VZCZCXRO8382
PP RUEHCN RUEHGH RUEHVC
DE RUEHBJ #1592/01 1660119
ZNR UUUUU ZZH
P 150119Z JUN 09
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 4502
INFO RUEHOO/CHINA POSTS COLLECTIVE PRIORITY
RUEHPE/AMEMBASSY LIMA 0538
RUEHSG/AMEMBASSY SANTIAGO 0292
RUEHSJ/AMEMBASSY SAN JOSE 0120
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RHEHNSC/NSC WASHDC

UNCLAS SECTION 01 OF 02 BEIJING 001592 
 
STATE PASS USTR 
 
SIPDIS 
SENSITIVE 
 
TAGS: ETRD EINV EIND PREL EFIN CH PE
 
SUBJECT: Peru-China Free Trade Agreement 
 
¶1. (SBU) Summary. During the late April visit to 
China by Peruvian Vice President Giampietri, China 
and Peru signed a comprehensive free trade agreement 
which covers goods, services and investment and is 
expected to go into effect by the end of this year. 
Giampietri also promoted Chinese investment in Peru 
during his visit.  Currently, China's most 
significant investment in Peru is in the mining 
sector, in which Chinese companies have committed to 
invest $7.4 billion over the next 5 years. Peru 
might be interested in pursuing a currency swap 
agreement with China but has not yet begun 
discussions. 
 
The Peru Free Trade Agreement 
---------------------------- 
 
¶2. (U) Peru and China began negotiating a Free Trade 
Agreement (FTA) in January 2008 and reached an 
agreement in November 2008.  After completing legal 
reviews of the agreement, Peruvian Vice President 
Luis Giampietri signed the agreement in Beijing 
April 27th.  The FTA is still awaiting ratification 
by the Peruvian Congress but Peruvian Emboffs expect 
it will be passed by the end of this year. 
 
¶3. (U) The FTA is China's first comprehensive FTA 
with a Latin American country, including goods, 
services and investment. (The Chile-China FTA 
included only goods).  In the agreement, 62 percent 
of trade tariffs will be immediately eliminated and 
others will be phased out over periods of between 5- 
17 years.  Peru protected its textile and shoe 
industries by obtaining agreement to maintain key 
tariffs for up to 17 years.  China, in turn, 
obtained similar treatment for agricultural and wood 
industries products. 
 
Peru curious about currency swap agreement 
---------------------------- 
 
¶4. (SBU) According to Peruvian Emboffs in Beijing, 
Peru is looking for additional trade financing and 
is considering the option of a currency swap 
agreement with China.  They are hoping that this 
might give them access to more financing but do not 
yet fully understand the mechanism and are 
researching it. 
 
Looking for more Chinese investment 
----------------------------------- 
 
¶5. (U) Chinese investment was also on the Peruvian 
Vice President's Beijing agenda.  On the second day 
of his visit, he attended a presentation of 
investment opportunities in Peru at the Chinese 
Ministry of Commerce.  As part of its privatization 
efforts, Peru is offering concessions on airports, 
ports and trains.  However, there was not much 
interest from Chinese companies, who are more keen 
on construction projects or natural resources, the 
Peruvian emboffs said.   The Chinese companies lack 
overseas operational experience and are not 
interested in building and operating concessions, 
they added. 
 
PRC mining companies to invest $7.4 billion 
------------------------------------------- 
 
¶6. (U) Vice President Giampietri also met with 
executives from some of China's top metals and 
mining companies already invested in Peru: Shougang 
(Capital Iron and Steel), Chinalco (China Aluminum), 
Minmetals and Zijing.  On May 11, Peru's La 
Republica reported that these four companies plan to 
invest $7.4 billion in Peru over the next five years. 
Many of these investments are financed by China 
Development Bank and China's EXIM Bank. EXIM Bank is 
planning to open an office in Peru. 
 
Chinese Mining companies improving their image 
---------------------------- 
 
 
BEIJING 00001592  002 OF 002 
 
 
¶7. (SBU) The first significant Chinese investment in 
Peru was Shougang iron mines venture in 1994. 
According to the Peruvian emboffs, Shougang has 
consistently had problems with Peru's mining labor 
unions and continues to be unpopular with Peruvians. 
Other Chinese companies have learned from Shougang's 
experience and are now more conscious of social 
responsibility and environmental issues, helping to 
slowly improve China's image in Peru.