Indonesia and Peru on Aug. 11 signed a free-trade agreement, which the countries said will bolster bilateral trade and investment. The signing happened during a visit to Indonesia by Peruvian President Dina Boluarte. How important is the trading relationship between Peru and Indonesia, and how will the new agreement affect it? What sectors in the two countries will gain the most from the accord? What appetite do other Southeast Asian countries have for deeper economic engagement with Latin America?
Cynthia Sanborn, professor of political science and director of the Center for China and Asia-Pacific Studies at Universidad del Pacífico in Peru: “This year, Peru and Indonesia celebrate 50 years of diplomatic relations, as well as the signing of a comprehensive economic partnership agreement, or CEPA. Similar to a free trade agreement (FTA), Indonesia prefers CEPAs because they include noncommercial agreements, in this case regarding environmental issues, tourism and services, agriculture and fisheries, among other topics of common interest. Currently, bilateral trade between the two countries is not significant, representing less than 0.5 percent of Peru´s total trade and 0.2 percent of Indonesia’s. Peru primarily exports agricultural products to Indonesia, such as cacao and grapes, and it imports manufactured goods, mainly vehicles and footwear. However, this agreement is part of a longer-term strategic effort by Peru to pivot to Asia—including the large and dynamic economies of Southeast Asia (SEA)—in its efforts to diversify markets and attract new investment. The challenge now is to have follow-up strategies to help Peruvian firms take advantage of such opportunities, something that has been difficult in a context of political turmoil. For the SEA nations in general, such agreements should be understood in the context of the high tariff rates imposed by the current U.S. administration, as they actively seek to diversify their trade with other major partners, such as China, the European Union and the Gulf nations. Latin America has not been considered a priority for SEA due to the geographical distance and transport costs. Yet Peru is betting that this will change, as the new Chancay mega-port north of Lima promises to significantly reduce shipping time and costs from this region to Asia.”
Dewi Fortuna Anwar, research professor at the Research Center for Politics at Indonesia’s National Research and Innovation Agency: “The Indonesia-Peru Comprehensive Economic Partnership Agreement, which was first mooted in August 2023 and took less than two years to negotiate, clearly demonstrated the keenness of both parties to expand their economic cooperation, particularly their bilateral trade. Indonesia has actively sought to open new markets for its products and diversify its economic relations in the past two decades, especially during the presidency of Joko Widodo (2014-2024), whose foreign policy prioritized economic diplomacy. Indonesia is a member of all ASEAN-related multilateral free trade agreements (FTAs), as well as a growing number of bilateral FTAs, comprehensive economic partnership agreements (CEPAs) and preferential trade agreements, seeking to safeguard and expand its traditional markets as well as securing new markets. The CEPA with Peru is the second one that Indonesia signed with a Latin American country; the first one, with Chile, came into effect in 2019. These agreements show the growing economic importance of this region to Indonesia. Besides its market potential and complementary products that do not compete directly with Indonesian exports, Indonesia and other countries see Peru as a strategic economic partner and as a gateway for entering the wider Latin American market. Equally important, Indonesia regards Peru as a kindred spirit as the two countries are equally active in promoting multilateralism, are both members of APEC and aspiring to join the OECD. Indonesia’s CEPAs with Chile and Peru also strengthen South-South cooperation in general and ASEAN-Latin American cooperation in particular, especially as both Chile and Peru have become ASEAN development partners.”
Jorge Heine, former Chilean ambassador to China: “Earlier this year, Indonesia, the fourth most populous nation in the world, with a population of 280 million and a GDP of $1.4 trillion, joined the BRICS group as a full member, giving a significant boost to one of the leading platforms for the Global South. Indonesia was one of the founders of the Non-Aligned Movement, and in the 21st century has continued to actively promote the principles of nonalignment. The recent Peru-Indonesia trade agreement thus has a significance that goes way beyond a bilateral commercial accord. On the one hand, it reflects Peru’s longstanding strategy to reach out to the Asia-Pacific. This led to its joining APEC in 1997, to signing an FTA with China in 2009, to hosting two APEC summits in the new century and to joining the CPTPP. Peru’s remarkable economic performance in the 21st century, despite its considerable political instability, is not unrelated to its success in conquering Asian markets and in attracting Asian investment, in other words to its understanding of ‘globalization as Asianization.’ Though not a full FTA, and bilateral trade being modest at present, the agreement will allow more than half of Peru’s current exports to Indonesia duty-free entry, as well as 90 percent of Indonesia’s exports to Peru. A main beneficiary will be Peru’s agricultural exports—including blueberries, avocados, cocoa and coffee, which will compete with some of Chile’s exports, a country that signed an FTA with Indonesia in 2017. On the other hand, this agreement reflects the fact that, as the Global North embraces protectionism and withdraws into its own cocoon, the action in international trade has moved to the Global South.”
Hari Seshasayee, co-founder of Consilium Group and visiting fellow at the Observer Research Foundation: “The recently signed Peru-Indonesia FTA gives Peruvian President Dina Boluarte, who has an approval rating of a meager 2 percent, a little breathing room. It is a consolation prize for a president who has utterly failed in many other respects. These two far-off countries may seem like strange bedfellows at first glance, but there is merit in their kinship. They are both members of the Asia-Pacific Economic Cooperation (APEC), and their trade relationship is highly complementary in nature. What Peru exports, Indonesia needs, and vice-versa. Trade between the two countries is minimal at the moment, just under $700 million in 2024. About two-thirds of Peru’s modest exports of $191 million to Indonesia are made up of cocoa beans. Indonesia’s exports of about $500 million consist of value-added products like cars, footwear, biodiesel and machinery. By far, this benefits Peru more than it does Indonesia. Peru gets duty-free access to a plethora of products in the world’s fourth-most populated country. The Peru-Indonesia Agricultural Working Group and the agreement between both countries’ quarantine authorities paves the way for Peru to export cocoa, avocados, coffee, blueberries and other agricultural products to Indonesia, and perhaps also to the larger ASEAN region. Although some analysts suggest this may usher in a new era of engagement between Peru or Latin America and Southeast Asia, such forecasts would be premature now. Southeast Asia is home to highly integrated and competitive economies, and we should wait and see if Peruvian products can succeed in these markets.”
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