72740 v1 World Trade Indicators 2009/10 Peru Trade Brief Trade Policy economic downturn, the government temporarily increased the tax rebate rate for non-traditional After drastically reducing tariffs between September exports (from 5 to 8 percent).3 In 2008, Peru initiated 1990 and March 1991, a framework for trade three anti-dumping investigations. In March 2009 a liberalization in Peru was established through a safeguard investigation on imports of cotton yarn was legislative decree in 1991. Peru’s latest (2007) MFN initiated, but the case was rejected in August 2009.4 Tariff Trade Restrictiveness Index (TTRI)1 of 7.4 percent places the restrictiveness of its tariff regime on par to that of an average Latin America and Caribbean External Environment (LAC) or upper-middle-income country as judged by TTRIs of 7.6 and 6.9 percent, respectively. Peru ranks According to the latest Market Access TTRI5 78th of 125 countries, where 1st is least restrictive. (including preferential rates), on which it is ranked 15th Peru’s barriers to imports are somewhat higher for (out of 125) and scores 0.8, both Peru’s agricultural agricultural goods than non-agricultural goods, with and manufactures exports face very low tariff barriers TTRIs of 10.6 and 6.9 percent. Peru’s 2008 simple on international markets, especially when compared to average of the MFN applied tariff (including ad a LAC and an upper-middle income group comparator valorem equivalents of specific duties) fell four (2.0 and 2.3 percent, respectively). Peru’s 2008 rest of percentage points since 2006 to 6.1 percent, reflecting the world simple average applied tariff (including recent major liberalization. It now is significantly lower preferences) is a high 9.6 percent, compared to the than the average for LAC countries of 9.3 percent. mid-2000s average of 7 percent. When considering the Peru’s maximum tariff on all goods (excluding alcohol level of trade, it is 0.9 percent. Over the course of and tobacco) was 17 percent in 2008, with all tariff 2008, the Peruvian currency, the nuevo sol, lines bound. The trade policy space, as measured by depreciated against the U.S. dollar by 4.7 percent.6 In the wedge between bound and applied tariffs (the the third quarter of 2008, Brazil and Argentina overhang), rose in the past year to 24.1 percent. initiated anti-dumping investigations against Peru. Regarding the extent of its commitment to trade During 2008, the real effective exchange rate of the liberalization in services, Peru ranked 64th out of 148 nuevo sol appreciated by 7.1 percent, reducing the countries according to the GATS Commitment Index. competitiveness of exporters. In response to the global increase in food prices in Peru is part of the Andean Community of Nations 2007–08, the Peruvian government lowered tariffs on (CAN) free trade area, along with Bolivia, Ecuador, imported rice (from 25 to 9 percent) and maize, and and Colombia. A key element of Peru’s trade strategy eliminated tariffs on wheat imports in April 2008.2 has been securing markets through trade agreements. Duties were cut or reduced on other basic foodstuffs The Peru-U.S. Trade Promotion Agreement (TPA), a including beef, dairy products, fish, fruits, and comprehensive free trade agreement, entered into vegetables. Most recently, in the face of the global force on February 1, 2009. As a member of CAN, Peru has been engaged in recent talks about a free trade agreement (FTA) with the EU, which began in June 2007. Negotiators from Colombia and Peru Unless otherwise indicated, all data are as of August 2009 completed a fifth round of negotiations toward a free and are drawn from the World Trade Indicators 2009/10 trade deal with the EU in July 2009. In March 2009, an Database. The database, Country Trade Briefs and FTA with Chile went into effect and an FTA with Trade-at-a-Glance Tables, are available at China was signed in April 2009. In August 2009, two http://www.worldbank.org/wti. separate FTAs—one with Canada and one with Singapore—went into effect. Peru is currently If using information from this brief, please provide the negotiating additional bilateral trade agreements with following source citation: World Bank. 2010. ―Peru Japan and the Republic of Korea.7 Trade Brief.‖ World Trade Indicators 2009/10: Country Trade Briefs. Washington, DC: World Bank. Available at http://www.worldbank.org/wti. World Trade Indicators 2009/10 Peru Trade Brief Behind the Border Constraints 2007, though they declined to 3.2 percent of GDP in 2008. In terms of the conduciveness of its institutional environment to business, Peru ranked in the top third (56th out of 183 countries) in the 2010 Ease of Doing Notes Business index. The Logistics Performance Index, a 1. TTRI calculates the equivalent uniform tariff that measure of the ease of trade facilitation, rates Peru at would keep domestic welfare constant. It is weighted by 2.77 on a scale from 1 to 5 with 5 being the highest import shares and import demand elasticity. performance. This is compared with 2.57 for the LAC 2. FAO, 2009. region and 2.85 for countries in the upper-middle- 3. Cuesta and Jaramillo, 2009. income group. Peru ranked 59th in the world and 5th in 4. WTO, July 2009. the LAC region (with Chile leading the regional 5. MA-TTRI calculates the equivalent uniform tariff of group). The area in which it performed the best was trading partners that would keep their level of imports domestic logistics costs and timeliness of shipments constant. It is weighted by import values and import and it needs most improvement in quality of transport demand elasticities of trading partners. and IT infrastructure In response to the financial 6. IMF, 2009. crisis, the Peruvian government set up, in January 7. SICE, 2009. 2009, a stimulus plan to provide trade finance to small and medium-size exporters.8 8. WTO, 2009. Trade Outcomes References Bridges News and Analysis. ―China Marches on in Latin Peru’s real growth (in constant 2000 U.S. dollars) in America.‖ June 2, 2009. Bridges News and Analysis 13. total trade of goods and services accelerated to 17.7 July 20, 2009. . expected to slowdown in 2009. Real exports grew by Cuesta, J., and F. Jaramillo. April 2009. ―Taxonomy of 10.1 percent in 2008 compared to 6.2 percent in 2007, Causes, Impacts and Policy Responses to the Food while real imports of goods and services grew by 24.1 Price Crisis in the Andean Region. Inter-American percent in 2008 (compared to 21.3 percent in 2007). Development Bank. Rich in mineral resources, Peru’s top exports are Economic Commission for Latin America (ECLAC). copper, gold, zinc, fishmeal, and fish oil. High June 2009. ―The Reactions of the Governments of commodity prices during the first half of 2008 largely the Americas to the International Crisis.‖ ECLAC, explain the 20.1 percent increase in the dollar value of New York. exports in 2008 (even though international prices and Economist, The. June 11, 2009. ―Oil and Land Rights in world demand for Peru’s exports fell by 18.4 percent Peru; Blood in the Jungle.‖ 20 July 2009. in the fourth quarter). The impact of lower copper . gold and silver. The main buyers of Peru’s exports— Food and Agriculture Association of the United Nations the United States, China, Canada, and Japan—are (FAO). 2009. ―Policy Measures Taken by experiencing lower economic growth due to the Governments to Reduce the Impact of Soaring financial crisis, which leads to expectations that the Prices (As of 15 December 2008).‖ FAO. . During the first half of 2009, exports have already Foreign Trade Information Service (SICE). 2009. ―Trade fallen by 29.6 percent year-on-year. Peru’s main Policy Developments.‖ . plastics, machinery, and vehicles. High fuel prices International Monetary Fund (IMF). August 2009. largely explain the 40.1 percent increase of imports in International Financial Statistics (Country Tables). nominal terms in 2008. Imports are expected to IMF. July 2009. . decrease by 14.8 percent in 2009 due to lower Puentes Quincenal. April 21, 2009. ―Mientras Can Intenta international prices for commodities and weaker Replantearse, Ecuador Apela Resolucion Y Amenaza domestic demand. FDI inflows have increased steadily Con Irse.‖ Puentes Quincenal 6(7). July 20, 2009. since 2003, peaking at close to 5 percent of GDP in Peru Trade Brief World Trade Indicators 2009/10 . Geneva. World Bank PREM Trade Group. April 21, 2009. ———. March 26, 2009. ―Report to the TPRB from the ―Update on Trade Measures and Sector-Specific Director-General on the Financial and Economic Support (Note for Mr. Zoellick).‖ The World Bank Crisis and Trade-Related Developments.‖ WTO, Group. 26 June 2009 . Director-General on the Financial and Economic World Trade Organization (WTO). 2007. ―Trade Policy Crisis and Trade-Related Developments.‖ WTO, Review Body—Trade Policy Review—Report by the Geneva.