1. Institutional and sector context

This chapter provides and overview of Peru’s public institutions and the main features of the sectors regulated by Peru’s transport infrastructure regulator (Organismo Supervisor de Inversión en Infrastructura de Uso Público, OSITRAN).

    

Institutions

Peru has a centralised system of government, which is comprised of the executive, legislative and judiciary branches.

Figure ‎1.1. Branches of the government of Peru

Source: (Government of Peru, 2019[1]), https://www.peru.gob.pe/directorio/pep_directorio_gobierno.asp.

Executive

The President of the Republic, the Council of Ministers, and the Presidency of the Council of Ministers (Presidencia del Consejo de Ministros, PCM) constitute the core bodies of the executive branch (see Figure ‎1.2, (OECD, 2016[2]). Along with the PCM, the Ministry of Economy and Finance (Ministerio de Economía y Finanzas, MEF) help shape the overall regulatory environment in Peru. In the transport infrastructure sector, the Ministry of Transport and Communications (Ministerio de Tranporte y Comunicaciones, MTC) and other public bodies, such as the Agency for the Promotion of Private Investment (Agencia de Promoción de la Inversión Privada, Proinversión), also work closely with OSITRAN.

Figure ‎1.2. Structure of the executive branch of the Peruvian government

Note: The PCM also houses a large number of public entities, secretariats and commissions, which are not included in this figure.

Source: (OECD, 2016[3]), Regulatory Policy in Peru: Assembling the Framework for Regulatory Quality, OECD Reviews of Regulatory Reform, Paris, https://doi.org/10.1787/9789264260054-en.

Presidency of the Council of Ministers (PCM)

The Presidency of the Council of Ministers (PCM) is responsible for co-ordinating national and sector policies within the executive, including line Ministries and public agencies. The PCM houses several secretariats and commissions, and manages and co-ordinates line ministries and public entities. The PCM plays a key role in appointing and nominating the President and the members of the Board of the regulator, as well as administering budget allocations and disbursements. While not formally defined in law, the President of the Council of Ministers in practice plays the role of Prime Minister and government spokesperson (OECD, 2016[2]).

Ministry of Economy and Finance (MEF)

The Ministry of Economy and Finance (MEF) is responsible for the development of economic and financial policy in the country. MEF manages the performance-based budgeting system, which applies to all executive bodies and economic regulators. MEF is also in charge of other areas of regulatory policy such as administrative simplification, international regulatory co-operation, inter-governmental co-ordination, performance-based regulation, ex ante impact assessments of regulation, and governmental transparency and consultation (OECD, 2016[3]).

Agency for the Promotion of Investment (ProInversión)

The Agency for the Promotion of Investment (Agencia de Promoción de la Inversión Privada, ProInversión) is a specialised technical body attached to MEF and is responsible for the promotion of national investments through public-private partnerships (PPPs) in services, infrastructure, assets, and other state projects. It provides information and orientation services to investors, mediating different views on investment projects, and creating a conducive environment for attracting private investments, in accordance with economic plans and integration policies, such as those related to the development of transport infrastructure. ProInversión receives technical comments from OSITRAN, MEF and the MTC when developing investment projects; however, only MEF and the MTC opinions are considered binding.

Ministry of Transport and Communications (MTC)

The Ministry of Transport and Communications (MTC) establishes the general policy and direction of the transport sector. It is in charge of designing, leading, promoting, and implementing actions aimed at providing efficient transportation and telecommunication systems and overseeing concession programmes in these sectors.

Legislature

Congress is a unicameral institution composed of 130 members elected to serve five-year terms. Congress can enact legislation that requires regulators to develop secondary regulations. Moreover, Congress can call on ministries and regulators to submit opinions on draft laws and to attend sessions to respond to any questions raised by Congress. There are currently 23 standing committees, including the Commission for Consumer Defence and Regulators of Public Utilities (Comisión de Defensa del Consumidor y Organismos Reguladores de los Servicios Públicos, CODECO) and Commission for Transport and Communications (Comisión Transporte y Comunicaciones).

Judiciary

The judiciary branch is responsible for interpreting and applying the laws in Peru. It is responsible for providing mechanisms for dispute resolution through a hierarchical system. The judiciary is led by the Supreme Court and is supported by superior courts with defined jurisdictions across the 25 regions in the country. Under each superior court are 195 primary courts responsible for each province and 1 838 Courts of justice of the Peace within each district (Poder Judicial del Peru, 2012[4]). In the transport infrastructure sector, dispute resolution between regulated entities, as well as between regulated entities and users, are first handled via OSITRAN’s internal dispute resolution bodies. If the parties wish to appeal these decisions, they can launch a “contentious administrative process” under Law No. 27584. The judiciary makes the final decision, which can be decided based on both the merit of the issue as well as the process. In addition, it is possible for regulated entities to resort to arbitration.

Subnational governments

There are three subnational layers of government in Peru: the regional government, the provincial local government and the district local government (OECD, 2016[3]). These government levels have exclusive and joint functions which are described in the Peruvian Political Constitution (Constitución Política del Perú, CPP), the Organic Law of the Executive Power (Ley Orgánica del Poder Ejecutivo, LOPE, the Organic Law of Regional Governments (Ley Orgánica de Gobiernos Regionales, LOGR) and the Organic Law of Municipalities (Ley Orgánica de Municipalidades, LOM). Sub-national governments have the authority to enact regulatory measures in their region.

Comptroller General of the Republic

The Comptroller General of the Republic (Contraloría General de la República del Perú, CGR) was established in 1929 as the supreme audit institution of Peru. As the highest authority of the national control system, the CGR supervises, monitors and verifies the correct application of laws and the use of state resources and assets. An Institutional Control Body (Órgano de Control Institucional, OCI) represents it inside each public entity. The Chief Audit Officer of the OCI is assigned by the General Comptroller of the Republic and its function is to oversee transparent management of public resources, safeguarding the legality and efficiency of activities. The OCI is responsible for all auditing all public spending.

Sector context

OSITRAN oversees transport infrastructure for public use, such as airports, ports, roads, railways (including passenger services in the Lima Metro), as well as the Amazon Waterway. As of December 2018, OSITRAN supervises 32 contracts with the approximate total amount of investments at USD 15.2 billion (see Figure ‎1.3).

Figure ‎1.3. Sectors supervised by OSITRAN

Note: The information is for the year 2018, except for the committed and executed investments that are as of June 2019.

Source: Information provided by OSITRAN, 2019.

Figure ‎1.4. Map of contracts supervised by OSITRAN

Note: Map available on OSITRAN website. It includes relevant information related to concession contracts, tariffs, supervision plans, sanctions, etc.

Source: (OSITRAN, 2018[5]).

Figure ‎1.5. Amount of investments and number of contracts, 2006-2018

Source: (OSITRAN, 2018[6]).

Figure ‎1.6. Distribution of investments per sector as of December 2018

Source: (OSITRAN, 2018[6]).

Concession contracts system

The large majority of concession contracts for transport infrastructure in Peru are governed by public-private partnerships (PPPs). PPP contracts aim to enhance the development of public service infrastructure for the benefit of citizens and users. The State (grantor) delegates the construction, operation and maintenance of public service infrastructure to a private company (concessionaire). Contracts can be awarded either through public tenders or initiatives that can be classified as self-sustained and co-financed (see Table ‎1.1).

Table ‎1.1. Types of concession contracts
Self-sustained concessions (autosostenibles)	Co-financed concessions (cofinanciadas)
OSITRAN supervises sixteen self-sustained concessions. Do not require co-financing of the public sector and produce their own income. Must meet the following conditions: Minimum or no demand for financial guarantee by the Peruvian state. Non-financial guarantees that have no or minimum probability of demanding cofinancing.	OSITRAN supervises sixteen co-financed concessions. Require granting or contracting of financial guarantees or non-financial guarantees that have a significant probability of cofinancing demands.
Role of OSITRAN
The role of OSITRAN is the same in both categories: The regulator verifies compliance with concession contracts. Differences in procedures, standards, adjustment mechanisms or methodological aspects for tariff review are established in the contracts.
Source: Information provided by OSITRAN, 2019.

Figure ‎1.7. Main public entities involved in PPPs

OSITRAN participates in the design of concession contracts by issuing technical and non-binding opinions. Since 2018, under Legislative Decree 1362, it is mandatory for OSITRAN to issue opinions on initial drafts of contract. Previously, OSITRAN’s opinions were mandatory only once contracts had been negotiated and finalised.

Legislative Decree 1362 introduced other important modifications, such as the requirement to obtain property rights of the lands needed to execute the projects early; the role of the CGR in issuing non-binding opinions on draft contracts; and the obligatory publication of all OSITRAN and MEF opinions concerning contract modification on their institutional websites.

In addition, OSITRAN supervises some infrastructures that are not governed by PPPs. For example, the Regulator supervises the activities of the public company Corporación Peruana de Aeropuertos y Aviación Comercial S.A., CORPAC that administrates 29 airports.

Figure ‎1.8. Evolution of the private investment for public works framework (1991-2018)

Source: Figure provided by OSITRAN, 2019.

References

[1] Government of Peru (2019), Organización del Estado, https://www.peru.gob.pe/directorio/pep_directorio_gobierno.asp.

[2] OECD (2016), OECD Public Governance Reviews: Peru: Integrated Governance for Inclusive Growth, OECD Public Governance Reviews, OECD Publishing, Paris, https://doi.org/10.1787/9789264265172-en.

[3] OECD (2016), Regulatory Policy in Peru: Assembling the Framework for Regulatory Quality, OECD Reviews of Regulatory Reform, OECD Publishing, Paris, https://doi.org/10.1787/9789264260054-en.

[5] OSITRAN (2018), Concesiones, https://www.ositran.gob.pe/concesiones/ (accessed on 28 October 2019).

[6] OSITRAN (2018), Memoria Institucional OSITRAN 2018, https://www.ositran.gob.pe/wp-content/uploads/2019/08/Memoria_Institucional_2018.pdf.

[4] Poder Judicial del Peru (2012), Poder Judicial del Peru, http://www.pj.gob.pe/wps/wcm/connect/CorteSuprema/s_cortes_suprema_home/as_Inicio/ (accessed on 25 June 2018).