Why Peru's trade will continue to face complications

Bnamericas Published: Monday, September 20, 2021
Why Peru's trade will continue to face complications

Maritime transport services are affecting the value chain of Peru's exporters, who face higher freight costs and risks of delay in delivering products to their customers.

The underlying causes are strong growth in global trade, COVID-19 outbreaks in some Chinese ports, and container shortages as a result of an unusual concentration of ships in Asia.

"There are cases in which the cost of freight for export or import is greater than the value of the products," said Rafael del Campo, president of exporters' association Adex's foreign trade services committee, who expects "a return back to normal by the end of 2023." 

In his opinion, regular maritime transport that offered a precise schedule for the arrival of ships with merchandise to Peruvian ports and their exit with exportable supply is almost non-existent. "Now, in many cases, it is noticed that the established official itinerary is not complied with," he said.

A recent central bank report said, “the increase in costs intensifies on those routes whose point of origin is China: so far this year, the transport rate has more than doubled on trips to Europe and North America.”

Del Campo said local small exporters and producers of perishable products are most affected. “The maximum delivery time for dry paprika is between 25 and 30 days, due to the risk of deterioration of the product. However, I have observed cases that were delivered after 70 days.”

Insurance may cover these risks, but exporters can’t sign contracts without knowing if the hired ship will enter the port. "In that case, the insurer will not recognize that risk," he said.

Another problem for importers is the increase in the exchange rate related to the reference price, which includes the freight rate and taxes.

The central bank report showed import costs amounted to US$116/t in July, a year-on-year increase of 75.6%. The report also detailed bottlenecks that cause delays, and reduced effectiveness of the reliability indicator used for scheduling.

Price increases are mainly caused by insufficient port infrastructure, unable to efficiently service vastly bigger ships.

But the central bank also expects a trade record for this year, with exports of up to US$60.7bn, up 41.3% year-on-year, and imports of US$45.7bn, up 31.6%. Export volumes will increase 11.0% and imports 15.5%.

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