By Sebastian Sterzer
Media www.rajawalisiber.com – In Indonesia’s search to increase its export capacity and international business projection, in recent years the need to work on the global South-South relationship and cooperation in various fields, including commercial, has gained relevance. In this sense, in addition, the Indonesian government has been developing the strategy of expanding commercial ties with non-traditional markets, such is the case of Latin America.
Precisely, this region of the world with 33 countries and more than 650 million inhabitants, has a range of opportunities and challenges those Indonesian entrepreneurs must analyze when they want to develop their businesses. Hence, also, the need arises for both the government and academic sectors to be able to support the business community, either with trade policies or support for exports, as well as through academic research.
In Latin America, there are countries that have different patterns of behavior and economic characteristics, beyond the fact that the majority share a common past, as well as the fact that the majority speak the Spanish language. This is where it is necessary to differentiate Peru, a country that is in the western part of South America. It has an estimated population of 33 million inhabitants, the GDP is 226 billion and the GDP per capita is USD 6,530 (considered an upper middle-income country, according to the World Bank). The Peruvian economy is expected to grow 9.5% (according to the latest estimate from the Economic Commission for Latin America and the Caribbean), considering that in 2020 it had fallen more than 10% in 2020.
Regarding bilateral trade, Indonesia has imported in 2020 the main products from Peru: Cocoa and cocoa preparations (33%); Residues and waste from the food industries; prepared animal fodder (25%); Fertilizers (15%); Zinc and articles thereof (13%); Edible fruit and nuts; peel of citrus fruit or melons (7%); Salt; sulfur; earths and stone; plastering materials, lime, and cement; Pharmaceutical products (1%), among others.
Indonesia, for its part, has exported the following products to Peru in 2020: Vehicles other than railway or tramway rolling stock, and parts and accessories thereof (33%); Machinery, mechanical appliances, nuclear reactors, boilers; parts thereof (10%); Paper and paperboard; articles of paper pulp, of paper or of paperboard (10%); Man-made staple fibers (9%); Footwear, gaiters and the like; parts of such articles (8%); Animal or vegetable fats and oils and their cleavage products; prepared edible fats; animal … (8%); Rubber and articles thereof (3%); Cotton (2%); Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television … (2%); Coffee, tea, mate and spices (2%); Miscellaneous chemical products (2%), among others. Indonesia has a trade surplus compared to Peru: according to data from the Indonesian Ministry of Commerce, the trade balance in 2020 was USD 96.734 million. In the 2016-2020 period, imports from Peru have grown more (almost 6%) than Indonesian exports (3.50%). The important thing, however, is that Indonesian exports have grown more (53%) than imports from Peru (40%) this year, compared to 2020.
According to information from the International Trade Center, the products with greatest export potential from Indonesia to Peru are Motor vehicles for the transport of persons, (Ignition) wiring sets for vehicles, and Phosphoric acid; polyphosphoric acids. Motor vehicles for the transport of persons, it shows the largest absolute difference between potential and actual exports in value terms, leaving room to realize additional exports worth $ 1.4 bn.
There are many potentialities for Indonesia to insert itself in Peruvian territory, either in the export of goods and services, as well as investments. The agribusiness sector, retail, everything related to the digitization of businesses, technology for agriculture and aquaculture, among others. It could be also interesting to explore ways for cooperation in tourism sector. As Peru has a new president, Pedro Castillo, Indonesian businessmen will have to know if this change of presidential mandate implies a change, also, in the business environment.
Indonesia and Peru can move forward with the signing of a trade agreement in one of its forms (PTA, IP-CEPA, among others), as well as the possibility that Indonesia advances with the possibility of being an associate member in the Pacific Alliance, a South American regional bloc of which Peru is part.
Indonesia and Peru can strengthen their relations through mechanisms of cooperation such as the Joint Commission, Agricultural Group, among others. One of the current forms of cooperation between the two countries has been the process of printing Peruvian banknotes by the Indonesian state currency printing company, Perum Peruri which has printed Peruvian banknotes, in denominations of 10, 20 and 50 soles (the Peruvian currency).
Peru and Indonesia are called to move forward their bilateral relations, following the example of the denomination of the State Elementary School SDN Menteng 02 (Republica Del Peru School), which is in Menteng, Jakarta Pusat. Indonesia should be more connected with Latin America, and Peru is an ideal partner for this.
*Sebastian Sterzer is the Head of the International Relations Area for the Observatory of International Trade at the National University of Lujan, Argentina. He is currently living in Indonesia, and his focus is helping the development of relations between Indonesia and Latin America.