PERU: Alan Garcia Pledges to Respect Stability Agreements with Foreign Investors

During Garcia’s term the mining technology and services sector should remain areas of potential for Australian companies.

Alan Garcia, of the centre-left APRA party, was inaugurated on 28 July as President of Peru, and his stated main priority is the alleviation of poverty and inequality. He has pledged to do so while still maintaining the open, free-market economic policies of his predecessor, keen to avoid the hyperinflation and economic mismanagement of his first term.

Importantly for Australian companies, Garcia has noted that he would respect stability agreements with foreign investors. This was particularly important in the mining sector, with high prices for commodity exports making foreign mining companies a potential target for new taxes. But Garcia announced in August that instead of this, the Administration and major mining companies had agreed on a voluntary contribution to the state. During Garcia’s term the mining technology and services sector should remain areas of potential for Australian companies. Many new projects are under development, including Xstrata’s Las Bambas mine. Garcia has also announced increased public spending on infrastructure, another area of increased Australian commercial involvement, particularly in the provision of engineering and other services to planned improvements to highways, ports and airports.

In terms of foreign policy, Foreign Minister Garcia Belaunde has made reaching out to the Asia-Pacific region a priority. Peru would like to become an entry point for Asia Pacific countries to Latin America. A key part of this will be Peru’s hosting of APEC in 2008. Indeed, the number of high-level visits in both directions during Australia and Peru’s hosting of APEC in 2007 and 2008 respectively should heighten awareness of the bilateral relationship, and provide opportunities for further commercial interaction.

Australia and Peru will be working closer together in the area of trade liberalisation after Australian Trade Minister Truss announced in November that Peru had been accepted into the Cairns Group of agricultural exporting countries.