New offices in Peru, Chile cement trade alliances for Israel

With the opening of trade offices in Peru and Chile earlier this month, Israel is on track to greater integration with the Pacific Alliance – a trade group that includes both countries, as well as Colombia and Mexico – bringing trade opportunities for Israeli firms in South America and beyond.

Over the weekend, Peru’s Production Minister Bruno Giuffra met with Israeli Ambassador to Lima Ehud Eitam and the embassy’s business attaché Ariela Rada to discuss ways of partnering with Israeli companies. According to Peruvian news sites, Giuffra is seeking to work with Israeli startups and veteran firms to enhance the country’s tech economy, as well as connecting with Israeli entrepreneurs to learn how they helped create Israel’s famed startup economy.

Israel has been an observer in the Pacific Alliance since 2012, and since then has been working on developing business relations and free-trade agreements with each of the four member countries. Israel already has an FTA with Mexico, and agreements with Panama and Colombia have been completed, but have yet to be ratified by their respective governments.

The combined GDP of Pacific Alliance nations is approximately $3 trillion and constitutes 40% of Latin America’s GDP. If they were a single nation, the alliance would form the world’s sixth largest economy, according to the World Bank.

Israeli officials who have been working on deals with Latin American countries believe there is a great demand for Israeli technology and expertise in a wide variety of fields.

Exports of goods from Israel to Pacific Alliance states in 2012 (the last year for which the Ministry of Economy supplied figures) exceeded $1 billion, only 2% of the total exports of the State of Israel. Meanwhile, the average growth of Pacific Alliance member countries is 5%, and the expected growth in imports is expected to reach 6% a year.

Israel has since 2007 had a free-trade agreement with Mercosur, the other large South American trade bloc that includes Argentina, Brazil, Paraguay and Uruguay. According to the World Trade Organization, the Pacific Alliance countries together exported about $445 billion in 2010, almost 60% more than Mercosur. Within each of these agreements, member countries are able to export to each other with either no tariffs or ones that are greatly discounted.

A Declaration of Interest for an FTA with Peru has been signed as well. According to Eitam, “the Peruvian market is increasingly drawing the attention of entrepreneurs and the Israeli government, thanks to its large growth in recent years.”

As a largely agricultural country, Eitam added, Israel could be very helpful to the country’s economy, especially in its efforts to maximize water use.

This is all part of Israel’s strategy of opening new markets for Israeli exporters, said Ohad Cohen, director of the Foreign Trade Administration in the Ministry of Economy. While trade with the developed world remains strong, there is no reason Israeli companies should limit themselves to the US, Europe, or even China.

The Foreign Trade Administration has been leading Israel’s foreign trade policy in an effort to increase competitiveness of Israeli industry in international markets. By the end of 2016, the administration will have sponsored 44 trade missions around the world.

“We continue to strengthen Israel’s economic ties with countries around the world, with an emphasis on developing economies with great potential for growth,” said Cohen. “In this case, we are expanding Israel’s economic footprint in Latin America, in accordance with our policy of expanding export horizons for Israeli industry and service sectors.”