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Cablegate: January Trade and Investment Brief

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SUBJECT: January Trade and Investment Brief

SUMMARY

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

Trade

-- Peru's Free Trade Agreement with S. Korea

-- Entry into Force of Peru-China Agreement Delayed

-- The Peru-EU Negotiations

-- Negotiations with Japan Remain Complicated

-- India and Peru Talk Possible Free Trade Agreement

Investment

-- Various Airlines Looking to Enter Peruvian Market

-- Best Western to Open Its First Premier Hotel in Peru

TRADE

Peru's Free Trade Agreement with S. Korea

-----------------------------------------

In Washington, DC, between January 14-15, Peru and S. Korea held
their fifth round of free trade agreement negotiations. A sixth
round of negotiations has been scheduled beginning February 24 in
Lima. Currently, 8,800 Peruvian products will enter the Korean
market duty-free, which represents 85% of the 11,000 products Peru
wanted included in the agreement. However, in the agro-industry
sector the agreement includes only 25%, representing 379 products.
The duty-free products include coffee, sugar, and tomato paste.
Asparagus and avocado will become duty-free after three to five
years. Within ten to sixteen years, eggs, flowers, artichokes,
strawberries, mangoes, and pork will become duty free. Oranges and
onions have been excluded. While Peru continues to push for
greater access for agricultural and fish products, S. Korea wants
better access for its vehicle exports.

Entry into Force of Peru-China Agreement Delayed

--------------------------------------------- ---

The Peru-China Free Trade Agreement was scheduled to enter into
force on January 15. On January 13, China asked for a delay.
China cited an internal digitalization project of its economic
sector as the reason for the requested postponement. Once the
agreement enters into fore, 83.5% of Peruvian products will enter
China duty-free. No new date has been announced for entry into
force.

The Peru-EU Negotiations

------------------------

The eighth round of negotiations between Peru, Colombia, and the EU
occurred in Lima from January 18-22. The Minister of Foreign
Affairs, Jose Antonio Garcia Belaunde, hopes Peru and the EU will
be able to sign the agreement in May during the European Union -
Latin America Caribbean Summit. President Garcia announced he will
attend the summit in Spain. Remaining issues under negotiations
include drawbacks, market access, rules of origin, services,
intellectual property, commercial disputes, commerce and
sustainable development. The ninth round of negotiations will be

held in March in Brussels.

Negotiations with Japan Remain Complicated

------------------------------------------

Japan continues to exclude more than 1,000 Peruvian products from
the agreement and to push for more access for Japanese automobiles.
A new round of negotiations will be held in February. Peru is
looking to close the negotiation phase, but is not prepared at this
time to accept the exclusion of such a large number of its
products.

India and Peru Talk Possible Free Trade Agreement

--------------------------------------------- ----

The visiting Indian Minister of External Relations voiced his
country's interest in investment opportunities in Peru and
exploring the possibility for a free trade agreement. Particular
sectors of interest for investment include hydrocarbons, mining,
pharmaceutical products, agriculture, and information technology.
The Peruvian Minister of External Relations responded that Peru has
not yet made a determination as to whether they will pursue
negotiations with India given their current focus on concluding
pending agreements with Japan, Korea, and the EU.

INVESTMENT

Various Airlines Looking to Enter Peruvian Market

--------------------------------------------- ----

Air Europe presented to the Peruvian Director General for Civil
Aviation (DGAC) a request to open a direct route between Madrid and
Lima. Air Europe plans to operate flights three times a week with
Airbus aircraft A330 (capacity 294 passengers). The DGAC has 90
days to make a decision on whether to grant Air Europe
authorization for the flights. Other airlines, such as, the US
carrier Jet Blue and Argentinean carrier Aerolineas Argentinas,
have indicated their interest in operating international and
domestic flights in Peru. Currently, Chilean Lan Airlines
dominates the domestic market in Peru.

Best Western to Open Its First Premier Hotel in Peru

--------------------------------------------- -------

In November, Best Western will open its first Premier (five star)
hotel in Peru. This represents Best Western's second Premier hotel
in Latin America. The $15 million dollar investment will include a
hotel with 12 bungalows, 2 Presidential Suites, 90 suites and 6
duplexes located south of Lima in Sarapampa, Canete. Construction
on the project began last September. The hotel complex will also
include restaurants, a spa, a water sports arena, and a convention
center.
McKinley

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