The share of global fuel consumption in the form of biofuels has experienced a dramatic growth in the last decade, and the participation of biofuels as an energy source is forecasted to increase. This growth is driven to a large extent by governmental support, in a context where many developing countries have become aware of the potential benefits of the production and use of this renewable source of energy. This global trend is also seen in Latin America, where besides Brazil, many latecomers such as Peru, have enacted specific legal frameworks to address the promotion of biofuels as a way to reduce dependence on fossil fuels while exploiting the potential climatic advantages of that region for the cultivation of energy crops. This research analyzes the basic characteristics of the biofuel promotion framework in Peru, as well as the status and main challenges faced by the biofuels industry in that country, with the aim of extracting conclusions and policy recommendations. The biofuel framework in Peru is mainly based on the creation of demand by means of establishing blending mandates for anhydrous ethanol and biodiesel with fossil gasoline and diesel, with dissimilar results in the industry. In the case of anhydrous ethanol, the comparatively advantageous climatic conditions of the Peruvian coast for growing sugarcane, and the use of efficient irrigation technology on mostly previously unproductive land, have provided the opportunity for investors to achieve a production that exceeds the domestic demand, opening the possibility for a further reduction in dependence on fossil fuels. On the other hand, in the case of biodiesel, production centered on palm oil in the jungle regions has not met domestic demand created by the blending mandates, thereby generating a dependence on foreign source biodiesel. The current production of palm oil also does not cover the domestic demand for oil and fats for human consumption. The future expansion of the ethanol industry on the coast is likely to be challenged by the availability of water resources, whereas the development of the biodiesel industry in the jungle faces a more complex scenario where the lack of adequate infrastructure, land titling, and zoning are among the problems confronted by investors.