The Renewable Energy Landscape in Peru

Why Peru Could Make Clean Energy Investors a Fortune

Written by Brian Hicks
Posted January 14, 2010

I came here to Lima, fresh from a nasty cold snap on the East Coast.

I'm here reporting on what's happening in the renewable energy industry, including several meetings with wind energy companies this week.

My local contacts already tell me that one of our top European clean power plays in the Green Chip International portfolio is heavily involved here in Peru with the development of different regional renewable energy initiatives.

The story of how Peru got to be an investment hot spot in early 2010 is what I want to tell you today.

Now I'm sitting in a cafe in Lima, writing to you in English via wireless internet while I read the newspaper in Spanish. Outside I see the freshly paved, grass-lined streets of a city many foreigners had given up on just a few years ago.

In the 90s and 00s, Peru endured earthquakes and terrible political scandals. Both rocked investor confidence and kept many locals feeling isolated from and inferior to the rest of the world. Now international banks like HSBC and energy companies such as Brazil's Petrobras are clamoring to establish themselves in Peru, where they hope to tap economic growth that is expected to lead Latin America in 2010.

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Economic Growth to Lead Latin America in 2010

In 2008, Peru's gross domestic product grew by a sizzling 9.8%. That cooled in 2009 — but only moderately, since Peruvian financiers steered clear of the derivatives that drove the credit crisis and rich-country recession. In 2010, U.S. investment bank BCP Securities expects 5.7% growth, with government finances improving and the financial system not showing any deep cuts of the global credit crisis (other than the impact on some poor souls who invested with American fraudster Bernard Madoff).

Our GCI European wind power firm is angling toward well over a gigawatt in installed wind power capacity, from Lima to far-flung poorer areas in the Andes.

Interestingly, the experience I've had talking to national leaders and businessmen in Brazil about that country's renewable energy rollout and recent wind power auction will inform my research here in Peru. Peru is right on the border with Brazil, and as I wrote this week in Wealth Daily, this country is becoming a conduit between China across the Pacific and Brazil just to the east.

Peru, like Brazil, has both extensive river-based energy potential and strong winds that can compliment each other. I hear that the government of President Alan Garcia has mixed feelings about clean energy because of his efforts to make Peru a natural gas hotbed, but the World Bank and other international organizations are pushing for Peru to keep the natural beauty and ecosystems of its Amazon and Andes healthy, so clean energy is a must for economic development that safeguards the country's ecological endowment.

The natural views and experiences of Peru at sites like Machu Picchu are, after all, the reason that millions of tourist dollars pour into this country every year.

As a case in point, Lima is just now drying out from a week's worth of rain that totaled as much as the city normally gets in six months! The impact of climate extremes can be tempered and even harnessed with advanced water and energy infrastructure like run-of-river power and urban hydroelectric generation.

Peru is Set to Embrace Clean Energy

If Presidente Garcia wants more reasons to embrace clean energy, Brazilian renewable energy pioneers can tell him that in their country, wind and water energy resources tend to alternate throughout the year; this means a basic level of clean energy capacity is maintained in all four seasons.

How about the slick new streets I mentioned? Well, new cars — many of them Chinese — are all over Lima. Even the taxi that picked me up from the airport had a clean-burning natural gas tank in the trunk!

Like Brazilian motorists, Peruvians are zooming away from gasoline dependence. The growing exposure of Peru's expanding automotive market to China's EV-heavy burgeoning car industry is another trend I intend to learn much more about while I'm here.

I'll be spending my time here looking at how 2010 will be a pivotal year for Peru's government and people to attract billions in foreign direct investment from international clean energy players. You'll hear plenty more from me during my stay.

And as our portfolio companies take advantage of opportunities in Peru, Green Chip International readers will profit!

Saludos desde Lima,

Sam Hopkins

Sam Hopkins

International Editor