Peru’s threat to annul free trade agreement is only a “hypothetical”

Chilean business leaders expressed confidence this week that the current diplomatic row between Santiago and Lima will not affect their interests in Peru, despite calls from Peruvian politicians to cancel the two countries’ free trade agreement (FTA).

On Wednesday Peruvian nationalist parliamentarian Juvenal Ordonez called for a debate to discuss annulling the FTA. But this latest installment of the ongoing espionage row between Chile and Peru is discounted by Chile’s business leaders.

“The cancellation of the FTA is purely hypothetical” said Pedro Ibanez, President of Chilean Holding firm Corpora. “The agreement benefits both Peru and Chile, and we don't consider its cancellation likely.”

This view was further endorsed by LAN Airlines chief executive Ignacio Cueto. “This is purely a political subject, it won’t affect our work,” he said.

The Chile/Peru Free Trade agreement came into effect on March 1of this year despite strong opposition within Peru (ST. March 4). Opponents challenged the FTA's constitutional legitimacy in Peru's Legislative courts and a verdict on the matter is expected within two weeks.

Fueling opposition to the agreement is the ongoing diplomatic row over alleged Chilean espionage in Peru.

Spying accusations came last week after press in Lima reported that Peruvian Air Force official Victor Ariza had been arrested on charges of treason. Ariza worked at Peru’s Santiago embassy in 2003 and is accused of passing secret documents to Chilean intelligence in exchange for large sums of money (ST. Nov 16).

Peruvian press on Wednesday published a confession from Ariza in which he admitted the charges.
“I take full responsibility for my actions and ask for the forgiveness of my family and my country” the confession read.

A war of words has broken out between the political leaders of each country, with Chile denying any involvement. The row forms part of a larger territorial dispute between the countries involving maritime borders. A case at the International Courts of Justice in The Hague will commence in March next year to settle the dispute(ST Nov. 19).

Despite political tensions, Chile and Peru have close economic relations with trade between the two countries totaling US$1.8 billion in 2008. Peru ranks third behind Argentina and Brazil as a favorite location for Chilean overseas investment, accounting for 15 percent of the country's total foreign investment.

Tourism also ties the nations together. In 2008 half a million Chileans visited Peru while a large number of Peruvians reside and work in Chile.

SOURCE: EL MERCURIO, LA TERCERA
By James Fowler (editor@|santiagotimes.cl)