Ladies and Gentlemen:

I should like to begin by giving you all a warm welcome to my country and, in particular, to the Third Andean Business Forum. I hope that within the next few hours you will achieve the business objectives that brought you to this city, which is giving you such a friendly reception today.

Before I continue, allow me to express my grateful thanks to the following entities for their wholehearted support:

The Commission on the Promotion of Peruvian Exports – PROMPEX, under the direction of its untiring Chairman and Vice-President of the Republic, Mr. Ricardo Marquez, for the unstinting support in the organization of this important event.

The Andean Development Corporation – CAF for sponsoring this Forum once again.

The Ministry of Foreign Affairs for their support through their commercial offices throughout the region.

The General Secretariat of the Andean Community, which was responsible for organizing the business panels.

The Ministries of Foreign Trade and Export Promotion Organizations of the different Andean countries.

Finally, the Trade Associations in this country, such as CONFIEP, ADEX, the National Association of Industries, the Lima Chamber of Commerce and COMEX Peru, for their enthusiastic promotion of this event among their members.

Gentlemen, as you all know, integration processes in this region during the last decade shifted from being a protection mechanism for industrialization processes based on an import replacement model, to an open market scheme and the eventual elimination of the protection barriers separating the countries in our sub-region from the rest of the world.

As a result of this significant change, free trade developed more efficiently within our economies. This was the first step towards our insertion in the international market, more in keeping with worldwide development and current integration schemes. This new approach also reduced the external vulnerability of member countries and improved their position within the international economic context. This should lead to a continuous improvement in the standard of living and better prospects for our products.

In recent years, as part of its open regionalism strategy, the Andean Community and its member countries signed agreements with Central America and the Caribbean, Chile and Mexico. In addition, the Andean Tariff Preferences Law was implemented with the United States of America and the Generalized Andean System of Preferences was enforced with the European Union. Furthermore, the Community participated in the negotiations to establish the Free Trade Area of the Americas (ALCA) and strengthened its relationship with other countries, international organizations and groups of nations. Moreover, our Agreement is aiming for the eventual transformation of a united customs process within a Community of Nations project that will guarantee extensive free market operations and higher levels of competitiveness.

The new economic policy and ambitious structural reform programs implemented by member countries of CAN during the last decade, had a significant impact on the growth rate and economic stability of our countries. This important accomplishment in our macro-economic balance and the control of inflation prompted a flow of capital and productive investments that should give rise to a more promising and agreeable future. Growth and integration will provide the benefits required to increase our struggle against poverty and cater to the social and educational needs of our population.

Moreover, in April 1998, a Framework Agreement was signed to create a Free Trade Zone between Mercosur and the Andean Community. It must be stressed that this is a significant step forward in the process of uniting both blocks and a milestone that we should value.

The presence at this Forum of 70 importers from Mercosur and 30 representatives of Chilean companies is very gratifying. I should like to stress that the union of both blocks is a priority for Peru, and for all South American countries as well, I am sure. The ensuing joint efforts and objectives will make us more capable of facing the foreign relations of both blocks in the future, to promote the production and exportation of value added products from member countries and to prepare ourselves for the challenges involved in the implementation of the Free Trade Area for the Americas (ALCA).

CAN and Mercosur should, therefore, improve their efforts to negotiate a free trade zone between them. This would be a meaningful experience in linking two customs unions and a first step towards the integration of the hemisphere, which would be of great relevance for the future of our people.

We must not forget that the total GDP of both groups amounts to US$ 1.2 billion and that the extended market would consist of 310 million people. Of these totals, CAN accounts for 1/3 of the total population and at least ¼ of the regional GDP. These figures clearly demonstrate the existing potential and the significance of the above proposal. Consequently, I propose that the representatives of the private sector of both blocks attending this event should begin the important task of becoming the protagonists of integration in the region.

On the other hand, we are fully aware of the great challenges that the Andean Community will have to face in the future, in its efforts to improve and consolidate its insertion in the global economy. To this end, the advantages of unified markets, stronger economies of scale, lower transaction costs and the circulation of resources are widely acknowledged, and will boost our business efficiency and competitiveness so that they can compare with the rest of the world. As a result, consumers in all our countries will enjoy greater advantages.

The process of interdependence of the worldwide economy is progressing steadily, characterized by the rapid technological, financial and commercial changes we are going through. Under these circumstances, it is worth stressing that the future evolution of integration schemes will depend on the speed and intensity with which we achieve their union.

Early in July 1999, CAN and Brazil completed the first stage of the process to obtain a Fixed Preferences Agreement, which was enforced halfway through August last year. A similar Agreement is currently being negotiated between the Andean Community and Argentina. These agreements are the first stage of the Free Trade Zone to be negotiated between the integration blocks formed by these countries.

It is you, our business friends present at this Andean Business Forum, who with your joint efforts and decisive participation, will help us find adequate ways to increase our regional integration. This is a challenge we need to face. If we work unselfishly, under the conviction that regional integration will improve the standard of living and future prospects of our population, and if we also make our societies aware of this, we can not only achieve this objective, but also overcome whatever stumbling blocks we encounter in our various international negotiations.

Before closing, I would like to remind those of you representing the 1,200 companies participating in this Forum that, during the next 48 hours, you will have the opportunity to participate in the so-called Negotiating Boards, so that you can carry out whatever transactions you are interested in. You may also look at the 200 samples of Andean export supplies exhibited at the front of this pavilion. In addition, you will be invited to participate in the Business Panels designed to analyze different topics of interest concerning regional trading facilities.

As Chairman of the Andean Community Commission, I repeat my warm welcome to each and every one of you and I wish you every success in your discussions, negotiations and agreements over the next few days.

Thank you very much.