Peru's New Government Closes To China, President Castillo Uses Sinopharm's COVID-19 Vaccine

Peru is presided over by José Pedro Castillo Terrones. (Wikimedia Commons / Braian Reyna Guerrero)

JAKARTA - Within a week of taking office, Peru's new left-wing government under President Pedro Castillo has moved closer to China, the Andean nation's most important commercial partner and major buyer of copper, according to a key source of tax revenue.

Since President Castillo was sworn in on July 28, government officials have met with China's ambassador and Chinese mining executives to discuss industrial policy, as well as strengthen a free trade agreement signed in 2009, government sources said.

President Pedro Castillo is poised to 'tilt' Peru to the left after successive central and right-wing governments, although maintaining good relations with China has been a priority for all Peruvian leaders recently, analysts say.

"It has no ideological character, it has a pragmatic character," Jorge Heine, a professor of international relations at Boston University and former Chilean ambassador to China, said in an interview.

Interestingly, apart from China, Peru also has a free trade agreement with the United States and has been considered an ally of Washington for decades, which has recently been in friction with Beijing.

Mining tax policy will be very important for China, whose companies are important copper miners in Peru, as well as the world's number two producer of the metal.

President Castillo has said he wants to extract higher tax revenue from mining companies, potentially pushing to destroy the tax stability deal that prevents extreme hikes agreed in advance with many miners.

Pablo de la Flor, head of the National Association of Mining, Oil and Energy, said miners who enjoyed tax stability deals included China MMG Ltd and Chinalco's Aluminum Corp.

"I think this should be a concern especially when discussing modifications to the tax framework and that topic is likely to come up," he said.

On the commercial front, Chinese Ambassador Liang Yu met with Foreign Trade Minister Roberto Sanchez on Monday. In a bid to change their free trade agreement, Peru hopes to cut red tape and encourage e-commerce.

"Currently, the Peruvian and Chinese technical teams are working, through virtual means, on the optimization of the Free Trade Agreement between the two countries," he said in a statement on the importance of bilateral relations with China.

To note, President Castillo has also chosen China's COVID-19 vaccine and it was announced this week. Pfizer is the main vaccine used in Peru, but the President on Friday will be vaccinated with the Sinopharm vaccine.