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ZNR UUUUU ZZH
R 021900Z JUN 08
FM AMEMBASSY LIMA
TO RUEHC/SECSTATE WASHDC 8747
INFO RUEHWH/WESTERN HEMISPHERIC AFFAIRS DIPL 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 000956 
 
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 - MAY 2008 
 
 
SUMMARY 
------- 
¶1. (U) This is an update on the following trade and investment news 
from Peru: 
 
TRADE 
-- Peru signs FTAs with Canada and Singapore 
-- Peru-China FTA May Be Completed in Two More Rounds 
-- Peru and Chile Moving Closer to Finalizing FTA 
-- Imports Registered a 47% Growth in April 
-- Overall Increases in Textile Exports from 2007 
-- Exports of Fish Products Grew 15.9% in March 
-- Exports of National Software Grew 25% This Year 
-- 18-25 Year Olds Buying More Electronics 
 
INVESTMENT 
-- Peru Attracts New Spanish Investment 
-- French Businesses Look to Peru, Not Just Lima 
-- Brazil and Peru Partner on Hydro electrical Project 
-- Mitsui of Japan Plans to Construct Desalinization Plant 
-- French, Austrian, and Czechs Interested in Water 
 
 
Peru Signs FTAs with Canada and Singapore 
----------------------------------------- 
¶2. (U) On May 30, 2008, Peru and Canada signed a trade agreement 
after ten months of negotiation.  The Canada-Peru FTA will 
immediately eliminate tariffs on 97 percent of Peruvian exports to 
Canada, with the remaining tariffs to be phased out over three to 
seven years.  The deal also eliminates tariffs on 94 percent of 
Canadian exports to Peru, with the rest to be lifted over a period 
of five to 10 years.  Peru's principal exports to Canada are gold, 
copper, asparagus and fishmeal, while its major imports are grains, 
machinery, electrical equipment, leguminous vegetables and paper. 
Peru and Canada also signed a cooperation agreement on labor and an 
agreement on the environment. 
 
¶3. (U) On May, 30, 2008, Peru and Singapore signed a trade 
agreement.  Negotiations between the two countries were completed on 
August 29, 2007.  The agreement enables Peruvian products to enter 
Singapore duty free, as well as the rest of South East Asia, given 
that Singapore holds one of the central ports for products entering 
the region.  President Alan Garcia remarked that this agreement will 
test the capacity and ability of Peruvian industry to export its 
diverse products to the Asian market. 
 
Peru-China FTA May Be Completed in Two More Rounds 
--------------------------------------------- ----- 
¶4. (U) The Minister of Trade and Tourism, Mercedes Araoz, announced 
that Peru may be able to complete negotiations on a free trade 
agreement with China with just two more rounds.  She noted that the 
two parties need only to clarify a few important aspects of the 
agreement, primarily customs and tariff issues.  Vice-Minister of 
Trade and Tourism Eduardo Ferreyros said Peru had introduced a 
customs cooperation agreement into the discussions with China during 
the third round of negotiations held in Beijing last week. The next 
round of negotiations will be held in Peru from June 28 to July 3. 
 
Peru and Chile Moving Closer to Finalizing FTA 
--------------------------------------------- - 
¶5. (U) The Minister of Trade and Tourism, Mercedes Araoz, welcomed 
comments made by the President of Chile, Michelle Bachelet regarding 
the trade cooperation agreement between Chile and Peru.  The 
agreement, which is short of a full FTA, goes by ACE (acuerdo de 
complementacion economica in Spanish) or economic facilitation 
agreement.  During an exclusive interview with CPN radio, the 
Chilean President said she awaits the quick passage of the agreement 
by her Senate.  Further action on the agreement between Peru and 
Chile is dependent on action by the Chilean Congress.  The Chilean 
Senate, in a pique over a border dispute, recently removed the 
agreement from its 'fast track' procedures. 
 
Imports Registered a 47% Growth in April 
---------------------------------------- 
¶6. (U) In April, imports totaled US$2,265 million, an amount that 
represents a 47% growth from the same period lst year.  SUNAT 
announced that this represents 51 months of consecutive positive 
growth in imports.  Capital goods and construction materials 
represented the leading import products at 61.7%, followed by 
consumer goods at 44.1%, and raw materials and intermediate products 
 
LIMA 00000956  002 OF 003 
 
 
at 39.2%.  The United States was the leading country of origin for 
imports for the month, followed by China, Ecuador, Brazil, and 
Argentina. 
 
Overall Increases in Textile Exports from 2007 
--------------------------------------------- - 
¶7. (U) Peru reports increased diversification in exports of the 
textile sector in the first trimester of the year, according to 
ComexPeru, the Society for External Business of Peru.  Overall, 
ComexPeru reported sales of US$461.59 million in the first trimester 
of the year, a 34.53% increase from the same period in 2007. 
 
Exports of Fish Products Grew 15.9% in March 
-------------------------------------------- 
¶8. (U) The Minister of Production, Rafael Rey, announced that 
exports of fish products increased by 15.9% in March over the same 
period in 2007.  This rise is a result of a 20.2% increase in volume 
of exports for fish meal. 
 
Exports of National Software Grew 25% This Year 
--------------------------------------------- -- 
¶9. (U) Peruvian exports of software reached US$ 31.25 million this 
year, a 25% increase from last year.  The General Manager of Graa y 
Montero Digital (GMD) noted that software resulted in the largest 
increase with services representing only a small percentage of this 
increase.  He remarked that the private and public sector are 
working together to promote the national software industry abroad. 
The General Manager noted that Chile, Mexico, Colombia, and 
Argentina all have a law that promotes this technology industry, 
whereas Peru does not. 
 
18-25 Year Olds Buying More Electronics 
--------------------------------------- 
¶10. (U) 18-25 year olds represent a new consumer segment with 
growing strength in purchasing electric appliances and electronics. 
A study, conducted by Arellano Marketing, revealed that 18-25 year 
olds represent 29% of the consumer market for electronic appliances 
in Lima.  This group has a rising standard of living and an 
increased presence in the labor force.  Top products purchased by 
18-25 year olds include: (45%) Small electronics such as MP3, MP4, 
IPOD, calculators, PDAs; (28%) Video electronics such as DVD, Home 
Theaters, Televisions; (19%) small electrical appliances such as 
microwave ovens, vacuums, irons; (18%) audio equipment; (9%) 
cellular telephones; (7%) cameras. 
 
Peru Attracts New Spanish Investment 
------------------------------------ 
¶11. (U) The top two sources of Foreign Direct Investment (FDI) in 
Peru are Spain (27%; $4,392 million) and the United States (18%; 
$2,883 million).  The Embassy of Spain announced in early May that 
at least ten new large and medium-sized Spanish businesses plan to 
invest in Peru this year.  Interests focus on the following sectors: 
sanitation, infrastructure for ports and airports, consultant and 
other services, hotels, hospitals, housing, energy, and agricultural 
exports.  The new investment will likely raise Spanish FDI to 
US$4,622 million. 
 
French Businesses Look to Peru, Not Just Lima 
--------------------------------------------- 
¶12. (U) The French Embassy in Peru announced that the French 
companies Suez Water and Veolia of France are interested in 
investing in concessionary projects for potable water in Huachipa, 
and in water services in La Chira and Taboada.  In the last four 
years the presence of French companies in Peru has increased by 50%. 
 The embassy cited Peru's economic development as the investment 
attraction for French companies. 
 
Brazil and Peru Partner on Hydro electrical Project 
--------------------------------------------- ------ 
¶13. (U) Brazil has negotiated the construction of 15 Hydro 
electrical plants in Peru.  Peru and Brazil have reached agreement 
on the construction of a first plant with future plans for the 
construction of 14 additional plants.  All of the energy created by 
the plants will be destined for Brazil. 
 
Mitsui of Japan to Construct Desalinization Plant 
--------------------------------------------- ---- 
¶14. (U) Mitsui of Japan plans to construct a desalinization plant in 
Chilca, south of Lima.  Next week the Japanese company will present 
its final proposal to the Ministry of Housing, Construction, and 
 
LIMA 00000956  003 OF 003 
 
 
Sanitation.  Mitsui has formed a consortium with several Korean 
businesses to develop this project.  The company is evaluating other 
possibilities for private investment in water plants for other 
regions in Peru including, Iquitos, Cusco, and Puno. 
 
French, Austrian, and Czechs Interested in Water 
--------------------------------------------- --- 
¶15. (U) The European Union-Latin American Caribbean Summit held in 
Lima during mid-May resulted in an increased interest by European 
investors in Peru.   French, Austrian, and Czech businesses have all 
expressed interest to Peruvian government officials on investing in 
the construction of water treatment plants in Peru.