Lima awash with flood waters, corruption allegations
28 January 2017
Last week was a difficult one, both for many Peruvians and for their government.
Flooding affected large swaths of the coast, not least in Ica and Lima. Unusually heavy rainfall across the western cordillera sent huge amounts of water down the steep-sided ravines that lead down to the coast, washing away homes and infrastructure. A large part of the city of Ica was flooded, the worst flooding in at least two decades; in Lima the Rimac burst its banks sending flood waters into vast urban settlements such as San Juan de Lurigancho. There was also serious flooding in Huancavelica and Arequipa. Flooding also affected places like Puno which has suffered unusually heavy rainfall in past days.
At the same time, the backwash from the Brazilian Car Wash (Lava Jato) scandal continued to concentrate media attention. The announcement by President Pedro Pablo Kuczynski that there will be no place for companies like Odebrecht in Peru has effectively scuttled (at least for the immediate future) one of the country’s largest investment projects, the gas pipeline from Camisea to the southern regions of Cuzco, Puno, Moquegua, Arequipa and Tacna. This in turn has sent officials at the Ministry of Economy and Finance (MEF) back to the drawing board in calculating this year’s growth rate.
The official prediction of 4.8% growth always seemed to be wishful thinking, but now this estimate has been discarded. Finance Minister Alfredo Thorne has said it could be nearer 3.8%. Other economic analysts think it may be lower, around 3.5%. To compensate, the MEF is bringing forward other investment projects, the biggest of which is Michiquillay, the US$700 million mining project in Cajamarca. Anglo-American announced its decision last week to continue with the development of Michiquillay, delayed because of political opposition from the communities living in its vicinity. However, even if Michiquillay proceeds rapidly, it is doubtful whether these investment projects will impact much on growth this year.
At the same time, some pieces in the jig-saw puzzle of corruption unleashed by Lava Jato are beginning to slot into place. Last week saw the arrest of Miguel Angel Navarro for his role in the corrupt bidding surrounding the Lima metro project, adjudicated to Odebrecht during the second García administration (2006-11). As we saw last week, the vice-minister of communications at the time, Jorge Cuba has skipped arrest and is currently in hiding. Also under suspicion is the former minister of transport and communications, Enrique Cornejo, a senior figure in the APRA party. Cornejo, who has emerged as a leading dissident in the party, had his party membership suspended on 27 January by the group closest to Alan García.
Other Odebrecht projects are also under the spotlight, including the Chavimochic irrigation project in the north of the country and the Interoceanic Highway project in the south. The latter was given the official go-ahead at the end of the Toledo government in 2006. A group of Brazilian construction companies (including Odebrecht), as well as to the large and influential Peruvian construction firm Graña y Montero won the bid. This was in spite of Odebrecht being barred from bidding because of earlier contractual problems. President Kuczynski may find that he has questions to answer when official investigations into the bidding procedures for the Interoceanic Highway get going; he was prime minister at the time the contracts were awarded. Fernando Zavala, the current prime minister, was finance minister in 2006.