Identifier
Created
Classification
Origin
09BEIJING1592
2009-06-15 01:19:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Beijing
Cable title:  

Peru-China Free Trade Agreement

Tags:  ETRD EINV EIND PREL EFIN CH PE 
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FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 4502
INFO RUEHOO/CHINA POSTS COLLECTIVE PRIORITY
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RUEHSG/AMEMBASSY SANTIAGO 0292
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UNCLAS SECTION 01 OF 02 BEIJING 001592 

STATE PASS USTR

SIPDIS
SENSITIVE

TAGS: ETRD EINV EIND PREL EFIN CH PE

SUBJECT: Peru-China Free Trade Agreement

UNCLAS SECTION 01 OF 02 BEIJING 001592

STATE PASS USTR

SIPDIS
SENSITIVE

TAGS: ETRD EINV EIND PREL EFIN CH PE

SUBJECT: Peru-China Free Trade Agreement


1. (SBU) Summary. During the late April visit to
China by Peruvian Vice President Giampietri, China
and Peru signed a comprehensive free trade agreement
which covers goods, services and investment and is
expected to go into effect by the end of this year.
Giampietri also promoted Chinese investment in Peru
during his visit. Currently, China's most
significant investment in Peru is in the mining
sector, in which Chinese companies have committed to
invest $7.4 billion over the next 5 years. Peru
might be interested in pursuing a currency swap
agreement with China but has not yet begun
discussions.

The Peru Free Trade Agreement
--------------


2. (U) Peru and China began negotiating a Free Trade
Agreement (FTA) in January 2008 and reached an
agreement in November 2008. After completing legal
reviews of the agreement, Peruvian Vice President
Luis Giampietri signed the agreement in Beijing
April 27th. The FTA is still awaiting ratification
by the Peruvian Congress but Peruvian Emboffs expect
it will be passed by the end of this year.


3. (U) The FTA is China's first comprehensive FTA
with a Latin American country, including goods,
services and investment. (The Chile-China FTA
included only goods). In the agreement, 62 percent
of trade tariffs will be immediately eliminated and
others will be phased out over periods of between 5-
17 years. Peru protected its textile and shoe
industries by obtaining agreement to maintain key
tariffs for up to 17 years. China, in turn,
obtained similar treatment for agricultural and wood
industries products.

Peru curious about currency swap agreement
--------------


4. (SBU) According to Peruvian Emboffs in Beijing,
Peru is looking for additional trade financing and
is considering the option of a currency swap
agreement with China. They are hoping that this
might give them access to more financing but do not
yet fully understand the mechanism and are
researching it.

Looking for more Chinese investment
--------------


5. (U) Chinese investment was also on the Peruvian
Vice President's Beijing agenda. On the second day
of his visit, he attended a presentation of
investment opportunities in Peru at the Chinese
Ministry of Commerce. As part of its privatization
efforts, Peru is offering concessions on airports,
ports and trains. However, there was not much
interest from Chinese companies, who are more keen
on construction projects or natural resources, the
Peruvian emboffs said. The Chinese companies lack
overseas operational experience and are not
interested in building and operating concessions,
they added.

PRC mining companies to invest $7.4 billion
--------------


6. (U) Vice President Giampietri also met with
executives from some of China's top metals and
mining companies already invested in Peru: Shougang
(Capital Iron and Steel),Chinalco (China Aluminum),
Minmetals and Zijing. On May 11, Peru's La
Republica reported that these four companies plan to
invest $7.4 billion in Peru over the next five years.
Many of these investments are financed by China
Development Bank and China's EXIM Bank. EXIM Bank is
planning to open an office in Peru.

Chinese Mining companies improving their image
--------------


BEIJING 00001592 002 OF 002



7. (SBU) The first significant Chinese investment in
Peru was Shougang iron mines venture in 1994.
According to the Peruvian emboffs, Shougang has
consistently had problems with Peru's mining labor
unions and continues to be unpopular with Peruvians.
Other Chinese companies have learned from Shougang's
experience and are now more conscious of social
responsibility and environmental issues, helping to
slowly improve China's image in Peru.

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