State-Owned Enterprises and Fiscal Risks in Peru
This paper presents an overview of the SOE sector in Peru, with special focus on the fiscal risks that it may create. The analysis suggests that such risks have generally been contained through a centralized system of governance and controls, including through the holding company, FONAFE. However, this system has also had costs in terms of the SOEs’ efficiency and their ability to plan, finance, and execute needed investments in both the maintenance and the expansion of existing infrastructure. Therefore, the challenge for the Peruvian authorities is to design and implement reforms that, while safeguarding fiscal responsibility and sustainability, would strengthen the SOEs’ incentives to operate efficiently, compete effectively with private enterprises in the same sector, and improve the access to and the quality of their services to the population. The paper makes a number of suggestions for such reforms.