Professor Kriengsak Chareonwongsak an economic point of view

From an economic point of view, Latin America may be divided into two sub-regions: the MERCOSUR Group, having links in eastern and southern South America, and the ANDEAN Group, having links in the northwestern and northern sections of the continent. Peru is geographically situated in the middle of the 5 member countries of the ANDEAN Group: Venezuela, Colombia, Ecuador Bolivia and Peru. It lies along the coastline of the Pacific Ocean and has at least 7 seaports, which the Peruvian government plans to modernize. These ports would be able to serve large freighters and would provide public storage facilities for shipped goods. Moreover Peru has its own commercial fleet and good roads for rapid and convenient transportation to neighboring target markets. All these features make Peru highly attractive as a regional trading hub for the ANDEAN Group for Thailand.

In addition, Peru's location makes it a good connecting point between the 2 sub-regions, especially at the southern port of Ilo, which could certainly be used as a transfer point to countries with no access to the sea, such as Bolivia and Paraguay. Also, a network of over-land transportation routes, composed of both highways and railways reaching to Northern Argentina and Western Brazil, is easily accessible from Ilo. This would make Thailand’s access to the markets in these two nations much shorter than by using Atlantic routes.

Already, Thailand has developed a higher level of trade with Peru than with any other nation in the ANDEAN Group. In the first 9 months of 2000, trade with Peru totaled 3 billion baht, higher than the 1.2 billion bath worth of trade with Colombia, Thailand’s second most significant trading partner in this sub-region. Even though Thailand’s trade relationship with Peru is still in its infancy, it is abundantly clear that Peru is better suited than any other nation for becoming a regional trade hub.

new gateway to Latin America

Professor Dr. Kriengsak Chareonwongsak
Executive Director, Institute of Future Studies for Development (IFD)
kriengsak@kriengsak.com, http://www.ifd.or.th

Professor Kriengsak Chareonwongsak new gateway to Latin America

new gateway to Latin America

Professor Dr. Kriengsak Chareonwongsak
Executive Director, Institute of Future Studies for Development (IFD)
kriengsak@kriengsak.com, http://www.ifd.or.th

This article was first published in the Bangkok Post on June 24, 2001 during the period when the government was trying to seek new export markets to decrease dependency on existing major markets . After this article was published, the government initiated negotiations on a bilateral free trade agreement with Peru during the APEC meeting in Thailand in October 2003 in order to make Peru a gateway for exports to the Andean Nations and Latin America.

Trade between Thailand and South America is still quite limited, accounting for less than 1% of Thailand’s international trade value. Factors such as lack of information, distance, and language difficulties contribute to Thailand’s lack of ties with this region. Even so, new trade opportunities continue to grow between the two regions, providing Thailand with a natural segue for new markets in this region.

Because ties between Thailand and Latin America are minimal, one of the best strategies for accessing these new markets would be to establish strong relationships with one nation that could act as a centralized trading hub and regional distribution center, saving Thailand per unit costs for transportation across the continent. I suggest that Thailand take a serious look at the advantages Peru could offer as a regional trading hub, at least for one section of the region.