On a recent Thursday morning, voices emerged suggesting that the drawback mechanism, a customs process allowing exporters to partially or totally recover tariff rights paid on imported supplies, might not be eliminated as previously proposed. This decision hinges on a Supreme Decree issued by the former Ministry of Economy and Finance (MEF) under the leadership of José Arista.

Julio Pérez Alván, president of the Association of Exporters (ADEX), revealed after a meeting with key government officials that the future of the drawback mechanism was a central topic of discussion. The meeting included representatives from the Ministry of Economy and Finance (MEF), the Ministry of Foreign Trade and Tourism (Mincetur), and the Ministry of Agrarian Development and Irrigation (Midagri). Pérez Alván reported a positive response from the ministries regarding the continuation of the drawback mechanism.

According to Pérez Alván, the Ministers of Economy and Foreign Trade and Tourism have shown willingness to review the current regulations, which initially planned for the progressive elimination of the drawback by July 2025.

“There was talk of the drawback theme. A law had left that eliminated it, but the minister (of Economy, José Salardi) and the Minister of Mincetur (Disylú León) are convinced that this is not the time after having heard us. Both ministers have understood and I think that this decree that repealed the drawback will be eliminated,” said the ADEX representative.

Drawback Mechanism to Remain in Peru

In an interview on Channel N, the current MEF minister, José Salardi, confirmed the entrepreneurs’ statements: “We had a meeting with the Minister of Foreign Trade and the guilds involved in this issue and we have given a clear message. We have heard them, we have analyzed the numbers, we have made an analysis of the current situation, how we should not turn off the export dynamics and The drawback is going to be maintained, that is going to be politics”.

Salardi added, “Every measure that generates a positive impact for the country will go.”

Additional Issues Discussed in the Meeting

During the meeting, export unions also raised the need to approve a new Agrarian Promotion Law. Pérez Alván indicated that these regulations are key for promoting agricultural competitiveness and regional development.

The new Minister of Economy is totally plain to review this and I think he is convinced that this law must be approved

Another topic discussed was the bill for the creation of Special Economic Zones (ZEE), aimed at encouraging industrial and commercial activity across various regions in Peru. Representatives from ADEX, Comexperú, and the National Society of Industries (SNI) participated in the meeting, presenting their concerns and proposals to government authorities.

As of now, the Executive Power has not issued an official pronouncement on the possible repeal of the elimination of the drawback or on the other issues addressed in the meeting.

Implications for U.S. Exporters

For U.S. exporters, the decision to maintain the drawback mechanism in Peru could have significant implications. The drawback allows exporters to recover tariff rights, which can be a substantial cost-saving measure. This could encourage more U.S. companies to engage in trade with Peru, potentially leading to increased exports and economic benefits for both countries.

For example, if a U.S. company imports raw materials to manufacture goods in Peru, the drawback mechanism allows them to recover the tariffs paid on those imports. This can make the manufacturing process more cost-effective, potentially leading to increased investment and job creation in Peru.

However, critics argue that maintaining the drawback mechanism could lead to unfair advantages for certain industries, potentially distorting the market. It is essential for Peru to balance the benefits of the drawback with the need for fair competition and market stability.

Case Study: U.S. Exports to Mexico

A similar scenario can be observed in the U.S.-Mexico trade relationship. The North American Free Trade Agreement (NAFTA), now replaced by the United States-Mexico-Canada Agreement (USMCA), includes provisions that allow for the recovery of certain tariffs, similar to the drawback mechanism. This has encouraged U.S. companies to invest in Mexico, leading to increased trade and economic growth.

For instance, companies like Ford and General Motors have established manufacturing plants in Mexico, taking advantage of the tariff recovery provisions. This has not only benefited these companies but has also created jobs and stimulated economic activity in Mexico.

Future Developments

As Peru continues to evaluate the future of the drawback mechanism, it will be crucial for the government to consider the long-term impacts on the economy and trade relations. Maintaining a balanced approach that supports exporters while ensuring fair competition will be essential.

For U.S. exporters, staying informed about these developments and understanding the implications can help them make strategic decisions about their trade activities in Peru. Engaging with local industry associations and government bodies can provide valuable insights and opportunities for collaboration.