The development of U.S.-Peru trade relations

2. The development of U.S.-Peru trade relations Omar Azañedo Deputy Manager American Chamber of Commerce Peru (AmCham Peru) tradecenter@amcham.org.pe

3. Index • The American market • U.S.-Peru trade relations • The U.S.-Peru Trade Promotion Agreement (PTPA) • Future vision of U.S.-Peru trade relations

4. The American market United States: world’s largest economy • According to the IMF, the US GDP represents 24% of the world GDP (or 20% based on purchasing-power-parity). Almost 3 times as big as China’s GDP • There are 310 million American consumers with a GDP per capita of US$ 47,000 (Peru’s GDP pc is US$ 5,200) • According to the WTO, the U.S. accounts for 9% and 13% of the world’s exports and imports, respectively. It is the largest importer and the 3rd largest exporter after China and Germany • Private consumption represents 70% of the U.S. GDP and it is the engine of its economy The U.S. produces Peru’s GDP in less than 4 days (Peru GDP = 1% U.S. GDP)

5. The American market GDP by state (in US$ billions) Top 10… • California (1,891) ≈ Brazil • Texas (1,144) ≈ Australia • New York (1,093) ≈ Mexico • Florida (737) ≈ Turkey • Illinois (630) ≈ Indonesia • Philadelphia (555) ≈ Switzerland • New Jersey (483) ≈ Belgium • Ohio (471) ≈ Sweeden • Virginia (408) ≈ Norway • North Carolina (398) ≈ Austria • Oklahoma (154) ≈ Peru * 2009 figures Source: U.S. Bureau of Economic Analysis y FMI

6. The American market Personal income per capita by state (in US$) Top 10… • District of Columbia (68,013) • Connecticut (55,063) • New Jersey (50,009) • Massachusetts (49,643) • Maryland (48,275) • Wyoming (48,178) • New York (46,459) • Virginia (44,129) • Alaska (43,209) • Washington (42,933) * 2009 figures Source: U.S. Bureau of Economic Analysis y FMI

7. U.S.-Peru trade relations In 2010 the U.S. was Peru’s top trading partner for both exports and imports, representing 18% of its total trade exchange Source: SUNAT / 2010 figures are preliminary

8. U.S.-Peru trade relations In January-November 2010, 8 states concentrated 89% of Peruvian exports Montana 9% New York 13% California 18% Maryland 8% Georgia 5% Texas 9% Louisiana 9% Florida 18% Source: USITC

9. U.S.-Peru trade relations Export channels to the U.S. Peruvian companies are ceasing to use programs such as the ATPA/ATPDEA and the Generalized System of Preferences in order to export to the U.S. under the PTPA Source: USITC

10. U.S.-Peru trade relations Trade structure with the U.S. Traditional Exports (with little value-added) are still predominant, however Non-Traditional Exports grew at an average annual rate of 11% in the last 10 years Source: SUNAT / 2010 figures are preliminary

11. U.S.-Peru trade relations US$ 5.580 billions< US$ 5.802 billions Main products exported to the U.S. in 2010 Copper cathodes, minerals (gold, molybdenum, tin, zinc, silver), petroleum-based products, coffee, asparagus, cotton apparel, artichokes, liquefied natural gas, grapes, shrimp tails, sugar, paprika, jewelry, scallops, mangoes, etc. Main products imported from the U.S. in 2010 Petroleum-based products (diesel mainly), wheat, dumping lorries, hard yellow corn, polyvinyl chloride (PVC), Polyethylene, steel scrap, cotton, soy oil, digging machines, acrylonitrile, self-propelled front-end shovel loaders, vaccines for human medicine, etc. Source: SUNAT / 2010 figures are preliminary

12. U.S.-Peru trade relations Structure of imports Even though the U.S.-Peru trade balance in 2010 was negative for Peru (-US$ 222 MM approx.), it is worth mentioning that 92% of imports were capital goods and intermediate goods which enhance the capital stock and the productivity of Peruvian companies Source: BCRP

13. The U.S.-Peru Trade Promotion Agreement (PTPA) • The U.S.-Peru Trade Promotion Agreement (PTPA) is a bilateral treaty that eliminates obstacles for trade exchange between both countries, consolidating market access for goods and services and stimulating private investments • The PTPA entered into force on February 1, 2009. It is permanent (does not expire) • It includes various subjects: economic, institutional, intellectual property, labor, environmental, public procurements, dispute settlement, among others

14. The U.S.-Peru Trade Promotion Agreement (PTPA) PTPA’s main benefits Structural reforms and clear game rules Investment attraction Creates Sustained job opportunities PTPA Bilateral tariff preferences Increase of Traditional and Non-Traditional exports Improves personal real income Poverty It is more than a trade agreement... PTPA: Tool for development

15. U.S.-Peru bilateral trade will continue to be an effective tool to create jobs and reduce poverty in Peru The PTPA will boost trade exchange between both countries. U.S. exports will increase faster than Peru’s exports as long as Peru’s domestic demand remains strong and the U.S. economy does not recover It is fundamental for the Peruvian government to finish the implementation of the Annex on Forest Sector Governance to secure the PTPA The U.S. will probably lose some share with respect to Peruvian total trade exchange because of China. However, the U.S. has direct investments in Peru almost 10 times greater than China, and a major geopolitical and cultural bond with Peru Peruvian and American companies will be able to make joint ventures within the framework of the Trans-Pacific Partnership Agreement (TPP) to take advantage of Asia-Pacific markets Future vision of U.S.-Peru trade relations

16. The recently enacted law thatpromotes foreign trade of services will allow Peru to export more services to the U.S. (tourism, health, financial/administrative outsourcing, etc.) but the services balance will remain favorable for the U.S. because the competitiveness gap between both economies is still too big The Peruvian government must focus on improving competitiveness to maximize the contribution of trade with the U.S. to Peru’s development Future vision of U.S.-Peru trade relations