20 years ago, Peruvian agro-exports mainly consisted of coffee beans, cocoa beans and asparagus and were worth around $1 billion; last year, however, the agricultural export sector managed to surpass the $10 billion threshold after diversifying its range with fruits like avocados, mandarins, table grapes, mangoes and blueberries, according to Edgar Manuel Vásquez Vela, director of the Global Economics and Business Research Center of the Exporters Association (CIEN – ADEX).
Edgar Manuel Vásquez Vela, director of the Global Economics and Business Research Center of the Exporters Association
"Last year, Peru was the ninth-largest fruit exporter in the world, and the outlook for the short, medium and long term is positive. Even small and medium-sized companies are taking advantage of the boom in the agro-export sector. On the one hand, they are supplying exporters with their products, and on the other, they are receiving training in certifications, agronomic management and quality standards. In fact, the income of fruit and vegetable producers delivering to the international market is 50% greater than that of those selling their produce in the domestic market," says the director of CIEN – ADEX. However, he added that the greatest progress was made between 2010 and 2019, since the pandemic and the El Niño phenomenon slowed the growth of the agricultural and export sectors.
The rapid development was backed by three factors
According to the director, the growth achieved over several years has been largely motivated by three factors, starting with the legislative framework, which allowed the establishment of a favorable tax regime for agriculture and related industries since the early 90s. "Secondly, for 30 years, Peru has been committed to negotiating free trade agreements with many countries, to the point that today it has 22 agreements in place with 58 countries in Europe, America, Asia and Oceania. To this, we must add the work of the National Agricultural Health Service (SENASA), which is in charge of the implementation of the sanitary protocols for different horticultural products in different markets. Thirdly, this immense progress achieved over the last twenty years has been facilitated by improvements in infrastructure, especially large irrigation projects," says the director.
There is still much room for growth
And while the sector has made remarkable progress in recent decades, the relatively low GDP per capita compared to neighboring Chile, about $7,000 versus approximately $14,000, indicates that there is much room for improvement regarding production costs in the coming years. Moreover, as explained by the director, thanks to its highly diversified product range, Peru continues to expand its presence in foreign markets, with Asia currently offering the most promising outlook, not only because of the Chinese market, but also because of India and Indonesia, two countries with very large populations and significant economic growth figures.
It should also be noted that the continuous development of the agro-export sector would not be possible without the expansion of the cultivated acreage. "At this time, the government is committed to giving a boost to a very important irrigation project in La Libertad, and the idea is to continue gaining agricultural land from the desert in the north and south of Peru, for a total of about 200,000 additional hectares. With this, I do not rule out the possibility that in ten years, Peruvian agricultural product exports could double in terms of both volume and value," says the director of CIEN – ADEX.
The director of the Global Economics and Business Research Center predicts that in 2024, Peruvian agricultural product exports will grow by 3.7%. "The value of table grape and blueberry shipments exceeds $1 billion, and a total of 15 products, including ginger since last year, have an export value of $100 million or more. And while avocados remained at $967 million last year, this time they may regain their status as one of the products with an export value of more than $1 billion. And we still have many products in the Amazon that have the potential to become the fruits of the future," says Edgar Manuel Vásquez Vela.
Hurdles for sustained development
However, in terms of infrastructure, the poor connection between the Amazon or even the Andes and the coastal area of Peru is one of the biggest hurdles for the sustained development of the agro-export sector. "We have a very high-quality pineapple that grows in the jungle at high altitudes, but whose export is hardly viable due to the lack of roads to ports or airports."
Another major challenge is the impact that political instability has been having on the growth prospects of companies over the last two years. According to the director, things have changed a lot compared to the last three decades, when politics and the economy seemed to be two well-separated worlds. "The fact is that two years ago, a law that had been very important for the promotion of the agro-export sector for two decades was changed. Fortunately, the current government plans to bring this agricultural promotion law back, including tax measures and support for irrigation projects."
As for other factors threatening the growth of the horticultural sector, the director also mentions the lack of qualified workers and research centers. "We are missing opportunities to add value to our productions. Moreover, the availability of labor is also becoming a problem in Peru. Wages will inevitably have to increase in the future, and the selling prices of our products will have to follow, so we may lose competitiveness, although I believe this is a problem that also affects other fruit and vegetable producing countries."
The Exporters Association of Peru is the leading Peruvian foreign trade business association. It works to ensure the development of the country and the promotion of Peruvian exports. "We work in three areas: the association, where members meet, debate and make proposals that are transferred to the various ministries; a research center that conducts market studies; and an educational institute, both for members and for non-associated companies willing to enter the international market," says the director of the Global Economics and Business Research Center of the Exporters Association, who was Minister of Foreign Trade and Tourism of Peru from December 2018 to July 2020.
For more information:
Edgar Manuel Vásquez Vela (director)
CIEN – ADEX (Global Economics and Business Research Center
– Exporters Association)
Av. Javier Prado Este 2875
San Borja, 15021. Peru
Tel.: +51 1 618 3333
[email protected]