Cablegate: December Trade and Investment Briefs

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DE RUEHPE #1973/01 3642209
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R 292209Z DEC 08
FM AMEMBASSY LIMA
TO RUEHC/SECSTATE WASHDC 9798
INFO RUEHWH/WESTERN HEMISPHERIC AFFAIRS DIPL POSTS
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHC/DEPT OF INTERIOR WASHINGTON DC
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 02 LIMA 001973

SIPDIS

COMMERCE FOR 4331/MAC/WH/MCAMERON
TREASURY FOR MEWENS
USTR FOR BHARMAN AND MCARRILLO

E.O. 12958: N/A
TAGS: ETRD EINV ECON EFIN USTR PE

SUBJECT: DECEMBER TRADE AND INVESTMENT BRIEFS

SUMMARY
-------
1. This is an update on the following trade and investment news
from Peru:

Trade
-- The EU Initiates Bilateral Trade Talks with Peru
-- Mexico and Peru Expand Ace No. 8
-- The Global Financial Crisis and Exports to the US
-- Ministry of Transportation to Ban Import of Used
Cars
-- Toy Exports Increased 42% Over 2007

Investment
-- 3M Purchases Peruvian Company
-- Wal-Mart to Enter Peruvian Market
-- Peru: An Attractive Market for Chilean Software
Companies
-- Chilean Retail Store Foresees Continued Growth

THE EU INITIATES BILATERAL TRADE TALKS WITH PERU
--------------------------------------------- ---
2. The Member States of the European Union granted authorization to
move forward with bilateral trade talks with Peru and Colombia. The
next step will be for the negotiators to meet, most likely next
month in Brussels, to outline the mechanics of negotiations.
Negotiations are tentatively scheduled for February in Bogota, March
or April in Brussels, and a third possibly in Lima. The President
of the European Commission hopes to conclude negotiations by June
2009.

MEXICO AND PERU EXPAND ACE NO. 8
--------------------------------
3. Mexico and Peru announced the implementation of the Ninth
Additional Protocol of the Agreement on Economic Complementation
(ACE) No. 8. The agreement will expire on December 31, 2009.
Mexico and Peru will continue to move towards a comprehensive trade
agreement.

THE GLOBAL FINANCIAL CRISIS AND EXPORTS TO THE US
--------------------------------------------- ---
4. The Peru Export and Tourism Board, PROMPERU, conducted a study
on the impact of the global financial crisis on Peruvian exports to
the United States. The study found that many exporters have already
begun to redirect their products to other markets and/or focus on
niche markets in the United States. For some exporters, this action
began in December 2007, as a preventative measure and for others it
has been a necessity to remain in business. The study identified
five sectors facing potential risk: Non-metal minerals; wood and
paper; fish and agriculture; non-traditional agrarian; and,
ready-made clothing.

5. The study found that the wood sector has adjusted to the crisis
by diversifying its market and focusing on a niche market. In 2006,
Peru exported 28% of its wood products to the United States compared
to 14% as of August 2008. Additionally, manufacturers offer premium
products to the US market, such as specialty hurricane strength
doors which sell on average for $10,000. Previously, exporters sold
raw materials. Another example cited in the study involved the
agricultural sector. Prior to the crisis, the asparagus industry
sold large volumes of fresh asparagus to restaurants. With fewer
people eating in restaurants, the demand for fresh asparagus
decreased by 9%; however, the demand for canned asparagus sold in
supermarkets has increased by 55%.

6. In the ready-made clothing sector, the industry diversified its
markets to include Europe, Japan, and
China. The industry established solid markets in Chile, Ecuador,
and Venezuela as well. As a result, approximately 19% of total
exports in the sector are destined for the United States, in
comparison to Ecuador and Colombia who export approximately 40-50%
of their products to the United States.

MINISTRY OF TRANSPORTATION TO BAN IMPORT OF USED CARS
--------------------------------------------- --------
7. The Ministry of Transportation seeks to permanently ban the
import of used cars citing security and environmental concerns.
Congress recently extended the importation of used cars until 2010.
The original date for the ban to take effect was January 2009.

LIMA 00001973 002 OF 002

Concerned that Congress may extend the date of importation of used
cars again, the Ministry of Transportation and Communications (MTC)
announced that it will send a new bill to Congress to ensure that
the ban becomes final as of December 2010. Congress banned as of
January 1, 2009, used vehicles with compression-ignition engines
(diesel and others).

TOY EXPORTS INCREASED 42% OVER 2007
-----------------------------------
8. The Association for Exporters (ADEX) announced a 42% increase in
toy exports over the same period in 2007. The primary destinations
for the toys are Bolivia (32%), United States (22%), Ecuador (19%),
Chile (14%), Italy, Switzerland, Portugal, and Japan. The majority
of the toys are produced in Tacna, Lima, Arequipa, Puno, and Ica.

3M PURCHASES PERUVIAN COMPANY
-----------------------------
9. 3M announced that it has acquired ABRASIVOS S.A., a manufacturer
of coated abrasives in Peru. ABRASIVOS sells its products under the
ASA brand. ABRASIVOS has more than 40 years of experience in all
phases of coated abrasives production and converting. "Investing in
a local company from the industrial sector expands our product
portfolio and will allow us to better support our customers in
Peru," commented Miguel Rios, regional managing director, 3M Peru.
ABRASIVOS employs approximately 140 people and is headquartered in
Lima.

WAL-MART TO ENTER PERUVIAN MARKET
---------------------------------
10. Wal-Mart Stores, Inc. announced its intention to take over the
Chilean retail chain, Distribucion y
Servicio D&S S.A. According to Craig Herkert, President and CEO,
the Americas, Wal-Mart International, "This investment demonstrates
our deep respect for D&S, which has a long history of providing the
best value to Chilean consumers. We share a laser focus on price
leadership just as we do in Wal-Mart's 10 retail markets throughout
the Americas. Both companies also have the same core values and
business philosophies: respect for the individual, service to the
customer and striving for excellence." D&S had already planned to
expand in Peru; with the takeover this will mark the entry of
Wal-Mart to Peru. The Peruvian market will benefit with increased
competition in the retail sector.

PERU: AN ATTRACTIVE MARKET FOR CHILEAN SOFTWARE COMPANIES
--------------------------------------------- --
11. Chilean software companies consider Peru an attractive market
due to its proximity to Chile and economic growth of the past
several years. The Chilean Software and Services Association
recently hosted a seminar for business owners on how to do business
in Peru.

CHILEAN RETAIL STORE FORESEES CONTINUED GROWTH
--------------------------------------------- -
12. The Chilean department store chain, Ripley, expects to see a
15-17% growth in its 2008 sales figures over 2007. The Christmas
season represents 30% of the store's total sales for the year. The
company plans to expand retail stores in Lima and to the provinces,
currently retail stores are located in Lima with one store in
Trujillo. The company has advanced on negotiations to open
additional stores in Arequipa, Chiclayo, and Piura.
MCKINLEY

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