PERU'S EXPORTS OF GOODS SURGE 36 PERCENT IN 2006

UNCLAS LIMA 000210 SIPDIS SIPDIS USTR FOR BHARMAN AND MCARRILLO GENEVA FOR USTR COMMERCE FOR 4331/MAC/WH/MCAMERON E.O. 12958: N/A TAGS: ETRD ECON EAGR EMIN ENRG USTR PE SUBJECT: PERU'S EXPORTS OF GOODS SURGE 36 PERCENT IN 2006 SUMMARY -------------- ¶1. On January 23, Trade Minister Araoz presented the GOP's official export statistics for 2006. Peruvian exports totaled USD 23.431 billion (all figures are FOB),35.6 higher than in 2005, and accounted for just over a quarter of Peru's GDP. Exports were the biggest contributors to Peru's impressive 7.7 percent GDP growth in 2006 (Central Bank figure). The U.S. market share of Peru's exports dropped from 31 percent in 2005 to 23 percent in 2006. Some Peruvian officials blame the slowdown in export growth to the U.S. (only 2.5 percent in 2006) on the uncertainty surrounding the extension of Andean trade preferences (ATPDEA) and approval of the U.S.-Peru Trade Promotion Agreement (PTPA) by the U.S. Congress, though many other factors also contributed (market prices, increased competition from CAFTA and China, etc.). ¶2. After posting a record month in December, Peru has had 58 consecutive months of export growth. Helped by strong prices, mined metals continued their dominance in 2006, accounting for 62 percent of Peru's exports. The vast majority of Peru's exporters are micro or small enterprises (e.g. 90 percent of textile exporters and 82 percent of agricultural exporters). The Exporters' Association (ADEX) predicts a 15 percent increase in Peru's export of goods in 2007, and the Trade Ministry has set a target of USD 27 billion. The above figures do not include Peru's exports in services, which totaled USD 2.4 billion in 2006. End Summary. SELLING MORE TO MORE MARKETS -------------- ¶3. The twelve countries receiving the largest share of Peru's exported goods are listed in the table below. The U.S. remained Peru's top export market by far, receiving 23.3 percent of Peru's exports (USD 5.468 billion). However, exports to the U.S. increased by only 2.5 percent (USD 134.1 million) in 2006, compared with 43.8 percent in 2005, when the U.S. received 30.9 percent of Peru's exports. Some Peruvian officials blame the slowdown in export growth to the U.S. on the uncertainty surrounding the extension of Andean trade preferences (ATPDEA) and approval of the U.S.-Peru Trade Promotion Agreement (PTPA) by the U.S. Congress, though many other factors also contributed (market prices, increased competition from CAFTA and China, etc.). ¶4. Peru's exports to China increased by 21 percent, and virtually all of third-place Switzerland's imports were gold. The countries receiving the largest percentage increase in exports from Peru were: Ukraine (3,062%, total USD 38.8 million),North Korea (2,296%, USD 23 million),Bangladesh (1,547%, USD 4.5 million),Congo (1,275%, USD 4.5 million), and the Philippines (551%, USD 4.5 million). In 2006, Peru exported to seven new markets -- Oman, Monaco, Macedonia, Solomon Islands, Ivory Coast, British Indian Ocean Territory, and Nauru -- bringing the total markets for Peruvian goods to ¶181. Peru's Top 12 Markets for Exported Goods (2006) Country : Value (USD million) : % Change'05 : % of Total'06 1)USA : $5,468 : 3% : 23% 2)China : $2,267 : 21% : 10% 3)Switzerland : $1,683 : 114% : 7% 4)Canada : $1,592 : 55% : 7% 5)Chile : $1,422 : 27% : 6% 6)Japan : $1,230 : 103% : 5% 7)Germany : $812 : 57% : 3% 8)Brazil : $809 : 77% : 3% 9)Italy : $761 : 93% : 3% 10)Spain : $761 : 36% : 3% 11)Netherlands : $702 : 27% : 3% 12)South Korea : $545 : 140% : 2% LEADING SECTORS ARE STILL MINING, PETROLEUM AND AGRICULTURE -------------- ¶5. The eight sectors that accounted for approximately 98 percent of Peru's exports are listed in the table below. Helped by strong prices, mined metals continued their dominance in 2006, accounting for 62 percent of Peru's exports. Non-traditional crops boosted agricultural exports by 33 percent compared with 2005, and iron/steel exports increased 86 percent. Peru's Top 8 Export Sectors (2006) Sector : Value (USD million) : % Change'05 : % of Total'06 1)mined metals : $14,465 : 48% : 62% 2)petroleum/derivatives : $1,793 : 13% : 8% 3)agriculture : $1,783 : 33% : 8% 4)fishing : $1,770 : 8% : 8% 5)textiles : $1,468 : 15% : 6% 6)iron/steel/metallurgy : $718 : 86% : 3% 7)chemicals : $597 : 12% : 3% 8)wood/paper : $332 : 27% : 1% MINING: COPPER AND ZINC LEAD GROWTH -------------- ¶6. The value of the dominant metal mining sector's exports increased by 48.2 percent in 2006 to USD 14.465 billion. Copper exports totaled USD 6.034 billion (up 76.5%),gold totaled USD 3.952 billion (27.7% increase),Zinc totaled USD 1.991 billion (147.3% increase),and Molybdenum accounted for USD 862 million (a 25% decrease). Non-metallic mining exports (not included in "mined metals" above) increased by 14.2 percent in 2006 to USD 135 million. The mining sector should maintain its dominance in 2007, as prices show no signs of dropping. PETROLEUM AND DERIVATIVES: MORE OIL ON THE WAY -------------- - ¶7. Petroleum derivatives totaled USD 1.305 billion, a 7 percent decrease compared with 2005. However, crude exports rose 161.2 percent to USD 488 million, and should continue to rise in the future due to new exploration and extraction. AGRICULTURE: CROP DIVERSITY INCREASING -------------- ¶8. The agricultural sector exported USD 1.783 billion in 2006, 33 percent more than in 2005, with the top markets being the U.S. (35 percent),Spain (13 percent),the Netherlands (8 percent),France (5 percent),the UK (5 percent),Ecuador (5 percent),and Colombia (3 percent). As a combined grouping, the European Union received 40 percent of Peru's agricultural exports. Prominent traditional exports included coffee (grew by 68 percent to USD 514 million) and sugar (USD 43 million). Non-traditional agricultural exports were led by asparagus, paprika and artichokes (see table below). 82 percent of agricultural exporters were micro or small enterprises. The impressive growth in agricultural exports should continue in 2007 as more and more farmers switch to higher-value crops with GOP and international assistance and these products enter more markets. Peru's Top 10 Non-Traditional Agricultural Exports (2006) Product : Value (USD million) : % Change'05 1)asparagus : $291 : 18% 2)paprika : $73 : -23% 3)artichokes : $65 : 48% 4)fresh mangoes : $59 : 55% 5)evaporated milk : $51 : 29% 6)fresh peppers : $50 : 39% (export to U.S. not permitted) 7)grapes : $48 : 41% 8)avocados : $39 : 67% 9)shrimp feed : $34 : 26% 10)bananas : $27 : 52% FISHING: MORE FISH AND SQUID -------------- ¶9. Traditional exports of fishmeal (USD 1.135 billion) and fish oil (USD 196 million) comprised the bulk of fishing exports. But non-traditional fishing exports grew an impressive 33 percent, led by mackerel (631% growth),yellow jacks (544%),and squid (which increased 21% to USD 148 million). TEXTILES: UNCERTAINTY HURTS SHIPMENTS TO U.S. -------------- ¶10. Despite a slowdown in some categories of textile exports to the U.S., total textile exports grew by 15 percent (to USD 1.468 billion). Peru's top textile markets were: USA (59%), Venezuela (12%),Chile (3%),and Colombia (3%). Ninety percent of textile exporters were micro or small businesses. FOCUS ON SERVICES INCREASING -------------- ¶11. Taken together, exports in services totaled USD 2.4 billion in 2006. About half of this total was travel, and USD 20 million was in software. The GOP announced plans to support the expansion of exports in elective health, ship repair, software, franchising, and call centers. The Exporters' Association (ADEX) predicts 10 percent growth in services exports in 2007. MORE EXPORTERS, BUT HIGH FAILURE RATE -------------- ¶12. According to GOP figures, 6,440 companies exported at least USD 2,000 worth of goods in 2006 (compared with 5,452 in 2005 and 3,883 in 2001). Of these, 806 companies exported over USD 1 million each. There were 2,025 new exporters in ¶2006. The vast majority of Peru's exporters are micro or small enterprises (e.g. 90 percent of textile exporters and 82 percent of agricultural exporters). ¶13. GOP officials were puzzled by the high rate of business failure in the export sector. About one-third of exporting companies cease to export the following year, and 63 percent have ceased by the fourth year. The GOP would like to reduce this costly rate of abandonment, and plans to provide market intelligence training to targeted audiences in 2007. COMMENT -------------- ¶14. Peru's exports have more than tripled since 2002, when the U.S. Andean Trade Promotion and Drug Eradication Act (ATPDEA) expanded Andean trade preferences. These years of rapid trade expansion and of free trade agreement negotiations with the United States have brought exports to the forefront in Peru, and many Peruvian businesses continue to join the exporting ranks. The Garcia Administration recognizes the fundamental importance of exports to economic growth, job creation, and poverty reduction. While approval by the U.S. Congress of the PTPA remains the GOP's top trade priority, GOP ministries and the private sector are actively engaged in further opening other markets for Peruvian products. Trade negotiations are underway with the EU, Mexico and several Southeast Asian countries. The GOP's preparations to host APEC in 2008 include an important push to secure trade deals with new partners. POWERS