Diversifying a growing economy
A KEY MEMBER OF THE ANDEAN COMMUNITY AND THE ATPA REGIONAL TRADE AGREEMENT, PERU NEEDS TO DIVERSIFY ITS EXPORT BASE TO IMMUNIZE THE ECONOMY FROM PRICE FLUCTUATIONS

Alfredo Ferrero Deputy Minister for Integration and International Trade Negotiations

Peru’s new government has taken a strongly pro-active stance regarding transnational economic integration, linking the nation first with its immediate neighbors, then on a regional and continental basis, and ultimately as part of a network that spans the entire hemisphere.
According to Deputy Minister for Integration and International Trade Negotiations Alfredo Ferrero, “it is impossible for any country to make progress and create employment unless there is trade. In that respect, Peru’s potential has not yet been fully realized.”
The negotiated settlement of a festering border dispute with Ecuador has helped reactivate the Andean Community trade group and allowed Peru’s goods to access a 100 million-strong market in Bolivia, Colombia, Ecuador and Venezuela. Peru has also concluded an agreement with Chile that progressively reduces and will eventually eliminate tariffs on both countries’ goods.

SHEAR STRENGTH Peru’s leading position in sectors such as textiles, fish meal and gold will enable the country to take full advantage of the ATPA trade agreement, if passed by U.S. Congress.

With its largest trade partner, the United States, the Andean Trade Preference Act, currently up for review by the U.S. congress, allows 6.200 Peruvian products to enter the U.S. at zero tariffs, but unfortunately does not cover key items such as textiles. Consolidating and strengthening all of these arrangements helps lay the groundwork and qualify Peru for a post at the starting gate if the Free Trade Area of the Americas gets off the ground in a few years’ time. As Vice President Raúl Diez Canseco Terry has to acknowledge, “globalization is calling the tune, and we have to dance to it along with everyone else.”

Nevertheless, the vice-president says, there is no getting around the fact Peru has never been much of an export-oriented country. On a per capita basis, its exports amount to barely $240, while for Costa Rica they total $1,800 and in Chile, which has roughly the same population as Peru, $1,040. Mr. Ferrero’s view is that trade involves much more than just commodities and manufactured goods. “It means services, investments, exports imports, transportation, tourism, agriculture, dumping, competition policy, intellectual property rights, market access, dispute resolution, tariffs. And, as such, it is a key part in the configuration of the entire state.”
As the country must rely on its output on primary products, its offer has to be diversified (53% of exports are minerals and oil) to immunize the economy from market distortions and price fluctuations.

“Fish meal, gold and commodities sell themselves. All one has to do is to see that they enjoy fair and equal market access. But there are a number of products that Peru is well placed to develop for the external market. We need a fair deal from our partners, but we also need exportable goods to take advantage of it,” Mr. Ferrero says while noting that Peru produces only 700 of the 6,200 product categories that are entitled under ATPA.
The private business community has been nodding its approval at the professionalism and seriousness of President Toledo’s economic team. The policy guidelines that his administration has presented get a thumbs-up from CONFIEP, the National Federation of Private Industry, though its president, Julio Favre Caranaza, cautions that time will be needed for them to show results. “The worst that could happen is for people’s pent-up frustrations to give rise to unrealistic expectations. But we definitely think that in 2002, the economy can grow 5-6% and by the following year, everything will be in place for a 7-8% steady growth.”