Identifier
Created
Classification
Origin
07LIMA826
2007-03-19 23:18:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Lima
Cable title:  

PERU'S FERVOUR FOR GLOBAL TRADE MARCHES FORWARD

Tags:  ETRD ECIN EINV APECO PE BL CA CI CH CO EC 
pdf how-to read a cable
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RUEHBS/USEU BRUSSELS
UNCLAS LIMA 000826 

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ETRD ECIN EINV APECO PE BL CA CI CH CO EC
IC, LS, MX, NO, SN, SZ, TH, VE
SUBJECT: PERU'S FERVOUR FOR GLOBAL TRADE MARCHES FORWARD

REF: 06 LIMA 3384

UNCLAS LIMA 000826

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ETRD ECIN EINV APECO PE BL CA CI CH CO EC
IC, LS, MX, NO, SN, SZ, TH, VE
SUBJECT: PERU'S FERVOUR FOR GLOBAL TRADE MARCHES FORWARD

REF: 06 LIMA 3384


1. (SBU) SUMMARY: While Peru waits for the US Congress to
consider the U.S.-Peru Trade Promotion Agreement (PTPA),the
GOP continues to discuss and engage in trade negotiations
with numerous other countries. Peru recently completed an
expanded trade agreement with Chile in October 2006; will
finish negotiations with Singapore within a month; has
ongoing talks with Mexico, the European Free Trade
Association (EFTA) countries, and Thailand; and will start
negotiations with Canada this month. Peru has formed a group
with China to study the feasibility of an FTA. More
complicated is Peru's strong interest in an agreement with
the European Union; the EU's requirement that an agreement be
with the Andean Community and the Community's own
difficulties in reaching consensus have slowed progress
considerably. Trade agreement negotiations under President
Garcia, as with the previous Toledo Administration,
demonstrate Peru's enthusiasm and commitment to expanding
global trade as an engine for domestic economic development.
End Summary.

USING APEC TO EXPAND IN ASIA
--------------

2. (SBU) Peru expects to conclude a trade agreement with
Singapore by the end of March, according to Vice Minister
Luis Alonso Garcia. The only remaining hurdle is the chapter
on services. He told us recently that the GOP's strategy was
to establish a "hub" in Asia with a country that it believes
is a trade leader and sets an example for a competitive
market that has benefited from the transfer of technology.
Elsewhere in Southeast Asia, the GOP is negotiating a
tariff-only agreement with Thailand to liberalize duties on
75 percent of the goods within both countries' schedules.
The Thai agreement is currently in "stand by" status as the

GOP awaits a response from the Thais. We were told privately
by ministry contacts that the changes in the Thai government
had delayed their talks. With Peru hosting the Asia-Pacific
Economic Cooperation (APEC) forum in 2008, the government has
committed itself to using APEC to expand its market access to
as many of the 20 other member economies as possible.

OFFERING A BROADER BASKET OF GOODS TO CHINA
--------------

3. (U) With China as Peru's number two trading partner, an
agreement with the PRC has been touted by many in and outside
of Peru's government. The GOP and China established a joint
study group to look at the feasibility of an FTA. Trade
officials hope to start the actual negotiations in 2008 and
to have made significant progress by the November 2008 APEC
Leaders' meeting. In 2006, Peruvian exports to China totaled
$2.27 billion, an increase of 21 percent from the previous
year. Though the impact of Peruvian exports in China is
minimal and primarily consists of basic minerals and metals
such as copper, zinc, and molybdenum, the GOP wants to expand
its mix of exports to China by exporting value-added products
such as off-season fruits and vegetables. In this regard,
Peru is looking towards Chile as a model, as the Chileans
already have an FTA with China. Peru recently started
exporting table grapes to China, but the grapes carry a 16
percent tariff, while Chilean grapes enter China tariff-free.
Peru wants to compete with Chile on pure market terms -- a
zero percent tariff basis -- in order to gain a larger market
share in China.

CANADA COMING UP
--------------

4. (SBU) In February, Canadian and Peruvian negotiators
agreed to move forward with FTA negotiations, and Vice
Minister of Trade Luis Alonso Garcia told us that
negotiations would begin in the coming weeks. Last year, the
Canadians had told us that their original strategy had been
to negotiate with the Andean Community (CAN) as a bloc.
However, the CAN's difficulties in agreeing internally on
even such simple things as a common external tariff presented
considerable obstacles. Garcia told us that the GOP fully
expected the FTA with Canada to be completed within six
months. Though the Canadians want to model an agreement with
Peru on the PTPA with the USG, the Peruvians told us that
they expect talks with the Canadians to be tougher than with
the United States.

LANDING LATIN AMERICAN PARTNERS
--------------

5. (U) Peru is pursuing an agreement with Mexico but
anticipates that this will take longer as the Mexican
government tends to use its market size as a bargaining chip
with the GOP. As previously reported (see reftel),the GOP
negotiated tariff reductions with Chile in 1998 and then
conducted six rounds of trade talks over 2005 and 2006 to
broaden the previous agreement into a nearly full-fledged
trade agreement. This agreement, styled as an "Economic
Complementation Agreement" (or ACE in Spanish) represents
further evidence of Peru's willingness to engage economically
with its southern neighbor, with whom it has had a history of
rivalry.

REACHING ACROSS THE ATLANTIC
--------------

6. (SBU) The GOP is also negotiating with the EFTA --
Iceland, Liechtenstein, Norway, and Switzerland. Besides
broadening Peru's access to European markets, trade with
these countries would pair Peru with nations that are highly
ranked on measures of wealth, education, and heath. As noted
by Eduardo Ferreyros, the Trade Ministry's General FTA
Coordinator, completing agreements with higher developed
countries is a more dynamic strategy for Peru in terms of
attracting investment, technology, and business practices.


7. (SBU) The European Union (EU) and the Andean Community
(CAN) met in early March to begin discussions on a trade
agreement. According to Cristian Espinosa, General Director
of CAN, the EU prefers a trade bloc to trade bloc agreement
over deals with individual CAN countries (current members are
Peru, Colombia, Bolivia, and Ecuador),and is willing to wait
for CAN members to establish common negotiating positions.
The CAN countries have widely diverging external tariffs,
with Colombian tariffs higher than most.

THE ANDEANS: CAN THEY GET TO YES?
--------------

8. (SBU) Progress for such an agreement is moving at a slow
pace due to current difficulties among the members of CAN in
getting to consensus on trade. EU Mission contacts in Lima
have admitted to us privately that they knew it would be
difficult for CAN to move forward on an agreement with the
EU, given the divergent trade policy practices. But there
are other factors as well and the problems may, in fact, be
deeper, given the evolution in Ecuador and Bolivia's
politics. High-level Foreign Ministry contacts report
anecdotal evidence that both Ecuador and Bolivia have begun
to express distinctly different philosophies on trade and the
value of open economies in recent meetings, putting them at
odds with Peru's trade strategy. While in Europe during this
month, Peru's Foreign Minister, Jose Antonio Garcia Belaunde,
noted publicly that Bolivia wants to raise tariffs on imports
and that Bolivia and Ecuador both expressed their preference
for only a limited agreement with the EU.

COMMENT
--------------

9. (SBU) Peru is reaching out to Latin neighbors, NAFTA
partners, and APEC partners to expand trade and attract
investment. The GOP's active engagement in free trade
negotiations with multiple partners clearly indicates the
country's continued commitment to market integration with the
global economy, and an element of policy continuation from
the Toledo Administration. The government views its trade
strategy as (1) an opportunity for increased economic growth
and (2) a way to engage with more developed countries that
will stimulate domestic economic and social reforms. Last
year's debate over the PTPA served to focus interest in Peru
on the potential for small and medium-sized exporters as one
way to deliver the Garcia administration's goals on poverty
reduction. Through this strategy, and others, the government
continues to tout exports and trade as opportunities to
reduce poverty by encouraging entrepreneurship among lower
classes, reducing bureaucracy, and imposing transparency and
the rule of law.
STRUBLE