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RR RUEHAO RUEHCD RUEHGA RUEHGD RUEHGR RUEHHA RUEHHO RUEHMC RUEHNG
RUEHNL RUEHQU RUEHRD RUEHRG RUEHRS RUEHTM RUEHVC
DE RUEHPE #0655/01 1061926
ZNR UUUUU ZZH
R 151926Z APR 08
FM AMEMBASSY LIMA
TO RUEHC/SECSTATE WASHDC 8412
INFO RUEHWH/WHA DIPLOMATIC POSTS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHC/DEPT OF INTERIOR WASHINGTON DC
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUEAIIA/CIA WASHDC
UNCLAS SECTION 01 OF 02 LIMA 000655
SIPDIS
SIPDIS
COMMERCE FOR 4331/MAC/WH/MCAMERON
TREASURY FOR MMALLOY
USTR FOR BHARMAN AND MCARRILLO
E.O. 12958: N/A
TAGS: ETRD ECON EFIN USTR PE
SUBJECT: PERU TRADE AND INVESTMENT BRIEFS
SUMMARY
1. This is an update on the following trade and investment news
from Peru:
-- Imports Increase 30% First Two Months of 2008
-- Peru Reports $538 Million Trade Surplus for February
-- 2007 Agriculture Exports Remain High
-- Peru Investment Grade Follow On
-- Strike, Environmental Challenges at Doe Run Peru
-- Despite Politics, Chileans Propose More Investment in Peru
-- Peruvians Interested in Purchasing North American Stocks
-- Port Concessions Could Result in Significant Investment
-- PTPA Agriculture Assistance Will Reach $1.2 Billion
IMPORTS INCREASE 30% FIRST TWO MONTHS OF 2008
2. Peru's imports are up 30.2% from the same period last year,
mostly due to strong consumer demand. For January and February,
capital goods were up 33.8%, consumer goods were up 42.13% and
durable goods also showed an increase. The number one country of
origin is the U.S. with 18.9% of the import volume, or $264.4
million in February alone. Next is China with 16.4% or $214 million
followed by Japan, Mexico, and Colombia. The Korean car company Kia
reported a 93% increase in imports in the first trimester due to a
71% increase in sales.
PERU REPORTS $538 MILLION TRADE SURPLUS FOR FEBRUARY
3. Peru reported a February net trade surplus of $538 million as a
result of larger than expected exports earnings due to higher prices
and increased production, according to the Central Bank. Exports
grew 26.4% from the same month last year to $2.411 billion, while
imports totaled $1.873, resulting in a 37.2% surplus. Traditional
exports were up 26.3% to $1.840 billion owing mostly to increased
sales in copper (up 57.5%) and gold (up 75.4%). Non-traditional
exports grew 27.6% to $559 million from the same time last year
driven primarily by agriculture, fisheries, and chemicals markets.
2007 AGRICULTURE EXPORTS REMAIN HIGH
4. An increase in prices and high production levels led to record
agricultural exports, totaling $2.167 billion in 2007, up 5% from
2006. Production levels were seen on average to have increased
3.1%, with a 15% increase in sugar, and an 8% increase in asparagus.
The top exports in rank order were: asparagus, paprika, artichokes,
grapes, avocado, and citrus. Predicted climactic conditions
indicate that 2008 exports will be even higher in production and
will benefit from an opening of new markets in China, Singapore and
Thailand. Peru is the number one exporter of fresh asparagus to the
United States and has become number one in preserved artichokes,
recently overtaking Spain.
PERU INVESTMENT GRADE FOLLOW ON
5. Despite the congratulatory mood around the Fitch Investment
recent rating of Peru as investment grade BBB minus (stable),
observers say that markets had largely factored in the upgrade.
Peruvian assets showed some improvement, and additional investment
flows into Peru in terms of both FDI and portfolio inflows will now
increase marginally. Nevertheless, market observers say increases
will be more substantial once an additional investment upgrade is
received from one of the major raters, such as Moody's or Standard &
Poor's. Fitch made the announcement based on strong improvement in
Peru's fiscal and external solvency ratios, which helped
counterbalance credit weakness, as well as political and social
risks. Standard & Poors and Moody's rate Peru at one and two
notches below investment grade respectively.
STRIKE, ENVIRONMENTAL CHALLENGES AT DOE RUN PERU
6. The U.S.-owned Doe Run metallurgical plant in La Oroya is
operating at partial strength due to a week-long strike by most of
its 1,720 workers, who are demanding shorter hours and more pay.
Unrelated, the Peruvian subsidiary also recently lost its
environmental certification from German-based company TUV Rheinland.
The Peruvian government recently gave Doe Run until next year to
complete an emergency clean-up plan to alleviate toxic emissions
near the smelter. The company was recently sued in U.S. federal
courts for the lead poisoning of 150 Peruvian children living near
the plant.
DESPITE POLITICS, CHILEANS PROPOSE MORE INVESTMENT IN PERU
7. Despite the current bilateral dispute over maritime borders,
Chilean investors remain very interested in investing more in Peru.
LIMA 00000655 002 OF 002
The president of the Chilean Bank and Financial Investment
Association stated Chilean investors are putting pressure on their
Congress to widen its commercial agreement with Peru and approve an
FTA immediately in order to invest significantly more. Peru is the
third largest recipient of Chilean investment in the world, a total
of $5.575 billion from 1990-2007, currently providing for over
40,000 Peruvian jobs. Chilean investors currently dominate the
retail sector. This time Chilean investors are reportedly looking
seriously at the energy sector.
PERUVIANS INTERESTED IN BUYING NORTH AMERICAN STOCKS
8. The president of the Central Stock Registry predicted that
Peruvian purchases of U.S. and Canadian stocks will increase $122.8
million in the first quarter of 2008 (up 147% from the same time
last year), 95% in stocks and 5% in bonds. He reported that sales
of Peruvian stock to foreign investors this first quarter totaled
$196.8 million (up 29%), 86% in stocks and 14% in bonds. Most of
the stocks purchased in both directions were in the mining,
telecommunications, hydrocarbon, and banking and financial sectors.
PORT CONCESSIONS COULD RESULT IN SIGNIFICANT INVESTMENT
9. Peru's port concessions could result in $411 million of
investment in Peru's seven ports. The ports include Paita,
Salaverry, Chimbote, Ilo, San Martin, Iquitos, Pucallpa, and
Yurimaguas. Peru's Investment Promotion Agency (ProInversion)
stated that it will use the APEC and EU summits to attract investors
from countries such as Singapore who has already expressed interest.
David Lemor, the Director of Peru's Investment Promotion Agency
(ProInversion), voiced concern that the Peruvian Congress will
weaken potential port concessions with legislation to replace
national with regional port authorities and other changes to the
National Port System Law. On April 9th, the ports were shut down
for two hours due to striking workers supporting the legislation.
Peru's main port of Callao, outside Lima, remains troubled by
inefficiencies. In June 2006, Dubai Ports World (DPW) acquired a
30-year concession to develop and operate a new terminal at Callao.
PTPA AGRICULTURE ASSISTANCE WILL REACH $1.2 BILLION
10. The Minister of Agriculture announced $1.2 billion investment
over the next five years into two programs designed to assist with
U.S.-Peru Trade Promotion Agreement (PTPA) implementation. The
competitiveness enhancement plan ($700 million) will aim to create
economies of scale by the formation of associations with direct
support for innovation, technology, and agricultural reconstruction.
The agro-rural program ($500 million) will work to modernize the
poorest agricultural sectors, centralizing the administration of
rural development activities and projects creating a single office
for all related services. It will have an emphasis on
public-private partnerships with a focus on regional economic
development. There will be further details in the near future.
MCKINLEY