State-owned oil company Petroperu said it will not be purchasing a stake in the local assets of Spanish firm Repsol.
The decision follows weeks of speculation about a possible purchase of Repsol’s La Pampilla refinery, in north Lima, and the Repsol network of gasoline stations. It also follows a wave of stiff criticism from business groups and opposition politicians worried that the purchase would be the first sign of a policy shift towards a statist economy.
Top government officials, including Mines and Energy Minister Jorge Merino, said the decision was not a result of increased political pressure on the administration to back down from the purchase.
Petroperu said in a statement that it carried out a “technical, economic and financial evaluation” of the Repsol assets and that its board of directors decided to not continue in the process to purchase the assets because the possible income would not compensate the investment.
The state company said it will prioritize completing its portfolio of investment projects, which includes an upgrade to its Talara refinery.
The government’s interest in acquiring a minority stake in the assets raised concerns that it would abandon its market-friendly policies in favor of a socialist agenda. Humala ran on a platform to increase the state’s presence in the economy in the 2011 presidential election, but since taking office he has maintained free-market policies.
The Lima Chamber of Commerce applauded the decision. “The decision is not only healthy, but it was also taken quickly, avoiding increased distrust,” the group’s vice president, Mario Mongilardi, said.
“The decision is a positive signal that President Ollanta Humala is sensitive to swings in investor confidence and remains committed to the current investor-friendly economic policy framework,” the Eurasia Group said.
“The episode probably shows that Humala still believes in the merit of greater state presence in the hydrocarbons sector, but the risk of more aggressive policies will be contained by Humala’s attempt to do so through market mechanisms and his concern over negative investor sentiment,” it added.