In this Issue: Overseas Business Insights - Telecom Snapshot ...... 1 - Craft Beer Market ...... 1 - Health Care Law ...... 2 March 2015 Canada - Electricity Trading ...... 3 U.S. Department of State - Ethanol ...... 4 Bureau of Western Hemisphere Affairs Resource Links...... 5 Peru’s Telecom Sector: A Snapshot When the Fujimori administra- Peruvians use pre-paid mobile mobile penetration. Since tionSystem privatized Peru’s two state cards, and only 21% of mobile these changes, over 200,000 -owned telephone companies phones are smart phones. The Peruvian consumers have in 1994, just three percent of overall mobile phone penetra- switched providers. Bitel aims Peruvians had telephones. tion rate is 96% (32 million to capture 1% of the market by Peru’s telecommunications accounts), with 2G services 2017 by focusing on lower-end sector has grown significantly accounting for 91% and 3G users. plans to expand since privatization, with state- four percent. Movistar and its operations with corporate owned companies Compañía have the largest shares of and higher-end market seg- Peruana de Teléfonos, S.A. the mobile market at 51.5% ments (it is not connected to (which operated in Lima) and (20.8 million accounts) and the earlier Peruvian state- Entel Perú (which operated cations Supervisory Agency, 43.2% (11.9 million) respec- owned company). Additional- outside of Lima) sold to Span- regulates and monitors the tively. Entel is third at 5.3% ly, two more companies— ish company Telefónica (doing country’s public telecommuni- (1.3 million accounts), entering Virgin Mobile (U.S.) and Móvil business as (d/b/a) Movistar). cation services market. ProIn- the market with the purchase Falabella ()—have an- The 1998 Telecommunications versión, the government’s pri- of Nextel Peru in August 2014. nounced plans to enter the Law further liberalized compe- vate investment agency, is re- ’s Telefónica owns both market in 2015. sponsible for promoting pri- tition under a single concession upscale Movistar and more Although mobile penetration and license process for tele- vate sector investment. Invest- affordable and social network- ment in telecommunications has increased significantly, communication services, in- ing-focused . Peru still lags behind its neigh- cluding fixed-line, mobile/ reached $1.5 billion in 2013, a 30% increase over 2012. In July 2014, OSIPTEL intro- bors. For instance, the average cellular, pay television, and duced number portability— revenue per user (ARPU) for internet. Mobile Sector which allows consumers to mobile phones in Peru is The Ministry of Transporta- There are currently five active keep their mobile phone num- $9.00—below Latin America’s tion and Communication mobile service providers: Mo- ber despite changing service average ARPU of $9.67. By (MTC) is responsible for devel- vistar (Spain), Claro (), providers—and cut intercon- comparison, Chile’s ARPU is oping telecommunications Entel (Chile), Viettel Mobile d/ nection fees by 68% to spur $13.70, Mexico’s $12.20, and policy; granting contracts; and b/a Bitel (Vietnam), and Tuen- competition and facilitate new ’s $9.93. The gov- managing resources, such as ti (Spain) (with the last three entrants into the market. ernment plans to increase Pe- spectrum and numbering. entering the market in late OSIPTEL also lowered costs OSIPTEL, the Telecommuni- 2014). Seventy-six percent of for rural operators to facilitate (continued on page 4) Craft Beer Brewing in Panama Large national breweries pro- Bruja started to gain ground Panama’s strong economic American culture have all contrib- ducing light lagers have long within the last decade, chang- performance, with the highest uted to the rise of craft beer indus- dominated Panama’s $390 mil- ing palates and introducing GDP growth rate in the region, try in Panama. lion beer market. Gastro pubs new flavors. Casa Bruja uses a vibrant logistics, shipping, On February 27 and 28 throngs of and independent brewers such local ingredients to create and financial sector, a growing Panamanians gathered for the third as La Rana Dorada and Casa uniquely Panamanian beers. middle class, and an affinity for annual “Micro Brew Fest”, featur- Page 2 Panama Beer (continued) are lagers low in alcohol content, highly “Panama ranks 12th in the -ing artisanal beers from many countries, to carbonated, and usually consumed very world in per capita beer sip craft beers and line up for burgers from cold. These characteristics mean that Pana- consumption ” a food truck, while classic rock blasted in manian beers can be consumed in high the background. The event boasted 93 quantities on a hot day with minimal dam- and Sea Dog Brewing Company from New artisanal brews from a range of countries, age to one’s pocketbook, or liver. Hampshire. Other American craft brewers are looking for distributors in Panama. including American craft beer brews from Four major brands owned by two brewer- Lost Coast, Mission Brewery, Ballast Point, ies dominate Panama's $390-million-a-year One of the owners of a micro-brew pub Founders, Anderson Valley, Shipyard, beer market: Heineken Interna- said the landscape for artisanal beers has Rogue, and ACE Cider. Both days of tional’s Cervecerías Barú Pana- changed dramatically since 2005, when the festival were sold out. A pre- má, owner of the Panama and locally produced craft beer was a rarity. La dominantly young and upper-middle Soberana brands, and SABMil- Rana Dorada opened in 2010and already class crowd filled the open-air patio ler’s Cervecería Nacional, which has two locations and brews four beers on where the event took place. owns the Balboa and Atlas site: a pale ale, a pilsner, a blonde ale, and a Panama ranks 12th in the world in per brands. Fermenting beneath the porter. Cervecería Legítima, which made capita beer consumption at 21.7 gal- surface is a growing market for its second consecutive Micro Brew Fest lons, or roughly 232 bottles of beer a craft beers. In an interview with showing, plans to open a brewpub in 2015. year per person. This level of con- a local publication, Cervecería One of the largest craft brewers is Casa sumption might be due to the year- Nacional’s master brewer noted, Bruja, which has its own bottling facility round hot, humid weather, or to the fact “A growing number of consumers are and distribution network. You can find it that Panama boasts some of the cheapest looking for different flavors and textures.” in restaurants across Panama City and at beer in the world, with a can of one of Pan- Increasingly, mainstream supermarkets sell the leading alcohol retailer Felipe Motta. ama’s national beers costing anywhere from American craft brands, including Hum- 50 to 75 cents. Panama’s traditional beers boldt Brewing Company from California Brazil’s Health Care Market—A New Investment Law On January 19, 2015, President Dilma ties linked to the United Nations that pro- triple within the next four decades. Rousseff signed a law (Law 13097/2015) vide technical cooperation, financing, and According to industry experts, people in opening the way for direct or indirect for- loans. Before this law, foreign capital could low-middle income stratum, defined as eign capital investment in a number of areas be invested in health insurance companies, those earning below US $2,111 per year, of Brazil’s health care market, whose value which in turn could acquire hospitals, but and upwards, have begun to look into pri- was estimated at $208 billion or 9.1 percent these hospitals could not buy other hospi- vate health care plans and private care. In of GDP in 2013. The Ministry of Health tals with foreign capital. 2012, Minneapolis-based United Health (MOH) has responsibility for formulating According to press reports, the intent of Group (UHG) purchased a 90 percent the regulations that will govern the law. the new law is to improve health system stake in Amil, a Brazilian hospital owner Actual authorization for foreign capital pur- management and introduce result-driven and health insurance provider, for US $5 chase of hospitals, clinics, etc. must be given modernity, particularly towards improving billion to sell low-cost tiered insurance by the Ministry of Justice. patient quality of care. plans to low-middle income classes in Bra- Among other things, Law 13097/2015 spe- Two factors appear to underlay the law. zil. The private sector receives substantial cifically allows for direct foreign capital in- First, an increasing proportion of the popu- revenue from SUS to cover the services vestment, including ownership and control- lation is leaving the underfunded govern- SUS cannot provide, including hospital ling shares in: (1) health services provision ment-run universal access public health beds, diagnostic equipment and specialty and ownership of general and specialty hos- system (SUS) to seek private insurance and care. Private hospitals and health services pitals, general and specialty clinics, diagnos- health services in the private sector to more providers are also increasingly forming tic laboratories, and management services quickly access mid- and high-level care. networks to leverage shared technology for these organizations; (2) not-for-profit Second, Brazil’s population is aging – the and data for enhanced decision making, health plans provided by companies for number of senior citizens will more than health service management, integration, their employees; and (3) international enti- and information technology that SUS lacks. Brazil Health Care Law (continued) Page 3

Brazil has approximately 6,800 public and nership for productive development (PDP) man knowledge capacity, and often, a lower private hospitals of varying distribution and model to offset the government borne price on patented products. Another ex- service quality, as well as 500,000 hospital health care costs and address the need for ample is health IT. Through its Health IT beds, according to public source data. De- increases in human and technological ca- Strategic Advisory Committee, the U.S. spite a 35 percent increase in health plan pacity. PDPs are negotiated arrangements Consulate in Sao Paulo facilitates the coor- membership in Brazil over the last decade, between the public and private sectors dination of health IT business development infrastructure has not grown – the total aimed at exchanging market access for strategies among U.S. health IT companies. number of hospital beds in Brazil declined commitments to invest and/or transfer Some experts advise a cautious approach to by nine percent over the same time period, technology. For example, in exchange for the new law. In an interview with Reuters, mostly from reductions in the public sec- granting companies a share of the public Francisco Balestrin, president of Anahp (a tor. It is estimated that an additional health sector market for their products, group representing private hospitals) stated 13,000 hospital beds, at a cost of approxi- entering into joint ventures, and providing that the new law "was a milestone, but it's mately US $2.7 billion will be needed in assistance with regulatory constraints, SUS hard to see anything gaining traction in the Brazil by 2017. negotiates for technology transfer, assis- short run. Any new investors want to first The MOH’s overall “health-industrial tance with the strengthening and advance- understand the existing market asymme- complex” strategy is employing the part- ment of domestic manufacturing and hu- tries." Canada – Trading Hydro for Wind

Manitoba Hydro (referred to locally as has been in place between the two utilities “A unique aspect of the power “Hydro”) is a Crown Corporation (state- since 1995. Seasonal diversity exchanges owned enterprise) and the province of take advantage of the fact that Manitoba purchase agreement is the Manitoba’s major energy utility, and one of Hydro's load peaks during winter, due to inclusion of a “wind storage” the largest energy producers in Canada. It heating demand. Most U.S. utilities experi- provision that entitles Minnesota serves 555,760 electric customers through- ence their peak loads in the summer, due to out Manitoba. The utility generates nearly higher air conditioning use. The diversity Power to transmit electric energy all of its electricity from self-renewing wa- exchange means Manitoba Hydro will pro- northward from its wind farms” ter power using 15 hydroelectric generating vide 200-MW of renewable hydroelectric stations, primarily on the Winnipeg, Sas- capacity to Great River Energy in the sum- dams, using the Manitoba system as a re- katchewan and Nelson rivers of Manitoba. mer to meet their energy needs, while chargeable battery. This wind storage pro- Great River Energy will provide Manitoba In 2013–14 Hydro’s export sales totaled vision will allow Minnesota Power to bal- Hydro with 200-MW of capacity during the $342 million with 89 per cent derived from ance its energy position and maximize the winter. the U.S. market and 11 per cent from sales value of its wind resources. to Canadian markets. Since 2005, Hydro’s In May 2011, Manitoba Hydro announced Xcel Energy of Minnesota has also been a export sales have totaled $4.1 billion, and a new agreement with Minnesota Power for long-term partner with Manitoba Hydro. the utility forecasts total export revenues of the sale of 250-MW of electricity over a 15- The utilities recently enhanced and extend- more than $12.5 billion over the next twen- year period, beginning in 2020. A unique ed by ten years a significant power pur- ty years. Energy utilities in the upper Mid- aspect of the power purchase agreement is chase agreement worth close to $3 billion. west – especially in Minnesota but now in the inclusion of a “wind storage” provision Under the agreement, Northern States Wisconsin as well – are attracted to the that entitles Minnesota Power to transmit Power (part of Xcel Energy) will purchase long-term price certainty and stability Man- electric energy northward from its wind between 375 and 500 MW of power from itoba Hydro offers. farms in North Dakota when wind produc- Manitoba Hydro. The two corporations tion is high or electric loads are low. When In October 2013, Manitoba Hydro signed a have a series of power sales agreements, Minnesota Power transmits power north- 200-megawatt (MW) seasonal diversity dating back to the early 1970s. The re- ward, Manitoba Hydro will absorb it into exchange with Great River Energy of Min- newed power sale starts in 2015 and will its system – in essence storing the wind nesota that runs until 2030. The new agree- extend contracts through 2025. ment extends a 150-MW arrangement that power in the form of water held behind its Page 4 Canada - continued from page 3 Extensive power sales to Minnesota (and of the line, with Minnesota Power owning the Wisconsin) necessitated the construction rest. The Great Northern Line has an antici- of a new transmission line to the United pated in-service date of June 1, 2020 and is to States. In 2014, Minnesota Power’s Great provide 883-MW of transmission capacity, of Northern Transmission Line received which 383-MW will be used to deliver hydroe- approval from the U.S. Federal Energy lectric power purchased from Manitoba Hy- Regulatory Commission. The 500- dro to serve Minnesota Power’s customers. kilovolt, 220-mile line will run from the Total project cost of the U.S. side of the line Manitoba-U.S. border northwest of Ros- is estimated to be between $560 million and eau, MN to an electric substation east of $710 million, depending on its final route. A Grand Rapids, MN. Manitoba Hydro will decision from the Minnesota Public Utilities initially own 49 per cent of the U.S. side Commission on the line is expected by the end of 2015. Peru Telecom – continued from page 1 -ru’s ARPU through electronic banking and second with 20%. Demand is growing for net is sparse and mobile download speeds money transfers via mobile phones but the all-inclusive fixed-line telephony, internet, low. high price of non-pre-paid accounts may and cable television packages. According Internet impact the plan’s effect. The entry in 2014 to OSIPTEL, almost 70% of Movistar of three new providers appear to be driving fixed-line accounts now include cable and Internet penetration in Peru is just over prices down, however, a trend that could internet bundles. This represents an op- 40% of the population (9.2 million users) continue as more new entrants compete for portunity for companies to make inroads and mainly concentrated in urban areas market share. into the market. along the Pacific coast. Currently, most broadband is delivered by asymmetric digi- Fixed Line Demand for Technology Strong tal subscriber line (ADSL) over existing Just over a third of Peruvian households According to industry sources, demand for copper telephone lines. The government have fixed-line telephone accounts (3.7 information and communications hard- launched a national broadband plan in 2007 million) after 20 years of liberalization, ware, software and services has grown an to modernize the system, pledging $350 leaving Peru with the third lowest fixed-line annual average 12% over the past decade. million to build 14,000 km of fiber optic penetration in the region. Poverty in rural Technological advances (e.g., voice-over- cables in 22 regions and 120 rural munici- communities, high infrastructure/capital internet protocols, digital/video streaming, palities by 2016. The initial broadband investment costs, diffuse communities wireless internet, cloud-based computing, speed in these areas will be limited (156 (Peru has over 10,000 rural communities etc.) have merged into separate and distinct KB/second to 1 MB/second), and will be with a population of less than 100), and the services and products creating new con- subsidized by the government to keep pric- significant geographical barriers posed by sumer markets. Peru’s emergent middle es affordable. MTC officials have said they the Andes mountain range and the Ama- class is viewed as a market for smart are on schedule to achieve this goal by zon rain forest all factor into relatively high phones, tablets, laptops, and other new 2016. prices and low fixed-line adoption rates. products, but growth in this sector remains Movistar has 70% of the fixed-line market, limited due to inadequate broadband infra- and Mexico-based América Móvil’s Claro is structure and mobile coverage, especially in areas outside of Lima where wireless inter- Guatemala—Ethanol Program The Guatemalan Ministry of Energy and February 25. The pilot project will docu- will use ethanol with different types of petro- Mines (MEM) and the Organization of ment and assess environmental impact, leum blend fuels sold in Guatemala. Partici- American States (OAS) launched a six- mechanical performance, and gas emis- pating vehicles are initially fueled with an E5 month ethanol blending pilot project on sions using a sample of 30 vehicles that (5% ethanol) blend, then 7% the following Guatemala (continued) Page 5 month, and up to a maximum of 10% cargo express (3), Claro Telecommunications Prensa Libre and El Periódico newspa- by the end of the pilot. Solar Founda- (3), Vehicles Importers Association (3), Mu- pers published stories of the launching tion is the implementing partner. Rep- on February 26: Gas Inc. is the dispatching station, and http://www.prensalibre.com/ ethanol will be supplied by the Guate- economia/etanol-gasolinas- malan Association of Alcohol Produc- combustibles-super-produccion-OEA- ers (APAG). Del Valle University MEM-Guatemala- (UVG) will monitor gas emissions and precios_0_1310269150.html. other specialized laboratories will eval- uate oil quality and blending. Final http://www.elperiodico.com.gt/ results are expected to be analyzed and es/20150226/economia/9133/Treinta- shared publicly in August. In addition veh%C3%ADculos-usar%C3%A1n-- to five privately owned vehicles, partic- nicipality of Guatemala (5 motorcycles), Re- mezcla-de-gasolina-y-etanol.htm ipating vehicles belong to: MEM (2), newable Fuels Association in Guatemala (1), http:// Ministry of Environment and Natural Solar Foundation (1), and the Guatemalan www.mem.gob.gt/2015/02/25/inicia- Resources (2), Ministry of Agriculture Electricity Company (1). plan-piloto-de-uso-de-etanol/ (2), Ministry of Economy (3), DHL

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