Latin America Biannual Construction Market Report 3Q/4Q 2024
Other factors
Gross domestic product (GDP) and consumer price index
Our last report noted that the market consensus for Peruvian economy growth in 2024 was between 2.3% and 2.4%. However, according to the latest projection by the Ministry of Economy and Finance (MEF), the economy is now expected to grow by 3.2% this year and 3.1% in 2025.
The latest data from the National Institute of Statistics and Information (INEI) shows the economy grew for a fourth consecutive month in July at 4.47% year-on-year. July’s growth was significantly higher than the preceding month’s figure of 0.21% — primarily driven by manufacturing rising by 10.91%.
Peru, therefore, looks set to reclaim its place as one of Latin America's best economic performers after last year saw its economy shrink by 0.6% as a result of adverse weather, lower private investment and anti-government protests that hit mining.
In September, the Central Reserve Bank of Peru (BCRP) cut interest rates for a second successive month to the lowest level in Latin America — a reduction of 25 basis points to 5.25%.
According to INEI, the Consumer Price Index of Metropolitan Lima fell by 0.24% in September, falling to 1.78%, the lowest level since 2020, when inflation was last below 2%.
Consumer price rises have steadily fallen since a post-pandemic peak of 8.8% in June 2022.
The BCRP board of directors expects headline inflation to stay within the target range of 1–3% and core inflation to “follow a decreasing trend” over a two-year forecast period.
Impacts from localised conflicts
A slight majority of respondents (56%) said their projects had not been disrupted by localised conflicts in the last six months, which is an improvement on our last report, where one-third said the same.
Anti-government protests and roadblocks were logistical headwinds last year and while not as severe this year, organised crime and the government’s response in the form of a state of emergency could be the next challenge to navigate.
Construction-related government initiatives
Respondents were unconvinced that the government’s plans for a Ministry of Infrastructure would have a positive impact, with three-quarters saying no or unsure.
Ambitious plans announced over the summer by President Boluarte, such as linking Chaucay megaport with new trains, will first require economic and political stability. Peru has had six presidents since 2018 and elections are expected to be called next year.
The vast majority of respondents (87%) thought that adopting NEC contracts would positively impact the delivery of public works.
This follows 90% of respondents in our last survey ranking the use of standard contracts as the top priority for government to improve the industry.
The memorandum of understanding signed in August between the MEF and NEC paves the way for the publication of an official Spanish translation of the NEC4 Contract, user guides and training programmes.
Peru has already used NEC for around USD 9 billion worth of public projects, including the Bicentennial Schools Programme (BSP). A further pipeline of 70 infrastructure projects should now benefit from improved collaboration, transparency and efficient procurement.
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