Rafael Torres, president of the Brazil-Peru Chamber, said it is urgent to reactivate the FTA to attract US$3 billion in investment and prevent Chile from gaining Brazil’s logistical exit to Asia.
What is the purpose of the Chamber?
The Chamber has two purposes. The first is to be a good partner, a business partner, an articulator and facilitator of business activity and the meeting between Peruvian and Brazilian businessmen. The second line of action is the institutional one. That is, what can we do as a chamber to facilitate macro processes and relations between countries, to improve, for example, the trade flow and integration between Peru and Brazil. That is a fundamental and crucial part that we have also been working on.
Trade between Peru and Brazil is governed by the Economic Complementation Agreement. How has this trade evolved?
We have a trade balance of approximately US$5,000 million. For several years now, Brazil has been selling us double what we buy from it, which creates an imbalance. Still, Brazil is our main trading partner in the region, and that is no small feat. From the chamber, and based on studies and reports that we have analyzed, we estimate that this trade could double or even triple if Peru and Brazil set a joint agenda on different fronts.
What would those fronts be?
One of them is to go beyond the Economic Complementation Agreement and develop other agreements that complement not only the elimination of tariffs, which the agreement already achieved, with zero tariffs for practically all products, but also mechanisms that encourage investment. For example, agreements that protect Brazilian investment in Peru, that provide legal security, and also that promote Peruvian investment in Brazil.
Unfortunately, despite the fact that Brazil is a leading player in the world economy, the ninth or tenth largest economy in the world and the largest in Latin America, Peru does not have an FTA with Brazil.
What is Peru missing by not having an FTA with Brazil?
We are missing out on billions of dollars in Brazilian investments that could come quickly. It is estimated that in the last 20 years, Brazilian investments in Peru have been between US$3,000 million and US$4,000 million. I am sure that, if we overcome some bumps and the Economic Deepening Agreement that has been stalled in the Executive Branch for almost 10 years is approved, at least another US$3 billion dollars could arrive in the coming years, if not more. What we have to do is get back on the agenda, turn the page and work together with Brazil.
Was this agreement stopped by the Lava Jato case?
Because the Lava Jato case broke out, a political problem that generated resistance at the time and that has dragged on for nine years. The situation was complex at that time, but it is time to turn the page. Otherwise, countries like Ecuador and Chile will continue to beat us, and we will be relegated in the regional logistics system. This type of agreement would clearly benefit forgotten areas such as the Amazon and the border regions with Brazil. Furthermore, you cannot stigmatize an entire country. In the Lava Jato case there were not only Brazilian companies, but also Peruvian ones, and even presidents involved. These problems occur everywhere.
Have you spoken to the Executive again?
We have asked the ministry for technical and objective explanations, but we have not received a clear response. As a chamber, our job is to articulate, recommend and ask. We are not a public entity. Since the chamber was created, this has been a central theme for us. I myself, as a Peruvian businessman who lived in Brazil, was surprised to learn of all the untapped potential.
So, will the next government be the one to solve this problem?
Fortunately, in recent months we have seen a change in attitude both in Congress and in Foreign Affairs. Brazil has always been ready. Even recently, Congress has approved a rule that declares the Peru-Brazil communication routes of national interest. There is a growing desire to move this relationship forward.
Do you think that the trade agreement with Brazil could help consolidate, for example, the Chancay Megaport?
Yes, definitely. The port of Chancay is very positive because it has given us great visibility worldwide. However, the truth is that Peru already has very important ports. This infrastructure gives us the ability to receive and move cargo not only to Asia, but to the entire Asia-Pacific. And when we talk about the Pacific, we also talk about the United States, particularly California and Washington state, which would also benefit.
To the extent that the Peruvian logistics system improves at the port level, this will strengthen our commercial relations not only with China, but also with Japan, Thailand, Australia and with the United States on its west coast.
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