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1 Introduction

Peru is divided into three topographic regions: the Pacific coast, the Andean highlands (Sierra), and the tropical rainforest (the Amazon basin). As a result, it is among the most ecologically diverse countries in the world. Most agricultural output comes from the river valleys in the coast, while agriculture in the Sierra is of a subsistence nature, and agriculture is just beginning in the Amazon basin. Agriculture is vulnerable to weather anomalies, such as the El Niño phenomenon. Peru imports large amounts of food products, notably grains and other basic foodstuffs.

The importance of agriculture in the Peruvian economy has increased slightly in the last decade. Agricultural output has been growing more rapidly than the economy as a whole, and this implies that the share of agriculture in GDP is somewhat higher in the year 2000 (9 percent) than it was in 1990 (7.9 percent).

Peru runs a deficit on its agricultural trade (not including fisheries). Agricultural exports have been growing less rapidly than mining exports and other exports, and the share of agricultural exports in total exports has decreased from 8.3 percent in 1991 to 7.3 percent in the year 2000. Agricultural imports similarly grew more rapidly than total imports between 1991 and 1998, and the agricultural share increased from 12.6 percent in 1991 to 13 percent in 1998. However, this share decreased to 9.4 percent in the year 2000. Agricultural imports peaked in 1998, which is explained by the negative impact of the El Niño phenomenon on domestic food production. The increase in import volume was more significant than the increase in import value in the period. The volume of imports in 2000 was 1.92 times the amount imported in 1991, while import value (in nominal terms) increased by a factor of only 1.54; this situation is explained by decreases in world prices of some grains, milk, and meat products between these two years.

The main export commodities in the early 1990s were coffee, sugar and cotton. Of these, exports of sugar and cotton decreased continuously in the 1990s and were replaced by non-traditional exports such as fruits (mangoes, grapes) and vegetables (onions, asparagus). The main import commodities in the 1990s were grains (wheat, maize, rice, barley), oils (soyoil), milk products and meats.

Regarding subsistence agriculture, the main staple food products are potatoes, yucca and plantain. The structure of agricultural production in Peru is made up of many small producers farming very small parcels of land (“minifundios”).

The agricultural sector in Peru experienced major changes during the last two decades and specifically during the 1990s, driven largely by the structural adjustment policies of that decade. Macroeconomic policies replaced agricultural sector policy as the main determinant of agricultural performance. Agricultural trade policy was liberalized as part of the reform of general trade policy. One indicator of liberalization is the average level of tariffs on agricultural and industrial items. The average tariff level was 32 percent in September 1990, decreasing to 16.8 percent after the mid-1991 reform, and averaging 11.9 percent after another reform in April 2001 (Boloña and Illescas, 1997; Fairlie and Torres Zorrilla, 2002).

Peru has an open trade and investment regime, which remained stable during all of the 1990s. The continued consolidation of structural reforms paid off during the 1990s in the form of growth in GDP, trade, and foreign investment, as well as in improved social welfare indicators (WTO, 2000a). However, this growth turned into a moderate recession after 1998.

In parallel with its domestic reforms, Peru consolidated its involvement in trade integration mechanisms at various levels (WTO, 2000a):

1. Peru formally became a member of APEC in November 1998.
2. Peru is taking an active part in the negotiations on the FTAA (ALCA).
3. The integration process within the Latin American Integration Association is continuing.

At the subregional level, Decision 414 of the Andean Community (CAN), which facilitates Peru’s full reintegration into the Andean Free Trade Area and sets a timetable for progressive reductions in tariffs for its members, entered into force in July 1997. In January 2002, this decision was ratified. In particular, Decision 414 means that Peru is committed to apply the CET for all products including agricultural products.

Peru ratified the Marrakesh Agreement establishing the WTO in December 1994. It is classified by WTO as an NFIDC. In the context of the UR Agreements, Peru consolidated within the WTO its unilateral liberalization and economic reforms. It has subsequently enacted domestic regulations to ensure implementation of its multilateral obligations. Peru’s trading partners have thus benefited from growing market access for their merchandise exports and services suppliers (WTO, 2000a).

In summary, the overall trade policy context in Peru within which the WTO disciplines on agricultural policy have been implemented is one of significant liberalization and sound macroeconomic policies. Peru nowadays has an open and stable trade and investment regime.

[86] Study prepared for FAO by Dr Jorge Torres Zorrilla, Peru.

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