PERU: Proving that trade agreements work
Thomas Cromwell

For those who doubt the value of America’s growing list of bilateral and multilateral trade agreements, take a look at the Andean Trade Preferences Act, and its successor, the Andean Trade Promotion and Drug Eradication Act.

The ATPA was signed in 1991 between the United States and four Andean countries, Peru, Colombia, Ecuador and Bolivia, as a way to boost the economies of those countries and provide incentives for coca farmers and others in the cocaine business to switch to legal business activities.

ATPA worked. It proved a boon to those economies. For example, the Colombian Ministry of Foreign Trade reported that between 1992 and 1999 ATPA generated a total of $1.2 billion worth of output and more than 140,000 direct jobs in Colombia.

For Peru, the impact of ATPA and ATPDEA has likewise been dramatic. In 1994 only 16 percent of Peruvian exports went to the United States. Last year the figure was nearly 30 percent.

Peru’s ambassador to Washington, Eduardo Ferrero, points to the dollar increase in exports and the resultant steady growth of the Peruvian economy, which has done better than most Latin American countries, and grew an average of 4.5 percent a year over the past three years, and is growing at an annual rate of six percent this year.

In 1991, Peru’s exports to the United States were $655 million. In 1996, four years after ATPA was enforced, they had risen to $1.2 billion, and in 2002, a decade after ATPA entered into force for Peru they were $1.9 billon. The ambassador notes that with the passage of ATPDEA in 02, which broadened and deepened ATPA’s trade incentives, Peru’s exports to the US climbed to $3.6 billion last year.

At the same time, US exports to Peru have also been growing steadily, and Peru imports more from America than any other country (about 20 percent) by a large margin, at a value of $2 billion last year, the ambassador says.

And these agreements have served to greatly bolster Peru’s alternative development programs aimed at promoting the cultivation of crops such as coffee, palm oil and cacao in areas previously used for growing coca, from which cocaine is processed. A decade ago, 115,000 hectares were under coca cultivation in Peru. Today the figure is 35,000 hectares, by US estimates.

However, Ambassador Ferrero points out that coca growing is a regional problem. When drug control activities are stepped up in Colombia, for example, growers move across the border to Peru, in what he calls “the balloon effect.” That is why, he says, “There has to be a regional approach to dealing with illicit narcotics.”

That approach now centers on the Andean Free Trade Agreement currently under negotiation. A 12th and final round of talks is expected in September, after which the pact will be forwarded to Congress for approval, some time early next year.

“We want to continue to have the trade preferences in a permanent way,” the ambassador says, of the Andean countries in the negotiations, Peru, Colombia and Ecuador. Because of domestic turmoil, Bolivia is not party to this deal.

The second benefit of an Andean Free Trade Agreement , he says, is that a permanent trade agreement will reassure and encourage foreign investment. “Free trade agreements create an economic and legal framework that provides greater stability for foreign investment.”

In addition, these agreements contribute to the democratic stability and security of the countries concerned,  

Already some 500 American companies have invested $10 billion in Peru, in everything from agriculture and mining to trade, energy, finance, tourism and transportation.

Peru’s main industry has been mining and its main exports have been minerals. The ATPDEA, however, provided incentives for agricultural and textile exports, and these account for a big part of the increase in exports to the United States.

Peru has had particular success with Asparagus, and the ambassador says that 40 percent of all green Asparagus eaten in the US today was grown in Peru. Not surprising, then, that resistance to an Andean Free Trade Agreement in America could come from Asparagus growers, although the ambassador says that Peru’s season for growing the plant is different from the US season.

The largest industrial and export-related venture, which includes major US investments, is Camisea, a project to bring natural gas from a location in the Andes down to the coast for use in a domestic gas network and, secondly, to supply a gas liquification plant from where tankers will take LNG to Mexico and, possibly, other Latin American countries. Most of the LNG is expected to be forwarded from the Mexican terminal to California.

Camisea I, the domestic part of the project, required an investment of $2 billion, and is now complete, the ambassador says. It was implemented by a consortium of Argentina’s Plus Petrol, Korea’s SK, Algeria’s Sonatrach and America’s Hunt Oil, with Argentina’s Plus Petrol as the operator.

Hunt is leading Camisea II, an LNG project which will create the export infrastructure at a cost of a $2.2 billion. Hunt has sold some of its shares to Spain’s Repsol, having SK as another partner. There has been opposition to Camisea from environmentalists, concerned about damage to the Peruvian rain forest and some indigenous peoples affected by the pipeline that passes through their territory, but the ambassador says Peru has done its best to preserve the environment.

And Peru is a wonderful country to visit as a tourist. From the spectacular cuisine of Lima, which blends European, Asian and Latin American dishes, to the soaring Andes with their rivers and rain forests, to the marvels of Machu Picchu and other Inca and Spanish colonial sites, Peru has magnificent destinations to entice travelers.

In the 80s and early 90s, Peru’s home-grown communist group, the Shining Path, terrorized Lima and other parts of the country, dampening tourist enthusiasm and scaring investors. Today, with the leaders in jail and probably no more than several hundred members based in the Andes, the group is of little concern and, “There is no possibility for it to be seen as a challenge or threat to the state,” Ambassador Ferrero says.

He says that tourism has been growing as much as 30 percent a year, reaching 1.2 million visitors last year. Of these 250,000 were Americans. But the potential is great and tourism is bound to increase. “We have so many things to offer,” the ambassador says.


Curriculum Vitae of Eduardo Ferrero Costa

Name
Eduardo Ferrero Costa.

Place and date of birth 
Lima, Peru, 1946.

Status 
Married to Verónica Diaz de Ferrero. They have four children.

Education 
Pontificia Universidad Católica del Perú
Law Degree, Lima, 1970
University of Wisconsin, Graduate Studies in International Law, 1971
University of California, San Diego
Scripps, Research on Law of the Sea, 1972.
Pontificia Universidad Católica del Perú
Ph.D (Law), Magna Cum Laude. 1974.

Current Position 
Ambassador Extraordinary and Plenipotentiary of the Republic of Peru to the United States of America, since March 2004

Relevant Experience 
Ambassador, Permanent Representative of Peru to the Organization of American States (OAS) in Washington, D.C., since October 2001.
Estudio Echecopar Law Firm, Senior Partner (2001-1999).
Minister of Foreign Affairs of Peru, October 1998-July 1997.
Peruvian Center for International Studies (CEPEI), Founding Member and Executive President. 1998-1980
Eduardo Ferrero Costa Law Firm, Senior Partner (1995-1980)
Vice President and Member of the United Nations Committee against Racial Discrimination – CERD  (2000-1988).

Other Relevant Experience 
Member of the International Court of Arbitration of the International Chamber of Commerce of Paris (2002-2000).
Advisor to the Andean Community (2000-1999).
Advisor of Peruvian Delegation for Border Negotiation with Ecuador. 1997 – 1996.
President of the Peruvian Commission for the Pacific Basin and Member of the Board of the Pacific Economic Cooperation Council- PECC (1995-1992.
Member of the Advisor Committee of the Ministry of Foreign Affairs (1992-1985)
Legal Advisor to the Peruvian delegation to the United Nations Conference on the Law of Sea (1982-1978).
Senior Legal Counsel to the Minister of Foreign Affairs (1982-1980).
General Legal Counsel to the Ministry of Industry, Tourism, Foreign Trade and Integration (1978-1975).
Member of the board of Compañia Minera San Ignacio de Morococha – SIMSA 92001-2000), Banco Financiero (1996-1995), Petroleos del Perú, PETROPERU (1977-1975), Servicio Nacional de Aprendizaje Industrial (SENATI) (1977-1975),

Affiliation (s) 
Lima Bar Association
Permanent Court for International Arbitration, Member for Peru.
Peruvian Center for International Studies (CEPEI), Founding Member.
Peruvian Association for International Law, Member of the Board.
Peruvian Center for Solution of Conflicts (CEPSCON) Member of the Board.
Peruvian Association for Peace Studies (APEP), Member of the Board.

Academic Experience 
Senior Professor of International Public Law at the Pontificia Universidad Católica del Perú since 1972
Professor of International Law at Universidad de Lima 2001
Professor of International Law at the Diplomatic Academy of Peru, 1988-1974
Visiting Professor, Law School University of California, Berkeley 1987
Conferences on International Law and Peruvian Foreign Policy at Centro de Altos Estudios Nacionales (CAEN), Escuela Superior de Guerra Aérea and Escuela Superior de la Marina de Guerra del Perú, among other national institutions between 2001 and 1974.

Publications 
Author and/or editor of 19 books and more than 50 academic articles published in Peru and abroad on issues related to International Law, International Relations, Law of the Sea and Peruvian Foreign Policy

Recognitions 
Ford Foundation Fellowship to the University of Wisconsin, 1971.
Eisenhower Fellow, 1992.
Has received decorations in the highest level from the Governments of a, Bolivia, Brazil, , Colombia, Guatemala, Mexico, Paraguay and Peru.

Languages 
Spanish, English