In Latin America and the Caribbean, investment levels in infrastructure have not matched green growth objectives in recent years. Now more than ever, with the socioeconomic crisis generated by the pandemic, investment in sustainable infrastructure is crucial for the economic recovery. An additional investment in infrastructure could significantly boost growth in the region.
The policy and investment choices we make in the region regarding infrastructure over the next 10 years will affect the trajectory of the region towards low-carbon and inclusive growth pathways. The window of opportunity is closing fast, and advanced economies can play an important role financing sustainable and low-carbon infrastructure.
In this context, the United Kingdom and the IDB Group are jointly implementing the UK Sustainable Infrastructure Program (UKSIP) to reduce emissions and to spur transformational changes. Through this program, this partnership will provide approximately $230 million (UK£ 177 million) between 2018 and 2022 to catalyze private sector investment in sustainable low-carbon infrastructure, considering the IDB’s Sustainable Infrastructure Framework as a base.
Peru is one of four countries (together with Mexico, Brazil and Colombia) that are currently receiving support of the UKSIP fund for technical assistance and investments in infrastructure. According to Infralatam between 2008 and 2016, public investments in infrastructure in Peru were 2.96% (3.63% including the private sector) of the country’s GDP on average. And in 2019, the public investment value reached 2.15 %. However, levels of 7.5% of GDP are needed to address all infrastructure gaps, and an annual investment of approximately 2% of GDP is needed on top of other annual needs.
So, how do we close that gap?
The UKSIP can play a fundamental role in contributing to close the infrastructure investment gap sustainably. The program helps mobilize private sector financing through innovative finance solutions with different instruments such as technical cooperation, blended financing and new models of public-private partnerships (PPP) with high multipliers and co-benefits. Sustainable low-carbon infrastructure can then provide a climate low-carbon pathway for Peru’s economic growth and a transition to a Net Zero economy while closing the gap in public services in strategic areas as energy, transport and water and sanitation, to achieve the Paris Agreement objectives.
In 2016 the energy sector represented 28.32% of Peru’s GHG emissions, of which more than a third was generated by fuel combustion from transport. That is why Peru put forward a more ambitious National Determined Contribution (NDC) in 2021 (compared to the 2015 NDC), which increases the reduction of Green House Gases (GHG) emissions to 30% with respect to the business-as-usual scenario, and a further reduction to 40% conditioned on international cooperation support.
Results in Sustainable Infrastructure in Peru through UKSIP
Through the UKSIP, the UK has provided key support to Peruvian infrastructure sectors with great potential to cause transformational change in decarbonization, from upstream planning to project intervention. Some successful interventions in Peru over the last years include:
- Support to the preparation of the National Infrastructure Plan for Competitivity launched in July 2019, which included the quantification of the country’s infrastructure gap. Now, as a second phase, UKSIP is currently helping the Ministry of Economy and Finance to determine sustainability indicators that will be used to define quality infrastructure and to prioritize projects in the updated National Infrastructure Plan.
- Support to the Municipality of Lima with the development of a baseline on the operation of the Lima sanitary landfills as necessary input to analyze the alternatives to achieve a management based on the circular economy for the management of urban solid waste.
- And a Sustainable Infrastructure Workshop in Lima to promote infrastructure investments that can sustain economic growth and improve quality of life. It explored how sustainability in infrastructure projects is integrated in the different stages of the project cycle by the identification of the main institutional gaps.
What comes next?
In this context, previous work and new strategic areas of UKSIP support were presented and discussed at a high-level virtual meeting on January 18th, 2022. Representatives from the IDB Group, the Government of Peru, and the Government of UK (the Department for Business, Energy & Industrial Strategy and the UK Embassy in Peru) reviewed the progress achieved and the next steps to move forward the sustainability and low-carbon agenda with the financial support from the UKSIP and technical support from the IDB Group.
The three parties agreed on moving forward with an ambitious agenda, in line with the new updated Peru’s NDC target of reducing emissions by 30% by 2030 and an additional 10% with international support. The agenda will include catalytic interventions in the infrastructure sectors with the highest potential for both climate mitigation and transformational impact. Among the discussions, it was found that water and sanitation was a priority sector for investment for the Government of Peru. Furthermore, investing in enabling sectors such as agriculture can become a powerful driver for competitiveness to leverage renewable energy and clean transport.
Improving upstream planning, project preparation and implementation, and easing financing, will be the work pillars going forward. This is also in line with the strategic areas of the last COP 26 event hosted by the UK in November 2021 in Glasgow and follows the Glasgow Climate Pact.
The IDB Group is keen to continue and accelerate its work with Peru in these areas with the help of the UK. Providing first technical assistance from the public side, and later, private advisory services that ultimately will pave the way to sustainable low carbon infrastructure. Climate change action is key for the Vision 2025, IDB Group’s blueprint for achieving inclusive and sustainable growth. In this way, the UKSIP will help Peru in the adoption of policies and regulations to enable scaling up of low-emission technologies, and enable further private investments. Ultimately this will contribute to closing the investment gap in infrastructure in Peru in tune with international climate agreements.
Pablo Navacerrada: As Technical Advisor for the Sustainable Infrastructure Programme of the UK, Pablo Navacerrada manages a project portfolio covering Colombia, Peru, Mexico, and Brazil for the IDB. He is responsible for sectoral analysis at country level regarding renewable energy, clean transportation, solid waste and cross-cutting themes at upstream level that contribute to emissions reduction. He holds a bachelor’s in environmental sciences and a master’s degree in engineering sustainable cities from Aalborg university, Denmark.
Jaime Fernandez-Baca: Specialist in the Climate Change and Sustainability Division of the Inter-American Development Bank (IDB) since 2012. He coordinates IDB operations in Peru to support the climate change mitigation and adaptation agenda. He was Project Manager in the Southern Andes Program of The Nature Conservancy, in charge of the design and implementation of conservation and development projects in the Yungas ecoregion. As an independent consultant, he has led the design and evaluation of programs and projects for the management of natural resources and biodiversity in various countries in Latin America and the Caribbean. Jaime worked for several years in the private sector as an environmental specialist for various investment projects in the mining, hydrocarbons, energy and industry sectors. Engineer in Agronomic Sciences from the University of California, Davis, Master of Science in Environmental Management from the University of Stirling, Scotland, United Kingdom, and Master in Agricultural Economics from the National Agrarian University, La Molina.