Port hub, the key to reactivating the GDP of the Pacific Alliance

The difficult economic situation that the world is going through, and in particular Latin America, forces us to rethink options to weather the storm. One of them, in the opinion of the sources consulted, is to target the Pacific Alliance (PA), a trade integration mechanism shared by Peru, Colombia, Chile and Mexico.

And, since the entry into force of the trade protocol in 2016, the accession of these four nations has greatly benefited them.

Between 2016 and 2022, Peru’s trade with the PA went from US$6,066 million to a record of US$8,418 million, which means an increase of 39%. In addition, it represents 7.1% of what we exchange with the world, according to official figures from the Ministry of Foreign Trade and Tourism (Mincetur).

In the last year alone, Peru’s trade with Chile and Colombia grew 14.2% and 11%, respectively. Even the number of companies Peruvian exporters went from 2,467 in 2016 to 3,143 in 2022; That is to say, there are 676 new companies that have opted for PA, the majority being micro and small companies.

The Pacific Alliance, in the opinion of the Minister of Economy and Finance, Alex Contrerashas allowed investors from these countries to show greater interest in Peru.

“Quite a few Colombian, Mexican and Chilean investors are coming. The contribution is positive because we have managed to differentiate ourselves from the rest of the region. They no longer talk about South America, but about Argentina, Brazil and the countries of the Pacific Alliance,” highlights the head of the MEF in dialogue with La República.

Port strategy

Thus, in a year in which it has not been the most prosperous for the economies of the AP, Peru seeks to take greater advantage of this commercial integration because it has the potential to consolidate itself as the port center of the region thanks to the megaport of Chancay.

Contreras Miranda told this medium that he seeks to develop an entire strategy through logistics corridors, a better infrastructure, among others. “We could talk about growth of at least one point in the long term. It benefits exports,” he adds.

The investment for the port hub amounts to S/891 million and is aimed at the construction of the Dock, which will allow the freeing up of spaces in the port of Callao, and will increase areas of port and logistics operations.

In addition, this month the strategic ally of the CHASM so that ships can be built as part of the promotion of the naval industry. Public investment projects will also be prioritized for Chancay, Ancón, Callao and northern Lima.

Along these lines, Raúl Pérez-Reyes, Minister of Transport and Communications, commented to this newspaper that the Peruvian port hub will allow shipments from neighbors such as Chile and Colombia to be concentrated towards the Asian market and, due to its proximity, distances will not only be shortened, but also the costs, which is why ports such as Long Beach (Los Angeles, United States) and Manzanillo (Mexico) would take center stage.

“The port of Chancay is going to become a cargo concentrator. Success will depend on its growth, since we will go from one million TEU —unit of measurement for cargo containers— to two or four million in the following years,” commented the minister; and with this potential increase it would be equal to the 4 million TEUs that Manzanillo moves.

It is worth mentioning that, according to the Minceturthe Chancay multipurpose port terminal generates savings of between 8 and 12 days to reach the Asian market, which makes it attractive for companies from allied countries such as Chile and Colombia.

Sectors with potential

Since August of this year, Peru has held the Pro Tempore Presidency of the AP, which is also a key opportunity to strengthen ties and enhance sectors such as health and education, which showed greater gaps in the 4 countries of the AP as a result of the pandemic. Magali Silva, former Minister of Foreign Trade, considers that in the health sector the public procurement mechanism can be activated and the acquisition of medicines and services can be negotiated as a block. According to her, she said, this would allow prices to be considerably lowered, since, for example, in the case of Peru, it would participate in a market 7 times larger.

On the education side, he specified that the AP scholarship program has been highly beneficial for the young people who have earned this benefit. However, he suggests two changes: one, promote scholarships for careers linked to what is known as STEM (science, technology, engineering and mathematics), and turn former scholarship recipients into ‘Ambassadors for Education in the AP’ to promote integration, training teachers and improving the quality of teaching.

Another crucial aspect, highlights the former minister, is that by 2030 the population of the AP would reach 270 million with a high percentage of people of working age, a phenomenon known as a “window of opportunity produced by the demographic bonus.” “This means that from now on we would have to make profound changes in our systems to be able to absorb this contingent of people in the labor market and take advantage of it for long-term economic growth,” she highlighted.

Manufacturing and locations

Another sector that also presents itself as an opportunity is manufacturing, since it has not been valued by consumers and clients, says Luis Torres, founder of the Business Council of the Pacific Alliance. Torres considers that metalworking should be targeted, specifically, in the packaging sectorand in the clothing and clothing industry.

For the former executive president of Promperú, another space that has not been taken advantage of, and that emerges as a great opportunity, are film locations.

We have to do very powerful work between Chili, Colombia and Peru to, jointly, develop these spaces so that Transformers is not a one-time news story, but rather develop the orange economy for Asia, Europe and India, which are major centers of audiovisual production in the world. We have to go out and look for them and that is a new space that the four countries can jointly develop,” Torres Paz recommended. Finally, in the expert’s opinion, these economic integration processes – such as Pacific alliance— continue to be attractive and so much so that it maintains a number of powerful observers who are later incorporated into trade agreements. “That is the case of Singapore, which is very interested in being the bridge connecting Callao with Asia,” he said.

A window for the orange economy

The productive model of goods and services with a cultural value – called the orange economy and which includes art and scientific and technological innovations – also represents a niche to be exploited within the Pacific Alliance, considering the landscape and ancestral wealth of Peru, according to the former head of Mincetur Claudia Cornejo.

For example, he recommends not only promoting locations with these companies in the film industry—as happened recently with Transformers—but improve service provision, have qualified personnel and provide tax incentives to make our market more attractive.

And in favor of tourism, Cornejo highlights the need for joint tourism promotion in the PA to attract distant markets, such as Asia.

AP: regional strategic relationship

Analysis. Juan Carlos Mathews, Minister of Foreign Trade and Tourism

When there are these situations of slowdown in the world and in some cases of recession, as is happening in Chile and Peru, the great challenge that countries have is how to recover the path of growth, because through this they reduce poverty.

The main problem we have in the region is the high levels of poverty and extreme poverty, so the effort has to do with the engines that allow you to grow. One of those drivers without a doubt is foreign trade.

What we have to do is identify where those opportunities are to continue trading, and also promote investments and tourist flow. A week and a half ago we were in England and other European market places, promoting investments in different areas, including tourism. We have seen many tour operators who are looking not only for a country, but for a tourist circuit for that Englishman or that Japanese or that Australian.

So, instead of looking at ourselves in the region as competitors, we could say: why don’t we put together a package Cartagena, Macchu Picchu and Easter Island and between the three of us we put together a strategic alliance that allows us to collectively offer to the market.

We have had meetings with ProChile and with ProColombia, and in the case of Ecuador as well, and although it is not part of the Pacific Alliance, but it is part of the Andean Communitycould add the Galapagos Islands to a tourist offer.

The same logic applies to the commercial issue, for example a Belgian company was interested in distributing a kit of a polo shirt and a shirt. Peru is very strong in knitted fabrics such as polos, and Colombia is stronger in flat fabrics (shirts); So, why don’t we make an alliance between a Peruvian company and one from Colombia to collectively sell this kit that the Belgian company is asking for. Again, the issue comes that instead of looking at each other as rivals, we must look at each other as strategic allies. That is the figure and there is the challenge of the Pacific Alliance where we have to put a lot of strength into it.

In the field of investments, this ends up being fundamental and in that sense it is redirected. There may be opportunities in the sector agroexporter, which today has a lot of Chilean investment. Part of what has been developed in southern Peru, such as in Ica, is the production of asparagus, seedless grapes; There has been a lot of Chilean participation.

Chile was the number one exporter of grapes and blueberries in the world, now it is Peru. Chile is strong in asparagus, but Peru is stronger than them. Peru has already become an absolutely relevant player and that makes it not only attractive for investment, but also for co-investment, joint venture; That is, a company seeks strategic alliances.

On the port side and its effect on the PA, Peru is beginning to draw global attention to the development of the port of Chancay. The largest ports in the world have a draft to receive ships of 18,000 containers and Chancay will have a capacity to load 26,000 containers.

This port allows a direct route to the Chinese market, the port of Shanghai; That means that a cargo, whether Peruvian, Chilean or Colombian, could save 10 days of freight, and if it is Brazilian cargo it would save 20 days. This has a very important impact on the cost of freight. This port issue puts Peru in a privileged situation. It is a valuable letter to improve the logistics of foreign trade to and from Peru.

Reactions

Alex Contreras, Minister of Economy and Finance

“It is the most integrated bloc in the world and the most successful economic integration alliance that has ever existed. If you add the trade that there is, the integration of the stock markets and the agenda, is an important impact.”

Claudia Cornejo, former Minister of Foreign Trade and Tourism

“We have different geographies where we can complement each other well (in the AP) not only promoting locations, but also improving the provision of services or tax incentives.”

Luis Torres, former executive president of Promperú

“The opportunity for the Pacific Alliance is 2024. In the case of Peru, which is leading the process, taking advantage of the great forums that we will have to host, such as the summit APEC from Lima”.