Projects Portfolio

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1 Colca Canyon, Arequipa. Photo: Gihan Tubbeh l PromPerú Projects Portfolio Regional Government of Arequipa Promoting Investments Prepared by: Project Portfolio / Regional Government of Arequipa

2 Arequipa s Cathedral, Arequipa. Photo: Gihan Tubbeh l PromPeru

3 Words from the Governor of the Regional Government of Arequipa Arequipa Yamila Osorio Delgado Lawyer Governor Regional Government of Arequipa throughout its history has been characterized by the strength and drive of its people, which led us to always be considered the most important region after Lima. Thanks to that drive, Arequipa is today a leading region of Peru with growth rates higher than the national average for the past ten years and is the third most competitive region in the country. In that scenario, the main task of my administration is to maintain these growth rates, boost private projects, and promote public projects that generate more jobs and increase regional productivity to meet the needs of the population in sectors such as health, education, infrastructure, agriculture, energy, among others within the shared vision of regional development. To this end, the strategic decision has been made to create for the first time in our region the Regional Department for the Promotion of Private Investment, through which we have implemented the Agency for the Promotion of Private Investments (AFIP in Spanish), a privatepublic cooperation space for the development of investments that have enabled us to produce this Project Catalogue. This catalogue is an essential instrument that provides all the necessary information to domestic Entorno Macroeconómico del Perú and international investors, and guide their investment expectations through concessions, Private Public Partnerships (PPPs), and a special Peruvian regime named Works for Taxes which can be performed by public and Private Initiatives (PI). Finally, let me reiterate our strong commitment as Regional Government to create all necessary conditions for the business sector to bet on projects that strengthen and expand our capacity to attend regional infrastructure needs and at the same time, offer the benefits expected by investors, within a framework of trust and transparency for the creation of more jobs, better living conditions and increased welfare. Project Portfolio / Regional Government of Arequipa 3

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5 Entorno Macroeconómico del Perú Table of contents Macroeconomic Outlook 1 Good management and macroeconomic outlook 9 2 In addition to low risk 11 3 Generate a propitious investment climate 12 Situation of Arequipa 1 Macroeconomic Environment of Arequipa 15 2 Sector Analysis 17 3 Business Situation 18 4 Projects in Arequipa 19 5 Regional Competitiveness Index 20 Legal Framework for private investment in Peru 25 Available mechanisms for private investment 1 Types of Investment Initiatives 29 2 Works for Taxes (WFT s) 30 3 Public Private Partnership (PPPs) 31 Projects Presentation 1 Projects in Pipeline 38 2 Projects in Evaluation 39 Projects in Pipeline Agriculture 43 Environmental 46 Health 48 Tourism 51 Transport 54 Projects in Evaluation Agriculture 63 Education 64 Mining 65 Fishery 66 Technology 67 Transport 68 Tourism 72 Projects in Pipeline and Projects in Evaluation Index 75 Contacts Contact List Regional Government of Arequipa 79 Contact List EY Peru 81 Yanahuara Viewpoint, Arequipa. Photo: Inés Menacho l PromPeru Project Portfolio / Regional Government of Arequipa 5

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7 Macroeconomic Outlook Macroeconomic Outlook Chachani Volcano and Project Arequipa s Portfolio countryside, Arequipa. / Regional Photo: Government Gihan Tubbeh of l Arequipa PromPeru 7

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9 Macroeconomic Outlook 1Good management and macroeconomic outlook The Peruvian economy has experienced sustained growth during the period from the year 2007 to Growth rates of the real Gross Domestic Product (GDP) fluctuated between 1% to 9%, with an average annual growth of 5.8%. In 2009, as a result of the international financial crisis, Peru s GDP experienced a contraction that mainly affected the fishing, mining and manufacturing sectors. As of 2010, the economy has maintained a steady growth, although with lower rates than in previous periods. For the years 2015, 2016 and 2017 it is projected a recovery in economic growth with rates of 3.9%, 5.3% and 5.8% respectively. On the other hand, it is expected that the inflation for the coming years will be within the range set by the Central Bank of Peru (BCRP) due to the absence of demand pressures. Evolution of GDP and Inflation ( ) Source: Inflation Report May 2015, BCRP e: estimated GDP Growth (%) Inflation (%) e In the chart below we can see that 49.1% of the National Gross Domestic Product is generated in the city of Lima. In addition, production in the departments of Arequipa, La Libertad and Cuzco represents 5.4%, 4.9% and 4.7% of the National GDP respectively. GDP 2014 by Department (% of total GDP) Madre de Dios Tumbes Apurimac Amazonas Huancavelica Ucayali Pasco Huanuco San Martin Tacna Ayacucho Moquegua Loreto Puno Lambayeque Junin Cajamarca Ancash Ica Piura Cusco La Libertad Arequipa Lima 0.5% 0.6% 0.6% 0.7% 0.8% 0.9% 1.1% 1.2% 1.2% 1.3% 1.3% 1.6% 2.1% 2.3% 2.5% 2.8% 2.9% 3.5% 3.6% 4.5% 4.7% 4.9% 5.4% 49.0% Regarding the GDP growth estimates for Latin America prepared by the International Monetary Fund, Peru is located in the third position with a growth rate of 3.8% for the year 2015, being surpassed only by Bolivia and Paraguay. For 2016, Peru is located in first place with an estimated growth of 5.0%. GDP Growth - Latin America ( ) GDP Growth Rate Unit 2015e 2016e Argentina % Bolivia % Brazil % Chile % Colombia % Ecuador % Paraguay % Peru % Uruguay % Venezuela % Source: IMF International Monetary Fund e: estimated Source: INEI Project Portfolio / Regional Government of Arequipa 9

10 As in the case of the GDP for the years , it is expected a gradual recovery in domestic demand growth, driven by the announcement and the granting in concession of private investment projects. Domestic Demand Evolution ( ) In the last five years, private investment has represented in average 21.6% of the GDP, while public investment has represented 5.4%. Private investment is concentrated in the following economic sectors: (i) Mining, (ii) Oil & Gas, (iii) Power, (iv) Industrial and (v) Infrastructure. Private investment projects for a total amount of USD 40.1 billion are expected during the following years, of which 36% corresponds to the mining sector and 18% to Oil & Gas projects. Private and Public Investment Evolution ( ) The exchange rate has registered an upward trend since the year 2013 as a result of the gradual recovery of the US economy. It is projected that in the month of December 2015, the national currency will be depreciated by 16% compared to its value registered on December Specifically in the first four months of 2015, the exchange rate has increased as a result of an enhancement of the dollar and lower terms of trade Public Investment (as % GDP) Private Investment (as % GDP) Source: Inflation Report May 2015, BCRP e: estimated e Monthly Exchange Rate Evolution (2014 August 2015) Domestic Demand Growth (%) Source: Inflation Report May 2015, BCRP e: estimated e In 2009, the exchange rate was significantly affected by the international financial crisis that generated a slowdown in the US and Peruvian economy Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Source: BCRP

11 Macroeconomic Outlook Annual Exchange Rate Evolution ( ) In addition to low risk Peru registers the lowest EMBI ( Emerging Markets Bonds Index ) of Latin America, which is the main country risk indicator calculated by the investment bank JP Morgan Chase. The EMBI is the difference in interest rates paid by dollar-denominated bonds issued by emerging countries and The US Treasury Bond Rates. Latin-American EMBI (December 2013 August 2015) Peru also maintains a ratio of net international reserves in relation to GDP of 30.4% which is higher than the rest of economies in the Pacific Alliance. This represents an important financial support for the Peruvian economy. Ratio: NIR/GDP (May 2015) Source: BCRP, BMI. e: estimated e 2016e 2017e 3,500 3,000 2,500 2,000 1,500 1, Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Abr-15 May-15 Jun-15 Jul-15 Aug-15 Latin America Ecuador Peru México Argentina Colombia Brazil Venezuela Peru 15.0 Chile 12.3 Colombia 15.2 Mexico Source: BCRP Source: Inflation Report May 2015, BCRP Project Portfolio / Regional Government of Arequipa 11

12 3 Generate a propitious investment climate This is reflected in results and key indicators: a. Key Indicators Foreign Direct Investment as % of GDP - Latin America Latin American Bonds classification Country Moody's S&P Fitch Peru A3 BBB+ BBB+ Brazil Baa3 BBB- BBB Chile Aa3 AA- A+ Colombia Baa2 BBB BBB Ecuador B3 B B Mexico A3 BBB+ BBB+ Venezuela Caa3 B- CCC Source: Inflation Report May 2015, BCRP b. Among the best countries to do business Forbes Ranking Doing Business Ranking 2015 LatAm Position Worldwide Position Country 1 34 Colombia 2 35 Peru 3 39 Mexico 4 41 Chile Ecuador Brazil Venezuela Source: World Bank Group c. The best cities of Peru to do business America Economia Ranking Peru Brazil Latin America Colombia Chile Mexico LatAm Position Worldwide Position Country 1 29 Chile 2 52 Peru 3 55 Uruguay 4 61 Mexico 5 67 Colombia 6 94 Brazil Ecuador Peru Position LatAm Position City 1 10 Lima 2 33 Arequipa 3 40 Trujillo Source: América Economía Source: Inflation Report May 2015, BCRP Source: Forbes

13 Situation of Arequipa Situation of Arequipa Project Sibayo Portfolio Suspension 2015 Bridge, Arequipa. / Regional Photo: Government Julio Angulo of l Arequipa PromPeru 13

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15 Situation of Arequipa 1 Macroeconomic Environment of Arequipa Evolution of the GDP and Inflation ( ) Evolution of the GDP Per Capita ( ) Projection of the Real GDP Growth by Region ( ) Arequipa has shown positive growth rates for the period between the years 2008 and In many of those years the growth rate of Arequipa was bigger than the GDP growth of the country. In 2014 Arequipa grew 0.8%, which is the lowest rate recorded in recent years, due to a lower performance of primary and extractive sectors. On the other hand, the inflation has been relatively constant at a medium level with the exception of the year 2009 due to the context of the international crisis. In line with the GDP growth shown between the years 2008 and 2013, the GDP per capita shows an average growth rate of 2.15% for this period. The southern region is the one with the strongest real GDP growth rate for the period between the years % 4.5% % 1.0% % 4.4% 2.8% 2.9% % 5.0% % 2.2% % 0.8% ,000 7,000 6,000 5,000 4,000 3,000 2,000 1, , , , , , , , % - 4.5% North 5.0% - 5.5% Lima 6.0% - 6.5% South 4.0% - 4.5% Center % East Real GDP Var. % Inflation (%) Source: National Institute of Statistics and Information (INEI) Real GDP Per Capita (Thousand of US$) Source: National Institute of Statistics and Information (INEI) Source: Aurum Consultoría y Mercado Project Portfolio / Regional Government of Arequipa 15

16 Arequipa s population has remained relatively stable, growing with an average CAGR of 1.1%. The Economically Active Population (PEA) has increased from 51.9% of the total population to 55% in the period between 2008 and The value of the exports of Arequipa is greater than imports, due to the boost of mining exports and the price of metals. However, the gap in the trade balance has been declining over the years. Evolution of the Population and the Economically Active Population (PEA) ( ) 1,400,000 Evolution of the Trade Balance ( ) 5,000,000 4,500,000 4,000,000 1,200,000 1,000, , , , % 52.8% 53.3% 54.4% 55.5% 55.0% 53.1% 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000, , , Exports (Thousand of US$) Imports (Thousand of US$) Population PEA (% of Total Population) Source: Aurum Consultoría y Mercado Source: National Institute of Statistics and Information (INEI)

17 Situation of Arequipa 2 Sector Analysis The most important economic sectors in the region are mining, manufacturing and trade. These sectors represent approximately 51% of the total production. The productivity of the primary sectors (agriculture, fishing and mining) in Arequipa is significantly bigger than the productivity seen in the same sectors nationwide. They incorporate 18% of the total Economically Active Population (PEA). The services sector has a bigger dynamism, larger number of operating companies and more trainet staff than other sectors. Economic Data by Economic Sector in Arequipa (2013) Sectors Nominal GVA (S/. MM) Real GVA (S/. MM) Percentage Structure (%)* Real GVA CAGR ( ) (%) PEA Percentage (%) Productivity in the sector (Arequipa vs Peru)** Index of employment in private companies with 10 or more workers Number of companies in the private sector*** Agriculture 2,249 1, % 2.4% 675 Fishing % -18.7% 18% Mining 5,627 5, % 3.4% Electricity, gas % 4.1% and water 12.3% Manufacture 3,766 3, % 0.8% 110 2,184 Construction 2,452 2, % 16.9% 8.6% N/E 837 Trade 3,118 2, % 7.0% 18.6% ,701 Transport and communications 2,196 1, % 7.5% ,617 Tourism % 7.3% 1,284 Public administration % 9.3% 42.5% and defense Other services 4,944 3, % 5.5% 4,866 GVA: Gross Value Added. NS: Not Specified. * Measure the GVA of the sector in the department of Arequipa in comparison with the total GVA of the sector nationwide. ** Productivity is defined as the added value generated by a given area divided by the economically active employed population by the sector. *** As of September 2014; only those companies were registered in the data bases of electronic sheets. Preparation: EY. Source: National Institute of Statistics and Information (INEI), Central Reserve Bank of Peru (BCRP), Ministry of Labour and Employment Promotion. Real Gross Value Added by Economic Sector Agriculture 6.59% Fishing 0.22% Mining 24.42% Electricity, gas and water 1.20% Manufacture 15.29% Construction 9.06% Trade 11.38% Transport and communications 8.75% Tourism 2.30% Public administration and defense 3.28% Other services 17.50% Source: National Institute of Statistics and Information (INEI), Central Reserve Bank of Peru (BCRP), Ministry of Labour and Employment Promotion Project Portfolio / Regional Government of Arequipa 17

18 3 Business Situation 96% of the companies that operate in Arequipa are micro-companies. Through the study made to managers of 30 medium and big companies, developed by the consulting company Aurum, we can conclude that there is medium optimism about the economic performance of the business sector of Arequipa. However, 62% of the interviewed managers believed that the companies in which they work will grow more than 5% in Finally, the two indicators of greatest concern to the managers of Arequipa are currency volatility and government policies. Formal Distribution of Companies by Size (number) Micro Companies 96.0% Medium Companies 0.1% Big Companies 0.2% Small Companies 3.7% Source: Las Mipymes en cifras 2013, developed by the Ministry of Production Business Optimism about Arequipa s Economy 60% 52% 53% 50% 43% 40% 31% 30% 20% 17% 10% 4% 0% Less Optimism Equally Optimistic More Optimism Growth Expectations in Sales over the Previous Year 70% 60% 50% 40% 30% 20% 10% 0% 31% Less than 5% 26% 11% 7% 5% Growth 62% 63% More than 5% March 2015 March 2014 Source: Aurum Consultoría y Mercado March 2015 March 2014 Source: Aurum Consultoría y Mercado

19 Situation of Arequipa Main Risks Considered by the Companies of Arequipa Foreign competition Credit/interest rates market Corporate taxes March Domestic demand Competitive pricing pressure Global financial inestability Currency risk March 2014 Source: Aurum Consultoría y Mercado. *The scale is from 0 to is nothing to worry and 10 is very worrying. Government policy 4 Projects in Arequipa In the following table we can see the main projects to be developed in Arequipa. We observe that most of the expected investment is in the mining sector through the Cerro Verde, Pampas de Pongo y Zafranal and Tia Maria projects. These projects represent approximately 77% of the total investment amount. Another important project is Majes-Siguas II which started to be executed during the month of July This project represents approximately 5.7% of total investment. Main Projects - Arequipa - I Nationawide projects with an impact in Arequipa Amount of Project Name Sector investment (US$ MM) Southern Gas Pipeline Energy 3,000 Energy Node South Energy 900 Transmission Line Mantaro Marcona Energy 278 Socabaya and Montalvo Mass use of Natural Gas Energy 205 South Panamericana ** Transport 79 Main Projects - Arequipa - II Arequipa: Regional project Project Name Sector Amount of investment (US$ MM) Cerro Verde Expansion Mining 4,600 Pampas de Pongo y Zafranal Mining 1,500 Tía María Mining 1,400 Hydroelectric Molloco Energy 600 Majes-Siguas II Irrigation 550 Plant wastewater treatment La Sanetation 350 Enlozada Port of Matarani Expansion Transport 260 Arequipa Airport* Transport 256 Integrated transport System Transport 191 Total Account of National and Regional Projects with impact in 14,169 Arequipa *Amount for the group of six regional airports for the Macro South Region, for a period of 25 years. **Section Dv. Quilca Dv. Arequipa: Dv. Matarani Dv. Moquegua; Dv. Ilo Tacna La Concordia. Source: Proinversión. Project Portfolio / Regional Government of Arequipa 19

20 Arequipa s Projects by Sector (% of Total Amount) 5 Regional Competitiveness Index Regional Competitiveness Index (2015) 8 The Regional Competitiveness Index (INCORE) quantifies the relative position of each region of Peru through six pillars of competitiveness: (i) economic environment, (ii) infrastructure, (iii) health, (iv) education, (v) labour and (vi) institutions. Currently Arequipa is in the third place of the index with a total score of 6.5, being surpassed only by Lima and Moquegua with a total score of 7.1 and 7.0 respectively Mining 77% Energy 6% Irrigation 6% Source: Proinversión Sanitation 4% Transport 7% Loreto Cajamarca Puno Huanuco Pasco Huancavelica Ucayali Amazonas Ayacucho Apurimac San Martin Junin Piura Ancash La Libertad Lambayaque Cusco Tumbres Madre de Dios Tacna Ica Arequipa Moquegua Lima Source: Chamber of Commerce and Industry of Arequipa

21 Situation of Arequipa In the chart below we can see the score that registered Arequipa in each of the pillars compared to the national average. This region is positioned above the national average in 5 of the 6 pillars that considers the INCORE. Arequipa scored less than the national average in the pillar institutions because the study argues that there is still low public investment by regional organizations. Arequipa Competitiveness Index Institutions Labour market Total index Macroeconomic environment Infrastructure Description of the Competitiveness Pillars Arequipa Pilar Position Key Highlights Macroeconomic environment Infrastructure Health Education Leading indicator of availability of financial services and access to credit. Second region with the highest real GDP. Progress in real spending per household. In the top 5 of the regions with best infrastructure indicators. Third position in water coverage. Positioned in fifth place in terms of drainage coverage and households with at least one cellphone. First place in coverage of medical personnel and the second best result in child mortality. Higher life expectancy and lower mortality rate. Improvement in mathematics results. More schools with internet access. Even though the Arequipa region is in third place nationwide (according to the Regional Competitiveness Index Peru), it still has a long way to improve regarding the operations and strategies of the companies, regional business environment, social infrastructure and political institutions; globally. Global Competitiveness of Arequipa Companies operations and strategy Factor conditions (entrance) Microeconomic competitiveness Strategy and rivalry context Regional business environment Industries and related group support Demand conditions Basic demand capacity Macroeconomic competitiveness Social infrastructure and political institutions Political institutions Rule of law Macroeconomic policy Monetary policy Fiscal policy Education Health Arequipa National average Source: Chamber of Commerce and Industry of Arequipa Labour Institutions 5 14 Youth Unemployment of 14.9%. Differentiated income between men and women. Low execution of public investment. Ineffectiveness resolving court cases. Strategic and Organizacional operational practices effectiveness Company s internalization Logistic infrastructure Comunications infrastructure Administrative infrastructure Capital markets infrastructure Economic indicators Not fulfilled / low / unfavorable Fulfilled/high/favorable Innovative Source: Chamber of Commerce and Industry of Arequipa Source: Aurum Consultoría y Mercado. Study Arequipa: a strategy for sustained growth and prosperity, directed by Michael Porter Project Portfolio / Regional Government of Arequipa 21

22 In this manner, Arequipa offers opportunities in the short and medium term: Short Term Still growing middle class and increasing spending power. National and international companies interested in Arequipa. Increased public sector spending. Increased demand from the US and Asian tourism. Opportunities Medium Term Low penetration of different services and unsatisfied demand. Population growth. Start of the operations of large infrastructure projects. Housing and infrastructure deficit.

23 Legal Framework for private investment in Peru Legal Framework for private investment in Peru Vicunas in Salinas Project and Portfolio Aguada 2015 Blanca, Arequipa. / Regional Photo: Government Gihan Tubbeh of l Arequipa PromPerú 23

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25 Legal Framework for private investment in Peru Peru offers an appropriate legal framework that stimulates foreign investment: Non-discriminatory treatment between foreign and domestic investors. Unrestricted access to most economic sectors. Free capital movement. Free competition. Guarantees for Private Property. Right to free remittances, profits, dividends and royalties. Freedom to access internal and external credit. Agreements to avoid double taxation. Free availability of foreign exchange. Special Regimes: Legal Stability Agreements / Early recovery of VAT. Chapter of investment in various Free Trade Agreements (FTA) and member of the International Centre for Settlement of Investment Disputes (ICSID) and the Multilateral Investment Guarantee Agency (MIGA). Participation of Peru in the Investment Committee of the Organization for Economic Cooperation and Development (OECD) and has initiated the process for future incorporation as a member. Legal Framework for the Promotion of Private Investment 1Peruvian Constitution Legal Social market economy and freedom of private initiative. Freedom of contract. Equality for domestic and foreign investment. Concessions on public goods Law promoting private investment in public enterprises (Leg. 674) Standards for promoting investment in companies and assets of public enterprises. It establishes various mechanisms for the liquidation of a company such as transfer of shares or assets, capital raising, various contracts (lease, joint venture, management, usufruct) and disposal of assets. Law framework for private investment growth (Leg. 757) Legal security of investments in tax matters. Creation, modification and deletion of taxes, other tax benefits, etc. Procedures and formalities must be certain, simple and transparent. PPP framework law (Leg. 1224) Framework for Public Private Partnerships (PPP) for the generation of productive employment. It describes the rules to accelerate the promotion process of private investment. Types of PPP: (i) self-financing and (ii) con-financed. Modalities: concession, operation, management and joint venture stability for foreign investment (Leg. 662) Government promotion and guarantee of foreign investment in the country. Conditions set for access to legal stability regimes. Tax regime stability and free availability of foreign exchange, capital and dividends. Law framework to promote private investment (Law N 28059) Regulatory framework for the Government to promote investment in a decentralized way to achieve comprehensive, harmonious and sustainable development of each region. Government guarantees domestic, private and foreign investment initiatives in all sectors of economic activity. Concessions Law for public infrastructure and services (DS PCM) Types of concessions: (i) costly, (ii) free of charge, (iii) mixed and (iv) co-financing. Period with a maximum of 60 years. Regulates tax benefits and modifications to the concession contract. Private initiatives concepts. Law which encourages the local and regional public investment with private participation (Works for Tax Law Law N 29230) Promote the implementation of public investment projects with the participation of the private sector by signing agreements with regional and/or local Governments. Definition of CIPRL certificate. Source: Proinversión Project Portfolio / Regional Government of Arequipa 25

26 Legal Framework of Decentralized Investment and Special Regimes Law N 27867: Organic Law of Regional Governments. Law N 27972: Organic Law of Municipalities. Law N 28059: Legal Framework for the Promotion of Decentralized Investment. S.D PCM: Regulations of the Legal Framework for Promotion of Decentralized Investment. Law N and its Regulations : Concession Regime for public charities assets. Law N : Archaeological Heritage Concessions. Legislative Decree N 994 : Private Investment in agricultural projects. Specific Ordinances to Arequipa Region Regional Ordinance N Arequipa: Approves the modification of the organizational structure and Rules of Organization and Functions of the Regional Government of Arequipa. Regional Ordinance N Arequipa: Approves the deadline for the pronouncement of the Regional Coordinating Council regarding to private investment initiatives on resources and state assets submitted to the Regional Government of Arequipa. Related to the Legal Framework of the Regional Government of Arequipa Considerations Regional Office for the Promotion of Private Investment: - Department responsible for promoting private investment in the Regional Government of Arequipa and responsible for driving the promotion process of private investments presented to the Regional Government of Arequipa. - Releases operational minutes: (i) Admission of the Initiative, (ii) Constitution of Committees for Private Investments Evaluation (CEPRIP) and (iii) Declaration of a Project as a Regional Interest Initiative. CEPRIP: temporary committees responsible for evaluating private investment initiatives under the procedures laid down in Article 6 of Law N The deadline for issuing an opinion regarding the private initiative presented is sixty (60) labour days.

27 Available mechanisms for private investment Available mechanisms for private investment Project Portfolio La Punta 2015 Beach, Arequipa. / Regional Photo: Government James Posso of l Arequipa PromPeru 27

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29 Available mechanisms for private investment 1 Types of Investment Initiatives There are two types of investment initiatives depending on the entities that participate and propose the investment project: (i) public initiative and (ii) private initiative. The public initiative is the one proposed by the Government with the objetive to provide benefits to the population through works, infrastructure, services, development of productive projects and improving the quality of the life style of the country. In the other hand, the private initiatives are projects proposed by the private sector involving the Government participation. They are basically made through four methods: (i) concession, (ii) operation, (iii) management and (iv) joint venture. In addition, the funding of the project can be performed under any of the following ways: Self-sustaining: it is financed through fees paid by users. It does not require the use of public resources. Cofinanced: it requires the granting or contracting of financial or non-financial guarantees that have a significant chance of claiming the use of public resources. The following flowchart shows the process of awarding a private initiative for the specific case of the Regional Government of Arequipa (GRA). Flowchart for the Award of a Private Initiative 1 2 Private Initiative Presentation (PI) Admission and evaluation It includes: Investment proposal. Payment for submission and evaluation. Consider: Type of the initiative will be proposed. 4 3 Opinion of the Regional Coordination Council Only if the PI takes place as the form of an assets sales. Consists in: Verification of requirements and legal framework. Checking the admissibility report. Payment for assessment. The PI is sent to CEPRIP for evaluation. CEPRIP Evaluation Consists in: Verification of technical viability. 5 6 Declaration of regional interest Selection Process Consists in: PI approved by the Regional Council through a regional agreement. Publication in the official newspaper El Peruano. Letter of guarantee or credit when the contract is signed. Required documents: Application of interest. Letter of guarantee or credit. Technical and economic proposals. Procedure depending on the number of companies interested: Up to 2: Public offering Greater than 2: Public bidding Source: Guidelines for submission and approval of private initiatives provided by the Regional Government of Arequipa Presenting a private initiative must meet certain requirements requested by the Regional Office for the Promotion of Private Investment of the Government of Arequipa. Later this initiative is evaluated by the CEPRIP, who will perform a more detailed evaluation and declare the initiative as regional interest if warranted. Finally, the initiative is published and starts the process of selection of the private company or partnerships that will perform the investment project. It is important to remember that the flowchart is valid for private initiatives. It is important to know that there are two types of available mechanisms to perform public and private initiatives in the country: (i) Works for taxes (WFT s) and (ii) Public-Private Partnerships (PPP). Project Portfolio / Regional Government of Arequipa 29

30 2 Works for Taxes (WFT s) It is a form of income tax payments that companies can choose (Law N 29230). It consists in replacing the income tax cash payment for the execution of public works projects in a municipal or regional location. In this type of payment the regional government, local government or public university doesn t have to mobilize public funds immediately. The private company finances the work today, chargeable up to 50% of the income tax to be paid during the following fiscal year to the SUNAT. On the other hand, regional governments, local governments and public universities are funded today but they start paying a year after the work is finished. This payment is made for up to ten years without interest from its resources as the canon, overcanon, royalties, customs tax and participations. Overall, the works for taxes mechanism process is the following: the municipal or regional government carries out a selection process to choose a private company that will finance or execute the project. This company will sign an agreement letter to start with the investment phase of the project. When the project is finished, the regional government, local government or public university will request to the Ministry of Finance and Economics (MEF) the issuance of the Regional and Local Public Investment Certificate (CIPRL). This certificate can be used by the company from the next fiscal year, up to ten successive years, in order to deduct the income tax paid to the SUNAT for up to a total sum equivalent to the investment amount. Under this scheme, 159 public investment projects have been developed for a total amount of more than S/. 1,505 million. Successful Projects Project Region Amount (S/. MM) Chilina Bridge Arequipa 240 Potable Water and Sewer Systems in Majes and Arequipa 75 Industrial Villa Construction of the Public Safety Cusco 15 Management Center Construction and Improvement of the Streets in Huarmey Ancash 9.5 Source: Proinversión Flowchart for the Award of Works for Taxes 1 Project selection of interest 2 Introducing the selection process 3 Signing of the agreement with RG/LG 4 Execution of the work 5 Delivery of the work 6 Receiving CIPRL 7 Application of CIPRL Source: Proinversión This mechanism allows financing all types of public investment projects as long as they are consistent with the national, regional and local policies and development plans. They must count with the viability declaration of the National System of Public Investment (SNIP).

31 Available mechanisms for private investment 3 Public Private Partnership (PPPs) It is an investment scheme that considers private and public participation in infrastructure and public services. The private sector gives their experience, expertise, equipment and technology in order to share risk and resources with the public sector for the creation, development, improvement, operation and maintenance of public infrastructure or public services. Public Private Partnerships (PPPs) are generated from public or Private Initiatives (PI). PPPs Awarded by Sector (by amount) PPPs Awarded by Amount (per number) Transport 45.6% Energy 45.4% Amount < US$500 MM 75.0% US$1,000 MM < Amount 7.1% Irrigation 4.0% Tourism 0.1% Source: Proinversión Sanitation and Health 0.9% Telecommunications 3.9% US$500 MM < Amount < US$1,000 MM 17.9% Source: Proinversión Project Portfolio / Regional Government of Arequipa 31

32 Awarded projects Project Companies Amount US$ MM Description Line 2 and Ramal Av. Faucett - Av Gambetta Metro Lima and Callao 5,075 South Peruvian Pipeline 3,643 South Node Energy 700 Molloco Hydroelectric Power Station Source: Proinversión 600 This Subway will cover 13 districts of Lima and Callao. The concession includes the design, financing, construction, provision of equipment and electromechanical systems, operation and maintenance. The concession includes the design, financing, construction, operation, maintenance and transport of natural gas in two tranches across Arequipa, Cusco and Moquegua. It also includes the development of engineering studies for future regional pipelines. With the usage of the gas transported by the South Peruvian Pipeline, Peru will have an additional energy node to the existing power generation plants located in the central coast. It will consist of two thermal plants located in Ilo (Moquegua) and Mollendo (Arequipa). The project is designed to generate electricity through the use of water resources of the Molloco and Palca river. This project will increase national electricity production by 300 MW. The total amount of investment projects awarded through PPPs ascends to US$ million. Transport and energy sectors account for 91% of the total amount awarded, which represents about US$12,945 million. Likewise 75% of these are projects with lower investment amounts than US$500 million. About half of projects under the PPPs modality are co-financed with the state, so that means that the rest are funded on a self-sustaining scheme. As of December 2014, Proinversión (Private Investment Promotion Agency) had 12 projects in the pipeline that represented a total amount of US$4.668 million. The sector which contains the largest number of projects in pipeline and investment amount is energy. PPPs by Amount and Sectors Land and Water Transport 409 Energy 3,789 Sector Number of projects Amount (US$ MM) Land and Water Transport Energy 7 3,789 Sanitation Source: Proinversión Sanitation 470

33 Available mechanisms for private investment Flowchart for the Award of PPPs Overall a Public-Private Partnership has the following process: Economic Sector Sector Requirement 1 Technical / Economic Proposal E Proinversión Admission Procurement End of Process Contract Supervision A Promotion Plan B Announcement and tender rules Supervisory Authority 1) An economic sector identifies an economic need and presents it to Proinversión for evaluation. 2) As a result of the evaluation, Proinversión prepares the promotion plan, the bidding contest, the concession agreement and launches the tender. As a result of this, it receives a technical/economic proposal from the investors. 3) Award of the Project based on the evaluation of the proposals received by the bidders. 4) Closing of documentation with the awarded Company or consortium. 5) The Supervisory Authority or the industry regulator guarantees the compliance of the concession agreement. Review of sectors and entities D C Preparation of the contract Source: Proinversión Project Portfolio / Regional Government of Arequipa 33

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35 Projects Presentation Projects Presentation We have considered the following classification of projects based on their percentage of completion: a) Evaluation: identifies the problem and unmet need. Objectives, sector, benefits, location and associated institution are described. b) Technical Profile: incorporates additional information. Preliminary studies are conducted to consider alternatives from a technical and economic approach. c) Technical File: includes the preparation of final engineering and architectural designs as well as administrative, legal and institutional aspects. The detail of the project cost is defined. Project Santa Portfolio Catalina 2015 Convent, Arequipa. / Regional Photo: Government Renzo Tasso of l Arequipa PromPeru 35

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37 Projects Presentation The Regional Government of Arequipa is committed to the economic and social development of the region on a long-term horizon. In a context of strong growth, Arequipa is launching a series of projects to work hand in hand with domestic and foreign investors and increase competitiveness in the region. We have developed the Regional Development Plan Arequipa , which promotes five strategic areas: 1. Education, culture, health and family. 2. Economy, competitiveness and employment. 3. Infrastructure and macro regional and regional integration. 4. Environment and natural resources. 5. Public management and governance. Also, we have been working on competitiveness studies with Professor Michael Porter to achieve greater strategic understanding for the development of the economic sectors in the region. This initiative seeks to formalize the desire of the region for achieving a sustainable development with the participation of private investors. In that line we are open to evaluate private initiative proposals. List of projects - Arequipa We have identified 15 projects in pipeline with a total estimated investment of US$1,000 million. In addition, we have identified 11 projects in evaluation stage. Pacific Ocean Ecuador Arequipa Caraveli Colombia Camaná Brazil Chile La Unión Condesuyos Bolivia Castilla Caylloma Arequipa Islay Projects in Pipeline 1 Installation of a facility, picking, packing and processing storage for agricultural products in the Majes irrigation 2 Improvement of grape, avocado and granada harvests in the Majes Irrigation 3 Improvement of the planting and harvesting of water in mountain ecosystems 4 Recovery of the availability of ecosystem services in the Queñua del Rayo Forest 5 Improve the availability of ecosystem services in Queñua of Pichu Pichu Forest 6 Expansion and improvement of health services of the Regional Institute of Neoplastic Diseases of the South (IREN SUR) 7 Improvement of the health services in the General Hospital Honorio Delgado 8 Construction and remodeling of the Goyeneche Hospital 9 Ashlar park 10 Improvement of tourist services in the Pisco Route 11 Improvement of services in the gastronomic tour of Arequipa 12 Construction of access roads to the Chilina Bridge 13 Improvement of the Road of Uchumayo Variant 14 Regional highway La Joya - Yura 15 Platform for Logistic Activity Agriculture Environment Health Tourism Transport Projects in Evaluation 1 Installation of collection and cooling milk centers 2 Electricity generation by photovoltaic solar energy 3 Mining cluster Arequipa 4 Artisan Fishing Landing 5 Implementation of the Information Technology and Communication (ICT) corridor 6 Construction of the Interoceanic Train Brazil - Peru 7 Construction of the Interoceanic Train Brazil - Bolivia - Peru 8 Construction of the Continental Logistics Center Puerto Corío 9 Metropolitan expressway and renovation of city services 10 Construction of Tourist - Productive corridor in Arequipa s Coast (Waterfront) 11 Construction of the Andean Tourist - Productive corridor Agricultural Fishery Tourism Fishery Technology Mining Transport Project Portfolio / Regional Government of Arequipa 37

38 1 Projects in Pipeline Projects in the Pipeline by Sector (% of total amount in US$) Number of Projects in Pipeline by Sector Number of Projects in Pipeline by Investment Amount We present 15 projects in our pipeline that belongs to the following economic sectors: (i) agriculture, (ii) environment, (iii) sanitation & health, (iv) tourism and (v) transport. The 52.3% and 42.8% of the pipeline belongs to transport and sanitation & health sectors, respectively. Also 10 of the projects have estimated investment amounts of less than US$50 million and 2 of the projects of more than US$150 million. Agriculture 2.5% Health 42.8% Environment 0.4% Tourism 2.0% Agriculture 3 Health 3 Transport 4 Environment 2 Tourism 3 Amount < US$50 MM 10 US$50 MM < Amount < US$150 MM 3 US$150 MM < Amount 2 Source: Regional Government of Arequipa Source: Regional Government of Arequipa Transport 52.3% Source: Regional Government of Arequipa

39 Projects Presentation 2 Projects in Evaluation We also count 11 projects in preliminary or evaluation stage for the following economic sectors: (i) agriculture, (ii) fishing, (iii) technology, (iv) transport, (v) tourism, (vi) power and (vii) mining. The major part of the estimated investment (with 4 projects) is allocated in the transport sector. Projects in Evaluation by Sector (number of projects) Agriculture 1 Fishery 1 Tourism 2 Power 1 Technology 1 Mining 1 Transport 4 Source: Regional Government of Arequipa Project Portfolio / Regional Government of Arequipa 39

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41 Projects in Pipeline Projects in Pipeline Compañía Project Portfolio de Jesús 2015 Convent, Arequipa. / Regional Photo: Government Renzo Tasso of l Arequipa PromPeru 41

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43 Projects in Pipeline 1 Installation of a facility, picking, packing and processing storage for agricultural products in the Majes irrigation Sector What is the project? Why invest? Investment modality Agriculture Objective Increase the profitability of agricultural production activity with added value, for the domestic consumption and exports. Current situation Agricultural producers do not have adequate infrastructure for storage, sorting, conservation and packaging of agricultural products. It involves the construction of an infrastructure that allows logistic work in order to supply the domestic and international market with higher productivity. Estimated Investment amount in US$ Pre-investment: US$3 865,182 Investment (year 1): US$2 437,717 Operation and maintenance: US$1 391,466 Total estimated investment: US$7 730,365 *Exchange rate as of 08/31/15: S/ The project will increase the production and productivity through improved technology levels. The increasing of profitability will improve the socio-economic situation of producers. Established health standards will be taken into account, which will contribute to reduce pollution of waste and scrap the entire process of collection, storage and packaging of agricultural products, turning them into organic fertilizers. Location Province: Caylloma / District: Pedregal PPP - Works for Taxes Project status Technical Profile Project Portfolio / Regional Government of Arequipa 43

44 2 Improvement of grape, avocado and granada harvests in the Majes Irrigation Sector What is the project? Estimated Investment amount in US$ Location Agriculture Objective Provide to the small producers in the Majes Irrigation the right infrastructure for the export of table grapes, hass avocado and pomegranate. Current situation Currently there are 900 hectares of fruit (grapes, pomegranate and avocado haas) that could be exported if they were processed. Small producers are not in a financial capacity to build the necessary infrastructure. Consequently, they have to market their products through intermediaries of the area at prices far below international levels. There are two private processing plants that do not provide services to small producers. It involves the construction of a plant for packing table grapes, fresh avocado and Granada. It requires a system of selection of grape with reception and a processing room. In addition, a processing line for avocados and pomegranates. Moreover, a cooling system is constructed to complete two dispatch cameras for finished products. The plant will have additional facilities such as a laboratory, a control office, among others. The daily production capacity is 60 tons of grapes, while the processing lines have a capacity of 1,500 to 2,000 kg/h per line per shift. Machinery and equipment: US$776,930 Civil engineering works: US$1 160,501 Total estimated investment: US$1 937,431 *Exchange rate as of 08/31/15: S/ Why invest? One hectare of export fruit generates 2 daily wage labor work. The project will double the existing area and reach 2,000 hectares. Since there is a large gap between the current price and the export price, the project will promote export production and create jobs. In particular, this project will benefit 400 producers. It is important to consider that if the Autonomous Authority of Majes provides a land with infrastructure that can be suitable for the activity of packing, the project cost will be reduced by approximately S /. 3 million. Consequently, it will boost the productivity and economic structure of Arequipa. Province: Caylloma / District: Majes Investment modality PPP Project status Technical Profile

45 Projects in Pipeline 3 Improvement of the planting and harvesting of water in mountain ecosystems Sector What is the project? Estimated Investment amount in US$ Investment modality Agriculture Objective Access to services of water regulation and erosion control in wet and dry sub-humid mountain ecosystems. Current situation Due to global warming there is a latent threat relating to water scarcity. It is therefore necessary to evaluate modern technologies in order to harvest rainwater and replace andean glaciers and mountains that are in the process of thawing. Provide a service of water regulation and erosion control through four actions: 1. Storage of water resources through microdams. 2. Installation of systems for rainwater infiltration and reduction of soil erosion. 3. Installation of green cover for retaining moisture decreased soil erosion through the management and recovery of natural pastures in the high Andes. 4. Strengthening of organizations and knowledge in management of water resources through training. US$15,460,730 *Exchange rate as of 08/31/15: S/ Why invest? Through this project the water resources in the provinces could be regulated and therefore be prepared for the future effects of climate change. The project will increase the income of the population due to the momentum of agricultural activity and also decrease the incidence of diseases caused by the scarcity and poor water quality. Location Works for Taxes Project status Technical Profile Provinces: Arequipa, Caylloma, La Unión, Castillas and Condesuyos. Project Portfolio / Regional Government of Arequipa 45

46 4 Recovery of the availability of ecosystem services in the Queñua del Rayo Forest Sector What is the project? Estimated Investment amount in US$ Investment modality Environment Objective Restore and maintain ecosystem services available in the Queñua del Rayo Forest. Current situation Queñua del Rayo Forest is part of the priority areas for conservation declared by the Regional System of Protected Areas ( Sistema Regional de Áreas Naturales Protegidas - SIRANP ) and also is in the area of influence of the National Reserve of Salinas and Aguada Blanca. However there is limited capacity of local authorities to promote sustainable forest management. Restore ecosystem services of the Queñua del Rayo Forest through five activities: 1. Reforestation of 1,215 hectares. 2. Implementing a sustainable management of livestock activities. 3. Implementing a system of early warning and contingency plan against the threat of forest fires. 4. Implementing a system of control, surveillance and awareness against. illegal logging. 5. Awareness, training and technical assistance to government. institutions, residents and users for sustainable forest management. US$2,402,752 *Exchange rate as of 08/31/15: S/ Why invest? This project will stop the decline in forest vegetation coverage, which led to a deterioration of forest ecosystem services. This would allow an increase in agricultural activities and therefore a big purchasing power of approximately 29,862 people living in the area. Location Provinces: Arequipa and Caylloma. / Districts: Yura and Yanque. Works for Taxes Project status Technical Profile

47 Projects in Pipeline 5 Improve the availability of ecosystem services in Queñua of Pichu Pichu Forest Sector What is the project? Estimated Investment amount in US$ Investment modality Environment Objective Improve the availability of ecosystem services from the Queñua of Pichu Pichu Forest through five activities: US$1,416,822 *Exchange rate as of 08/31/15: S/ Works for Taxes Project status Improve the availability of ecosystem services in the Queñua of Pichu Pichu Forest. Current situation The Queñua of Pichu Pichu Forest is an area where there has been a deterioration of forest environmental services due to a loss of plant coverage to an annual rate of 9.76 ha/year as there is a limited recovery of the degraded areas. At the present, we have identified 214 hectares affected by overgrazing, logging, burning and quarrying clay from the forest. In addition, there is a limited capacity of local authorities and users to promote sustainable forest management population. 1. Reforestation of 2,014 hectares of forest seedlings obtaining public and community nurseries; and an irrigation flow regime based on hydro retainers accompanied with water. 2. Implementing a sustainable management of agricultural activities. 3. Implementing a system of early warning and contingency plan against the threat of forest fires. 4. Implementing a control system, surveillance and awareness against illegal logging. 5. Awareness, training and technical assistance to government institutions, residents and users for sustainable forest management. Why invest? This project could offset the decline in agricultural production. Also it will counteract the increasing possibilities of forest damage and losses that would originate a reduction in purchasing capacity of approximately 11,459 inhabitants in the area. Finally, it will counteract the increase of the negative effects of climate change that will decrease the quality of life of the population. Location Province: Arequipa. / Districts: Chiguata, Characato, Pocsi, Polobaya and San Juan de Tarucani. Technical Profile Project Portfolio / Regional Government of Arequipa 47

48 6 Expansion and improvement of health services of the Regional Institute of Neoplastic Diseases of the South (IREN SUR) Sector What is the project? Estimated Investment amount in US$ Investment modality Health Objective Improve coverage and attention of health services provided by IREN SUR. Current situation The IREN SUR is dedicated to providing specialized services of health such as early diagnosis and treatment of cancer. It seeks to guarantee comprehensive health care, giving priority to poor people. It consists of 4 actions: 1. Infrastructure: expanding and improving coverage with 250 beds. 2. Acquisition of furniture and equipment. 3. Miscellaneous: - Development of staff training plan. - Design and sharing of protocols and guidelines. - Plan for strengthening human capabilities. It includes organizational development, system and software. 4. Awareness of the population about the use of the service. Machinery and equipment: US$ ,756 Civil engineering works: US$56 586,271 Total estimated investment: US$ ,027 *Exchange rate as of 08/31/15: S/ Why invest? The project will improve the medical oncology in order to diagnose and treat patients through comprehensive care. About 7 million people will benefit of this project. PPP Project status Technical Profile Location Province: Arequipa / District: Arequipa

49 Projects in Pipeline 7 Improvement of the health services in the General Hospital Honorio Delgado Sector What is the project? Estimated Investment amount in US$ Investment modality Health Objective To have adequate conditions in the provision of health services in the General Hospital Honorio Delgado. Current situation Hospital Delgado pays attention to : (i) Medicin, (ii) Pediatrics, (iii) Surgery, (iv) Obstetrics and Gynecology (v) Oncology. It also provides imaging services, hospitalization, emergency and special services. The project consists of 4 actions: 1. Improvement of Infrastructure. 2. Acquisition of biomedical equipment, medical furniture, blood bank, laboratory, among others. 3. Development of the Training Plan for hospital staff and Building Capabilities Plan. 4. Awareness of the population about the use of the service. Machinery and equipment: US$77 430,524 Civil engineering works: US$46 458,314 Total estimated investment: US$ ,837 *Exchange rate as of 08/31/15: S/ Why invest? The project will improve service and care in the province of Arequipa. The number of beneficiaries will be about 5 million people. Location Province: Arequipa / District: Arequipa PPP Project status Technical Profile Project Portfolio / Regional Government of Arequipa 49

50 8 Construction and remodeling of the Goyeneche Hospital Sector What is the project? Estimated Investment amount in US$ Investment modality Health Objective Achieve adequate conditions in the provision of health services in the Goyeneche Hospital. Current situation Goyeneche hospital constitutes one of the more complex health facilities, making interventions of high, medium and low difficulty high range. It was built in 1912 of noble material, so the facilities are not adequate and neither is the distribution of the hospital. In addition, the equipment and furniture are damaged or deteriorated. Human resources are insufficient and inadequate with poor management system. However, the emergency room has modern infrastructure and proper distribution. It consists of 4 actions: 1. Construction of infrastructure. Approximately: - New: 26,554 m 2. - Reconstruction: 430 m 2. - Put in value: 9,645 m Acquisition of furniture and equipment. 3. Miscellaneous: - Development of staff training plan. - Designing and sharing of protocols and guidelines. - Building Capabilities Plan. It includes organizational development, systems and software. 4. Awareness of the population about the use of the service. Machinery and equipment: US$86 966,605 Civil engineering works: US$52 179,963 Total estimated investment: US$ ,568 *Exchange rate as of 08/31/15: S/ Why invest? Goyeneche Hospital is one of the most complex establishments. It is currently in a critical situation, which does not allow it to meet demand. It serves patients in the province of Arequipa coming to be attended by private means or by the Integrated Health Insurance System (SIS). It is estimated to benefit about 1.3 million people. Location Province: Arequipa / District: Arequipa PPP Project status Technical Profile - In Evaluation (ProInversión)

51 Projects in Pipeline 9 Ashlar park Sector What is the project? Why invest? Project status Tourism Objective Develop a resort using the source of the material as a stage. Build a cultural center that meets the best of different traditions and achieve substantial collection of sculptures. It seeks to develop the potential of ashlar, considered valuable in contemporary visual arts. Estimated Investment amount in US$ The project will benefit 7.2 million people. The environmental impact is minimal because it takes place in waste land, desert-like. It seeks to consolidate the city of Arequipa as an attractive tourism scenario. Location Technical Profile Current situation US$15,000,000 Province: Arequipa / District: Cerro Colorado There is a canyon that is the source of ashlar. *Exchange rate as of 08/31/15: S/ Investment modality PPP - Works for Taxes Project Portfolio / Regional Government of Arequipa 51

52 10 Improvement of tourist services in the Pisco Route Sector What is the project? Why invest? Project status Tourism Objective Provide adequate conditions for the tour of the Pisco Route. Current situation Currently the Pisco route is offered by travel agencies, but it does not have the infrastructure or equipment necessary for that purpose. In each of the areas there are warehouses containing jars of 1590, sills and coils for the production of pisco. Until now they have discovered about 16. It has 2 components: 1. Provision of an adequate infrastructure to improve services. Current travel: improve roads, signage, promotion of tourism, among others. 2. Improving wineries to be suitable for providing tourist services. Estimated Investment amount in US$ US$2,164,502 *Exchange rate as of 08/31/15: S/ The Pisco Route shows an important potential for travel agencies. The project will increase the tourist flow and benefit populations of Siguas, Vitor, Majes, Camaná and Caravelí. Location Provinces: Arequipa, Castilla, Camaná, Caraveli / Districts: Vitor, Uraca-Aplao, Mariscal Cáceres and Caraveli Investment modality Public Works Tax Deduction Technical Profile

53 Projects in Pipeline 11 Improvement of services in the gastronomic tour of Arequipa Sector What is the project? Why invest? Project status Tourism Objective Provide adequate conditions for sightseeing the gastronomic potential of the region. Current situation It has 2 components: 1. Provision of adequate infrastructure to improve existing tourist services: improvement of roads, signage, tourist promotion, among others. 2. Improvement of restaurants to be suitable for providing tourist services. The increase of tourist flow will not only bring benefits to the food sector, but it will affect other economic sectors. The benefits depend on the particularities of each province. Location Arequipa Technical Profile The growing interest in Peruvian cuisine is framed with the gastronomic potential of the region. However, the level of infrastructure is poor or non-existent and the access is limited. Estimated Investment amount in US$ US$2,782,931 Investment modality Works for Taxes *Exchange rate as of 08/31/15: S/ Project Portfolio / Regional Government of Arequipa 53

54 12 Construction of access roads to the Chilina Bridge Sector What is the project? Why invest? Project status Transport Objective Finish the execution of the Interconnected Road in order to decongest vehicular traffic in the area of influence. Current situation It involves the construction of a viaduct that integrates the district of Cerro Colorado and Cayma. Moreover, Av. Ramón Castilla will be improved on the surface. The component I has a length of 889 meters and the component VI has 3,510 meters long. Both contemplate the expropriation of land. Expropriation will affect land affected by the stroke of the road. Estimated Investment amount in US$ The project will improve traffic in the districts of influence, improving transportation in the province of Arequipa and promoting economic dynamism. Location Province: Arequipa / District: Miraflores, Alto Selva Alegre, Yanahuara, Cayma and Cerro Colorado Technical File The area has a congested traffic flow due to reckless, excessively vehicle crossings, coexistence of different types of transport and inappropiate road sections. US$146,131,56 *Exchange rate as of 08/31/15: S/ Investment modality PPP - Public Works Tax Deduction

55 Projects in Pipeline 13 Improvement of the Road of Uchumayo Variant Sector What is the project? Why invest? Investment modality Transport Objective Improve conditions for vehicular and pedestrian access and transitability in Uchumayo Variant. Current situation Uchumayo variant is constituted as the main route of entry to the city of Arequipa, with a high vehicle traffic. It is part of one of the main axes of integration and functional coordination, with a main focus of interdistrict and regional connection. The maintenance has not been adequate. It consists of 4 components: 1. Bridges and roads: it includes the improvement and construction of various roads, bridges and interchanges. 2. Exchanges: 3 bridges. 3. Interferences: related to relocation, adaptation work and improving existing facilities. 4. Sensibilization: in order to avoid potential disagreements with the affected population. Estimated Investment amount in US$ US$32,904,264 The project will improve traffic in the districts of influence, improving transportation in the province of Arequipa and promoting economic dynamism. It will decrease operating costs, decrease the number of accidents and travel time of passengers. Around 1,265,175 people will be benefited. Those direct beneficiaries of the area belong to the urban, commercial and industrial sectors. It is estimated that the number of vehicles which will transit daily will be about 6 thousand. In addition, it could generate an additional payment to allow better service permanently. Location Province: Arequipa / Districts: Yanahuara, Sachaca and Cerro Colorado PPP Project status Technical File *Exchange rate as of 08/31/15: S/ Project Portfolio / Regional Government of Arequipa 55

56 14 Regional highway La Joya - Yura Sector What is the project? Why invest? Location Transport Objective Increasing road capacity in the southern region. Current situation Currently there is an alternative route in Uchumayo in poor condition and considered one of the most dangerous in the country. It involves the construction of a dual 40 km long two-lane carriageway highway from La Joya district to Yura district. It will include three road interchanges (Panamerican Highway Logistics Platform and Yura) as well as two tunnels of 800 meters and a bridge of 400 meters. Estimated Investment amount in US$ US$310,000,000 *Exchange rate as of 08/31/15: S/ The project will increase road capacity to transport cargo and passengers. It will save operational costs and reduce travel times and accident rates. It will facilitate the connection with the maritime HUBs (port of Matarani), air (future International Airport of La Joya) and terrestrial (Platform for Logistics Activity). The project will benefit around 7,200,000 inhabitants. It is estimated that the number of vehicles which will transit daily will be about 6 thousand. Province: Arequipa / Districts: La Joya, Uchumayo and Yura Investment modality PPP Project status Technical File

57 Projects in Pipeline 15 Platform for Logistic Activity Sector What is the project? Why invest? Investment modality Transport Objective Provide logistic infrastructure to the southern region and allow competitive cargo handling. Specialized cargo handling center, private and rental facilities, for cross-docking, packing, picking, cold chains, among others. It will have a truck center: workshops, faucets, restaurants, hotels, business centers, banks and customs. It will reduce logistics and cargo handling costs. Those related to the collection and distribution of regional load. It will improve the competitiveness of the region with a greater storage capacity and international logistic standards. PPP Project status Technical File Current situation Estimated Investment amount in US$ Location The potential realization of the regional highway La Joya - Yura provides opportunities to build a platform for logistic activities that connects directly with such highway. US$40,000,000 *Exchange rate as of 08/31/15: S/ Province: Arequipa / Districts: Uchumayo and Yura Project Portfolio / Regional Government of Arequipa 57

58 16 Creation of bus terminal in the district of majes, caylloma - arequipa Sector Transport Objective The district of Majes, is an agro industrial area that has grown exponentially. Being the need for transportation to various destinations a priority, this project seeks to provide suitable conditions for intercity transportation from the Majes District, Province of Caylloma - Arequipa. Current situation Majes district currently does not have a bus terminal that provides exchange service between city and intercity urban transport and vice versa. In addition, companies use improvised transport terminals that unsuitable for such activities which creates disorder and discontent to both users and transportation businesses. Another problem to be solved is that you cannot open new transportation routes as there are no proper conditions. Passengers who want to reach other destinations besides Arequipa city, haves to first go there and then start their transportation to destinations nationwide. For all these reasons the project is a necessity. What is the project? The project consists in the construction of a building with counters and boarding gates with boarding platforms plus business parking lots, complementary services, user parking lots, motorcycle taxi parking lots, waiting area and properly equipped perimeter fence. Estimated Investment amount in US$ US$$ 3 614,457 *Exchange rate as of 08/31/15: S/ Why invest? The project will improve the transport services in an orderly manner, in addition new routes will be opened to different destinations from the city of Majes to the whole country. This project will directly benefit the entire population of Majes district and indirectly the entire population of the region Arequipa. Majes is a hotbed of emerging development, it is estimated that the current annual average of travelers is 981,457 and by developing this project and the figure will increase by 50% more. Location Majes District, Province of Caylloma, Intersection of Av. Los Colonizadores and Av. Diagonal 400 Investment modality Private investment in public assets Project status Technical File

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61 Projects in Evaluation Projects in Evaluation Project Portfolio Andean 2015 Cóndor, Arequipa. / Regional Photo: Government Gihan Tubbeh of l Arequipa PromPeru 61

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63 Projects in Evaluation 1 Installation of collection and cooling milk centers Sector What is the project? Why invest? Investment modality Agriculture Objective Increase the profitability of livestock through a greater volume of collected milk and improve technical criteria to standardize productivity and competitiveness. It involves the installation of 42 milk collection centers with thermal technology. Estimated Investment amount in US$ US$519,481 *Exchange rate as of 08/31/15: S/ Farmers could standardize technical operation criteria to increase productivity and be able to charge a higher price. The project would improve the quality of life of about 12,000 farmers by increasing profitability in their businesses. The good practices will reduce contamination of waste fodder, dairy and would use the campus and biological manure for fertilizing under organic agriculture. Works for Taxes Current situation Location The collection of the milk is made through dealers. These carry milk trucks travels long distances. In consequence, this process affects the preservation of milk. Producers are affected by low prices and the rejection of the product for acidity levels. Provinces: Arequipa, Camaná, Caylloma, Castilla, Condesuyos, Caravelí, La Unión, Irrigación Majes and Islay. Project Portfolio / Regional Government of Arequipa 63

64 2 Electricity generation by photovoltaic solar energy Sector What is the project? Why invest? Location Power Objective Harness solar photovoltaic s in the region as a source to produce electricity. Current situation Installation of an interconnected national network of electricity generating plants for solar photovoltaic systems. Estimated Investment amount in US$ It depends on the technology type. The high average of solar radiation in the region favors the conditions for promoting the project. The electrical energy is clean. It does not consume fuel in generating gases. Thus, the project would contribute to the sustainability of the country s electrical system, benefiting mostly the inhabitants of the region. Arequipa Investment modality Open modality There is a growing demand for electricity in the region, with two plants in operation: Distribution and Majes project. The climatic conditions of the region are favourable regarding the generation of electricity.

65 Projects in Evaluation 3 Mining cluster Arequipa Sector What is the project? Why invest? Investment modality Mining Objective Concentrate highly specialized companies in the productions of goods or services of the mining sector. Current situation Consists in the generation of a space and infrastructure for the creation of a mining cluster for suppliers, customers, brokers, industry organizations, research centers and educational organizations. Estimated Investment amount in US$ Amount to be estimated. About 90% of exports are from the mining sector in Arequipa. It includes suppliers and key customers in the mining sector as well as the Port of Matarani and the presence of Ceticos. The project will increase the interaction between users and producers, generating competition and collaboration. Importantly, Ceticos Matarani will provide the ground for the project. Open modality The Regional Government of Arequipa is in the process to obtain the land owned by Ceticos Matarani to be used in the project. The government has a representative on the board. Location Province: Islay / District: Islay Project Portfolio / Regional Government of Arequipa 65

66 4 Artisan Fishing Landing Sector Current situation Estimated Investment amount in US$ Location Fishing Objective Construction of a modern artisan fishing landing. Islay district is an important point of landing. It has two private landings with an operating capacity of 100 boats. However, the fleet is currently about 700 boats. This increases the time of landing, collapsing even in times of high traffic. What is the project? It involves the construction of a artisan fishing landing infrastructure with greater operating capacity, frozen cameras and ice production in line with the Sanitary Standard. US$4,329,004 *Exchange rate as of 08/31/15: S/ Why invest? The demand is greater than the installed capacity of the piers. It will benefit about 200,000 people, including fishermen and consumers. It will reduce environmental pollution and increase the quality of the products of a major landing point in the region. Province: Islay / District: Islay Investment modality PPP - Public Works Tax Deduction

67 Projects in Evaluation 5 Implementation of the Information Technology and Communication (ICT) corridor Sector What is the project? Estimated Investment amount in US$ Location Technology Objective Increase and promote Information Technology and Communication (ICT) from universities and suppliers to users. Current situation There is a poor supply of ICT in the region. However, Arequipa has a favourable scenario for the development of technology. The development of a technology corridor involves three steps: 1. Generation of initial conditions and coordination with stakeholders. 2. Consolidation of strategic infrastructure corridor. 3. Sustainability and continuity of the corridor. Diversification of the productive matrix and development of new markets. US$36,224,490 *Exchange rate as of 08/31/15: S/ Why invest? It will promote technological development of the region. Arequipa has qualified human capital, high capacity of universities and high level of research, publications and events. In addition, there are initiatives and technology based startups. In its commitment to the project, the Regional Government of Arequipa will provide a physic space of 60 hectares for the project. Province: Arequipa / District: La Joya Investment modality Open modality Project Portfolio / Regional Government of Arequipa 67

68 6 Construction of the Interoceanic Train Brazil - Peru Sector What is the project? Why invest? Location Transport Objective Establish an interoceanic logistic corridor linking the port of Azú in Brazil and the southern ports of Peru. Current situation It involves the construction of a railway between the Azú Port in Brazil and the southern ports of Peru, with an approximate length of 5,000 km. Estimated Investment amount in US$ US$10,000,000,000 *Exchange rate as of 08/31/15: S/ The project will form a new inter-oceanic corridor to compete with the Chilean - Argentine Aconcagua Bi-Oceanic Corridor. Also this route is an alternative to the Panama and Nicaragua channels. This project will also activate the bilateral trade between Brazil and Peru benefiting more than 100 million people; and generating jobs during the construction phase. Country: Brazil Regions: Rio de Janeiro, Minas Gerais, Goias, Matogrosso, Rondonia and Acre. Country: Peru Province: Madre de Dios, Puno, Arequipa and Moquegua. Investment modality Currently, there is not a railway linking Brazil and Peru to enhance bilateral trade between both countries. Open modality

69 Projects in Evaluation 7 Construction of the Interoceanic Train Brazil - Bolivia - Peru Sector What is the project? Why invest? Location Transport Objective Establish an interoceanic logistic corridor linking the port of Santos in Brazil and the southern ports of Peru. Current situation Currently, there is no a railway linking Brazil, Bolivia and Peru, to enhance the multilateral trade between these countries. It involves the construction of a railway between the Santos Port in Brazil and the southern ports of Peru, with an approximate length of 3,600 km. Estimated Investment amount in US$ US$7,000,000,000 *Exchange rate as of 08/31/15: S/ The project will form a new inter-oceanic corridor to compete with the Chilean - Argentine Aconcagua Bi-Oceanic Corridor. Also this route is an alternative to the Panama and Nicaragua channels. This project will also activate the multilateral trade between Brazil, Bolivia and Peru benefiting more than 100 million people; and generating jobs during the construction phase. Country: Brazil Regions: Sao Paulo y Mato Grosso del Su. Country: Bolivia Regions: Santa Cruz, Cochabamba and La Paz. Country: Peru Regions: Puno, Arequipa and Moquegua. Investment modality Open modality Project Portfolio / Regional Government of Arequipa 69

70 8 Construction of the Continental Logistics Center Puerto Corío Sector What is the project? Why invest? Location Transport Objective Construct a logistic hub base for the countries in the South Pacific. Current situation South America currently does not have a city or logistic terminal that could generate a more dynamic and direct trade with Asia Pacific. Construction of a logistic center base (Hub) for the transaction of goods from the South American economic system to the rest of the world. This project would house four Hubs: 1. Land Hub: Corío Truck Terminal. 2. Land Railway Hub: Corío Terminal Railway. 3. Air Hub: Corío International Airport. 4. Hub Maritime: Corío Mega Port. Estimated Investment amount in US$ US$800,000,000 Peru is a country that has good conditions to host such a center due to the following conditions: (i) geopolitical center of the continent, (ii) geographical center of the South American Pacific Coast and availability of physical space, energy, water and human resources in Corío. The project would mean the construction of the first logistic city on the continent and benefit more than 100 million people through direct trade between the South Pacific and Asia Pacific. Province: Islay / District: La Punta de Bombón Investment modality Open modality *Exchange rate as of 08/31/15: S/

71 Projects in Evaluation 9 Metropolitan expressway and renovation of city services Sector What is the project? Why invest? Location Transport Objective Build urban roads to increase road capacity in the city. It also seeks to renew the main networks of urban basic services. Current situation Highway for a speed of 90 km/h and a length of 17 km. It will have a section of 11 lanes. Renovate or install underground water networks, drainage, sewerage, electricity, communications, gas, etc. Estimated Investment amount in US$ Amount to be estimated. The project will increase the supply of road infrastructure. It will allow savings in travel time for passengers and cargo, as well as reductions in transport costs and accident rates. In addition, old trunks water, drainage and sewer capacity to absorb new current demand and future growth of the city will be replaced. In addition this would generate the construction of new trunk electric power, communications and natural gas. Province: Arequipa Districts: Cerro Colorado, Yanahuara, Cercado, Hunter, Sachaca, Bustamante and Paucarpata. Investment modality Open modality Initial technical studies under the Metropolitan Development Plan. Project Portfolio / Regional Government of Arequipa 71

72 10 Construction of Tourist - Productive corridor in Arequipa s Coast (Waterfront) Sector Current situation What is the project? Why invest? Tourism Objective Appropriate conditions for tourist use and productive integration in the Coast of Arequipa. Currently the coastal road linking the provinces of Arequipa coast is under construction (sections Punta de Bombon - Matarani - Quilca); connecting with the Panamerican highway in the town of Camana. This road will have four stops in the towns of Mejia, Matarani, Camana and Lomas. It does not yet have the infrastructure and equipment needed to exploit the increased flow of tourism that would generate the construction of the road. It consists in the construction of the coastal road of Arequipa that would cover the provinces of Islay, Camaná and Caravelí. The project will include the construction of checkpoints, interpretation centers, visitor centers, tourist infrastructure, science and education at the National Sanctuary of Mejia Lagoons. Estimated Investment amount in US$ US$61,842,919 The project will generate an increase in the tourist flow in the area of influence. This would benefit economically to the provinces of Islay, Camaná,Caravelí and Arequipa region. Location Provinces: Islay, Camaná and Caravelí. Investment modality *Exchange rate as of 08/31/15: S/ Open modality

73 Projects in Evaluation 11 Construction of the Andean Tourist - Productive corridor Sector What is the project? Estimated Investment amount in US$ Location Tourism Objective To have appropriate conditions for tourist usage and productive integration of the Andean area of the Arequipa region. Current situation It consists in the construction of a road linking the towns of Arequipa, Chivay, Andagua, Cotahuasi and Caravelí; to connect the main tourist attractions of the Andean highlands of Arequipa such as the City of Arequipa, the National Reserve of Salinas and Aguada Blanca, the Colca Valley, the Volcanoes Valley and the Cotahuasi and Caravelí Valley. The project includes the construction of roads, signage and information facilities. US$123,685,838 *Exchange rate as of 08/31/15: S/ Why invest? The project will generate an increase in tourist traffic as it will strengthen the regional tourism route supply and provide comfortable and safe access. Provinces: Arequipa, Caylloma, Castilla, La Unión and Caravelí. Investment modality Open modality Around the high andean region of Arequipa there are a variety of tourist resources which are not being adequately exploited, because they do not have the right infrastructure and equipment. The road of integration of andean communities is incomplete and therefore the construction of major sections are needed: Ayo- Huambo, Castilla - La Union, La Union - Caravelí. Project Portfolio / Regional Government of Arequipa 73

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75 Contacts Projects in Pipeline and Projects in Evaluation Index Project Portfolio Cotahuasi 2015 Valley, Arequipa. / Regional Photo: Government James Posso of l Arequipa PromPeru 75

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77 Projects in Pipeline and Projects in Evaluation Index Projects in Pipeline Projects Page Sector Investment amount in US$ Investment modality Project status 1. Installation of a facility, picking, packing and processing storage for agricultural products in the Majes irrigation 45 Agriculture US$7,730,365 PPP - Works for Taxes Technical Profile 2. Improvement of grape, avocado and granada harvests in the Majes Irrigation 46 Agriculture US$1,937,431 Works for Taxes Technical Profile 3. Improvement of the planting and harvesting of water in mountain ecosystems 47 Agriculture US$15,460,730 Works for Taxes Technical Profile 4. Recovery of the availability of ecosystem services in the Queñua del Rayo Forest 48 Environmental US$2,402,752 Works for Taxes Technical Profile 5. Improve the availability of ecosystem services in Queñua of Pichu Pichu Forest 49 Environmental US$1,416,822 Works for Taxes Technical Profile 6. Expansion and improvement of health services of the Regional Institute of Neoplastic Diseases of the South (IREN SUR) 50 Health US$170,068,027 PPP Technical Profile 7. Improvement of the health services in the General Hospital Honorio Delgado 51 Health US$123,888,837 PPP Technical Profile 8. Construction and remodeling of the Goyeneche Hospital 52 Health US$139,146,568 PPP Technical Profile 9. Ashlar park 53 Tourism US$15,000,000 PPP - Works for Taxes Technical Profile 10. Improvement of tourist services in the Pisco Route 54 Tourism US$2,164,502 Works for Taxes Technical Profile 11. Improvement of services in the gastronomic tour of Arequipa 55 Tourism US$2,782,931 Works for Taxes Technical Profile 12. Construction of access roads to the Chilina Bridge 56 Transport US$146,131,563 PPP - Works for Taxes Technical File 13. Improvement of the Road of Uchumayo Variant 57 Transport US$32,904,264 PPP Technical File 14. Regional highway La Joya - Yura 58 Transport US$310,000,000 PPP Technical File 15. Platform for Logistic Activity 59 Transport US$40,000,000 PPP Technical File 16. Creation of bus terminal in the district of majes, caylloma - arequipa 60 Transport US$$ 3 614,457 Private investment in public assets Projects in Evaluation Projects Page Sector Investment amount in US$ Investment modality Project status 1. Installation of collection and cooling milk centers 65 Agricultural US$519,481 Works for Taxes In Evaluation 2. Electricity generation by photovoltaic solar energy 66 Power It depends on the technology type Open modality In Evaluation 3. Mining cluster Arequipa 67 Mining Amount to be estimated Open modality In Evaluation 4. Artisan Fishing Landing 68 Fishing US$4,329,004 PPP - Works for Taxes In Evaluation 5. Implementation of the Information Technology and Communication (ICT) corridor 69 Technology US$36,224,490 Open modality In Evaluation 6. Construction of the Interoceanic Train Brazil - Peru 70 Transport US$10,000,000,000 Open modality In Evaluation 7. Construction of the Interoceanic Train Brazil - Bolivia - Peru 71 Transport US$7,000,000,000 Open modality In Evaluation 8. Construction of the Continental Logistics Center Puerto Corío 72 Transport US$800,000,000 Open modality In Evaluation 9. Metropolitan expressway and renovation of city services 73 Transport Amount to be estimated Open modality In Evaluation 10. Construction of Tourist - Productive corridor in Arequipa s Coast (Waterfront) 74 Tourism US$61,842,919 Open modality In Evaluation 11. Construction of the Andean Tourist - Productive corridor 75 Tourism US$123,685,838 Open modality In Evaluation *Exchange rate as of 08/31/15: S/ Project Portfolio / Regional Government of Arequipa 77

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79 Contacts Contact List Regional Government of Arequipa Regional Government of Arequipa Calle Unión 200, Urb. César Vallejo Paucarpata - Arequipa /gobiernoregionaldearequipa /Gobierno-Regional-de-Arequipa Yamila Osorio Regional Governor of Arequipa T E. yosorio@regionarequipa.gob.pe Juan Carlos Agramonte Advisor of the Regional Governor T Jose Luis Rodriguez Regional General Manager T E. jrodriguez@regionarequipa.gob.pe Brunno Gambetta Regional Manager of the Promotion of Private Investment T E. bgambetta@regionarequipa.gob.pe Plaza de Armas and Arequipa s Cathedral, Arequipa. Photo: Gihan Tubbeh l PromPeru Project Portfolio / Regional Government of Arequipa 79

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81 Contacts Contact List EY Peru South Region Av. Bolognesi 407, Yanahuara - Arequipa Phone: Lima Av. Víctor Andrés Belaúnde 171, San Isidro - Lima 27, Perú Phone: Fax: Enrique Oliveros Transactions and Corporate Finance Services Lead Partner T E. enrique.oliveros@pe.ey.com Pedro Arizmendi Infrastructure - Transactions and Corporate Finance Services Partner T Ext E. pedro.arizmendi@pe.ey.com Región Norte Av. Santa Victoria 612, Urb. Santa Victoria, Chiclayo Telf: /company/ernstandyoung /EYPeru Iván Frías Partner in charge of EY South Region office Jorge Farfán Transactions and Corporate Finance Services Senior Manager T E. ivan.frias@pe.ey.com T Ext E. jorge.farfan@pe.ey.com Misti Volcano and Arequipa City, Arequipa. Photo: Gihan Tubbeh l PromPeru Project Portfolio / Regional Government of Arequipa 81

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86 edificio EXPERTOS EN CONSULTORÍA EMPRESARIAL Y DESARROLO SOSTENIBLE T C / / RPM # / # / # D Mercaderes 224 Of. 202 C.C. Panorámico E galvarado@carrealdi.pe /PromotoraCarrealdi P R O M O T O R A Desde el año 1997, CESEM viene aportando, participando y/o contribuyendo activamente en el lago proceso del crecimiento económico, social, cultural, ambiental y político del país, elaborando y ejecutando proyectos de desarrollo humano sustentables, productivos y empresariales, y ofreciendo beneficios al empresariado a través de soluciones a medida para transformar su empresa, haciéndola más eficiente, rentable y competitiva. CLIENTES Project Portfolio / Regional Government of Arequipa 61

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88 While the information in this Catalog is believed to be accurate, EY Peru does not make any representation or warranty, express or implied, regarding the accuracy or completeness of such information because it has been supplied by the Regional Government of Arequipa. Potential investors should conduct their own research and business analysis.