THE state visit of Peruvian president Dina Boluarte to Jakarta on Aug 11 to 12 marked a pivotal milestone in bilateral relations: the signing of the Comprehensive Economic Partnership Agreement (CEPA) between Indonesia and Peru.
Concluded after an intensive 14-month negotiation process, the agreement aims to dismantle tariff and non-tariff barriers, expand market access and enhance cooperation in agriculture, energy, defence and food security.
For Indonesia, Peru offers an important gateway to the Latin American market, particularly for tropical commodities such as coffee, spices and seafood.
In turn, Peru stands to gain a strategic entry point into South-East Asia for its agricultural exports, including high-value produce like blueberries.
Yet, while the promise of the CEPA is substantial, its success will not be automatic. The benefits of trade liberalisation hinge on effective implementation, domestic capacity to compete and the ability to navigate complex logistics across vast oceanic distances.
Without a coherent strategy, the CEPA risks becoming a ceremonial document rather than a transformative economic instrument.
This article examines the agreement’s potential, the structural challenges it faces and the strategic measures required to ensure its outcomes are tangible and mutually beneficial.
Mutual benefits
Trade agreements such as the CEPA can be understood through the lens of comparative advantage theory (David Ricardo) and the new trade theory (Paul Krugman).
Ricardo’s principle of comparative advantage posits that countries benefit most when they specialise in producing goods in which they have a relative efficiency, and trade for goods in which other nations have a comparative edge.
Applied to Indonesia-Peru relations, this explains why Indonesia can focus on exporting tropical agricultural products and manufactured goods while Peru supplies temperate agricultural produce and mineral resources.
The new trade theory expands this view, recognising the importance of economies of scale, product differentiation and strategic market positioning.
In contemporary trade, competitiveness is shaped not merely by cost efficiency, but by innovation, branding and the ability to integrate into global value chains.
These theoretical perspectives suggest that the CEPA’s real impact will not stem solely from reduced tariffs.
Gains will depend on the capacity of domestic industries to adapt, the quality of logistics infrastructure and the effectiveness of trade promotion strategies.
Thus, while theory underscores the potential benefits, it also highlights that the pathway from agreement to economic growth is neither linear nor guaranteed.
From a practical standpoint, the Indonesia-Peru CEPA offers three primary opportunities.
First, export market diversification.
Indonesia’s exports remain heavily concentrated in East Asia, Asean and the European Union (EU).
Access to Peru provides a stepping stone into the Latin American market, which collectively – through mechanisms such as the Pacific Alliance – represents more than 650 million consumers.
Second, strengthening competitive advantages.
Indonesia’s coffee, cocoa and premium seafood products, such as tuna and shrimp, have strong potential in Peru and neighbouring states.
With appropriate certification and quality assurance, these commodities could capture niche markets willing to pay premium prices.
Third, technology transfer and investment cooperation.
CEPA provisions on agricultural innovation, renewable energy and defence cooperation could enable mutually beneficial exchanges of expertise and capital.
Real challenges
However, these opportunities are tempered by real challenges: complex logistics over long shipping distances, differences in regulatory standards and limited market intelligence among Indonesian exporters about Latin America.
To address these issues, several measures are essential.
First is establishing an Indonesia–Peru trade information centre to provide up-to-date market data, regulatory guidance and investment leads.
Second is facilitating direct shipping routes or leveraging third-country logistics partnerships to reduce delivery times and costs.
Third is supporting small and medium enterprises through training, export readiness programmes and assistance in meeting international technical standards.
And fourth, setting up integrated promotional campaigns at trade fairs and cultural events in Lima and Jakarta to build brand recognition and consumer familiarity.
These strategies, if pursued systematically, could convert the CEPA from a diplomatic achievement into a genuine driver of economic transformation.
The Indonesia-Peru CEPA represents a strategic pivot in Indonesia’s economic diplomacy, extending its reach beyond traditional trade partners such as China, Japan and the EU.
By engaging with Peru, Indonesia positions itself to tap into under-explored markets while reducing vulnerability to regional economic fluctuations.
Bilateral trade
In the medium term, the agreement’s success should be evaluated against measurable outcomes: growth in bilateral trade volumes, increased foreign direct investment and a broader composition of traded goods.
A realistic target could be a 20% to 30% increase in trade within the first three years, accompanied by Peruvian investment in Indonesia’s agro-processing and renewable energy sectors.
Nevertheless, the post-signing phase will be critical.
Experience from other free trade and partnership agreements suggests that the follow-up phase – through active promotion, private sector engagement and infrastructure support – determines whether agreements yield lasting benefits.
Looking ahead, the partnership with Peru could serve as a launchpad for deeper engagement with the Pacific Alliance, unlocking access to markets in Chile, Colombia and Mexico.
This would not only expand Indonesia’s trade footprint, but also strengthen its integration into diversified global supply chains.
If managed effectively, the CEPA could become a model for cross-continental partnerships – leveraging economic complementarities, reinforcing food security and fostering strategic cooperation – demonstrating that even geographically distant nations can craft mutually rewarding alliances in the interconnected global economy. — The Jakarta Post/ANN
Budi Kristanto is a lecturer at the Faculty of Social and Political Sciences, Universitas Lambung Mangkurat. The views expressed here are the writer’s own.
