Peru-Chile trade pact to take effect March 1st

Almost three years after it was signed by both South American countries, the Peru-Chile trade deal will take effect this Sunday, said Foreign Affairs and Tourism Minister Mercedes Aráoz.

“The free trade agreement with Chile is very beneficial and includes an additional labor clause that is very good because it protects Peruvian workers in Chile,” said Aráoz in comments to daily El Comercio.

According to the Peruvian Consulate in Chile, there are approximately 80,000 – legal and illegal – Peruvian migrants working in Chile’s capital, Santiago. Almost 80 percent of these Peruvian workers send money back home, totaling $60 million annually.

The deal will also allow for “reciprocal trade,” added Aráoz, “and allow Chilean firms in Peru and Peruvian firms in Chile to export services.”

Signed by Peru and Chile on Aug. 22, 2006, to replace the Economic Complementation Agreement, or ACE Nº 38, the trade pact was formalized in 2007.

Despite major investments in Peru by Chilean businesses, the relationship between both countries has remained sensitive since the War of the Pacific (1879-1881), when Peru lost territory on its south coast. The border issue flares up seasonally, as many Peruvians harbor a deep suspicion of Chilean intentions, and the Peruvian military is acutely sensitive to any upgrading of Chilean military material.

Last January, the maritime border dispute with Chile prompted Peru to seek arbitration from the International Court in The Hague.

According to the ICJ, the dispute is related to “the delimitation of the boundary between the maritime zones of the two States in the Pacific Ocean” and the recognition of “a maritime zone lying within 200 nautical miles of Peru’s coast.”

The dispute dates back to the 1879 – 1883 War of the Pacific, in which Peru and Bolivia lost substantial territory to Chile. Central to the row is 38,000 square kilometers, or about 14,500 square miles, of fishing-rich sea which Chile currently controls.

The maritime dispute has caused considerable tension in the past. In August 2007, Chile recalled its ambassador from Peru after the State-run newspaper, daily El Peruano, published an official map that indicated Peru’s control over the contentious area.

Both Peru and Chile have signed trade pacts with the U.S., and Peru has put into force similar agreements with Canada, Thailand and Singapore. And, a free trade pact between Europe, Peru, Colombia and Ecuador is currently in the works.

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