Peruvian economist Fritz Dubois: “We need to strengthen the APEC process”

Fritz Dubois, director of the Peruvian Institute of Economics, recently visited Chile in order to discuss the Chile-Peru FTA at a Santiago Chamber of Commerce conference.

The Peruvian Institute of Economics is one of Peru's leading think tanks for economic policy. It has been very influential in the reforms that have been implemented in Peru of late. As such, the Asia-Pacific could not let the opportunity to interview Mr Dubois pass us by; especially given the fact that Peru is hosting the leaders of the Asia Pacific Economic Cooperation (APEC) forum.

From Peru’s standpoint, how important are economic relations with APEC?

In general, the APEC bloc is increasingly important in the minds of Peruvians. The United States is not our only, vital export destination. Now we have a second one: China.

When Peru joined APEC ten years ago, its markets were virtually unknown to Peruvian exporters. Nowadays, Peru is much more (aware of them). But other countries, such as Chile, are gaining increasing presence in the Peruvian market. So, (you might say) our trade with APEC members has increased rapidly.

How do you see APEC trade evolving within the next five years?

It should continue at the current rate, especially given the FTAs being signed. Peru is signing an FTA with China during the Leaders' Meeting next week. This should result in growth accelerating to between 15-16%.

Peru will also announce the start of FTA negotiations with Japan, Australia and Korea. Five years from now, Peru should have 70% of its foreign trade guaranteed by FTAs; that is, if it gets the pending FTAs signed. If we exclude the EU from said 70%, the remaining trade is virtually all APEC-related. In practice, the only trade being lost is regional; that is, the trade with Latin America.

Is it preferable to negotiate Asia-Pacific FTAs on an individual basis or negotiate them multilaterally?

The problem with group or multilateral negotiations is that they are very slow. We have seen this with the Doha Round and the Free Trade Area of the Americas, which never materialized. So when we talk about multilateral negotiation, we had better address the issues of speed and effectiveness.

As for this issue’s relevance to Peru, there are several aspects. One of which is that they assure export markets. But a more important issue is solving the major challenges we have in our economic sector. The rules of the game are constantly changing each election cycle. We experience radical changes (after each election), which impact our economy. And foreign trade is the first to suffer from Peru’s tariff structure shifting; some barriers are lifted, others dropped. This all affects trade.

But with FTAs in general, we can predict their effects on trade. Election cycles aside, we know that the flow of exports and imports will unhindered in each bloc, regardless of election results. That is something that Peruvians have never had before. This scenario will facilitate the flow of investment and investor decision-making. This, in turn, will generate consensus on economic policy; something which has heretofore escaped us.

What comparative advantages does Peru have to offer the nations of the Asia-Pacific?

We have a fairly diversified portfolio of raw materials and commodities available for direct investment; significantly more than most countries that export mineral resources, fish and forestry products. We (also) have infrastructure needs of $30 billion, which means that we have a group of projects that are ready for implementation and quite attractive.

But we are also a good bridge to other markets. Peru will probably have the last to sign FTA United States for some time, after the change of government, and therefore it will also give an advantage. Peru is an interesting option from the standpoint of the domestic provision of raw materials, access to markets and even energy. This is because we have a portfolio that is diversified between hydroelectric energy and local production of gas.

What are the most important issues to be addressed by Peru at this APEC meeting?

Apart from the economic situation, which is a real issue in the short term, we must address the consolidation of our economic scheme. Clearly, a small and poor country such as Peru only stands to gain from increased economic integration into a club of relatively wealthy countries, such as APEC. So we must address the strengthening of this (integration) process. And if APEC was to unify into a single free trade zone, this would be ideal (for Peru).

In what state are the negotiated FTAs or those pending negotiation?

We have already signed (an FTA) with Thailand, EFTA, Singapore and Canada. In 2009, we will be negotiating four FTAs: Korea, Australia, Japan and the European Union. During the APEC summit, we will be signing the Chinese FTA.

The Peru-United States FTA should be implemented in January. There is a delay in the US Congress, due to their certifying compliance with the preconditions. This should be resolved by December. As regards the Chile FTA, we are very advanced. We hope to finalize it or announce it during President Bachelet’s visit to the Leaders Meeting.