Exclusive: Is trade with Peru top of mind in the UAE? Surprise!
Ancient Peru was home to many cultures, most of them still quite mysterious to modern archaeologists.
In 2007, Machu Picchu, a 15th century Inca citadel located in the Eastern Cordillera of southern Peru, was voted one of the New Seven Wonders of the World in a worldwide Internet poll.
The Amazon Rainforest is also one of many attractions that make Peru worthy of international fame.
Alvaro Silva Santisteban, Director of Peru’s Trade, Tourism and Investment Office, Ministry of Foreign Trade and Tourism in the UAE, is doing his best to make his country top of mind to UAE’s businesses and residents.
In an interview with AMEinfo, Alvaro reveals how close he is to achieving his mission.
What do you know about Peru?
In Peru, several years ago, if you were to ask anyone what they knew about UAE, the answers would likely be, oil, Burj Al Arab, or desert landscape.
“If today you ask about what 3 things a UAE resident knows about Peru, you would likely not get that the country is the biggest exporter of asparagus, the second biggest exporter of avocado, top 5 exporters of mangos, berries and artichokes biggest exporter of Quinoa, second biggest exporter of copper and silver, and fifth biggest exporter of Gold,” says Alvaro, who has more than 16 years of experience in the MEASA region, before his 2011 appointment as first Director of Peru’s Trade, Tourism and Investment Office.
In an effort to create increased awareness about Peru’s strengths and how it can be a powerful trade and business partner to the UAE, Alvaro said his office is tasked with 4 pillars.
– Trade: Increasing trade
– Investments: Generating FDI from the region into Peru and using the UAE as a platform to create business for Peruvian organizations
– Tourism: Promoting Peru as a destination.
– Brand representation: Creating awareness of Peru’s brand
Let’s talk exports
In 2011, when Alvaro arrived on the scene, Peru exported a grand total worth $6 million, a number that he summed in one word “Nothing!”
Under Alvaro’s guidance, that number has grown 100 fold, reaching more than $600 million by end of 2017 (Ministry of Economy claims $670 million).
No easy feat.
“The most challenging thing for us is connectivity. Peru is among the top 5 exporters in the world in products like Asparagus, Mangos, Avocados, and Quinoa, and all fresh produces need to arrive as fresh, as quickly as possible to a country where 90% of its imports depends on what the world can supply,” starts Alvaro.
“But ship freighted cargos would take between 38-42 days, too much of a long stretch, thus our greater emphasis is on air connectivity since 85% of our fresh exports are products that need to be air freighted.”
Air shipments present price challenges, but so do a number of other factors.
The price is not right
While bringing products from Peru via air freight solves the issue of expedient delivery of time-sensitive products, it makes for a more expensive proposition than delivery via sea shipments.
Generally speaking, air freight is best used when the cost of shipping is less than 15-20% of the value of the goods and although faster, safer and more reliable than ocean freight, it can be 5 times more expensive – a $195 ocean shipment can cost $1,000 by air.
“In our specific case, although a necessary and prudent action, one major effect that has put greater challenges to our objectives in growing our trade, has been the 5% VAT,” says Alvaro.
“As an example, if you were eating avocados on a weekly basis, and this product is now 5% more expensive, it will no longer be consumed on a weekly basis, because it’s simply not considered yet as a basic necessity like it is rice, chicken or sugar.”
Avocados from Peru are sold on the market for approximately AED39 ($19.6), while the competition is selling them at AED13 ($3.54).
“Ours is 3 times more expensive, and if we add 5%, it is only expected we would be losing market share,” explains Alvaro.
“Fortunately for us, once our products occupy a big niche in the market, it makes them key, but on the other hand, it has made it very difficult to bring in new products because of the VAT. So we are maintaining our numbers but are not able, for now, to increase them this year,” he adds.
On a similar note, according to Alvaro, “it is as important to also measure the sentiment of the consumer, regardless of the application of 5% within different settings of the supply chain, as it is them who drive consumption and thus the ones that have expressed a feeling that prices have gone up significantly more than a 5%.”
Info exchange not right either … is where we can still improve …
“The biggest challenge that we keep on facing has been information,” declares Alvaro.
“It is complicated to send your message across in terms of possibilities and opportunities between the two countries to generate synergies, because it makes sense for a country like the UAE or Peru to have greater interests in their closest neighbors, as opposed to those across oceans. However, considering the importance of today’s geopolitics, this is to be less of challenge within a short time.”
He added that if one takes out China, Japan, and Korea, a big portion of Asia has not been a top priority for Peruvian exporters, until recently and an example of this is precisely the UAE.
“Also UAE suppliers have not been looking at South American countries like Peru.”
Alvaro said that Peru does not have an export subsidy program to alleviate for the cost of exporting to places like the GCC, but Peru does have a very pre-exports post-imports program.
“We would cater for all the travel and accommodation expenses needed for buyers to travel to Peru, in support of bringing closer to businesses there,” reveals Alvaro.
On the post imports end, assuming someone is, for instance, bringing Quinoa into the UAE, Peru’s Trade, Tourism and Investment Office would support major supermarkets with promotional activities, like placing a chef to show buyers how to cook Quinoa within Arab gastronomy dishes.
“We show how to make Quinoa falafel, Tabbouli, and support importers to gain more access into the market, not only by above the line promotions but also through aggressive marketing,” says Alvaro.
Happy New investments 2019 for Peru and UAE
Following a year of adaption with the 5% VAT, Alvaro believes trade will be smoother running.
“We continue to be among the top 3 biggest players from Latin America in all aspects such as exports and investment on both sides. Whenever you think about avocados or Quinoa, Peru is top of mind and this will help us amplify the basket of offerings we are currently expanding,” explains Alvaro.
“Once you expand the base and trust of a country as a reliable supplier, it will trickle down to other areas.”
He said that areas of investment for Peru in the UAE are mining, manufacturing, food security, and fashion/home decoration.
‘We will not see ourselves as investors in energy, like oil exploration, because the expertise/investments are already here,” Alvaro clarifies.
The UAE, on the other hand, invests in logistics, oil exploration and thermo-electric plants in Peru.
“We are not competing with the UAE but rather complementing each other.”
The next phase in 2019 for Peru is about solidifying its positioning as a major trade and investment player with the UAE.
“By 2017 we became the 3rd biggest export partner and the 2nd largest investment destination of the UAE in Latin America, and Peru is the 3rd largest investor in the UAE from Latin America,” announces Alvaro.
What about tourism?
According to Alvaro, air connectivity brings as well tourism.
“With those two regions being so far away, we start air connectivity because of cargo needs and which after 6 months of sustainable cargo air freighters going to Peru, it would put Peru as a milestone or first choice for also passenger transport,” says Alvaro.
Peru is a treasure trove of ancient architecture, rich history, nature at its wildest and lush landscapes, visited by over 3 million tourists in 2017.
Dubai, a cultural destination of its own, received 8 million tourists in the first half of 2018 and offers a huge range of activities, from desert safaris to Ferrari racing, aqua-based entertainment, and shopping havens.
Tourism-wise, both Peru and the UAE are again complimenting the other, again ripe for more synergy and harmony.