Edgar Vasquez, Vice Minister of Foreign Trade of Peru, was in India recently to push for a comprehensive free trade agreement (FTA) covering goods, services and investments between the two countries. The Dollar Business caught up with him to understand the rationale behind the proposed FTA, which is in line with the agreements the Latin American nation already has with 53 countries.

Interview By KANCHI BATRA | April 2017 Issue | The Dollar Business



TDB: Peru and India are working hard to ink a free trade agreement (FTA). How important is this FTA for Peru?

Edgar Vasquez (EV): Peru is a key trade partner for India as it ranks third amongst India’s export destinations in the Latin American and the Caribbean (LAC) region. The country can well serve as a hub for Indian investors in the region. We are currently the fastest growing economy in Latin America and have already signed 19 FTAs in goods, services and investments with 53 countries. We also have bilateral agreements with US, EU, China, Japan, Canada and South Korea, amongst others.

The Indian government has agreed to negotiate a comprehensive free trade agreement with us and we hope Peru becomes the first Latin American country to ink such a pact with India that includes accords on both goods and services. Going forward, this FTA would be a significant landmark in Peru-India relations and would solidify the traditional fraternal relations that have existed between India and the Latin American countries. Peru and India share many common objectives. Our terms for the comprehensive treaty extend beyond merchandise trade as it also includes services and investment. This agreement will eliminate trade and tariff barriers and will bring companies from both the countries closer, while generating a wave of new trade opportunities. Also, this FTA will comprehensively address the issue of movement of human resources.

TDB: Now that US has withdrawn from the TPP, how important is it for Peru to create a broader Asia-Pacific accord with India and China?

EV: Peru is a member of WTO and it is very open to international trade. International trade constitutes more than 45% of Peru’s GDP. Trans-Pacific Partnership (TPP) is now in a special situation with US walking out, but the bloc is still important for us. Peru is also well-integrated with economies in Asia Pacific as it’s a member of Asia Pacific Economic Cooperation (APEC). It is imperative for us to strengthen our relationship with Asia, specifically with India and China. The Asia Pacific region is currently a key region for Peru when it comes to trade, and will continue to be so in the future.

TDB: Do you think the proposed FTA will benefit SMEs in both the countries and help boost trade between them?

EV: 60% of Peru’s urban workforce is employed with small and micro enterprises (SMEs), which account for more than 90% of all business in the country’s manufacturing, commercial and services sectors. As Peru continues to be one of the fastest growing economies in the region, Peruvian businesses are poised to expand. But, regardless of their noteworthy contribution, SMEs are facing certain challenges. We believe this FTA will pave the way for new export opportunities and develop new businesses. The FTA will also help fortify supply chains by streamlining SME business practices. It will spur innovation and entrepreneurship, which will further expand trade between the two countries. The proposed FTA will also promote effectual, transparent and agile customs operations.

TDB: Apart from the proposed FTA, what else do you think can boost trade between the two countries?

EV: Our trade with India is about $2 billion, but there is potential for more. With this trade agreement, we expect bilateral trade to grow by 60-70%, which will be a win-win situation for both the countries. We want Indian companies to invest in infrastructure in Peru and we are keen on tapping India’s expertise in space, agriculture and information technologies. In addition, gastronomy is a thriving sector in Peru. The advancement of Peruvian gastronomy is part a wider effort from our government to endorse the richness of Peru’s history, biodiversity and culture at the international level. Peruvian gastronomy is well-known worldwide like the Indian gastronomy, and we should be able to leverage each others expertise.

TDB: Mining, hydrocarbons and big infrastructure projects are attracting FDI into Peru. Is there any particular sector India needs to focus on that can help the two countries take the bilateral trade to the next level?

EV: Peru’s open trade and investment policy is an essential part of a comprehensive economic method that is concentrated on creating an environment that inspires business activity. Further, Peru has rich deposits of natural resources, huge agricultural potential, good fishing grounds, a traditional textile industry and enormous tourism capacities, amongst other resources. Both countries can and should cooperate in the agriculture sector as there are plenty of opportunities that are yet to be explored by both. Also, there are huge investment opportunities in services sector, particularly in restaurant business and film production. We also want to increase the movement of people between the two countries, not just tourists but also businessmen.

Machu Picchu, an ancient Inca citadel, attracts thousands of foreign tourists every year.

TDB: Are there any plans to invite Bollywood producers to Peru?

EV: Peru has exciting and unique tourism destinations with varied landscapes and a welcoming population. Also, the country’s tourism sector has been going through a very encouraging phase. The local government promotes tourism to attract international tourists and Bollywood too should use the country’s beautiful locales for cinema production.

TDB: Do you envision a direct air connectivity between India and Peru?

EV: The direct air connectivity with Asia is one of the most important gaps that needs to be bridged. We are trying to encourage Asian airlines to take advantage of Peru as a hub to facilitate business and tourism in the region. In fact, one of the exceptional historical and cultural links that Peru and India share is that both countries are home to early sites of human civilisation dating back to some 5,000 years. Peru’s multi-ethnic and multi-cultural society offers visitors a unique variety of cultural expressions that include art and, of course, outstanding cuisine. Peru is planning to attract Indian travellers through a variety of measures and we expect similar initatives from the Indian government as well.
 
TDB: What challenges hamper Peru’s trade and investment relations with India? How can they be addressed?

EV: Perhaps the most pressing challenge is the lack of information. The business communities in both the countries are not aware of opportunities that exist in the other country. The two countries need to put in additional efforts to share information and encourage people to communicate. I have met exporters, importers, industry leaders and business associations and apprised them of the opportunities available in Peru. We are also working with the Indian Embassy in Peru to encourage Indian companies to explore avenues in Peru.

TDB: In CY2016, Peru’s economy expanded 3.9% y-o-y as against 2.3% in CY2015. What spurred this growth?

EV: Peru was able to post a decent growth number in CY2015, thanks to the continuous decade-long liberal economic policy. The government focused on upholding monetary stability and fiscal balance apart from ensuring an open trade policy. We also added some new FTAs and further strengthened Peru’s position as a regional hub for trade between Latin America and APEC countries.

While economic growth is indispensable for a country’s progress, it alone cannot eradicate poverty and inequality. We need to improve infrastructure and increase spending on social services. And, Peru is using global integration as a key tool to achieve that objective. We are a small country with a population of 30 million. But, with the help of FTAs we have been able to create a big market of over 2 billion consumers worldwide for Peruvian products and services.