Peru’s Economic Boom and the Asian Connection

Abstract

This paper analyzes recent economic and diplomatic relations between Peru and Asia, with emphasis on China, Japan and the Republic of Korea. In the last decade, Peru has experienced remarkable economic growth, driven by global demand for its minerals and other natural resources, combined with sound macroeconomic policies and a firm commitment to international trade. Although Peru´s relations with Asia tend to reinforce its overall position as a mineral exporter, the country has not experienced significant “de-industrialization”. On the contrary, through aggressive pursuit of free trade agreements (FTA) and new foreign investment, trade with Asia has increased in scope and diversity, with considerable dynamism in value-added exports to China and Japan. Furthermore, Peru´s booming extractive industries have not only benefitted from Asian demand, but also from significant new direct investment, and from efforts by Asian firms to comply with global standards for mining operations. Conceding the fact that policymakers can be credited for successful negotiation of FTAs, subsequent advances in trade and investment with Asian partners have largely been the result of private initiative. The authors conclude that if Peru is going to take better advantage of these opportunities over the longer term, to achieve a more diversified and productive economy, greater state leadership and strategic public policies will be necessary.