Despite continuous volatility and uncertainty in the region, the recovery in Peru has been step fast and continuous.
Peru’s sound macroeconomic fundamentals and performance are recognized by the markets: Peru’s country risk, measured by the spread over US treasury, has remained below the Latin American average.
1. AIR CARGO TRANSPORT AND TRADE DEVELOPMENT IN PERU Eduardo García-Godos M. Legal Adviser Calgary, September 2006
2. SITUATION OF AIR COMMERCIAL MARKET <ul><li>Rising oil prices has affected airlines costs. Announcing permanent increase of its fares. </li></ul><ul><li>September 11th, worsened critical condition of air cargo transport sector. Approximately, by 83% of Latin American airlines face economic problems and several of them were bankrupted. </li></ul><ul><li>On the other hand, world traffic of passengers has experimented a steady recovery, having reached a growth of 7.6% in 2005. Latin America´s traffic of passengers has grown around 6% during 2004 and 10% in 2005. </li></ul><ul><li>Nevertheless, great expectations are foreseen: 2006 started growing 9.8% in air cargo traffic of Latin-American Airlines, as compared to world average growth of 3,2%. </li></ul>
3. WHERE IS THE AIR CARGO?
4. AIR CARGO TRANSPORT IN AMERICA
5. Peru has maintained its economic growth for the last three years Growth of GDP (Variation compared to the same month of previous year, %) Estimated GDP 2005: 6.4 % Source: Central Reserve Bank of Peru 2 3 4 5 6 7 8 IIQ 03 IIIQ 03 IVQ 03 IVQ 04 IQ 0 4 IIQ 0 4 IIIQ 0 4 IQ 05 3,6 3,5 2, 9 4 , 9 3,6 4,8 6,6 6,4 6,2 IIQ 05 6,4 IIIQ 05 7,7 IVQ 05 7,3 IQ 06 6,0 IIQ 06
6. Source: Bloomberg Update August 31, 2006 Country risk has remained below the Latin America average JP Morgan Index EMBI+ ( basic points differential on US Treasury Bonds) 200 400 México 1 000 600 529 136 207 323 111 203 222 209 Argentina Perú Venezuela Ecuador Colombia Brasil Latinoamérica 800
7. EXPORTS GROWTH AND FORECAST 2006 Peru: Exports to the world billions US$ FOB Fuente: SUNAT PROJECTION 2006: US$ 21 billions
8. FOREIGN MARKETS AND TRADE NEGOTIATIONS AGENDA
9. AIR CARGO TRADITIONAL MARKET <ul><ul><li>Products for whose features require to be promptly delivered. </li></ul></ul><ul><ul><li>Perishables: Asparagus, fresh fruits, flowers, fishery. </li></ul></ul><ul><ul><li>Animals: Camelids, livestock, horses. </li></ul></ul><ul><ul><li>High-value commodities and light weight products: i.e. mobile phones and electronic products. </li></ul></ul>
10. AIR CARGO MARKET IN PERU Gap between maritime and air transport is one of the largest in Latin America 1/ En volúmenes 1/ En volúmenes 1/ En volúmenes Fuente: CEPAL
11. AIR CARGO MARKET IN PERU <ul><li>There is a different course of imports and exports air cargo in Peru and the Region. </li></ul><ul><li>There are more than 3 exported kilos for each kilo imported. </li></ul><ul><li>In 2004 Imports*: 32,491,363 kg </li></ul><ul><ul><ul><ul><li>Exports*: </li></ul></ul></ul></ul><ul><li>98,158,149 kg </li></ul><ul><li>* (registered at Lima Airport) </li></ul>
12. AIR CARGO MARKET IN PERU
13. MAIN PRODUCTS EXPORTED THROUGH AIR CARGO 100,00 % 4 269 676 899 TOTAL 11,51 % 491 525 380 OTHERS 0,56 % 23 872 374 OTHERS COTTON APPAREL 0,60 % 25 754 687 OTHERS COTTON SHIRTS AND APPAREL FOR WOMEN AND GILRS 0,70 % 29 958 938 PINPOINT COTTON SHIRTS FOR MEN ONE COLOR 0,89 % 37 816 277 OTHER COTTON "T-SHIRTS“. 1,87 % 79 770 081 PLAIN SILVER 1,96 % 83 712 623 COTTON “T-SHIRTS” WOVEN ONE COLOR 2,12 % 90 453 982 JEWELERY 3,07 % 131 240 935 ASPARAGUS (FRESH OF REFRIGERATED 4,77 % 203 682 124 CARBUROREACTORES TIPO QUEROSENO PARA REACTORES Y TURBINAS DESTINADOS A EMPRESAS DE AVIACION 71,95 % 3 071 889 497 GOLD IN OTHER FORMS EN BRUTO % FOB FOB US$ PRODUCTS 100,00 % 4 269 676 899 TOTAL 11,51 % 491 525 380 OTHERS 0,56 % 23 872 374 Garments of cotton 0,60 % 25 754 687 Others, of yarn of different colours for women and boys 0,70 % 29 958 938 Of man-made fibres 0,89 % 37 816 277 Others, of yarn of different colours 1,87 % 79 770 081 Silver non alloy 1,96 % 83 712 623 Of one uniform colour dyed yarn, including bleached yarn 2,12 % 90 453 982 Of other precious metal, whether or not plated or clad with precious metal 3,07 % 131 240 935 Asparagus 4,77 % 203 682 124 Carburoreactors type Kerosene for reactors and turbines (Turbo A1) destined to the businesses of aviation 71,95 % 3 071 889 497 Gold other unwrought forms % FOB FOB US$ PRODUCTS
14. AIR CARGO MARKET IN PERU <ul><li>Peruvian non traditional exports mainly concentrates in fresh asparagus, which is seasonal. </li></ul>
15. AIR CARGO MARKET IN PERU <ul><li>Despite high concentration and seasonability, asparagus has a low unitary value for air cargo standards markets, even if compared to other perishable products. </li></ul>
16. DIFFICULTIES OF AIR CARGO IN PERU <ul><li>Emerging industry affected by rising costs, i.e. fuel, tariffs of cargo imports, navigation services, landing and takeoff charges, etc. </li></ul><ul><li>Limited promotion measures of civil aviation. </li></ul><ul><li>Disadvantages if compared to other competitors who operate under a more favorable legal conditions in air cargo transport services. </li></ul><ul><li>Main routes serve major cities of the country however, the country is only connected by 20% of airports. By 80% of airports are not suitably used. </li></ul>
17. CHALLENGES <ul><li>Improvement of airport and logistic infrastructure: August 2006, launched a privatization process under PPP framework. Focus on domestic regional airports. </li></ul><ul><li>To take advantage of both strategic location (centre of South American Pacific shore) and nearness between Major ports and airports. </li></ul><ul><li>To facilitate trade flows with other world markets by promoting Free Trade Agreements i.e. FTA with US, Chile, forthcoming FTA with EU. </li></ul><ul><li>Specific provisions in FTA´s with regard to custom administration, trade facilitation and cooperation. </li></ul>
18. CHALLENGES <ul><li>Promote air service liberalization. Increasing willingness in Latin America (LA) to enter into cargo “Open Skies” agreements under reciprocity criteria. </li></ul><ul><li>Improvement and expansion of private facilities for air cargo transport management by reducing state interference. To encourage competition and innovation. </li></ul><ul><li>Training of government officials, phasing out trade barriers, unnecessary procedures and eradicate corruption. </li></ul>
19. CONCLUSIONS <ul><li>Despite economic downturn there are promising perspectives on air cargo transport development in Latin America. </li></ul><ul><li>Peru and other LA countries are fully inserted in global trade. Peru´s economy is becoming healthier. </li></ul><ul><li>Exports boost has reached historic records and several products (perishables, cloths) substantially rely on air cargo transport. </li></ul><ul><li>Better logistic infrastructure has encouraged reforms i.e. airport privatization and custom practices commitments. </li></ul>