After an unhappy dive into socialism and hyperinflation in the 1980s, a radical move to a pro-market economy and robust growth in the early 90s, and then several years of recession overshadowed by government corruption, Peru is now firmly set on a path of steady growth driven by private sector investment.

Peru hopes more U.S. companies will invest in infrastructure projets, mining, energy and other areas of the economy. This pylon was erected in the Andes by Maple, a Dallas company.

The decline and fall of Alberto Fujimori in the late 90s, as the now-reviled president worked to secure a third five-year term (in 2000 elections), ruined the economy and drove away investors.

But Fujimori is widely credited with making good pro-market decisions in his first seven years in office (1990-97), including replacing a bankrupt social security system with private pension funds and selling off inefficient and loss-making public enterprises.

His greatest success came on September 11, 1993, when Abimael Guzman, leader of the Marxist Shining Path guerrilla organization, was captured. Terror attacks, which had scared away many investors, came to a virtual stop.

With the passage of legislation that established the rule of law and protected private business, foreign and domestic companies began to invest heavily in Peru, in everything from mining and energy to telecommunications and service industries.

Today, the government owns little. Its companies generate some $2 billion a year in revenues, says Pedro Sanchez, the head of COPRI, the agency responsible for privatizations.

Another $1 billion in government revenue is generated from the social security payments still being made by workers close to retirement as the government system is phased out.

COPRI's Sanchez

Together, the total $3 billion of government revenue from state companies and social security amounts to only 5 percent of GDP.

And Sanchez says that this year some $1.1 billion of government shares, mainly in the electricity sector, will be sold to private companies.

That will leave three major privatization projects to be tackled in 2003: the Talara refinery in the north, the Mantaro generation company and a water supply project.

Privatization got something of a bad reputation in Peru during the last Fujimori years, because it was associated with corruption, as the president increasingly surrounded himself with a clique of insiders who abused their power.

The Toledo government has not been unscathed by the negative image. When it re-started privatizations after a three-year hiatus with the sale of Electroandes, a company running four hydroelectric plants, to New Jersey's PSEG through an open bid process last July, opposition figures attacked the sale as detrimental to consumers, warning that jobs would be lost and electricity prices would go up.

Into the fray stepped Sunat, Peru's IRS, which said it had found PSEG avoiding taxes in its Luz del Sur operation, which distributes electricity to over three million customers in Lima, almost half the city's population.

An arbitration board vindicated PSEG in December, and the political storm died away almost at once, said Mark Hoffmann, the head of business management at PSEG in Lima.

Nevertheless, COPRI is cautious not to push its agenda too hard, Sanchez says, hoping to avoid political reactions where possible.

It has some 68 projects on offer in all, although all but a handful are concessions to develop and operate ports, airports, roads and other infrastructure projects.

Sanchez says it will take, "two to three years" to sell the shares and concessions represented by the 68 projects.

The first two of nine major highway construction concessions are coming up for bids now, but a law preventing the privatization of ports will have to be rescinded before they get much-needed investment.

The law was enacted when a public outcry was raised over the privatization of Matarani Port in southern Peru.

Transport Minister Chang

Luis Chang, the minister of transport, is confident the law will be rescinded when members of parliament receive more information about the benefits of privatizing ports, and learn that Matarani has been "greatly improved" by the Romero Group that took it over.

Chang says Lima Port is particularly in need of investment and, given its proximity to Lima Airport, the government wants to see it developed soon as part of a wider strategy to make Lima a travel and transport hub for Latin America.

Lima airport has already been privatized and is being developed by Lima Airport Partners, a consortium of U.S. engineering giant Bechtel, its Peruvian construction partner COSAPI, and Frankfurt Airport.

Carolina Castilla, who manages LAP, says that over 30 years the consortium will invest $1.2 billion, modernizing the present facilities, adding a total of 56 jetways (19 by 2008), building a four-star hotel and a shopping center.

"It will operate as a tourist attraction not only for Peru, but also for the rest of the Americas," she said. Also, "It will result in an estimated $8 billion return for the Peruvian government during the 30 year concession period."

There are four regional airports that also need privatizing.

Sanchez points out that while some $1.3 billion is being invested annually in infrastructure projects now, Peru will have to invest $18 billion to reach the level of Chile.

The government does not have this money, privatization sales bringing in only a fraction of what is needed. Only private investment can close the gap.