The contemporary era of globalization exemplifies the neo-liberal argument of understanding bilateral relations where trade and economic ties are regarded as the primary drivers of foreign policy, enhancing engagements between two countries. Trade and investment are the primary sources of economic engagement that can leverage bilateral relations and can also be used as an effective tool of political bargaining. Resonating these ideas, Peru and India have come a long way, breaking the barriers of geography and connecting via economic diplomacy.
Located in Western South America, bordering the South Pacific Ocean, Peru is a Presidential Republic that has emerged as an important economic partner of India in the recent years. Peru and India have always had amicable relations with economic linkages being the backbone of mutually beneficial ties.
There have been MoUs on Cooperation in Geology and Mineral Resources and Educational Exchange programmes. Along with this, there has been robust and extensive cooperation in the field of technical education, with Peru making the best utilization of Indian Technical and Economic Cooperation (ITEC) slots supported by the Ministry of External Affairs. Since the new millennium, the relationship has been strengthened with the commencement of the Joint Study on Feasibility of a Trade Agreement that thrusts upon multifaceted bilateral cooperation in a wide range of areas such as energy and mining, health, pharmaceuticals, agriculture, textiles, science and technology, defence and space, capacity building including information communication technology and building people to people contact and cultural connect among others. Thereafter, business delegations from both sides have been frequent and about five Indian companies have invested about US $30 million in Peru’s mining sector. The smooth operation of economic engagements can be attributed to each nation-states’ understanding of their economic base, and this is enhanced due to Peru’s economic system being similar to that of India. In this sense, both the countries follow a mixed economic system with a rapidly booming private sector along with government controls in key sectors. With an economy that is heavily dependent on foreign trade, the World Bank has identified Peru as an upper-middle income economy with a strong mining and agro-fisheries sector that continues to be one of the promising among Latin American countries. It has an export-driven economy with copper ore, gold, petroleum gas as main trading items. Peru and India has emerged as strong economic partners with the total trade between two countries in the financial year 2022-23 was US$3291.64 million, of which India’s exports were worth US $1160.64 million and imports from Peru were US$ 2,131.00 million.
The main trading items included- India exporting cars, cotton yarn and medicaments, whereas the main items exported by Peru included gold, copper ore and calcium phosphates. Gold stands as one of the biggest import from Peru to New Delhi, accounting for $ 1.8 billion or about 80 per cent of the total imports. Statistics also reveal that Peru has emerged as India’s third-largest trading partner in the Latin American and Caribbean region and in the last two decades trade has made an incredible growth from US$ 66 million in 2003 to around US$ 3.68 billion in 2023.
The economic ties are projected to receive a further boost with the discovery of about 2.5 million tonnes of high-grade lithium, a rare earth critical mineral, in the southern part of the Puno region of Peru. Presently, the country is the second largest producer of copper in the world, and with this discovery, Peru (the name being derived from a Quechua word that means the land of abundance and economic wealth) now possesses one of the greatest lithium resources, which is regarded as the major drivers of economic power since this rare earth mineral is quintessential for the production of lithium batteries required for electric vehicles, mobile phones, semi-conductors, wind turbines, solar panels and almost all modern commercial technological gadgets along with vital defence build-ups. Along with this, Peru has an increased probability of joining the ‘lithium triangle’ that comprises Chile, Argentina and Bolivia, and making it the lithium QUAD with the biggest lithium reserves in the world. With the decline in the global crude oil reserves and the rising demand for lithium as a primary energy source, the small South-
The seventh round was American nation of 1.285 million square kilometres has emerged as a head-turner for global economic giants and emerging economies.
As per 2022, India is one of the largest importers of lithium carbonate and the demand is rising. This makes Peru the most important trade partner in the coming decades. Both the countries have concluded the seventh round of negotiating the Bilateral Trade Agreement that was held in New Delhi from April 8 to 11, 2024. The Bilateral Trade Agreement that began in June 2017 is intended to enhance bilateral commercial investment between the two countries and lower tariff barriers on both sides. attended by sixty delegates from both sides, comprising representatives from the Ministry of Foreign Trade and Tourism and the Ministry of Foreign Affairs of Peru, and officials from the Department of Commerce, Directorate General of Foreign Trade, Department of Revenue, The seventh round was attended by sixty delegates from both sides, comprising representatives from the Ministry of Foreign Trade and Tourism and the Ministry of Foreign Affairs of Peru, and officials from the Department of Commerce, Directorate General of Foreign Trade, Department for Promotion of Industry and Internal Trade from the Indian side, and is regarded as the pillar for further collaboration in multiple sectors of mutually beneficial engagements. Discussions encompassed convergence of opinions and agreements in Trade in Goods and Services, Rules of Origin, Movements of Natural Persons, procedures for customs and trade facilitation, trade remedies and also legal and institutional mechanisms for dispute settlement and cooperation including General and Security Exceptions.
With India’s thrust to boosting electric vehicle (EV) industry, lithium remains the key component and the successful negotiation of the Bilateral Agreement is the cornerstone of India’s economic diplomacy in Peru. Also because, India, presently is not linked to the lithium supply chain. Therefore the comprehensive agreement remains the nucleus of the government’s goal of increasing the EVs’ to 30 percent by the year 2030.
To this end, the successful negotiation of the comprehensive Bilateral Trade Agreement, which is often regarded as India’s first comprehensive Free Trade Agreement in the region is crucial, as New Delhi is moving towards becoming an economic power-house in the wake of Prime Minister Narendra Modi’s Atmanirbhar Bharat, Start-up India and Make in India initiatives. Again, the trade agreement has manifestations beyond the arena of commercial ties and is intended to foster people to people contact and act as a cultural connect.
The presence of a small yet strong Indian diaspora in Peru that is mostly engaged in business and commerce can leverage ties by providing specialized knowledge and technical support to the Peruvian economy, thereby amplifying ties between the two growing economies of the present millennium.
