MULTILATERAL DEVELOPMENT BANKS’ COLLABORATION: INFRASTRUCTURE INVESTMENT PROJECT BRIEFS Peru: Metro Lima Line 2 Overview The Metro Lima Line 2 project is one of the largest infrastructure projects ever to be undertaken in Peru and is undergirded by an innovative project financing mechanism. The project is intended to ease traffic congestion in the city of over 9 million, (32 percent of Peru´s total population, representing 45 percent of the country’s GDP), where economic growth and rising incomes and a limited public transport network has seen an almost 30 percent rise in car ownership. The World Bank’s International Bank for Reconstruction and Development (IBRD) and the Inter-American Development Bank (IDB) have together provided over a billion dollars as financing for this project. This series showcases how the Multilateral Development Banks’ collaboration supports the development and implementation of infrastructure investment. This support comes in the form of public sector loans, private sector finance, sector and transaction advice, guarantees, and output-based aid. - MULTILATERAL DEVELOPMENT BANKS’ COLLABORATION: INFRASTRUCTURE INVESTMENT PROJECT BRIEFS - APRIL 2016 PeruMetroLimaLine2_WBG_IDB.indd 1 4/6/2016 4:46:17 PM Background Grantor, in this case MTC. The RPI-CAO in the case of MDL2 makes available 60 quarterly payments for a During the last decade, Peru’s economy grew at an average period of 15 years to the project upon achievement of rate of 6.4 percent per year. The country is also making defined milestones. The RPI-CAO is transferrable and can progress in reducing infrastructure gaps as evidenced in be auctioned by the project company in foreign capital its 7th place out of 23 Latin American and Caribbean markets as bonds. This financing mechanism is unique to countries and 61st place overall in a 2013 infrastructure Peru and has enabled the successful financing of six prior study. The country’s urban population has been growing infrastructure projects, including the MDL2. at a rate of 1.6 percent while its rural population has been falling at a rate of 0.4 percent, creating the need to improve access to jobs and public amenities in the growing Multilateral Development Banks’ Role urban areas. In the Lima-Callao Metropolitan Region The project costs of $5 billion are being financed from a (LMR), nearly 1.3 million of the 9 million inhabitants number of sources. MDL2 will invest $1.6 billion while are considered poor and an additional 1.7 million are nearly half of the financing will come from the government considered vulnerable. As a consequence the Government of Peru. Multilateral support for the project includes: of Peru (GoP) has made urban development one of its key • A $300 million loan from the IBRD. priorities; the $5 billion Metro Lima Line 2 project is one of the largest and most critical infrastructure investments • A $400 million non-sovereign guaranteed A loan from the IDB, now administered by the Inter- being executed in the country right now. American Investment Corporation. • A $50 million loan from the China Co-Financing Project Description Fund for Latin America and the Caribbean under The Metro Lima Line 2 project consists of the design, the management of the IDB. construction, operation, maintenance and supply of • A $300 million sovereign guaranteed loan from electromechanical equipment, systems and rolling stock the IDB. for 35 kilometers of a greenfield underground metro line through the city and to the international airport. The objective of the project is to provide a major East-West axis Outcomes to the Metro Lima-Callao region, improving access to jobs Metro Lima Line 2 will impact hundreds of thousands of and services through a modern rapid mass transit system. citizens daily connecting downtown Lima to suburban The winning tariff has been agreed at $0.7 cents with a Callao, allowing users to save up to 1 hour and 40 minutes permissible rise to $1 over time. in travel time during peak hours over the entire route. Apart from the benefits of providing cheap, efficient and The project will be executed by Metro de Lima Línea 2 S.A. durable mass transit, this project will also have significant (MDL2), a special purpose vehicle owned by the following environmental benefits for LMR. By 2020, once all phases entities: Iridium/ACS Group of Spain (25%); FCC of Spain of the Project are fully-operational, demand is expected (18.25%); Salini Impregilo of Italy (18.25%); Ansaldo to reach 660,000 passengers/day. By 2030 demand is STS of Italy (16.90%); Ansaldo Breda of Italy (11.60%); expected to grow to 803,000 passengers/day assuming full and COSAPI of Peru (10%). MDL2 was awarded the integration of the lines with the rest of the city’s public 35-year concession by the Ministerio de Transportes y transport system. Comunicaciones (MTC) and will be under the supervision of the country’s transport infrastructure regulator, For more information please contact: Organismo Supervisor de la Inversión en Infraestructura de Transporte de Uso Público (OSITRAN). World Bank Group: Nadine Ghannam Email: Nsghannam@worldbankgroup.org Peru now employs a unique project financing mechanism Inter-American Development Bank: John P. Ferriter to minimize construction risk called based on RPI-CAOs. Email: johnfe@iadb.org These are government-backed milestone-linked payment certificates that represent the payment obligations of the Photo Credits Front: James C./CC BY SA 2.0 iadb.org @the_IDB worldbank.org @WorldBank PeruMetroLimaLine2_WBG_IDB.indd 2 4/6/2016 4:46:17 PM