28 de Sep 2021 | Coffee

Coffee and cocoa with open doors and complicated logistics

Peru has 22 trade agreements that allow it to access 81% of the world GDP, this encourages exports, however, current cost overruns affect the operation.

Juan Fernando Correa Malachowki, president of the Peruvian Foreign Trade and Tourism Society-COMEX, appeared on September 15 in the Congress of the Republic, before the Foreign Trade and Tourism Commission. In trade integration, Peru presents conditions that favor entrepreneurship and job creation for more Peruvians; 22 trade agreements to access a global market 337 times larger, where it has a share of 81% of the World GDP and where it allocates 90.4% of exports.

Exports have multiplied by 7 in the last twenty years, growth is consistent and thanks to this, more than 2 million jobs have been created in Peru. Agro-exports have become the second most important item of trade, where the FTAs ??have promoted nearly 800,000 jobs. By 2020, there are more than US $ 41 billion exported, with a diversified offer.

According to COMEX, this benefits the exporting regions within the country. From January to June of this year, its exports grew 48.3%, highlighting those located in the south of the country. In the same way, exporting MYPES has incentives for their businesses. In the period 2000-2020, their number went from 3,653 to 5,981. This dynamic is supported by logistical competitiveness, generated by private investment in infrastructure in ports, which in turn promotes jobs for more Peruvians. For example, the movement of containers for export creates positions for more than 10,000 truck drivers, in charge of transportation.

COMEX proposes to enhance the benefits that come to Peru through foreign trade, the country must work on its logistics efficiency, taking measures such as: accelerating the implementation of the Single Window for Foreign Trade 2.0, promoting the role of Customs as trade facilitators, promoting the digital transformation of the State and promote the use of electronic commerce. It is also essential to strengthen and merge the health agencies that accompany the operations.

From this September 19, the TIPAT that involves Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Singapore and Vietnam enters into force for Peru, who adopted the decision to create the Committee on Electronic Commerce, in order to promote new and better business opportunities and forms of distribution of products and services in the region. Thus, the challenge is to deepen and expand markets taking advantage of the agreements.

Peru: country that satisfies the world

An important part of the Peruvian supply to the foreign market is in agro-exports, as we can see in the following graph, Peru is part of the "Top 10" of 39 food products, with an important component of small agriculture: quinoa, fine hair (alpaca) and ginger have one of their three main suppliers in the world in Peru. In coffee and cocoa we are in eighth place, both products being pillars of the Peruvian jungle economy and an important part of our image for the world.

The coffee trade has increased more than 3 times in this time, although the neighbors have grown more, Peru is expectant in the international market. In the case of cocoa, the outlook is different, with a defined goal of 250 thousand tons of cocoa by 2030, Peru seeks to advance positions in the international market.

It is important to note that, in both products, Peru is a main supplier of volume trade, although the offers of certified products are relevant (20% to 30%) and we have high quality production (4% to 10%), Peru supplies high volume markets where it allocates more than 70% of its production. The promotion has been focused on segments with little coverage of producers and focused on a minority part of the world market, where the substitution of origins is frequent. The Peruvian challenge in coffee and cocoa is to be sustainable throughout the chain.

Operating costs

The pandemic has affected logistics management, in the macro the lack of containers and spaces on ships for boarding is a regional problem, which involves several actors. In micro, many companies find themselves with storage, inspection and travel cost overruns, as they send their products with available reservations and at the port they receive the news that they have already been canceled or changed.

Thus, in addition to paying shipping and container registrations, additional costs for inspection, transfer and opening of merchandise, administrative expenses on payments made and others are added. And it is that in a competitive market, logistics expenses must be efficient and aspects such as cancellation or alteration of programs significantly affect medium and small companies. These over-costs can increase previous costs by more than 10%, they are expenses that were not foreseen and that not only reduce the margin, but also the liquidity of the companies.

Do you know any cases of these? Can you tell us? Reporting will help characterize these problems and be able to find alternatives that help the majority. Competitiveness and sustainability are a joint and strategic work in the chain.

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Sources:

1) PromPerú (2021). Perfil del consumidor en los países miembros de la Alianza del Pacífico

2) Images: Pixabay