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Monthly Snapshots - July 2019: Peru Edition

Peru - the next major oil player in the region

In January 2018, Tullow Oil agreed terms to add six new licenses covering 28,000 sq km offshore Peru to its portfolio. But 3 months later, the Supreme Decrees, authorising state regulator PeruPetro to execute license contracts for these blocks, were revoked by the Peruvian government.

However earlier this year, the Peruvian government reapproved a contract for the company to explore shallow-water block Z-64, which lies off the northern coastal area of Tumbes. The company has also been approved for another block in the region, which is due to start drilling early next year. It is also awaiting news on four other blocks. These blocks are positioned close to where Canadian explorer Frontera Energy operates a 1,200 barrels of oil per day (bpd) unit. 

It has been predicted that these investments will help double Peru’s oil and gas production from 48,869 bdp of oil in 2018 to 100,000 bdp before 2023. Indeed, according to Angus McCoss, Tullow’s exploration director, “[they have] a good position in Peru, and believe it could be one of the industry hotspots.” 

As stated by Mr McCoss, the key is to “get into a hotspot before it becomes one.”

Investment in Peruvian startups is growing rapidly

Digital business initiatives that develop innovative ideas in startups are increasingly becoming more appealing alternatives than traditional sectors. In the first quarter of 2019, investments in digital business amounted to US$ 6.6 million. This represents an increase of 295 % compared to the same period in 2018, according to the report prepared by the Peruvian Seed and Venture Capital Association (Pecap). This growth in investment in Peruvian startups is due to the foreign investment rounds that startups now have access to.

Amongst the leading startups in Peru are Crehana, a platform worth $4.5 million offering online courses in various subjects, and Keynua, an electronic signature provider to identify people and validate their transactions. Moreover, Incubadora PQS states that Peru has a number of startups showing high potential for national and international growth. These include Carcool, an application in which drivers publish the route they usually use so that others can save time on their own journeys and Fitness Pass, an online membership that enables the user to access classes in the best fitness centers. 

All of the above shows that the startup scene in Peru is on the upward trend.

The focus for the future - Peru's manufacturing industry

Edgar Vásquez Vela, Peruvian Minister of Foreign Trade and Tourism, recently launched a new promotion strategy focusing on the manufacturing sector to stimulate international sales. To kick it all off, an international business roundtable was organised by Industria Perú which grouped 184 buyers from 34 markets with 117 representatives mainly from Bolivia, Ecuador, Mexico, Colombia and Chile. The rest of the delegations were from North America, Europe, Asia and Oceania. Overall, 241 Peruvian business people attended, 87% of which represented micro, small and medium sized companies. 

Over the course of the event, sales of up to US$107 million had been finalised with over 2500 trade meetings completed.

The products in the highest demand were mining machinery, flexible food packaging, decking, wooden doors and floors, natural oils and disposable medical clothing. It is expected that this event will kickstart a new dawn for the manufacturing sector in Peru.

Fighting corruption through blockchain

Transparency International’s 2016 Corruption Perception Index ranks Peru 101st place out of 176. More recently, the Peruvian government has turned to blockchain startup to create a transparent, contract-procurement system. The aim is to create a verification system for government contracts that make it resistant to data manipulation and other fraud. In addition to this, it will register purchase orders from Peru Compras, the government agency that regulated electronic purchases in the country. 

One of the desired effects in the adoption of blockchain is that it will encourage entrepreneurs and investors to invest in Peru. Dave Mejia, Senior Blockchain Strategist at Talos Digital, explains that blockchain could help “build faith in banking, the safety of personal savings and property, political processes, and the plausibility of entrepreneurial pursuits”, therefore encouraging further foreign investment. Beyond Peru, governments in Latin America have looked to test blockchain technology. Mexico’s government, for instance, has announced plans to conduct the first ever public procurement procedure on a blockchain network, helping guarantee transparency and accountability

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