Living in Peru : your everyday companion

Foreign Trade and Tourism Minister, Mercedes Aráoz, explains the advantage of Peru’s being a member of the APEC from an economic and entrepreneurial point of view.  She also defends the convenience the Free Trade Agreement with China and her particular point of view on the Chinese democratic system.

How would you sum up the APEC? 

It is a great window of opportunity. The APEC is when Peru goes on display next to the main world economies. Besides that we are the new South American attraction.

How do you take advantage of that situation?

It is the possibility to increase commerce. It means more industries that could be developed here. Today South Korea sees our country as a great opportunity for business. It does not only invest in infrastructure, mining and energy but also industry and services.

As host country, what has Peru put the most effort into?

The point was to develop the topics of commerce and investment within the frame of corporate social responsibility. But the agenda always ended up being altered by the board. The financial crisis will be one of the key issues during the debate.

Will it overshadow the other topics?

It has not overshadowed the other topics but it will have to be discussed. The other fundamental issue is the reduction of food prices, which still remains an issue to be considered in the long term. This means improving productivity in the fields and preventing the increase of prices which may cause a threat to people’s necessary nourishment and health.

How is the APEC viable when its agreements are not obligatory?

Peer pressure. If you want to become attractive to investors then it is best you follow your individual plan of action. It is a way of letting your peers know you are reliable and that they should invest in your country.

On a different note, why is there such a rush to finalize the free trade agreement with China during the APEC?

It isn’t that we are in a rush. We have had a better negotiation than any other country has managed to have with China. (China only has two Free Trade Agreements, one with Chile and one with Australia). Obviously there is a political willingness and this agreement is a full service deal because it comes with a service format, goods trading list with 10% of exemptions in our favor, a holding basket for a period of sixteen years (deregulated trade) and a customs cooperation agreement.

Is there a real chance that there will be an invasion of Chinese products that will flood the market?  

No. We have protected ourselves more than we have done in the past. Before they had 17% and today they still have 17%. Before there was no customs agreement and now there is. We have also taken guaranteed commercial defense measures. All that is left now is to work on an internal agenda with the textile sector. However it would be wrong to consider limiting commerce based on a small group of producers.

What Chinese product is our industry most sensitive to?

Without the TLC, it would be textiles, metalmecanics. Now with the TLC there won’t be any industry at risk because they have all been heavily protected. Eighty-seven different exports have been excluded and have been put into a 16 year basket, enough time to increase the level of competitiveness in our market.

What have the Chinese asked of us in return? What have we had to sacrifice?

There interest is pretty much political. They need an in into this market, obviously we would have liked that grape exports to China had begun sooner but they are still entering their market at a steady pace. They have asked us to put aside a certain type of synthetic fabric. They have given me a list of products which represents 1% of the commerce.

How many products does that represent?

I don’t have the exact number.

And the exports?

I don’t have those either. It’s nothing, its only one factory, a synthetic thread and four other things. We must understand that we are not a country which can affect them that much. They are not sensitive to us because we are a small country.

Can our market be sensitive to Chinese products?

One more time! We have taken preventative measures and our products are protected. China is a strategic partner, lets not be petty, my God!

The argument that those against the Free Trade Agreement are petty and those for it are broad minded, isn’t that just putting a very positive or negative spin on reality instead of seeing things for what they are?

You are giving me an ideological sermon. I’m talking about economics.

That is the government’s response on the issue.

I haven’t given any response, I’m talking about economics. We are discussing the situation which occurs when a big country enters into a negotiation with a little country. The little country always wins.

What do they ask for in exchange?

They want to enter into our market. They have earned an opportunity to invest in our country and to use us as a platform to earn more deals with the rest of America. It’s a win-win situation for both countries. A negotiation is not “I will give you this just so I can take more away”. The internal agenda goes hand in hand with this. Let’s think of an agenda for cooperation between the public and private sector, it would be a mistake to dwell on complaints and not make an actual proposal. Yesterday I met with the ‘gamarrinos’, I told them what I was doing and they said it was a good idea. We have a strategic national plan, to allow for development. That is what is happening in the regions.   

Yes, but there has been support from the regional governments.

Excuse me, that was single-handedly coordinated by the MINCETUR. We have planned the regional exports (PER). It didn’t just happen, there was planning involved. We pay a manager who works in the Regional Export Council so we can support them. The hugs I received today from the people in the regional directory were sincere. They would mention “how well be work together”, no one calls me minister anymore they call me Meche as an affectionate term.

Will the Free Trade Agreement with the U.S. be ready this week?

Though we are in the final stages there are two major topics missing. The topics are related to the environment. Were not 100% there yet but we have made significant progress.

How important is the Andean Community in the economic integration process?

I like to be within the Andean Community. The problem at the moment however is that there are conflictive views on widening the markets. We have deepened our relationship with Ecuador and Colombia. Unfortunately Bolivia thinks differently. When another country nationalizes a Peruvian owned company, then no new market is being created.

Do you think there is freedom in China?

It is a country on the verge of becoming the most modern economy. There is more political participation everyday. I cannot comment on that process.

Like you have just criticized Bolivia for its economic backwardness, you may state your opinion on China.

There is much more autocracy, there is a politburo.

It is a dictatorship, there is a single party.

But there are elections.

Elections regarding the single party!

But there is a political option. They are taking the more democratic road.

Is there a prison in China for dissidents?

That is a topic that needs to be addressed and eradicated world wide. What I see is a country moving towards a higher level of democracy.

Don’t you suppose your economic analysis is clouding your judgment regarding the dictatorship?

No. I have seen it there. One can see there is more and more participation with each passing day. I have been told of how public education has been improved and how regional integration has been developed using the electoral system.

Elections involving another party?

There obviously is no other party. Are you in the position to say which if the two systems is the best, ours or theirs?

To believe in economic freedom is to also have to believe in the freedom of the individual, I’d rather have the full package.

I think having the choice of many different political parties is the best option.  I cannot judge China prematurely based on an assumption as I cannot judge Bolivia based on its ideologies. At the same time no one has a right to judge my decision based on their ideologies. Besides, Bolivia elected its president democratically.
 
Hu Jintao was not elected democratically.

But they have different political mechanisms at play. We must allow each nation to chose.
News source: El Comercio
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