See also:
https://www.slideshare.net/carlosalbertoaquinorodriguez/peru-relations-with-china-at-present
Peru's
relations with China at present
Carlos Aquino, Director of CEAS[1]
2021 is a
special year in Peru's relationship with the People's Republic of China as it
marks (in November) 50 years since the establishment of diplomatic relations
with that country. China is increasingly important for Peru (and the world as
well), as it is the country's largest trading partner, it is becoming the
largest investor, and at the present juncture of the pandemic, it is the
country that actually provides and will provide Peru with the largest number of
vaccines to face the COVID-19 pandemic.
For this
reason, Foreign Minister Allan Wagner said that "The relationship with
China must be taken with much care"[2].
In this article we will review the state of Peru's relationship with that
country, to see what makes it special and why it should be taken with much care.
An
introduction will be seen first, where a brief review of the history of
relations with that country will be made, then the current commercial
relationship will be seen, then the status of Chinese investments in Peru, the
political and diplomatic relationship, then the topic of the vaccines, and
finally some conclusions will be given.
1.
Introduction. -
We have a
long history of relations with China, with the Manila Galleon, of the great
ships that made the Acapulco - Manila (then Spanish colonies) crossing, which
existed from the second half of the 16th century to the early 19th century.
From Manila other ships went to Macao, and this allowed a relationship with
Asia, and China in particular. There was an exchange of goods, and even people,
in that period.
Then a
massive Chinese immigration to Peru began, since 1849, the first in South
America, when they came to work on the coastal farms, and which created the
largest Chinese community in Latin America in our country[3].
And in 1874 Peru established relations with the then Qing Empire, the first of
China with a country in Latin America.
2. Trade
relations. -
Before 1990
the commercial relationship with China was less important. With the opening of
the Peruvian economy from 1990 onwards and China's growing appetite for natural
resources, trade (and investment) between Peru and China increases. Of course,
there was also the vision of the Peruvian State of projection to Asia Pacific
from 1990 onwards, which, for example, made it possible for the country to also
join the APEC forum in 1998. Being in this forum brought us closer to China.
Let's
remember that China is the second largest economy in the world. It grew at
rates of almost 10% annual average for 33 consecutive years from 1979 to 2011.
Afterwards it has grown on average at 6.5% annually. China retakes the place it
has had in the world, in which it was the largest economy until even the
beginning of the 19th century[4].
China is
now the engine of the world economy, it has been since the second half of the
2000s. In 2020 the world economy fell -3.5%, but China grew 2.3%. This year
2021 the world economy will grow 5.5% and China 8.1% according to figures from
the International Monetary Fund (see attached table).
That is why
China is our biggest trading partner today. The year 2020 represented 28.7% of
our foreign trade in goods (although we sell almost only raw materials and
import manufactured goods). The second is the US, but far below China, with
only 17.1% of the total. 28.3% of what was exported to the world went to China,
and 28.5% of what was imported from the world came from China. See next
Table.
Source: MINCETUR:
Reporte Mensual de Comercio Exterior, diciembre 2020
China is
also important because 42% of all the minerals that Peru exports go to that
country, and let's remember that mining represented 57.7% of everything that
Peru sold to the world in 2020. Moreover, the main product that Peru exports is
copper, which represented 28.6% of everything exported in 2020, and China is
the main buyer, since 62% of all Peruvian copper went to China.
Source: MINCETUR:
Reporte Mensual de Comercio Exterior, diciembre 2020
The
importance of China is growing as a market for our products more and more, and
it will continue to grow in the future. In 2010 we exported 15% of the total,
at the end of the last decade it reached almost 30%. See Table below. Among
other reasons, because Peru mainly exports raw materials, and China is still
the one that most demands these products for its industrial machinery, for its
urbanization process, and, although not as much as a few years ago, as it has
already built an important part of it, for the construction of its
infrastructure.
Exports of merchandise of Perú to Asia by main
destination, million dollars, and as a % of total, years 2010 to 2019
|
(Ranking* en el 2019) |
2010 |
2011 |
2015 |
2018 |
2019 |
|
China (1) |
5,436 (15%) |
6,961 (15%) |
7,333 (22.1%) |
13,237 (27.6%) |
13,503 (29.4%) |
|
Corea del Sur (5) |
896 (2.5%) |
1,695 (4%) |
1,077 (3.2%) |
2,467 (5.1%) |
2,228 (4.8%) |
|
Japón (6) |
1,792 (5%) |
2,175 (5%) |
1,118 (3.4%) |
2,181 (4.5%) |
1,974 (4.3%) |
|
India (7) |
219 (0.6%) |
248 (0.5%) |
676 (2.0%) |
2,481 (5.2%) |
1,787 (3.9%) |
|
Taiwán |
293 (0.8%) |
369 (0.8%) |
270 (0.8%) |
289 (0.6%) |
201 (0.4%) |
|
Total, Asia |
9,163 (26%) |
12,191 (27%) |
11,043 (33.2%) |
21,982 (45.8%) |
21,755 (47.3%) |
|
Total, mundo |
35,806 (100%) |
45,726 (100%) |
33,245 (100.0) |
48,014 (100.0%) |
45,978
(100.0%) |
*Ranking como
principales mercados para el Perú.
Soruce:
MINCETUR, Reporte Mensual de Comercio Exterior, y Reporte de Comercio
3.
Chinese investment in Peru. -
China's
investment represents almost 25% of the accumulated FDI in the country (31 billion
dollars already invested, and several billions of dollars more to invest, -only
in mining there is a project portfolio of 10.4 billion dollars -)[5].
At the end of 2019 there was a cumulative stock of $ 115 billion of foreign
direct investment in Peru. And only from 2005 to 2020 it is estimated that
China had invested 29.3 billion dollars in Peru. What's more, just in mining
Chinese investment in the coming years will be important. See following charts
and graphs.
Stock of foreign direct investment, million dollars
Source: UNCTAD: World Investment Report 2020, page 244
Source: https://www.aei.org/china-global-investment-tracker/
Source: MINEM: 2020 Cartera de Proyectos
de Construcción de Mina, noviembre 2020
Traditionally,
Chinese investment has been in the extraction of natural resources, but in
recent years investment in infrastructure projects has increased. The
importance of Chinese investment in mining is remarkable, for example, as its
companies produce 100% of the iron (Shougang), almost 30% of the copper (Las
Bambas and Toromocho), and 34% of the oil (CNPC and its subsidiary SAPET ), 14%
from fishmeal and fish oil (the CFG company). (2019 figures).
The
importance of Chinese investment is also beginning to be seen in other sectors
such as electricity generation and distribution, and in port capacity. The fact
that Peru joined the Chinese Belt and Road initiative in 2019 is expected to
further promote that country's investment in Peru.
Chinese
investment will continue to increase, as Peru needs foreign investment and the
Chinese want to invest here. Peru offers a favorable environment for foreign
investment, and this is particularly appreciated by the Chinese.
Large-scale
Chinese investment was the first in Latin America. They had some problems, in
the mining and hydrocarbons sector in particular (mainly environmental problems
and with the local community).
Peru will
need 5G telecommunications network technology and Huawei will be a candidate.
Chinese investment should be attracted to manufacturing, but that depends on
Peru. It should be added that most of the Chinese investment is made by state
companies.
4.
Political and diplomatic relationship. -
As said in
1874, Peru established relations with the then Qing Empire, the first with a
country in Latin America. After the establishment of the People's Republic of
China in 1949, Peru was the third country in Latin America to establish
diplomatic relations with the new China, in 1971.
Since then
the political relationship has advanced a lot. This was driven by the growing
economic and commercial relationship from 1990 onwards. Thus, in 2009 a Free
Trade Agreement was signed with that country, which enters into effect in 2010
(and at the moment a modernization, an adaptation to the new times, is being
negotiated).
In 2013
Peru and China sign a comprehensive strategic partnership[6],
and in 2019 Peru joins the Chinese initiative of the Belt and Road[7].
5. Peru
and Chinese vaccines. -
The
COVID-19 pandemic affects the whole world, and until a country vaccinates the
majority of its population, it will not be safe, and economic activities will
not be able to start 100%.
For various
reasons, which is not the case to analyze at this time[8],
Peru has been one of the countries most affected in the world by the pandemic.
We became the country with the highest number of deaths per million
inhabitants, now we are the 15th country, and the second in Latin America after
Mexico (see table below), although if we include the real number of deaths we
would continue to be the first in the world.
Coronavirus (COVID-1)) Deaths in the world
Source: https://www.realclearpolitics.com/coronavirus/?fbclid=IwAR0ZgG-ghP_Xp9rXMPN07jiPIisIr_dggoLyDaUSYg1k27aqqMS3YTt8n0w 21 de febrero 3pm.
Not only
that, Peru´s economy has been practically the most affected in the world in
2020. The Peruvian economy fell almost 12% that year[9].
Another major reason to urgently get vaccines for Peru.
So far,
only one million Chinese vaccines have arrived in Peru, from the Sinopharm
company, and there is a contract for 37 million more to arrive in the course of
the year (of a total of 38 million that was agreed with that country). See Table below.
Source: https://www.facebook.com/CancilleriaPeru/photos/a.771856589562239/3720650081349527/
And Health
Minister Oscar Ugarte declared on Saturday, February 20, that at the beginning
of March another two million Chinese vaccines would arrive, from Sinopharm, and
probably a million vaccines from Pfizer[10].
Then, also
in the subject of vaccines China is increasingly important, in fact, it is the
only country from which we have received vaccines, and which has assured
vaccines for half of the Peruvian population, at a time when most developing
countries in the world do not have secured vaccines.
6.
Conclusions. -
The
relationship with China is increasingly important in various aspects. On the
subject of trade, it is our largest partner (28% of the total), on that of
investment it is likely to be soon the most important (and already a quarter of
all foreign direct investment comes from China), on the political and
diplomatic side there is a very close relationship and of the highest level,
and in that of vaccines it is our greatest source and the only one secured so
far.
There is a
very old relationship with China, and the immigration of citizens of that
country to Peru, the oldest in South America, has made Peru the seat of the
largest community of that country in Latin America. And China is the fastest
growing economy, and will be the world's largest economy by the end of this
decade[11].
Due to all
of the above, we need to carefully manage our relationship with that country,
and try to get more out of it, something that still needs to be done, and the
latter also requires knowing more about this country.
February 21, 2021
[1] CEAS, Centre for Asian Studies, San
Marcos National University, Lima, Peru
[2] El Comercio newspaper, page
4, sunday 21, february 2021.
[3] For a detailed analysis see: https://www.slideshare.net/carlosalbertoaquinorodriguez/relaciones-de-peru-con-china-inmigracion-china-y-la-ifr
[5] See the Conference of CEAS in
january of this year about this theme: https://www.facebook.com/CentroDeEstudiosAsiaticos/videos/263108838490448
[8] For a detailed analysis see: https://asiapacifico-carlosaquino.blogspot.com/2020/07/peru-y-latinoamerica-frente-la-pandemia.html
[10] El Comercio newspaper, page
13, sunday 21 february, 2021.
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