Lead poisoning of Callao’s population is the most severe externality port operations cause in Peru. The problem could have been tackled in 2009, after the government issued a decree regulating how mineral ore was to be handled at Peruvian ports. However, the port regulator’s inability to follow the criteria contained in their own regulations led the procedure of selecting the providers of the service to continuous delays, and finally, to a complete stop. As a consequence, Callao’s population will continue to be affected by this externality until 2013. The problem the regulator could not solve was to determine whether the market for ‘mineral ore stevedore services’ at Callao Port was monopolistic or competitive. This article re-examines the case and concludes that the market for the service has natural monopoly characteristics. Therefore, the regulator should have ordered the ca...

In theory, X-factor regulation provides better incentives for cost reduction than previously widely-used rate-of-return regulation. However, a deeper look into how this factor is effectively estimated shows the regulator enjoys a great deal of discretion, especially when selecting the methodologies used to estimate its components. This paper describes how the X-factor is estimated in Peru and analyzes the main controversies (both theoretical al practical) that arose when the X factor for the country’s main airport was estimated. Conclusions are the following: i) careful planning of the concession process reduces the probability of unnecessary controversies when the X factor is estimated retrospectively, since this methodology requires data that needs to be collected at the time of the concession; ii) cost of capital estimation is a main source of controversies due to the subjective cri...

In the largest antitrust case prosecuted in Peru during the 2000s, the competition authority fined three firms for colluding to supply oxygen to Social Security hospitals (ESSALUD). At first the case looked simple: between 1999 and 2002 these firms won tenders in the same geographical areas in processes where the other two bidders always disqualified themselves. Moreover, this is an industry with a history of anticompetitive practices, since producers of industrial and medical gases have been found guilty of collusion in several countries, including Brazil, Argentina, Chile and the European Union. However, a deeper look at the economic evidence of the case shows that it was not conclusive, since the collusion hypothesis cannot explain key facts: the reason for which the firms disqualified themselves, since the others did not require it to win the tenders; the reason why the firms would m...

The purpose of this paper is to estimate CO2 emissions from Peru’s domestic air transport. This is basic and relevant information for public policy making that has not been calculated before. The estimation has been performed using destination, frequency and aircraft related data of all domestic flights that departed or landed at Jorge Chavez International Airport, a hub that accounts for over 93% of the country’s domestic air passenger traffic. CO2 emissions were estimated using a methodology proposed by the International Civil Aviation Organization that differentiates fuel usage during each phase of a flight. Results show that, in 2014, Peruvian domestic air transport was responsible for emitting approximately 606,975 tons of CO2. This is equivalent to US$4.35 million or US$59.4 per one-way flight. These results could be used as an input to assess how to internalize the externaliti...

This study uses an original data set on the Peruvian media sectors to analyze the effect that the association between the two largest newspaper conglomerates would have on the content and advertising markets. This case is particularly relevant given the particularities of Peru’s competition framework and media markets. Using survey data, we conclude that Peruvian newspapers face effective competition from other media sectors in both the content and advertising markets. Our analysis shows that both markets are “unconcentrated” according to the U.S. Horizontal Merger Guidelines and thus, the operation would be cleared. However, if concentration is analyzed taking into account only news-providing media and programs, the market would be categorized as “moderately concentrated” and a full merger between these conglomerates would warrant further scrutiny.

Salaverry es un pequeño puerto localizado a pocos kilómetros de la ciudad de Trujillo, al norte del Perú. Moviliza alrededor de 2.5 millones de toneladas de carga al año, en su mayoría, granel seco. Desde 1982, ENAPU, la empresa estatal que opera el puerto, ha venido reduciendo sus costos de dragado mediante el alargamiento de un molón retenedor de arena, solución que ha alterado el equilibrio dinámico de la costa y causado la virtual desaparición de las playas de Trujillo. Desde el punto de vista de las políticas públicas, el problema se vuelve aún más complejo si se toma en cuenta el alto costo de las obras necesarias para detener la erosión de las playas (US$ 150 millones), el incremento de la demanda por más y mejores servicios ambientales, y lo poco probable que resulta concesionar al sector privado una operación que genera una externalidad negativa tan seria. El obj...

Jorge Chavez International Airport (JCIA) is Peru’s main airport, handling 95% of the country’s international traffic. Since its concession in 2001 international transfers have grown 15 times and in 2019 represented 42% of the international outbound traffic. This substantial increase, and the fact that transfer passengers do not pay a fee for the use of the airport’s infrastructure, suggest a misalignment between the incentives faced by concessionaire and the public interest. This misalignment has the potential of reducing the Peru’s air connectivity in the future. The goal of this paper is to assess: (i) if it is convenient to authorize the JCIA’s concessionaire to charge a transfer fee to foreign nationals even though this might generate economic rents, and (ii) if so, whether this fee should be set by the market or by the regulator. Results suggest that it would be desirable...

In theory, Peru could use its recently gained international reputation as a culinary destination as a lever to improve the competitiveness of its tourism sector. However, no single factor can, by itself, make a destination competitive, and Peru has the disadvantage of being located far from the world’s main outbound tourist markets. The aim of this paper is to analyze the price-competitiveness of Peruvian gastronomy relative to its main Latin American competitors. I do so by comparing the cost of the baskets of products and services acquired by gastronomic tourists from 15 countries who have visited Peru with the cost of acquiring the same baskets in five alternative gastronomic destinations: Argentina, Brazil, Chile, Colombia, and Mexico. Results show that, overall (considering both local and travel costs), Mexico is the most price competitive destination for gastronomic tourists, fol...

The aim of this paper is to determine if the increase in the number and capacity of non-stop flights to and from Peru that occurred between 2004 and 2015 affected the number of visitors arriving from its main tourist markets (United States and Europe). Results using a SARIMA-X model show that a 1% increase in the number of available seats on non-stop flights from and to the United States generated a rise in the number of American tourists by 0.36%. In Europe, where only Spain, the Netherlands and France are connected to Peru via non-stop flights, results are heterogeneous. Evidence shows that the increase had no effect on the number of tourists arriving from these countries, but that a higher availability of seats on flights arriving or departing from Spain did have a positive effect in the number of tourists arriving from Italy, Switzerland, and Germany. These findings suggest that expa...