The Miami Herald
September 21, 1998
Peru readies its seaports, airports for privatization

             BY LARRY LUXNER
             Journal of Commerce

             LIMA, Peru -- Having generated more than $8 billion since 1991 from the sale of
             Peru's state-owned telecommunications firms, electric utilities, mines, fisheries and
             banks, the government now plans to privatize all operations at the nation's major
             ports by next year.

             Jorge Gonzalez Izquierdo, Peru's minister of labor and president of state privatization
             agency Copri, says the process will begin by Dec. 15, with the concessioning of
             operations at the southern ports of Ilo and Matarani. These two ports, which
             together account for less than 3 percent of total sea traffic, see their future primarily
             as a Pacific outlet to landlocked Bolivia.

             ``Since 1990, there has been growing participation of the private sector in the
             terminals' complementing services, in preparation for their privatization,'' says a fact
             sheet issued in mid-August by state-owned Empresa Nacional de Puertos SA,
             known as Enapu.

             ``Today, activities such as pilotage, tugging and stevedoring are carried out by Enapu
             and by private-sector companies, which set their own prices. Nevertheless, Enapu's
             prices are still determined by government regulation. Additionally, several companies
             offer warehouse services outside of the terminals' area.''

             First ports seen at $160M

             Together, Ilo and Matarani are expected to generate $160 million in investment.
             Other ports will later be included in the process, including Paita, Salaverry,
             Chimbote, Callao and General San Martin -- which together account for 99 percent
             of Peru's total cargo traffic.

             ``These two will be privatized by year's end,'' says Gustavo Caillaux, Peru's minister
             of industry, commerce and tourism. ``These ports could be the main ports for Bolivia,
             and we're going to finish the 80-kilometer (50-mile) road between Ilo and the
             Peruvian-Bolivian border at Desaguaderos.'' Commodities expected from Bolivia
             include soybeans, timber and minerals.

             Peru is an increasingly important player in the trades serving the west coast of South
             America. U.S. containerized imports from the west coast of South America totaled
             114,225 20-foot containers or their equivalent in the first half of 1998, according to
             PIERS, the Port Import/Export Reporting Service of The Journal of Commerce.

             That is almost on pace for last year's totals of 231,943 TEUs for all of 1997, an
             encouraging sign given this year's El Niño weather patterns that caused severe crop
             losses in the region.

             Disputing complaints of job losses, Caillaux said, ``The ports will move more than
             now, so they'll end up with more employees than before.''

             Better position now

             Jaime Garcia, general manager of the American Chamber of Commerce of Peru,
             says it is about time the government took the crucial step to privatize.

             ``We are in a better situation than five years ago, but compared with our neighbors,
             we still need to improve,'' he said. ``It's not enough to talk about the past, which is
             what all the politicians do. They've been talking about this for seven years.''

             Last year, according to Copri, Peru's seven ports handled a combined 13.9 million
             metric tons of cargo, led by Callao (9.06 million tons), San Martin (1.46 million tons)
             and Matarani (1.07 million tons).

             In 1997, Callao handled 321,567 TEUs, or 86 percent of Peru's total, while Ilo, with
             12,783 TEUs in 1997, has seen a 66.4 percent growth in containerized traffic during
             the last five years.

             Callao undoubtedly is the big prize -- and experts say it will need at least $300 million
             in port infrastructure investment. Principal commodities exported through Callao
             include metals, minerals, fish meal, general cargo and containerized goods, while
             leading imports are grains, petroleum, chemicals, fertilizers and containerized cargo.

             Airports going private

             Separately, the Peruvian government plans to begin transferring the operation of the
             country's main airports to the private sector by year-end.

             Corporacion Peruana de Aeropuertos y Aviacion Comerica (Corpac) oversees 33
             airports and 28 aerodromes. With 1,600 workers -- 900 in Lima and 700 elsewhere
             -- Corpac's main international airports are Aeropuerto Internacional Jorge Chavez in
             Lima, Arequipa Chachani and Col. Francisco Secada International in Iquitos.

             Corpac's total capacity is 7.5 million passengers, 200,000 flights and 120,000 metric
             tons of cargo a year. In 1997, the agency had income of $90 million, and handled
             5.68 million passengers and 59,724 tons of cargo.

             Planned investment at the Lima airport alone is $150 million to $200 million. Projects
             to be developed include main building improvement, aircraft fueling systems, freight
             warehouses and runways. Jorge Chavez accounts for 97 percent of Peru's total
             international passenger traffic, and 99 percent of its air cargo business.

             Parsons Latin America has been selected as engineering consultants to prepare the
             basis for a 30-year concession. Total expected investment could reach $500 million.

             Lima as the hub

             ``They really want to promote Lima as a passenger and cargo hub for South
             America. It's ideally situated,'' says Kevin Tynes, vice president of Parsons Latin
             America. In 1997, the airport accounted for 37,492 pounds of domestic cargo and
             146,223 pounds of international cargo.

             The private sector anxiously awaits airport privatization, said the Chamber of
             Commerce's Garcia, noting that exports of perishable products moving by air should

             Most of the airlines providing scheduled passenger operations also carry air cargo in
             their lower deck, including American Airlines, Lan Chile, Ecuatoriana de Aviacion,
             Aeromexico, KLM Royal Dutch Airlines, Alitalia and Lufthansa German Airlines.

             But Arrow Air and Challenge Air Cargo provide regular all-cargo services between
             Lima and U.S. cities, and Martinair Holland provides similar cargo links to

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