Air cargo transport development in peru eduardo garcia-godos

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AIR CARGO TRANSPORTAIR CARGO TRANSPORTAND TRADE DEVELOPMENT IN PERUAND TRADE DEVELOPMENT IN PERU

Eduardo García-Godos M.Legal AdviserCalgary, September 2006

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SITUATION OF AIR COMMERCIAL MARKET

Rising oil prices has affected airlines costs. Announcing permanent increase of its fares.

September 11th, worsened critical condition of air cargo transport sector. Approximately, by 83% of Latin American airlines face economic problems and several of them were bankrupted.

On the other hand, world traffic of passengers has experimented a steady recovery, having reached a growth of 7.6% in 2005. Latin America´s traffic of passengers has grown around 6% during 2004 and 10% in 2005.

Nevertheless, great expectations are foreseen: 2006 started growing 9.8% in air cargo traffic of Latin-American Airlines, as compared to world average growth of 3,2%.

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WHERE IS THE AIR CARGO?

4

AIR CARGO TRANSPORT IN AMERICA

5

Peru has maintained its economic growth for the last three years

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Estimated GDP 2005: 6.4 %Source: Central Reserve Bank of Peru

2

3

4

5

6

7

8

IIQ 03 IIIQ 03 IVQ 03 IVQ 04IQ 04 IIQ 04 IIIQ 04 IQ 05

3,6 3,5

2,9

4,9

3,6

4,8

6,6 6,4 6,2

IIQ 05

6,4

IIIQ 05

7,7

IVQ 05

7,3

IQ 06

6,0

IIQ 06

6

Source: Bloomberg Update August 31, 2006

Country risk has remained below the Latin America average

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México

1 000

600 529

136207

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222 209

ArgentinaPerú Venezuela EcuadorColombia Brasil Latinoamérica

800

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EXPORTS GROWTH AND FORECAST 2006

Peru: Exports to the worldbillions US$ FOB

Fuente: SUNAT

5.96.8

5.7 6.06.9 7.0

7.79.0

12.6

17.0

21.0

3.4

5.54.4

2

4

6

8

10

12

14

16

18

20

22

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

PROJECTION 2006:

US$ 21 billions

8Fuente: OMC, Banco Mundial

EE.UU.

PBI: US$ 11.7 billonesPoblación: 295 millones

MEXICO


CHILE


MERCOSUR


CAN


UNIÓN EUROPEA

PBI: US$ 10 billonesPoblación: 459 millones

TAILANDIA


SINGAPUR


EFTA


CHINA

PBI: US$ 1.6 billonesPoblación: 1,310 millones

J APÓN


RUSIA


Fuente: OMC, Banco Mundial

EE.UU.


MEXICO


CHILE


MERCOSUR


CAN


UNIÓN EUROPEA

PBI: US$ 10 billonesPoblación: 459 millones

TAILANDIA


SINGAPUR


EFTA


CHINA

PBI: US$ 1.6 billonesPoblación: 1,310 millones

J APÓN


RUSIA


FOREIGN MARKETS AND TRADE NEGOTIATIONS AGENDA

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AIR CARGO TRADITIONAL MARKET

Products for whose features require to be promptly delivered.

Perishables: Asparagus, fresh fruits, flowers, fishery.

Animals: Camelids, livestock, horses.

High-value commodities and light weight products: i.e. mobile phones and electronic products.

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AIR CARGO MARKET IN PERU

• There is a different course of imports and exports air cargo in Peru and the Region.

• There are more than 3 exported kilos for each kilo imported.

• In 2004 Imports*: 32,491,363 kg

Exports*: 98,158,149 kg

* (registered at Lima Airport)

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2.8 3.3 4.3

6.2

9.3

12.7

0

2

4

6

8

10

12

14

16

18

2003 2004 2005

Ex

po

rts

(U

S$

Bil

lio

ns

)

Air Transport Others (Maritime or road)

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MAIN PRODUCTS EXPORTED THROUGH AIR CARGO

PRODUCTS FOB US$ % FOB

GOLD IN OTHER FORMS EN BRUTO 3 071 889 497 71,95 %

CARBUROREACTORES TIPO QUEROSENO PARA REACTORES Y TURBINAS DESTINADOS A EMPRESAS DE AVIACION 203 682 124 4,77 %

ASPARAGUS (FRESH OF REFRIGERATED 131 240 935 3,07 %

JEWELERY 90 453 982 2,12 %

COTTON “T-SHIRTS” WOVEN ONE COLOR 83 712 623 1,96 %

PLAIN SILVER 79 770 081 1,87 %

OTHER COTTON "T-SHIRTS“. 37 816 277 0,89 %

PINPOINT COTTON SHIRTS FOR MEN ONE COLOR 29 958 938 0,70 %

OTHERS COTTON SHIRTS AND APPAREL FOR WOMEN AND GILRS 25 754 687 0,60 %

OTHERS COTTON APPAREL 23 872 374 0,56 %

OTHERS 491 525 380 11,51 %

TOTAL 4 269 676 899 100,00 %

PRODUCTS FOB US$ % FOB

Gold other unwrought forms 3 071 889 497 71,95 %

Carburoreactors type Kerosene for reactors and turbines (Turbo A1) destined to the businesses of aviation 203 682 124 4,77 %

Asparagus 131 240 935 3,07 %

Of other precious metal, whether or not plated or clad with precious metal 90 453 982 2,12 %

Of one uniform colour dyed yarn, including bleached yarn 83 712 623 1,96 %

Silver non alloy 79 770 081 1,87 %

Others, of yarn of different colours 37 816 277 0,89 %

Of man-made fibres 29 958 938 0,70 %

Others, of yarn of different colours for women and boys 25 754 687 0,60 %

Garments of cotton 23 872 374 0,56 %

OTHERS 491 525 380 11,51 %

TOTAL 4 269 676 899 100,00 %

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Peruvian non traditional exports mainly concentrates in fresh asparagus, which is seasonal.

EXPORTACIÓN DE ESPÁRRAGO FRESCO(Toneladas)

0

2,000

4,000

6,000

8,000

10,000

12,000

E F M A M J J A S O N D E F M A M J J A S O N D E F M A M*

Fuente: SUNAT

2003 2004 2005

*

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Despite high concentration and seasonability, asparagus has a low unitary value for air cargo standards markets, even if compared to other perishable products.

AVERAGE PRICE OF MAIN EXPORT PRODUCTS THROUGH

CARGO IN 2004

(US$/kg neto)

4.3 4.2

3.4

1.9

0.0

1.0

2.0

3.0

4.0

5.0

Filete de salmónfresco o refrigerado

(Chile)

Rosas frescas(Colombia)

Demás floresfrescas

(Colombia)

Espárragos frescos(Perú)

Fuente: Sunat, Servicio Nacional de Aduanas (Chile), Proexport (Colombia)

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DIFFICULTIES OF AIR CARGO IN PERU

Emerging industry affected by rising costs, i.e. fuel, tariffs of cargo imports, navigation services, landing and takeoff charges, etc.

Limited promotion measures of civil aviation.

Disadvantages if compared to other competitors who operate under a more favorable legal conditions in air cargo transport services.

Main routes serve major cities of the country however, the country is only connected by 20% of airports. By 80% of airports are not suitably used.

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CHALLENGES

Improvement of airport and logistic infrastructure: August 2006, launched a privatization process under PPP framework. Focus on domestic regional airports.

To take advantage of both strategic location (centre of South American Pacific shore) and nearness between Major ports and airports.

To facilitate trade flows with other world markets by promoting Free Trade Agreements i.e. FTA with US, Chile, forthcoming FTA with EU.

Specific provisions in FTA´s with regard to custom administration, trade facilitation and cooperation.

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CHALLENGES

Promote air service liberalization. Increasing willingness in Latin America (LA) to enter into cargo “Open Skies” agreements under reciprocity criteria.

Improvement and expansion of private facilities for air cargo transport management by reducing state interference. To encourage competition and innovation.

Training of government officials, phasing out trade barriers, unnecessary procedures and eradicate corruption.

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CONCLUSIONS

Despite economic downturn there are promising perspectives on air cargo transport development in Latin America.

Peru and other LA countries are fully inserted in global trade. Peru´s economy is becoming healthier.

Exports boost has reached historic records and several products (perishables, cloths) substantially rely on air cargo transport.

Better logistic infrastructure has encouraged reforms i.e. airport privatization and custom practices commitments.

Air cargo transport development in peru eduardo garcia-godos

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