PERU: An Introduction to International Trade/WTO
The following overview first appeared in Chambers Latin America 2024 and is awaiting update from the firm.
Open Trade for Development
Systemic post-COVID-19 disruptions have stressed the world trading system, asymmetrically affecting emerging economies. The eruption of the war in Ukraine has brought about a resurgence of economic and trade implications. Inflation has become a global concern, and the conflict has provoked an increase in energy costs, amidst long-standing tension between the US and China.
Latin American policies have consistently shifted towards centralised approaches, resulting in the election of left-wing governments in several nations, including Brazil, Argentina, Mexico, Chile, Colombia and Peru. Many of these governments, including Peru’s former administration, proclaimed a revision of trade policies by threatening to enact outdated development models that are not only incompatible with WTO agreements and Regional Preferential Agreements (RPAs), but also dysfunctional and driven by populist ideals.
Peru endured a tumultuous political crisis that led to the ousting of the recently elected president. The Vice President took office shortly afterwards (until 2026), alleviating some of the political and economic uncertainty. Principal indicators suggested a modest GDP growth in 2023 (2.5% compared to 2022), and the “El Niño” climate phenomenon threatened to slow down economic expansion. Nevertheless, exports and imports are expected to attain their best performance in the last decade, and the trade openness ratio – which compares exports and imports to GDP – yielded 51%, representing the highest score since 2014.
Looking at the 2023 Logistics Index Performance Report (LPI), Peru has achieved the best result since the 2012 Report, becoming the second-best performer (alongside Panama and Chile) in Latin America after Brazil. Peru improved in five of the six indicator criteria, in both score and ranking; its International Shipments and Traceability (Tracking & Tracing) scores are the best results obtained since 2007.
Even amidst global turbulence, Peru steadfastly adheres to orthodox macroeconomic policies. Unlike other Latin American countries, it intends to set an amicable environment towards private investment and regional economic integration. Some relevant facts endorse this trend. Firstly, Chinese investment significantly expanded in Peru in 2022, by acquiring large energy projects, and Cosco is currently building the largest port development in Latin America, the Chancay Port. Secondly, the US “friend-shoring” policy aims to enhance the ability of Latin American countries to become suppliers of inputs and raw materials to the US.
Peru has been compliant with rules-based open trade commitments. Trade policy is now fully aligned with open market fundamentals, removing any trace of protectionism. Peru has signed more than 20 preferential trade agreements, becoming the third most integrated economy in the region, after Mexico and Chile. Moreover, the current Minister of Trade, who is a renowned trade policy expert, is encouraging businesses to harness trade agreement benefits and has initiated negotiations of a Free Trade Agreement with Hong Kong.
In the past two years, the government has persistently dismantled efforts to take safeguards to protect domestic industries, showcasing its unwavering resolve against illegitimate trade remedies. A similar stance has been exhibited regarding technical barriers to trade, where an import-restrictive regulation on food labelling was amended in compliance with the WTO Technical Barriers to Trade provisions.
Moreover, technical requirements and regulatory practices are being scrutinised as Peru is a prospective candidate to join the Organisation for Economic Co-operation and Development (OECD). To this end, an unprecedented project of co-operation and inter-institutional co-ordination has been undertaken to benchmark as many as 240 OECD legal instruments, from Declarations to International Agreements, to adopt best practices and policies.
Peru has not only substantially implemented the WTO Trade Facilitation Agreement (TFA), excluding some standards related to border co-ordination and second-test procedures, but it has also applied further measures towards removing red tape and procedural digitisation, thereby going “beyond” the TFA stipulations. Key initiatives include the optimisation of the Single Window, which embraces an innovative design and services coverage, the sanitary Authorised Economic Operator, and other trade transparency-related tools.
Regarding cross-border e-commerce, further promotion and development policies must be fostered, directed at instructing and training companies on the advantages of transactions of this nature, subsequently optimising border control procedures. Customs has already streamlined its border processes, but refinements are required in other non-customs controlling agencies, as well as the postal service operator. Within the framework of the Pacific Alliance Trade Agreement (constituted by Peru, Colombia, Mexico and Chile), some endeavours are in progress, with the objective of removing the obstacles impairing efficient cross-border e-commerce development and harmonising border controls.
Domestic Trade Policy also encompasses Free Zones (so-called Special Economic Zones), which provide tax and regulatory benefits for particular industries. Four Free Zones are fully operating; they harbour manufacturing and logistics businesses. Despite the fact that the available facilities and spaces in these zones are almost fully occupied, the expected advantages have hardly been achieved. Several attempts to overhaul the legislation to redesign the Free Zones model have failed, but discussions seem to be included on this administration’s agenda.
International trade efficiency heavily depends on logistics and transport infrastructure. The recently published National Transportation Services and Logistics Infrastructure Plan 2032 provides the basis for the national infrastructure and logistics services to support trade facilitation measures. The plan also focuses on attracting foreign direct investment and improving national logistics performance, which is expected to enhance Peru’s market competitiveness. Regarding border controls, the Customs authority has optimised its processes by digitising procedures as well as documents; however, additional adjustments are needed in other border controlling agencies, especially those related to foods, medicines and medical devices.
In conclusion, Peru has experienced one of the deepest political crises in decades and continues to struggle to overcome structural constraints to increase productivity and competitiveness. However, the country is on track to achieve economic stabilisation. Legal and economic policies currently in place rely on international trade for development. The forthcoming agenda must boost and calibrate transport infrastructure, logistics services and trade facilitation that embraces a supply chain approach. This systemic approach will encourage other border controlling agencies to incorporate efficient processes, resulting in reduced transaction costs and enhanced transparency and predictability.