OCTOBER TRADE AND INVESTMENT BRIEFS

UNCLAS SECTION 01 OF 02 LIMA 001742

SIPDIS

COMMERCE FOR 4331/MAC/WH/MCAMERON
TREASURY FOR MEWENS
USTR FOR BHARMAN AND MCARRILLO

E.O. 12958: N/A
TAGS: ETRD ECON EFIN USTR PE

SUBJECT: OCTOBER TRADE AND INVESTMENT BRIEFS

SUMMARY:
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1. (U) This is an update on the following trade and investment news
from Peru:
Trade
-- Update on Peru-China Free Trade Agreement Negotiations
-- Peru-EFTA FTA Negotiations Concluded
-- Export Growth in September - The Lowest Growth in Six Years
-- Exports of Fruits and Vegetables Mostly Unaffected
-- Export of Timber Increases from 2007 Levels
-- Mango Exports Enter New Markets

Investment
-- More Vehicles from China
-- Five Ecuadorian Companies to Invest in Peru
-- Seattle-Based Company to Invest in Peruvian Real Estate
-- American Express Launches Corporate Card in Peru
-- More Telecom Options from Brazil and Chile


UPDATE ON PERU-CHINA FREE TRADE AGREEMENT NEGOTIATIONS
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2. (U) On October 6, representatives of the Ministry of Trade and
Tourism (Mincetur) met with private corporations to seek their
support for the trade agreement with China. The meeting was in
preparation for the VI round of negotiations held in Beijing. The
Vice-Minister for Industry Carlos Ferraro attended along with other
Peruvian officials. The primary issue under negotiation involved
Peru's proposal to exclude 13.89 percent of sensitive products
(mostly textile and clothing items),while China would prefer no
more than 10% of these products to be excluded. Negotiations held
from October 13-20 did not result in an agreement. The next
negotiations will take place via teleconferencing and, if necessary,
a small round in early November. The goal is still to have an
agreement to sign during the APEC Summit in Lima.

PERU-EFTA FTA NEGOTIATIONS CONCLUDED
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3. (U) Minister of Trade and Tourism Mercedes Araoz announced that
Peru concluded negotiations for a free-trade accord with the
European Free Trade Association (EFTA),Peru will eliminate tariffs
on trade with EFTA member states Iceland, Liechtenstein, Norway and
Switzerland. There is no timetable for signing.

EXPORT GROWTH IN SEPTEMBER -- THE LOWEST GROWTH IN SIX YEARS
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4. (U) In September, foreign sales grew by only 4.2% -- the lowest
growth rate since July 2002. Traditional exports fell 1.6%,
primarily from the decline in mineral prices and fish products.
Nontraditional exports continued to show a strong increase at 23.3%.
The textile and clothing sector increased 3% despite a decrease in
sales to the United States and Venezuela. Between January and
September, the European Union was the principal destination for
nontraditional agrarian products with a 34.2% increase over the same
period last year.

EXPORTS OF FRUITS AND VEGETABLES MOSTLY UNAFFECTED
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5. (U) The global financial crisis has not seriously affected
exports of fruits and vegetables from Peru. The Vice-President for
the Development of Global Business at the Produce Marketing
Association (PMA) noted that during a financial crisis people tend
to eat at home more often and therefore supermarket products do not
suffer the same decrease in demand.

EXPORT OF TIMBER INCREASES FROM 2007 LEVEL
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6. (U) The Peruvian timber industry increased its exports by 11.26%
in the first eight months of the year to U.S. $ 152.20 billion, with
Mexico and China being the main destinations, according to the
Commission for the Promotion of Peruvian Export and Tourism
(PromPeru). The figure exceeds the $ 136.8 billion recorded between
January and August 2007. Bozovich Timber firms, Ucayali Industrial,
Wood and Vulcano Consortium Lumberjack remain the leaders in this
export sector, mainly due to their manufacture of products with
higher added value such as finished floors, home furnishings, doors,
and plywood.

MANGO EXPORTS ENTER NEW MARKETS
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7. (U) Exports of mangos increased 70% from January to August 2008.
Three countries have joined the list of export destinations,
increasing the number from 26 to 29 over the same period last year.
The United States remains the primary destination for mango exports,
followed by the United Kingdom and Canada.

MORE VEHICLES FROM CHINA
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8. (U) The General Manager of Chinese car manufacturer GNV Lifan in
Peru, Augusto Bezada Alencastre, announced that the company has sold
300 Chinese vehicles since March and will import 480 additional
ones. Lifan has a strategic alliance with the Peruvian company
Group Altos Andes, which plans a large expansion in South America.
Since September, imports of Chinese vehicles by GNV Lifan have
surpassed all their imports in 2007.

FIVE ECUADORIAN COMPANIES TO INVEST IN PERU
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9. (U) Over the past year, ten Ecuadorian companies have begun
operating in Peru. Recently, the Chamber of Commerce for
Peruvian-Ecuadorian Integration announced that an additional five
companies are interested in operations in Peru. Additionally,
two-to-three micro-enterprise banks have sought permits from the
Superintendent of Banking (SBS) to operate in Peru. Many believe
the Ecuadorian businesses are moving to Peru to take advantage of
the benefits of the free trade agreement with the US. The
Ecuadorian businesses are involved in the textile, agricultural,
construction and oil sectors. The Ecuadorian companies plan
investments in Peru reaching approximately $ 60 billion this year,
but this figure could rise as high as U.S. $ 73 billion.

SEATTLE BASED COMPANY TO INVEST IN PREUVIAN REAL ESTATE
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10. (U) The Executive Director of NDG Investment Group, Jose Nio de
Guzman, (NDG is an investment group based in Seattle that focuses on
real estate development in emerging countries) announced plans to
invest U.S. $ 1,240 billion in the Peruvian property sector over the
next five years. The investment breakdown is 38% in residential
real estate, 16% in offices, 15% in hotels and 31% in urban
development and renovation projects. The directors of the
investment group believe that the financial crisis in the United
States has not slowed the growth of the real estate sector in Peru,
but estimate that there will be a reshuffling of competitors, mainly
affecting businesses with less financial backing.

AMERICAN EXPRESS LAUNCHES CORPORATE CARD IN PERU
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11. (U) American Express introduced the Corporate Meeting Card, a
new product that allows corporate customers of American Express to
more effectively manage budgets and expenses of its meetings,
conferences and events with a single payment instrument. Gunther
Bright, Senior Vice President and General Manager of the Global
Client Group, stressed that this new tool will generate savings in
cost management procedures.

MORE TELECOM OPTIONS FROM BRAZIL AND CHILE
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12. (U) The Brazilian company Telemar-Brasil and Chilean company
Entel de Chile have both voiced interest in providing
telecommunication services in Peru. Currently, Telefonica Moviles,
America Movil, and Nextel offer service in Peru.