"CARACTERÍSTICAS Y DESAFÍOS DEL COMERCIO MUNDIAL EN EL SIGLO XXI"

Introduction to the Event

Overview of the Conference

• The event is hosted by Dr. Hugo Álvarez Anzamendi, a professor at the Universidad de San Martín de Porres, aimed at sharing business experiences and practices.

• This ninth session serves as a platform for critical reflection and analysis of best business management practices, complementing academic learning in various professional fields.

Importance of Global Trade

• The upcoming discussion will focus on "Characteristics and Challenges of World Trade in the 21st Century," led by Dr. Enrique Cornejo Ramírez, emphasizing its significance for all countries, especially developing ones like Peru.

• Historical context shows that international trade has been a topic of debate among governments and businesses globally, with varying approaches such as free trade versus protectionism.

Global Trade Dynamics

Varied Approaches in Latin America

• Different countries adopt distinct trade policies: some embrace open markets (e.g., Peru, Chile), while others lean towards protectionism (e.g., Bolivia, Argentina).

• The university setting is highlighted as an ideal environment for understanding these complex discussions surrounding global trade dynamics.

Speaker Introduction

Credentials of Dr. Enrique Cornejo Ramírez

• Dr. Cornejo brings over 45 years of experience in public and private management roles including executive positions at Banco de la Nación and various ministerial roles in Peru's government.

• He holds multiple degrees in economics and administration from prestigious universities and currently teaches at Universidad Nacional Mayor de San Marcos.

Engagement Guidelines

Student Participation

• Students are encouraged to remain engaged during the conference as they will need to submit a review on Moodle afterward; questions can be sent via chat for later discussion with the speaker.

Dr. Cornejo's Presentation Begins

Digital Engagement Tools

• Dr. Cornejo shares his website QR code for access to resources related to his topics, including books and articles he has authored; he encourages students to reach out with questions post-conference via email or through his YouTube channel "Enrique Cornejo Digital."

Contextualizing Globalization

Historical Perspective on Globalization

Globalization: An Ambivalent Phenomenon

Understanding Globalization

• Globalization has historical roots dating back to the 14th century, marked by significant innovations like the steam engine and compass, which facilitated trade.

• The term "ambivalent" describes globalization's dual nature, encompassing both positive and negative aspects that need to be navigated effectively.

Positive Aspects of Globalization

• Key benefits include technological advancements in information and communication, leading to increased economic growth and efficiency.

• The rise of middle classes in various countries creates new markets with purchasing power for international goods and services.

• Improved healthcare and lifestyle choices have led to longer life expectancies, influencing demand for specific goods and services.

Negative Aspects of Globalization

• Globalization contributes to persistent inequality and environmental degradation, alongside speculative capital flows that can destabilize economies.

• It also fosters significant migration patterns, regional conflicts (e.g., Russia-Ukraine), nationalism resurgence, criminal activities, terrorism, and cyber threats.

Trends in International Trade

• Over the past 50–60 years, international trade has expanded significantly across both physical goods and services due to globalization.

• Various forms of trade agreements—multilateral, plurilateral, regional, and bilateral—have emerged as complementary strategies for enhancing commerce.

Multilateralism vs. Regionalism

• Contrary to previous beliefs that multilateralism would conflict with regionalism, current trends show they can coexist beneficially within global trade frameworks.

• The World Trade Organization (WTO), established post-WWII with foundational agreements like GATT (General Agreement on Tariffs and Trade), plays a crucial role in this integration process.

Historical Context of WTO Agreements

• Countries actively engaged in international trade tend to experience better economic well-being; those that isolate their economies face higher opportunity costs.

• Smaller economies like Peru cannot afford isolationist policies due to insufficient internal market size necessary for sustaining productive activities.

Evolution of Multilateral Trade Agreements

• The WTO has evolved since its inception in 1947 with GATT; it now includes a broader agenda addressing modern challenges in global commerce.

Global Trade Dynamics and the Role of WTO

Overview of Global Trade Membership

• The United Nations has 194 member countries, indicating nearly universal affiliation; however, 85% of these members are part of the World Trade Organization (WTO), which accounts for almost 100% of global trade.

• China’s entry into the WTO in 2001 marked a significant historical moment, with representatives from various nations participating in this global trading framework.

• Countries like Albania, once isolated due to communism, have joined the WTO, while others such as Iran and Cuba remain outside but still influence global decisions.

Impact of U.S. Tariffs under Trump Administration

• President Trump's announcement in 2025 regarding new tariffs reflects a shift in U.S. trade policy that could undermine previous free trade agreements.

• The imposition of a 10% tariff on imports affects exporters significantly but allows some resilience through existing international agreements.

• Trump's tariffs have generated substantial revenue for the U.S. government but also create uncertainty within the global economy.

Economic Consequences of Tariffs

• Trump humorously stated that "My favorite word is tariff," highlighting his administration's focus on protectionist policies that can disrupt market stability.

• Tariffs lead to increased prices and affect production and consumption patterns globally; their long-term effects will become evident over time.

• Citing Milton Friedman, it is emphasized that economic interventions have consequences—there is no "free lunch" when it comes to economic policies.

Multilateral Trade Agenda

• The current multilateral agenda includes 18 points aimed at addressing various aspects of international trade beyond just tariffs.

• Historical context shows that earlier negotiations focused on reducing tariffs; however, modern discussions encompass complex issues like services and intellectual property rights.

Ongoing Challenges in Global Trade

• Key unresolved issues include agricultural subsidies and market access related to tariffs; progress has been made but challenges persist especially with current political climates.

• Future negotiations will need to address topics such as investment treatment, public procurement competition, and electronic commerce amidst evolving global dynamics.

Subsidies in Fishing and Global Trade Agreements

Overview of Recent WTO Decisions

• The World Trade Organization (WTO) has made significant decisions regarding fishing subsidies, with Peru being a key player. Four agreements have been reached on 18 topics, marking a 22% progress rate.

• These agreements include public procurement, trade facilitation, and the elimination of agricultural and fishing subsidies. Consensus among all member countries is required for these decisions to be finalized.

Importance for Peru

• As a major fishing nation that exports products like fishmeal and canned goods, Peru benefits from the elimination of fishing subsidies which fosters greater market competition.

Global Trade Dynamics

• There is a shift towards new regionalism in trade agreements, moving away from import substitution strategies. This includes various nations collaborating within frameworks like APEC to enhance free trade.

Competitiveness Metrics

• The World Economic Forum assesses global competitiveness through several variables: conducive environments for competitiveness, infrastructure related to international trade, macroeconomic stability, human capital (education and skills), market size, and innovation ecosystems.

Innovation as a Driver

• Innovation is defined as creating something novel or significantly modifying existing products. Countries excelling in innovation also tend to perform better in international trade.

Characteristics of 21st Century International Trade

Emerging Leaders in Global Trade

• China has emerged as the leading global trading power while the U.S. remains dominant in production. India is anticipated to become a significant competitor to China by the latter half of the century.

Regional Strengthening

• Asia's economic growth outpaces other continents; it showcases rapid development compared to others globally.

Relocalization Trends

• An interesting trend involves relocalization and specialization across mega-cities worldwide, allowing cities to function almost independently like countries.

Global Value Chains

• The concept of global value chains allows products seemingly made in one country to actually be produced across multiple nations based on cost efficiency and specialization.

Impact of Technology on Trade

Economic Dynamics of Global Trade

China's Role in Global Trade

• China, along with Hong Kong, significantly influences global trade, accounting for 11.4% of the world's exports and imports compared to the U.S.'s 11.1%.

• While the U.S. remains the top producer, China has surpassed Japan and Germany to become the second-largest producer globally.

The Evolution of Production Processes

• Jack Ma, founder of Alibaba, predicts a shift from "Made in China" to "Made on the Internet" by 2030, highlighting a future where digital manufacturing becomes prevalent.

• Services currently represent about 20% of total trade value but are expected to rise to 30% over the next decade; however, this does not fully capture their true impact when embedded in physical goods.

The Value of Technology in Goods

• The actual worth of complex technology products (like computers or high-end cars) is largely derived from services such as software and intellectual property rather than just their physical components.

• When considering integrated services within technological goods, it's estimated that services could exceed 50% of total global trade value.

Digital Transformation in International Trade

• Emphasizing digital transformation involves leveraging disruptive technologies like AI and blockchain to enhance international trade efficiency and customer satisfaction.

• Modern products cannot be attributed solely to one country; they often involve production processes spanning multiple nations.

Changes in Global Economic Landscape

• In 2005, retail and oil companies dominated global markets; by 2024, tech companies lead with electric vehicles and cloud services shaping economic power dynamics.

• Over the past five decades, global trade's share of world GDP has doubled from approximately 15% in 1970 to around 30%, driven by technological advancements and trade agreements.

Case Study: Boeing's Global Supply Chain

• The Boeing 737 exemplifies globalization; its production involves over twenty countries despite being branded as an American product.

Peru's Position in Global Trade

Economic Overview of Peru's Trade and Growth Potential

Current Trade Status

• The GDP of Peru is approximately $290 billion, indicating that total trade represents nearly 50% of the country's GDP. This highlights significant growth relative to its size.

• Despite this growth, Peru's total trade accounts for only 0.5% of global goods and services trade, illustrating its small share in the world market.

Growth Opportunities

• There is potential for Peru to grow tenfold in trade while still remaining a small player globally; however, such growth could significantly improve living standards for Peruvians.

• Currently, Peru is at an interesting juncture with numerous commercial agreements with major global markets, although a few key partnerships are still pending.

Commercial Agreements

• As of November last year, a second phase of the strategic treaty with China was signed, which includes new areas like e-commerce and customs information exchange.

• With 24 existing commercial agreements, Peru has established strong ties with major partners including China (the leading partner), Japan, South Korea, North America (USA and Canada), South America, and Europe.

Infrastructure Developments

• Ongoing negotiations with India are crucial as they aim to enhance economic relations further.

• The Callao port operates under DP World War from the UAE and has undergone significant technological upgrades to become competitive on a global scale.

Future Prospects in Port Operations

• APM Terminals from Denmark/NL operates at Callao port and is investing heavily in modernization efforts including constructing grain silos.

• The Chancay terminal by Cosco Shipping from China has recently opened with substantial investment aimed at becoming a pivotal hub for Pacific trade.

Regional Port Development

• Major international operators are establishing their presence in Peru due to its strategic location; other ports like Paita are also modernizing to support regional cabotage operations.

• New developments include Yurimaguas as the first fluvial container port facilitating multimodal commerce between Brazil and Peru.

Strategic Partnerships

Economic Opportunities in Peru

Overview of Technological Advancements and Investments

• The speaker discusses the production and maintenance of large vessels using local technology, emphasizing collaboration with the National Society of Industries to integrate with Peru's metal-mechanical industry.

• Fraport, a leading global airport operator, has invested over $2 billion in the Frankfurt airport and its services, highlighting significant infrastructure investments in Peru.

Strategic Positioning of Peru

• New strategic private areas or free zones have been approved as law and will be regulated soon, indicating a shift towards enhancing economic frameworks.

• The geographical positioning of Peru is highlighted as it looks towards Asia-Pacific and India, suggesting potential for increased trade opportunities.

Economic Theories Supporting Growth

• Reference to Paul Krugman’s Nobel-winning theories on international trade emphasizes the importance of specialized industries located strategically to achieve competitive advantages through economies of scale.

• Porter’s competitiveness theory is discussed alongside Krugman's insights on strategic location contributing to external economies that enhance competitive sales.

Current Global Dynamics

• The speaker notes that while historical economic centers were in the Mediterranean and Atlantic, current dynamics are shifting towards the Pacific region where Peru is situated.

• Emphasis on leveraging this unique opportunity for growth amidst global tensions between major powers like China and the United States.

Actionable Strategies for Development

• Recommendations include consolidating leadership in South America within Pacific alliances, fostering a culture focused on value-added products, and increasing exports from 30% manufacturing/services to a balanced 50%.

• A call for creating a competitive environment through improved infrastructure, education, health policies, and changing business mindsets to adapt to new market realities.

Business Management Guidelines

• Ten criteria are proposed for managing international business effectively: focusing on value addition, customer-centric marketing strategies, long-term planning, forming export consortia or cooperatives for efficiency.

• Emphasizing innovation through R&D investment while developing both domestic and international market strategies is crucial for sustainable growth.

Infrastructure and Development in Peru

The Need for Rapid Action

• Emphasizes the urgency for Peru to enhance its maritime and airport infrastructure to avoid lagging behind in development.

• Stresses that improving infrastructure is not about increasing taxes but about elevating the country's status and reducing poverty and inequality.

Updating Infrastructure Plans

• Points out that existing infrastructure plans lack essential components like special economic zones and must be updated to include modern technological developments.

• Discusses the necessity of completing key projects such as the metro line, unfinished bridges, and the Callao anteport, highlighting a short-sighted approach in current governance.

Long-term Political Stability

• Advocates for establishing state policies that transcend individual governments, ensuring continuity in foundational goals despite changes in leadership.

• Argues that this is a unique opportunity for Peru to transform into a resolved problem rather than a persistent issue, aiming for national leadership.

Vision for Peru's Future

• Quotes Jorge Basadre on Peru's potential while stressing collective responsibility among citizens to leverage favorable circumstances.

• Envisions an educated, integrated, and happy Peru leading South America within 30 years.

Engagement with Audience

Contact Information

• Provides various social media handles where audiences can follow updates: TikTok, YouTube, Instagram, Facebook.

New Publication Announcement

• Introduces a new book replacing an older publication on international trade; encourages audience engagement through WhatsApp for purchasing details.

Export Strategy Discussion

Focus on Traditional Exports vs. Diversification

• Responding to questions about whether Peru should concentrate on traditional exports or diversify into services like technology and education.

Importance of Mining Sector

• Highlights mining as crucial for national income (50% of foreign currency), advocating continued investment while also developing other sectors.

Value Addition Strategies

Gold Mining and Economic Strategies

The Impact of Gold Prices on Informal Mining

• The rise in gold prices is attributed to market speculation, with expectations that they will continue to increase.

• Former President Trump’s policies are believed to influence the price of gold, particularly through the introduction of digital dollar coins in the U.S. starting January 1st next year.

Cryptocurrency Backed by Gold

• There is a shift towards cryptocurrencies backed by gold rather than unbacked versions, leading to increased demand for gold.

• This trend may also affect various industries, including jewelry and industrial applications like zinc alloys.

Value Addition Across Sectors

• Emphasis on generating value-added products across sectors such as agribusiness and fisheries, moving from raw exports to processed goods.

• Gastronomy serves as a prime example where Peru exports not just food but chefs and culinary brands, showcasing potential for service exportation.

Future Projections for Product Composition

• A vision for the future suggests a balanced composition of 50% traditional products and 50% manufactured goods/services within 30 years. However, basic product production must also grow significantly alongside this transition.

• The goal is for basic products to grow at least 10%, while other sectors should aim for growth rates of 20%-30%.

Industrialization Policies in Peru

• Discussion on how Peru can reorient its export promotion policies to encourage industrialization of copper and other commodities instead of merely exporting raw materials. Suggestions include refining processes domestically.

• The establishment of special economic zones is seen as crucial for attracting large companies that would require local subcontracting services, thus boosting local industry capabilities.

Challenges with Special Economic Zones

• Historical context provided regarding past initiatives like the free trade zone in Tacna aimed at counteracting contraband; however, current zones have not met expected impacts on productivity or competitiveness yet.

Economic Management and Free Trade Zones in Peru

Overview of Free Trade Zones

• The management of the Tacna free trade zone has not effectively attracted foreign companies, indicating a need for improved economic policies.

• Currently, the only functioning free trade zones in Peru are state-managed, specifically Tacna and Paita, with a focus on public sector control.

Private Economic Zones

• A new model inspired by China's private economic zones is being proposed to attract investment through private management rather than state control.

• Large companies are expected to be drawn to these zones due to strategic locations like Chancayipu and Callao, which offer direct routes to Asia.

Infrastructure Development

• The shift towards larger vessels arriving directly from Asia will reduce transit times significantly compared to previous indirect routes via Los Angeles and Mexico.

• There is potential for Peru to replace some commerce currently passing through the Panama Canal by enhancing its infrastructure.

Strategic Advantages

• The strategic location of Peru's ports and airports makes it an attractive destination for international businesses, leveraging geographical advantages that were not previously available.

Conclusion of Discussion