(Bloomberg) --
Peru is betting that new trade links with China and local tax breaks can take its booming agribusiness industry to the next level, almost tripling exports over the next decade and a half.
Agriculture Minister Angel Manero is targeting $30 billion in exports by 2040, primarily fruit shipments, compared with an estimated $12 billion this year. “Most of that growth will come from Asia,” he told Bloomberg in an interview.
Manero has reason to be bullish. Peru has become a fruit-growing powerhouse in recent years and is now the top exporter of blueberries and table grapes and No. 2 in avocados. Chinese President Xi Jinping was in Peru last month to officially open the $1.3 billion Chancay port. By reducing travel times, the Chinese-operated facility will make perishable goods more accessible to Asian markets.
Today, just 3% of Peru’s agricultural exports go to China, compared with a combined 65% to the US and the European Union. Manero sees scope to redirect some product to China, with the resulting squeeze in other markets likely to help push up prices.
“That’s what we have to create with the US — under supply them a little,” he said. “We have to under supply Europe a little too and channel all that to Asia.”
Peru is also planning irrigation projects that could double the country’s planted area. Manero wants to auction the first of those lands as early as 2027.
In order to boost growth, Manero is also a passionate advocate of tax breaks and has opposed significantly raising the minimum wage. “The state needs to know when to give up tax revenue in order to generate employment.”
Wage Pressure
Peruvian companies pay 30% in corporate income tax but agricultural producers have generally paid just 15% this century. A bill before Congress to extend those benefits through 2035 will hopefully pass by year-end, Manero said.
In his view, Peruvian agribusiness is competing with other countries that charge corporate income tax rates as low as zero. Manero cited South Africa, Ghana, Morocco, Colombia and Mexico as nations that could win over investments at Peru’s expense if taxes rise.
Peru’s minimum wage is currently set at 1,025 soles ($274) a month, while agricultural workers are entitled to an additional 30%. Manero doesn’t want to do away with the bonus, but he doesn’t think the minimum wage should rise by much.
Still, he concedes he’s probably lost that battle. Peruvian President Dina Boluarte has promised the minimum wage will go up this year, although she hasn’t announced by how much.
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