Kuczynski Says Peru Must Prepare for Climate Change After Floods

(Bloomberg) -- As Peru clears up the mess left by the worst flooding in almost 20 years, the country’s leader says preparing for the next big one is more urgent than ever.

Severe El Ninos “will come around more frequently because of climate change” and Peru needs to plan to prevent major flooding in future, President Pedro Pablo Kuczynski told Bloomberg News in an interview at the presidential palace in Lima.

Torrential rains in mountain areas and along the country’s arid coast caused rivers to burst their banks last month, killing more than 100 people as towns were flooded, and leaving thousands homeless. The rain was caused by a sudden warming of the sea nearby, known by meteorologists as a coastal El Nino, and took the authorities by surprise.

Peru’s economic growth may slow to 3 percent to 3.5 percent this year before rebounding next year as the government finances construction of new homes, roads and bridges destroyed by floods and mudslides, Kuczynski said.

After the emergency passes, Peru will start a three-year rebuilding program that includes construction of thousands of earthquake-proof houses in areas less prone to flooding, Kuczynski said.

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The government will also need to invest in defense systems for the 30 or so rivers that flow down from the Andes mountains and into the Pacific Ocean. Rivers will be cascaded in parts and confined with channeling as they reach the coast, he said.

“These rivers that go from nothing to a raging torrent have to be channeled, especially in urban areas,” he said. “That’s quite expensive. This requires a big plan that we have to design. ” 

Channeling will free up large areas of fertile land for agriculture, making the project attractive for the private sector, said Kuczynski. Building companies could finance the work in exchange for land, he said.  

The president said he expects the reconstruction plan will be ready in three months time and may include 150,000 new homes for low and middle income families, and a major expansion of water and sanitation systems.

Peru is better placed to withstand the economic and financial cost than in the past, and will tap its “substantial” savings as well as loans to finance rebuilding, said Kuczynski, a 78-year-old former Wall Street banker who took office in July.

“We should get a good rebound in growth next year of 4 percent to 5 percent,” he said. “Now, what is the cost for reconstruction? People throw out numbers, but the situation in the north hasn’t ended yet, so we’re not ready to say.”

Savings, Catastrophe

Saving during the commodities boom allows Peru to face the disaster with unprecedented resources to finance reconstruction. The government has about $8 billion of savings in a contingency fund for natural disasters as well as access to $3.7 billion in emergency credit lines.

Flooding and mudslides have killed more than 100 people this year, destroyed more than 18,000 houses, almost 50 schools and more than 2,400 kilometers (1,491 miles) of highways and damaged much more.

The catastrophe hit the Andean nation as it was reeling from an investigation into bribes paid by Odebrecht SA that’s stalled some of the country’s biggest investment projects.

Reconstruction

Lima-based Grana y Montero SAA, which partnered Odebrecht in some of its Peruvian projects, can keep bidding for government contracts, Kuczynski said. The company, the country’s biggest builder, has denied allegations it participated in or knew about about any illegal payments.

“Grana y Montero hasn’t been indicted of anything so they can continue operating,” Kuczynski said. “There are always allegations, but there’s an atmosphere of finding and hanging guilty parties.”

The government’s priority in the next three months is providing temporary housing for 15,000 people left homeless, he said.

To contact the reporters on this story: John Quigley in Lima at jquigley8@bloomberg.net, Ben Bartenstein in Lima at bbartenstei3@bloomberg.net.

To contact the editors responsible for this story: Vivianne Rodrigues at vrodrigues3@bloomberg.net, Robert Jameson