Japanese Investment in Peru: Limits of Developmental Investment
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Munich Personal RePEc Archive Japanese investment in Peru: limits of developmental investment Kamiya, Marco Graduate School of Asia Pacific Studies, GSAPS December 2004 Online at https://mpra.ub.uni-muenchen.de/14463/ MPRA Paper No. 14463, posted 04 Apr 2009 23:08 UTC 1 GSAPS Journal. November 8, 2004 JAPANESE INVESTMENT IN PERU Limits of Developmental Investment Marco )amiya* Summary Japanese Investment in Latin America ,as considerable in t.e 1900s and 1910s, but t.e investment never too2 off in t.e developmental style as in East Asia. T.e aut.or e3amines ,.y Japanese 4oreign Direct Investment in Peru did not follo, t.e pattern of developmental investment, analy6ing t.e elements involved regarding policies in Peru and particular circumstances in Japan in t.e last decade. T.is essay s.o,s recent trends on bilateral relations Peru7 Japan and concludes ,it. general considerations for public policy. Japanese investment .as been seen in developing countries as .aving special capacity for generating employment, transferring tec.nology, and serving as an engine for gro,t. and development. In part t.is must be due to t.e accelerated gro,t. and development t.at Japan ac.ieved follo,ing t.e end of 8orld 8ar II, as ,ell as t.e role t.at it played in t.e industriali6ation of Sout. and East Asia. In Latin America, 9ra6il .as al,ays been t.e primary destination of Japanese investment in t.e region, and Me3ico because of its presence in t.e Nort. American 4ree Trade Area :NA4TA). Most of t.e countries .ave received investments in mining, agriculture and oil sectors. Peru’s case, .o,ever, is special. Its relation ,it. Japan is intert,ined ,it. t.e .istory of t.e Japanese immigration, t.ereby creating strong emotional ties bet,een t.e t,o nations. 8it. almost 120,000 Ni22ei, Peru’s population of Japanese descendants living in Latin America is second only to 9ra6il, ,.ic. .as almost a million. At t.e beginning of 4ujimori’s term a study1 concerning t.e image of Japan in Latin America in evaluating t.e possible range of future relations bet,een Peru * Graduate Sc.ool of Asia7Pacific Studies, 8aseda University, Doctoral Degree Program; 早稲田大学大学院アジア太平洋研究科博士後期課程 2 and Japan indicated t.at 84% of t.e Peruvians polled t.oug.t t.at t.e relations s.ould bot. e3pand and improve. Anot.er poll, t.e Latinobar@metro ta2en in nine major cities t.roug.out Latin America also reflected a positive image of t.e Japanese and Japanese enterprises, ,it. a clear .ig.er percentage of Peruvians e3pressing pro7Japanese sentiments.2 Diplomatic ties ,ere strong during 4ujimori’s tenure. At t.e beginning of t.e 1990’s, Peru ,as isolated from international finance because t.e previous president Alan Garcia declared a moratorium on payments of t.e e3ternal debt; so Peru ,as not eligible for loans or assistance from international institutions including t.e IM4 and t.e 8orld 9an2. Japan supported Peru at international level and .elped to form support groups for Peru at meetings ,it. debtor nations and organi6ations. Peru also became member of APEA in 1991 ,it. important bac2up from Japan. In addition to t.e numerous official e3c.anges, t.e level of financial cooperation reac.ed e3ceptional levels, surpassing even Japan’s guidelines ,.ic. limit t.e amount of money t.at can be assigned to a country based on predetermined GDP level per capita of t.at country. 1.1.1. Japanese Investment in Global Aonte3t Japanese 4DI began to gro, at an accelerated pace during t.e second .alf of t.e 1980’s. Until t.at period production ,as concentrated in Japan because t.e c.eaper yen made t.e Japanese arc.ipelago an e3cellent springboard for e3portation to t.e United States, and Europe. Japanese investments .ave been concentrated in developed countries, in 2002, t.e Japanese 4DI ,as distributed as follo,s United States ,as t.e most important recipient :23.C%), follo,ed by Asia :2C.3%), 8estern Europe :30.2%), and Aentral and Sout. America :12.0%) :See Table 1). T.e percentage corresponding to Aentral and Sout. America includes Dfinancial paradises,E suc. as t.e Aayman Islands ,it. a total of 10.1%. Only less t.an 2% of 1 See :Horisa2a, 90) referring to a poll ta2en in 1990, just before t.e election in Peru ,on by Alberto 4ujimori. 2 In t.e Latinobar@metro, a survey annually ta2en in Latin American countries, C8.4% responded t.at t.ey preferred to receive investment from Japan; 19.9% favored t.e United States; and only 0.0% indicated a preference for Europe. See Latinobar@metro, 199C, Mori Aonsultants, A.ile. 3 t.e Japanese 4DI found its ,ay to Aentral and Sout. America, a percentage t.at s.o,s t.e marginal nature of t.e region as a target for investment. Table 111 Regional Distribution of Japanese 4DI Region 2002 TOTAL 100.0 Nort. America 20.8 United States 23.C 8estern EurEuropeopeopeope 30.2 Asia 2C.3 ASEAN 4 0.8 Asia NIES 9.3 A.ina 8.1 Latin America and 12.0 Aaribbean Aaiman Islands 10.1 Ot.ers :Africa, Middle East, C.1C.1C.1 Australia, Eastern Europe) Note Data on 9alance of Payments basis. Me3ico’s data are included in Aentral and Sout. America. Source JETRO based on Japan’s Ministry of 4inance, Ministry of 4inance Statistics Mont.ly, various editions. JETRO 2003. Total accumulated investment amount in 19C172002 s.o,s t.at manufacturing sector ,as only 3C.4%, and for non7manufacturing sector 04.C%, ,it. considerable allotments to finances and securities, real estate, and services. Aoncerning t.e distribution of investments by sectors, more t.an .alf of t.e Japanese 4DI, CC.1%, is directed to non7manufacturing, ,.ic. includes services, finances, and ra, materials. T.e manufacturing sector received 3C.4%. Japan relies .eavily on imported ra, materials, but t.e proportion of its investment in ra, materials seems relatively small from t.e total investment. Nevert.eless, Japanese investment is not directly directed to t.ese sectors, but t.e reHuisite materials are obtained t.roug. trade or from loans :as ,e s.all see in t.e case of mining in Peru). AonseHuently, a large portion of t.e Japanese 4DI in finances, securities, and commerce represents an indirect investment in ra, materials :see Table 2). 4 Table 222 Distribution of Japan’s 4DI 4lo,s Sectors 2002 :%):%):%) 19C019C0777720022002 :%):%):%) TOTAL 100.0 100.0 Manufacturing 31.0 3C.4 4oodstuff 0.4 0.8 Te3tile 0.2 0.1 Rubber I Leat.er Products 0.0 0.C A.emical 19.0 10.0 Oil 2.8 2.8 Glass I Stone Products 0.0 0.2 Metallic Products 0.8 1.2 Mac.inery 12.4 18.1 Ot.er 2.0 1.1 Nonmanufacturing 02.4 04.C Aonstruction 0.1 0.1 Real State 1.3 2.4 Aommerce and Trade 11.8 13.3 Service 11.3 11.2 Transport 7 Logistics 0.1 0.2 Aommunications 1.9 13.0 4inance J Insurance 29.0 19.1 Ot.er 0.3 0.8 Note Official figures for 2002 and t.ereafter .ave been converted to yen, and .ave been converted to U.S. dollar by t.e e3c.ange rate of t.e 9an2 of Japan calculated for eac. year. Source Ministry of 4inance Statistics Mont.ly No 020. December 2003 2.2.2. Japanese Investment in Peru T.e .istory of Japanese investment in Peru begins to,ards t.e end of 1900’s ,.en Japan ,as in a period of rapidly accelerating gro,t. ,it. increased e3portations signaling t.e need to insure future sources of ra, materials. In 1901, Japan started a policy of liberali6ation t.at ,as completed in 1913, t.e same year t.e oil crisis occurred and t.e fle3ible e3c.anges rates ,as adopted by ,orld po,ers. Japan foresa, t,o major problems t.e petroleum crisis reminded t.at Japan ,ill be unstable unless assure a stable supply of ra, materials. T.e c.ange in t.e monetary system, on t.e ot.er .and, s.o,ed it ,as urgent to modify t.e industrial system from producer of lo, value7added, suc. as steel, coal C and te3tiles, to go to,ard t.e production of .ig.er profit margin products to secure trade surplus.3 In t.is conte3t, supported by different indirect mec.anisms by t.e Japanese government :Ministry of 4inance and Ministry of Industry) a ,ave of investments started in Latin America ,it. t.e entry of Japanese manufacturing companies and Sogo7S.os.a :Japanese trading companies)4 mainly in t.e mining sector. a.a.a. PerPerPeruPeru Investment in Manufacturing In early 1910s, Japanese companies also ,ent to Latin America to secure mar2et s.are against protectionist agreements suc. as t.e Andean Pact :created in 1909 ,it. Peru, Ecuador, 9olivia, Aolombia, and A.ile ,.ic. ,it.dra, from t.e pact in 1910, Vene6uela ,as included in 1913). Negotiations under,ay ,ould e3clude limit foreign investment and imports of foreign goods. Peru served as an ideal site for t.is e3pansion, Toyota and Nissan began t.e production of ve.icles, National of Peru :Matsus.ita) started to produce .ome appliances, and Ajinomoto produced its famous food seasoning. According to t.e reports of Toyo )ei6ai C and information from Japanese companies in Lima, Japanese businesses in Peru ,ere and are focused on t.e follo,ing areasKToyota assembly and import of ve.icles; LuMmica Sol industrial dynamite and gunpo,der; Honda of Peru motorcycles; Ajinomoto monosodium glutamate seasoning; and National Peruana dry batteries.