71183 v1 Peru: Trade Brief* Trade Policy A framework for trade liberalization in Peru was established through a legislative decree in 1991. As judged by the 2007 Trade (MFN) Tariff Restrictiveness Index (TTRI), on which it is ranked 76th out of 125 and scored 7.4 percent, the restrictiveness of Peru’s tariff regime is similar to that of an average Latin America and Caribbean (LAC) or lower-middle-income country, although including nontariff measures, Peru’s agricultural imports face considerably higher trade barriers. Declining slightly from late 1990s and early 2000s year averages, Peru’s 2005 MFN applied simple tariff average (10.2 percent) is similar to its comparators’, while the import- weighted (6.8 percent) tariff average is below its comparators’ means. The maximum tariff rate of 20 percent (2007) is fairly low. The 25 percent nontariff barriers frequency ratio for 2000–04 is lower than LAC regional (35.7 percent) and similar to lower-middle-income (24.7 percent) averages. The country’s 2005 International Telecommunication Union (ITU) competition index in telecom is 2.0, the maximum on a scale from 0 to 2. However, the relatively low overall GATS commitments index (25) suggests ample room for greater future multilateral commitments that would reflect more closely the progress already made in opening up various services sectors. Market Access According to the 2006 Market Access TTRI (including preferential rates), on which it is ranked 33rd (out of 125) and scores 1.9, both Peru’s agricultural and manufactures exports face relatively low tariff rates in their export markets (its access to international markets is also more favorable than the LAC and lower-middle-income comparator groups’ when nontariff barriers are taken into consideration). MFN duty-free exports constituted 36.8 percent of Peru’s total exports in 2006. A Generalized System of Preferences (GSP) beneficiary with a number of industrialized (and several middle-income) countries, Peru also ratified in 2007 a free trade agreement (FTA) with the United States that is expected to become effective as of January 2009. Despite its very high utilization rate of EU and U.S. preferences, the value of such preferences so far has been modest, equivalent to only 3 percent of bilateral exports. The country is also a member of such regional organizations as the Andean Community of Nations (CAN), the Asia-Pacific Economic Cooperation (APEC), and the Latin American Integration Association (LAIA). The trade- weighted real exchange rate depreciated since 2000 on an annual average basis. However, the trend has changed since the mid-2007 and there has been a mild appreciation of the real exchange rate. Behind the Border Constraints Concerning its business environment, Peru’s Doing Business 2007 rank is 58th (out of 178), higher than most of its comparators. Its weakest category was Enforcing a Contract, as it has a highly centralized judiciary process with poor coordination among various law enforcement agencies. Its performance in the area of governance is much better than its lower-middle-income comparators, particularly in regulatory quality and control of corruption. Surpassing its comparators on all but the timeliness of shipments category of the index, Peru ranked 59th (out of 151) on the 2006 Logistics Performance Index. Its weakest logistics indicators were quality of * As of April 2008. See the World Trade Indicators 2008 database at http://www.worldbank.org/wti2008 Peru: Trade Brief 1 transport and information technology (IT) infrastructures, and the inefficiency of the Peru’s ports that hampers the country’s trade activities. On another proxy for trade facilitation, the Doing Business—Trading Across Borders subcategory, Peru is ranked 71st. The 2005 per capita rate for telephones/mobile phones (39.3 percent) falls noticeably short of the regional and middle-income average (73.9 and 82.2 respectively), while per capita rates for Internet usage (22.1 percent) and secondary school enrollment (92.4 percent) exceed both the comparators’ averages. Trade Outcomes Peru’s real growth in total trade of goods and services decreased from a yearly average of about 9.6 percent in 2005–06 to an estimated 8.8 percent in 2007 (national sources report a higher number of 11.9 percent), higher than the LAC or lower-middle-income country performance (7.5 percent and 8.3 percent respectively). Peru’s trade share in GDP was estimated at 48.5 percent in 2007, less than half the comparators’ openness ratios. Rich in mineral resources, Peru’s top 2005 export products included gold (15 percent)1, copper (11 percent), and copper ores (9 percent); flours accounted for 9 percent of total product exports. In 2007, services’ share in total exports (including tourism) averaged about 9.2 percent. Peru’s main destination markets in 2006 were the United States, China, Switzerland, Canada, Chile, and Japan, and imports were primarily obtained from the United States, China, Brazil, Ecuador, Colombia, and Chile. References International Monetary Fund (IMF). 2003. “Peru: Statistical Appendix.� Country Report No. 03/73, March. IMF, Washington, D.C. Available at: http://www.imf.org/external/pubs/ft/scr/2003/cr0373.pdf. ———. 2008. “Peru: Second Review Under the Stand-By Arrangement—Staff Report; Staff Statement; Press Release News Brief on the Executive Board Discussion; and Statement by the Executive Director for Peru.� Country Report No. 08/28, January 23. IMF, Washington, D.C. Available at: http://www.imf.org/external/ pubs/ft/scr/2008/cr0828.pdf. Organization of American States (OAS). 2007. “Peru-United States: Background and Negotiations.� June 25. OAS, Washington, D.C. Available at: http://www.sice.oas.org/TPD/AND_USA/PER_USA_e.ASP. World Bank. 2002. “Peru Country Assistance Evaluation.� Report No. 24898-PE, September 25. World Bank, Washington, D.C. Available at: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/ IB/2002/10/25/000094946_02101104024174/Rendered/PDF/multi0page.pdf. ———. 2006. “Country Partnership Strategy for the Republic of Peru FY07–FY11.� Report No. 37913-PE, December 19. World Bank, Washington, D.C. Available at: http://www-wds.worldbank.org/external/default/ WDSContentServer/WDSP/IB/2006/11/29/000090341_20061129101115/Rendered/PDF/37913.pdf. ———. 2008. World Trade Indicators 2008 Database, including the Trade At-A-Glance (TAAG) country table. World Bank, Washington, D.C. Available at: http://www.worldbank.org/wti2008. World Trade Organization (WTO). 2007. “Trade Policy Review Body—Trade Policy Review—Report by the Secretariat—Peru—Revision.� December 17. WTO, Geneva. 1 Official statistics report that gold accounted for 17.8 percent of exports in 2005. 2 Peru: Trade Brief