April 2006—In Peru, building trade capacity means getting ready to grow. The recent signing of a free trade agreement between the United States and Peru marks the penultimate stage of a long series of negotiations. Final approval should be reached by the congresses of both countries by July.

Negotiating for a Bright Future

Pablo de la Flor, Peru’s Vice Minister of International Trade and chief FTA negotiator, talked to Nathan Associates about the negotiations that led to the agreement. Acknowledging the support of USAID’s CRECER project, based in Lima and managed by Nathan, Mr. de la Flor said “CRECER’s support was invaluable in helping us prepare for the negotiations. [Nathan] helped the team gain negotiating skills through workshops, study tours, and other means…Without the capacity building CRECER provided us the negotiations would not have gone as well as they did.”

When the FTA is in full force, Peru will have gained permanent access to the U.S. market and be in a position to attract investment from the United States as well as other Andean countries. It is expected that the effects of the FTA will boost Peru’s GDP, employment, and export values while creating more jobs, cutting consumer prices, and improving the variety and quality of goods available in Peru.

Emphasizing the positive impact of the agreement, Mr. de la Flor said “The FTA will definitely improve the quality of life of the Peruvian people. We have already seen many improvements; the effect of the FTA will be to ‘lock in’ these improvements…People will have more access to better jobs, lower prices, and higher quality goods and services.”

Preparing for Challenges

Mr. de la Flor also discussed the challenges the country will face if the agreement is ratified, reiterating the importance of efficient ports to Peru’s exports and imports. Thanks to the CRECER project, Peru now has a plan for port reform. The Port of Callao, Peru’s gateway port and long ranked as one of the world’s costliest, will be developed first.
Praising the CRECER project for its groundbreaking port studies, Mr. de la Flor said, “CRECER has had a huge impact on shaping the debate on port reform. The two studies revealed the ports’ inefficiencies and the impact such inefficiencies have on logistics, imports, and the cost to consumers. CRECER changed the way we discuss port reform.”
Peruvians must be prepared to respond—not merely react—to changes ushered in by the FTA. The CRECER projectwill continue to help prepare Peru for those changes.