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Project finance is a specialized form of long-term financing typically used for large-scale infrastructure, energy, mining, and industrial projects. In Peru, project finance has played a crucial role in driving economic development by enabling private investment in essential sectors such as transportation, power, water supply, and extractive industries. Unlike traditional corporate financing, project finance relies primarily on the projected cash flow of the project itself for repayment, with assets and rights of the project held as collateral. The legal framework in Peru draws on both local regulations and international standards to support secure and transparent project finance structures.
Navigating the complexities of project finance in Peru often requires expert legal guidance. Here are some situations where a lawyer’s assistance is indispensable:
- Structuring project finance agreements to address Peruvian regulatory requirements - Conducting due diligence on titles, permits, licenses, concessions, and land use rights - Negotiating loan agreements, security packages, and inter-creditor arrangements - Addressing guarantees and collateralization for lenders and investors - Advising compliance with environmental, labor, and tax regulations - Reviewing contracts with government entities such as Public-Private Partnerships (PPPs) or concession agreements - Handling disputes that may arise during the construction or operational phases - Assisting foreign investors in navigating national content rules and foreign exchange regulations
Project finance in Peru is shaped by a specialized legal environment involving several regulatory pillars:
- The Civil Code of Peru provides general rules on contracts, obligations, and property rights. - The Peruvian Law on Public-Private Partnerships (PPP Law, Legislative Decree No. 1362) sets the framework for PPP projects, including required approvals, government support mechanisms, and risk allocation. - The Securities Market Law and Superintendency of Securities Market regulations govern capital markets transactions involved in certain financings. - Sector-specific legislation, such as mining, energy, or transport laws, define licensing, permits, and operational requirements. - Environmental protection laws require environmental impact assessments and ongoing compliance. - Tax laws include critical rules on tax stability agreements, VAT recovery, and the withholding regime relevant to project structures. - Foreign investment regulations safeguard the repatriation of capital and profits. - Regulation on secured transactions enables the use of project assets and rights as collateral.
When planning a project in Peru, it is essential to identify all relevant laws, obtain the required permits, assess local community rights, and incorporate risk mitigation measures into project documents.
Project finance is a method of financing where lenders and investors rely primarily on the cash flow generated by a specific project for repayment, rather than the entire balance sheet of the sponsor or developer.
Common sectors include energy (hydroelectric, solar, wind, and gas projects), mining, transport infrastructure (highways, ports, airports), telecommunications, and public utility systems.
Yes, Peru encourages foreign investment and participation in large-scale projects. Foreign companies must comply with local laws, including registration and sector-specific permitting.
Key risks include regulatory changes, project delays, cost overruns, environmental compliance, community opposition, foreign exchange risk, and operational risks once the project is running.
Lenders can take security interests over project assets, project accounts, contractual rights, and, where applicable, mortgages over concessions, equipment, and real property. Secured transactions must typically be registered for effectiveness.
In some PPP projects or projects of national interest, the Peruvian government may provide certain guarantees or support mechanisms, such as payment guarantees or minimum revenue assurances, subject to strict approval processes.
Project finance contracts often include arbitration clauses for dispute resolution. Both domestic and international arbitration are commonly used, and Peru is a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
This is a government body that oversees major infrastructure projects, especially those with public funding or PPP structures, and ensures compliance with public procurement rules and national development goals.
Yes, project finance structures must consider Peruvian tax rules, including VAT and income tax, tax stability agreements, and the potential use of tax-efficient vehicles for financing.
Generally, yes. Depending on the project’s sector, size, and structure, various permits and authorizations from national, regional, or municipal authorities may be required for construction, operation, and financing.
- Ministry of Economy and Finance (Ministerio de Economía y Finanzas - MEF): Oversees PPPs and infrastructure investments - National Infrastructure Authority (Autoridad Nacional de Infraestructura): Administers public works and PPP projects - Private Investment Promotion Agency (ProInversión): Facilitates investment and provides information on concession and partnership opportunities - Superintendency of Securities Market (Superintendencia del Mercado de Valores): Regulates capital markets activities - National Society of Mining, Oil, and Energy (Sociedad Nacional de Minería, Petróleo y Energía): Offers sector-specific guidance - Chambers of Commerce: Provide industry contacts and sponsor investment-related events - Peruvian Bar Association: Directory of qualified legal professionals in project finance
If you are planning to engage in or finance a project in Peru, consider these actions:
- Identify the sector-specific and general legal requirements for your project - Prepare all necessary documentation, including environmental studies, land rights, and permits - Consult with a specialized project finance lawyer to develop a comprehensive risk management and compliance plan - Engage in early discussions with potential lenders, investors, and government authorities to align expectations - If you require legal assistance, seek a lawyer with experience in Peruvian project finance law to guide you from structuring to execution - Stay informed about regulatory changes and market opportunities by consulting reputable resources and industry associations
Proper legal advice can significantly reduce project risk and ensure successful financing and implementation of your investment in Peru.
