TRADING PLACES
One of the most significant international agreements in history officially came into force on February 4, 2014 when a series of representatives descended upon Auckland to sign the Trans-Pacific Partnership (TPP) into law.
The TPP agreement, the result of years of negotiations between the 12 participating countries (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam), is touted by its member countries as a way to “promote economic growth; support the creation and retention of jobs; enhance innovation, productivity and competitiveness… and promote transparency, good governance, and enhanced labor and environmental protections." The agreement includes regulations governing a wide range of trade and diplomacy-related topics, including the ability to set tariffs, the use of child labor, and resolving trade disputes.
It is hard to overstate the significance of the TPP—the combined GDP of the countries involved is over USD20 trillion, equivalent to about 30% of global GDP. This means the TPP's effects will be felt throughout the world, not just within the countries that are a party to the agreement. Furthermore, the TPP allows other countries to join after it has been ratified; Colombia, South Korea, and Indonesia are just a few of the nations that have officially expressed interest. It will doubtless take time for the TPP's full impact to be understood, but an early look at the agreement shows some elements important for Peru, which is expected to ratify the agreement soon.
The TPP is in keeping with the Peruvian government's policies over the past several years. Peru has signed free trade agreements with most of its largest export partners, including Latin American neighbors Colombia, Venezuela, Chile, as well as China and the US. These previous agreements sought to create a “permanent comprehensive trade openness, which would provide the necessary stability for increased investment in the exporting sector" (Acuerdon Comerciales del Perú). These policies have been largely successful over the past decade, as Peru's exports have more than doubled since signing its first free trade agreement in 2016. As global demand for its raw metals and minerals increased and prices rebounded after slipping a bit during the financial crisis, the Peruvian export sector has formed new ties with other world economies and strengthened existing ones.
The effects of the TPP, then, are likely to be similar to that of the previous trade agreements signed over the past several years, with additional benefits and complications due to the sheer size of the agreement. A World Bank analysis of the agreement concludes that the TPP will have the most impact on smaller and less globally integrated member countries; as an economy already well integrated into the global marketplace, Peru will see less dramatic effects than others. Still, it should create new opportunities for partnerships within Asian markets looking for new areas for investment. The TPP contains language lowering tariffs and protecting the rights of foreign investors, both of which should lead to a more robust foreign investment environment.
Jorge von Wedemeyer Knigge, a businessman with decades of international experience and former president of the Lima Chamber of Commerce, expressed as much in an interview with TBY. “It opens up possibilities to have wider markets and to come into markets at lower costs." Knigge added that, “As long as we are members, we open up possibilities for others to work with us in these globalized markets. It is an investment opportunity for people of other countries to generate their products with us and through us sell the products in these markets we have easy access to."
China, Peru's largest trade partner, is not a member of the TPP agreement. Peru has a separate trade agreement with China that they signed in 2009; since then, trade has gone up 20%, reaching USD5.7 billion worth of goods exchanged in 2013. China is also responsible for about a fifth of Peru's imports, most of which are finished goods. Its absence from the trade deal was noteworthy on the international scale, but ultimately it should not affect Peru that much because of its preexisting trade agreements. The two countries should remain important trade partners in the years to come.
The TPP has been the subject of great discussion due to its massive scale and wide-reaching impacts. Peru, already a well-integrated member of the global economy thanks to a number of previous trade partnerships, stands to gain additional foreign investment and export markets thanks to the new links provided by the agreement, but gains will likely not be as significant as those for smaller and more isolated nations. Still, the TPP is an important step toward a more interconnected and productive future.
TRADING PLACES
TABLE OF CONTENTS
Interview
Diego de Osma Ayulo, President of the Board of Directors and Chairman, Omnia Medica (Grupo de Osma)
TBY talks to Diego de Osma Ayulo, President of the Board of Directors and Chairman of the Board of Omnia Medica (Grupo de Osma), on introducing novelty, successful human resource management, and company goals for 2016.
read articleInterview
Jesús Tamayo Pacheco, Chairman, Supervisory Agency of Investment in Energy and Mining of Peru (Osinergmin)
TBY talks to Jesús Tamayo Pacheco, Chairman of the Supervisory Agency of Investment in Energy and Mining of Peru (Osinergmin), on the country's mining safety regulations, the largest energy project in Peru, and the body's future projects.
read articleInterview
Luis Andrés Montes Bazalar, Technical Secretary, Fund for Investment in Telecommunications (FITEL)
TBY talks to Luis Andrés Montes Bazalar, Technical Secretary of the Fund for Investment in Telecommunications (FITEL), on IT connectivity in Peru, challenges facing the sector, and increasing IT inclusion.
read articleInterview
Gonzalo Martin Ruiz Díaz, President, Telecommunications Regulatory Agency of Peru (OSIPTEL)
TBY talks to Gonzalo Martin Ruiz Díaz, President of the Telecommunications Regulatory Agency of Peru (OSIPTEL), on the state of telecoms in Peru, the role of the private sector in extending coverage, and the country's performance compared to regional counterparts.
read articleInterview
Edgar Patiño GarridoEdgar Patiño Garrido, President, National Port Authority (APN)
TBY talks to Edgar Patiño Garrido, President of the National Port Authority (APN), on the role of Peru's ports in the economy, the impact of the Panama Canal expansion, and efforts to tackle crime at ports.
read articleReview: Doing Business
Off the rock, the roots of prosperity
Despite the momentary slowdown from a dip in commodities prices, Peru remains just as promising a place to do business as any in Latin America. Diversification away from minerals, revamped special economic zones, and the narrow, unexpected victory of a Wall Street savant and committed infrastructural reformist mean that Peru looks to 2017 with bright eyes.
read articleReview: Legal
Rewarding Ends
Cesar Candela, Partner at Zavala Hernández & Candela Jara Abogados, discusses the role of investment in Peru's economic growth and how in order to raise funds it has established a stable and appealing legal framework for national and foreign private investment.
read article