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DE RUEHPE #1813/01 3231524
ZNR UUUUU ZZH
R 181524Z NOV 08
FM AMEMBASSY LIMA
TO RUEHC/SECSTATE WASHDC 9627
INFO RUEHAC/AMEMBASSY ASUNCION 2077
RUEHBO/AMEMBASSY BOGOTA 6149
RUEHBR/AMEMBASSY BRASILIA 7991
RUEHBU/AMEMBASSY BUENOS AIRES 3543
RUEHCV/AMEMBASSY CARACAS 1283
RUEHMN/AMEMBASSY MONTEVIDEO 9630
RUEHQT/AMEMBASSY QUITO 2186
RUEHSG/AMEMBASSY SANTIAGO 2067
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/USDOC WASHDC

UNCLAS LIMA 001813 
 
SIPDIS 
 
PLEASE PASS TO USTR/GBLUE; EB/TPP/BTA 
 
E.O. 12958: N/A 
TAGS: ASEC ECON EINV PGOV
 
SUBJECT: PERU NATIONAL TRADE ESTIMATE REPORT 2009 
 
REF: SECSTATE 88447 
 
¶1. (U) In response to State 88447, Embassy Lima reports the 
following update for its National Trade Estimate Report.  This 
report has also been sent as a Word document with track changes to 
USTR by email. 
 
¶2. (U) TRADE SUMMARY 
 
The 2008 data is current as of August 2008.  The U.S. goods trade 
deficit with Peru was $327 million, a decrease from $1.1 billion in 
¶2007.   U.S. goods exports in 2008 were $4.3 billion, up from $4.1 
billion in 2007. Corresponding U.S. imports from Peru were $4.0 
billion in 2008, a decrease from $5.2 billion in 2007.  Peru is 
currently the 40th largest export market for U.S. goods. 
 
The stock of U.S. foreign direct investment (FDI) in Peru was $6.8 
billion in 2007 (latest data available), up from $5.0 billion in 
¶2006. U.S. FDI in Peru is concentrated largely in the mining sector. 
 
 
¶3. (U) UNITED STATES - PERU TRADE PROMOTION AGREEMENT (PTPA) 
 
The United States and Peru signed the United States-Peru Trade 
Promotion Agreement (U.S.-Peru TPA) on April 12, 2006. The Peruvian 
Congress ratified the Agreement in June 2006, and a protocol of 
amendment in June 2007. On December 14, 2007, President Bush signed 
the United States-Peru Trade Promotion Agreement Implementation Act. 
The Agreement will enter into force after Peru has taken the 
necessary steps to implement its obligations. 
 
¶4. (U) IMPORT POLICIES 
 
Tariffs 
 
Peru applies tariffs to virtually all goods imported from the United 
States with an average applied rate of 10 percent. Most imported 
goods are subject to tariff rates which range from 4 percent to 20 
percent. There is an additional 5 percent "temporary" tariff 
surcharge on many agricultural goods. Peru has also applied a price 
band or variable levy on the following sensitive agricultural 
products: rice, corn, sugar, and dairy products. However, in 2007, 
the GOP took steps to address the rising prices of food commodities 
and eliminated most import duties on food items and agricultural 
inputs.  This has contributed to slowing inflation pressures on food 
products earlier in 2008 when global commodities prices spiked. 
 
Under the PTPA, 80 percent of U.S. exports of consumer and 
industrial products will become duty free immediately upon entry 
into force of the agreement. Within 5 years, an additional 6 percent 
will become duty free and another 4 percent within 7 years. Duties 
on the remaining 10 percent will be phased out over 10 years. Peru 
is in the process of joining the World Trade Organization (WTO) 
Information Technology Agreement, removing tariffs and nontariff 
barriers to information technology products. 
 
In addition, more than two-thirds of current U.S. farm exports to 
Peru will become duty free immediately upon entry into force of the 
PTPA, including high quality beef, cotton, wheat, soybeans and 
soybean products, key fruits and vegetables, almonds, and many 
processed food products. Peru also will immediately eliminate its 
price band system on trade with the United States. These benefits, 
coupled with a preference clause included in the PTPA, will enable 
the United States to better compete with countries, both within and 
outside of the region, for Peru's market. Tariffs on other 
agricultural products will be eliminated gradually, most within 5 
years to 15 years. Within 17 years, all U.S. agricultural exports 
will enter the Peruvian market duty free. 
 
Nontariff Measures 
 
The government of Peru has eliminated many nontariff barriers, and 
under the PTPA will subject remaining measures, including subsidies 
and import licensing requirements, to additional disciplines. Peru 
currently restricts imports of certain used goods, including used 
clothing and shoes (except as charitable donations, which are 
subject to the 19 percent value added tax), used tires, cars over 5 
years old and heavy trucks (weighing three tons or more) over 8 
years old. Used cars and trucks that are granted import permits must 
pay a 45 percent excise tax - compared to 20 percent for a new car - 
unless they are refurbished in an industrial center in the south of 
the country after importation, in which case they are exempted 
entirely from the excise tax. Additionally, Peru's prohibitions on 
the importation of used goods apply to U.S. remanufactured goods. 
Under the PTPA, Peru affirmed that it would not adopt or maintain 
prohibitions or restrictions on trade in remanufactured goods, and 
that certain existing prohibitions on trade in used goods would not 
apply to remanufactured goods. Upon entry into force of the 
Agreement, this commitment will provide new and significant export 
opportunities for firms involved in remanufactured products such as 
engines, automotive parts, mining and construction equipment, 
transportation machinery, medical equipment, and computers. 
 
For textile and apparel products and footwear, Peru requires that 
products bear a label that, in addition to the name of the 
manufacturer, includes the name and address of the importer or 
distributor. Industry reports that such information is difficult if 
not impossible to know during the manufacturing process when 
permanent labels are attached. The re-labeling of products upon 
entry to meet these requirements results in additional costs and 
delays. 
 
In 2006, the United States Government and the government of Peru 
resolved a number of significant sanitary and phytosanitary (SPS) 
and technical standards issues. Specifically, the two governments 
reached agreements addressing Peru's bans or restrictions on imports 
of U.S. beef and beef products (related to Bovine Spongiform 
Encephalopathy), poultry and poultry products (related to avian 
influenza), pork and pork products, and rice. The government of Peru 
has implemented these agreements through a series of resolutions and 
decrees. For example, in October 2006, Peru issued a Supreme Decree 
permitting the importation of all U.S. beef and beef products, 
except high risk materials, when accompanied by a sanitary 
certificate issued by the U.S. Department of Agriculture's Food 
Safety and Inspection Service. In addition, Peru formalized its 
recognition of the equivalence of the U.S. meat and poultry 
inspection systems, and eliminated a rice quality standard that 
discriminated against imports of U.S. rice. Restrictions still exist 
with regard to trade in live cattle. U.S. officials continue to 
engage Peruvian authorities in pursuit of science-based import 
requirements with respect to such trade. 
 
¶5. (U) GOVERNMENT PROCUREMENT 
 
Since 2002, Peru has applied a 20 percent price preference to bids 
by Peruvian firms on government procurement contracts. The PTPA will 
require the use of fair, nondiscriminatory, and transparent 
procurement procedures for procurement covered by the PTPA. Under 
the PTPA, U.S. suppliers will be permitted to bid on the procurement 
of most Peruvian central government entities, including state owned 
enterprises such as Peru's oil company and Peru's public health 
insurance agency. When the PTPA is implemented, the price preference 
will no longer be applied to U.S. companies in procurement covered 
by the PTPA. The anti-corruption provisions in the PTPA will require 
each government to ensure under its domestic law that bribery in 
trade-related matters, including in government procurement, is 
treated as a criminal offense or is subject to comparable penalties. 
Peru is not a signatory to the WTO Agreement on Government 
Procurement. 
 
¶6. (U) INTELLECTUAL PROPERTY RIGHTS (IPR) PROTECTION 
 
Peru's implementation of the provisions in the PTPA's IPR chapter 
will bring about a number of important improvements in IPR 
protection, including: protection of trademarks used in Internet 
domain names; strengthened measures to prevent the circumvention of 
technological devices for preventing Internet-based copyright 
piracy; protection of test data and other undisclosed information 
submitted in connection with regulatory approval for pharmaceutical 
and agricultural chemical products; and provision of deterrent 
penalties against piracy and counterfeiting. 
 
There have been government efforts to improve enforcement, including 
increased raids on large-scale distributors and users of pirated 
material, but piracy remains a problem. U.S. industry has called for 
increasing anti-piracy efforts in Peru with enhanced support from 
the Peruvian National police, and increased coordination between 
Peru's copyright office (INDECOPI) and local municipalities in order 
to revoke licenses granted to vendors selling pirate products. 
 
Patents and Trademarks 
 
Peru's 1996 Industrial Property Rights Law provides the framework 
for patent protection. In 1997, Peru addressed several 
inconsistencies with the WTO TRIPS Agreement provisions on patent 
protection and Most Favored Nation treatment for patents. U.S. 
industry representatives are pleased that INDECOPI has shifted the 
burden of proof in patent infringement cases from the patent holder 
to the alleged copier. INDECOPI has issued preliminary injunctions 
against presumably illegal copies and in 2006, U.S. pharmaceutical 
companies won several important patent infringement court cases. 
However, the U.S. pharmaceutical and agrochemical industries 
continue to have concerns about Peru's protection of undisclosed 
test and other data submitted in connection with marketing approval 
procedures. The PTPA contains provisions to address these concerns. 
 
 
Enforcement 
 
Despite some Peruvian government efforts to improve enforcement, 
including increased raids on large-scale distributors and users of 
pirated material, piracy remains widespread, due notably to a 
failure to apply deterrent penalties vigorously. The judicial 
problems should improve now that Peru has five courts and three 
prosecutors' offices that can specialize in IPR cases. 
 
¶7. (U) SERVICES BARRIERS 
 
Under the services chapter of the PTPA, Peru will assume commitments 
to provide nondiscriminatory treatment and market access in a 
substantial number of services sectors. These commitments 
significantly improve upon Peru's WTO commitments in terms of 
sectors covered and elimination of restrictions in sectors such as 
advertising, construction and engineering, energy, information, 
express delivery, and entertainment, including audiovisual services 
and broadcasting. The chapter also commits Peru to increased 
regulatory transparency and to free transfers associated with the 
supply of a service. 
 
Financial Services 
 
The financial services chapter of the PTPA provides for secure 
access and nondiscriminatory treatment across most banking, 
insurance and securities sectors, and improves U.S. companies' 
ability to provide portfolio advice and certain kinds of insurance 
on a cross-border basis. 
 
Telecommunications 
 
Peru is continuing the process of developing a competitive 
telecommunications market. OSIPTEL, Peru's telecommunications 
regulator, has established a time frame to lower average mobile 
termination rates by more than half over a period of 4 years, from 
2005 levels of roughly $0.21 to under $0.10 by January 2009. U.S. 
companies continue to complain that the rates should be further 
reduced and that unconstrained pricing by the dominant supplier has 
created significant barriers to competition in the wireless sector. 
Continued oversight and review of these rates by OSIPTEL will be 
important to achieving progress in addressing concerns raised by 
suppliers. 
 
¶8. (U) INVESTMENT BARRIERS 
 
Under the investment chapter of the PTPA, Peru will assume 
obligations relating to national treatment and Most Favored Nation 
treatment; assure the right of U.S. investors to make financial 
transfers freely and without delay; apply international legal 
standards for expropriation and compensation; and provide access to 
binding international arbitration. 
 
Peruvian law restricts majority ownership of broadcast media to 
Peruvian citizens. Foreigners are also restricted from owning land 
or investing in natural resources within 50 kilometers of a border, 
but they can operate within those areas with special authorization. 
Under current law, foreign employees may not comprise more than 20 
percent of the total number of employees of a local company (whether 
owned by foreign or Peruvian persons) or more than 30 percent of the 
total company payroll. Under the PTPA, Peru has agreed not to apply 
most of its nationality-based hiring requirements to U.S. 
professionals and specialty personnel. 
 
U.S. firms sometimes complain that executive branch ministries, 
regulatory agencies, the tax agency, and the judiciary often lack 
the resources, expertise, or impartiality necessary to carry out 
their respective mandates. Peru's weak judicial branch is a 
particular problem. The resolution of commercial disputes that end 
up in Peruvian courts is often delayed, and judicial proceedings can 
yield results that are not foreseeable based on a review of relevant 
precedents. U.S. investors have also complained about the 
reinterpretation of rules and the imposition of disproportionate 
fines by the tax agency.  Customs procedures and delays have also 
been cited as a major concern for U.S. companies importing products 
to Peru. 
 
The Peruvian government has tried to address institutional 
weaknesses in the executive branch and has also offered plans for 
judicial reform. In July 2005, the Supreme Court issued an edict 
stating that final binding arbitration awards cannot be disputed in 
the domestic judicial system. The U.S. Government has worked with 
the government of Peru both before and in parallel with the PTPA 
negotiations to ensure the fair resolution of U.S. investor 
disputes, consistent with Peruvian law.