Peruvian computermaker barters goods with East bloc, easing country's debt
Foreign debt may be a dirty word to a lot of Peruvians, but not to Alfredo Novoa. The Peruvian entrepreneur has taken advantage of his country's inability to pay off its $14.2 billion debt to establish a company with an unusual activity: It produces computers for export to Soviet-bloc countries.
With the Soviet Union, East Germany, and their neighbors now accepting Peruvian products in place of debt payments, Mr. Novoa's fledging company, Novotec, has become one of a number of Peruvian firms tapping into this potentially lucrative market.
But in a country where the majority of households don't own a telephone or an automobile, Novotec is the only Peruvian company exporting high-tech goods to Eastern Europe.
The firm is currently shipping 500 computers, worth $2.5 million, to Czechoslovakia in a deal that will help reduce the $100 million debt Peru has with the East European nation. Next month, Novotec hopes to begin exporting an additional 1,500 computers as part of a barter trade agreement the two governments are negotiating.
Peru would receive one-third of the payment for the computers in Czechoslovakian goods, one-third in hard currency, and the remaining third in credits toward further reducing Peru's debt with Czechoslovakia. Novotec, in turn, would be paid in Peruvian currency.
``Peru's foreign debt has been a blessing in disguise for us,'' says Novoa, who founded Novotec in May 1983. ``Problems can be opportunities.''
The European-educated engineer said Novotec will produce about 3,000 computers this year, almost all for export, worth about $15 million. Sales will almost certainly rise next year when the company finishes a planned refurbishing of a factory in Lima that will increase capacity from the current 300 machines per month to 4,000.
Short of foreign currency to repay its loans, Peru in the past three years has paid part of its debt in products. In 1986, Peru repaid $130 million in debt to the East-bloc countries with fabrics, clothing, handcrafts, and other products. This year the government hopes to reduce the foreign debt by $245 million in payment-in-kind deals.
Novotec's sales pitch has generated interest because the US government has banned the export of many categories of American-made or licensed high-tech goods to Warsaw-pact countries.
In what would easily be Novotec's biggest deal, the Peruvian company and the Soviet Union last December reached preliminary agreement for the export of more than 100,000 IBM-compatible personal computers over the next seven years.
But wrangling between the two governments over terms involving the foreign debt and other products has held up the deal, which could be worth $500 million to Novotec.
Peru's only computer firm is also negotiating agreements to ship about 500 of its CP-100 computers this year in barter deals to both Hungary and East Germany.
Novotec is concentrating on foreign markets. One reason is that the Ministry of Foreign Relations and the State Export Company have provided contact with high-level Soviet-bloc officials. Another is that Novotec's computers cost about $5,000 each while Asian-made machines in Peru sell for as little as $1,000.
``We can't beat the cut-rate,'' says Percy Buller, Novotec general manager.
Novoa says a company study revealed a third reason for focusing on exports: Local consumers indicated they were unlikely to buy a nationally produced computer.
``Peruvians don't believe that Peruvian companies can build computers,'' he says. ``We're trying to be pioneers.''
Novotec was created four years ago when management at Novoa Ingenieros, the parent company that works in construction contracting and engineering, began looking into the possibility of expanding into the computer business, either developing software or computer applications. Management soon discovered that it was feasible to make its own computer.
Designing the computer took 35,000 man-hours. Local content is 64 percent, according to Mr. Buller, with the company importing microchips from Japan, Taiwan, and South Korea.
Novoa sees developing high-tech industries as key to improving Peru's economy, which is hampered by underdevelopment, unemployment, and attacks from the ``Shining Path'' guerrillas.
``We've seen that the model of trying to grow by exporting raw materials and semi-finished products doesn't work,'' he says. ``With the world in the information age now, if we want to become a decent country in the future, we have to export high-tech products.''