1. Written Statement of the Instituto Peruano del Espárrago y
Hortalizas (Peruvian Asparagus and Other Vegetables Institute )
regarding the probable Economic Effect of Duty Free treatment
Under a U.S. Andean Countries Free Trade Agreement ( FTA )
February 26, 2004
I.- THE PERUVIAN ASPARAGUS INDUSTRY
1.1. Peruvian asparagus exports to the United States in the year 2002 were
US$67.3 million, 92% of which were fresh asparagus (US$62.1 million) and 8%
processed asparagus (US$3.8 million frozen and US$1.5 million canned). Most of
Peruvian asparagus is exported to the US between the months of August and
December. During this period, there is practically no domestic production of
asparagus in the US ( Chart 1 )
Chart 1: Peru Imports to the USA 2002 ( in US $ thousand )
Asparagus to the USA Fresh Frozen Canned Total
World $140,647.00 $5,323.00 $2,782.00 $148,752.00
Peru $62,059.00 $3,819.00 $1,474.00 $67,352.00
Participation 44% 72% 53% 45%
Peru / Total agricultural imports 0.16%
Source: Department of Commerce, US Census Bureau, Foreign Trade Statistics
1.2. Asparagus is the most important agricultural export in Peru. It is a value added
and labor intensive crop. In the last years asparagus production has increased its
demand for labor in Peru. Annually, the industry directly employs over 50,000
workers in the different production areas. From this number an estimated 30,000
jobs are for women which contribute with an extra salary for low income families in
the area, and most significant, around 40% of all workers in the asparagus industry
come from the mountain areas of Peru that are close to where the coca leaves
originate, Therefore, these workers from the mountain areas have found
alternative legal employment in the asparagus industry in the coast of Peru.
1.3.The social impact of the jobs generated by the asparagus industry is very
important. Non-skilled unemployed workers in the Peruvian mountains are
basically the population that used to seek employment in the illegal coca
production areas. The asparagus industry offers a legal alternative for those
workers. The Department of Ica (150 miles south Lima) is where the greatest part
of the green asparagus crop is grown, harvested and processed. Until the early
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2. 1990s, areas very close to Ica, such as departments of Ayacucho and Apurímac,
were at the mercy of terrorists. Inhabitants had to choose between migrating to the
rain forest and working in illicit activities such as coca leaf cultivation and drug
trafficking in general or migrating to the coast, specifically to Ica, and working in
asparagus production. The same situation occurs with the Department of La
Libertad, second largest asparagus production area in Peru, which is an important
alternative of legal agricultural activity for the inhabitants of the lower Huallaga, an
important coca cultivating area.
1.4.As we can appreciate from the employment figures in the Peruvian asparagus
industry, it will contribute significantly to the Free Trade Agreement ( FTA ) primary
goal of promoting broad-based economic development in the Andean countries.
1.5. It is essential to understand that the war against drugs is another face of the
battle against terrorism and will be successful only if new legal jobs are created as
an alternative to illegal activities. The asparagus industry in Peru is an example of
how this policy is successful.
1.6. Peru is committed to winning the war on drugs. The Peruvian Government has
demonstrated significant success in this effort, reducing the illicit coca crops
from 115,300 hectares ( 1995 ) to approximately 28,000 hectares in 20031. The
only way Peru will be able to continue to move in the right direction is by offering
alternative forms of development.
1.7. In Peru, the processed asparagus industry (canned and frozen) competes
for raw material with fresh asparagus exporters. It is not true that they can buy
cheap raw material due to an excess of production.
The key factors for competitiveness is that 90 percent of the processing companies
in Peru have invested important amounts of money to develop their own farms in
order to achieve an integrated value chain.
Additional costs
It is true that we have a lower cost of labor in comparison to US growers but it is
important to consider that Peruvian products must be transported to the US and
pay a very high freight cost. For instance, the air freight cost for an 11 Lb. box of
fresh asparagus represents between 40% to 45 % of the overall cost of production
( basically US airlines ). We need to comply with the Bioterrorism Act and pay an
extra US $ 10 to US $ 15 per shipment for the Pre-notice required by the Act ( to
US Customs Brokers ) . These are just examples of several important extra costs
that Peruvian asparagus exporters have to pay, compared to US growers.
1
.Comisión Nacional para el Desarrollo y Vida sin Drogas ( DEVIDA )
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3. We must take into consideration also the different Power Purchasing Parity (PPP)
as the US has a GDP per capita of US$35,000 and Peru only US$2,000.
II.- BENEFITS AND ADVANTAGES OF THE FTA FOR THE UNITED STATES
2.1. CONSUMERS´ “FRESH VEGETABLE” PREFERENCE AND YEAR ROUND
AVAILABILITY
According to the last report to Congress by the General Accounting Office (GAO)2,
the extended product availability throughout most of the year, due to
Peruvian exports, has been responsible for the rise in per capita US
consumption of fresh asparagus. This has benefited the overall consumption of
asparagus, domestic as well as imported, resulting in lower prices for consumers
and greater production in the US. The figures from this report are clear: the
consumption of fresh asparagus in the US has increased 70% since 1990 and
consumption of processed asparagus has declined 37% since that year. GAO’s
report mentions that “the shift in the per capita consumption of asparagus is part of
the general trend toward increased consumer preference for fresh vegetables”.
Pricing to the consumer has fallen over $2.00 per pound over last few years (fresh
asparagus) and the consumer has the ability to purchase asparagus year-round.
Producers of the States of Michigan and Washington of processed asparagus have
to deal with the U.S. consumer's preference for fresh asparagus, which benefit
fresh asparagus growers of California, the biggest producer. For this reason,
Washington producers have been shifting production from processed to fresh
asparagus in the last years. According to GAO’s report and the USDA3 the overall
production of asparagus in the US has increased in the last years.
Peruvian asparagus exports to the US come as fresh, frozen and canned and are
mainly green asparagus. It is important to mention that this crop is exported to the
US in a period of time where there is practically no US production.
Fresh asparagus exports to the US are basically in the second semester of the
year, considering that Peru exported 10.3 million boxes x 11 pounds to this market,
82 % were between July to December, 10 % between January and March and 8%
between April and June (Washington harvesting season).
2
GAO “Impacts of the Andean Trade Preference Act on Asparagus Producers and Consumers”.
March 2001
3.
USDA, “ Vegetables 2000 Summary “
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4. 2.2. ADDITIONAL SUPPLY
Peruvian asparagus exports represent an additional supply in the US market, it
does not replace the American production, and the consumers had benefited from
the availability of the different presentations of asparagus all year round. As can be
shown below:
In the middle of the 90´s to 2003, the American asparagus production had been
stable, with 99,000 MT per year with slightly ups and downs (Chart 2) and the
monetary value had been increased from US $ 177 millions in 1995 to US $ 198
millions in 2003 (Chart 3). For this reason the American production had been
affected mainly due to the entrance of the Peruvian asparagus.
Chart 2: US Asparagus Production (in thousand of tons)
1995 1996 1997 1998 1999 2000 2001 2002 2003
TOTAL US 101.2 99.5 101.3 99.0 109.6 106.21 97.80 87.52 95.59
Source: NASS Agricultural Statistics Board
Chart 3: US Asparagus Total Value Production (in US$ million)
1995 1996 1997 1998 1999 2000 2001 2002 2003
TOTAL US 177.1 156.6 182.5 199.5 234.1 221.3 230.2 172.9 198.7
Source: NASS Agricultural Statistics Board
2.3 INCOME AND JOBS TO US CITIZENS
2.3.1.Peruvian asparagus in the United States not only benefits American
importers and consumers, it also benefits other economic activities, such as
shipments to the US and local destinations, specialized storage, sanitary and
Customs controls, wholesalers and retailers, and generates substantial income for
the Miami Airport and Government Agencies.
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5. THE FRESH PERUVIAN ASPARAGUS4
• 10.3 million (11 lb.) cases were imported into the United States ( 2003 )
• Over 35 U.S. based companies are importers of this product
• On average, each company employs about 12 people (420 people)
• For every dollar spent on Peruvian asparagus, 70 cents stays in U.S. hands
(US $16.00 Average Sale Price)
This makes a total amount of over $ 115.4 million dollars that stays in the US
economy ( only considering the fresh asparagus presentation )
2.4 DIVERSIFIED OFFER
2.4.1. With the Peruvian offer the American consumer had benefited from a
diversified range of products in all three presentations (canned, frozen and fresh),
giving employment to American companies that support the international and local
logistics in the commercial chain
2.4.2. The American market for frozen asparagus consumes Peruvian and
American product, as well as frozen asparagus from China and Chile. The frozen
asparagus from Peru has a higher price than the frozen asparagus produced in the
US because we export individually quick frozen (IQF) asparagus that requires
more investment in technology and costs more to process and pack compared to
the block frozen Wet Pack asparagus produced in the US.
Nevertheless, American production of frozen asparagus has been stable in the
last five years ( Chart 4 ) representing $ 6.7 million in 1999 and $ 4.6 million in
2003.
Peruvian frozen asparagus imports have increased due to the superior quality of
IQF asparagus compared to wet pack asparagus. This has benefited US
consumers as well as retailers and wholesalers. It is also important to consider
that American frozen asparagus is focused on the production of cut asparagus
(cuts & tips), while Peruvian frozen asparagus imports are basically whole spears.
This fact shows that Peruvian frozen asparagus, instead of replacing US frozen
asparagus, has created a new, different market segment.
4
. Peruvian Asparagus Importers Association
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6. Chart 4: ASPARAGUS – TOTAL VALUE – 1000 DOLLARS
1999 2003
FOR 6,770 4,560
FREEZING
Source: NASS Agricultural Statistics Board
III. – OTHER CONSIDERATIONS
SIZE OF THE US CANNED INDUSTRY
The figures5 show that Peruvian exports of processed asparagus (canned and
frozen) in 2000 were 5.3 million lbs., which represents only 2.6% of total US
asparagus production of 209.20 million lbs., in the same year. Peruvian main
export was fresh green asparagus and has not affected US production: in 2000,
total Peruvian asparagus exports to the US were 71 million pounds, which 65.7
million pounds (92.5%) were fresh asparagus. In the same year, US production of
fresh asparagus reached 150.4 million pounds, only 8 million pounds more than
1992 production.
The canned asparagus imports to the US do not represent an important value
considering the size of the market, and the participation of the American canned
industry, this can be seen in Chart 5 that shows that in 2002 the total US Peruvian
canned asparagus imports were US$ 1.5 million and in this same year the US
production for the canning industry was US $ 33.3 million (Chart 6).
The Peruvian canned asparagus represented only 4.5 % of the US market. In this
sense, it is inaccurate to affirm that the asparagus canned imports from Peru could
affect the US production.
Chart 5: US Imports of Peruvian Canned Asparagus (in US$ million)
Canned vegetables 2002
Asparagus 1.5
Source: Department of Commerce, US Census Bureau, Foreign Trade Statistics
5
. American Farm Bureau Report ( 2002 )
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7. Chart 6: US Asparagus Total Value Production (in US$ million)
2003
For Canning 33.26
Source: NASS Agricultural Statistics Board
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