Country Report
ECONOMIC GROWTH: Economic growth in 2005-06 will continue to be driven by the giant Camisea natural gas project, as well as by mining and exports (principally of minerals, textiles and agricultural produce). Growth in processed exports--particularly to China--drove year-on-year GDP growth of 5.35% in the first quarter of 2005. We expect the dynamism in the mining sector to be sustained on the back of continued investment in new operations and continued high prices for gold and copper. Agricultural and textile exports are also benefiting from the ATPDEA. Investment in Camisea, transport infrastructure, and new mining projects will also contribute to growth. Construction looks set to pick up further in 2005-06, on the back of growth in domestic demand, and a government-sponsored low-cost housing programme.
INTERNATIONAL RELATIONS: Peru's foreign relations will concentrate on advancing talks on bilateral free-trade agreements (FTAs), particularly with the US. The minister for international trade and tourism, Alfredo Ferrero, is confident that a schedule for resolving conflicts involving several US companies can be drawn up, but there have been delays in negotiations over the sensitive issues of intellectual property and agriculture. The latest round of negotiations, held in Peru in mid-April, was overshadowed by the presidential ouster in Ecuador, and little was agreed. In addition, the US Congress is delaying signing an FTA with the Dominican Republic and four Central American countries (the DR-CAFTA), and passage of the Andean-US FTA would appear to be dependent on the successful ratification of the DR-CAFTA. The Peruvian congressional debate over the FTA with the US is therefore likely to get caught up in the elections, delaying ratification by Peru by another year. The government is keen to have the FTA ratified before end-2006, as that is the expiration date of the Andean Trade Promotion and Drug-Eradication Act (ATPDEA), which allows duty-free access to the US for around 6,000 Andean export products. However, it might have to look to start negotiating an extension of the ATPDEA.
Source: EIU Country data