This content is from: Local Insights

To benefit from FTAs: a pending task

Luis Alonso García Muñoz-Najar

Today in Peru, it is very common to see announcements or declarations in the mass media by government and even the private sector regarding the negotiation, signing or bringing into force of a Free Trade Agreement between Peru and its business partners around the world. On April 6 2010, the signing of an FTA with Mexico was announced. This is a trade agreement that extends and deepens the exchange conditions that both countries had; in fact, it is considered that as a consequence bilateral trade will double in the next five years.

The date of coming into force of the trade agreement concluded with the European Union will soon be defined. Negotiation of this trade instrument has been very difficult due to the political context of the sub-region (Andean countries); and once again the weakness of Andean integration has become evident: the negotiation began bloc to bloc (Andean Community and European Union) but had to be finished with a bilateral agreement between the European bloc and only Colombia and Peru, without the presence of Ecuador and Bolivia. There is no doubt that the agreement signed will contribute to generating new trade and investment opportunities and also the possibility of new and better cooperation schemes.

On the other hand, there is also an important relationship being developed with China. Soon it will become a reality that China has displaced the United States and become the main target market of Peruvian exports, after the coming into force last year of FTA between the two countries. It is a huge opportunity for Peru as a strategic partner and entrance door from the Pacific to South America, particularly Brazil.

In addition, other free trade agreements have been signed with the United States, Canada, European Free Trade Association, Chile, Singapore, Korea and Japan. At present, other agreements are under negotiation with countries from Central America, and the Trans-Pacific Partnership Agreement which has the ambitious objective of being the base and means to creating the Free Trade Area of the Asia-Pacific.

This new, opening vision supporting the seeking of new and bigger markets has determined the proliferation of free trade agreements aiming to strengthen international trade and as well as to become instruments for introducing the structural and institutional reforms that Peru requires. There is no doubt that competence among countries in the world to attract direct foreign investments, in particular in this period of crisis, determines the need to count on proper tools to succeed in this global scenery, including the possibility of offering investment platforms with predictable legal and institutional frameworks: that is to say, offering a reliable and viable country. In this order of ideas, Peru has only completed half of the task.

The pending task, and maybe the most difficult one, requires much more initiative, political will and creativity, because it is not easy to generate, on time, mechanisms for the proper use of such a number of FTAs. Today more than ever, Peruvians need to be convinced that free trade is not just news; they need to perceive and benefit from the advantages that this system may offer them. They need to feel prosperity knocking on their door.

Luis Alonso García Muñoz-Najar

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