Living in Peru : your everyday companion

A couple of weeks ago we shared with you the business opportunities that the Peru – United States Trade Promotion Agreement (PTPA) offers to our country, not only for exporting using the preferential access to the American market, but for importing products that may attract the attention of the increasing demand of our industry.

As said before, the PTPA eliminates the tariffs for the products that Peru and United States exchange, and therefore robust trade between our countries in both ways. In other words, by dismantling the PTPA will allow us to export more but also, import more. The exported goods will come from sector where our country has revealed advantages for production while imported products will depend both on the demand of our market and our commercial partner’s ability to produce with competitive advantages.

Without a doubt our country has a clear competitive edge for clothing exports and it doesn’t surprise anyone, that using the unilateral preferences from the ATPDEA, this sector has heavily increased its sales to the United States stimulating the growth of non traditional Peruvian exports.

It is easy to observe that Peruvian clothing exports increased by 58% between the years of 2004 and 2007, being U.S. and Venezuela the fundamental markets. The main products exported were cotton t-shirts, blouses and shirts, even though there is an interesting dynamic going on with baby clothing as well.

According to the National Association of Specialty Food Trade, NASFT, gourmet canned food represents a 22 million dollar market annually in the U.S. in which around 120,000 products gravitate. For this reason, our exporters should take a close look at the market characteristics to start taking advantage of this opportunity.

First of all one should ask what is a gourmet product. Well, according to the NASFT, specialty foods differentiate themselves from the rest because they have a particular level, style and/or higher quality.

There is no doubt that in recent years, our sales overseas have gone through a considerable expansion, and non-traditional products are going through a huge boom, being totally stimulated by the evolution of agro industrial exports.

Within this group, asparagus for instance have been extremely successful and its international quality placed Peru as the leader amongst the global producers of asparagus in the world. Nevertheless, we should not take it for granted and must develop other valuable crops that present such high potentials as those in the international markets.

As we have been mentioning the AFP Peru – U.S.A., offers our industry and our businessmen countless opportunities to generate new business and, in particular, to offer and sell our products in one of the world’s biggest markets. But in order for this as well as other negotiated agreements boost our exports, it is necessary to make the process easier and convince our entrepreneurs that exporting is simple.

Kosher is a Hebrew word that means appropriate or permitted and it is commonly used when referring to the allowed food for the people that observe the dietetic regulations of the Jewish Orthodox. And even though the Jewish colony in Peru is very small, in countries like the U.S., the Kosher market can represent a very interesting alternative. And in spite of the Jewish population in the U.S., being extensive they are not necessarily the only consumers of this market, Muslims and Adventists as well as vegetarians and lactose intolerants are also regular buyers.

Conscious as they are, of an alarming increase of obese people living in the United States, a vast array of advertising campaigns exist in that country, inviting consumers to participate in a healthier and better diet instructing them to include a larger number of vegetables and fruits in their eating habits. This positive change generates a great opportunity for countries like Peru, who now have a competitive edge to export these type of products which in turn, count with preferential access to the market. But, in spite of having all sorts of production advantages, certain specific products are still priced and taxed very highly, which presents a notorious limitation for their importation from countries who do not happen to have the same preferential access with the U.S.

Onions are regularly known for their capacity of making one cry as they cut them opened. But those particular onions destined to be exported, often make us smile instead of crying, due to their favorable usage and the sustained growth they provide in the sales market abroad.

During the years 2003 to 2007, the Peruvian onion exports have grown in 95.9%, reaching only during the last year, the sum of 22.2 million dollars. Unquestionably, our most important markets are the U.S., Chile and Holland; with the U.S. being the most important destination of them all, receiving around 86% of the worldwide onion exports during the year 2007.

When a new industry starts brewing an export idea, it is the procedure to create a detailed plan with the specific characteristics of the products, the country of destination, the demand, and requirements to enter the market, the sales strategy, amongst many other things. Another important point to consider in the evaluation and many times fundamental in the decision to export, is the adequate financial opportunity, especially among those entrepreneurs with good ideas but no real capital to initiate their export adventure. Nowadays, though and, thanks to the increasing credit opportunities businessmen who have successfully identified a business idea don’t have to worry about anything else.

The coming free trade that is about to happen with the U.S.-Peru Trade Promotion Agreements, will allow Peru to have 80% of its goods completely tariff free and the rest, will be eliminated in settlements during the course of the next ten years. With this liberalization, U.S. imports will be cheaper, which will in turn raise the competitiveness amongst Peruvian industries placing raw materials and equipment at lower prices for their manufacturers. Let’s not forget that the majority of taxes on the Peruvian imports from the U.S. range from 6% to 12%, while other goods are at 20%. Nevertheless, the U.S. is one of Peru’s basic providers, concentrating 18% --approximately of the total imported goods by Peru.