Public-Private Partnership helps pioneer health project

It’s no secret that Peru is home to one of the most attractive investment climates in all of Latin America. Over the past decade, it has received more than $70 billion in foreign direct investment, making it a leader on the continent. Globally important mega projects, such as the proposed railway that will link Peru’s Pacific port through the Amazon to the Atlantic Coast of Brazil, have drawn attention worldwide. The volume and the pace of work have accumulated in recent years, as Peru’s government continues to build capacity for critical public- private partnerships (PPPs).   

Over the last decade, Latin American governments and private sector investors have become increasingly familiar with the PPP model, establishing clear regulatory guidance and operational clarity that has served both parties. Many countries now include PPPs in their national development plans, demonstrating growing political support and acceptance amongst the private sector. Peru has been a leader in this movement, consistently ranking amongst the top countries in the region in its execution of PPPs and in its investment in infrastructure.

“The Public-Private Partnerships (PPP) have been very successful in this regard, in roads, communication, ports, energy, transportation, natural gas pipelines, social infrastructure, hospitals, and schools,” says Carlos Herrera Perret, Executive Director of ProInversión (Peru’s Private Promotion Investment Agency).

Indeed economists credit Peru’s strong record of infrastructure investment for the impressive rates of economic growth, job creation, and poverty reduction that the country has enjoyed. “Commissioning and building infrastructure generates growth,” says Gonzalo Prialé, President of Peru’s Association for Promotion of National Infrastructure (AFIN), the country’s promotional organization for infrastructure projects. “With great efforts, a large number of projects have been awarded.” Despite the progress made, Mr. Prialé says that AFIN will continue its drive to modernize the country. “We suggest a rate of about 6 to 7% of Peru’s GDP, which is the same rate Asian countries that emerged from their problems held in the last century.”

Progress made in the early part of the 2000s has enabled Peru to extend the reach of its PPPs into yet another critical area that has a direct impact on people’s lives: health care. Through its existing structure, the government of Peru offers health care benefits and services to the working population through a program called EsSalud, which covers working families and individuals similar to most employment-based plans in the United States, but is on a national scale, and offers full coverage within its network of health care professionals and facilities. EsSalud provides health benefits to roughly 20% of the population, some 6 million people.

Through an innovative partnership with the Brazil-based health care services company Salog S.A., Peru’s first ever health care PPP began in 2010. An expert analysis was carried out that identified significant potential savings in the procurement and distribution of medical supplies and medications, which together can add up to 25% to overall health care costs. Following a bidding process, construction and operation contracts were signed for four different health-care projects. Salog signed up to construct and operate medical distribution centers in February of that year.

“Without good management of those costs you can get in some trouble,” says Rogerio Marcondes Barros, General Manager of Salog S.A. “We offered EsSalud a monitoring system because they didn’t have anything like it, they had no best practices when it came to storage or controls, with the result of having a lot of waste and loss. We started in 2010, and now EsSalud has, without question, the best public health care infrastructure in all of Latin America.”

Mr. Barros credits Peru’s openness and the strength of its well-established PPP framework for the project’s record of achievement. “Our great advantage was being able to do this under the umbrella of the PPP, which allows us to invest in the long term, a contract that is independent of the different administrations and very strong in terms of institutional support. The PPPs are 5% inspiration and 95% hard work, being the first in the health sector there are high expectations but also a lot of prejudice.”

While the project met initial skepticism, Mr. Barros says that Salog’s experience in implementing global standards and best practices quickly made a positive impact. “We have signed agreements with universities. We invested in staff training and the improvement of the labor conditions, which in turn increased the service quality and reduced costs. It is a continuing process. The health system always has new challenges. It is not perfect and usually has limited resources. Our contracts are much stricter than the traditional private sector. That makes us ever evolving and stronger.”