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Last Updated:[01-09-2010 00:29:53 EDT] Zoom in Zoom out Back to Tradenews

S-Korea Bags another Deal in Latin America - FTA with Peru

tradenews After holding seven rounds of talks in past 18 months, South Korea has decided to sign an FTA with Peru to fuel its ambitions in South America. The latest trade pact for Asia's fourth-largest economy is the second in the region after Chile which it signed seven years ago.

Peru's presidential website reported, after announcing the conclusion of negotiations on an FTA with South Korea, the Peruvian President Alan Garcia Perez said that “this is a very important day for the national economy and for the future because these agreements set a goal for the country’s economy.” While an official at the Federation of Korean Industries (FKI), South Korea's largest business lobby said “The deal will help boost overall competitiveness of Korean goods in the South American market.”

Under the new deal, all tariffs between the two nations will be eliminated within 10 years in a phased manner. The tariffs on Peruvian coffee, Korean color TVs and Korean cars with a displacement of 3000cc or more will be scrapped forthwith. Whereas, vehicles with engines smaller than 3.0 liters will have their tariffs eliminated over a period of five years.

The trade agreement is expected to primarily benefit the South American country's agriculture, fishing and forestry industries. On the other hand, the Asian giant will have direct access to the Peruvian markets as well as its mineral resources.

Peru holds roughly a third of the world's key resources such as zinc and copper. South Korea's annual imports of key resources such as copper amount to about US$900mn. Currently, the South Korean automakers, led by Hyundai Motor Co., claim 23 percent of the Peruvian auto market, and as of last year, the South Korean firms' investment in oil development projects in Peru amount to roughly $800mn.

In 2009, two-way merchandise trade totaled $ 1.34bn with Peruvian exports to South Korea reaching $748.7mn and Peruvian imports from the Asian nation reaching $599.6mn. Furthermore, both sides hope the bilateral trade to reach $7bn or about five times in next five years as it had happened with Chile post-FTA.

Both countries will likely sign the accord in November after conducting a legal review. South Korea currently has free trade pacts with India, the Association of Southeast Asian Nations (ASEAN), Singapore and the European Free Trade Association (EFTA), which includes Switzerland, Norway, Iceland and Liechtenstein.

By Jose Roy

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