Curious case of the Pisco Sour

Following a weekend in Lima, the Oilholic has crossed over to Santiago de Chile. However, before one gets down to commodities related matters, there is the not so little matter of ‘not settling’ where the splendid regional cocktail Pisco Sour originates, a subject of much disquiet between Peru and Chile.

But first the recipe – you’ll need 25ml Lemon Juice, one egg white, 50ml Pisco (either Chilean or Peruvian), 20ml simple syrup. Give it an almighty shake with ice cubes, pour from shaker and add a dash of bitters. The end result is that delicious stuff in the photo on the left. That dear readers is the national drink of both Peru and Chile!

The origin of the main liquor base – Pisco, a colourless to yellow amber grape brandy made from distilling grape wine into a high proof spirit (below right) – is hotly contested. First known production dates back to the 16th century. Peruvians claim the name and first production site originates from the town of Pisco, while the Chileans claim the word “pisco”, a derivative of a term for a common bird, was used all along the Pacific Coastline of South America since the early days of Spanish settlers.

Going one step further, should names of towns matter, the Chileans renamed the town of La Unión in 1936 as Pisco Elqui so as to reinforce their claims over the name Pisco. Chile’s Pisco production volume dwarfs Peru’s by a ratio of 10 bottles to one. However, on the international stage Peruvians have the bragging rights as the “finer pisco” (at least in their opinion) is exported 3.5 times more than the Chilean produce.

There was dismay in Santiago, when Lima won a significant battle by being recognised as the original home of Pisco by the European Union in 2013. Yet, Chile’s usage of the word Pisco to describe its brandy cannot be curtailed, given its commonality. So much so for the liquor, but the tussle doesn’t end here! The cocktail is just as hotly disputed. According to bartenders in Lima’s Larcomar area, the cocktail originated in the city and was invented by an American named Victor Morris in the 1920s. 

When Morris, who had been living in Peru since 1903, opened Morris' Bar in Lima, the cocktail became his specialty. However, the recipe underwent several changes until Mario Bruiget, a Peruvian employee of Morris, added Angostura bitters and egg whites to the mix, thus creating the cocktail mix that has stood the test of time since 1926.

However, in Santiago de Chile, the story is widely dismissed. On the contrary, bartenders in the Chilean capital’s Providencia area say it was an English sailor Elliot Stubb who came up with the idea in 1872. Stubb, they say, mixed Key lime juice, syrup, and ice cubes to create the cocktail well known in Chile, some 50 years before the modern Peruvian version was even around.

Rubbish, no proof – retort the Peruvians again, while adding that the Chileans pinched the idea when Morris advertised the drink in 1924 in a local newspaper in the port of Valparaíso, Chile. Guess that doesn’t settle this one then. All the Oilholic can say is – whether sipped in Peru or Chile – it’s a splendid beverage! Cheers! That’s all for the moment folks! Keep reading, keep it ‘crude’!

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© Gaurav Sharma 2015. Photo I: Pisco Sour in Lima, Peru. Photo II: Pisco on rocks, Santigo, Chile. Photo III: Enojoying Pisco Sour in Santiago, Chile © Gaurav Sharma, October 2015

Crude conjecture: The IMF & a view from Peru

The Oilholic is just about to wrap-up a touristy weekend in Lima, Peru, before heading over to Santiago de Chile. One arrives barely a week after International Monetary Fund annual meetings held here from October 5 to 12.

The IMF’s decision to choose Lima as the venue had a ‘crude’ subtext; ok perhaps a ‘natural resource’ centric subtext. In March 2014, the fund’s Survey Magazine: Countries & Regions had predicted that commodity exporting countries of the Andean region, including Peru, could achieve sustainable economic growth levels and match the output rates of industrialised economies in percentage terms.

Extractive industries – chiefly oil, gas and mining – would play a growing role, it added. Of course, that was before the oil price started slumping from July 2014 onwards. By the time the first day of the Lima meet arrived this month, the IMF was predicting that should headline regional growth touch 1% over 2015, we’d be lucky. It also confirmed that Latin America would see its fifth successive year of economic output deceleration.

There is clear evidence of the oil price decline hurting Peru. However, as the Oilholic wrote on Forbes.com, the political climate in the run up to the April 2016 presidential election, is also spooking investors. President Ollanta Humala had to appoint his seventh Prime Minister in less than four years earlier this year and is in a tussle with Congress over the state’s role in oil and gas exploration.

All the while, the stars aren’t quite aligning, crudely speaking and are unlikely to do so for a while yet. Both benchmarks are currently languishing below $50 per barrel, and even the Oilholic’s $60 medium term equilibrium projection won’t quite cut it for Peru, where production has been declining since the mid-1990s (though proven reserves have been revised upwards to 740 million barrels).

Soundings over the past week have been anything but positive Latin American oil and gas producers in general, and we’re not just talking about the IMF here. The International Energy Agency said last week that the global economic outlook was “more pessimistic” and expected a marked slowdown in oil demand growth, with the commodities downturn hurting economic activity of exporting nations.

“Oil at $50 a barrel is a powerful driver in rebalancing the global oil market...But a projected marked slowdown in demand growth next year, and the anticipated arrival of additional Iranian barrels will keep the market oversupplied through 2016,” it added. In near tandem with the IEA, several brokers and rating agency Moody’s also revised their respective oil price assumptions “on oversupply and weakening demand.”

Moody's lowered its oil price assumption in 2016 for Brent to $53 from $57 per barrel and for the WTI to $48 from $52 per barrel. The rating agency expects both prices to rise by $7 per barrel in 2017, or a $5 per barrel reduction from its prior forecast.

Steve Wood, a Moody's senior analyst, said, "Oil prices will remain lower for a longer period, as large built-up inventories and oversupply cause oil prices to increase at a slower rate. Although supply should begin to drop as capital spending declines, increased Iranian exports could place additional pressure on oil prices in 2016."

As is evident, sentiment on the supply glut persisting in 2016, is gaining traction. These are particularly worrying times for smaller oil and gas exporters, a club that Peru is a member of. That’s all from Lima folks, as the Oilholic leaves you with a view of the Pacific Ocean from Larcomar. Keep reading, keep it ‘crude’!

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© Gaurav Sharma 2015. Photo I: IMF Meetings Banner at Lima Airport, Peru. Photo II: A view of the Pacific Ocean from Larcomar, Lima, Peru. © Gaurav Sharma, October 2015