Free trade agreement between Korea and Peru goes into effect today.
Peru is the second Latin American nation (after Chile) and the seventh world economy to implement an FTA with Korea.
The agreement, signed in March, is expected to benefit Korea, as Peru’s average tariffs, at 11 percent, were relatively high. Korea’s automobiles, electronics and pharmaceutical exports are expected to benefit the most.
Peru has had an average annual economic growth of 7.2 percent in the past five years, and its abundant resources have made it the Latin American nation with the fastest inflow of foreign investment.
All tariffs will be eliminated within a decade. Until then, Korea will immediately eliminate tariffs on 10,044 items, including major minerals, tires, coffee, sugar and bicycles, which are 86.8 percent of all items in the agreement.
Peru will immediately eliminate tariffs for 5,001 Korean products, including televisions, automobile parts, tires and large vehicles, which account for 68.6 percent of the total amount of products agreed upon.
Rice, which was a sensitive issue on the Korean side, was not included in the pact.
In order for Korean products to receive tariff-free benefits, they will need to receive country of origin approval. One hundred products made in the Kaesong Industrial Complex, such as clocks and home appliances, are considered Korean products under the agreement.
“Peru is a promising new market, with imports growing at 19.1 percent per year and Korean exports to Peru increasing 27.3 percent per year,” said Myung Jin-ho, a senior researcher at the Korea International Trade Association’s Institute for International Trade. “Peru has become the second largest destination for Korean investment in South America after Brazil, and it has seen annual growth of 23.5 percent in foreign investment.”
Peru has a population of 29.2 million and a per capita income of $5,172 as of 2010, according to the Korean Ministry of Foreign Affairs and Trade.
The deal is expected to create opportunities for Korean investment in mines. Peru has major mineral reserves, with 23.5 percent of the world’s silver, 14.3 percent of its copper and 9.2 percent of its zinc. Apart from its abundance of minerals, Peru is also aggressively improving its infrastructure, including its airport, ports, power plants and tourism sights, creating opportunities for Korea’s builders.
The deal was signed in March this year and approved by Korea's parliament last month.
The agreement calls for all tariffs to be eliminated within the next ten years.
Korea will immediately eliminate tariffs on more than 10-thousand items, including major minerals, tires, coffee, sugar and bicycles, which account for nearly 87-percent of all items in the pact.
Peru will immediately scrap tariffs on about 5-thousand Korean products, including TVs, automobile parts, tires and large vehicles, which make up nearly 69-percent of the total amount of products.
Peru becomes the second Latin American nation after Chile and the seventh economy to implement an FTA with Korea.
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