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Doing business in Peru

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The company you work for is expanding its business and would like to begin to trade with another country.

Go to http://www.ustr.gov/assets/Document_Library/Reports_Publications/2004/2004_National_Trade_Estimate/2004_NTE_Report/asset_upload_file231_4191.pdf for the 2003 National Trade Estimate Report on Foreign Trade Barriers.

Choose one country for analysis. What type of trade restrictions does this country use? Who will benefit from these restrictions? Who might lose?
The country chosen for analysis is Peru. The various trade restrictions used by this country are:

1) Tariff on goods imported from USA:Almost all products imported from USA are subject to import tariff. The beneficiary of this restriction is the local producer. US exporters lose from this restriction.

2)Sensitive agricultural products are subject to a price band or variable levy. The beneficiary of this system are the local producers who are ensured of a minimum import price. Exporters from USA stand to lose due to this system.

3)Trade barriers on import of agricultural and poultry and beef products. Ban on paddy rice imports. These import restrictions are a loss to US companies looking to export these products to Peru.

4) Significant preference and advantage given to national companies in bidding for government procurements. Foreign companies, who can easily win these bids in absence of such preferences on account of superior technology and lower costs, stand to lose due to this preference given to national bidders. Local companies stand to gain in biddings due to this system.

5)There are various investment barriers for foreigners in Peru. Foreigners cannot hold majority stake in broadcast media companies. There is restriction on the employment of foreign employees
upto a certain extent only in the toal payroll of the company. There are restrcitions in national air and water transportation for foreigners. All these investment barriers restrict foreign companies to gain competitive advantage in their operations in Peru. local companies, inspite of being unsufficient, stand to gain due to these restrictions
yes all this information came from the URL only
and you added the Perruvian government companies give significant advantage to national companies bidding for Goevernment procurnment project. they use a point system in the bidding process. For national companies bidding procurment, the automatically give certain set of points, which gives them strategic advantage over foreign comapnies. therefore , inspite of low bidding prices, the difference caused due to these perference cost results the decision in favor of national companies bidding for these projects.


What is "price band"? Could you please explain this a little further,
I would like to know what price band is and why US exporters suffer. , EXPLAIN WHERE THIS INFO IS FROM

2. Does the US produce paddy rice? I thought that was only produced in Asia.

3. It does not sound like Peru is very interested in an open trading environment. Is this one of the reasons that the recent Trade Summit in South America was not successful?

4. You gave a very good complete explanation of the bidding for government procurement situation.

It really sounds as if Peru is international trade averse.

I AM USING A BOOK :Carbaugh, Robert J. International Economics, 10th edition. Mason, Ohio: Thomson/South-Western. 2005.

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Solution Preview

1. The information was drawn from this document only. Price band is a kind of variable levy on certain sensitive agricutural products such as rice,sugar, corn etc. to ensure that the import prices, in any circumstances, shall not fall below a predermined price. This ensures that local producers are protected against the low import prices from other countries such as USA, who product, after such levies, ...

Solution Summary

Country analysis of Peru.