APEC Peru 2008: The Road to Lima

Summary

On February 11 and 12, AS/COA hosted programs in Washington, DC and New York to discuss the opportunities and challenges facing Peru, the host of the 2008 Asia Pacific Economic Cooperation Summit (APEC). Representatives from APEC, the APEC Business Advisory Council (ABAC), the Inter-American Development Bank, and U.S. and Peruvian governments gathered to discuss Peru's economic growth and outlook, the economic opportunities for business in Peru, and the growing importance of APEC in the world.

APEC 2008

APEC now boasts 21 member economies. In the Americas, those countries are Peru, Chile, Mexico, Canada, and the United States. The APEC region represents 41 percent of the world's population, almost 50 percent of world trade and 55 percent of world GDP. APEC countries’ markets reach 2.7 billion consumers. According to Ambassador Juan Carlos Capuñay, membership in APEC has had a positive impact on all member economies. Since its founding in 1989, per capita GDP in APEC economies has increased by 26 percent compared with 8 percent for non-APEC economies. Intra-APEC merchandise trade has more than doubled since 1994, from $1.4 trillion to over $3 trillion.

According to APEC CEO Summit Chairman José Miguel Morales, this year's CEO Summit will focus on Peru's role as Asia's gateway to Latin America, public and private sector roles in addressing global warming, the challenges of sustainable development, Asia’s economic rise and its potential impact on the world economy, and the future of APEC.

ABAC 2008 Work Program

ABAC Chairman Juan Francisco Raffo said the theme for the ABAC 2008 work program will be: “Mind the Gap: Making Globalization an Opportunity for All.” Under this theme, ABAC 2008 will seek to identify measures to transform the significant growth that has characterized much of the APEC region into lasting development and to spread the benefits of globalization more widely among and within APEC economies. Key priorities identified in the 2008 work program include:

• Seeking ways to further advance trade and investment liberalization in the region;
• Building a proposal for a Free Trade Area of the Asia-Pacific (FTAAP);
• Continuing work on model measures for regional trading arrangement and free trade agreement chapters;
• Improving the investment environment;
• Reducing the costs of doing business in the region;
• Strengthening and deepening capital markets, enhancing social security and retirement safety nets, and micro-credits;
• Addressing the challenges posed by climate change and energy security; and
• Improving support for small and medium-sized enterprises (SMEs).

Detailed recommendations will be developed during the course of the year on all priorities identified in the 2008 work program for submission to APEC officials in advance of the annual Leaders’ Meeting in November.

Peru's Economic Growth and Outlook

Peru now boasts one of Latin America’s most dynamic economies, emphasized the Inter-American Development Bank’s Alberto Morales. He cited increased trade as a major contributor to Peru’s growth and favorable business climate and asserted that he believes the country will continue to grow at a rate of about 7 percent annually. He added that Peru has low inflation rates and a legal framework that is favorable to foreign investment.

Since joining APEC in 1998, Peru’s trade has increased 30 percent. Peru’s exports have tripled in the past five years. Morales credited this expansion to access to foreign markets through APEC and a number of bilateral free trade agreements. Peru’s yearly exports to Asia now hover around $7 billion per year. The country currently enjoys a trade surplus with China, said Ambassador Patricia Haslach. With dynamic growth in agribusiness, mining and hydrocarbons, and tourism—among other industries—Peru has focused much of its investment and energy on making that growth sustainable.

Regional Integration and Growing Inequality

APEC works by promoting the foundations needed to compete in a rapidly changing world, said Capuñay. However, he expressed concern over social inequality, which often accompanies economic growth and stated that attention should be devoted to the greater inclusion of SMEs in 2008. Peru has made reducing the gap between rich and poor and improving social development one of the priority issues for the Peru APEC year. Raffo said APEC officials hope to see as many as 1,000 SMEs represented at APEC conferences.

Capuñay noted that while SMEs comprise 98 percent of businesses and account for 60 percent of jobs in the APEC region, SMEs only account for a 30 to 35 percent of the region's international trade. In order to better prepare SMEs for globalization, Capuñay stressed the importance of improved technology, access to English education, and strengthened communications.

Latin America as a Strategic Partner for Asia

In line with Peru’s role as Asia’s gateway to Latin America, Inter-American Development Bank President Luis Alberto Moreno spoke of the unique opportunity the APEC Peru year offers the region to showcase the role of Latin America and the Caribbean as a strategic partner for Asia. Moreno argued that the deepening of trans-Pacific relations holds the potential to deliver promising results for both regions, as there are a number of complementarities between the two regions, particularly in the natural resources sector. In addition, growing numbers of Asian corporations are building strategic joint ventures with Latin American partners.

Outlook for Regional Trade

Panelists expressed support for enhanced regional integration and looked ahead to future APEC summits, which will be held in Singapore, Japan, and the U.S. over the next three years. Haslach commented that with the recent approval of the U.S.-Peru free trade agreement, all the Western Hemisphere APEC members are linked by a matrix of FTAs. She said the U.S. government would like to see the entire region joined in an eventual FTAAP. The U.S., which will host APEC in 2011, will seek to make progress toward this goal, possibly through an analytical study of existing bilateral and plurilateral FTAs with a view to possibly docking or merging these agreements.