The Hong Kong government is looking to finalise a free trade agreement with Peru, as Chief Executive John Lee heads to the South American nation to attend the Asia-Pacific Economic Cooperation (Apec) leaders’ meeting this week.

The Trade Development Council (TDC) also hopes a brand new port near the Peruvian capital of Lima will provide fresh impetus for cargo trade between the two regions.

According to the Commerce and Economic Development Bureau, Peru is Hong Kong’s fifth largest trading partner in Latin America, with over HK$5 billion worth of merchandise trade last year.

While Latin American nations are rich in natural resources, they rely heavily on imports for some daily necessities such as clothing and household appliances.

Economist Alice Tsang, who leads the global research team at TDC, expects more Hong Kong businesses to tap into the Peruvian market once a free trade agreement is signed.

“From what we see in Peru, there is room to further boost spending among general consumers. After the Covid pandemic, there is demand for high-end products,” she said in an interview with RTHK.

Tsang added that Peruvian department stores have been sourcing products in Hong Kong, mainland China and Southeast Asia. Some develop their in-house brands whose products are manufactured by SAR companies.

“A free trade agreement can facilitate these exchanges by spelling out the legal framework and government regulations. I believe more Hong Kong companies will be willing to tap into this emerging market,” she added.

According to a 2022 document published by the Trade and Industry Department, the proposed free trade agreement seeks to eliminate or reduce tariffs, facilitate customs procedures, as well as improve market access for both sides.

China is already Peru’s largest trading partner globally, with bilateral trade reaching some US$37 billion last year.

With a massive Pacific coastline, Peru’s strategic importance in cargo trade was recognised by China Ocean Shipping Company, or COSCO, a state-owned enterprise headquartered in Shanghai.

In a major undertaking, the firm in 2021 began the construction of Chankay port, located around 80km north of Lima.

Once a remote fishing village, Chankay has been transformed into a natural deep-water port and could serve as a crucial gateway for shipments in and out of Latin America.

The port began its soft launch this month, and a massive container ship was docked there during a visit by RTHK on Sunday.

Tsang explained that once the port becomes operational, the shipment time between Shanghai and Peru can be slashed by one week. The time savings also translate to a one-third reduction in operational expenses.

“The cooperation between China and Peru is mutually beneficial. Many consumer goods in Peru arrive from China and Asia. Following the construction of Chankay port, a container ship will be able to reach Peru from Shanghai in 28 days, down from the current 35 days,” she said.

“That reduces costs by more than 30 percent, because less fuel is used and the insurance would be cheaper due to less time spent at sea.”

The economist believes the project may not be necessarily linked to the trade tensions between China and the United States. She explained that after Covid, nations around the world realised the need to diversify supply chains to reduce risks and minimise disruptions.