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Olmos Irrigation Project Reviewed in Peru

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INCREASING ARABLE SOILS THROUGH IRRIGATION: The OLMOS project, LAMBAYEQUE, PERU

Since before Inca times (XV-XVI centuries), Peruvian people constrained by the Central Andes region geographical characteristics have strived to dominate water for agriculture.

olmos-map-1Perú climate zones: Coast, Sierra and Forest inca     Irigation channel in Inca settlement Tipón, Cuzco

 

On the center-west of South America, Perú has three clearly defined climate zones:

  • The coast is a 50-100 km wide desert strip extended between the Pacific Ocean and the Andes mountain range up to altitude 500m. It accounts for 11 percent of the country area but concentrates 65% of the population. Climate is very dry though the soils are adequate for cultivation if irrigated;
  • The sierra is dominated by the Andes mountain range, altitudes between 500 and 6,780m. Including deep valleys and high plateaus (altiplanos) it occupies 30% of the country area, 70 % of it over 3,000 m high. It has a distinct wet season -December to March- and a dry one with sunny days and very cold nights;
  • The forest is the eastern side of the Andes, with water draining into the Atlantic Ocean through the Marañón and Amazon basins. Ranging in altitude from 1000 to 80m, most of the lower regions are unexploited impenetrable tropical forest.

This geography determines that only 6% of the country area may be cultivated. In spite of this fertile land shortage, Perú massively produces three of the most important human food crops: potatoes in the coast and sierra, maize in sierra and forest and rice in coast and forest zones. There are also excellent conditions for harvesting wheat (in the Andian valleys), vegetables (asparagus, onions, tomatoes, avocado), tubers (sweet potato, yucca), pulses and beans, fruit (650 species including mango, banana, grape and lemon), industrial crops (sugar cane and sugar beet, coffee, cotton), high protein Andean grains (quinoa, maca, tarwi) and coca leaves.

Irrigation has always been a determinant factor in agriculture growth and human development of rural areas. However, most of the existing irrigation (92%) relies on surface water distributed through inefficient systems: old channels, leaky distribution and outdated gravity or flooding practices. This combination causes high inefficiencies in water use and increasing soil salinization due to under irrigation.

The government has directly invested in irrigation projects for many years, with meager results. Nowadays it bets on PPP (Public and Private Participation) projects such as Chavimochic (La Libertad, operative since 2006), Olmos (Lambayeque, operative since 2014), Majes-Siguas II (Arequipa, under construction) and others. The aim is to incorporate 300,000 new cultivable hectares by 2021. The general scheme calls for private investors who build the infrastructure in exchange for the operation (water, energy and roads) rights collected over a set number of years, after which the works will be administered by the Governmental entity.

THE OLMOS TINAJONES SPECIAL PROJECT

In November 2014 President Ollanta Humala inaugurated water operations of the Olmos project that will irrigate 38,000 new hectares and 5,500 hectares belonging to traditional communities with water derived from the Huancabamba and Tabaconas river basins across the western Andes mountain range. Furthermore, the water descent will be intersected by two dams for hydroelectric energy production. The project includes construction of a new 60,000 people city –to be called Engineer Charles Sutton, in homage of the author of the first Olmos project and father of Peruvian irrigation- and industrial park, still in the design development phase. In posterior stages the same water derivation will irrigate additional hectares in Olmos and Alto Piura.

Lambayeque province, situated 900 km from Lima, is part of the North Economic Corridor, a multimodal logistic project aiming to develop the northern Amazonía, sierra and coast regions and integrate them with overseas markets. Olmos has good access to the Pan American highway leading to Chiclayo and Piura airports and to the north IIRSA highway linking Yurimaguas fluvial port with the Paita maritime port on the Pacific Ocean. There are projects underway to strengthen existing airport and port facilities

olmos-map-peru-1
Localization of Olmos irrigation project. Source:
Odebrecht Peru

The region has conditions favorable to agriculture, with a dry subtropical climate without extreme seasonal variations that allows for cropping twice a year. Soils are sandy and loose, enriched with abundant organic material, because it is a dry prehistoric forest. There is available work force and a population traditionally dedicated to agriculture. Nearby cities Lambayeque, Cliclayo and Piura are increasing education facilities, aimed at the expected demand of qualified personnel.

 

The idea of transferring water from the Atlantic basin to the Pacific one has existed since 1922 but it was only in the 60’s when the pre-feasibility paper was approved and the project started to be considered to combine irrigation and hydroelectric energy. The Government even began construction of the transcending tunnel in 1977 but had to abandon it because of insufficient funding. In late 1998 a private initiative project was presented and the idea was relaunched, with a first stage divided into water transfer, energy production and irrigation components.


Olmos project: components of stage 1. Source: Proyecto Especial Olmos Tinajones

In 2004 the water transfer component was allocated for 20 years to Concesionaria Trasvase Olmos (CTO), belonging to mega engineering firm Odebrecht. The water transfer project is an engineering feat in itself, including the Limón dam (44 million cubic meters) on the Huancabamba river and a 20 km long transcending tunnel for which a special Tunnel Boring Machine had to be fabricated. Construction was finished in 2012.

In October 2010 the Lambayeque Regional Government (GRL) signed the concession contract for the energy production component with Sindicato Energético S.A. (SINERSA). The contract includes building of two dams (404 and 472m brute fall) on the Lajas creek and Olmos river, two tunnels connecting them and the energy production and distribution facilities, connected to the national web. Construction is scheduled to begin in late 2015 and operation to start in 2018.

In June 2010 the GRL adjudicated the irrigation component to H2Olmos -another Odebrecht firm- for 25 years. The contract includes building, operation and preservation of an irrigation system covering 43,500 hectares. The works include 2 water intakes on the Olmos river, 2 sand decanters, a regulating 800,000 m3 water dam, 13 km open air channels, 2 km tunnel channels, 50 km pressurized water distribution tubes, 85 km electrical lines and 150 km access and service roads as well as the automatized systems that regulate water distribution in accordance with user needs.

In 2012 the 38,000 hectares in the New Valley were auctioned in 250 to 1000 ha lots with pressurized water intakes, electricity connection and access roads. The land was bought by 11 firms, most notably Peruvian industrial conglomerate Gloria Group (4,500 ha), Azucarera Olmos (Gloria Group sugar production firm, 11,100 ha) and Mirabilis/ Parfen S.A. of Uruguay (4,000 ha). Land not sold in auction (11,500 ha) was adjudicated directly to Odebrecht Latinvest Peru Ductos S.A. who has been selling them.

map2

Olmos project land distribution. Source: Proyecto Especial Olmos Tinajones

Additionally, 5,500 irrigated hectares in Valle Viejo were reserved for local producers with long standing establishment in the Olmos area, notably the Santo Domingo peasant community. Lots already have access to water and the property transferal is underway.

To date, the Proyecto Especial Olmos Tinajones official site informs that infrastructure work (leveling, irrigation, etc.) has been initiated on the inside of most of the lots with about 2,200 hectares already cultivated with sugar cane, table grapes, avocados, cotton, blueberries and peppers. Gloria Group is starting construction of a sugar factory. About 1,200 direct jobs have already been created.

Will the announced agro export development materialize? Probably, if it depends on private investment. The challenge now is to attract the necessary qualified workforce and for the Government to continue building the infrastructure. Definitively, Northern Peru is an area worth watching in the next few years.

Research: Alice Bonet

Contact the Gateway to South America team to learn about the best investment opportunities in the region. The company is a benchmark for foreign investors wishing to invest in Argentina, Brazil, Chile, Paraguay, Peru and Uruguay, providing expert advice on property acquisition and investment tours.

www.gatewaytosouthamerica.com

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Geoffrey McRae

About Geoffrey McRae

GTSA - Founder and Marketing Director. Geoffrey is a New Zealander with a strong commercial, agro business and real estate background spanning over 30 years. Prior to coming to South America he was one of Australasia's most successful Real Estate negotiators reaching the highest level in the industry before emigrating to South America over 11 years ago. He has a reputation as a brave and a formidable negotiator and creative 'deal maker'. His reputation for discretion, experience and expertise has involved him in representing some of the Worlds highest profile clients. I hope you enjoy reading our news site. Please share it on your social media below.

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