indirectly from the execution of PPP agreements, the state's ability to pay must be taken into account. the state must not compromise the balanced budget of public entities, the sustainability of public finances, nor the regular provision of public services.


Conduct of those who participate in the promotion of private investment processes is guided by honesty, rectitude, honesty and truthfulness, avoiding any improper practice.

Additionally, the Value for Money and Appropriate Risk Transfer principles apply specifically for PPPs.

Institutional framework

the National System for Promotion of Private Investment is the functional system for the development of PPP and asset projects. It is composed of principles, norms, procedures, guidelines and normative technical directives aimed at promoting and expediting private investment to contribute to the growth of the national economy, to closing gaps in infrastructure or public services, to the generation of productive employment and the country's competitiveness.

the MEF is the entity in charge of establishing the private investment promotion policies and the General Directorate for Private Investment Promotion Policy (DGPPIP) of the MEF is the governing body of the system.

the DGPPIP is responsible for establishing guidelines for the promotion and development of private investment in PPPs and asset projects (which are binding on the system entities) and for issuing an exclusive binding opinion on the interpretation and application of the regulatory framework.

Acting as project holders, the ministries, the regional governments and the local governments that have projects or decide to develop private investment promotion processes under these modalities must create a Committee for the Promotion of Private Investment. this Committee will assume the role of the Private Investment Promotion Body (OPIP) in the promotion processes under its competence or of coordination body with the Private Investment Promotion Agency (Proinversión) in the promotion processes under the latter's competence.

the OPIP is entitled to design, conduct and complete the private investment promotion processes under PPP and asset projects modalities. Proinversión and the ministries are the OPIPs for projects assigned by the central government owing to their national relevance, through their respective investment committees. In the case of the regional governments and local governments, the OPIPs will be the investment committees. Both the ministries and the regional or local governments may entrust Proinversión with the promotion processes as well as to require its technical assistance for any phase.

In their capacity as project holders, ministries, regional governments and local governments are responsible for preparing the assessment report, signing the agreements under the modalities regulated by law, enforcing the penalties for breach of contract, unless this duty is delegated, amending and declaring the suspension or termination of the agreements, supporting the budget capacity to assume commitments under the agreements and its eventual amendments.

through the Specialised Investment Monitoring Team, the MEF carries out the accompaniment, follow-up, articulation and simplification of all the phases of the investment projects that are developed under these modalities. During the contract performance phase, the MEF, through the DGPPIP, provides specialised support in legal, economic, financial and technical matters, on aspects of high complexity.


Proinversión is a specialised technical body attached to the MEF whose management is oriented to results, with efficiency, effectiveness, transparency, quality and integrity. Likewise, Proinversión intervenes in the contract performance phase (as mentioned below) and provides technical assistance and support to public entities in the different phases of the PPP and assets projects. It has decentralised offices.

the board of directors is the highest authority of Proinversión and is made up of five members: the Minister of Economy and Finance, who presides over the board, and four ministers of those sectors whose portfolios of projects incorporated into the promotion process have the highest monetary value.

Among the most important duties of the board of directors are: (1) creating the investment special committees and designating their members; (2) proposing to the MEF the organisation and duties of Proinversión as well as the remuneration scale for their approval; (3) deciding on the incorporation or exclusion of a project into and from the promotion process; (4) acting as an additional decision level in certain PPP or asset projects processes; and (5) approving the main milestones of the PPP or asset projects process having a total investment cost in excess of 300,000 Peruvian tax units.

the progress report on the promotion and development of PPP projects and asset projects will be submitted on a quarterly basis by the board of directors to the President of the Republic and the Prime Minister.

the executive director is the highest executive authority and the legal representative of Proinversión.

the work of public officials is protected by establishing Proinversión's obligation to take out administrative, civil and criminal liability insurance policies for the officials responsible for making decisions within the framework of PPP and asset projects investment projects.

Public–private partnerships

One of the purposes of PPPs is the possibility of creating, developing, improving, operating or maintaining public infrastructure or providing public utility services through the contract mechanisms permitted by the legal framework in force. As such, PPPs allow the development of projects for public infrastructure, public services, provision of services related to public infrastructure, applied research and technological innovation.

Certain concepts, such as appropriate risk transfer, value for money, and optimal combination of cost and quality of the public utility services offered to users, are widely recognised as principles that PPP agreements must respect.

the PPP agreement is sufficient title for the investor to enforce its rights towards third parties (in particular, collecting tariffs, prices, tolls or other investment recovery systems).

With regard to PPP classification, the concept of self-financed PPP (in replacement for the self-sustainable PPP included in the former applicable regulations) describes those projects that are capable of generating income by themselves, that do not require co-financing and that meet the following conditions: (1) minimum or no demand for financial guarantees by the state; and (2) non-financial guarantees with no or minimal probability of demanding co-financing. the concept of co-financed PPP is maintained.

Five phases are regulated within the PPP processing procedure, without prejudice to their classification and origin:

  • planning and scheduling;
  • formulation (design or assessment);
  • structuring (economic-financial structuring and compensation mechanisms);
  • transaction (openness to the market); and
  • contract performance (follow-up and supervision of contractual obligations).

Prior to the project award, the OPIP must obtain with respect to the final version of the PPP agreement, without exception: (1) the favourable opinion of the public project holder; (2) the non-binding opinion of the regulatory body, exclusively in respect of matters within its area of competence; (3) the favourable opinion of the MEF; and (4) the previous report from the Office of the Comptroller General of the Republic, exclusively in respect of those aspects that compromise the credit or financial capacity of the state.

the entities issuing opinions and reports are required to raise, on a single occasion, all the observations they may have concerning matters within their area of competence.

the maximum term of a PPP is 60 years.

the ministries, regional governments and local governments may create trusts for the administration of payments and income derived from the agreements (which was already being done in practice in most PPP agreements).

Private initiatives

Proinversión is the OPIP for nationwide self-financed nationwide private initiatives and co-financed private initiatives at all government levels.

Nationwide co-financed private initiatives will be submitted at such times and concerning such matters as determined by a Supreme Decree countersigned by the requesting ministries and the MEF. Each sector involved must publish its intervention needs, as well as the maximum budget capacity it has to assume such commitments.

Regional and local co-financed private initiatives are submitted to Proinversión on a yearly basis, for the term determined by the regulations. the regional and local governments must also previously publish their intervention needs as well as their maximum budget capacity.

Within 90 calendar days of a private initiative being declared of interest, interested third parties must express their interest in executing such initiative. If no third party expresses its interest during such period, the initiative will be directly awarded to the proponent.

State initiatives

Public entities are entitled to develop PPP projects on their own initiative. Projects intended for the provision of services related to public infrastructure or utility services that the state needs to provide, applied research or technological innovation projects, as well as PPPs that do not require an investment component, will be processed through a simplified procedure established in the regulations.

the Competitive Dialogue has been foreseen as an award mechanism for the development of PPP projects that, due to their complexity, require the participation of at least two bidders at an early phase, with the purpose of incorporating experiences, linked to their technical aspects, in order to incorporate innovative solutions from the private sector as well as to optimise the value for money for the public sector based on the principles of competence and transparency.

Other relevant provisions

the MEF administers the National PPP Agreements Registry, which contains the Supreme Resolution, Regional Council Agreement or Municipal Council Agreement that establishes the incorporation of the project into the promotion process, executed PPP agreements, the addenda thereto, among others. the application for registration is automatically approved, subject to subsequent review.

the information related to economic-financial assessments (aimed at determining the competition variables used in the design and structuring of private investment promotion processes) that are part of the National PPP Agreements Registry is considered confidential information; hence, it is an exception to the right of access to public information under the provisions of the Transparency and Access to Public Information Act.

In addition to the usual arbitration clause for dispute resolution, PPP agreements may allow intervention within the direct negotiation stage of a neutral third party called the amiable compositeur, who will propose a dispute resolution formula that, if accepted in whole or in part by the parties, will solve the dispute.

PPP agreements may also contain clauses setting out the compensation to which the investor will be entitled in case the state suspends or terminates the agreement unilaterally or due to its own breach.

the public project holder must initiate with due anticipation the process of identification, acquisition and expropriation of the necessary areas for the execution of the project as well as the release of interferences. Likewise, said entity is authorised to carry out the relocation or resettlement processes allowing the release and cleaning up of land and plots for the implementation of the project within the established deadlines.

In Table 1, we include some opportunities to invest in public infrastructure and utility services that Proinversión has in its portfolio as at August 2018. there are other investment promotion processes under state initiatives and unsolicited proposals not included in said table owing to the fact the award dates are currently under evaluation or may be after 2019.


As mentioned above, whichever regulatory framework a country decides to implement – not only with regard to PPPs – it should necessarily be adapted or framed within the relevant macro-institutional framework and respond to an effective cost-benefit analysis that confirms the properties and benefits of its application for all actors involved.

Hence, in the past three decades our regulatory framework for private investment promotion has evolved, building on general principles of equal or non-discriminatory treatment, free private initiative, the state's subsidiary role, free competition and prohibition of anticompetitive practices.

PPPs, as a means to encourage private investment, was included in our legislation primarily as a result of the lessons learned over the years, as well as the mechanism's evolution around the globe.

thus, based on international experiences, the recent establishment of a new regulatory framework has sought to incorporate the best practices and recognised standards for the implementation and development of these schemes in all phases, including, for example, OECD recommendations. Without a doubt, the application and execution of such regulatory framework will be perfected based on our own experience, and with the active and invaluable participation of multilateral organisations, such as the World Bank and the Inter-American Development Bank, which provide our authorities with technical assistance and help with the challenges that arise on the road towards consolidation. We must follow this path without missing a step.

Table 1



Current Status

Estimated investment (million US dollars/VAT not included)

Estimated award date



500kV Piura Nueva substation – Frontera transmission lineTumbes and PiuraTo be called144 Second semester
New 220kV Carhuaquero substationCajamarcaTo be calledTo be defined First semester
Repowering up to 1000MVA of 500kV Carabayllo-Chimbote-Trujillo transmission line and variable reactive compensator +400/-150MVAR in 500kV Trujillo substationAncash, La Libertad and LimaTo be called90Second semester 
New La Planicie 500/200kV substationLimaTo be called20 First semester
Variable reactive compensator +400/-100MVAR in San Juan substationLimaTo be calledTo be defined First semester
New high-complexity hospital (ESSALUD)ChimboteTo be called110 Second semester
New high-complexity hospital (ESSALUD)PiuraTo be called144 Second semester
Mass use of natural gas - distribution via pipeline networks in regions of Apurimac, Ayacucho, Huancavelica, Junín, Cusco, Puno and UcayaliApurímac, Ayacucho, Huancavelica, Junín and Cusco, Puno and UcayaliCalled400Second semester 
Land transport     
Road project 'Longitudinal de la Sierra' Section 4: Huancayo-Izcuchaca-Mayocc-Ayacucho and Ayacucho-Andahuaylas-Puente Sahuinto / Dv. Pisco-Huaytará-AyacuchoJunín, Huancavelica, Ayacucho, Apurímac and IcaCalled464 First semester
Colca mining projectApurímacCalledTo be definedSecond semester 
Jalaoca mining projectApurímacCalledTo be definedSecond semester 

Huancayo - Huancavelica railway

Junín and Huancavelica




First semester

Real estate

Ancon industrial park


To be called



First semester


Headwaters and conduction of drinkable water supply for Lima

Junín and Lima




First semester

Improvement of sewage system and sewage treatment
of the cities of Huancayo, El Tambo and Chilca 


To be called


First semester


Improvement of sewage system and sewage treatment
of the city of Puerto Maldonado 

Madre de Dios

To be called



Second semester


Broadband installation for integral connectivity and social development of the Ancash, Arequipa, Huánuco, La Libertad, Pasco and San Martín regions

Ancash, Arequipa, Huánuco, La Libertad, Pasco and San Martín

To be called


Second semester


Source: Proinversión


1 Juan José Cárdenas Mares and María Luisa Peña Hartog are partners at Rebaza, Alcázar & De Las Casas.

2 As mentioned below, this Decree has been recently replaced by Legislative Decree 1362 approved in July 2018, which will become effective once its respective regulations are approved (which is expected to happen in the month of October).

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