LSE LACC Blog: Has COVID-19 ‘infected’ infrastructure development in Peru?

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by: Antonella Bancalari and Oswaldo Molina

The COVID-19 crisis is devastating the economies of low- and middle-income countries around the world, but one issue that has received relatively little attention is the reduction in progress of infrastructure projects. Even in normal times, half-finished infrastructure projects are a common sight in most Latin American cities. But today, with the virus sweeping across the region, a half-built hospital matters more. In Peru specifically, measures adopted to contain the spread of COVID-19 appear to be aggravating the longstanding issue of mid-project abandonment.

Understanding project progress during COVID-19

In order to gauge the extent of this issue, we compared the financial progress of projects in key sectors between March and May 2020 – covering the strict lockdown period – with progress during the same period of the previous year.

Our analysis reveals a worrying degree of mid-project abandonment. During the lockdown period, the government of Peru made only half of the financial progress that it had managed during the same period in 2019, although the magnitude of this difference varies across sectors (as illustrated below). Energy and industry, meanwhile, experienced reductions in progress of 75 and 82 per cent respectively. Strikingly, progress in a key sector like health fell by 61 per cent, whereas other important sectors like transportation, water and sanitation, and housing and urban development saw reductions of over 40 per cent.

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