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Cablegate: June Trade, Investment & Aviation Briefs

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FM AMEMBASSY LIMA
TO RUEHC/SECSTATE WASHDC 8988
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RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHC/DEPT OF INTERIOR WASHINGTON DC
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
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UNCLAS SECTION 01 OF 02 LIMA 001183

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

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

SUBJECT: JUNE TRADE, INVESTMENT & AVIATION BRIEFS

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

Trade
-- Peru Pursuing Trade Negotiations in Asia
-- Trade Agreement with China Moves Forward
-- Bilateral Trade Between Peru and India Exceeds $450 million
-- Imports Reach Record Level in May
-- Wal-Mart and Costco Voice Interest in Peruvian Products
-- Exporta Facil Supports Peruvian Exports Not Only in Lima

Investment
-- Yahoo, Peru Specific Portal
-- Alicorp Buys Argentine Business

Aviation
-- Airline Icaro de Ecuador Interested in Peru
-- Aero Condor Fleet Shut Down
End Summary.

Peru Pursuing More Trade Negotiations in Asia
---------------------------------------------
2. Peru and South Korea agreed last September on preliminary themes
in order to initiate negotiations on a trade agreement.
Negotiations are anticipated to begin during the first trimester of
2009. Peru and Hong Kong have begun to explore the possibility of
beginning negotiations on a free trade agreement. Japan is now
considering placing Peru on its list of priority countries for
negotiating trade agreements, having rejected the possibility of a
trade agreement with Peru last year.

Trade Agreement with China Moves Forward
----------------------------------------
3. Peru continues to move forward on its agreement with China.
Sources in the trade ministry say the Chinese are increasingly open
to expanding the scope of the agreement. The GOP has penciled in a
possible signing at the APEC Leaders summit in November by both
Presidents. Chinese Trade Minister Chen Deming assured the
Peruvians that negotiations will move forward as quickly as possible
so both countries will soon benefit from a trade agreement.

Peru-India Trade Exceeds $450 Million
-------------------------------------
4. Bilateral trade between Peru and India already exceeds $450
million a year, and relations between the two nations are gaining
increasing importance, the Indian Ambassador Apuni Armes told the
media. "In general (trade) has quadrupled in recent years and both
Peru and India have been pursuing similar development models," he
stressed. He indicated that there are many companies in India that
have the ability and desire to establish relations with Peru, and
Reliance Industries Limited (RIL) is one of the most interested.
RIL is India's largest private sector enterprise.

Imports Reach Record Level in May
---------------------------------
5. Imports increased 67.3% compared with May 2007. This represents
52 consecutive months of increases in imports to Peru. Increased
consumer demand and decreases of tariff rates by the Government of
Peru fuel the demand for imported products. Raw materials and
intermediary products lead the list of most popular imports for May,
followed by capital goods and construction materials, and then
consumer goods. Despite alarm bells by some economists, Peter
Anders of the Lima Chamber of Commerce pointed out that the type of
products being imported to Peru indicates that this is a result of
increased investment in Peru. Continued investment in Peru brings a
demand for imports such as machinery, raw materials, and production
goods. Ultimately, he said, the result of theseimports will be
greater production for Peru which will help the trade imbalance.

Wal-Mart & Costco Interested in Peruvian Products
--------------------------------------------- ----
6. Wal-Mart is planning a trade visit to Peru in August to discuss
opportunities for purchasing fish products for its supermarkets.
Costco has met with the Peruvian Embassy in Washington to discuss
the purchase of fruit, vegetables, coffee, cacao, and fish products
for sale in its stores.

Exporta Facil Spurs Exports Throughout Peru

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-------------------------------------------
7. SUNAT (Customs Agency) announced that 90% of exports made by
postal service occur via 'Exporta Facil.' In particular small and
medium size businesses are using the program to increase
international sales. Exports under this program which began in July
2007 have reached US$500,000. Exporta Facil is a government
initiative regulated by SUNAT, Ministry of Transportation and
Communication, Ministry of Economy and Finance, Promperu, Serpost
and other institutions. SUNAT noted that Exporta Facil is the
preferred mechanism for businesses far from Lima to export their
products. Besides Lima, exports are being realized from Arequipa,
La Libertad, Lambayeque, Ancash, Puno, Amazonas, Ayacucho, and other
regions under this program.

Yahoo: Peru Specific Portal
---------------------------
8. On June 11, Jose River Front, the VP and General Manager of
Yahoo Hispanoamerica, officially presented its Peru version Yahoo
portal (http://pe.yahoo.com). The portal will provide local
information to its users. Internet users will be able to search the
web through traditional methods with more relevant local information
appearing on the main page, instant messaging, question and answer
page, news, and tools. Currently, Yahoo has local version portals
in Argentina and Mexico. Future portals in Latin America include
Colombia, Chile, and Venezuela.

Alicorp Expands, Buys Argentine Business
----------------------------------------
9. Alicorp (Grupo Romero - Peruvian Company), Peru's biggest wheat
importer and processed food manufacturer and distributor, announced
the purchase of Argentine company The Value Brand Company (TVB).
TVB is the third most important company in Argentina for personal
and home care products. Alicorp purchased TVB for US$65 million.
Sales for TVB reach approximately $100 million. TVB exports its
products to Peru, Bolivia, Chile, Paraguay, and Uruguay. This
purchase follows others made in the region by Alicorp. Last year,
Alicorp purchased an Ecuadorian business, Eskimo. The General
Manager for Alicorp acknowledged that the company is pursuing
business in Central America as well, looking at projects in
Honduras, El Salvador, and Guatemala.

Airline Icaro de Ecuador Interested in Peru
-------------------------------------------
10. The airline company Icaro de Ecuador has expressed interest in
investing in Peru's domestic market. The airline operates small
aircraft in Ecuador. Peruvian Trade & Tourism Minister Mercedes
Araoz told the media that the entrance of foreign airlines into the
domestic market is needed for improved competition and service to
areas that are not being served by Peruvian airlines due to high
fuel costs. Both Aero Condor and Star Peru airlines have announced
suspension of air service to many routes due to high fuel costs.

Aero Condor Flights Shut Down
-----------------------------
11. Recently, Aero Condor (Peruvian airline) announced that the
company would cease operation of its 737 fleet due to high fuel
costs. The following day, the Ministry of Transportation and
Communication (MTC) announced that Aero Condor had been told to
cease operation of the fleet due to numerous incidents involving
mechanical failures. LAN Peru announced on the same day as the MTC
announcement, that the airline will begin routes previously served
by Aero Condor's 737 fleet.
NEALON

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