Trick or Trade? Uncertainty Remains on US-Peru Trade Deal

With flak coming from all corners of the political spectrum, the Democrat-Republican deal to allow the US-Peru trade agreement to pass must have got something right. Or perhaps its most salient feature it that, for now, its details are unclear.

In a previous post I linked to an outline of the deal. A fuller summary can be seen here. To retirate, the key points are that:

• parties to trade agreements with the US will be required to adopt and enforce the five basic standards in the 1998 International Labour Organization declaration, and the labour sections will be subject to the the same dispute resolution mechanisms as the rest of the agreement
• parties must ratify and enforce seven key multilateral environmental agreements, and the environmental sections will be subject to the the same dispute resolution mechanisms as the rest of the agreement
• intellectual property requirements are softened to allow earlier availability of generic medicines to US trade partners
• Peru is specifically required to crack down on illegal logging of mahogany

In the Times Online, columnist Irwin Stelzer blustered that this represented "the end of free trade as we know it". He lamented that:

We can sue our trading partners if they violate the agreement, and they can sue us. For example, if some country such as Panama decides we are violating trade-union rights here at home, they can bring a suit to press Congress to change the law.

Stelzer failed to mention that , in requiring wholesale adoption and implementation of American trademark, copyright and patent laws, the original agreement cut across national sovereignty in far more significant ways.

At the other end of the political spectrum, US netroots activists were furious with the secretive process that had been followed and bemoaned that drafting of the actual legislative language would be delegated to the Bush White House. They also cast doubt on how enforceable the labour and environmental conditions would be.

Blogger David Sirota lambasted the press for applauding the deal when they hadn't seen the all-important legislative language. He pointed to similar, unfulfilled claims about labour and environmental standards being made in relation to the North American Free Trade Agreement (NAFTA) more than ten years ago.

However, a blogger identifying himself as DemHillStaffer claimed that "we defeated the Bush trade agenda and got 100% of what Democrats have been demanding for years". He asserted that the labour and environmental standards will be "FULLY enforceable and subject to the same dispute settlement procedures as every other part of trade agreements, including investment, and intellectual property...EXACTLY what Democrats demanded before the election".

In a later update, Sirota reported the White House as saying that labor and environmental standards would not be written into the core text of trade agreements, "but instead will mean merely unenforceable NAFTA-esque 'side agreements' or even weaker 'letters' of understanding".

In fact, this is something Peruvian representatives were saying at least a week ago.

Somewhat missing in all this angst was what Peruvians might think about the deal. Alan Garcia's government has been presenting the trade deal as a sine qua non for the country's development, by supporting export-led growth and creating much-needed jobs.

But while Peru's televised media has repeated this line, it is far from a universal viewpoint. In La Republica, columnist Javier Diez Canseco launched a scathing attack on Garcia, whom he characterized as 'Toledo II' (previous president Alejandro Toledo, who was a cheerleader for the free trade deal, and who helped the outgoing Peruvian congress controversially push the agreement through on the eve of last year's election).

Diez Canseco pointed out that Garcia had raised significant concerns about the trade agreement during his election campaign and promised to "retire his signature [if Toledo signed the agreement] and review it line by line". But now in government, Garcia had allied himself with "the powerful business Right" and become a "yes man" for the agreement. To the Democrats proposal that Peru's trade preferences be unilaterally extended for two years while issues were sorted out, Garcia "remained mute".

With ratification looking imminent, the attention in Peru has turned back to the impact of the trade agreement on agriculture. The most prominent concern in Peru has been that the FTA will allow an influx of subsidised American products which will push out small farmers - who will then have the option of joining the influx to the already overburdened cities, or perhaps turning to growing coca.

The government has suggested that a system of compensation will be put in place for farmers affected by the trade deal - particularly producers of corn, wheat, and cotton. But La Republica reported that the agricultural subcommission charged with developing such a system had not yet determined which products would be significantly affected, let alone worked out how to implement such compensatory subsidies.

In any case, with specific regulatory change required of Peru at least in respect to mahogany logging, and many rank-and-file Democrats apparently wanting the new conditions to be written into the agreement itself, it's hard to see how only "process" remains for the agreement to enter into force. There may yet be an opportunity for Diez Canseco - and other Peruvians angered by the lack of transparency in trade negotations - to see "a national and congressional debate on the issue".

Categories: free trade, United Statess, Peru, FTA, trade agreement

A Marriage Made in Heaven

Arequipan adventure travel agency Zarate Expeditions and the provincial government of Arequipa are collaborating to produce the second edition of "the world's highest mass marriage" on 1-2 December this year. Couples are invited to get married in either a civil or religious ceremony, on the summit of the El Misti volcano at the breathtaking altitude of 5,825 metres above sea level.

The first mass marriage on the El Misti took place in November 2000, when a total of 36 couples made the trek to perform their nuptials under the summit's giant iron cross.

Apart from the obligatory stab at the Guiness Book of Records, the organizers are hoping to promote Arequipa both as a tourist destination and as a centre of religious faith (the city is known as the "Rome of Peru" for its staunch traditional Catholicism).

The event is also intended to promote the family unit and the harmony of cultures, since, according to the organizers, the journey to the summit will be "a pilgrammage [achieved] through the force of love" (though I would also recommend consideration of Diamox for those couples hoping to make it to the altar).

The proprietor of Zarate Expeditions is Mickey Zarate, known for discovering the famous "mummy Juanita" on Nevado Ampato in 1995, along with American explorer Johan Reinhard

As well as the agency and the provincial government, the police, army, Red Cross and tourism commission are lending their support. The organizers are also looking for sponsors to support the resources required to carry out the event.

Anyone interested or seeking further information can contact Zarate Expeditions directly.

Categories: Arequipa, El Misti, Peru, marriage, high altitude

Peru - US Trade Agreement Likely to be Ratified

The free trade agreement between the United States and Peru now looks certain to be approved by the US Congress before its August recess, after Democratic legislators and the Republican administration reached an agreement that will also set a framework for future US trade agreements, including those that have recently been negotiated with Panama and Colombia.

The Democrat-Republican accord that opens the way for ratification was announced last Friday 10 May by House Speaker Nancy Pelosi, who called it "a new day for our trade policy".

Pelosi stressed that "we have certain principles which we must accept as the foundation of how we talk about trade...labour standards form a core element of our agreements".

The stronger labour and environmental standards that Democrats had been arguing for are now likely to be included in annexed letters to the main agreement, meaning it will probably not have to be renegotiated, or re-ratified by Peru's congress. These new policies include requirements that US trade agreement partners adopt and enforce five core International Labour Organization labour standards and seven major multilateral environmental agreements. Intellectual property-based restrictions on generic medicines are also softened, and Peru is specifically required to act against illegal logging, particularly of mahogany. A summary of the key adjustments to US trade policy can be read here.

If ratified as expected, the agreement will come into force towards the end of 2007 or early in 2008. Until then, Peru's existing trade concessions under the Andean Trade Preferences and Drug Eradication Act (ATPDEA) will be automatically renewed.

Peruvian sources credited the recent visit of President Alan Garcia to Washington with helping convince US legislators of the importance of the trade agreement to Peru's development.

In a forthcoming post, I'll summarize the key issues and controversies of the US-Peru trade agreement.

Categories: free trade, Latin America, Peru, FTA, TLC

Ghost Stories of the Sierra III: Gerardo's Second Sight

It was Lizbeth's brother Pablo who added a missing link to the story as we sat around chatting while we looked after the otherwise empty house on the avenida Gutemberg.

According to Pablo, it had been six year-old Gerardo's disturbing visions that provoked Hugo and Lizbeth to perform the pagamento, or offering (literally 'payment'). A couple of weeks previously, when Pablo was on another visit down from Cabanaconde, the family had been sitting around the kitchen table, just before bed time. The back door was open, and Gerardo had wandered out to the patio.

Lizbeth got up from the table and went to get Gerardo to take him to bed. He was standing at the far end of the patio, staring fixedly out beyond the back garden, to where the lights of Arequipa flickered weakly into the darkness beneath the bulk of Nevado Chachani. He was waving his hand and saying in his childish voice, "bye bye...good bye".

"Who are you saying goodbye to?" asked Lizbeth. Gerardo looked up at her with a puzzled frown. "The souls", he replied.

The rest of the story Lizbeth had already told me with a kind of awed relish, though she refused when I asked her to retell it in detail a couple of evenings later. "I can't tell it at night time", she said. "It sends shivers down my spine".

According to her, it had been a routine decision that it was time to make a pagamento; a ritual which they had done several times before. Such a ceremony relates to the prehispanic practice of making offerings to the pachamama, the Mother Earth, to give thanks for her fruits. Like many aspects of Latin American culture, it has become creolized, mixed with Catholicism, and worked into urban middle class life.

Lizbeth had gone to find a local woman, expert in such matters, who had explained how they should carry out the ritual and what items should be included in the offering. Hugo and Lizbeth followed the instructions, wetting the earth around their front entrance and burying the designated items. Later the same day the woman came to their house, bringing some strange shells, stones and quartzes. She placed them on the mantelpiece and assured Lizbeth that they would bring extra good luck.

That night, Hugo and Lizbeth were in bed, watching TV and discussing what needed to be done the next day. For no apparent reason, an aloe plant sitting in the window fell to the ground. Lizbeth went and put it back in its place. Moments later, it fell down again. Then the door to their room swung open. Lizbeth got up and closed the door; a draught must have blown it open. This time, the door handle slowly turned, as if by an invisible hand, and the door was flung open again.

They both felt a force enter the room; a wind swept through the house, though it was a still night. A malignant energy coursed into the room.

"When an evil spirit comes, you can't show it fear", explained Lizbeth. "You have to swear and curse at it, tell it to be gone". This she tried to do, but the spirit was powerful. Hugo roused himself and went into the living room, shouting at the spirit. He found a bottle of holy water on a shelf and began to splash it around the room, ordering the spirit to leave.

" And then the idiot grabbed me by the arm" recounted Lizbeth. "So it passed from him to me, and I wasn't as strong". Objects were shaking on the shelves. A statue of the Virgin Mary crashed to the floor and cracked.

Eventually, Lizbeth thought of the shells on the mantelpiece. She picked them up and threw them out the front door. The turmoil subsided, and the malignant energy left the room

The next day, Lizbeth took the shells back to the woman. "These are not good", she told her. The woman shook her head and insisted that they were benign, bringers of good luck. "If you don't want them, you should get rid of them yourself", she said. But Lizbeth was admant that she was leaving the shells behind.

They also decided that the pagamento had been done wrong; they would need to dig it up and start again. But the next week when they excavated the site, the things they had buried weren't there; all they found was dog poo and the bones of what appeared to be a small animal.

A couple of weeks later, Gerardo and Renzo (who was visiting from Lima) were sent up to stay with their cousins in the sierra. Lizbeth's parents run the well-known Valle de Fuego hotel in Cabanaconde, while her brothers help with the business or farm the family lands.

One night in Cabanaconde there was an electricity outage, and the village was thrust into darkness; the fault couldn't be fixed until morning. Pablo's mother asked him to sleep with Gerardo and Renzo, as Gerardo refused to be alone in the pitch darkness. Pablo took them down to the family hotel, where he could sleep in the same room.

As he prepared for bed, he felt a strange and an accountable fear. In the night he slept poorly and was plagued by nightmares. "When I have bad dreams, I turn my pillow over to make them stop", he explained

Sometime after midnight, Gerardo woke up and began to cry out. "Nooo" he wailed. "I don't want to! I don't want to!"

Pablo was roused from his disturbed sleep. "What don't you want?", he asked.
"Please! I don't want to!" screamed Gerardo.

Pablo tried to comfort Gerardo, to ask him what the matter was. But Gerardo was as if possessed, and unable to speak coherently. Trembling, he tried to say something, but his tongue was stuck. Pablo thought Gerardo was trying to form the word "Emilia" - his grandmother, Pablo's mother.

"You want to go to Emilia?", he asked. He tried to think of something that would calm his nephew; he remembered that Gerardo had been excited the previous day about going for a horse ride. "Let's go find Emilia, to ride horses" Still trembling, Gerardo nodded. Pablo found his flashlight, and ferried his nephew the couple of blocks down to his mother's place, where he left him for the rest of the night.

In the morning they heard the news. Six drunkards had been quaffing meths in a local den. In the dark caused by the blackout, they had picked up the wrong bottle, one that contained poison. It was assumed that in their already inebriated state, they hadn't noticed what they were drinking. In the morning, all six were found dead.

Categories: Peru, Arequipa, Colca, Andes

In Peru, Working Hard is Not Enough

On the suburban block in Arequipa where Hugo and Lizbeth live, there's no fewer than six family-run grocery stores. That's six on the one block, not the whole street.

There's also a constant stream of yellow "Tico" taxis buzzing by. According to Hugo, there are 40,000 taxis in Arequipa. With a population of around 1.3 million, that means a remarkable ratio of approximately one taxi for every six families.

Taxis and grocery stores provide just two examples of Peru's overcrowded economic geography, where too many service and retail providers compete to supply a limited market. Regardless of how hard they work, the pickings are stubbornly slim.

This situation stems from the Peruvian economy's inability to provide more than 30 percent of its people with formal employment. By necessity, the others become self-employed entrepreneurs. But most don't have the ability to accumulate capital or invest in something risky and innovative. So they must scramble to carve out a share of the limited internal market for basic goods and services.

Fifth-form economics tells us that supply increases to meet demand. But what this means depends on where you are. In Western countries, the decision to 'supply' is usually based on whether an enterprise can turn a decent profit. In Peru, the threshold is much lower, based on the need to simply subsist. So, wherever there's a stable, predictable demand for a good or service, the market is not just supplied, but saturated.

Meanwhile, other costs don't go down. Most taxi drivers, for example, have to work hard just to cover the rental of their vehicle and keep it gassed up. With a typical taxi shift running from around 7:00 am to 7:00 pm. it's effectively only around 2:00 pm that drivers actually start earning money for themselves.

And taxis or corner stores are fairly high up the complex hierarchy of service providers. At the bottom are the people, mostly children or the very old or disabled, who sell sweets two or three at a time out of big bags. This is effectively indistinguisable from begging.

Then there are the itinerant vendors who peddle cigarettes and gum from trays hung around their shoulders. Success is graduating to having a trolley which is parked on a street corner and adds cookies, potato chips and bottled drinks to the inventory. At night, these "carritos" sell hamburgers, hot dogs, herbal drinks and anticuchos. Other people carve out a little retail niche by buying and reselling popular items a few at a time. In tourist areas they wander along vending t-shirts, crafts, paintings, sunglasses; on the market streets it's nail scissors, cutlery, photo albums, shoelaces, or anything else that can be moved.

All this is great for the consumer, who has a choice of products at her fingertips most hours of the day and night. But the majority of hopeful entrepreneurs are barely getting by.

And being skilled is no guarantee of breaking out of the rut. In a turnabout that would make the Western householder chortle with irony, tradesmen wait around on the street to be hired. You can wander down to the corner and find an electrician, carpenter or builder for as little as 15-20 soles per day ($5-7 USD).

The phenomenon of chronic service oversupply continues up into an industry that in theory should be turning a decent profit - tourism. When I first arrived in Arequipa in April 2004, I estimated there were about 90 agencies selling the same things - the Colca Canyon, Misti, Chachani, and city tours. By March 2007 the number had risen to about 120.

What hadn't changed was the number of tourists. Even within Peru, Arequipa struggles to attract its share; the regional government, which has done little to effectively promote the area, estimated in 2006 that just 14 percent of visitors to Peru make it to Arequipa.

No one was offering anything very different or innovative, and the conditions for tourism hadn't changed. The road into the Colca valley was as potholed and arduous as ever. The same two bus companies offered the same crowded, uncomfortable service up into the sierra.

In such a static market, the growing number of providers produces a predictable result - intensifying competition on price. Relatively few of Arequipa's agencies actually operate the tours, which involves organizing transport, food and guides for the tourists. But the craft shops, internet cafes and hotels that throw in a desk and a sandwich board advertising "Colca, Chachani, Misti" are happy to clip the ticket, and shave a few dollars off the margin of the eventual operator.

And even among the operators, there's little compunction about joining the race to the bottom. Costs are squeezed by hiring a less experienced guide, providing less food for the tourists, or simply by taking a loss on the first few sales in order to get a group together.

A couple of years back, Lizbeth employed a woman called Yunisa in the Incaventura agency After a while, Yunisa quit and started her own agency. She installed herself in the corner of a crafts shop, half a block further up the calle Santa Catalina. Her sales tactic? She waited until tourists came out of the Incaventura office, having had the tours explained to them. Then she sent one of the three or four girls that hung round her office to run after the tourists, bad mouth Lizbeth, find out what price they had been offered, and undercut it.

Little encapsulates the Peruvian economic situation better than these "jaladores" (literally "pullers"). Normally students or otherwise unemployed young people, they are paid purely on commission, but this hardly dents their eagerness to work. They are often bright, articulate, and may even speak some English. But with a limited pool of possible sales to be made, any hard-won income is earned directly at the expense of each other.

In fact, in some places, so intense is the competition to "jalar" a tourist that it's to the mutual detriment of all. In central Cuzco the tourist is assaulted at almost every step by people promoting tours, bars, and restaurants, or selling crafts, jewellery, and clothing. It makes for a somewhat hostile environment, which doesn't encourage visitors to stay around and spend more of their money. Often their response is to retreat to the sealed-off, foreign-owned venues where they won't be hassled.

Tourists themselves hardly help the situation. They come with the expectation that Peru is a cheap country, and expect to have amazing adventures for orders of magnitude less expense than what they would pay for a similar experience in a developed country. In Arequipa, many are happy to cruise from agency to agency, looking for the cheapest offer. They assume that if someone charges them a few dollars more, they are being ripped off. I wonder whether their attitude would be different if they knew that the $2-3 USD they just bargained off a tour price had come at the expense of a couple of meals worth of wages for the guide, or the meagre commission of the girl who works in the office, or the profit margin of the agency which is used to pay its rent and employment costs?

Despite its diminishing returns, tourism is still seen as a bright propspect by many. These days, I instinctively groan when another young student tells me enthusiastically that "one day I'd like to open an agency of my own". How many more do we need, I ask?

Some people have bright ideas, like Tessy and Rafael who are saving to set up a hotel and tourist operation in Cotahuasi, picturesque location of the world's deepest canyon. But for now it's not viable; the destination is poorly promoted, and it's 11 juddering hours away from Arequipa on a mostly unsealed road. Few visitors make it that far.

The well-meaning outsider is tempted to question why more Peruvians don't band together to produce something of higher value, and to criticize the unfortunate habit of ripping off or undercutting one's neighbour. But once you appreciate the lack of confidence created by an unstable history, unhelpful government, and inadequate infrastructure, the tendency to grab at what's going becomes more understandable. So, until Peru can find ways to allow ordinary people more of a chance to get a slice of the economic pie, its citizens are condemned to continue the current vicious circles, scrapping over stale crumbs from the crust.

Categories: Peru, Arequipa, economics, tourism

Getting Things on Track

After years of false starts and delays, Lima may be about to get its long-awaited electric train system. Peruvian TV reported that the bidding process will begin this month for construction and operation of Line 1, which will link the south of the city with central Lima.

The project was first conceived in the late 1980s, during the disastrous first term of Alan Garcia. A special authority was constituted to oversee the project's development, but it has become known as the "ghost train", after twenty years of delay and $400 million USD squandered. Just 9.8 km of track has so far been constructed, linking Villa El Salvador with San Juan de Miraflores.

The successful tenderer will be expected to begin construction in January next year of the remaining 14 km in Line 1, which will continue through to the plaza Grau in central Lima. They will have a 30-year concession for operating the train line. A spokesman for the metro authority estimated that it would carry 300,000 passengers daily - a total of around 100 million per year

Lima is the last Latin American city of its scale not to have a mass-transit system. Mexico City, Buenos Aires, Rio de Janeiro, Sao Paulo , Santiago de Chile and Medellin already have comprehensive metro systems, while Bogota has a network of guided busways.

Implementation of the electric train is part of the Municipality of Lima's grand plan for adressing the city's transport problems, which include traffic congestion, pollution, 1200 accidental deaths per year, and time-consuming and unsafe transit for citizens.

Understandably, some locals remain sceptical about prospects for completion of the metro system. A shopkeeper asked for his opinion by aTV reporter, suggested that "maybe it will happen next century". When asked "don't you believe it?", he responded "No, I don't believe it".

Categories: Peru, Lima, Metro, Tren Eléctrico