For years now, Peru has been an up-and-coming country, being one of the fastest growing economies in Latin America. A large part of this economic success is due to its strategic Free Trade Agreements (FTAs). Peru is now more freely able to import and export goods with the rest of the world, spurring economic growth.
Keep reading to learn about Peru and its FTAs, in particular, the opportunities available given current trade negotiations with India, one of the global economic powerhouses.
Status of Peruvian Economy
Peru is currently the 7th largest economy in Latin America, with a Gross Domestic Product (GDP) of over USD$190 billion in 2017, nearly doubling in the last 10 years. Peruvian exports for the year 2017 amounted to USD$44billion, amounting to nearly a quarter of the Peruvian GDP.
Of these exported goods, mining amounts to approx. 37% of total Peruvian exports. Copper and gold alone amount to 22% and 16% of total exported goods respectively.
Peruvian imports amounted to USD$40 dollars in 2017. Of the top Peruvian imports were types of machinery such as broadcasting equipment, computers and telephones, vehicles such as cars and delivery trucks and chemical products such as pharmaceuticals and pesticides.
Peruvian Free Trade Prospects
For decades, Peru has been aggressively pursuing free trade policies with countries all over the globe. Currently, Peru has free trade agreements with the United States, the European Union, China, Japan, South Korea, Singapore amongst others. These trade agreements allow Peru to buy and sell goods from foreign countries with relative ease. Daniel Anteparra from PromPeru, a commission dedicated to promoting Peruvian tourism and exports abroad, was able to provide more information – “Peru is an attractive commercial jurisdiction, however, there can be complications in trading with Peru are the issues and costs of logistics and obtaining licences”.
As of now, the Peruvian and Indian governments are in negotiations over a new FTA. Currently, without the existence of an FTA, Peru exported USD$1.5 billion worth of goods to India in 2017. Overall Peru has exported over USD$15.5 billion worth of goods to Asian markets in 2017, up from USD$10.5 billion in 2016.
Free Trade Negotiations with India
In light of these numbers, it is clear that the Peruvian government sees an enormous upside in the establishment of an FTA with India. In fact, it is estimated that after this agreement comes into effect, the value of Peruvian exports to India could climb to USD$2 billion.
This would not be without significant advantages to Indian companies, who currently ship over USD$800 million of exports to Peru in the forms of machinery, vehicles, electrical equipment and pharmaceuticals.
Current Trade Between Peru and India
Currently, without the FTA, India imposes a 7.5% duty on Peruvian bulk pharmaceuticals, while Peru does not impose any such tariffs on Indian bulk drug pharmaceuticals. In addition, Peru imposes a 6% duty on other Indian imports while India, in turn, imposes 10% on Peruvian imports.
For Peru, automobiles and motorcycles account for 4.5% of its total imports at USD$1.8 billion. Currently, this is their second largest import category. India´s largest exports to Peru are cars, motorcycles, and other transportation goods. In total for 2016, the value of Indian transportation goods to Peru amounted to nearly a quarter billion dollars.
Currently, 6% of India´s imports are gold, with a value of USD$24 billion. Coincidentally, gold is Peru´s second single largest export with an export value of USD$6.5 billion. Even without the existence of an FTA, Peru has been steadily increasing the number of gold exports to India. In 2014 Peru supplied only .6% of Indian gold imports, however, this amount increased from USD$106 million in 2012, to USD$270 million in 2014.
In addition to gold, copper and calcium, phosphate is among Peru´s largest export items to India. In order to meet the increasing Indian demand for Peruvian mineral products and precious metals, there has been an increase in investments from Indian in Peruvian mining companies. Currently, there are (5) Indian companies operating in the Peruvian mining sector. These companies include Tata Consultancy Services, Zuari Argo Chemicals, and Tech Mahindra.
Future Trade Trade Between Peru and India
Trade between Peru and India will continue to grow stronger with each passing year in spite of existing tariffs. India and Peru have welcomed the growth in commercial ties, and in turn, the two economic powers have become solid business partners. As the quantity and value of goods traded between the two nations each year increases, one can only imagine the increase in business opportunities available between the two regions.
Interested in Taking Advantage of Increasing Commerce between Peru and India?
Interested in learning more about importing or exporting goods from Peru? Do you have a business idea for creating and forming an export/import company in Peru? If so, get in contact with Biz Latin Hub. Our team in Peru provide professional market-entry, legal and accounting services to assist you and your business.
Watch the following video to learn more about the company formation in Peru.