Dina Boluarte's proposal has caused controversy due to the lack of discussion with other political actors and the overload of projects that the new Ministry would have. But analyzing the experiences of Chile, Argentina and Australia could broaden the range of opportunities.
On July 28, Dina Boluarte, the president of Peru, surprised everyone with a five-hour Address to the Nation on the occasion of the Andean country's National Holidays. Amid a monotonous list of projects, she managed to highlight one initiative: the creation of a Ministry of Infrastructure.
This is an institution that seeks to merge 13 public works executing entities from various ministries. The objective is to provide the Peruvian State with greater supervision and less delay in construction procedures. Among the organizations that would be absorbed are entities dedicated to urban and rural sanitation, the construction of educational and medical centers, transportation routes, among others.
Boluarte's government figures were optimistic about the project. For example, the president of the Council of Ministers, Gustavo Adrianzén, declared that the new ministry "will make the Peruvian State more efficient." However, specialists consulted by AméricaEconomía point out that apparently, the creation of a specialized portfolio for public works centralizes their execution. Although in reality, we would be facing a case where the old saying "he who embraces too much, squeezes little" applies.
“A State reform cannot be achieved merely by merging 13 entities. We are talking about programs and funds from different sectors that are being merged into a new ministry, with two vice-ministries. In reality, a comprehensive State reform is needed that addresses differentiated changes in each sector. One can work on issues in health, education or transportation and all of them require a series of institutional reforms and the government's proposal is not comprehensive,” declared Manuel Glave, principal investigator of the research center Grupo de Análisis para el Desarrollo (GRADE), for AméricaEconomía .
Glave also believes that another factor that is conspicuous by its absence is the lack of prior discussion before presenting the project. The economist recalls that between the 1990s and 2000s, Peru was a “star student” of the second generation of state reforms proposed by the Washington Consensus.
In this way, the privatization of public companies and the consolidation of the subsidiary role of the State were followed by a new legal framework consisting of regulations for citizen participation, transparency portals and debates around accountability.
"It was unimaginable that in 2005 or 2009, a government would propose a law like the one proposed by the Ministry of Infrastructure, which lacks mechanisms for consultation and participation of other actors such as the private sector, academic groups, organizations of peasant and indigenous communities, among others," criticized Glave.
For the academic, it is not surprising that the response of Peruvian businessmen has been late, since many did not know the text of the proposal until the bill was presented. It is not surprising then that Alfonso Bustamante, the president of CONFIEP, the main business association of the Andean country, only spoke out against the project on August 3.
"If we talk about the execution of public and private works, there is a lot of permitting that is repeated, it goes from one ministry to another (...). The problem is not the number of entities, but the number of administrative procedures that exist. Only on the basis of that can the creation of a new entity be defined," Bustamante told the local newspaper La República .
Along the same lines, Stephani Maita, senior economist at the Peruvian Institute of Economics (IPE), argues that efficiency in the execution of public works is gained through reengineering processes in institutions.
“In this case, for the Ministry of Infrastructure to be efficient, it would have to think more carefully about which documents or procedures are necessary to be executed prior to the execution of an investment project such as a road, bridge or something similar. But it should also evaluate what resources are used within the ministry, both in terms of personnel and other current expenses. Merging ministries or agencies does not necessarily involve this,” Maita told AméricaEconomía.
THE RISKS OF THE NEW MINISTRY
This is not the first time that the Boluarte government has intervened in this sector. In October 2023, the creation of the National Infrastructure Authority (ANIN) was approved, whose functions include the execution of emblematic works in Peruvian territory as well as preventing the risk of natural disasters.
It is absurd that less than a year after its implementation and without sufficient time to evaluate its performance, the functions of ANIN are being assumed by a ministry that will not only execute large projects, but also works of lesser investment and scope.
“In the end, all the projects will be concentrated in a single logistics and general administration office that will buy and tender a bridge, then a school and then a hospital. In practice, what we are doing is creating a very large “bottleneck” in the administration office of this ministry and that seems very risky to me,” said Mónica Muñoz-Nájar, coordinator of projects and public management of the think tank Redes de Estudios para el Desarrollo (REDES) for AméricaEconomía .
Muñoz-Nájar warns that in the short or medium term, the main risk of a “hoarding” ministry is linked to the operation of the projects involved. Because in his view, whenever the Peruvian State merges executing units, the speed of execution of certain initiatives is lost, especially if we are talking about projects of ministries with serious problems such as the health sector, where several medical centers are paralyzed.
As an example, by August 2023, the Peruvian Ministry of Health had 23 hospital projects paralyzed for an average of six years. The main causes include non-compliance by construction companies, social conflicts, corruption and ineptitude in handling climatic phenomena. The situation would be aggravated with the new portfolio, taking into account that the bill states that it will take up to 24 months to organize, a situation that does not guarantee the continuity of the works during this period.
On the other hand, Stephani Maita cites a report that goes in the same direction. “In fact, the Comptroller General of the Republic published a study related to the units, which have the greatest delays in terms of execution of works, whether paralyzed or not, and many of these are now going to be absorbed by the Ministry of Infrastructure. So, in that line, we would have to see a lot about what will be done with the new ministry to unblock these projects and ensure that the assignment of works and their execution is truly efficient.”
CHILE AND AUSTRALIA: MODELS TO FOLLOW?
Despite these liabilities, Muñoz-Nájar believes that the Peruvian government's project could be rethought in a model similar to that of the Chilean Ministry of Public Works. "What the Chilean Ministry does is concentrate the functions of some more specific ministries. For example, everything that belongs to the transport sector is executed, which includes airports, ports, waterways and obviously, roads and water such as dams, transfer interchanges, among others. It does not consider schools or hospitals, because that would be too much," analyzes the economist.
The success of the Chilean Ministry of Public Works' management has been reflected in the fact that the OECD recognises it as one of the reasons why the southern country has been able to adequately develop its infrastructure over the last 50 years. Its management capacity is so broad that in 2017, the OECD itself recognised that 88% of public investment in Chile is decided at the central government level, in contrast to the 41% average of the other members.
Today, Peru is even struggling to get projects in essential sectors such as transport and communications off the ground. “Projects such as roads, metro lines and departmental networks are typically very expensive and that is precisely why they account for a large part of the gaps in the infrastructure sector. But there is also now a whole process of awarding high-performance schools that has also been in the pipeline for years without being implemented,” Maita adds.
On the other hand, Peru can also find answers in other continents to guide its future ministerial portfolio to success. For Manuel Glave, the Australian model could be an example to follow.
“There is an intermediate space between the planning and implementation spheres. The latter is similar to our ANIN, where a technical team, accountable to both the Executive Branch and civil society, defines the viability of projects with a series of filters, including those of sustainability and intersectoral coordination,” he describes. In the long run, this system reduces the number of projects in each ministry.
WHAT ABOUT ARGENTINA?
But if we talk about the most recent precedent of a Ministry of Infrastructure, we must turn to Argentina. When Javier Milei assumed power in December 2023, he inaugurated this portfolio as one of the seven that the libertarian government would retain. Its creation involved the merger of three ministries: Public Works, Transport and Territorial Development, and Habitat.
However, Guillermo Ferraro, the new minister, resigned at the end of February 2024, without serving three months in office. Immediately afterwards, under the pretext of “cost reduction”, Milei’s government dissolved the Infrastructure portfolio and delegated its functions and agencies to the Ministry of Economy, chaired by Luis Caputo. Although President Boluarte cited the Argentine model as one of her inspirations for the bill, analysts believe that these are dissimilar cases.
“Argentina is undergoing a significant fiscal adjustment process, with a view to fulfilling its commitments to the International Monetary Fund. Therefore, the decision to have the Ministry of Economy absorb the Ministry of Infrastructure is a response to the issue of reducing expenses. While the success of the Peruvian proposal depends on how well a new portfolio is managed, which would have one of the largest budgets in the State,” says Maita.
For his part, Muñoz-Nájar believes that the Peruvian government should learn from the relative transparency of the process of merging and eliminating ministries in Argentina.
“These operations often lead to a series of stoppages in various public services. Here in Peru, this is part of the costs that one assumes when carrying out reforms and the State must carry it out in a responsible and transparent manner. They must clearly communicate how the merger of two ministries will be beneficial in the long term, but that in the process, for one or two years some services will not be available. This is something we can learn from Argentina,” he says.
