Spotlight on Peru
A New President—And Maturing Project Management Practices—Could Help the Country Reinvent Itself
BY CATHERINE ELTON
Peru is forging a different path forward.
As one of the world's largest mineral exporters, the South American country's economy has long been at the mercy of volatile metal prices. High values powered a historic period of growth nearly 10 years ago, but a price collapse slowed Peru to modest gains over the past three years.
To spark stronger and sustained growth, a new leader is pushing for reforms to stoke project diversity and economic stability. Although some of the country's project growth was already percolating, President Pedro Pablo Kuczynski—a former investment banker and World Bank economist who took office last year—aims to push Peru over the top by cutting government red tape and creating new funding streams.
His plan includes spurring foreign investment and encouraging public-private partnerships (PPP) to drive an ambitious expansion of infrastructure projects over the next five years. President Kuczynski insists that new growth can deliver more equitable benefits than what the country has seen in the past. Among other goals, he wants to launch a national project giving the entire population access to drinking water by the end of his five-year term in 2021.
“I am optimistic that new projects are going to emerge across all sectors,” says Luis Llaque, PMP, PgMP, PfMP, project management office solution delivery lead, Newmont Mining, Lima, Peru. “The new administration has shown signs of possessing the political will to push projects in all sectors forward.”
Miraflores District in Lima, Peru
PHOTOBLISS/ALAMY STOCK PHOTO
But a project-hungry administration can't do it alone. The country's project management culture must mature for promised benefits to be delivered, says Luis Claros, PMI-SP, PMP, PgMP, senior project consultant at PMO3 Ingenieros Consultores, Lima, Peru. Project professionals must be better prepared to manage stakeholders and mitigate risks, such as a history of government inertia that has delayed or even derailed projects.
“If projects are better planned and better controlled, in the end, more projects will be possible,” Mr. Claros says.
“If projects are better planned and better controlled, in the end, more projects will be possible.”
—Luis Claros, PMI-SP, PMP, PgMP, PMO3 Ingenieros Consultores, Lima, Peru
The situation in Peru is by no means dire. The country's GDP growth rate is projected to reach 3.5 percent this year, one of the highest in a region where overall growth was negative. But growth isn't likely to even approach the all-time high of 9.1 percent set in 2008 unless Peru cultivates sectors beyond mining. For instance, double-digit growth in the construction industry ended in 2014, and private investments in the sector continue to lag.
“Many of the companies we compete with have gone out of business or are laying people off,” says Mr. Claros. “When it comes to projects in recent years, everyone has suffered.”
President Kuczynski says he'll help by increasing government spending and wooing foreign investors to finance the country's glaring infrastructure gap. Peru is in need of nearly US$160 billion in infrastructure projects through 2025, according to a study by the School of Public Management at Universidad del Pacífico, for the Association for the Promotion of National Infrastructure. And the government has pledged to spend US$3.1 billion this year on telecommunications and transportation infrastructure. Already, PPPs are helping to build new roads, including a 3,503-kilometer (2,177-mile) highway to connect villages and cities in the Andes Mountains.
The president also has focused on Peru's tourism sector—setting a goal to double the number of people who visit Peru each year to 7 million by the end of his term. The tourism sector needs new projects so the Incan ruins at iconic Machu Picchu and the nearby city of Cusco aren't the country's only main tourist attractions. To spike interest in the pre-Incan ruins of Kuelap, President Kuczynski's predecessor agreed to fund a US$24 million cable car system project that was completed earlier this year. The system slashes the two-hour drive to the top of the ruins to a 20-minute ride.
And in order to free up a logjam of stalled projects—and keep backups from occurring in the future—in November, the government approved a new public investment system designed to drastically reduce planning and approval time for government-sponsored projects. For instance, fewer studies and less paperwork will be required to execute regional and municipal projects.
Even before President Kuczynski assumed power, the government was starting to give Peruvian organizations—or at least Peruvian professionals—the opportunity to lead projects rather than rely on foreign contractors, says Julio Alvarez, assistant manager of engineering, Shougang Hierro Peru, Marcona, Peru. For instance, a 20-year, US$1.4 billion mine expansion project that was launched in 2010 is in the hands of Peruvian teams that he oversees, he says. With President Kuczynski in charge, government confidence in Peruvian project leadership is expected to grow, Mr. Alvarez says.
“With a little effort and the trust of the private company and the government, we have been able to take this important step forward,” he says. “It's not that complicated, really. It's just about doing things right and being well-trained.”
Despite the positive project vibes coming from the government, experienced project professionals know change won't happen overnight. For instance, a US$1.2 billion expansion and renovation project at Jorge Chávez International Airport in Lima has been delayed for more than 10 years. Teams need to be able to adapt to deal with long waits, says Alida Anicama, PMP, a Lima-based project manager with AC Consulting SAC, which has worked on the airport project.
“The company that has the concession to the airport cannot invest because of the government's delays in expropriating the lands required for the project,” she says. The government also needs to move sewage lines and finish a tunnel before construction can begin. To avoid further delays, Ms. Anicama believes it would be best to start construction of the terminal on the land that's already acquired, rather than waiting until all of the land is secured.
“As a project manager, you have to look for ways to overcome these obstacles,” she says. “You have to plan for different scenarios and be able to refocus the project accordingly.”
For President Kuczynski's ambitious plans to become reality, public and private organizations must elevate their project management culture. But too many companies don't support project managers who are seeking professional certifications and don't understand the strategic value of establishing sound project processes, Mr. Claros says.
“The majority of companies in Peru either aren't aware of the importance of project management or, if they are, they don't have the necessary tools in place that enable them to implement certain procedures or practices to help their project offices,” he says.
PHOTO COURTESY OF TELECABINA KUELAP SA
The new cable car system in Kuelap, Peru
PHOTO BY XINHUA / ALAMY STOCK PHOTO
A mining worker in Marcona, Peru
Peru at a Glance
1.3 million square kilometers (502,200 square miles)
GDP growth rate (2015):
GDP growth forecast (2017):
Mining, energy, agriculture and tourism
“You have to plan for different scenarios and be able to refocus the project accordingly.”
—Alida Anicama, PMP, AC Consulting SAC, Lima, Peru
Mr. Llaque says project managers often have their hands tied when trying to implement sound practices, because organizations in Peru generally lack a long-term vision. “If we are just starting out in project management, program and portfolio management are basically occult sciences to them,” he says.
Skills that project managers and organizations need to emphasize most are risk management, stakeholder relations and communications, says Ronal Calderon, PMP, deputy manager, infrastructure projects, DPWorld, Callao, Peru. “We need project managers who know how to map the stake-holders and their needs and ensure that these are reflected in the technical documents before they are budgeted,” he says. “Sometimes these are deficient, and it affects costs and time frames.”
“If we are just starting out in project management, program and portfolio management are basically occult sciences.”
—Luis Llaque, PMP, PgMP, PfMP, Newmont Mining, Lima, Peru
At a minimum, managing relationships with community members also can help avoid the types of protests that have paralyzed or even killed mining projects in Peru, he says. But in Lima and other areas on the coast, project managers must contend with another stakeholder risk: gangs that threaten violence during construction projects. Dealing with these groups is an essential aspect of planning, Mr. Calderon says. Teams must identify such groups and arrange meetings with them before construction begins. In a worst-case scenario, gangs attempt to extort money from project sponsors. But organizations are taking steps to ensure such tactics aren't rewarded—and to build a culture of hope in affected communities, Mr. Calderon says.
“This is not anything that appears in A Guide to the Project Management Body of Knowledge (PMBOK® Guide). But serious companies and project teams are implementing corporate social responsibility policies in the places they operate. By working closely with local people, they are trying to solve their main problem—poverty—and create more opportunities through projects.” PM
We asked project professionals: What skill is needed for project managers to stand out in Peru today?
“Stakeholder management. If you're working on a building in an urban area and don't work to raise neighbors' awareness, they could stop the project by protesting against the noise and traffic congestion in front of the work site and calling the media to cover it.”
—Alida Anicama, PMP, project manager, AC Consulting SAC, Lima, Peru
“Long-term vision. Even if your project lasts just three months, you need to think about how what you produce is going to function for the next five years. That enables you to justify your project, make it more visible and ensure its sustainability.”
—Luis Llaque, PMP, PgMP, PfMP, project management office solution delivery lead, Newmont Mining, Lima, Peru
“In Peru, many project managers have excellent technical skills, but they must develop leadership skills. They need to develop people skills and take on specialized courses that help boost their leadership.”
—Julio Alvarez, assistant manager of engineering, Shougang Hierro Peru, Marcona, Peru
“The ability to identify and map the stakeholders and risks associated with the project, and proper training in negotiation and conflict resolution.”
—Ronal Calderon, PMP, deputy project manager, infrastructure projects, DPWorld, Callao, Peru
Fast Forward Four projects showcase Peru's promising future
TALARA REFINERY MODERNIZATION
Budget: US$3.5 billion
Targeted close: 2019 The public-private partnership (PPP) between state-owned Petroperú and Spanish contractor Técnicas Reunidas launched in 2015 and will enable the refinery to produce cleaner diesel, gasoline and liquefied petroleum gas. The target benefits: improved air quality and public health—and a nearly 50 percent increase in the refinery's daily output.
PHOTOS COURTESY OF, CLOCKWISE FROM TOP, PETROPERU, HYDRO-BID, ELECNOR, AND AUTORIDAD AUTÓNOMA DEL SISTEMA ELÉCTRICO DE TRANSPORTE MASIVO DE LIMA Y CALLAO
LINE 2 OF LIMA METRO
Budget: US$5.8 billion
Targeted close: 2021
Part of the country's largest-ever infrastructure program, the second line of the capital city's oft-delayed urban rail system will be 35 kilometers (21.7 miles) of subway tunnels linking 35 stations. Daily capacity is slated to be 660,000 people.
ALTO PIURA HYDRO
Budget: US$115 million
Targeted close: 2021
Northern Peru's coastal Piura region is parched—and this 13-kilometer (8.1-mile) tunnel cutting through the Andes will bring relief. The first phase of a joint PPP construction venture between Italy's Astaldi and Peru's Obrainsa began early last year to carry water to Piuran agricultural lands. For another nearly US$600 million, subsequent phases will deliver hydroelectric and irrigation systems.
SOUTHERN GAS PIPELINE
Budget: US$7 billion
Targeted close: 2019
Funding obstacles have delayed the project, but the government hopes to broker a deal among private contractors to complete a 1,134-kilometer (705-mile) pipeline stretching from natural gas fields in the Amazon, over the Andes, and to Ilo on the Pacific coast.