Investing in Peru: Agricultural opportunities in fertile valleys of Huanuco

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In 2009, the Huanuco Chamber of Commerce and Industry had the task to measure the impact of the city’s anniversary (opportunity for tourism and economic activity). Sixty percent of the surveyed businessmen reported a visible improvement: their income had increased from between 10 and 50 percent. However, more than 60 percent of those in the business sector said the lack of tourist promotion and development affects the region’s growth, which is mainly a lack of access roads. Communication by land is done mainly through the Carretera Central by all kinds of transport companies.

Nonetheless, commerce – the second regional activity – has developed well. The presence of pharmacy and electro-domestic product chains is notable in the city’s commercial zone. There are still, however, no supermarkets or malls. 

Agriculture

Agriculture is one of the main regional activities and supplies demand from the regional capital city. Potato and yucca are two of the major agricultural products cultivated in mountain valleys such as Ambo, Pachitea and Huanuco, while bananas come from the high Huanuco jungle.

Potato as well as yucca production decreased by more than 20 percent in February 2010 due to pests. The productions of yellow corn also decreased up to 50 percent in February in productive zone in the provinces of Puerto Inca, Leoncio Prado, Marañón, Huanuco and Monzón. Other characteristic agricultural products include carrots, beans, tomatoes, alfalfa, peas and cacao, which grow thanks to the temperate climate of the Huanuco valleys, classified as one of the best in the world.

Infrastructure
Huanuco’s beautiful landscape contrasts with its limited road networks. The main accesses from Lima are the Lima-La Oroya highway or the Ferrocarril Central Andino, with its Callao-Huancayo route (approximately 500 kilometers). The limited access to this central zone surrounded by mountains makes this train the main transport for loads of up to 1.4 million metric tons a year (due to economic activities in the region’s center, like mining), but it is not yet largely used for tourism.

On the other hand, the Alférez FAP David Figueroa Airport (run by Corpac), situated 6 kilometers from Huanuco, allows access to the city of Tingo Maria and is not expected to be given up for concession due to its low profitability for an eventual investor. The passenger volume in commercial flights is still low, due to its capacity which is oriented to small and medium fuselage aircrafts.

In 2009, the rehabilitation and improvement of the Tocache detour highway has been the main work of the region.

Huanuco towards the future

Undoubtedly, Huanuco has great potential if characteristics such as climate and the varied altitude ranges are considered. However, even though the region is known for its agriculture (fruit, vegetables and cereals), if better economic prospects in the long term are being sought, the target market for the produce has to be not only Lima but also less productive areas nearby such as Huancavelica and even the jungle refions (for products such as potatoes). This does not only depend on a better target market projection but also on the added value of the products. This is a pending task for which Huanuco is open to investment.

The same thing happens with coffee, which could follow in the footsteps of banana production with the “Platano y Banano” project promoted by the Ministry of Agriculture. Huanuco could focus on products of higher profitability and demand such as organic crops.

Nonetheless, the low profitability of some of the agricultural products makes the production of coca leaf an attractive activity for many. This is why the Huanuco jungle, made up of complicated areas of San Martin like Tocache and Alto Huallaga, has historically been the cradle of drug trafficking. Money laundering and other such activities are common mainly in Tingo Maria, the closest city to the tropical border. Currently, there exists the Control and Reduction of Coca Leaf Crops in Alto Huallaga Special Project (Corah) that operates in the San Martin border, but news of quota demands to coca growers and drug terrorists — remaining members of the Shining Path — are still common. This is doubtful to change soon because the political candidates find it easier to keep up appearances and not clash with those who could jeopardize their aspirations.

It is important to note that APOYO research group estimates that the GDP growth of Peru’s central highlands could reach 7 percent in 2010. This growth, however, should go hand-in-hand with investment in infrastructure, mainly roads and highways which are essential for communications and the local economy. Provias Descentralizado, through the Huanuco Municipality, has announced the investment of a million soles en rural highways for this year. The importance of the roads that connect this region and make it an economic corridor in the central highlands is revealed by the fact that two local projects were included in the Economic Stimulus plan of 2009: the Tocache detour highway and the Tingo Maria-Aguaytia-Pucallpa highway.

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