¹ As a consequence of the 1967–8 crisis and of the liberal orientation of Peruvian economic policy up to 1968, there were few projects in the pipeline in the first years of the military regime. This fact, together with the rapid growth of public capital formation in this period, made it possible for the Velasco government to initiate in the early 1970s a considerable number of projects. It had thus ample room to put its development strategy into practice.

² It is important to point out that this analysis is highly tentative due to the scarcity of the published statistical material, and the lack of a sufficient number of studies and detailed evaluations of the main investment projects and their economic and social consequences. It must also be underlined that many projects are not yet completed or have been operating only for a short time, making their evaluation even more difficult.

³ Thus the index of central government capital formation fell to 74.9 in 1968 and to 85.0 in 1969 (1967=100.0); see Banco Central de la República, (BCR), Cuentas Nacionales 1960–74, pp. 20–1.Google Scholar

⁴ See BCR, El Desarrollo Econórnico y Finançiero del Perú de 1969 a 1972, pp. 166–7.Google Scholar

⁵ As a consequence of the financial pressure exerted by the USA in the first years of the military regime in order to secure an adequate compensation for the American enterprises nationalized. On this see Robert, Devlin, Los Bancos Transnacionales y el Financiamiento Externo de América Latina. La Experiencia del Perú 1965–76 (Santiago, CEPAL, 1980), pp. 54Google Scholar and following; see also Shane, Hunt, ‘Direct Foreign Investment in Peru: New rules for an old game’, in Lowenthal, A. (ed.), The Peruvian Experiment (Princeton University Press, 1975), pp. 302–49.Google Scholar

⁶ See INP, Diagnóstico de la Inversióa Pública 1968–77 (Lima, 1979), Table 3A.Google Scholar

⁷ See Felipe, Portocarrero, Crisis y Recuperación. La economía peruana entre los 70 y los 80 (Lima, Mosca Azul, 1980), pp. 71–2.Google Scholar

⁸ See INP, op. cit., table 3A.

⁹ F., Portocarrero, op. cit., pp. 57–60.Google Scholar

¹⁰ See ibid., statistical appendix, table 15.

¹¹ See Devlin, R., op. cit., pp. 155–61.Google Scholar

¹² As a consequence, the coastal region was given preference; see INP, Plan 1971–75, Plan Global, vol. 1 (1971), p. 57.Google Scholar

¹³ See INP, Informe Socio-Económico, Enero-Diciembre de 1978, vol. 2, abril de 1979, p. 10.Google Scholar

¹⁴ Although the information is not yet available in a fully polished version, the authorities have made progress in putting together a national inventory of public investment projects for the period 1968–June 1980, which should subsequently be kept up-to-date: see MEF-OFIN, Inventario Nacional de Proyectos: Principales Proyectos del Período 1968–80 (Lima, 2704 1981). There is additional information available for certain sectors such as agriculture, energy and mines. Using this listing and sectoral information, it is now possible to carry out a preliminary study of the principal public investment projects.Google Scholar

¹⁵ In these twenty-three projects are included all involving expenditure of more than 1000 million soles at 1970 prices (equivalent to US $25.8 million at 1970 prices) in 1968–78. By sector and with expenditure given in million 1970 soles, the projects are: (a) Industrial sector: tin plate factory of SIDERPERU (1483), rolling mill of SIDERPERU (11030) newsprint factory (3823). (b) Transport and communications: Carretera Pativilca-Caraz (1177), Carretera Huanuco-Aguatia (1102), Carretera Tarapoto-Rio Nieva (1558), Telephone expansion 1st stage (1365), and Carretera de Acceso al Callejon de Huaylas (1287). (c) Electricity: Hydroelectric project, Mantaro, 1st stage (2212); second stage (2073); expansion and renovation programme of ELECTRO PERU (5759). (d) Agriculture: Majes irrigation project (9044); Tinajones irrigation project (2426); Chira-Piura irrigation project (7009). (e) Mining: Cerro Verde I (4679), Zinc refinery (1735), Copper refinery (1538). (f) Hydrocarbons: expansion of La Pampilla refinery (1683); Ramal Norte oil pipeline (f); Selva Norre exploration programme (4714); Talara fertilizer plant (1621); Norperuano pipeline (18059). Source: MEF: OFIN op. cit. It must be taken into account that some projects were still under way in 1978; thus the final figure will be higher than that given here.

¹⁶ See MEN, informe de Situación de los Pro yectos de Inversióon del Sector Energía y Minas, OSP, Lima, 30.6.79, pp. 46 and following.Google Scholar

¹⁷ See Ministerio de Agricultura – OSPA; Itinerario de Inuersiones desde 1950 hasta 1976 and INP, op. cit., table 5B.

¹⁸ The superiority of the small and medium irrigation schemes over the large projects is a point which has been well documented for decades in Peru: see Gerardo, Klinge, Política de lrrigación (Lima, Sociedad Nacional Agraria, 1935), p. 63,Google Scholar and McGaughey, S. E., Misión Iowa, Criterios de Inversíon para la Evaluación y la Plantificación de los Proyectos de Irrigación en el Perú (Lima enero de 1970), p. 324.Google Scholar

¹⁹ See INP, Diagnóstico, p. 31.Google Scholar

²⁰ It is thus anticipated that Majes should reach full production thirteen years after the conclusion of the main civil works, while this result will be attained in ChiraPiura sixteen years after the initiation of the civil works: see Obando, Hugo A. Maradiegue, ‘A Comparative Social Benefit-Cost Analysis of the twelve principal projects of Peru's public investment program’ (Ph.D. Thesis, Iowa State University, 1977).Google Scholar

²¹ See INP, Diagnóstico, p. 30.Google Scholar

²² Reflecting clearly this situation, labour costs represent only 13.6 per cent and 11.9 per cent of total costs in the projected budgets of the Chira-Piura and Majes irrigation projects respectively: see Maradiegue, , op. cit., p. 130.Google Scholar It is also apt to quote the analysis of the World Bank: ‘The employment effect of public investment, during both construction and operation, is also low. Investment is heavily concentrated in large-scale projects that tend to use capital-intensive construction techniques and to require high investment per unit of output. Gross output per worker in the construction sector in general is three times higher than in small scale laborintensive public works projects of the type that the government recently financed in the Sierra region… The ratio is probably much higher with regard to large-scale public investment projects, since the average figure for the construction sector as a whole is heavily influenced by relatively labor-intensive house construction. Similarly, the permanent employment effect per unit of investment is much higher in small-scale irrigation rehabilitation projects and colonization projects in the Selva region than in large-scale irrigation projects … Those rough calculations show that by concentrating on large-scale projects employment creation through public investment is kept much below its potential.’ Cf. World Bank, Peru: Major Development Policy issues and Recommendations (Washington, 06 1981), p. 30.Google Scholar

²³ See ibid., p. 129 and following. Thus the main projects undertaken in the Energy and Mines sector show the following import content: Northern Peru Pipeline, 50.3 per cent of total costs; Jungle Operations (oil prospection and deposit development), 41.0 per cent; expansion of La Pampilla oil refinery, 46.4 per cent; Mantaro II Hydroelectric 79.2 per cent. Cf. MEN, op. cit., pp. 46 and following.Google Scholar

²⁴ See INP, Diagndsóico, p. 6.Google Scholar

²⁵ See Devlin, R., op. cit., especially pp. 155–61.Google Scholar

²⁶ See ibid., pp. 157 and following for the average duration and interest rates of the credits contracted to finance public investment projects.

²⁷ A review of the manner of implementing the main projects soon demonstrates this. Thus, the Northern Peru pipeline was built by two international firms: the consortium formed by Williams International Ltd., Sedco Construction Corporation and Horn International, of Tulsa, USA (a contract for $142 million September 1974) and Tecnit Cia, Tecnica International SACI, Argentina (a contract for $60 million signed October 1974). The associated works were undertaken by Page Communication Engineering of Virgina USA, G. Wimpey Co., UK, and COSAPI, Lima. The Bechtel Corporation of San Francisco acted as general supervisor (cf Andean Report, Aprl. 1976, p. 4). Again, in the case of the expansion of La Pampilla refinery Technip (Compagnie Francaise d'Etudes et de Constructions Technip) ‘is responsible for the project engineering, procurement, construction and start up’ (Andean Report 04 1976, p. 66).Google Scholar The Technip contract was signed in October 1974, with French government financing. The greater part of the equipment was imported, largely from France (ibid., p. 67). Similarly, in the Cerro Verde copper mine British Smelter Construction Co., UK, was involved as manager of the construction of the industrial plant and as buyer for the goods and services purchased in England, while Wright Engineering of Canada designed the processing plant and acted as purchasing agent for the equipment financed with Canadian funds. Again Parsons Jurden, USA, was contracted to represent MINIEROPERU in matters of purchases, construction and design. The greater part of the financing was arranged by British Smelter (Andean Report June 1976, pp. 209–10). Lastly, in the case of the paper-making complex of Santiago de Cao Commonwealth Construction of Canada was involved in construction and as managers; Bufete Industrial of Mexico and Rust Engineering, USA, designed the machines which were made by Valmet Oy of Finland and El of Harrison of Sweden. This project was largely financed by suppliers' credits (Andean Report, 06, 1977, p. 209).Google Scholar

²⁸ See Portocarrero, F., op. cit., ch. V for an analysis of these problems.Google Scholar

²⁹ Thorp, R. and Bertram, G., Peru 1890–1977: Growth and Policy in an Open Economy (Macmillan, 1978), pp. 252–6, 286–90 and 304–5.CrossRefGoogle Scholar

³⁰ Within the factors that limit the analysis in this area, it is necessary to underline that many projects are still under construction or have not yet reached full production. Likewise, there is an almost complete absence of ex-post evaluations of the main projects that have been concluded. Therefore, more detailed research is needed in this field before a general assessment of the efficiency and the profitability of public investment is undertaken.

³¹ Fitzgerald, E. V. K., The Political Economy of Peru 1956–78: Economic Development and the Restructuring of Capital (Cambridge University Press, 1979), pp. 252–5,Google Scholar for a brief analysis of the Peruvian micro-planning system and the formation of these pressure groups around the most significant investment projects. Unfortunately, the author does not explore this last aspect with sufficient detail. An illustration of the formation of these pressure groups can be seen in the case of the Majes project, which was implemented by means of a turnkey contract put together by the MACON consortium, which included Tarmac Construction Ltd. (UK: leader of consortium with 22 per cent share), AB Skanska Cementzjuteriet (Swedish, 27 per cent), Entrecanales y Tavora SA (Spanish, 19 per cent), Foundation Co. (Canadian, 16 per cent) and Concord Constructions (South African, 15 per cent). This consortium put together the financing and organized the construction work, bringing in local firms like Constructora Bertolero. On the domestic front, the support of local power groups was organized, which came into evidence each year around the discussion of the relevant budget allocation, when speeches and other kinds of pressures would be made (Andean Report, 11, 1975, p. 7, 12 1980 pp. 221–4).Google Scholar

³² This has been a notable feature of the large irrigation projects, which have been one of the forms of public investment with the more important links with the regional economy of the more advanced and politically organized coastal zone.

³³ See ‘Majes, , a test case’, Andean Report, December, 1980, pp. 221–4.Google Scholar