Korea and Peru initialed a free trade agreement on Monday. The two countries will formally sign it in March and submit it to their legislatures for ratification.
The FTA with Peru is the eighth Korea has struck and the second with a Latin American nation after Chile. Korea has FTAs with a total of 45 countries including the member countries of the EU and ASEAN.
President Lee Myung-bak met with his Peruvian counterpart Alan Garcia at Cheong Wa Dae in the morning and Minister of Trade Kim Jong-hoon and Peruvian Minister of Foreign Trade and Tourism Eduardo Ferreyros initialed the FTA.
Unlike Korea's other free trade deals, the one with Peru is characterized by an explicit stipulation of cooperation to develop energy resources. Peru is a resource-rich country with major mineral reserves. It ranks top for silver deposits, second for zinc and third for copper and tin. It also ranks 38th and 42nd in terms of oil and natural gas reserves.
Once the agreement comes into effect, Korea will be able to export more industrial products such as cars and electronics goods to Peru, and Peru more agricultural and fishery products such as bananas and squids to Korea.
Peru currently levies 9 percent customs duties on cars, Korea's main export product, but those will be abolished, starting with sedans with engine capacity over 3,000 cc
Tariffs on midsize cars with engine capacity between 1,500 and 3,000 cc will be abolished within five years and those on the others over the next 10 years. Cars take up the biggest portion in Korea's exports to Peru at 16.2 percent, amounting to US$97 million on average in 2007 and 2008.
Japanese vehicles had more than 60 percent share in the Peruvian car market until the mid-2000s, but this dropped to 46 percent in the first half of this year, while Korean cars took up 23.6 percent. Japan also announced on Sunday that it clinched an FTA with Peru.