In recent years, private pension funds have become the most important institutional investors in Peru and have experience in financing infrastructure through project-based and balance sheet financing. PPFs may be willing finance the WS&S sector provided that sound risk mitigation instruments are included in contracts and could have up to $800 million/year to allocate to infrastructure projects. Most PPPs in infrastructure projects have been arranged through PROINVERSION.
The upgrading of Peruvian issues of debt has made the cost of debt more competitive in both international and local markets. CRPAOs issued recently to finance a tool road project as irrevocable GoP payment obligations were given the same rating as GoP debt. Investment activity in the Urban Local Utilities' service areas was paralyzed from the early 2000s to 2006, with the exception of SEDAPAL.
Recently, investment activity has dramatically increased, from US$89 million in 2006, more than doubling in 2007 (US$ 184 million) and increasing to US$556 million in 2008. This increase is explained by the launch and implementation of the Water for All program (APT), started in February 2007. Investment activity in the WS&S sector has dramatically increased in the past few years, mainly due to the launch and implementation of the Agua para Todos program. Multilateral and bilateral donor funding is channelled through the APT program but there are also ODA loans to water utilities and several concessions in the WS&S sector have been financed privately. It is estimated that Peru’s investment needs to meet the MDG are in the order of $420 million per year. Meanwhile, the cost of underperforming utilities poses a significant burden on both the government and on consumers.