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Cablegate: Peru Trade and Investment Briefs

VZCZCXRO3753
RR RUEHAO RUEHCD RUEHGA RUEHGD RUEHGR RUEHHA RUEHHO RUEHMC RUEHNG
RUEHNL RUEHQU RUEHRD RUEHRG RUEHRS RUEHTM RUEHVC
DE RUEHPE #0693/01 1121757
ZNR UUUUU ZZH
R 211757Z APR 08
FM AMEMBASSY LIMA
TO RUEHC/SECSTATE WASHDC 8460
INFO RUEHWH/WESTERN HEMISPHERIC AFFAIRS DIPLOMATIC POSTS
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHC/DEPT OF INTERIOR WASHINGTON DC
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 03 LIMA 000693

SIPDIS

SIPDIS

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

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

SUBJECT: PERU TRADE AND INVESTMENT BRIEFS

SUMMARY
1. This is an update on the following trade and
investment news from Peru:

-- Imports Increase 30% First Two Months of 2008
-- Peru Reports $538 Million Trade Surplus for
February
-- 2007 Agriculture Exports Remain High
-- Peru Investment Grade Follow On
-- Strike, Environmental Challenges at Doe Run
Peru
-- Despite Politics, Chileans Propose More
Investment in Peru
-- Peruvians Interested in Purchasing North
American Stocks
-- Port Concessions Could Result in Significant
Investment
-- PTPA Agriculture Assistance Will Reach $1.2
Billion

IMPORTS INCREASE 30% FIRST TWO MONTHS OF 2008
2. Peru's imports are up 30.2% from the same
period last year, mostly due to strong consumer
demand. For January and February, capital goods
were up 33.8%, consumer goods were up 42.13% and
durable goods also showed an increase. The
number one country of origin is the U.S. with
18.9% of the import volume, or $264.4 million in
February alone. Next is China with 16.4% or
$214 million followed by Japan, Mexico, and
Colombia. The Korean car company Kia reported a
93% increase in imports in the first trimester
due to a 71% increase in sales.

PERU REPORTS $538 MILLION TRADE SURPLUS FOR
FEBRUARY
3. Peru reported a February net trade surplus of
$538 million as a result of larger than expected
exports earnings due to higher prices and
increased production, according to the Central
Bank. Exports grew 26.4% from the same month
last year to $2.411 billion, while imports
totaled $1.873, resulting in a 37.2% surplus.
Traditional exports were up 26.3% to $1.840
billion owing mostly to increased sales in
copper (up 57.5%) and gold (up 75.4%). Non-
traditional exports grew 27.6% to $559 million
from the same time last year driven primarily by
agriculture, fisheries, and chemicals markets.

2007 AGRICULTURE EXPORTS REMAIN HIGH
4. An increase in prices and high production
levels led to record agricultural exports,
totaling $2.167 billion in 2007, up 5% from
2006. Production levels were seen on average to
have increased 3.1%, with a 15% increase in
sugar, and an 8% increase in asparagus. The top
exports in rank order were: asparagus, paprika,
artichokes, grapes, avocado, and citrus.
Predicted climactic conditions indicate that
2008 exports will be even higher in production
and will benefit from an opening of new markets
in China, Singapore and Thailand. Peru is the
number one exporter of fresh asparagus to the
United States and has become number one in
preserved artichokes, recently overtaking Spain.

PERU INVESTMENT GRADE FOLLOW ON
5. Despite the congratulatory mood around the
Fitch Investment recent rating of Peru as
investment grade BBB minus (stable), observers
say that markets had largely factored in the
upgrade. Peruvian assets showed some
improvement, and additional investment flows
into Peru in terms of both FDI and portfolio
inflows will now increase marginally.
Nevertheless, market observers say increases
will be more substantial once an additional
investment upgrade is received from one of the
major raters, such as Moody's or Standard &

LIMA 00000693 002 OF 003


Poor's. Fitch made the announcement based on
strong improvement in Peru's fiscal and external
solvency ratios, which helped counterbalance
credit weakness, as well as political and social
risks. Standard & Poors and Moody's rate Peru
at one and two notches below investment grade
respectively.

STRIKE, ENVIRONMENTAL CHALLENGES AT DOE RUN PERU
6. The U.S.-owned Doe Run metallurgical plant
in La Oroya is operating at partial strength due
to a week-long strike by most of its 1,720
workers, who are demanding shorter hours and
more pay. Unrelated, the Peruvian subsidiary
also recently lost its environmental
certification from German-based company TUV
Rheinland. The Peruvian government recently
gave Doe Run until next year to complete an
emergency clean-up plan to alleviate toxic
emissions near the smelter. The company was
recently sued in U.S. federal courts for the
lead poisoning of 150 Peruvian children living
near the plant.

DESPITE POLITICS, CHILEANS PROPOSE MORE
INVESTMENT IN PERU
7. Despite the current bilateral dispute over
maritime borders, Chilean investors remain very
interested in investing more in Peru. The
president of the Chilean Bank and Financial
Investment Association stated Chilean investors
are putting pressure on their Congress to widen
its commercial agreement with Peru and approve
an FTA immediately in order to invest
significantly more. Peru is the third largest
recipient of Chilean investment in the world, a
total of $5.575 billion from 1990-2007,
currently providing for over 40,000 Peruvian
jobs. Chilean investors currently dominate the
retail sector. This time Chilean investors are
reportedly looking seriously at the energy
sector.

PERUVIANS INTERESTED IN BUYING NORTH AMERICAN
STOCKS
8. The president of the Central Stock Registry
predicted that Peruvian purchases of U.S. and
Canadian stocks will increase $122.8 million in
the first quarter of 2008 (up 147% from the same
time last year), 95% in stocks and 5% in bonds.
He reported that sales of Peruvian stock to
foreign investors this first quarter totaled
$196.8 million (up 29%), 86% in stocks and 14%
in bonds. Most of the stocks purchased in both
directions were in the mining,
telecommunications, hydrocarbon, and banking and
financial sectors.

PORT CONCESSIONS COULD RESULT IN SIGNIFICANT
INVESTMENT
9. Peru's port concessions could result in $411
million of investment in Peru's seven ports.
The ports include Paita, Salaverry, Chimbote,
Ilo, San Martin, Iquitos, Pucallpa, and
Yurimaguas. Peru's Investment Promotion Agency
(ProInversion) stated that it will use the APEC
and EU summits to attract investors from
countries such as Singapore who has already
expressed interest. David Lemor, the Director
of Peru's Investment Promotion Agency
(ProInversion), voiced concern that the Peruvian
Congress will weaken potential port concessions
with legislation to replace national with
regional port authorities and other changes to
the National Port System Law. On April 9th, the
ports were shut down for two hours due to
striking workers supporting the legislation.
Peru's main port of Callao, outside Lima,
remains troubled by inefficiencies. In June
2006, Dubai Ports World (DPW) acquired a 30-year

LIMA 00000693 003 OF 003


concession to develop and operate a new terminal
at Callao.

PTPA AGRICULTURE ASSISTANCE WILL REACH $1.2
BILLION
10. The Minister of Agriclture announced $1.2
billion investment over the next five years into
two programs designed to assist with U.S.-Peru
Trade Promotion Agreement (PTPA) implementation.
The competitiveness enhancement plan ($700
million) will aim to create economies of scale
by the formation of associations with direct
support for innovation, technology, and
agricultural reconstruction. The agro-rural
program ($500 million) will work to modernize
the poorest agricultural sectors, centralizing
the administration of rural development
activities and projects creating a single office
for all related services. It will have an
emphasis on public-private partnerships with a
focus on regional economic development. There
will be further details in the near future.
MCKINLEY

© Scoop Media

 
 
 
 
 
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