New export strategies to boost competitiveness

How has the exports sector contributed to the economic growth of Peru?

A country aspiring to improve its social, economic, cultural level and achieving proper development, has three aspects, one of them is investments. Investments depend on the economic but also political climate, and are what would led you wherever you want to go, Peru has had an important cycle of this kind. The other aspect is companies looking for convenient places that suit their interests to settle and invest in the country. And the third one is the result of export, which has an integrating effect on the production stages of a country. In that sense, Peru’s exports have been growing thanks to the vision that a group of people had back in the ‘90s, where the foundation for the growth that became more evident in early 2000 was set. Among these measures is the first FTA, with the US, that was pretty controversial at first but it has proved to be an important policy even now, when these kinds of agreements have proliferated they lost their differential sense. So now multilateral FTAs have begun to proliferate, taking the agreement to a new level, but again, only until all countries have them.

The United States ceased to be Peru’s main trading partner to be surpassed by China, with whom the predominant exports are traditional exports. How important has the United States been for the export sector in Peru?

The United States historically had a good manufacturing market but this is changing now. They have always been our main trading partner for both traditional and non-traditional products and products with a significant growth potential which in the case of agricultural products depends on the health barriers attached to agreements and local development. In manufacturing and metal we should seek to improve internal competition, and we have lost space in recent years. However, given the market size China presents, we believe that we could go there through traditional agricultural products, while we do not have many chances to sell them manufactured products.

You have said that "Peru has afforded not completing economic reforms, missing opportunities provided by FTAs and complex bureaucracy." That means the target should be higher efficiency in exports.

We have the capacity, what we need then is efficiency and competitiveness. And competitiveness is affected by internal problems, because the market is out there and one has to compete only, selling the best product in price and quality. We need to improve our competitiveness to improve prices, we must improve logistics. The state must regulate this and it is precisely in these kinds of functions where our weaknesses are concentrated.

And as an interlocutor, what would you ask the government to do?

First, there is a need to develop a country with a vision and second, and most important, is to work some issues on a common agenda. I think no one would disagree that education improvement is a matter of high priority, through participative budgeting, allocating over 6% of our GDP while currently we are close to 4%. Investment in education, then, takes at least a generation for the changes to become evident. The same happens in the health area, where investment keeps being reduced, and we let that happen when we did not realize the importance of an adequate health system. Currently many people hire private systems and they will be affected if after retirement or in a situation of unemployment they lack the necessary income to meet that expenditure. Thus, the government should address the overall health to guarantee a better structure for it, since it will also be a problem in the future. Another vital issue is safety, for business development, for people’s development. Transportation and logistics are also essential tools to improve time and cost for companies and individuals. All these issues are always affected by a number of interests, or votes and popularity, and that is why no one has enough determination to change the current situation.

How does all this affect the exports strategy?

We're talking about transmitting to the community and our partners and the state that we are looking for more FTAs, as they work really well. We have identified as an interesting perspective thinking about each US state as an equivalent to the economy of a country, so we will focus our efforts on each of those states. Then we will design custom strategies according to each one of them, without the need of looking for new treaties, given that from this point of view it is like having 50 FTAs in one.

What did your partners think when you came to them with this idea?

That it does look good, but it still has to be put into practice. And to achieve that we need the government’s cooperation, primarily through the participation of commercial attachés appointed in the United States, to develop relations with every state and live in those states as ambassadors. Despite the rivalry that many claim today based on the economic position of China, the United States still has much potential, due to its spending and purchasing capacity, evenly distributed among its population.

The World Bank has published a report, which states that Peru is continuously growing, while growth in many other countries in the region is slowing down.

I really try not to take these statements as revealed truth, because, for example, this year’s growth was projected above 5% and currently it is around 3 points. What happens is that the World Bank, IDB, CAF do research for their predictions taking into account interviews instead of audits, then the figures calculated are subject to statements and not to specific calculations. We have many advantages that we are not making use of, to grow at the 7% that we could achieve if we were more foresighted, as with the commodities super cycle. We shouldn’t be content with just being good, but we have an obligation to try to improve and be better every time.