Peru puts hopes in juicy, sweet exports

April 21, 2002

By Eduardo Orozco

CANETE, Peru (Reuters) - Sitting on his old tractor, Luis Reategui looks at his vineyard and wonders why Peru, Latin America's No. 7 economy, still hasn't taken the potential for agricultural exports as seriously as has its southern neighbor, Chile.

  "We could improve our agricultural exports because we have the will and we have the markets for our products, but we need a state that supports us. We need advice, infrastructure and credit," Reategui told Reuters on his farm in Canete, on the coast some 80 miles south of lima, as he prepared his land for more planting.

Grapes, mangoes and paprika are some of the products Peruvian farmers have set their sights on as they hunt for the markets and profits they can no longer find for their traditional produce like coffee and asparagus after world overproduction hammered prices and exports.

Peruvian agricultural exports could be big business. Next-door Chile, which is smaller, exported $4.9 billion worth of agricultural products, mostly fruit, in 2001, while Peru exported $640 million, according to official data.

The difference comes from investment: in Peru, it is almost non-existent, but in Chile it is a priority that has led to cultivation of 9.9 million acres, of which 3 million acres is watered by an extensive irrigation network.

Chile hopes to add 1.7 million acres of agricultural land by 2010, while Peru appears to have forgotten its agricultural heritage and the impressive Inca aqueducts of its past and sees no growth on the horizon in its current 6.4 million hectares under cultivation.

"We shouldn't get stuck in the export of minerals and fishmeal, just doing more of the same, when agricultural exports represent a development alternative for the country, like in Chile," Industry Minister Raul Diez Canseco told a recent conference.

Peru's economy, worth around $54 billion, earns 58 percent of its foreign currency from mining and fishing.

"The metals price crisis has proved that you have to diversify and besides (generating) foreign currency, agriculture can generate more jobs than mining and fishing," said Diez Canseco. More than half of Peru's 26 million people scrape by on $1.25 a day while unemployment -- which with underemployment tops 50 percent -- is one of the main anti-government gripes.

JUICY, SPICY, SWEET NEW STARS

Without state initiatives, producers say they have had to make their own luck by seeking out new export products and banding together into associations to sell them better.

"This fruit is already Peru's third-biggest agricultural export product, without bank support. Just think what we could do with financing," mango producer Hernan Roa, who grows the golden, juicy fruit in San Lorenzo in northeastern Peru, told Reuters. He is hoping the newly created state-backed AgroBank, which has yet to begin operations, will help.

AgroBank, which will have a mixture of state and private capital to lend to farmers, expects to start operations within two months after its creation in December.

But it will have a meager $72 million in funds at its disposal for a sector considered too risky and virtually shut out by commercial banks -- and in which costs can be high: It costs $10,000 alone to plant 2.5 acres of mangoes due to the high cost of clearing and preparing the ground.

Peru's Agriculture Ministry says mangoes made up 44 percent of Peru's fruit exports in 2001. Mango exports, mostly to the United States, were worth $27 million in 2001, up from $23 million a year earlier. This year's forecast is $33 million.

Paprika is another hot prospect. The spice is much in demand in Spain as a food coloring and flavoring. Peru's paprika exports rocketed to $16 million last year from $6 million in 2000, and producers hope the trend will last.

"Paprika exports will grow 47 percent this year against last year because of greater demand in a captive market like Spain and low production in other countries because of blight," said Eliazar Lupaca, an exporter based in southern Peru.

Grapes are another possibility. Peru's exports of the fruit were worth $12 million in 2001, double the value of a year earlier, and producers forecast higher productivity will spark a 60 percent leap in grape exports this year.

"Grape exports will continue to multiply because the majority of fields -- 4,940 acres -- are new and we exported 7,700 tons in 2001 compared with 3,300 tons the year before," said Felipe Llona, leader of Peru's grape producers' association.

SHORING UP TRADITIONAL EXPORT CROPS

But while Peru develops its new agricultural exports, it is also seeking to shore up its traditional, currently depressed but still leading agricultural export crops. Despite high quality, Peru's coffee and asparagus have been hit by low world prices caused by overproduction.

Peru is also dependent on the United States as its biggest market for products such as asparagus, a situation whose dangers have been highlighted by delays and uncertainty over the renewal of a duty-free U.S. trade pact.

The 1991 Andean Trade Preferences Act allowed duty-free access for some products from Peru, Colombia, Bolivia and Ecuador to the United States in a bid to curb the drugs trade in a region that produces almost all the world's cocaine, but it expired last year and is currently stalled in the Senate.

Peru is South America's No. 3 coffee producer behind Brazil and Colombia and the world's second biggest asparagus producer after China.

Last year was dramatically bad for coffee, said Lorenzo Castillo, executive director of Peru's National Coffee Board, but added: "Fortunately there's a deal to cut production among the biggest world producers (Brazil and Vietnam) that will help the price and lift the value of exports 8.3 percent to $195 million."

Castillo reckoned coffee could end the year at $58 per 101 pounds compared with an average $52 in 2001, and forecast Peruvian production of 3.65 million quintals in 2002, up from 3.51 million in 2001.

Another headache for Peru is an asparagus production avalanche from China that has been keeping prices low.

Peruvian producers expect an 8 percent improvement in the value of asparagus exports from $145 million in 2001, but producers are poorly motivated because of the low prices, Peru's export promotion agency, Prompex, says.

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