The pacific alliance as a platform for peru for increasing its trade with china osterloh mejia maria isabel rosa

The Pacific Alliance as a Platform for Peru for Increasing its Trade with China
1
THE PACIFIC ALLIANCE AS A PLATFORM FOR PERU FOR
INCREASING ITS TRADE WITH CHINA
Maria Isabel Osterloh Mejia1
ABSTRACT
This work deals with the strategy for using the Pacific Alliance as a platform for increasing
Peru exports of value added goods and services, attracting more Chinese tourists and
investment to Peru. An analyzing is done of what is the Pacific Alliance, what are its aims,
and one of them is to be a platform for projection to the world, especially to the Asia-
Pacific region, and what are the actions that the PA as a group have made in China or
catering to China. A review of the economic relationship between China and Peru reveals
that trade and investments links have increased, with the background of the Free Trade
Area agreement in effect since 2010, though still most of Peru exports are raw materials,
1
Researcher at Instituto de Estudios Políticos Andinos (IEPA)
MBA at Beijing Normal University 北京师范大学
Blog: http://comercioperuasiapacifico.blogspot.pe/
Website: https://mariaosterloh.wixsite.com/website

2
with few value-added goods sold to China. Finally, it is found that in the short time the
Pacific Alliance has of working as a group, it has been able to implement several events,
like seminars and Roundtables to promote Peru goods and services, tourism and investment
opportunities available for China. But still many challenges remain, like the need to carry
on more events, to spend more money in promotion activities, and also to prepare an
adequate offer of goods and services suited to the Chinese market and consumers.
KEYWORDS: pacific alliance, pa as a platform to china, peru nontraditional exports

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Table of Contents
Chapter 1: Presentation of the study …………………………………………. 10
1.0 Introduction …..……………………………………………………..10
1.1 Statement of the Problem ………..…………………………………..13
1.2 Objective of the study ………………………………………………..13
1.2.1 Specific objectives ……………………………………………………… 13
1.3 Hypothesis …………………………………………………………... 14
1.3.1 Secondary hypothesis ……………………...……………………………14
1.4 Literature Review …………………………………………………....14
1.5 Research Methodology Description ………………………………...18
1.5.1 Type of Research ………………………………………………………..18
1.5.2 Organization of the study ………………………………………………18
Chapter 2: Theories that support trade between countries and the
existence of a regional economic integration …………..……………….19
2.0 Absolute Advantage and Comparative Advantage ……………….19
2.1. Factor Endowments Theory ……………….…………………....20
2.2. Regional Economic Integration ………………………………....21
2.3. Region, regionalism, regionalization and interregionalism ..….23

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Chapter 3: Peru’s economic relations with China …………………....26
3.0 Origins of the relations: A brief overview ……………….………26
3.1 Exports of goods and services to China and the Free Trade
Agreement..……………………………………………………………..27
3.1.1 Comparative economic advantages of China and Peru ……………28
3.1.2 Opportunities of Peru according to their comparative advantage ..35
3.1.3 Peru - China Free Trade Agreement ………………………………..35
3.2 Chinese Foreign Direct Investment to Peru ……………...………41
3.3 Chinese tourism to Peru …………...………………………………49
Chapter 4: An overview of the Pacific Alliance ……………………….52
4.1 Recount of the main events since its creation ………………….....52
4.2 Common Objectives ……………………………………………......57
4.3 Structure …………………………………………………………….58
4.4 Promotion Entities ………………………………………………….62
4.5 Shared Embassies Missions ………………………………………..63
4.6. Joint Commercial Offices ……………………………………….64
4.7. Economic Overview of the Pacific Alliance …………………...65
4.7.1. Trade ………………………………………………………66

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4.7.2. Foreign Direct Investment ………………………………...71
4.7.3. Chinese Foreign Direct Investment outflows to the Pacific
Alliance countries …………………………………………………73
Chapter 5: The Pacific Alliance as a platform for Peru for increase its
trade with China …………………………………………………………..75
5.0 Joint Activities ………………………………………………………..75
Chapter 6: Conclusions and Recommendations ………………………..…80
References ……………………………………………………...……………….84

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Index of Tables, Charts, Figures and Maps
Table 1: Peruvian products that have the largest participation in the world market by 2015 ……29
Table 2: Net Exports of China and Peru by Sector, year 2014 ………………………………….30
Table 3: Main Peruvian exports to China, year 2016 …………………………………………..,31
Table 4: Main Peruvian imports from China, year 2015 ……………………………………….33
Table 5: Example of non-traditional products exported to China ……………………………. ..37
Table 6: Comparison between main products exported to China in 2009 and 2016 (Thousand US
dollars) …………………………………………………………………………………………..40
Table 7: Balance of Chinese FDI stock at the end of the year in Peru 1 /(Millions of dollars) ...41
Table 8: Peru: FDI stock at the end of each year by main countries of origin (Millions of dollars)
…………………………………………………………………………………………………..42
Table 9: China: Estimated FDI in Peru 1990 – 2012 (Millions of dollars) …………………….44
Table 10: Current, past and future investments announced from Chinese companies …………46
Table 11: China’s FDI stock structure in Peru by main sectors, 1980-2016 …………………..48
Table 12: Receptive Tourism indicators – China – 2010-2015 ………………………………...50
Table 13: Timeline of Presidential Summits and main events 2011 - 2016 ……………………53
Table 14: Shared Embassies ……………………………………………………………………64
Table 15: Economic Indicators for Pacific Alliance Countries, year 2015 …………………….65
Table 16: Indicators of the main products exported to China by Peru and Colombia …………67
Table 17: Indicators of the main products exported to China by Chile and Mexico …………..69

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Table 18: Foreign Direct Investment Flows to Pacific Alliance Countries: 2009-2014 (US$ in
Millions) …………………………………………………………………………………………72
Table 19: Estimates of Chinese FDI in Latin America and the Caribbean (Millions of dollars) ….73
Table 20: Ten largest acquisitions by Chinese companies in Latin America (Millions of dollars)
………………………………………………………………………………………………… 74
Table 20: Joint Activities done by the Pacific Alliance in China and/or where China participated
………………………………………………………………………………………………… 75
Table 21: Actions taken by PROMPERU and OCEX Beijing …………………………………...78
Figure 1: Peru: Non-Traditional Exports to China, 2011 – 2016, (US $ million) ………………32
Figure 2: Peru Imports from China, 2010 – 2015 (million US dollars) …………………………34
Chart 1: Organizational structure of the Pacific Alliance ………………………………………..60
Chart 2: Pacific Alliance Countries’ Direction of Trade in Goods: 2013 ………………………...71
Map 1: Observer countries of the Pacific Alliance ………………………………………………6

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Chapter 1
Presentation of the study
1. Introduction
The Chinese market increase its appeal to many countries and among them are the Latin American
ones, that already trade a lot with China, becoming for some of them their first trade partner (as in
the case of Peru and Chile). But most of what they sell to China are primary goods and they want
to sell more value-added goods. In this context, PA member’s countries have among their aim to
“Become a platform of political articulation, economic and commercial integration and projection
to the world, with emphasis on the Asia-Pacific region.”2
In this regard, the PA can really be a platform to increase trade with China and the aim of this
research is to see in particular how Peru can use the PA to increase its trade in goods and services
with China. It will be seen also how Peru can attract investment from China because investment
generate trade. The more investment come from China the more Peru will trade with China.
Exports of goods and services is a key factor in the growth of the Peruvian economy. However,
Peru have been mainly exporting primary goods and the price of these products fluctuates too
much in the international market. This is why a country has to export value added goods. In the
case of Peru, since the year 2000 this country has been increasing its exports of agroindustry,
2
Pacific Alliance official web site: “What is the Pacific Alliance?”
https://alianzapacifico.net/en/what-is-the-pacific-alliance/ retrieved May 11th 2017

9
textiles and some processed goods but mainly these products have been send to the North
American and Western Europe countries.
On the other hand, the main and biggest growing market in the world is China to the point that for
Peru this country is its main export destination. However nearly 96% of what Peru sells to China
is primary goods. But China with its growing middle class is demanding not only primary goods
but for example agroindustry products where it has a deficit to satisfy. So, as Peru sell these goods
to the world and China needs them we should sell to China these goods. Then what is needed for
Peru to sell more agroindustry goods to China? One of the main factors is maybe the lack of
promotion of these goods, because in China the consumers don’t know much about Peru
agroindustry goods.
For example, in western countries many people know about the quality of Peruvian asparagus,
avocado, grapes, mangoes, just to name some of them, so we need to promote them in the Chinese
market.
Also, Peru and China has a Free Trade Agreement (FTA) that became effective in March of 2010.
In this FTA, the agroindustry products of Peru were given a special treatment and the import duties
for many of them charged by China will become 0 in a gradual period. So Peru should take
advantage of this.
Besides promotion Peru needs to increase its production to satisfy the Chinese demand for fresh
fruits and vegetables, and to do this we need foreign investment. Currently for example there is
investment from European countries and some Latin American countries in the agricultural sector
but not from China, whose investment is mainly concentrated in the mining and energy sector.
Another issue that must be solved to increase exports of agroindustry goods to China is to satisfy
the Phytosanitary requirements needed for those goods. Currently some of the goods have already

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done this like avocado, grapes, blueberries, etc. but still there are more products that need to pass
these requirements.
1.1. Statement of the Problem
The Pacific Alliance country members represent around 30% of Latin America population, 40%
of its GDP and 50% of the trade. It receives 50% of FDI coming into the Latin America region. It
is looking for to have one integrated economy with free movement of goods, people and capital.
It is the group that grows more in Latin America and the regional group which have more
possibilities of success (compared for example with the Andean Group or MERCOSUR). They
are open economies and had already strong trade relations with China (but mostly exporting
primary goods).
China is a difficult market to enter so doing it in a joint manner as the Pacific Alliance wants to do
is probably the best way. That is why this research try to know how that is being done and in
particular whether this regional group can be a platform for Peru for increasing its trade with China.
Whether the common promotion campaign to sell good in China help to increase trade with that
county as well as the joint tourist campaigns can help to attract more Chinese tourists to Peru and
if the joint investment promotions campaigns can attract Chinese investment to Peru.
1.2. Objective of the study
To know if the PA can be a platform for Peru for increasing its trade with China
1.2.1. Specific objectives:
To asses if the common promotion campaign of the PA to sell goods in China can help increase
trade with that country

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To know if be common tourist campaign of the PA could help attract more Chinese tourists for
Peru
To know if the joint investment promotions campaign of the PA can attract more Chinese
investment for Peru
1.3. Hypothesis:
- The PA can be a platform for Peru for increasing its trade with China
1.3.1. Secondary hypothesis
- The common promotion campaign of the PA to sell goods in China can help increase trade
with that country
- The common tourist campaign of the PA could help attract more Chinese tourists for Peru.
- The joint investment promotions campaign of the PA can help attract more Chinese investment
for Peru.
1.4. Literature Review
Regarding the literature about the Pacific Alliance, there are several books and articles published
in the subject, that mainly deal with the nature of the PA, its differences with other Latin American
regional groups and the challenges it faces. In the following I will attempt to summarize some
specific themes in the works studied that I find particularly relevant on them.
In an interesting article published by Prof. Detlef Nolte from the German Institute of Global and
Area Studies (GIGA) with the title: “The Pacific Alliance: Nation-Branding through

12
Regional Organizations” 3
he states that “The four member countries of the PA “branded”
themselves as gateways to Asia and as “good economies” compared to the “bad economies” of
other more state-oriented economies in Latin America”. This is precisely what PA members are
looking for when they market themselves together abroad, as in China, not only to save in costs
and efforts but also to differentiate themselves from other Latin American economies that are in
trouble, like Venezuela and Brazil, to mention just two of them.
Something also that the author mention is the growing interest that the PA arise in the world as
showed by the many observers that are present, that come from all over the world. This is another
sign of how the four countries are seen as the most stable in the LA region but also of the
possibilities that they present. The author mention that this is a challenges for the group of how to
take advantage of this. At present there are 49 countries that have observer status in the PA.4
In a paper published by the United States Congressional Research Service and written by M.
Angeles Villareal, he talked about what make different the PA from other regional groups in Latin
American stating that “The Alliance’s approach to trade integration is often looked upon as a
pragmatic way of deepening economic ties. It is more outward focused than other regional
initiatives such as the Common Market of the South (MERCOSUR). Another unique characteristic
is that the four member countries share similar economic and political ideals and are moving
forward quickly to accomplish their goals. Member countries have signed various agreements to
share use of their facilities or embassies and consulates to further advance the objectives of the
3
German Institute of Global and Area Studies (GIGA) web site: “The Pacific Alliance: Nation-
Branding through Regional Organizations”: https://www.giga-hamburg.de/en/publication/the-
pacific-alliance-nation-branding-through-regional-organisations Number 4, August 2016,
retrieved May 12th 2017
4
Pacific Alliance official web site: “Countries” https://alianzapacifico.net/en/paises/#paises-
observadores retrieved May 12th 2017

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integration process.”5
In this case the author put emphasis also in the fact that the PA is more
outward looking than the MERCOSUR and that it wants to achieve free movement of people and
the integration of the stock exchange markets of member countries.
In the book “Emerging Markets: The Pacific Alliance, Perspectives and Opportunities for Latin
America” edited by Mario Torres Jarrin and Jonathan Violante Pica6
, the authors touch several
issues ranging from what they see in the Pacific Alliance as a new model of regional integration
for emerging markets in Latin America, to the themes of trade, investment and SME as engines of
growth in the group, to the analysis of the PA and what members, like Colombia, Chile, and Peru,
expect of them. An interesting article about China and the PA talk about the growing interest of
China in the PA, how the PA relation with China could be different from the traditional relation
of Latin American countries with China, where the former mainly export raw materials to China
in exchange of manufactured goods, while the PA relation with China could be one in which they
are involved in an industrial integration, being both part of a global value chain. This is relevant,
the authors said, given the new normal of the China economy, where now it demands more
industrial goods, creating an opportunity to countries like the PA.
Precisely, one of the objectives that officers from the PA mentions about the group is the possibility
of them becoming integrated into the Global value chains in Asia. As it is known, a global value
chains involves producers in several countries manufacturing parts and components that at the end
are assembled in a final destination for selling in the world markets. East Asian countries are
5
United States Congressional Research Service web site: ”The Pacific Alliance: A trade
Integration Initiative in Latin America” https://fas.org/sgp/crs/row/R43748.pdf retrieved May 12th
2017
6
Mario Torres Jarrin and Jonathan Violante Pica editors: “Emerging Markets: The Pacific Alliance,
Perspectives and Opportunities for Latin America”, European Institute of International Studies,
Salamanca 2016 http://www.ieeiweb.eu/wp-content/uploads/2016/01/The-Pacific-
Alliance_book.pdf, book, pdf edition, retrieved May 12th 2017

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involved in the global value chains of many goods, as automobiles, electronics, etc. Latin
American countries, except Mexico that is integrated into the value chain of the NAFTA group
(with Canada and USA), are not. What is needed for that?
Another study by the Committee on Trade and Investment of APEC with the title “Study on
enhancement of integration of regional vale chains in Asia and Latin America and the Caribbean”7
talks precisely about the challenges facing Latin American and PA countries to become part of the
global value chains. These challenges has to do with the provision of adequate physical
infrastructure of transport and communications, trade policies, human capital and so on, factors
that East Asian countries have been able to provide while LA countries still lack it.
In this study there are some examples of successful value chains in Latin America like the Chilean
salmon industry and the soybean industry. In the case of the salmon industry Chile has become of
the main suppliers of salmon in the Asian markets, thanks to the joint work of the public and
private sector in the development of the industry, the absorption of foreign technology, and the
wise marketing of the product in the Asian region. In the case of soybean, Argentina and Brazil
are the main supplier of Asian countries, thanks to a well-developed industry given the natural
resource endowment and the high level of technology used but also to the growing need in Asia of
the product, either as soybean, soybean oil or soybean meal.
7
Committee on Trade and Investment of APEC web site: “Study on enhancement of integration
of regional vale chains in Asia and Latin America and the Caribbean”, November 2016
http://publications.apec.org/publication-detail.php?pub_id=1841 retrieved May 12th 2017

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1.5. Research Methodology Description:
1.5.1. Type of Research
This is an exploratory and descriptive. It is an exploratory study as there have been studies done
about the Pacific Alliance in general. But there have been no studies on the economic impact of
the Pacific Alliance in the relations between Peru and China. This is a first study that tries to cover
the issue.
Additionally, this is an descriptive study because it will be described in the first place the
characteristics of the Pacific Alliance in general, the economic relationship between Peru and
China and from the data collected it will be described and analyzed how Peru have used the PA
from its creation in 2011 to 2016 to increase its trade with China and what mechanisms is using
for that and what can be improved in the future.
1.5.2. Organization of the study
In the first chapter, a literature review about the Pacific Alliance based in different sources is
presented. In the second chapter a conceptual framework, with the theories that explain the process
of the Pacific Alliance is presented. In the third chapter a presentation about the economic
relationship between China and Peru is given. In the fourth chapter an overview of the Pacific
Alliance, its structure and how it works is presented, in the fifth chapter a description of the actions
taken by the Pacific Alliance to promote business with China is presented, and in the last chapter
conclusions and recommendations for how Peru can use the Pacific Alliance as a platform is given.

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Chapter 2:
Theories that support trade between countries and the existence of a
regional economic integration
With the aim to illustrate and understand, from an academic perspective, the process of regional
integration initiated by the country members of the Pacific Alliance, it is required to define a set
of theories and concepts, such as absolute advantage, comparative advantage and the factor
endowment theoryas well as explain the concepts of region, regionalism, regionalization and inter-
regionalism.
2. Absolute Advantage and Comparative Advantage8
The first theory to explain which goods a country should trade was based in the principle of the
absolute advantage that Adam Smith formulated. This principle said that in a two nation, two
product world, international specialization and trade will be beneficial when one country has an
absolute cost advantage (use less labor to produce a unit of output) in one good and the other
country has an absolute cost advantage in the other good. Then a nation will export goods in which
it has an absolute cost advantage and will import goods in which it has an absolute disadvantage.
The theory of Smith was based in the concept of cost of labor, the theory of value that assumes
that within each nation labor is the only factor of production and is homogeneous (of one quality)
and the cost of price of a product depends only on the amount of labor required to produce it.
8
The following definitions have been formulated taking in consideration the book of Robert J.
Carbaugh: “International Economics”, Fifteenth edition, Cencage Learning, USA, 2014: 55 (pdf
edition)

17
For example, if China use less labor to produce a yard of cloth than the United States, Chinese
production cost will be lower.
David Ricardo formulated the theory of comparative advantage which solved the problem that
Adam Smith theory presented. According to Adam Smith mutually beneficial trade will happen
when each country is the less cost producer of at least one good it can export to its trading partner.
But what happen if a country is more efficient than its trading partner in the production of all
goods?
And unlike Adam Smith who stressed the importance of absolute cost difference among countries,
Ricardo stressed comparative (relative) cost differences. According to the principle of comparative
advantage even if a country has an absolute cost disadvantage in the production of both goods a
basis for mutually beneficial trade might still exist. The less efficient country should specialize
and export the goods in which is it relatively less inefficient (that is where it absolute disadvantage
is less). The more efficient country specializes and export the good in which it is relatively more
efficient (that is where its absolute advantage is greatest).
2.1. Factor Endowments Theory9
David Ricardo did not explain what determined in last instance comparative advantage. He took
for granted that relative labor productivity, labor cost and product price were different in the two
countries before trade. Besides that, Ricardo, as Smith, assumed that labor was the only factor of
production.
Two Swedish economists Eli Heckscher and Bertil Ohlin, formulated a theory which stated that
factor (resource endowment) determined a nation’s comparative advantage. Their theory, known
9
Ibid., 70

18
as the factor endowments theory, asserts that the immediate basis for trade is the difference
between pre-trade relative product price of trading countries. This price depends on the production
possibility curves and tastes and preferences in the trading countries. So according to the factor
endowments theory a country will export the product that use a large amount of the relative
abundant resource and will import the product that in production uses the relatively scarce
resource. In this way, the factor endowment theory predicts for example that China which is
relatively abundant in labor will export shoes and shirts while the United States which is relatively
abundant in capital will export machines and chemicals.
2.2. Regional Economic Integration10
Regarding economic integration, from the 1990’s there have been an increase in the number of
regional trade agreements because of the failure of the multilateral trading system.
The economic integration is a process of reducing or eliminating restrictions on trade and factor
mobility. Economic integration is the result of two or more countries uniting in a regional trade
arrangement.
Traditionally there have been 4 types of regional trading arrangement. The simpler is the Free
Trade Area in which members agree to remove all tariffs among themselves but each member
maintains its own set of trade restrictions against outsiders. An example of this type of integration
is the North American Free Trade Area (NAFTA) that consists of Canada, Mexico and the United
States.
A customs union is an agreement where two or more trading partners remove all tariff barriers
between themselves and in addition each country member impose identical trade restrictions
10
Ibid., 268 to 273

19
against outsiders. The effect of the establishment of the common external trade policy is to allow
free trade within the customs union whereas all trade restrictions imposed against outsiders are
unified. A good example of this is BENELUX (Belgium, The Netherlands and Luxemburg)
formed in 1948.
A common market is a group of trading countries that allow the free movement of goods and
services among themselves, the establishment of common external trade restrictions against non-
member countries and the free movement of factor of production across national borders within
the economic block. In this aspect, the common market represents a more complete type of
integration than a Free Trade Area or a Customs Union.
Beyond this type of economic integration could evolve to the type of economic union in which
national, social taxation and fiscal policies are harmonized and administered by a supra national
institution. The ultimate stage of economic union will be the creation of a common currency and
the unification of national monetary policies. In this way, the economic union would represent also
a monetary union.
There are several effects of a regional trading arrangement divided into static effects and dynamic
effects of economic integration.
The dynamic effects are the more important and this includes dynamic gains like economies of
scale, greater competition and a stimulus of investment. Probably the clearest effect of a custom
union is market enlargement because as producers penetrate into domestic market of other member
countries they can take advantage of economies of scale that would have not occurred in smaller
markets limited by trade restrictions. In this sense, larger markets may allow efficiencies
attributable to greater specialization of workers and machinery and the use of the most efficient
equipment. The European Union process suggest that significant economies of scale have been
achieved in products like steel, automobile, footwear and electronics.

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Bigger markets could also promote greater competition among producers within a customs union.
It is often said that trade restriction promotes monopoly power, when a small number of companies
dominate a domestic market. This companies would prefer to form agreements to not compete on
the basis of price, but with more open markets under a customs union, the potential for successful
collusion is lessened as the number of competitors increase. With more free trade, domestic
producers must compete or face the possibility of going bankrupt.
The creation of the Pacific Alliance should be understood within the context of the several Latin
American integration processes. Latin America is a region with a prolific number of regional
agreements as the Andean Pact, the MERCOSUR, MCCA, CARICOM and more recently
UNASUR and ALBA. Albeit the last two groups are more political in nature.
Anyway, what explain the difference between the Pacific Alliance and the other groups is its aim
of building an area of deep integration as defined as an area that includes the free circulation of
goods, services, capital and people and with an extra regional vision that focus specifically in the
Asia Pacific region. The Pacific Alliance especially intents to position the group in the “global
value chains”, so in this way be able to produce more value-added goods.
2.3. Region, regionalism, regionalization and interregionalism
For a theoretical explanation of the meaning of the Pacific Alliance, we have to consider the
following concepts:
A region, according to Hettne, is traditionally defined as a group of countries that share to an
extent a political project and have a geographical proximity. 11
11
HETTNE, B., INOTAI, A. AND SUNKEL, O.: “Globalism and the New Regionalism”.
Palgrave Macmillan, New York, 2002: 1

21
But according to Fawcett, the geographical proximity that define a region as the principal element
is not enough. He states that regions must be seen from a broader perspective with more elements
as reference, that is a group of states whose members share certain common features as a political
system or an economic system.12
It can be said that the Pacific Alliance as a region is best understood under Fawcett definition
because its process of regional integration began from a common set of elements such a political
system based in a democracy and an economic system that promotes an open economy.
Now regarding regionalism and regionalization, according to Hanggi, Roloff and Ruland, they
are now universal phenomenon13
. But according to Soderbaum, there is a difference between
regionalism and regionalization because the former is a generalized phenomenon that includes a
set of ideas, ideologies and identities common to a given region, that also look to the creation of a
supranational institution, but the second is a result of regionalism and might have no need for the
creation of a specific project.14
According to the definition of regionalism and regionalization given, it can be said that the Pacific
Alliance is a process looking to have something like a flexible regionalism because it fits the
definition of a process of regionalism but it is not looking for the creation of a supranational
institution.
Finally regarding interregionalism it is usually defined as the political dialogue that is established
between two regions of the world. In the case of the Pacific Alliance we have the example of the
12
FAWCETT, L.: Regionalism from an Historical Perspective, in FARRELL, M., HETTNE, B.,
and VAN LANGENHOVE, L. (editors): “Global Politics of Regionalism-Theory and Practice”,
Pluto Press London, 2005:24.
13
HÄNGGI, H, ROLOFF, R and RÜLAND, J.: “Interregionalism and International Relations”,
Routledge, London, 2006: 4ç
14
SÖDERBAUM, F.: “The Political Economy of Regionalism. The Case of Southern Africa”.
Palgrave Macmillan, Hampshire, 2004:7.

22
political dialogue that exists with ASEAN (Association of Southeast Asian Nations) and with
APEC (Asia-Pacific Economic Cooperation Forum).

23
Chapter 3
Peru’s economic relations with China
To understand how Peru can increase its trade with China, it is necessary to know how the
economic relations between the two countries have developed and how is currently.
3. Origins of the relations: A brief overview
The ties between Peru and China go back to ancient times. Both with a millennial and shared
history. Since the times of trade through the Galleon of Manila, China has become the main ally
in trade and lately in investment for Peru.
Thanks to the commerce of the Galleon of Manila (mid-16th century to early nineteenth century),
which consisted of one or two Spanish ships that made the annual Acapulco-Manila trip, the first
commercial exchanges between Peru and China began, leaving a deep footprint in the diet of the
Chinese population, as it managed to introduce new agricultural species of Peruvian origin, such
as sweet potatoes, potatoes, peanuts, tomatoes, beans, pineapple, cherimoya, cacao.
It also increased the extent of arable land. For example, sweet potatoes and potatoes adapt well to
dry and poor soils, with high productivity. So that the desert and mountainous regions in China,
which were considered sterile, became suitable land for the cultivation of these products, fighting
against the famine, which contributed to the growth of its population. According to official
documentation, in the year 1600 the population of China was 140 million, going to 205 million in
the year 1700.
Likewise, the refined Peruvian society of that time demanded the fine silks, perfumes and Chinese
porcelains, buying them with silver of the mine of Potosí (present day Bolivia). Silver was highly
valued by the Chinese, as they needed to support the transactions of their flourishing economy.

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3.1. Exports of goods and services to China and the Free Trade
Agreement
In modern times the trade between Peru and China began again in the year 1971 when the two
countries established diplomatic relations. But the volume of this trade was very low until the
beginning of the 1990’s when investment from China and the growing appetite of its industries
accelerated the demand for Peru raw materials.
For example, in 1993 Peru exported to China 140 million dollars from a total of 3.4 billion US
dollars that Peru exported to the world. The same year Peru imported from China a value of 90
million US dollars (from a total of 4 billion dollars that Peru imported from the world).
In 1993 China began to invest in Peru with Shougang Corp. buying an iron mine and mostly of
this was exported to China so the exports from Peru to China increased to 675 million US dollars
in the year 2003. But it is from this year that the value of exports to China began to increase very
fast as the price of the minerals that Peru sell began to increase. For example, the price of copper
rose from 72.6 cents of dollar per pound to 277.3 cents of dollar per pound in the year 2006 to a
peak of 386.5 cents of dollar per pound in the year 2011. In the case of iron, the price increased
from 15.9 dollar per ton in 2003 to 38.3 dollar per ton in 2006 to a peak of 113.5 dollar per ton in
the year 2011. In this way, as China demand for these goods increased, Peru exports to China
reached a peak in value of 7.84 billion US dollars in the year 2012 but from this year the value of
exports began to decrease as price of raw materials began to decrease. However, in the last two
years, the value of exports to China has begun to increase again because of the increase in the
volume of minerals demanded by China (and as the prices of the raw materials have increased a
little again).

25
3.1.1. Comparative economic advantages of China and Peru
The comparative advantage in exports is an indicator that reflects the economic development of a
country and consequently the technological improvements and the development of its industry in
the products in which it is more efficient.
Peru mainly export raw materials to China and buy from China manufactures, that means there is
an asymmetric trade between them, so it will be explained the trade between the two countries
from the point of view of comparative advantage.
Peru has comparative advantages in products in which it is the world's leading exporter, such as
fresh asparagus, quinoa, oil and fish meal. It is also a world exporter of minerals such as copper,
zinc, lead and its derivatives, as well as Brazil nuts, sawn wood, beans and synthetic fibers, among
others. Peru ranks 59th among the world's exporting countries with a share of 0.2% of exports to
the world (see table 1).

26
Table 1: Peruvian products that have the largest participation in the world market by 2015
Products
Share
of the
world
exports
Position in the
world exports
Flours, meals and pellets, of fish or of crustaceans, or ... 28,2 1
Asparagus, fresh or chilled 36,2 1
Fish oils and fats and fractions thereof, except fish oils 17,7 1
Quinoa "Chenopodium quinoa" 44,5 1
Coloring lacquers ... 18,2 1
Flour and meal of sago or of roots … 28,8 1
Coca leaves, fresh or dried, incl. Cut, crushed or powdered 67,4 1
Copper ores and concentrates. 14,1 2
Zinc ores and concentrates. 15,5 2
Lead minerals and their concentrates. 18,1 2
Other molybdenum ores and concentrates 25,8 2
Other vegetables prepared or preserved … 6,4 2
Zinc, unalloyed, of zinc content, by weight, less than 99,99%. 8,7 2
Molluscs, prepared or preserved: Cuttlefish (squid) and squid 17,3 2
Asparagus, prepared or preserved (except in vinegar or in acid ... 42,7 2
Sulfuric acid; Oleum 9,3 2
Fine, carded or combed hair (except wool and goat's hair) 13,6 2
Anchovies, preserved, whole or in pieces 18,1 2
Brazil nuts, fresh or dried without peels. 10,8 2
All the products 0,2 59
Source: Trademap
Elaborated by author
As shown in table 2, Peru is a net exporter in the sectors of fresh food with an amount of 2,077,476
thousand dollars and mainly of minerals with an amount of 9,429,479 thousand dollars. While in
the processed food, basic manufactures and clothing sectors it is also, but by comparison China

27
export a much higher amount than Peru. This is reflected in Peruvian exports to China, as well as
in imports.
Table 2: Net Exports of China and Peru by Sector, year 2014
Sectors
Peru: Value of Net Exports
(thousands of dollars)
China: Value of Net Exports
(thousands of dollars)
Fresh food 2,077,476 -56,140,614
Processed food 1,178,082 2,142,050
Wood Products -752,084 -11,596,744
Textiles -539,339 94,182,139
Chemicals -5,412,225 -44,194,516
Leather products -446,388 77,323,571
Basic Manufactures 821,401 134,807,127
Non-electronic machinery -5,233,842 72,459,053
IT & electronics -3,609,518 427,602,759
Electronic components -1,718,137 -14,583,082
Transportation Equipment -3,868,867 -16,920,534
Clothing 453,965 181,282,267
Minerals 9,429,479 -470,244,191
Source: Trademap
For example, as shown in Table 3, China purchases 63% of Peru exports of copper and its
concentrates, 55% of its copper cathodes, 70% of its fishmeal, 97% of its iron, etc. These products
have been classified by the Ministry of Commerce as “traditional products”, which represented
31.2% of what Peru sells to the world in 2015.15
15
Organization of American States (OAS) Foreign Trade Information System (SICE), web site:
See Declaration of Cartagena. Available at:
http://www.sice.oas.org/TPD/Pacific_Alliance/Presidential_Declarations/VIII_Summit_Cartagen
a_Declaration_s.pdf retrieved May 12th 2017

28
Table 3: Main Peruvian exports to China, year 2016
Product
Value in
2016, USD
thousand
Annual growth
2012-2016, %,
p.a.
Share in
Peru's exports,
%
All products 8.483.938 2 24
Copper ores and concentrates 5.467.325 10 63
Copper, refined, in the form of
cathodes and sections of cathodes
756.840
-1 55
Flours, meals and pellets of fish or
crustaceans, …
713.862
-4 70
Non-agglomerated iron ores and
concentrates, …
330.495
-25 97
Silver ores and concentrates 324.172 18 67
Lead ores and concentrates 236.255 -17 20
Zinc ores and concentrates 190.806 15 16
Fresh grapes 53.089 19 8
Wood, incl. strips and friezes for
parquet flooring, ...
49.304
11 67
Natural gas, liquefied 45.853 9
Source: Trademap
On the other hand, Peru non-traditional exports are goods that are different of raw materials, or of
traditional agricultural exports (like sugar and cotton). These are mainly agro-industry goods (like
avocado, asparagus, mangoes, etc.), fishery products, and processed and manufactured goods.
These products had a share of only 2.4% of the total that Peru exported to the world in 2016,

29
amounting 262,9 million US dollars, decreasing by -23,5% and keeping this trend since 2015.16
.
See Figure 1 below.
Figure 1: Peru: Non-Traditional Exports to China, 2011 – 2016, (US $ million)
Source: MINCETUR
China on the other hand is the world's leading exporter with a 14% share of world exports. It is the
8th country with the greatest number of comparative advantages covering a total of 287 sectors
(OECD / CAF / ECLAC, 2015).
China is a net exporter in sectors such as textiles, chemicals, IT & electronics, non-electronic
machinery, electronic components, etc. (See Table 2), and this is reflected in its world exports, and
is also reflected in Peruvian imports, having a wide comparative advantage in these products and
that’s why for three years Peru has been having a trade deficit with this country with an amount of
-1.333 billion dollars.
16
Ministry of Commerce and Tourism of Peru (MINCETUR) official website: “Reporte de
Comercio Bilateral Peru – China 2016” http://www.mincetur.gob.pe/comercio-exterior/reportes-
estadisticos/reportes-de-comercio-bilateral/ retrieved May 19th
, 2017

30
Of the total of Peruvian imports, 22.7% is represented by imports from China. Among the main
imported products, we have mobile phones worth $ 288.539 million, motorcycles for $ 119.43
million, automobiles for $ 93.26 million, tires for $ 79.06 million, among others (see table 4).
Table 4: Main Peruvian imports from China, year 2015
Product description
Value
2015, in
millions of
US $
Annual
growth
rate 2011-
2015
Share of
China's
exports
Position
in the
world
exports
All the products 6,354.911 8 0,3 1
Telephones, including mobile … 288.539 18 0,2 1
Automatic data processing machines 188.533 10 0,2 1
Motorcycles and cycles … 119.43 -9 2,9 1
Pipes and tubes, pipes and tubes - non-
ferrous metal
95.059 65 18,4 5
Motor vehicle transport persons with a
cylinder capacity exceeding 1000 c
93.266 5 7,9 17
New rubber tires of a kind used on buses and
trucks
79.026 11 1,1 1
Polyethylene terephthalate 75.251 27 3,7 1
Tricycles, scooters, pedal cars and similar
wheeled toys; Cars and chairs
74.128 12 0,5 1
Sinks, washbasin, bathtubs and the like, of
porcelain.
72.198 140 1,6 1
Other wire rods, of other alloy steel. 71.685 43 1,6 1
Source: Trademap
Figure 2 shows the classification of Peruvian imports from China. Among the raw materials that
were 2.208 billion dollars in 2015, we have, for example, that Peru imports rubber, organic

31
chemicals, aluminum, plastic, glass, paper or cardboard pulp, pearls, cement, concrete or stone
manufactures Artificial, etc.
Imports of capital goods amounted to USD 3.962 billion in 2015. The goods imported were
containers, automatic data processing machines, freezers, cranes, stone crushers, cement mixers,
etc.
Finally, imports of consumer goods amounted to US $ 2.491 billion in 2015. For example, Peru
imports mobile phones, footwear, clothing, wallets, lenses, toys, ceramic products, cameras, etc.
Figure 2: Peru Imports from China, 2010 – 2015 (million US dollars)
*Note:
Yellow: Raw materials
Grey: Capital Goods
Green: Consumption goods
Trend Line: Total
Source: MINCETUR

32
3.1.2. Opportunities of Peru according to their comparative advantage
Since the engine of the Chinese economy is changing, from being an economy that exports only
manufactured products that generally demand raw materials from resource rich countries,
especially minerals, it is now focusing on domestic consumption. In addition, its cheap labor is no
longer so abundant and will demand products with value added and more sophisticated as wines,
canned fruits and vegetables, frozen, soy, meat, wood furniture, among others.
3.1.3. Peru - China Free Trade Agreement
After 6 negotiation rounds that started in 2008, Peru and China signed a FTA on April 28th
of 2009
which came into force on March 1st
of 2010. Known like the widest FTA signed by China with a
Latin American country as 15 topics were negotiated; National Treatment and Access to Markets,
Rules of Origin, Customs Procedures, Commercial Defense, Sanitary and Phytosanitary Measures,
Technical Barriers to Trade, Trade in Services, Temporary Entry of Business Persons,
Investments, Intellectual Property Rights, Cooperation, Transparency, Treaty Administration,
Dispute Settlement and Exceptions.
In 2009, China was the second main trade partner for Peru after USA and exports of goods to
China amounted US $ 4.074 billion, which represented 15.3% of the total exports of Peru to the
world. On the other hand, imports amounted US $ 3,019 million, or 14.9% % of the total share of
what Peru bought from the world. 17
Next table shows a comparison of the main exported products by Peru to China before and years
after the agreement entered into force. For example, in 2009, exports of traditional products like
copper, lead ore, zinc ore, etc. occupied the biggest share.
17
Ministry of Commerce and Tourism of Peru (MINCETUR) official website: “Reporte de Comercio Bilateral Peru
– China 2009” http://www.mincetur.gob.pe/comercio-exterior/reportes-estadisticos/reportes-de-comercio-bilateral/
retrieved May 19th
, 2017

33
The main non -traditional products exported were wood strips and friezes for parquet flooring,
mollusks prepared or preserved and wood sawn or chipped lengthwise, sliced or peeled.
Currently, China is the main destination of Peruvian exports (since 2012) and the largest trading
partner for Peru (since 2015), above the USA. In 2016, Peru's exports to China amounted for $
8.484 billion, or 23.5% of the total, and imports amounted for $ 8.235 billion or 22.8% of the
total.18
Although, exports to China has more than doubled, from an amount of 4.074 billion US dollars in
2009 to $ 8.484 billion US dollars in 2016 this is mainly due to the increase of exports of raw
materials since 2009, specially minerals such as copper ores and concentrates that have grown
297,26%, iron ore and concentrates that have grown 66,85%, silver that have grown 317,85%, as
well as natural gas with an increase of 97,03%, and fishmeal that have grown 5,42%.
As it was seen in table 3, China is the main importer of minerals and fishmeal in Peru. Almost all
of what is exported of copper and iron to China, is being produced by Chinese companies in Peru
such as MMG Limited with Las Bambas mine and Chinalco with Toromocho mine that produce
copper, Shougang with Marcona mine that produces iron and China Fishery Group and Copeinca
that produce fishmeal.
On the side of non-traditional products (see table 5), the FTA has benefited mainly fishing,
agriculture, textile and chemical sectors as it has allowed the tariffs on these goods to be gradually
reduced or to become zero immediately.
18
Ministry of Commerce and Tourism of Peru (MINCETUR) official website: “Reporte de Comercio Bilateral Peru
– China 2016” http://www.mincetur.gob.pe/comercio-exterior/reportes-estadisticos/reportes-de-comercio-bilateral/
retrieved May 19th
, 2017

34
Table 5: Example of non-traditional products exported to China
Code Product
Value
exported
2016
Thousand
USD
Annual
growth
2012 -
2016 %
Ad
Valorem
Tariff
faced by
Peru
Sector
160554
Cuttlefish and squid,
prepared or preserved …
37,857 -19 1 Fisheries
80610 Fresh grapes 53,089 19 0
Agro
industry
440929
Wood, incl. strips and
friezes for parquet flooring,
not assembled ...
49,304 11 0 Woods
510539
Fine animal hair (Alpaca or
Llama), carded or combed
…
16,299 3 5 Textiles
121229
Seaweeds and other algae,
fresh, chilled, frozen or
dried ...
15,593 -14 6 Fisheries
140490 Tara powder 10,988 8 1
Agro –
Industry
110620
Semolina flour and maca
powder
898 92 0
Agro –
Industry
80440 Fresh or dried avocados 4,58 186 0
Agro –
Industry
80450
Fresh or dried guavas,
mangoes and mangosteens
327 156 2
Agro –
Industry
280490 Selenium 245 -23 2 Chemical
281700 Zinc oxide; zinc peroxide 407 -2 1 Chemical
Source: Trademap

35
For example, grapes, which had a base tariff of 13% before the FTA with China, since January
2015 the tariff is zero, or the mango that had a tariff of 15% before NAFTA, became zero since
January 2013, or the asparagus with a tariff of 13% before the FTA when entering into effect this
lowered to zero.
The problem with exports to China specially of agricultural products, as it was seen before it is a
sector where Peru has enormous potential and it is already ranked as number one exporter of some
products, is that the phytosanitaryexams that have to pass this products before entering the Chinese
market. These exams usually take long time and sometimes are complicated and tedious.
According to Carlos Aquino, that made a balance of the China Peru FTA “It should also be noted
that another positive effect of the FTA with China is that tariffs on many Chinese products that
Peru buys, such as cell phones, electronic products, cars, have dropped or are zero, which has made
possible for many people to access those products with lower prices and improve their standard of
living. Also, the cheaper machinery and industrial inputs of that country have allowed people and
companies to do business or become more competitive. A negative effect has been the strong
competition for some domestic producers of the arrival of cheap Chinese products.
It should be mentioned that Chinese investment in Peru has also increased from 2009 to 2016,
mainly in the mining and energy sector. With more Chinese investment, exports to that country
will also increase.”19
In Table 6 it can be seen that exports of products like copper increased a lot between 2009, a year
before the FTA entered into effect and 2016. But the increase in the value of minerals exported
19
Carlos Aquino Blog: “A 8 años de la firma del TLC con China”, April 28, 2017 http://asiapacifico-
carlosaquino.blogspot.pe/2017/04/a-8-anos-de-la-firma-del-tlc-con-china.html Retrieved May 20th, 2017

36
was mainly to the increase in price. Thanks to the FTA exports of fresh grapes was made easier
because first the reduction and after some years the elimination of the tariff was possible. In the
year 2016 around 53 million dollars of fresh grapes were exported, an increase of 8 times compared
with the value exported in the year 2009.

37
Table 6: Comparison between main products exported to China in 2009 and 2016
(Thousand US dollars)
Product
Value
2009
Product
Value
2016
Var%
2009-
2016
Ad
valorem
tariff
faced
by Perú
Copper ores and concentrates 1,376,272
Copper ores and
concentrates
5,467,325 297,26% 0
Flours, meals and pellets of
fish or crustaceans, mollusks
or other...
677,152
Copper, refined, in the
form of cathodes and
sections of cathodes
756,840 142,25% 0
Lead ores and concentrates 494,443
Flours, meals and pellets
of fish or crustaceans,
mollusks or other ...
713,862 5,42% 0
Zinc ores and concentrates 456,135
Non-agglomerated iron
ores and concentrates …
330,495 66,85% 0
Copper, refined, in the form
of cathodes and sections of
cathodes
312,422
Silver ores and
concentrates
324,172 317,85% 0
Non-agglomerated iron ores
and concentrates…
198,076
Lead ores and
concentrates
236.255 -52,22% 0
Light oils and preparations,
of petroleum …
185,991
Zinc ores and
concentrates
190,806 -58,17% 0
Agglomerated iron ores and
concentrates …
51,557 Fresh grapes 53,089 754,48% 0
Source: Trademap

38
3.2. Chinese Foreign Direct Investment to Peru
First of all, there is a point that needs to be clarified. The data given in Table 7, which start from
1980, does not reflect the real amount of FDI in Peru. According to Peruvian economist Victor
Torres, this is because the FDI entering the country, registered by The Agency of Private
Investment Promotion (PROINVERSION) only records the FDI that the foreign investor decides
voluntarily to declare, unless avails himself of the benefits of legal stability agreements with the
State.
Also, this institution does not register reinvestment, only new capital from the country the
company comes from.
Table 7
Balance of Chinese FDI stock at the end of the year in Peru 1 /
(Millions of dollars)
1980 -2008 2009 2010 2011 2012 2013 2014 2015 2016
147.3 147.3 147.3 147.8 208.1 208.1 208.1 208.1 208.1
Source: PROINVERSION
1/
December 2015 updated data

39
Table 8
Peru: FDI stock at the end of each year by main countries of origin
Source: Proinversión
Order
1992 2012 2016
Country Value Country Value Country Value
1 Usa. 617,7 Spain 4.441,5 Spain 4.486,1
2 Panama 166,8 Uk 4.314,9 Uk 4.336,0
3 Uk 127,2 Usa 3.216,1 Usa 3.193,8
4 China 118,1 Netherlands 1.532,8 Chile 2.226,3
5 Switzerland 96,8 Chile 1.407,7 Netherlands 1.532,8
6 Uruguay 41,5 Brazil 1.147,0 Brazil 1.188,9
7 Sweden 37,4 Canada 1.074,1 Colombia 1.124,1
8 Netherlands 37,0 Colombia 1.054,2 Canada 1.070,3
9 Canada 35,3 Panama 936,9 Panama 947,9
10 Japan 32,5 Mexico 476,8 Luxembourg 543,3
11 Germany 31,6 Switzerland 455,0 Switzerland 487,8
12 Italy 25,4 Singapore 365,5 Mexico 476,7
13 France 19,5 Luxembourg 272,4 Singapore 365,5
14 Luxembourg 17,8 Japan 238,4 Bermuda isl. 293,1
15 Britain 15,9 France 220,5 Japan 238,4
16 Liechtenstein 9,7 China 208,1 France 220,5
17 Venezuela 8,4 Germany 191,5 China 208,1
18 Spain 5,8 Bahamas isl. 183,1 Germany 191,5
19 Argentina 4,8 Uruguay 160,2 Bahamas isl. 183,1
Others 43,9 Others 791,7 Others 919,4
Total 1493,3161 Total 22688,354 Total 24233,47

40
During the 1980’s, Chinese investment in Peru was irrelevant, with an amount of 2,500 US $ in
1980 and 18,000 US $ in 1988. But it was in the first half of the 90’s that Chinese investment
started to be relevant with the investment in the oil sector by China National Petroleum
Corporation (CNPC) in 1994 and the purchase in 1992 of stated owned Hierro Peru by Shougang
corporation with an amount of 118.1 million US dollars. Thanks to this acquisition China ranked
as the fourth main investor in Peru in that year with a share of 7,9% (see table 2). The reason of
the increase of investment in general in Peru in that decade is explained by the deregulation of
foreign investment and the privatization process that was carried out by the government of Alberto
Fujimori.
In June of 1994, China and Peru subscribed a Bilateral Investment Agreement that entered into
force in February of 1995.
The second largest Chinese investment made in Peru was held between 2007 and 2008 with three
new copper concessions. Starting with Toromocho in Junin region, purchased by Chinalco
(Aluminum Corporation of China) for US$ 790 million, followed by Rio Blanco in Piura
purchased by Zijin Consortium for US$ 182 million and Galeno in Cajamarca region, purchased
by Minmetals Nonferrous Metals Company and Jiangxi Copper Company for US$ 455 million
The Economic Commission for Latin America and the Caribbean (ECLAC) in a document said
that in 2011 the estimated Chinese FDI in Peru was of 829 million of dollars while compared with
the data of a stock of US$ 147,8 million given by PROINVERSION in that same year (see table
9).
According to the Peruvian Chinese chamber of commerce (CAPECHI), in 2013 the Chinese FDI
in Peru reached the amount of 1800 millions of dollars (see table 7), distributed in mining with
48%, fisheries with 40%, finance with 10% and 2% in tourism.

41
It is important to mention that the Free Trade Agreement between Peru includes an investment
chapter.
Table 9
China: Estimated FDI in Peru 1990 – 2012
1990 - 2009 2010 2011 2012 2013 1/
Peru 2,262 84 829 1,306.84 1,800
Source: Chinese Foreign Direct Investment in Latin America and the Caribbean Working
Document: China – Latin America cross – council taskforce. ECLAC, 2013.
1/ La Republica. El gigante asiático pisa fuerte en el Perú y América Latina. May 20, 2014
Although according to PROINVERSION, China occupied the 17th place among the largest foreign
investor countries in Peru in 2016 (See Table 8), Chinese investment in mining is very important
for Peru. There are currently 7 Chinese mining companies that have about 10 billion dollars (21%)
of the total estimated on mining projects portfolio with a total of 46,996 billion dollars to January,
2017, becoming the main strategic investor partner in mining for Peru (before Canada and USA).20
Besides, during a speech given by President Xi Jinping in Peru National Congress in November,
2016, he mentioned that more than 170 Chinese companies have settled in Peru with a total
investment of 18 billion US dollars.21
It is estimated that when projects of Chinese companies Minera Chinalco and Minera Las Bambas
enter into full operation in 2017-2018, both would produce 33% of total copper production in Peru.
20
Page 3 http://www.minem.gob.pe/minem/archivos/file/Mineria/INVERSION/2017/CARTERA01_2017.pdf
21
See Chinese President Xi Jinping’s speech (in Spanish) at:
http://www.embajadachina.org.pe/esp/zbgx/t1446509.htm

42
In the other hand, Shougang Corporation owns the only iron mine in Peru that is located in
Marcona, Ica.
In the Finance sector stands out the first subsidiary of ICBC Group that came to Peru in 2013 and
that became the first Chinese-funded bank in entering the Peruvian financial system.
In the energy sector, the China National Petroleum Company (CNPC) bought the assets of
PETROBRAS in 2014 for $ 2.6 billion US dollars. Besides, it is going to invest 2,000 million US
dollars to exploit lot 58 of gas.
Currently this company is the country's largest oil producer with 14,500 barrels per day, producing
35% of the total national (from its lots X and VII-VI). In the case of lot X, it plans to drill 60 wells
during 2017, with the aim of increasing its production from 10,600 to 14,000 barrels per day.
China also has an important participation in the fisheries industry with China Fishery Group
Company (CFG) that bought COPEINCA in 2013 paying 762 million of US dollars, having in this
way the control of the largest quota of anchovy in Peru, becoming the third largest producer of
fishmeal in the world.

43
Table 10
Current, past and future investments announced from Chinese companies
Company Name
Project
Sector Place Resource /
Product /
Service
Investment
Amount
(Millions of
US $)
Comments
Shougang
Hierro Peru
S.A.A.
Marcona
Expansio
n
Mining Ica Iron 1,500 Possibly starts
producing on
December, 2018.
Chinalco Peru
S.A.
Toromoc
ho
Expansio
n
Mining Junin Copper 1,350 Possibly starts
producing on
December, 2019
Las Bambas
S.A. (MMG
Limited)
Las
Bambas
Mining Apurima
c
Copper 10,000 Construction
finished in 2016.
The mine is
forecast to
produce 500,000
tons of copper per
year
Shouxin Peru
S.A.
Exploitat
ion of
mining
tailings
Mining Ica Copper,
Iron, Zinc
239 With
Environmental
impact study
approved.
Under
construction.
Started on 2016.
Jinzhao
Mining Peru
S.A.
Pampa
de Pongo
Mining Arequipa Iron 1,500 With
Environmental
impact study
approved.
Possibly starts
producing on
January, 2021.
Junefield
Group S.A.
Don
Javier
Mining Arequipa Copper 600 Exploration
Stage.
Lumina
Copper S.A.C
Galeno Mining Cajamar
ca
Copper,
Silver, Gold,
Molybdenu
m
3,500 Exploration Stage
Possibly starts on
2021.
Rio Blanco
Copper S.A.
Rio
Blanco
Mining Piura Copper 1,500 Exploration Stage
Possibly starts
producing on
2021.
China
National
Block 58 Energy Cuzco Oil, Gas 2,000 Finished
exploration stage.

44
Petroleum
Company1/
2,600 Bought the assets
of PETROBRAS
in 2014.
COPEINCA
(China
Fishery
Group CFG)
2/
-- Fisheries Bayovar,
Chicama,
Chimbot
e,
Chancay,
Lima, Ilo
Fishmeal,
fish oil
800 CFG bought
Copeinca in 2013.
It controls the
largest anchovy
share quota
assigned to
fishing.
ICBC PERU
BANK
(Commercial
Bank of
China ICBC)
3/
-- Finance Lima Deposits,
transfers,
foreign
trade,
finance,
bonds cards,
loans, etc
50 Operates since
2014
First Chinese-
owned bank in
entering the
Peruvian financial
system.
Heixing
Electrical
Company
S.A.C. 4/
-- Trade Lima -- 0,3 It has a regional
sales and support
office in Lima.
Sources: Ministry of Energy and Mines of Peru
1/
El Comercio. CNPC completed seismic exploration in Block 58. January 18, 2016.
2/
La Republica. The Asian giant stomp in Peru and Latin America. May 20, 2014
3/
ICBC Peru Bank web page
4/
Ministry of Foreign Trade and Tourism. Bilateral Trade Report 2015.
5/
Torres, Sanborn (2009)
According to PROINVERSION, china’s FDI stock in Peru (see table 11) is mainly focused in
mining with US$ 157, 8 million (75% of total), followed by the finance sector with US$ 50 million
(24% of total).

45
Table 11: China’s FDI stock structure in Peru by main sectors, 1980-2016
Sector
US $
millions
Share
%
Receiving Company*
Trade 0,3 0.2 Hexing Electrical Company S.A.C
Finance 50,0 24 ICBC Perú Bank S.A
Mining 157,8 75.8
Shougang Hierro Perú S.A.A
Mineria Shouxin Perú S.A
Jinzhao Mining Perú S.A.
Total 208,1
Source: PROINVERSION, MINCETUR-VMCE-DGIECE
Although Peru, in order to promote foreign direct investment has set a stable and attractive legal
framework based on the constitution of 1993, with the legislative decree no. 662, which approves
the legal regime of foreign investment stability, the legislative decree no. 757, which approved the
framework law for private investment growth and the regulations guarantee schemes for private
investment approved by supreme decree 162-92-ef, there are certain weakness and obstacles that
make Peru a not very attractive country for foreign investors.
For example, we only have 8 agreements with foreign countries to avoid double taxation and these
do not include China nor Japan but Korea.
In the discussion paper written by Cynthia Sanborn and Alexis Yong named: Peru’s Economic
Boom and The Asian Connection, in an interview made to diplomats and businessmen from Peru
and China, they agreed that there are many obstacles for Chinese state-owned firms, and also for
individual entrepreneurs, wishing to invest more in Peru. This is especially due to Peru’s basic
regulatory requirements like the chores of obtaining work visas, permits for various stages of
operation, translating and officiating documents or the long delay to obtain visa for family
members.

46
Also, it is important to mention that Peru is a country with a rich biodiversity and many indigenous
communities. This is something foreign investors must take special attention. For example after
an agreement with local authorities in August of 2014, Fuerabamba (a local community) in
Apurimac, located in the area where Las Bambas copper project took place, was totally translated
to a new city that Glencore built (this company was owner of the project and sold it to Chinese
consortium MMG Ltd.) with all the facilities that a population needs such as roads, potable water,
sewage, electricity, schools and even a square. In this way the company and the community
reached an agreement and avoided a conflict.
There have being some problems for Chinese companies with local communities as in the case of
Rio Blanco Project (where still there is not an agreement with the local community to begin
exploration of the mine), or with labor unions as in the case of Shougang, but in the case of the
mine Toromocho they got an agreement with local communities to avoid those problems.
3.3. Chinese tourism to Peru
As can be seen in the following Table, the number of Chinese tourists coming to Peru is still very
small. In the year 2015 only 19, 243 of them come to Peru, of the more than 3.5 million tourists
that came to the country.
In the year 2015, according to Table 12 below, 78 million Chinese traveled abroad. So why few
Chinese came to Peru? There are several reasons for this: First, it was very difficult for Chinese to
get a visa to visit Peru, too many requirements and it took a long time. But in September 2016 Peru
simplified the procedures and now if a Chinese has a visa for USA or a Shenghen visa, he/she does
not need a visa to come to the country.

47
Second, there are not direct flights from China to Peru, there is a need to go through USA or
Europe. It requires at least 24 hours in a plane for a Chinese to go to Peru. There are talks to make
possible that Chinese airlines flight to Peru because actually there are not one.22
Third, there is a lack of interpreters of Chines language in Peru or of persons who can be guide
tours for the Chinese tourists, and Four, there is not much knowledge in China about Peru
attractions, about Peru history and culture so still Peru is not an attractive tourism destination for
Chinese tourists. For this what is needed is precisely the promotion of Peru image in China.
Table 12: Receptive Tourism indicators – China – 2010-2015
Tourist Indicators
(World)
2010 2011 2012 2013 2014 2015
Var
13/
12
Var
14/
13
Var
15/
14
Chinese departures to
the world (travel)
35 118
700
40
700
200
48
836
500
57
995
600
68
745
900
78
630
600
19
%
19
%
14
%
Total spending of
Chinese in US $
(thousands of
millions)
$34.1
$48.
5
$75.
8
$102.
8
$131.
8
$164.
1
36
%
28
%
25
%
Departures of Chinese
tourists to South
America (travel)
72 841
100
896
134
632
143
598
148
762
191
510
7% 4%
29
%
Tourist Indicators
(Peru)
International tourist
arrivals from China to
Peru
9 484
11
896
12
180
12
864
16
607
19
243
6%
29
%
16
%
US $ Millions of
foreign exchanges
generated by Chinese
foreign tourists
$0.0 $0.0
$17.
4
$18.7 $23.2 $26.1 7%
25
%
12
%
Average expenditure
of Chinese tourists in
Peru (US $)
$0.0 $0.0
$1
473.
0
$1
483.7
$1
475.7
$1
422.5
1% -1% -4%
22
In an interview for a local newspaper the Ministry of Trade and Tourism of Peru said that China Eastern Airlines
will began flying to Peru, bringing cargo, but he hope in the future also will bring passengers. See La Republica
newspaper, online edition, “Gobierno busca triplicar el numero de turistas chinos en el Peru en un lapso de dos años”,
November 22, 2016, http://larepublica.pe/economia/823997-gobierno-busca-triplicar-el-numero-de-turistas-chinos-
en-el-peru-en-un-plazo-de-dos-anos retrieved May 12, 2017

48
Source: Data compiled by Turismo IN (PROMPERU 2016)
http://www.promperu.gob.pe/TurismoIN/sitio/VisorDocumentos?titulo=China&url=/Uploads/m
ercados_y_segmentos/reportes/adjuntos/36/Indicadores-de-turismo-
China.pdf&nombObjeto=ReportesPaisesPriorizados&back=http://www.promperu.gob.pe/Turism
oIN/sitio/Paises/7/China
According to economist Carlos Aquino Rodríguez during an interview for El Comerio daily in
November, 2016 he indicated that the first visit of Peruvian President Pedro Pablo Kuzinsky and
his ministers to China “has been positive because they held meetings with chains of entertainment
and airlines of that country. Wanda group has said that it will visit Peru and there is a possibility
of having a commercial office to promote our country. He also believes that it will be vital that
Chinese hotel investments come to the country, as visitors of the Asian giant have special
preferences. For example, Chinese like hard beds and their breakfast is not like ours with bread
and milk, but fruits and soups”. 23
So, a tourism campaign of Peru in China is needed, and communication between the Chinese and
the Peruvian travel agencies is vital during the business conferences made by the Pacific Alliance.
According to the Chinese companies, they prefer travel agencies that have operators that speak
Chinese as this point influences in 90% the purchase decision. So here also the need of the
knowledge by Peruvian agents of Chinese language is important.
23
El Comercio Daily: Cómo elevar la llegada de turistas chinos al Perú:
http://archivo.elcomercio.pe/apec/noticias/como-elevar-llegada-turistas-chinos-al-peru-noticia-1947626 Retreived on
May 31, 2017.

49
Chapter 4
An overview of the Pacific Alliance
4.1. Recount of the main events since its creation
The Pacific Alliance was created on April 28th
of 2011 with the Lima Declaration which
was the first presidential summit of its members with the presence of President of Chile,
Colombia, Mexico and Peru. But it was on June 6, 2012 with the establishment of the
Framework Agreement of the Pacific Alliance, set during the Fourth Summit held in
Antofagasta, Chile that the block was formally created. The aim was to create an agreement
that will allow the free movement of goods, services, capital and people within the region.
But the creation of the Pacific Alliance was preceded by a history of negotiations and
agreements among the Latin American countries until 4 of them found a common
objective.

50
Table 13: Timeline of Presidential Summits and main events
2011 - 2016
Date Name of Meeting Main Events
28 April
2011
First Presidential
Summit
(Peru)
Declaration of Lima.
The Pacific Alliance initiative was stablished by the
presidents of Chile, Colombia, Mexico,
and Peru.
Panama was invited as a observer country.
04
December
2011
Second Presidential
Summit
(Mexico)
Declaration of Mérida.
It was agreed by the 4 country members to sign a
treaty within a maximum of 6 months.
05 March
2012
Third Presidential
Summit (Virtual
Summit via
teleconference held
in Cartagena,
Colombia)
Conclusion of the negotiation of the Pacific Alliance
Framework Agreement.
Costa Rica became observer.
06 June
2012
Forth Presidential
Summit
(Chile)
Declaration of Paranal.
Formal establishment of the Pacific Alliance with the
Framework Agreement of the Pacific Alliance (but not
yet into force). In this was defined the objectives,
requirements for future negotiations and participation
of other countries.
17
November
2012
Fifth Presidential
Summit
(Spain)
Declaration of Cádiz
Exemption of visa to Colombians and Peruvians in the
modality of visitors without paid activities for up to
180 days.
Australia, Canada, Spain, New Zealand and Uruguay
joint as observers.

51
26 January
2013
Sixth Presidential
Summit
(Chile)
Declaration of Santiago
Japan and Guatemala were accepted as observers.
Mexico ratified the Framework Agreement.
23 May
2013
Seventh Presidential
Summit
(Colombia)
Declaration of Cali
Ecuador, El Salvador, France, Honduras, Paraguay,
Portugal and the Dominican Republic as new observer
members.
Acceptance of Costa Rica's request to begin its process
of joining the Alliance.
Subscription of the Agreement for the Establishment
of the Cooperation Fund of the Pacific Alliance.
10
February
2014
Eight Presidential
Summit
(Colombia)
Declaration of Cartagena
It was signed the Additional Protocol of the
Framework Agreement of the Pacific Alliance.
Automatically was eliminated 92% of the tariffs
among the country members. It was agreed that the
remaining 8% would be gradually eliminated during a
period of 7 years.
Initiatives to share diplomatic, consular and
commercial offices
The launch of the "Pacific Alliance Traveler's Guide"
to facilitate the movement of people
Realization of 33 joint activities of commercial
promotion and investments during 2013.
Germany, China, South Korea, United States, Italy,
Netherlands, United Kingdom, Switzerland, Turkey,
Singapore, Morocco, Finland, India and Israel
accepted as new observer members.
20 June
2014
Ninth Presidential
Summit24
Declaration of Punta Mita
24
See Declaration of Cartagena. Available at:
http://www.sice.oas.org/TPD/Pacific_Alliance/Presidential_Declarations/VIII_Summit_Cartagena_Declaration_s.pd
f

52
(Mexico) The Mexican Stock Exchange is announced to be
incorporated into the common stock exchange, the
Latin American Integrated Market (MILA)
Discussions on the "Pacific Alliance Infrastructure
Development Fund".
Belgium and Trinidad and Tobago as new observers.
01-03 July
2015
Tenth Presidential
Summit25
(Peru)
Declaration of Paracas
Announcement that on July 20, the Framework
Agreement of the Pacific Alliance will enter into force.
Agreement establishing the Cooperation Fund of the
Pacific Alliance.
Austria, Denmark, Georgia, Greece, Haiti, Hungary,
Indonesia, Poland, Sweden and Thailand as new
observers.
28 June-
01 July
2016
Eleventh Presidential
Summit26
(Chile)
Declaration of Puerto Varas
Announcement that the Additional Protocol of the
Framework Agreement entered into force on the 01 of
May, 2016.
Announcement of the visa exemption for the free
circulation of permanent residents belonging to the
country members of the Pacific Alliance to promote
tourism.
Announcement of Argentina, Czech Republic,
Romania, Ukraine as new observer states.
Sources: Organization of American States, Foreign Trade Information System (SICE), Pacific
Alliance, at http://www.sice.oas.org/TPD/Pacific_Alliance/Pacific_Alliance_e.asp
M. Angeles Villarreal, The Pacific Alliance: A Trade Integration Initiative in Latin America, at
https://fas.org/sgp/crs/row/R43748.pdf
25
See Declaration of Paracas. Available at:
http://www.sice.oas.org/TPD/Pacific_Alliance/Presidential_Declarations/X_Paracas_Declaration_s.pdf
26
See Declaration of Puerto Varas. Available at:
http://www.sice.oas.org/TPD/Pacific_Alliance/Presidential_Declarations/XI_Summit_Puerto_Varas_Declaration_s.
pdf

53
For example, of the 4 members of the Pacific Alliance, 3 of them, Chile, Colombia and Peru, were
in a moment members of Andean Community, created itself in 1969 but Chile left the agreement
on 1976 and Venezuela, who also was a member of this, but left the Community in the last decade.
Chile left the agreement because the government of Pinochet undertook liberal economic policies
and opened Chilean economy to the world, something that was contrary to the policies of the
Andean Community. In the case of Venezuela this country left this agreement because Colombia
and Peru undertook a policy of signing free trade agreements that was contrary to Venezuelan
policy.
As can be seen the difference in economic orientation among its members were the reason why
the Andean Community did not advance with some countries leaving the group.
That is why in the year 2006, the Peruvian government began talking to several Latin American
countries to have a group committed to free trade and open market and with an interest in the Asia
Pacific region. The aim was to create a group of Latin American countries with cost bordering in
the Pacific Ocean. In this way on January 29th
, 2007 a meeting was held in Colombia with the
participation of trade ministers of 11 countries: Chile, Colombia, Costa Rica, Ecuador, El
Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama and Peru. This meeting led to the
creation of the “Forum on the Initiative of the Latin American Pacific Basin” which became known
later as the “Latin American Pacific Rim Forum”.
This new group of countries held several meetings but it became clear that there was difference
among its members. In one side countries like Chile, Colombia, Mexico and Peru were in favor of
greater economic openness and free trade that was contrary to the views of Ecuador and Nicaragua
for example.

54
In this situation, the president of Peru in October of 2010, asked first to the Presidents of Chile,
Colombia, Ecuador and Panama to consider the idea of creating an area of deep integration that
included the liberalization of trade of goods, services, capital and the free movement of people and
to form a common economic platform toward the Asia Pacific Region.
This proposal was answered in a positive way by Chile and Colombia and later the same invitation
was given to Mexico which accepted to participate in the regional integration project. In this way,
the first presidential summit of the Pacific Alliance was held on Lima on April 28th
of 2011 with
the presence of the President of Chile Sebastian Pineira, the president of Colombia Juan Manuel
Santos, the president of Mexico Felipe Calderon, and the president of Peru Alan Garcia.
This meeting at the highest level showed the political willingness of the countries which
established the Pacific Alliance as an area of deep integration within the Latin America Pacific
Basin.
It is said that the Pacific Alliance unlike the many others regional groups that exist in Latin
America, can have more possibilities of success because first they share a common economic view
that is they have open economies, are interested in having more relation with Asia Pacific region;
secondly, they share common values in the political field as democracies; and third, they have
among themselves free trade area agreements.
4.2. Common Objectives:
As the members of the Pacific Alliance share similar economic and political ideals and values,
aiming to move forward to rapidly achieve their goals, the following are the common objectives
they seek:27
27
See Abecé de la Alianza del Pacifico: https://alianzapacifico.net/?wpdmdl=4441

55
- To build a deep integration area to go forward progressively to the free circulation of goods,
services, capital and people.
- In this sense to impulse a greater growth, development and competitivity between the
country members in order to achieve greater welfare, reduce the socio-economic inequality
of its inhabitants and be socially inclusive.
- The goal that make the Pacific Alliance unique is to become a platform of political,
economic and trade integration in the region with an extra regional projection with special
interest to the Asia Pacific countries.
- The members seek to work jointly with coordinated and joint actions between the
promotion agencies of each country to impulse trade, attract tourism and foreign direct
investment as well as to strengthen the competitivity and innovation of SMEs. It also seeks
to impulse the research on climate change, facilitate the student and academic mobility,
migratory transit, etc. All these issues are part of the structure of the Pacific Alliance,
divided in technical groups as it will be seen below.
4.3. Structure:
The Pacific Alliance structure is compounded by 4 levels, 1 sub-level and 2 categories. It works
through the coordination among ministries and promotion agencies of each member as it does not
have a supranational organism.
As it can be seen in the following chart, the lowest level consists in 22 technical groups such as
Trade and Integration, Public Purchasing, Services and Capital, Intellectual Property, Tourism,
Cooperation, SMEs, etc. and compounded by public officials of the country members. These
groups negotiate the disciplines related to the Pacific Alliance.

56
The following is the High-Level Group, compounded by the vice ministers of foreign trade and
international relations of each of the country members. It supervises the technic groups, it also
prepares a proposal for the external approach jointly with another organisms or regional groups
specially from the Asia Pacific region.
The Council Members is integrated by the Foreign Trade and International Relations ministers of
each country member. They have to make decisions in order to develop objectives and actions
stated in the framework agreement.
The highest level of the structure are the Summits. This instance is formed by the presidents of
each country member where it is provided specific statements and a detailed plan of activities to
go forward with the common objectives agreed.
The sub-level would be the pro tempore presidency in which each year is chosen a country member
(promotion agency) in alphabetic order to coordinate the work to be done.
Regarding the categories inside the Pacific Alliance, the observer countries forms one, with
currently 49 countries. The second category is formed by the candidate countries to be members,
currently they are Costa Rica and Panama.
Although, during the High-Level Dialogue on Integration Initiatives in the Asia-Pacific:
Challenges and Opportunities held on March 14-15, 2017 organized by Chile, the current pro
tempore president, it was stated the desire to set another category, named “associated countries”
which would be formed by the countries with whom the Pacific Alliance is interested to conclude
quickly free trade agreements.

57
Chart 1: Organizational structure of the Pacific Alliance
Source: https://alianzapacifico.net/en/what-is-the-pacific-alliance/
Observer countries
According to Guidelines on the participation of the Observer States of the Pacific Alliance, the
countries that are not members can participate as an observer as long as this country shares the
principles and objectives set under the Framework Agreement of the Alliance.
When a country is accepted as an observer, this can be part of the meetings and instances and will
be able to speak but not to vote.

58
In case an observer country wants to gain full membership, the basic requirement is to have free
trade agreements as a minimum with 2 member countries.28
For example, the current potential candidates are Panama and Costa Rica that has applied for full
membership. Currently Costa Rica has FTA with Chile, Mexico and Peru and a Preferential Trade
Agreement with Colombia29
. Panama has an FTA with Peru, Chile and Mexico and has signed an
FTA with Colombia that is awaiting approval since 2013.30
Currently the observers are formed by 49 countries from all continents as it can be seen in the
following map:
28 Pacific Alliance web site: “Guidelines on the participation of observer countries of the Pacific
Alliance”: https://alianzapacifico.net/en/countries/ retrieved May 12th 2017
29 United States Congressional Research Service web site, M. Angeles Villarreal: “The Pacific
Alliance: A Trade Integration Initiative in Latin America”. https://fas.org/sgp/crs/row/R43748.pdf
30 Organization of American States (AS), Foreign Trade Information System (SICE), web site,
“Information on Panama” http://www.sice.oas.org/ctyindex/PAN/PANagreements_e.asp

59
Map 1: Observer countries of the Pacific Alliance
Source: https://alianzapacifico.net/en/paises/#paises-observadores
Observer members are a very important part of the Alliance as it is a channel to attract FDI to the
members. This will be explained with more detail in Chapter 5.
4.4. Promotion Entities
The Pacific Alliance relies in the promotion agencies of each of the country members. In the case
of Chile, the promotion entity is ProChile, for Colombia is ProColombia, for Mexico is ProMexico
and for Peru is PROMPERU.
According to the official web of the Pacific Alliance, they are in charge of:
“1. Developing synergies for promotion and participation in fairs and events. 2.
Exchanging experiences.3. Establishing trade offices abroad. 4. Identifying and promoting
business opportunities between companies within the member countries of the Alliance. 5.
Assisting and guiding investors in establishing their ventures. 6. Exchanging information
on companies who wish to implement an investment project and that have identified a
suitable partner within the member countries of the Alliance. 7. Exchanging experiences

60
to strengthen institutional knowledge. 8. Exchanging information on aspects that are
relevant to an investment decision, such as the applicable legal framework for taxes and
tariffs, market information, infrastructure, basic services and labor. 9. Disseminating
information among the business sectors of the member countries regarding investment
opportunities offered by each other. 10. Working together on actions that increase tourism
within the Alliance.”31
4.5. Shared Embassies Missions
As part of its deep integration policy, the members of the Pacific Alliance share 8 embassies, 1
permanent mission at OECD (see table 19 below), and 2 commercial offices.
In the declaration of Cali, it is highlighted the importance of these actions and encourages to move
forward with these initiatives.
With the information showed in table 19, it can be seen that the majority of these shared embassies
are in countries that don’t have much knowledge about Latin American countries. However, Peru
seems not as active as Chile is with this initiative as is only sharing embassies in Ghana and
Vietnam.
The aim of having shared embassies is to have more power of negotiation with third parties. Also
presenting themselves as an only block, the PA countries can present a better offer because
probably by going alone each of them would not be able to satisfy buyers demand for example, in
terms of quantity.
30
Pacific Alliance web site: “Promotion Entities”: http://alianzapacifico.net/temas-de-
trabajo/#!grupo=entidades-promocion retrieved May 12th 2017

61
Table 14: Shared Embassies
Member of the Pacific Alliance Country
Chile, Colombia, Mexico and Peru* Ghana
Colombia and Peru* Vietnam
Chile and Colombia* Morocco
Chile and Colombia* Algeria
Chile and Colombia* Azerbaijan
Chile and Mexico** Etiopia
Mexico and Colombia*** Singapur
Chile and Colombia*** France
Chile, Colombia, Mexico and Peru**** Permanent Mission at OECD, Paris
Sources:
* Torres Jarrin, Mario. Emerging Markets: The Pacific Alliance Perspectives and Opportunities
for Latin America. European Institute of International Studies. Salamanca, Spain. 2016. Page 35
**Secretaría de Relaciones Exteriores, México http://www.gob.mx/sre/prensa/chile-y-mexico-
suscriben-acuerdo-para-compartir-sede-diplomatica-en-etiopia
***Negocios ProMéxico Mayo 2014: The Pacific Alliance and the Latin American Integration.
Page 35
**** ProChile. Las agencias de promoción son pieza importante para la integración de Alianza
del Pacífico http://www.prochile.gob.cl/noticia/director-de-prochile-las-agencias-de-promocion-
son-pieza-importante-para-la-integracion-de-alianza-del-pacifico/
4.6. Joint Commercial Offices
On March 12, 2014 was officially presented the joint Commercial Office in Istanbul, Turkey and
since 2015 a joint commercial office was open in Casablanca, Morocco. This joint commercial
offices is valuable for the PA countries because it allow them to be in countries in which they still
have little commercial presence, but together they can better be known in these markets.

62
4.7. Economic Overview of the Pacific Alliance
As can be seen in the following table 13, Mexico is the biggest economy in the Pacific Alliance.
The size of its nominal GDP is equivalent to 1.5 times the GDP of the others three countries
combined. It is also the country that export and import the more, with exports equivalent to nearly
2.5 times the others three countries exports combined. Mexico is also the country with the biggest
population, of around 1.3 times the other three countries population combined.
As a group the PA represents 37% of Latin America total population, 35% of its GDP, and around
50% of the total trade value of the region.
Table 15: Economic Indicators for Pacific Alliance Countries, year 2015
Indicators Chile Colombia Mexico Peru
Total
PA
Latin
America
(LA)
PA as
% of
LA
Population (millions) 18 48 127 31 224 611 37%
Nominal GDP (US$
billions)a
241 287 1,144 189 1,861 5,361 35%
Nominal GDP (US$
billions at PPP)b
411 666 2,202 349 3,628 9.605 38%
Per capita GDP
(PPP)b
22,870 13,800 17,340 11,210 n.a. n.a. n.a.
Exports of Goods &
Services (US$
billions) 72 40 373 41 526 1,148 46%
Imports of Goods &
Services (US$
billions) 68 67 428 46 609 1,212 50%
Source: Compiled by CRS based on data from Economist Intelligence Unit (EIU) online database.

63
a. Nominal GDP is calculated by EIU based on figures from the World Bank and World
Development Indicators.
b. PPP refers to purchasing power parity, which reflects the purchasing power of foreign
currencies in U.S. dollars.
4.7.1. Trade
As can be seen in the following table 14 of the products exported from Peru and Colombia to
China, first it must be said that for Peru, China is the biggest market destination as 24% of its total
exports went to China in the year 2016. For Colombia, the share of China in its total export is very
small, just 4%. But regarding the kinds of products exported by both countries to China there is a
similarity because they sell to China mostly raw materials, minerals like copper and also fishmeal
in the case of Peru and mostly petroleum in the case of Colombia.
For some Peru exports, China is the biggest market destination as in the case of copper, in which
case for example 63% of all Peru’s copper ore and concentrates exported are sold to China. The
same can be said of iron, in which case 97% of all iron ore exported from Peru go to China. For
Colombia exports to China is not that important for a particular product, for example in the case
of oil, its main good exported to this country, only 11% of the total is sold to China. There are
other products for which China represent an important market, but the value of the product
exported is very small.

64
Table 16: Indicators of the main products exported to China by Peru and Colombia
Peru Colombia
Product
Value in
2016,
USD
thousand
Share
in
Perú's
exports
Product
Value in
2016,
USD
thousand
Share in
Colombia's
exports
All products 8.483.938 24 All products 1.107.268 4
Copper ores and
concentrates
5.467.325 63 Petroleum oils and
oils obtained from
bituminous minerals,
crude
851.249 11
Copper, refined, in
the form of cathodes
and sections of
cathodes
756.840 55 Ferro-nickel 86.062 26
Flours, meals and
pellets of fish or
crustaceans,
mollusks or ...
713.862 70 Waste and scrap, of
copper ...
85.856 49
Non-agglomerated
iron ores and
concentrates …
330.495 97 Full grains, unsplit
and grain splits, in
the wet state …
13.414 29
Silver ores and
concentrates
324.172 67 Fungicides
(excluding goods of
subheading 3808.50)
12.725 8
Lead ores and
concentrates
236.255 20 Copper ores and
concentrates
10.235 27
Source: Trademap

65
In the case of exports from Chile and Mexico to China, from the following table it can be seen that
for Chile, China is also an important market, but not at all for Mexico. In the year 2016, 29% of
all Chile exports went to China, and this country is its main export destination, but in the case of
Mexico, only 1% of its total exports went to China.
Now regarding the kind of products sold to China, as Chile like Peru are countries rich in natural
resources, mainly minerals in the case of Chile, and specifically copper, this is the main product
sold from Chile to China. Around 70% of the value of Chile exports to China is copper, be it
copper ore, copper refined or unrefined. But in the last years Chile is selling many agricultural
goods to China, like cherries, in which 83% of the total exported go to China, or fresh grapes,
where 14% of the total exported go to China. Also for wine, China is becoming an important
market for Chile, and in the last year 13% of the total exports of this product went to China.
For Mexico, as said China is not an important market, because Mexico does not have important
natural resources, except oil, but in the case of its copper, 74% of the total copper ore exported go
to China.

66
Table 17: Indicators of the main products exported to China by Chile and Mexico
Chile Mexico
Product
Value in
2016, USD
thousand
Share
in
Chile's
exports
Product
Value in
2016, USD
thousand
Share in
Mexico's
exports
All products 17.067.804 29 All products 5.407.392 1
Copper ores and
concentrates
5.693.186 46 Copper ores
and
concentrates
1.050.939 74
Copper, refined, in
the form of cathodes
and sections of
cathodes
5.692.358 45 Gear boxes
and parts
thereof, for
tractors,
motor, …
394.515 14
Copper, unrefined;
copper anodes for
electrolytic refining
1.114.899 62 Machines for
the reception,
conversion
and
transmission...
387.799 3
Semi-bleached or
bleached coniferous
chemical wood pulp,
soda or sulphate
(excluding dissolving
...
792.895 69 Motor cars
and other
motor
vehicles
principally
designed for
the transport
of persons, …
380.880 2
Source: Trademap

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