PERU’S FLEDGLING ETHANOL INDUSTRY EYES GROWTH
10.22.08 - Leído 31 veces. Enviar esta notaDana Ford
Energy companies, gobbling up land and pouring money into projects along Peru’s northern coast, are betting they can leverage the country’s impending access to US markets to make it an important producer of sugar cane-based ethanol
LIMA, Peru; October 22, 2008.- So far, eight companies have invested some $480 million to develop the popular alternative fuel in Peru. Most intend to export it to the United States, the world’s largest ethanol consumer, which will give Peruvian ethanol imports free entry starting next year, a trade benefit over Brazilian fuel.
“There are a lot of reasons why an ethanol project in Peru makes sense,” said Rex Canon, head of Maple Energy, a US-based group with a $220 million facility in Peru. “It’s arguably the best place in the world to grow sugar cane.”
Peruvian-grown sugar has one of the highest yields in the world, nearly double the global rate. Canon said Maple’s Peru yields top 150 tonnes per hectare, versus the global average of around 85 tonnes per hectare.
Cane can be planted and harvested year-round on the desert coast, which allows for constant processing, smaller industrial facilities, and, historically, had helped to make Peru a major sugar producer.
Output dropped drastically after Gen. Juan Velasco, a dictator, led a massive land reform effort in 1969. Ever since, Peru has been a net importer of sugar, though in recent years the crop has made a bit of a comeback.
This year, producers hope to produce some 910,000 tonnes of sugar, which is close to Peru’s domestic demand. Analysts predict production will likely keep climbing as consumption booms and the need for ethanol expands.
By 2010, Peruvian gasoline is required to contain at least 7.8 percent ethanol. Unless the country can ramp up production, it will need to start importing the fuel, from places like neighbouring Brazil.
THE ECONOMIC CRISIS
Brazil is the world’s largest producer of sugar cane-based ethanol. It feeds its own market and exports to countries like the United States, which charges a 54-cent-per-gallon tariff on imports.
Ethanol from Peru, under a free-trade agreement set to start in January, will have free access to US markets, making the country an attractive place for cane investors.
Brazilian companies are in talks with roughly 10 Peruvian sugar growers, according to Miguel Vega, president of the Peru-Brazil Chamber of the Commerce, who declined to give names.
“This kind of negotiation started more than a year ago. These things take time,” he said.
Vega stressed Brazilian companies are more interested in providing technologies and entering joint-venture agreements than in buying land. He said they have their sights set on markets in North America and developing ones in Asia.
Still, whatever ethanol projects might be in motion, the global credit crisis could threaten to undo or delay them.
Freddy Flores, head of Peru’s ethanol association, APPAB, said the country’s fledging sector will likely face setbacks, but remained optimistic about Peru’s long-term potential.
“It’s obvious the availability of financing from abroad will suffer some pressure,” he said. “We hadn’t exactly built the US financial crisis into our estimates.”
Large-scale projects could also face opposition from the government, which has been lukewarm about promoting ethanol investments, Flores said. Earlier this year, when food prices were high, Peru’s president said he would prioritize food over fuel production.
But, despite the challenges, Maple Energy said it was investing in Peru because it believes the country has a bright future in ethanol.
Last year, the company bought some 12,000 hectares (30,000 acres) in northern Peru, where it plans to plant sugar cane and construct a distillery, power plant and port additions.
“We’re building a whole new industry here,” Maple’s Canon said. “And believe me, we won’t be the only ones developing an ethanol project in Peru.”
(Reuters)
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