Special feature: PERU

Interview with Peruvian Foreign Minister Ricardo Luna

May, 2017

QLast year, Peru hosted the 24th APEC Economic Leaders Meeting. What is the importance of the Asia-Pacific region for Peru? Can you please list the country's priorities in relation to APEC and the region?

Peru’s international projection to the Asia-Pacific region is a natural response to both our geographic or geopolitical reality and the web of our common historic and cultural ties. Thus, it is a strategic priority of our foreign policy to expand and to strengthen links with all Pacific Rim countries. Our foreign trade is already highly concentrated in the Asia-Pacific, accounting for 65% of our total exchange, and most foreign investment in Peru comes from that same region. We have FTAs with nine members of APEC, including the US and China, and our commerce has grown six fold since entering APEC in 1998.

APEC has become a dynamic engine of economic growth and it certainly is the main forum in the Asia-Pacific region. As members of APEC we are working together to promote free trade and investment while facing a surge of protectionism elsewhere around the world. We are also focusing on the economic and social dimensions of sustainable development. People from APEC economies have seen their income increase and a steady growth of emerging middle classes have left poverty behind.

Last year Peru hosted again the APEC Summit, after having done so also in 2008, and pushed to continue progress in the forum’s main issues. Peru proposed four priorities for APEC2016: developing human capital, modernizing micro, small and medium enterprises, enhancing the regional food market, and advancing regional economic integration and growth. We are seeking now to implement the priorities discussed in Lima, as well as new initiatives presented by other economies, and we are committed to support Vietnam’s efforts to assure the success of the 2017 APEC Leaders Meeting.

QCoinciding with the first year since the signing of the TPP, last February President Kuczynski was in Washington where he met US President Trump. Interestingly, the meeting took place shortly after Mr. Trump affirmed that the US would withdraw from the TPP, an agreement that accounted for 40% of the world´s economy and a market of 800 million consumers. What are the alternatives for Peru, given the current scenario?

Peru remains committed to free trade and multilateral agreements to increase commerce and investment.

Peru remains committed to free trade and multilateral agreements to increase commerce and investment. Despite certain skepticism regarding the liberal international order and globalization, and eventual setbacks in liberalizing trade, Peru considers the TPP to be a relevant benchmark to assure modern competitive conditions that can assure that we continue to benefit from trade. It sets high standards for future negotiations. Furthermore, its complex negotiation process created strong links among TPP parties that will allow us to find ways to continue forward.

Members of the Pacific Alliance –Colombia, Chile, Mexico, and Peru– have decided to negotiate future FTAs as a bloc, including quality standards and modern trade patterns already agreed upon within TPP negotiations. Last April we met in Chile with Asian representatives to discuss this approach, and are looking forward to reach agreements within short timeframes. We seek to start trade negotiations soon with New Zealand, Malaysia, and Vietnam, as well as with Australia, India, and Indonesia in the near future.

QAsian countries to sustain global economic growth with some interesting factors to keep in mind: first, while China's economy is slowing down, other countries are emerging in mind with a very promising future. Second, domestic consumption is growing and so too is consumer spending. Finally, Asia remains the factory of the world, however it is emerging as a global investor too; in addition to Hong Kong and Singapore, investors group now come from countries like Indonesia, China and Malaysia. Infrastructure needs in developing. Asia and the Pacific will exceed $22.6 trillion throughout 2030, or $1.5 trillion per year, if the region is to maintain growth momentum, according to a new flagship report Meeting Asia's Infrastructure needs, by the Asian Development Bank (ADB). Please further elaborate on the priorities, role and partnerships that Peru is willing to develop in order to capitalize on current and future Asian Pacific trends.

Nobody doubts that the Asia-Pacific has become the most dynamic economic region in the world. Asian economies are valuable partners for Peru and we share a common vision regarding free trade, investment, and sustainable economic growth. China is a key strategic partner for Peru, and we aim to become China’s natural economic hub and point of entry to South America.

Relations among Peru and countries from the Asia-Pacific region have increasingly strengthened. Immigration from China and Japan to Peru started in the mid-nineteenth century and we established diplomatic relations with both countries in the 1870s. Today Peru is home to the largest population of Chinese descent in Latin America and the second largest of Japanese origin in the region. Peru expanded its presence in Asia in the 60s by establishing diplomatic ties with Australia, India, and Korea. We recognized the People’s Republic of China in 1971 and, subsequently, in the 90s, Peru opened embassies in Indonesia, Malaysia, Singapore, and Thailand.

Peru’s admittance to APEC in 1998, along with Chile and Mexico, was a key step in deepening our strategic relationship with the Asia-Pacific region. Likewise, the creation in 2011 of the Pacific Alliance was a political response to the need to create a dynamic and effective integration process aimed at the Asia-Pacific region.

We believe markets in the Asia-Pacific have the greatest potential to increase our exports, non-traditional as well as traditional ones. We are developing the potential benefits included in the FTAs already signed with China, Japan, Korea, Singapore, and Thailand. We also want to harvest progress made with Australia, Brunei, Malaysia, New Zealand, and Vietnam during TPP’s negotiations. We will follow a similar approach when negotiating agreements with India and Indonesia.

The Asia-Pacific region also is a key source for cooperation in innovation and advanced human capital, crucial tools in the road to sustainable development and to increased productivity and competitiveness. We seek to focus cooperation on the development of small and medium enterprises and their association with Asian counterparts to promote their insertion into international value chains. Exchanges with high-level educational and scientific centers in Asia-Pacific aim at improving human capital and transferring scientific and technological knowledge.

The Asia-Pacific also provides an array of untapped opportunities to bolster infrastructure, transports, and communications, through joint ventures and investment projects that can improve and expand connectivity across the Pacific. Endeavors in developing infrastructure constitute a key step towards the goal of becoming a logistical hub for South America.

Logically, the growth of Peru’s diplomatic network in Asia-Pacific is an on-going effort. We are taking steps to open embassies in New Zealand and the Philippines, and are considering doing the same in Pakistan and Kazakhstan in the near future. Our embassy in Australia already serves as a launch pad for fostering relations with Pacific island states, and we now have non-resident embassies in Mongolia and Myanmar.

QMerely 6 weeks after taking office, President Pedro Pablo Kuczynski visited China and on November 21, 2016, President Xi Jinping held talks with President Pedro Pablo Kuckzynski in Lima. Both Heads of State agreed to push China-Peru Comprehensive Strategic Partnership with China and Peru-Sino joint action plan 2016-2021?

President Kuczynski's visit to China was his first international trip after taking office. The choice of China was due to its key role as a strategic economic partner and its sheer global economic power. We were particularly interested in attracting Chinese investment to finance development projects. President Kuczynski also committed to asses national regulations to facilitate the entry of new banking institutions to Peru’s financial market.

Two months after Kuczynski’s trip to China, President Xi Jinping made a state visit to Peru, after attending the APEC Summit held last November. The exchange of high-ranking visits demonstrates the dynamism that Peruvian-Chinese relations have today, in response to a policy priority set by Peru’s current government.

Both leaders approved a five-year joint action plan to provide a framework to develop our bilateral relations during that period, which ends in 2021 when Peru celebrates its bicentennial. The joint plan and 21 additional agreements signed covering diverse areas such as trade, mining, industrial development, technology, energy, and environment, among others, show the qualitative improvement of Peru’s and China’s relations since President Kuczynski took office.

Additionally, during the presidential visit to Lima delegations from both countries met for the second time within the strategic dialogue mechanism designed to promote Chinese investment in projects of mutual interest, especially in the areas of infrastructure, mining, and energy. The mechanism responds to the main goal of the bilateral strategic association in place: to develop relations beyond the scope of commercial and economic issues by working jointly on an agenda of mutual interest and benefit.

QChina promotes the creation of the Asian Infrastructure Investment Bank (AIIB), an international financial institution that aims to support the building of infrastructure in the Asia-Pacific region. As of today. Peru is not a member of the Bank. Can you explain if this is going to change anytime soon? If not, can you explain why?

During President Kuczynski’s visit to China he announced Peru’s interest to join the AIIB. Last March the bank accepted us as a non-regional prospective member. Peru’s Economic and Finance Ministry is currently adjusting domestic regulations to join the bank, as well as preparing the payment of installments that require congressional approval.

Peru sought membership to the AIIB to express our commitment to become a financial partner in the task to close our infrastructure gap. The bank can have a crucial role in helping rebuild our road network, after ample damage caused by massive flooding due to unprecedented warming of the sea along Peru’s coasts.