Peru WT/TPR/S/69
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II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES
(1) INTRODUCTION
1. The period since Peru's last Review has been characterized by the consolidation of the
far-reaching changes made to the Peruvian legal and institutional framework in the early 1990s.  In
this regard, a major step was the adoption of the Marrakesh Agreement Establishing the World Trade
Organization, which was ratified by Peru in December 1994 and is an integral part of the domesticlegislation.  Trade policy has also sought to consolidate the process of deregulation and liberalization
with the ultimate aim of creating non-distorting incentives to encourage an efficient allocation of
resources and foster the development of economic activities according to market signals.  In parallel
with its participation in the multilateral trading system, Peru takes part in regional integration schemes
within the Andean Community and the Latin American Integration Association, as well as in the
Asia-Pacific Economic Cooperation forum and the negotiating groups of the Free Trade Area of the
Americas.
(2) T
RADE POLICY FORMULATION AND IMPLEMENTATION
(i) General legal and institutional framework
2. Peru’s legal and institutional framework underwent extensive modifications in the
early 1990s, including the adoption of a new Constitution in 1993.  The latter defines Peru as an
unitary republic organized under the principle of separation of powers. The legislative power resides
in a unicameral Congress elected for a period of five years and comprising 120 representatives.
Under the Constitution, the Congress is responsible for drafting and approving laws and legislative
resolutions and approving treaties.  By legislative decree, the Congress may delegate to the executive
power the authority to legislate over particular matters and for a specified period as established in the
authorizing law.
3. The President of the Republic is the Head of the State, and is elected by direct suffrage,
together with two Vice-Presidents, for five-year te rms.  The Constitution grants the President the
power to direct the general policies of the Government;  direct foreign policy, and negotiate and ratify
treaties;  introduce extraordinary measures in economic and financial matters through emergency
decrees that have force of law;  and regulate import tariffs.  The direction and management of publicservices are entrusted to the Council of Ministers, and to individual ministers in matters pertaining to
their offices.  The President of the Republic nominates and removes the President of the Council of
Ministers, whose responsibilities include the coordination of ministerial functions and the
authorization of legislative decrees, emergency decrees, and other decrees or resolutions as specified
in the Constitution and laws.
4. The judicial power is composed of administrative bodies, and jurisdictional organs, namely,
the Supreme Court and other courts and tribunals.  The President of the Supreme Court is also the
President of the judicial power.  Judges and prosecutors are nominated by the National Council of
Magistrates, an independent organ of the judicial power;  justices of the peace are selected by popular
election.  The Constitution also established an autonomous office of public defender of constitutionalrights and fundamental personal rights.  The public defender is elected (and removed) by the
Congress.
5. With the aim of consolidating the economic reforms introduced in the early 1990s, the
Constitution of 1993 included specific articles defining key elements of the Peruvian economic
regime.  In particular, the Constitution established national treatment for foreign investment, although
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interests, the State may adopt similar measures.  Restrictions apply to foreign investment within fifty
kilometres of the border.  Under the Constitution, the State guarantees the unrestricted possession and
disposal of foreign currency, as well as the protection of free competition, in particular by combatting
the abuse of dominant or monopolistic market positions.  The Constitution defined the Central Bank
as an autonomous entity charged with preserving monetary stability, and gave the Superintendency of
Banking and Insurance control over banks, insurance companies, and other entities that receivedeposits from the public.
6. Departing for an otherwise generally neutral institutional framework, the Constitution
stipulated that the State must grant preferential support to agrarian development, and promote small
businesses in all forms.  The Constitution also stip ulated that, with the exception of tariffs, taxes and
exonerations may be established, modified or derogated exclusively by law or by legislative decree.The Constitution gives the executive power the right to modify tariffs rates through supreme decrees,
without Congressional involvement.
(ii) Trade policy objectives and formulation
7. Within the context of the macroeconomic and structural reforms, implemented since the
early 1990s, Peru's trade policy has been aimed at consolidating the process of deregulation and
liberalization of the trade regime.  As such, the st ated goal of trade policy formulation has been to
create non-distorting incentives that allow an efficient allocation of resources and foster the
development of economic activities according to market signals.  Through its participation in regionaland multilateral agreements, Peru has tried to enhance access to international markets so as togenerate economies of scale and specialization.
8. Since Peru's previous Review, there have been no significant changes to the structure of trade
policy formulation.  The Ministry of Economy and Finance (MEF) is in charge of formulating and
implementing economic policy in general, and trade policy in particular.  The Ministry of External
Relations represents Peru in international forums, in coordination with other ministries and state
agencies.  Other state bodies supporting the implementation of trade policy include the Customs
Superintendency, in charge of supervising trade operations and administrating and collecting all taxesrelated to external trade;  the Ministry of Industry, Tourism, Integration and International Trade
Negotiations (MITINCI), responsible for international trade negotiations and regional integration
policy;  and the National Institute for the Defense of Competition and the Protection of Intellectual
Property (INDECOPI), in charge of monitoring enacted legislation to preserve free and fair
competition conditions.  INDECOPI is also the main agency responsible for the protection of
intellectual property rights and implementing contingency measures.  Two state agencies are involved
in the promotion of Peruvian exports: PR OMPERU and PROMPEX (Chapter III(3)(vi)).
9. The role of the private sector in policy formulation has remained unchanged since Peru's last
Review, its participation is still largely channelled through professional associations representing
different enterprises.  These associations participate on an ad-hoc basis in coordination meetings withthe relevant ministries and agencies.
(iii) Main trade laws and regulations
10. The Constitution is supreme over all other statutes.  Congressional approval and presidential
ratification are required for the entry into force of international treaties that affect national
sovereignty, financial obligations or taxes, such as the WTO Agreement and certain regionalarrangements.  Once approved and ratified, international treaties become an integral part of the
Peruvian legislation and thus do not require further legislative implementation to be applied or invoked
before the domestic courts.Peru WT/TPR/S/69
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11. In addition to Constitutional articles defining key principles of economic management,
Legislative Decree No. 668 of 14 September 1991 established the general framework for domestic
commerce and external trade.  It requires the State to guarantee the freedom to:  engage in commerce
and trade as a fundamental condition for Peru's development;  hold and use foreign currency, as well
as the free convertibility of the national currency under a single exchange rate regime;  and engage in
foreign trade unimpaired by prohibitions or non-tariff restrictions except when, for reasons such assafety or security, approved by the Council of Ministers and endorsed by the Ministry of Economy
and Finance.  Legislative Decree No. 668 also requires the State to ensure that standards and technical
regulations do not constitute an obstacle to the free flow and use of goods and services in external and
domestic transactions, and prohibits any type of exclusive right or other monopolistic restriction
affecting the production or marketing of goods and services.
12. Peru's trade regime is complemented by a liberalized investment regime and by several
regulations enacted since Peru's previous Review including in the areas of customs procedures,
competition policy, intellectual property and government procurement.
(3) F
OREIGN INVESTMENT REGIME
13. As mentioned earlier, the Constitution of 1993 established equal treatment for foreign and
national investment unless an exception is required to ensure reciprocity.  This reflects provisions in
Legislative Decree No. 662 of 29 August 1991 on fore ign investment promotion, which granted equal
treatment to national and foreign capital, permitting foreign investment in any sector without prior
authorization.  Once made, foreign investment must be registered with the CONITE, which is charged
with proposing and executing national policy on foreign investment.
14. Legislative Decree No. 662 guarantees foreign investors non-discriminatory treatment;  free
remittance of profits and dividends, once applicable taxes have been paid;  free capital repatriation;unrestricted access to domestic credit;  acquisition of technology and royalty remittance;  freedom to
acquire shares owned by nationals;  freedom to co ntract abroad insurance for investments in Peru;
and the possibility of protecting such investment through law stability agreements concluded with the
State.  These agreements have contract-law status and abide by the general provisions on contracts
established in the Civil Code.
15. Within the framework of the foreign investme nt promotion law, CONITE is entitled to
conclude, on behalf of the State and before the investment and related registration is made, law
stability agreements with foreign investors and the receiving company.  The Law for the Growth of
Private Investment (Legislative Decree No. 757 of 8 November 1991) extended this possibility to
national investors.  Benefits granted through these agreements extend for a ten-year period (or longerin the case of concessions, to cover the entire period of the concession) and involve mainly a pledge
by the State that the investment covered will not be af fected by changes to:  national treatment;  to the
income tax regime in force on the date the agreement is signed;  or to the regime of free availability of
foreign currency and of unrestricted remittance of profits, dividends, capital and other income
received by the investor.
16. As a counterpart to the above benefits, foreign investors engage to invest at least
US$2 million within two years; or not less than US$500,000, provided that either 20 jobs or more are
created, or not less than US$2 million in exports are generated within three years after the date the
agreement is signed.  The stability regime applies to the receiving company for the same term as the
investor and includes the guarantee of stability of conditions for labour hiring, export promotion
schemes, and the income tax regime.  The stability regime applies to new investments or capital
expansion as well as to privatizations or concessions by the State.  As at December 1999, someWT/TPR/S/69 Trade Policy Review
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332 stability agreements had been concluded covering investments worth some US$8 billion, of
which some 86% corresponded to foreign investment (investment patterns are described in
Chapter I(4)).
17. Peru's general investment framework is comple mented by sectoral or regional provisions,
including a law to promote investment in the Amaz on (Chapter III(4)(iv)); a law to promote private
investment in telecommunications (Chapter IV(6)(iii));  a law for the promotion of the agriculturalsector (Chapter III(4)(iv));  a general mining law (Chapter III(4)(iv) and Chapter IV(4));  a banking
and insurance law (Chapter IV(6)(ii));  and a regulation promoting private investment in public
infrastructure and other public services (Supreme Decree 059-96-PCM of 27 December 1996).
18. Peru's investment framework is also complemented by bilateral, regional, and multilateral
arrangements granting guarantees and protection to foreign investment.  In April 1991, the Congressratified Peru's adhesion to the Convention Establishing the Multilateral Investment Guarantee Agency
(MIGA) of the World Bank.  Peru has also accepted the Convention Establishing the International
Center for the Settlement of Investment Disputes  (ICSID), allowing investment-related disputes
involving the Peruvian State to be settled  within the ICSID framework.
19. In the context of the Andean Community, Peru has adopted several provisions to promote
investment within the subregion, including Andean Decision 40, which approved the agreement
among Andean countries to avoid double taxation and the standard agreement for executing
agreements on double taxation with third countries;  and Decision 291, which established a common
regime for the treatment of foreign capital and trade-marks, patents, licensing agreements, and
royalties.
20. As at December 1999, Peru concluded bilateral agreements for the promotion and protection
of investments with the following countries:  Arge ntina, Australia, Bolivia, Chile, China, Colombia,
the Czech Republic, Denmark, Ecuador, El Salvador , Finland, France, Germany, Italy, Malaysia, the
Netherlands, Norway, Paraguay, Portugal, the Republic of Korea, Romania, Spain, Sweden,
Switzerland, Thailand, the United Kingdom, and Venezuela.  Agreements with other countries were
under negotiation in early 2000. In addition, the Financial Agreement on Investment Incentives was
concluded with the United States in December  1992, allowing the Overseas Private Investment
Corporation (OPIC) to issue insurance, re-insurance or guarantees to cover U.S. investments in Peru.
(4) I
NTERNATIONAL RELATIONS
(i) World Trade Organization
21. The Marrakesh Agreement Establishing the WTO was ratified by the Peruvian Congress on
18 December 1994 through Legislative Resolution No. 26407.  As stated in the Constitution, WTOagreements are ranked as law in national legislation and may be invoked before national courts.  As
required by the Marrakesh Agreement, Peru has made several notifications to the WTO
(Table AII.1).
22. Various domestic regulations have been enacted or amended to harmonize them with Peru's
international obligations and thus facilitate their application.  Domestic regulations concerning theWTO Agreement on Implementation of Articl e VI of the GATT 1994 and the Agreement on
Subsidies and Countervailing Measures were a dopted through Supreme Decree No. 043-97-EF of
29 April 1997.  Similarly, the Agreement on Safeguards and the Agreement on Textiles and Clothing
were regulated through the adoption of Supreme Decree No. 020-98 of 18 December 1998.  With
respect to the Agreement on Implementation of GATT Article VII (on customs valuation), PeruPeru WT/TPR/S/69
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requested a waiver from its obligation from 1 April 1999 to 1 April 2000, which was granted under
specific terms (Chapter III(2)(ii)).
23. New regulations have also been enacted to incorporate into domestic regulations Peru's
international obligations concerning intellectual property rights (Chapter III(4)(viii)).  The authorities
indicated that Andean Decision 344, which is part of the Peruvian legislation, was under revision in
early 2000 to assure its consistency with the provisions of the WTO Agreement on Trade-RelatedAspects of Intellectual Property Rights, and was scheduled to be approved at an Andean Ministerial
Meeting in April 2000.
24. In a statement prepared for this Review, the Peruvian authorities indicated that the conclusion
of the Uruguay Round and the establishment of the World Trade Organization contributed to the
consolidation of the unilateral liberalization and economic reforms initiated in Peru in the early 1990s.In this context, Peru welcomed, especially, the resulting strengthening of the multilateral trading
system and its increased transparency and predictability.  However, the authorities noted that in some
areas actual results did not meet the expectations generated at the conclusion of the Uruguay Round.
In particular, in sectors such as agriculture or textiles and clothing, they were concerned about the
limited level of liberalization achieved so far.  The authorities also noted that weak disciplines withrespect to the adoption of anti-dumping measures we re resulting in the abuse of this instrument for
protectionist purposes.
25. Peru has been involved in only a few cases under the WTO dispute settlement mechanism.  In
January 1998, Brazil requested consultations with Peru concerning a Peruvian subsidy investigation
against imports of buses from Brazil
1;  consultations with Brazil took place in Lima, and
INDECOPI's Dumping and Subsidies Commission decided not to impose countervailing duties
(Chapter III(2)(vi)).  Peru applied to join consul tations requested by Hong Kong, China to consider
Turkey's restrictions on imports of textiles and clothing products as well as consultations requested by
the European Union with Chile concerning the Special Sales Tax on spirits.2  In 1995, Peru requested
consultations with the European Union regarding the trade description of scallops 3;  this case was
solved through the adoption of a new French order.4
(ii) Preferential agreements
26. Despite Peru's long-standing participation in the regional integration processes within Latin
America, the share of reciprocal preferential trade in total trade remains relatively modest.  In 1998,
less than one third of Peru's total imports origin ated in members of the Latin American Integration
Association (LAIA), including those in the Andean  Community, and less than 20% of that total was
granted preferential treatment.  The share of Peruvian exports benefiting from negotiated preferentialarrangements was lower:  only around 18% of Peru's total exports destined to LAIA countries
(Chart II.1).
27. As at July 1999, tariff preferences granted by Peru to other Andean Community countries
were substantial;  in particular, imports from Bolivia were almost completely liberalized (Tables II.1
and AII.2).  Although preferences covered a wide  product range, Peru's actual imports from its
Andean partners remained relatively concentrated, with some 45% of all imports taking the form of
mineral fuels and oils (HS 27).  In contrast, with the exception of preferences granted to Chile, Peru's
integration efforts with other LAIA countries appeared relatively modest.
                                                     
1 WTO document WT/DS112/1 of 9 January 1998.
2 WTO document WT/DS29/4 of 28 February 1996 and WT/DS87/2 of 30 June 1997.
3 WTO document WT/DS12/1 of 25 July 1995.
4 WTO document WT/DS12/12 of 19 July 1996.Peru WT/TPR/S/69
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Table II.1
Peru's average preferential tariff for LAIA and Andean Community countries
(Per cent)
Average tariff (%)
TotalAgriculture, hunting,
forestry & fishing Mining and quarrying Manufacturing
(1)ISIC Code a
(2) (3)
LAIA
Argentina 13.4 14.5 12.0 13.4
Brazil 13.3 14.8 11.9 13.3
Chile 8.0 6.8 0.9 8.2
Mexico 13.3 14.8 11.8 13.2
Paraguay 13.5 14.5 12.0 13.4
Uruguay 13.5 14.8 11.9 13.5
Andean Community
Bolivia 0.1 0.3 0.2 0.1
Colombia 3.4 1.4 0.3 3.5
Ecuador 3.3 1.5 0.3 3.5
Venezuela 3.7 1.5 0.3 3.9
No. of tariff lines 6,890 393 114 6,382
Memorandum:
Average MFN tariff 13.6 14.9 12.0 13.6
a Excluding electricity, gas and water (1 line).
Source : WTO Secretariat estimates, based on data provided by the Peruvian authorities.
(a) The Andean Community
28. Peru is a signatory to the 1969 Cartagena Agreement, which established the basis for the
Andean Community.  The Community has implemented significant changes over the last six years,including the adoption in 1995 of a new strategic design, which specified three major lines of action:
the intensification of the integration process, in particular through the introduction of services in the
liberalization agenda;  the improvement of the Community's external projection through the adoption
of common positions in international forums and in  particular in the negotiations of integration
processes with other countries or blocks includi ng with MERCOSUR;  and the development of a
social agenda.  The Cartagena Agreement was amended in March 1996 through the adoption of the
Trujillo Protocol, which introduced important inst itutional reforms and led to the addition in June
1997 of three new chapters to the Agreement.
5
29. In June 1998, the Andean Community adopted a framework of principles and provisions for
liberalizing trade in service by the year 2005 (Andean  Decision 439).  This framework applies to all
modes of supply, and to all service categories except services provided in the exercise of
governmental authority and air transport services.
30. Peru suspended its participation in the integration process in August 1992 (Decision 321),
motivated in part by its reluctance to abandon its two level tariff structure in favour of the four-tiered
                                                     
5 Detailed information on the Andean Community integration process may be found online at:
http://www.comunidadandina.org.WT/TPR/S/69 Trade Policy Review
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common external tariff (CET).6  The Decision authorized Peru to subscribe to bilateral agreements
with Andean partners in order to maintain trade flow levels.  In April 1994, Decision 353 established
a programme for Peru's progressive reintegration into the free-trade area (FTA).  Although this
programme was only partially completed, it allowed the incorporation of one third of tariff items into
the FTA.  Finally in June 1997, an agreement was reached for Peru's full and gradual incorporation
into the FTA by December 2005 (Decision 414), although no time frame or terms were established forPeru's adoption of the CET.
(b) Latin American Integration Association
31. In addition to the Andean integration process, Peru has signed several agreements under the
LAIA.  Agreements in which all LAIA members participate are designated as regional, while othersare classified as partial scope agreements.  As of March 2000, six regional agreements were in force:
granting preferential access to less developed countries in the region, namely Bolivia, Ecuador and
Paraguay (respectively Regional Agreement Nos. 1, 2 and 3);  establishing specific preferential tariff
concessions within the region (Regional Agreement No. 4);  establishing the framework for the
development of scientific and technical cooperation (Regional Agreement No. 6);  and establishingcultural, educational and scientific cooperation and exchanges (Regional Agreement No. 7).
7
32. Partial scope agreements signed by Peru include  bilateral agreements with Argentina, Brazil,
Chile, Cuba, Mexico, Paraguay, and Uruguay.  As noted earlier, with the exception of the agreement
with Chile, tariff concessions under the LAIA are relatively limited (Tables II.1 and AII.2).  The
agreement with Chile (LAIA Economic Complementarity Agreement No. 38 of 22 June 1998) is
aimed at establishing a free-trade area between the two countries by 2016.  It established immediate,
complete liberalization for over one third of all tariff items, and a schedule for progressive
liberalization of the remaining products over 3, 5, 6, 8, 10, 15, or 18 years.  It also included specific
provisions for safeguard measures, government procurement, sanitary and phytosanitary measures,and rules of origin.
33. In April 1998, Peru and its Andean partners, along with MERCOSUR countries, agreed on a
framework for negotiations to create a free-trade area.
8  Although the overall negotiations between the
two blocks came to a standstill, they resulted in  a new partial scope agreement between the Andean
Community and Brazil, which entered into force in Peru on 15 August 1999.9  The agreement
established mutual tariff concessions, and incorporated provisions covering rules of origin, customs
valuation, anti-dumping and countervailing measures, safeguards, technical barriers to trade, sanitary
measures, and dispute settlement.  The Peruvian authorities indicated that through this agreement Peru
obtained preferential treatment for some 98% of its exports to Brazil, while 44% of Peruvian imports
from Brazil were granted preferential treatment.
(c) Other integration processes
34. Peru has participated in the Asia-Pacific Economic Cooperation forum (APEC) for several
years and was fully incorporated into the forum in November 1998.  Through its participation, Peru isseeking greater access to APEC markets as well as the promotion of its image to attract Asian and
                                                     
6 GATT (1994).
7 A comprehensive description of LAIA's integration processes may be found online at:
http://www.aladi.org.
8 Partial Scope Agreement under Article 14 of the Montevideo Treaty No. 11, 16 April 1998.
9 Partial Scope Agreement of Economic Complementarity No. 39, 12 August 1999.Peru WT/TPR/S/69
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Pacific investors.10  Peru also participates in the various negotiating groups of the Free Trade Area of
the Americas (FTAA).11
(iii) Other arrangements
35. In addition to the negotiated integration schemes, Peru benefits from unilateral concessions
granted by certain countries through Generalized System of Preferences schemes.  GSP is granted to
Peruvian exports by Australia, Bulgaria, Canada, the Czech Republic, the European Union, Hungary,
Japan, New Zealand, Poland, Russia, the Slovak Republic, Switzerland and the United States.  The
Peruvian authorities indicated that these schemes have contributed to the diversification of Peru's
export supply although, as noted in Chapter I(3)(i), the bulk of Peruvian exports, included those
covered under GSP schemes, is made up of prim ary and processed primary products.  The Peruvian
authorities highlighted the importance of the concessions granted by the European Union, Japan, andthe United States.
36. In addition to their general GSP regimes, the European Union and the United States have
established special regimes to promote alternatives to coca cultivation and production by offering
Andean countries broader access to their markets.  The Andean Trade Preference Act appears to have
contributed to the significant increase of Peruvian exports to the United States (Table AI.4).  In 1998,among the ten principal Peruvian exports to the United States, eight products received special
treatment under the ATPA regime, including manuf acturing products (mainly jewellery), agricultural
and agro-industrial products (coffee, tea, and fish) and mining products.  The ATPA offers three main
advantages over the U.S. general GSP:  it covers more tariff categories;  imports under ATPA are not
subject to GSP competitive-need and country-income restrictions;  and qualifying rules for individual
products are more liberal in terms of local-content requirements.
37. Between 1994 and 1997, some 93% of Peruvian exports to the European Union were
granted duty-free treatment, of which 34% corresponded to special concessions under the EU Andean
GSP scheme and 59% corresponded to MFN duty-free rates.  Peruvian products benefiting from the
EU import regime are mainly primary resources and agricultural products.  The Peruvian authorities
indicated that these preferences have resulted in a substantial diversification of Peruvian exports;  the
number of products exported increased from 865 items in 1993 to 1,322 in 1997.  The agriculturesector was the main beneficiary of the EU GSP as, according to Peruvian estimates, some 85% of
agricultural exports took place under the scheme.
                                                     
10 Information on APEC activities and Peru's Individual Action Plan may be found online at:
http://www.apecsec.org.sg.
11 Information on the integration process of the Western Hemisphere may be found online at:
http://www.ftaa-alca.org.