Compensation for coarticulation (CfC), a context effect in which the articulatory characteristics of one segment influence the perception of a neighboring segment [1], has been a matter of considerable debate between proponents of gestural [2] and auditory theories of speech perception [3]. We set out to distinguish the two accounts by using nonnative liquids (Tamil with American English listeners) that have distinct articulatory and acoustic characteristics from the native phoneme categories to which they are assimilated. We report three experiments that show that the auditory contrast account of CfC cannot explain compensatory effects with our non-native stimuli. We argue that these context effects reflect perceptual compensation for coarticulation, as predicted on a gestural account, but discuss problems for both theories.