Not only the land’s fertility is a strong reason to attract investment flows to this crop, but also ethanol prices are on the rise; during the first semester of 2006 it surpassed the barrier of US$ 0.50 per liter.
However, in order to invest, some other points should be taken into consideration such as the high tax burden, the fluctuation in fuel prices, the imports of alcohol with different tariffs, the implementation of technological improvements and production infrastructure, among others.
As a counterpart, it should be clear that opportunities are currently at its best. External effects such as the Kyoto Protocol (- an agreement made under the United Nations Framework Convention on Climate Change (UNFCCC) in which 164 countries committed itself to reduce CO2 emissions and five other greenhouse gases -), support the use of alternative and clean sources of energy. Another interesting opportunity can be found through the U.S.-Peru Trade Promotion Agreement (PTPA). In fact, given that Brasil does not have trade preferences with the U.S, brazilian producers must export ethyl alcohol to Central America, where it is processed into ethanol and then exported to the U.S.
Hence, if Peru obtains the trade preferences through the PTPA, it could have an additional competitive advantage regarding Brazil. Besides, Peru is a natural hub for the Asian market and thus, to Japan, one of the main ethanol consumers in the world.
(Adapted from a column published in Correo newspaper, by Aldo Defilippi, AmCham’s Peru executive director)