peru investment report eng_19.04.2010

Peru: Investment opportunities April 2010

WHY INVEST IN PERU? 1. Internationally acknowledged macroeconomic stability 2. Friendly investment environment 3. Open trade and market access policy

1. MACROECONOMIC STABILITY Peru will continue to lead regional growth. Gross Domestic Product (Annual % rate) 6.0 Perú 12 4.8 Argentina 4.7 2.0 9.8 Venezuela 4.2 10 0.0 8.9 4.3 Colombia 3.3 8 7.7 4.2 Ecuador 6.8 1.7 Chile 3.6 5.0 4.3 6 4.5 5.0 5.1 Bolivia 4.0 3.6 4.0 2.9 4 Paraguay 4.3 Brasil 3.3 3.5 2 Uruguay 3.6 0.9 3.6 México 1.5 0 4.1 2002 2003 2004 2005 2006 2007 2008 2009 2010* 2011* -2.0 0.0 2.0 4.0 6.0 8.0 Prom. 2002-2009 Prom. 2010-2011 (proyección) Source: Central Reserve Bank of Peru , MEF Source: IMF, Latin Focus Consensus Forecasts * MEF estimates

1. MACROECONOMIC STABILITY Exports Private investment (US$ Million) (US$ Million) 35,000 31,529 30,000 27,322 30,000 27,882 26,885 25,000 22,402 25,000 23,830 19,478 20,000 20,000 17,368 15,117 15,000 15,000 12,809 12,285 10,545 10,000 9,091 10,000 8,668 8,356 8,395 9,221 6,955 7,026 7,714 5,000 5,000 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source : Central Reserve Bank of Peru Source : Central Reserve Bank of Peru

1. MACROECONOMIC STABILITY Commercial exchange Imports of capital goods (US$ Million) (US$ Million) 70,000 10,000 60,000 9,000 8,000 50,000 7,000 40,000 6,000 5,000 30,000 4,000 20,000 3,000 10,000 2,000 1,000 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Total Export ( US$ Millions) Total Import (US$ Millions) Others Capital Goods for the Industry Transport Equipment Fuente: Central Reserve Bank of Peru and MEF

1. MACROECONOMIC STABILITY Central government tax revenues (US$ Million) 25,000 19,905 20,000 17,463 16,764 15,000 13,891 10,795 10,000 9,123 7,877 6,524 6,710 6,840 5,000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Fuente: Central Reserve Bank of Peru

1. MACROECONOMIC STABILITY Exchange Rate in Latin America Inflation in Latin America (Index 2000=100) 45 180 170 Peru 40 Peru 160 35 Brasil Argentina Variación anual (porcentaje) 150 30 Brasil 140 Chile 25 Chile 130 Colombia Mexico 120 20 110 15 100 10 90 5 80 70 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 -5 2009 Average Exchange Rate: S/.3.01/ $ Inflation Rate 2009: 2.9% Source: INEI Source: Central Reserve Bank of Peru, Chile, Mexico and Argentina,

1. MACROECONOMIC STABILITY Net Foreign Reserves Investment grade (US$ Million) A Latin American comparison 35,000 33,135 País S&P Fitch Moody´s 31,196 30,000 27,689 Chile A+ A A1 25,000 91% México BBB BBB Baa1 20,000 17,275 Perú BBB- BBB- Baa3 63% 15,000 14,097 71% Brasil BBB- BBB- Baa3 12,631 10,000 9,598 10,194 86% Colombia BB+ BB+ Ba1 8,180 8,613 86% 77% 80% 78% Venezuela BB- BB+ B2 5,000 90% 84% Argentina B- RD B3 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Bolivia B- B B2 Net Foreign Reserves (US$ Million) Total Import (US$ Million) Ecuador CCC+ CCC Caa3 Source : Central Reserve Bank of Peru Source : Standard & Poor`s, Fitch Ratings y Moody s

2. FRIENDLY INVESTMENT ENVIRONMENT Peru offers a favorable legal framework for foreign investment ...  Non discriminatory treatment. Peru offers to foreign investor the same treatment as local investors.  Unrestrictive access to most economic sectors.  Free transfer of capital*.  Free competition.  Guarantee for Private Property  Freedom to purchase stocks from locals.  Freedom to access internal and external credit.  Freedom to pay royalties.  Network of investments agreements and member of ICSID and MIGA  Peru is adherent of the OECD Declaration on International Investment and Multinational Enterprises. *Investments that requires authorization: Located within 50 km in the border line and arms, munitions and explosive. Furthermore, a principal local partner for investment in radio and television as well as in air transport. Legal Framework: Constitutional provisions, “Law for the Promotion of Foreign Investment”, Legislative Decree N° 662, “Framework Law for Private Investment Growth”, Legislative Decree N° 757, “Law for the Promotion of Private Investment in Infrastructure and Public Service Works”, Approved by Supreme Decree N° 059-96-PCM

2. FRIENDLY INVESTMENT ENVIRONMENT LEGAL STABILITY AGREEMENTS Peruvian Government guarantees through this regime INVESTORS RECEIVING COMPANY  Stability of the right to non discriminatory  Stability of the right of recruitment regimes. treatment.  Stability of the regimes for the promotion of  Stability of the Income tax rules applicable to exports. dividends.  Stability of the Income Tax Regime  Stability to use freely the most favorable exchange rate available in the market.  Stability of the free availability and remittance of foreign currency, dividends and royalties regime. Requirement: Minimum investment of US$ 5 MM in any economic sectors. US$ 10 MM for hydrocarbon and mining sectors. Validity: 10 years. Concessions: Term according to the contract’s life (Max. 60 years).

2. FRIENDLY INVESTMENT ENVIRONMENT A steady tax regime: Tax Applicable Rate 30% Corporate profits Agriculture, agribusiness and aquaculture 15% INCOME Dividends 4.10% Royalties 30% Interest rate on loans from 4.99% abroad Value Added Tax (VAT) 19% Financial Transactions Tax 0.05% throughout 2010 Temporal to net assets for more than 0.40% S/. 1 000 000

2. FRIENDLY INVESTMENT ENVIRONMENT Special Regime of VAT Anticipated Recovery BENEFITS  Granting the return of the Value Added Tax during the pre-productive stage of the project (minimum 2-year term).  Applicable to all sectors of economic activity.  For agricultural activity it is not necessary to meet a minimum investment amount. For other activities the minimum investment amount is US$ 5 million.  The project can be divided by stages, phases, or similar levels.

2. FRIENDLY INVESTMENT ENVIRONMENT Reduced tariff structure with low tariff dispersion. TARIFF LEVELS TARIFF LINES ADVALOREM + SURCHARGES NUMBER PROPORTION (%) 0 3,952 53.7 9 2,616 35.5 17 792 10.8 Total 7,360 100,0 SIMPLE AVERAGE APPLIED 5,0 TARIFF RATE 5.8 STANDARD DEVIATION Source: CUSTOMS

2. FRIENDLY INVESTMENT ENVIRONMENT Recognition of a Favorable Investment climate World Economic Forum Getulio Vargas Foundation Peru is first in the region for Peru tops a global Peru ranks first in the ranking of government readiness for private macroprudential indicator ranking business climate in Latin investment in infrastructure America Position Country Points Position Country Points Position Country ICE* 1 Peru 5.8 1 Peru 6.53 1 Peru 5.0 2 Colombia 5.6 6 China 5.82 2 Brazil 4.6 3 Chile 5.5 8 Switzerland 5.70 3 Chile 4.3 4 Uruguay 4.8 9 France 5.49 4 Paraguay 3.9 5 El Salvador 4.6 5 México 3.7 10 Netherlands 5.48 6 Bolivia 4.5 6 Uruguay 3.3 11 Mexico 5.43 7 Brazil 4.2 7 Colombia 3.2 Dominic. 17 Argentina 5.30 35 Brazil 4.78 8 Ecuador 2.6 8 Rep. 4.2 39 Chile 4.66 9 Bolivia 2.4 9 Mexico 4.1 41 Colombia 5.51 10 Argentina 2.0 10 Guatemala 4.0 11 Venezuela 3.2 11 Venezuela 1.6 51 Venezuela 3.18 12 Argentina 3.1 Source: World Economic Forum, Source: World Economic Forum, The Financial *Economc climate index Benchmarking National Attractiveness for Development Report 2009. Source: Foundation of Getulio Vargas de Brasil 2009. Private Investment in LA Infrastructure. 2007

2. FRIENDLY INVESTMENT ENVIRONMENT Recognition of a Favorable Investment climate. The Economist United Nations Conference on Trade and Development. Peru ranks first in the region for best In 2009, Peru was third in FDI growth. legal and regulatory framework Italia 75.5% Alemania 40.7% Perú 28.1% Dinamarca 3.2% Source: The Economist 2009. Source: UNCTAD 2009.

2. FRIENDLY INVESTMENT ENVIRONMENT Investment Agreements  Peru has signed 32 International Investment Agreements, that underpin its liberalization policy.  Germany  Canada*  Belgium and Luxemburg  United States*  Denmark  Australia  Spain  China  Finland  Cuba  France  Korea  El Salvador  Nederland  Malaysia  Singapore*  Italy  Thailand  Argentina  Norway  Japan  Bolivia  Portugal  Chile*  United Kingdom  Colombia  Check Republic  Ecuador  Romania  Paraguay  Sweden * FTA  Venezuela  Switzerland  It has also signed double taxation agreements with Brazil, Chile and Canada.

3. PREFERENTIAL ACCESS TO THE MOST IMPORTANT MARKETS An economy working to become globalized and with access to the world’s largest markets and trade blocs. Rusia EFTA Rusia Canada European Union Japon USA China China Marruecos Corea OMC India México: ACE 8 Thailand CARICOM APEC Central Andean Singapore America Community MERCOSUR ACE 58 Australia Chile: ACE 38 ACE Plus Sudáfrica Nueva Zelanda Countries with agreements in force Countries under negotiations Countries with agreements signed Upcoming negotiations

MAIN INVESTMENT OPPORTUNITIES BY SECTORS

AGRIBUSINESS  Dry tropical weather and vertical sun radiation enhance crop productivity. • Highest world productivity in sugar cane. • Third highest world productivity in asparagus and artichokes.  Access to “seasonal windows” in the most important markets fetches higher prices for products.  5 million hectares of farm land. Optimum climate conditions in some areas allow crop scheduling.  Specialized in high-value crops: fruits and vegetables.  1st world exporter of asparagus, organic banana and organic coffee and 2nd of paprika  Promotional regulatory framework including lower income tax rates.

AGRIBUSINESS Agribusiness Exports Agribusiness Exports by Markets, 2009 (US$ Million) (US$ Million) Exports of main products, 2009 (US$ Million) Source: BCRP,FAO,ADEX DATA TRADE. Figures as December 2009

FISHING SECTOR  A long fishing coastline (3,080 km) and hundreds of lakes and lagoons ideally suited for continental and marine aquaculture.  Great hydro-biological wealth: 6 million MT of annual biomass for fishing (mainly anchovy).  Multiple species not yet entirely developed.  Fast growing exports of products for direct human consumption: Frozen, canned and processed fish products.  Largest world exporter of fishmeal and fish oil.  Incentives for the aquaculture industry.

FISHING SECTOR Fishing Exports, 2009 Frozen squid Fishing Products Exports Scallops King Prawn Frozen Fillets and giant (US$ Million) 3% 3% squiq of Hake Others 5% 1% 12% Fish oil 12% Fish meal 64% Exports by Markets,2009 Source: BCRP and Adex Data Trade. Figures as December 2009

MINING SECTOR  Only 10% of the country’s territory with mining potential has been explored.  High potential in non-metallic mining: borates, diatomite, betonies, phosphoric rock and travertine, among others.  Largest world producer of silver.  In Latin America:  Leading producer of gold, zinc, tin and lead.  Second producer of copper and molybdenum.  Practically all of the world’s multinational mining majors operate in Peru.  Announced investments over US$ 23 billion.

MINING SECTOR Mining Exports (US$ Million) Mining Exports (US$ Million) Excellent Competitive Position Production Ranking 2008 Latin Mineral World America Silver 1 1 Zinc 1 2 Tin 1 3 Lead 1 4 Gold 1 6 Copper 2 2 Source: ADEX DATA TRADE. Figures as December 2009

TEXTILES SECTOR  High quality of Peruvian Pima cotton.  Largest world producer of alpaca and vicuna fiber.  Textile exports worth US$ 2,000 million.  Recognized quality as “full package” supplier of the best international brands of knitted cotton fabrics.  Peru is garment supplier for renowned international brands.

TEXTILES Brands served by Peruvian companies Abercrombie & Fitch Izod Textile-Apparel Exports Ara Intersales JC Penny Armani Exchange Nassino Dutti ( US$ Million) Calvin Klein Nautica Donna Karan Inc. New Balance DKNY Lacoste Duck Head Appeared Kenneth Cole Co. Eddie Bauer Levy Strauss and Co. Guess Oakley Inditex / Zara Palacio de Hierro Polo Ralph Lauren Ragman Perry Ellis International Reebok The Gymboree Corp. Vanity Fair Tommy Hilfiger Saks Inc. Exports by country, 2009 Source: Prompex and BCRP

FORESTRY  2nd largest natural forest area in Latin America (Amazon forest).  78.8 million hectares of natural forests and more than 10 million hectares of lands suitable for reforestation (plantations).  Great bio-diversity and high-commercial value timber: Developing of tropical hardwoods in the rainforest and softwoods in the Andes.  Potential to export annually US$3 billion in timber and wood products.  Investment opportunities in lumber industrial compounds.

FORESTRY Forestry Exports Exports by Markets, 2009 (US$ million) Source: ADEX Data Trade

TOURISM  Machu Picchu among the New World Wonders.  An unsurpassed cultural destination featuring Inca and Pre-Inca civilizations’ archaeological sites.  Scenic diversity including natural attractions ranging from the Pacific Ocean beaches to the Amazon rainforests, through the snow- caps of the Andean Mountain Range.  A great diversity of ecosystems. Peru boasts 84 of the planet’s 114 life zones.  Vast flora and fauna, for its 1,730 bird species, 330 species of amphibians, 462 species of mammals, and 25,000 plant species (including 4,000 species of orchids).  Rich gastronomy. Lima has been acknowledged as the culinary capital of Latin America.

TOURISM Foreign exchange earnings generated by tourism Tourist Arrivals (US$ million) (Thousands of persons) 3,000 2,395 2,500 2,007 1,775 1,833 2,000 1,438 2,500 1,500 1,023 1,232 2,057 1,000 837 1,916 2,000 1,721 500 1,570 1,579 1,350 0 1,500 2002 2003 2004 2005 2006 2007 2008 2009 1,064 1,135 1,000 Tourist Arrivals, 2009 500 Main origin regions 0 South Europe Amercia 21% 2002 2003 2004 2005 2006 2007 2008 2009 49% Asia 4% Central North America America Source : MINCETUR 2% 24%

PROJECTS IN PROINVERSION’S PORTFOLIO

PROJECTS IN PROINVERSION’S PORTFOLIO Portfolio Projects Prioritized Projects 2010 50 Projects 21 Projects Estimated Estimated Sector Investment Investment (US$ Million) Sector (US$ Million) Energy 2,321 Including VAT Ports 433.8 Energy 746 Ports 169.6 Land Transport 86 Airports 237 Land Transport 86 Tourism 760.6 Airports 237 Agriculture 609 Tourism 750 Agriculture 609 Sanitation 145 Sanitation 145 Penitentiary Facilities 29 Penitentiary Facilities 29 Telecommunications 185.5 Mining 30 TOTAL 2,771.6 TOTAL 4,836.9

PRIORITIZED PROJECTS ACCORDING TO E.D. N°121 - 2009 Estimated Expected date Sector / Project Investment of Award (US$ Million) Energy Transmission Line Chilca– Marcona- Montalvo 500 Kv. 450 04.30.2010 Transmission Line Tintaya-Socabaya In 220 Kv 80 06.04.2010 and associated sub stations. Strengthening of the North system with a second transmission 16 06.04.2010 circuit 220 Kv ,among Talara and Piura. Cold Power Generation Reserve (2x200 MW, dual thermal plants) in 200 07.23.2010 the North (Trujillo ) and in the South ( Ilo) Ports Yurimaguas Port Terminal . 38.9 III Q 2010 Pucallpa Port Terminal . 16.7 IV Q 2010 San Juan de Marcona Port Terminal 114 IV Q 2010 Navigable River Routes, first stage: Yurimaguas-Iquitos To be defined IV Q 2010

PRIORITIZED PROJECTS ACCORDING TO E.D. N°121 - 2009 Estimated Investment Expected date Sector / Project (US$ Million) of Award Land Transport Road IIRSA Centro: section 2 75 III Q 2010 Road Autopista del Sol: Sullana section – Frontier with Ecuador To be defined IV Q 2010 (*) Road Panamericana Sur: Ica – Frontier with Chile. To be defined IV Q 2010 (*) Lima and Callao Mass Transportation Electric system Line 1: Villa El Salvador – To be defined II Q 2010 Av. Grau. Huancayo – Huancavelica Train 11 II Q 2010 Cajamarca – Bayovar Train To be defined IV Q 2010 (*) Airports Second Group of Regional Airports 237 05.19.2010 Tourism San Lorenzo Island 750 III Q 2010 Real Estate San Martin headquarters To be defined IV Q 2010 Agriculture (Irrigation Projects) Majes - Siguas II 344 To be called Chavimochic project phase 1 – third stage 265 IV Q 2010 Sanitation La Chira Wastewater treatment plant 145 II Q 2010 Penitentiary facilities Concession process of a Penitentiary facilities 29 IV Q 2010 * to be entrusted

CHILCA – MARCONA – MONTALVO TRANSMISSION LINE: (500 KV)  Location: Lima, Ica, Arequipa and Moquegua The called for tenders was made  Description: To grant in concession the design, financing, construction, operation and maintenance of Chilca Marcona – Montalvo T.L.  Estimated Investment: US$ 450 MM. • Concession period: 30 years plus the construction period (36 months). • Competition Factor: The lowest service total cost (annual investment for 30 years and rate of 12% plus the operation and maintenance cost). • Extension of the Line: 872 kilometers  Current Status: There are 5 short –listing bidders.  Deadline to submit a qualification request 03.26.2010  Award date: 04.30.2010

TRANSMISSION LINE TINTAYA – SOCABAYA (220 KV.)  Location: In the Regions of Arequipa and Cusco. The called for tenders was made  Description: To grant in concession the design, financing, construction, operation and maintenance of Tintaya-Socabaya T.L.  Estimated Investment (VAT is not included): US$ 80 MM. • Concession period: 30 years plus the construction period (30 months). • Competition Factor: The lowest service total cost (annual investment for 30 years and rate of 12% plus the operation and maintenance cost.) • Extension of the Line: 206 kilometers • Current Status: The Tender Documents have been published on Proinversion’s web site.  Deadline to submit a qualification request : 04.27.2010  Award date: 06.04.2010.

TALARA-PIURA TRANSMISSION LINE (220 KV.)  Location: Piura region The called for  Description: To grant in concession the tenders was made design, financing, construction, operation and maintenance of Talara-Piura (220 kv)T.L.  Estimated Investment(VAT is not included) : US$ 16 MM. • Concession period: 30 years plus the construction period (24 months). • Competition Factor: The lowest service total cost (annual investment for 30 years and rate of 12% plus the operation and maintenance cost.) • Extension of the Line: 102 kilometers  Current Status: The Tender documents have been published on Proinversion’s web site.  Deadline to submit a qualification request : 04.27.2010  Award date: 06.04.2010.

COLD POWER GENERATION RESERVE(2 X 200 MW, 2 DUAL THERMAL PLANTS OF SIMPLE CICLE )  Location : In La Libertad (Trujillo) and MoqueguaI (Ilo) The called for tenders was made  Description: The construction of dual thermal plants (diesel and natural gas) of 200 MW each, in order to increase the thermal reserve in the National Interconnected System, these will be used in a emergency generation. These plants will have power guarantees in order to cover the investment, the operator is not allow to subscribe contracts of energy sales and when operation starts up, the system will pay their variable expenses. • Estimated Investment (VAT is not included): US$ 200 MM. • Concession period: 15 - 20 years. • Competition factor: Lower payment per offered power  Current status: The Tender documents have been published on Proinversion’s web site.  Deadline to submit a qualification request : 06.23.2010  Award date: 07.23.2010

YURIMAGUAS – NUEVA REFORMA PORT TERMINAL The called for  Location: The new port terminal will be located in the left bank of tenders was made Huallaga river, locality of Nueva Reforma , 20 kilometers downstream from the current port.  Description: The concession comprises the design, construction, financing, maintenance and exploitation of the new Yurimaguas P.T.  Estimated Investment (VAT in not included): US$ 38.9 MM • Concession period: 30 years • Modality: Co- financed. Comprehensive project bid  Current status: The Contract’s second draft was issued on February 16, 2010.  Award date: III Quarter 2010.

PUCALLPA PORT TERMINAL  Location: Ucayali River in Callería district, Coronel Portillo province of Ucayali region. To be called  Description: The project comprises the design, construction, partial financing, maintenance and exploitation of Pucallpa Port Terminal.  Estimated investment (VAT is not included): US$ 16.7 MM • Concession period: 15 years but this can be extended up to 30 years. • Modality Comprehensive Project Bid. Co – finance process, establishing two payment commitments by the grantor: i) Payment per Works, amount allocated to cover requested investments; and ii) Annual maintenance and operation payments regarding the latter, the payment by MTC will correspond to the difference between annual collection of the concessionaire for regulated services that yield less than the corresponding annual maintenance and operation payment.  Current Status: The contract’s second version of the concession process was issued. The APN must define the amendments made on the referential project and the concession area. Bathymetric and topographic studies will be developed in the area.  Award Date : IV Quarter 2010.

SAN JUAN DE MARCONA PORT TERMINAL  Location: Region of Ica. To be called  Description: The project comprises the design, construction, financing, maintenance and exploitation of a new port terminal. The construction of an ores dock and its equipment is considered in the first stage. • Estimated Investment (VAT is not included): US$ 114 MM. • Concession period: To be defined, not over 30 years. • Modality: Self-sustaining  Current status: The promotion plan was published. Tender Documents to be approved by Proinversion’s Board of Directors.  Award date : IV Quarter 2010.

NAVIGABLE RIVER ROUTES, FIRST STAGE: YURIMAGUAS-IQUITOS RIVER ROUTES To be called  Location: Huallaga, Marañón and Amazonas Rivers.  Description: Development of dredging works, rivers information signs, in order to assure the navigability and therefore the traffic in the port terminals of Yurimaguas and Iquitos. • Estimated Investment: To be defined • Concession period: To be defined • Modality: To be defined.  Current Status: To be called.  Award date: IV Quarter 2010.

SAN LORENZO ISLAND  Location: In the Pacific Ocean, in front of Callao bay to To be called 3.8 km. from la Punta district.  Description: The transaction is comprised of : • 412 Ha in San Lorenzo Island granted under the modality of the land use only: Aim to real estate, commercial and tourism development of the area. • Bridge concession: Design, financing, construction, equipment and operation of a bridge which connects Callao’s West coast to San Lorenzo Island • Estimated investment: US$ 750 MM • Concession period: To be defined S  Current Status: Base Master Plan is currently under evaluation.  Award date: III Quarter, 2010 N

PENITENTIARY FACILITIES  Location: In the Region of Lima, Aucallama district , Huaral Province. The call for tenders was made  Description: Co – financing concession of a penitentiary facilities in the region of Lima for 1536 male inmates (first offender). – Estimated Investment: S/. 82 Million (aprox. US$ 29 Million) – Modality: Comprehensive project bid. The contract must comprises the construction, finance, equipment and operation (DFBOT). Comprehensive Project Bid. Including internal and external security service. – Proposed use: to reduce the overcrowding of inmates in the region of Lima and emphasized the installation of a factory in order to prioritize their rehabilitation and reintegration into society by jobs.  Current status: The Tender Documents are published on Proinversion’s web site.  Award Date: IV Quarter 2010.

MAJES-SIGUAS II PROJECT: WATER CONSOLIDATION  Location: Arequipa region, Caylloma province. To be called  Description: The project comprises the construction, operation and maintenance of Angostura dam and the Angostura Colca, Angostura - Siguas derivation, Callali and Angostura SE lines, furthermore the conduction works and water distribution to provide irrigation works for 38,500 hectares in Pampas de Siguas. • Estimated investment: US$ 344 MM (VAT is included). • Concession Term: 20 years (including 4 years of construction and 16 years of operation) • Competition factor: Lowest unit remuneration per meter cubic and lowest co-financing amount required by State. • Type of concession: Co-financing. The State will grant a maximum co – financing amount of US$ 140 MM, and guarantees a Minimum annual income of US$ 28.2 million plus VAT, plus the adjustment during 16 years. • Modality: DFBOT concession.  Current status: To be called.  Award Date: To be defined.

CHAVIMOCHIC PROJECT (1ST COMPONENT – 3RD STAGE)  Location: Department of La Libertad To be called  Description: Development of the first component of the third stage of Chavimochic project to assure the watering for permanents farming in the valley areas and inter valleys of Chao, Virú and Moche. The concessionaire must build a reservoir (Palo Redondo) which will allow to storage the water of Santa River in order to supply the main existing channel so this can provide a regular watering in 60, 000 has. Planned to develop with co-financing. The regional government of La Libertad will carry out complementary works: such as the upgrading of the water inlet to assure the storage of Santa River water and the construction of a second siphon in Viru River for transfering the water through Viru river s and up to Moche River valley. The public investment is US$ 53 MM. • Estimated investment: US$ 265 MM. • Concession type: Co- financing.  Current process status: Is currently under evaluation by the SNIP – MEF, for its feasibility.  Award Date: IV Quarter 2010.

LA CHIRA WASTEWATER TREATMENT PLANT AND SUBMARINE OUTFALL The called for  Location: Near La Punta La Chira, south of tenders was made Lima, district of Chorrillos.  Description: Design, financing, construction, operation and maintenance of a waste water treatment plant. • Capacity: 6.3 m3/seg in average. Maximum per hour: 11.3 m3/seg. • Technology: Can be accomplished through different technologies and/or process treatments and the effluent final disposal, by means of a submarine emissary infrastructure. • Estimated investment: US$ 145 MM (includes VAT)  Modality: BOT concession  Term: 25 years  Current Status: Process is currently in tender process.  Award Date: II Quarter 2010.

ROAD IIRSA CENTRO – SECTION 2 The called for AXIS IIRSA CENTRO, total extension of 900 km approximately and tenders was made cross the regions of Lima, Junín, Pasco, Huánuco and Ucayali. In order to facilitate the concession, it has been divided in 3 sections. Section 1 Ramiro Prialé - Ricardo Palma Bridge Section 2 Pte. Ricardo Palma - La Oroya La Oroya– Huancayo, La Oroya – Detour Cerro de Pasco Section 3 Detour. Cerro de Pasco – Pucallpa INITIALLY, SECTION 2 WILL BE GRANTED IN CONCESSION  Description: the section has an approximately 370 km long, the upgrading and rehabilitation works will be executed, operation and maintenance works will be done during the concession period. Details of process execution  HUÁ NUC O are to be defined  UCA Y A L I • Estimated Investment: US$ 75 MM (*)  PA SC O approximately, operation and maintenance expenses are not included.  L IM A • Concession period : 25 years.  J UNÍN • Competition factor: Additional works made by the concessionaire plus the ones established as mandatory by the State. • Modality: self- sustaining .  Current status: Contract’s final draft was published. (for sector opinion) (*) Investment to be defined  Award date: July, 2010.

ROAD AUTOPISTA DEL SOL SECTION: SULLANA– FRONTIER WITH ECUADOR  Location: Regions of Piura and Tumbes. PENDIENTE DE INCORPORATED INCORPORACIÓN  Description: Its route begins in Sullana and ends in the frontier of Ecuador (To be defined if its in Aguas Aguas Verdes or Puente Internacional). Additionally, will Zarumilla Verdes Puente benefit Talara, Máncora Zorritos, Zarumilla and Internacional Tumbes cities, among others. • TUMBES  Current status: To begins with the promotion Talara process, is pending the submission of the evaluation report by MTC Sullana • PIURA

ROAD PANAMERICANA SUR: ICA – FRONTIER WITH CHILE  Location: Regions of Ica, Arequipa, Moquegua and PENDIENTE DE Tacna. INCORPORATED INCORPORACIÓN  Description: Its route begins in Ica and ends in the frontier with Ecuador. Additionally, will benefit Palpa, Nazca, Atico, Camaná, Arequipa, Moquegua, Il o, Locumba, and Tacna cities among others.  Current status: To begins with the promotion Ica process, is pending the submission of the evaluation report by MTC. Nazca Dv Arequipa Camana Dv Matarani Dv Moquegua Dv Ilo Tacna Santa Ros a

LIMA AND CALLAO MASSIVE ELECTRIC SYSTEM TRANSPORTATION  Location: Region of Lima. The called for  Description: This project crosses 08 districts of tenders was made Metropolitan Lima. Its route starts in Villa El Salvador and ends in Av. Grau. It comprises the construction of the main Maintenance Workshop Terminal Marítimo del for the new and existing trains in the second level Callao Aeropuerto Internacional of the Workshop Yard, provision of rolling Jorge Chávez material, operation and maintenance. • Concession period: 30 years Av. GRAU • Modality: Comprehensive Project Bid. AVIACION  Current Status: The Tender Documents and Contract’s third version were published  Award date: II Quarter 2010. ATOCONGO LEYENDA LEYENDA L1- Existente L1 - Por Construir VILLA EL VILLA EL SALVADOR Futura prolongación SALVADOR (en planificación)

HUANCAYO – HUCANCAVELICA TRAIN  Location : Junín and Huancavelica region. The called for  Description: project comprises the tenders was made operation, administration and maintenance of its infrastructure, upgrading and acquisition of rolling material and the supervision of the development of the Train Transport Service (passengers and cargo). • Estimated Investment: US$ 11.6 MM (VAT is not included) • Concession Term: 15 years. • Competition factor: The lowest economic proposal fulfill by the grantor. Maximum Annual payment for operation and JUNÍN Maintenance: US$ 4,42 MM annually (VAT is not included. • Modality: Comprehensive Project Bid. Co-financing.  Current status: The contract’s final version to March 2010 HUANCAVELICA was published on Proinversion’s web site on March 25, 2010, and has been sent to MTC, MEF and OSITRAN for their favorable opinion.  Award date : II Quarter, 2010.

CAJAMARCA – BAYOVAR TRAIN  Location Regions of Cajamarca, Lambayeque and Piura. To be called  Description: The project comprises the development of definitive research, construction, operation, administration and maintenance of railroads infrastructure, acquisition of new rolling material and monitoring the train services. The project demand is mainly base on load traffic. • From Cajamarca to Bayovar Port: copper • Fromm Bayovar Port to Cajamarca: inputs for mining operation PIURA Not only the mining activity will be benefited but the agriculture, stockbreeding and tourism will be also benefited. LAMBAYEQUE  Current status: The pre investment studies are being carried CAJAMARCA out by the MTC

REGIONAL AIRPORTS-SECOND GROUP  Location: Tacna, Juliaca, Arequipa, Puerto The called for Maldonado, Ayacucho and Andahuaylas. tenders was made  Description: The project consist of establishing a Public – Private Partnership, and comprises the designing, construction, financing, operation, maintenance and the development of regional airports located in the south of Peru.  MADRE DE DIOS  Estimated Investment: US$ 237 million. • Concession Term: 25 years. Term may be extended at Grantor's judgment (MTC)  APURIMAC  AYACUCHO  PUN • Competition factor: Lowest co-financing amount O requested for operation and maintenance (PAMO), and lowest amount for mandatory  AREQUIPA investments, executed the first three years. (PPO) • Modality: co-financed by the State.  TACNA  Current status: 8 bidders have already qualified and are able to present their offers. The contract’s sixth version has been published on Proinversion’s web site.  Award date: 05.19.2010

OTHER PROJECTS IN PROINVERSION’S PORTFOLIO Estimated Sector / Project Investment Award date (US$ Million) Energy Gas pipeline to Chimbote (Natural Gas) 1300 Under evaluation Thermal Plant of 110 to 140 Mw in Quillabamba - Cusco (Natural 125 Under evaluation Gas) Distribution Syteme of Natural Gas in Quillabamba, Cusco, Puno, To be defined Under evaluation Arequipa Moquegua and Tacna cities Distribution System of Natural Gas in Ayacucho, Junín and Ancash Under evaluation To be defined Departments Santa Teresa Hydroelectric Power Station 150 06.25.2010 Ports Port Terminal General San Martín - Pisco. 107.8 Under evaluation Salaverry Port Terminal. 129.4 Under evaluation Iquitos Port Terminal 26.9 Under evaluation Ilo Port Terminal To be defined Under evaluation Land Transport Transcontinental crosstie “Brazil – Peru” Atlantic - Pacific (FETAB) To be defined Under evaluation * Under evaluation

OTHER PROJECTS IN PROINVERSION’S PORTFOLIO Estimated Investment Sector / Project Award date (US$ Million) IGV included Airports Cusco International Airport To be defined Under evaluation Tourism Kuelap Cable car 10.6 III Q 2010 Real Estate Lobitos camp To be defined IIQ 2010 Agriculture Majes land sale To be defined II Q 2010 Telecommunication C Band of 1900 MHz 150 III Q 2010 Rural Broadband Nationwide: South, North and Middle South 13 Under evaluation projects Puerto Maldonado – Juliaca Rural Broadband 7 II Q 2010 Broad band for the development of VRAE 8.3 III Q 2010 Lurin – Camisea Broadband Buenos Aires Canchaque implementation of Telecommunication 7.2 III Q 2010 Integrated services

GAS PIPELINE TO CHIMBOTE (NATURAL GAS)  Location: In Ayacucho (Huancayo, La Oroya and Tarma), Junin and Chimbote.  Description: The project comprises the design, construction, operation and maintenance of the gas transportation system, which will supply the cities of Ayacucho, Huancayo, La Oroya, Tarma y Chimbote. • Estimated Investment: US$1.300 million • Concession term: 30 years plus the construction period ( 40 – 48 months) • Competition factor: Lowest gas transportation service cost. • Modality: Comprehensive project bid.  Current process status: The availability of the Natural Gas by the producer (Camisea) is pending.  Award date: to be defined

SANTA TERESA HYDROELECTRIC POWER STATION (100 MW)  Location: Cusco Region The called for tenders was made  Description: Development of Santa Teresa Hydroelectric power station under the private capital participation and public companies scheme. o Estimated Investment( VAT is not included): US$ 150 MM. o Concession period: 30 years plus the construction period (36 months). o Competition factor: Higher percentage in production (energy and power) that will be generated by Santa Teresa Hydroelectric power station, this will be handed to EGEMSA according to the Business Cooperation Contract. o Modality: Signing of the Business Cooperation Contract link to the Investment Commitment Contract.  Current Status: The Tender Documents have been published on Proinversion’s web site.  Closing date of short listing bidder : 04.30.2010  Award date: 06.25.2010.

25 MHZ IN THE 1900 MHZ C BAND  Location: Nationwide.  Description: the concession of Public telecommunication services. • Concession period: 20 years, renewable. • Competition factor: Under definition • Modality: Special Public Bid • Possible bidders: Can only participate new operators (current operator are prohibited to participated by Law)  Current Status: After the international crisis the market is under evaluation  Award Date : IV Quarter 2010. Banda de C1900 MHz

JULIACA - SAN GABAN - PUERTO MALDONADO RURAL BROADBAND  Location: Puno and Madre de Dios region (Southeast).  Public services: Public telephony for 346 towns, telephony for subscribers in 33 towns and added value (Internet access) in 91 towns, 120 thousand of people will be benefited located in 370 towns. Thorough the use of optical fiber installed through the electric transmission network. • Estimated investment: US$ 6 MM. • Maximum estimated financing: US$ 12.5 million • Modality: Public bid. • Type of concession: Co-financing. The project will have a non-reimbursable financing provided by FITEL. • Competition factor: the lowest subsidy requested to the State.  Current Status: Two short –listing bidders. The Contract’s Final version was approved by Proinversion’s Board of Directors, and is currently published on Proinversion’s web site.  Award Date: II Quarter 2010. Juliaca - San Gaban - Puerto Maldonado Rural Broadband

VRAE BROADBAND CAMISEA – LURÍN BROADBAND  Location: Lima, Ayacucho, Apurímac, Ica, Junín, Cusco and Huancavelica regions.  Utilities: Public telephony for subscribers and pay phones, carrier services, value added (internet connectivity) for 776 towns; it is foresees that the services implementation will be done through the optical fiber capacity installed along the Camisea gas pipeline and in combination with the land satellite and wireless links in order to provide the service for the selected towns in the project area. • Estimated investment: US$ 8.3 million. • Estimated financing: US$ 10.8 million. • Modality: Public bid. • Type of concession: co – financing. The project will have a non-reimbursable financing provided by FITEL • Competition factor: Lowest government subsidy requested.  Current process status: The call for bidders have been made. The Tender documents are published in ProInversion’s web site. The deadline to submit Envelope N°1 (short listing) will be announced by Circular Letter, also waiting for the requirements definitions of the VRAE Broadband agreement among MTC –TGP by FITEL. Camisea – Lurín  Award date: III Quarter 2010. Broadband

IMPLEMENTATION OF TELECOMMUNICATION INTEGRATED SERVICES BUENOS AIRES – CANCHAQUE  Location: Region of Piura.  Public Services: Public telephony in 536 towns, subscribers telephony in 201 towns, and internet access in 249 towns. The towns benefited total 683, a population of 318 thousand of inhabitants located in Buenos Aires Chanchaque Piura, Morropón, Sullana, Ayabaca and Huancabamba provinces will be benefited. • Estimated Investment: US$ 7.2 million • Estimated Financing: US$ 11 MM • Process modality: Public Bid • Concession type: Co-financing. The project will have a non-reimbursable financing provided by FITEL. • Competition factor: Lowest financing requested to FITEL .  Current status: The Tender documents are published on Proinversion’s web site.  Submission date of Technical and Economic proposals (Envelope N°2 and N°3): 06.14.2010  Award date: It will announced by Circular Letter

SALAVERRY PORT TERMINAL  Location: La Libertad Region – Trujillo province.  Description: the project comprises the design, construction, financing, maintenance and exploitation of the port terminal. • Estimated investment: US$ 129.4 million, taxes are not included* • Modality: Comprehensive project Bid. Self-sustaining. • Concession period: Maximum 30 years.  Current status: Process to be called. The referential project was approved and sent by APN. The Port Development National Plan must be modified (APN –MTC) . Based on the PDNP amendment’s, the call for tenders can be defined.  Award Date: To be defined. * According to the referential project amendment’s t sent by APN in October 2009.

IQUITOS PORT TERMINAL  Location: Itaya river, 2 km upstream of its merging with the Amazon river, in Iquitos city, Maynas province in Loreto department.  Description: The project comprises the modernization, partial financing, maintenance and operation of the Iquitos river port. • Estimated investment (VAT is not included): US$ 26.9 Million* • Concession term: to be defined, not over 30 years. • Modality: Co-financing. Comprehensive Project Bid • Current status: To be called. Under awareness campaign.  Award date: To be defined. *Amount according to the Referential Project, approved in August by the OPI of the MTC and sent by the APN at the same time.

KUELAP CABLE CAR  Location : Amazonas  Project Description : The design, financing, construction, equipment and cable car system operation. Its objective is to provide an easy, fast and modern access to Kuelap. The cable cars would cover a distance of Cable Car 3,800 m., covering the difference of 965m height in between the localities of Tingo and Fortaleza. Kuelap • Concession Term: 20 Years. • Estimated Investment: US$ 10 .6 MM.  Current process status: Waiting for the land availability of the project, as well as the approval of the SNIP by the OPI of the Ministry of Transport and Telecommunication. Mincetur is in charge of both matters.  Award Date : III Quarter 2010.

LOBITOS BEACH  Location: Region of Piura, Province of Talara, District of Lobitos.  Description: Tourist project development in a lot 63.56 has, with 1800mts approximately of land facing the sea. Tourist complex composed by a group of hotels and vacation rental homes. All those would be served by a local mall. It is considered to keep the wharf of handcraft fishing and its service unit. Lobitos beach • Investment amount: To be defined.  Current Status: Waiting for the Land availability of the project .  Award Date: II Quarter 2010.

www.proinversion.gob.pe contact@proinversion.gob.pe

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peru investment report eng_19.04.2010

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