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Peru and Japan: an uneasy relationship.

Abstract. Relations between Peru and Japan go back over 100 years to the time when Japanese first immigrated to Peru seeking work. Japan became an important trading partner and aid donor over the last three decades, and Japanese in Peru prospered, culminating in the election as president in 1990 of Alberto Fujimori, a descendant of Japanese immigrants. Relations between the countries were never easy and at times even became strained, because Japan took a largely pragmatic economic and political approach. The article argues that Japan followed a policy that would be predicted by the realist paradigm for the most part, though at times it had a tendency to invest more, provide more development assistance, and risk more because of the ethnic ties between Japan and Japanese-Peruvians. Those links were not strong enough, in most cases, to overcome decisions made on practical considerations of risk assessment and the Japanese desire to make the most political and economically rewarding decisions.

Resume. Les relations entre le Perou et le Japon remontent a plus de cent ans, lorsque des immigrants japonais sont arrives au Perou en quete de travail. Durant les dernieres trois decennies, le Japon est devenu un partenaire commercial important, ainsi qu'un pourvoyeur d'aide au developpement. Les Peruviens d'origine japonaise ont prospere, si bien que M. Alberto Fujimori, d'ascendance japonaise, a ete elu president en 1990. Les relations entre les deux pays n'ont jamais ete faciles et, a certains moments, elles ont ete traversees par des tensions, notamment du fait que le Japon a adopte une approche surtout pragmatique sur le plan economique et politique. Cet article avance que le Japon a poursuivi une politique que le paradigme realiste aurait pu predire la plupart du temps, bien que parfois le Japon a eu tendance a investir davantage, a octroyer plus d'aide au developpement et a courir des risques plus eleves en raison des liens ethniques avec les Peruviens d'ascendance japonaise. Pourtant, ces liens ne se sont pas averes suffisamment forts, dans la plupart des cas, pour contrer les decisions prises sur la base de considerations pratiques et de l'objectif d'obtenir les resultats politiques et economiques les plus favorables pour le Japon.

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The presence of a large community of people of Japanese descent (nikkei) in Peru has been an important nexus for Japanese-Peruvian relations for more than a century. Japan has always placed a premium on its ethnic identity, and the significant number of nikkei in Peru--representing the third-largest Japanese community outside Japan in the world--has led to closer relations, especially since the 1960s. However, Japan's economic pragmatism appears to overshadow its tendency to favour its ethnic allegiance to Japanese-Peruvians.

This article examines the uneasy relationship between the two distant partners, Japan and Peru, focusing on the economic dimension (trade, aid, and investment) as well as on political aspects. I explore the ways in which the ethnic tie between the nations has affected their relations and I examine to what extent the generally pragmatic approach of the Japanese toward foreign relations with Peru has been influenced both by the presence of a population of Japanese descendants in Peru and, most recently, by a reverse migration of a growing number of Peruvian-born workers in Japan triggered by Japan's ethnicity-based immigration policy.

The study chronologically analyzes how these relations have evolved, with emphasis on the last three decades and particularly the 1990-2000 period. Japan is an important trade partner of Peru and one of its major aid donors. Although there have been tense moments over the years, due particularly to Peru's own domestic difficulties, relations remained warm and cordial during most of the study period. The closeness between the two countries reached its peak after the election of Alberto Fujimori. However, once Fujimori resigned and gained asylum in the land of his forefathers, relations became strained as Peru pressured Japan to have Fujimori return to face trial on a number of charges. Japan has so far refused, claiming that he cannot be extradited because he is also a Japanese citizen. A successful president of Japanese heritage in Peru was a significant factor in warming economic and political relations between the countries; a disgraced leader in exile in Japan became a contentious political issue between the two countries and put a damper on economic relations as well. The very factor that had strengthened the ties--a Japanese president--served as the point upon which those relations foundered.

"Realism" postulates that states are driven by the core concerns of security and control of goods, technology, and capital. States attempt to channel resources in order to survive. Thus, the realist paradigm creates a predictive framework in which actions of states can be traced to rational motives based on sustaining and improving the economic interests of the country.

This article explores the way realism can be used to analyze Japan-Peru relations, and the limits of its accuracy. The realist model would predict minimal Japanese involvement in Peru, because, as this article will show, Peru offered few strong incentives for Japanese investment or involvement. However, Japan became more involved than a rational economic/political strategy would advise. This involvement can be attributed to the ethnic tie between the two countries. In the end, though, realism is a more powerful and better predictor than ethnicity.

According to one of the core dimensions of the realist paradigm, Japan would be expected to behave toward Peru much as it did toward comparable countries, and that behaviour would be shaped by the dominant country's efforts to further its own best interests. In many cases, Japan's political and economic policy toward Peru has mirrored its policies toward other Latin American countries. The hypothesis here is that the presence of the nikkei mitigated and, in some cases, overcame realist policies. At several key points, the presence of a significant Japanese community in Peru resulted in closer ties between the two countries. My analysis of the overall relations between the countries will show that ethnicity has affected those relations enough to alter Japan's policies in some cases, but has not generally overcome realist policies on a broad basis. For instance, when Japan perceived that conditions for foreign investment were risky or not attractive enough during the 1980s, it sought other destinations. Hence, for much of the 1990s new Japanese investment was not undertaken in much of the region, including Peru. This article examines the extent to which the presence of nikkei has influenced Peruvian-Japanese relations over the years, and tests the limits of that influence.

Developing a Relationship

Japan has a significant economic presence in Latin America despite the great distance and the historical and geopolitical dominance of the United States in the region. Japan's relations with Latin America date back to the establishment of diplomatic relations, first with Peru in 1873, then later with the other countries. Peru was also the first country to admit Japanese immigrants in 1899. These migration flows that later spread to Brazil and other countries (e.g., Mexico, Chile, Argentina, Paraguay, and Bolivia) resulted in Latin America hosting the largest Japanese population living outside Japan (Fukumoto 1999; Sakuda 1999).

For much of the last century, Peru had the third-largest number of Japanese immigrants after Brazil and the United States. By 1941, more than 33,000 Japanese had immigrated to Peru. The main objective of these immigrants was to work for a few years and earn enough money to return to Japan. Many experienced hardship working in the cotton and sugar plantations. After their contracts expired, most of them headed for the cities, mainly Lima (Gardiner 1975; Morimoto 1999).

In the mid-1930s, the Peruvian government imposed restrictions on Japanese immigration and placed further restrictions on Japanese businesses. At the outbreak of war in 1941, the Japanese community in Peru faced retribution and hostility. Under pressure from the US, Japanese schools were closed and Japanese businesses were hard hit. The US government wanted Peru to sever its ties with Japan, and this led to the closure of the Japanese Embassy (Gardiner 1981).

In the postwar period, Japanese-Peruvians began to assert themselves as they gave up on the idea of returning to their homeland. Most of them prospered through hard work and learned to love Peru as their homeland (Sakuda 1999). In the 1960s, bilateral relations between the two countries improved significantly, and Latin America as a whole also became attractive to Japan as a rich source of raw materials needed by Japan for its re-industrialization efforts. Japan's economic presence in Peru became significant during that time, particularly in trade and investment. Trade relations followed the unequal exchange common among North-South relations: Peru exported primary goods and imported manufactured goods. The bulk of exports to Japan were minerals and goods with low value added, while the principal imports from Japan were automobiles, machinery, and equipment.

As Japan began to take a more significant role as a donor nation in the 1960s, it became more important to Peru, one of its recipient countries. Political relations between the two nations were cordial. Japan was always mindful of the strategic significance of the region for the United States and therefore set a pattern of coordinating its actions by first consulting with the Americans, thus following "the US lead in Latin America" (Smith 1990, 30).

Evolving Peruvian-Japanese Economic Relations until 1990

Trade Relations

In 1967, a private initiative was forged, creating the Peruvian Japanese Chamber of Commerce to promote trade. In October 1968, the nationalist military regime of Velasco Alvarado (1968-75) seized power in Peru and nationalized several American companies. Commercial contacts between Japan and Peru then underwent a dramatic expansion, particularly after the Peruvian government made known its development plans and requested investment, credits, and technical assistance from Japan, especially in mining and oil exploration. The Velasco government made assurances to the Japanese that nationalization was purely an issue with the Americans. By 1970, Japanese firms were importing significant amounts of copper, lead, and zinc from Peru. Japan's interest stemmed mainly from the need to secure certain raw materials to help sustain its rapid economic growth. That year Japan expanded its commercial representation in Lima. Official trade delegations met in Tokyo and Lima, and in 1971 the two countries signed their first mining cooperation agreement (de la Flor 1993).

As shown in Table 1, trade between the two countries during the 1970s expanded rapidly. Peru maintained a positive trade balance. In 1972, Japan became Peru's second-largest export market and its thirdlargest import supplier. About 80% of Peru's exports to Japan were concentrated in minerals, especially iron ore and non-ferrous metals such as copper, lead, and zinc. Japan's interest in raw materials led it to devise a "resource diplomacy strategy, which meshed well with Peruvian desires to obtain capital for development" (Stallings and Szekely 1993, 39). According to de la Flor, "Japan's resource diplomacy put little weight on asset ownership" (1993, 78). Japanese firms provided funding for the development of mineral resources in exchange for long-term iron ore supply contracts. Minority investment, in some sense, sheltered the Japanese firms from the emergent nationalism that was prevalent in the Andean region in the early 1970s. The Japanese strategy was to form consortiums of trading companies that worked with Peruvian authorities to promote joint ventures with the state or private ventures in which the state played an intermediary role in the negotiations (Kamiya 1998; Lausent-Herrera 1991).

During the 1980s, Peruvian exports to Japan became more diverse as fishmeal, oil, and coffee were offered. However, these commodities had greater price volatility; during the first half of the decade (particularly since 1982), they lost much of their value. Although trade did increase during the first half of the decade, there was a slight decrease during the second half, triggered by Peru's debt crisis, declining commodity prices, and the populist policies of President Alan Garcia (1985-90). In addition, labour unrest and the fiscal crisis undermined Peru's export competitiveness (Thorp 1991). Skeptical about events in Peru, Japan sought more stable and reliable markets such as Chile, Australia, and other countries in Asia.

The trade balance during those years was favourable to Peru even though its exports of non-traditional goods to Japan did not increase to any significant degree. This type of arrangement is what Kuwayama (1997) labels a "vertical" relationship, as opposed to the "horizontal" relationship Japan was maintaining with other Asian countries that were exporting and importing mainly manufactured goods.

Development Assistance

The realist paradigm stresses that foreign aid is motivated by the donor's pursuit of economic and political self-interests (kokueki). Japanese foreign aid to Peru largely fits this dominant view in the literature (Schraeder, Hook, and Taylor 1998). However, this is not to say that the presence of a significant number of migrants was not important, albeit secondary. As the world's largest donor of foreign aid (OECD 1990), Japan tries to use foreign aid to maximize the return on its foreign policy goals. Among its economic motives are securing access to raw materials, expanding its export market, and promoting overseas business affiliates. In pursuit of economic benefits the Japanese government works closely with private firms that want to do business in a specific country (Hook 1995). A Japan External Trade Organization (JETRO) office exists in every capital city where Japan has an economic presence. As Katada puts it,
 the government-private sector relationship has always influenced
 Japanese governmental behaviour. Japanese official financial
 flows to Latin America in the 1970s and 1980s took
 the form of the so-called national project. This scheme encompassed
 projects (a) that were directly related to the national
 interest, particularly with regard to natural resource security;
 (b) in which Japanese companies participated as a
 group; and (c) that were supported directly or indirectly by
 governmental organizations. (1997, 933)


In the early 1970s, Peru was the largest recipient of Japan's official development assistance (ODA) in Latin America (de la Flor 1993). During the 1980s, Peru's share of Japan's ODA decreased even though Japan was still the second most important provider of aid (Berrios 2000). Japan's technical assistance, channeled through the Japan International Cooperation Agency (JICA), increased, particularly in the exploration and mapping of mineral resources and the elaboration of feasibility studies (de la Flor 1993).

A common form of Japanese aid is concessionary loans. ODA loans to Peru started in 1973 when the first credit was extended to ElectroPeru to construct transmission lines between Lima and Chimbote. Although the first credit line was at 3.5% interest repayable in 25 years, others were granted in 1976-78 at 5% interest repayable in 20 years, and others followed at 4.24% interest (Alayza Betochi 1989). These loans were mainly for infrastructure development projects in electrical transmission lines, telecommunications, and roads. Other loans were also made available by Japanese firms to secure raw materials to be exported to Japan.

While technical assistance rose steadily during the 1980s (see Figure 1), increasing from $5 million in 1980 to nearly $18 million in 1989, no loans were issued to Peru from 1983 until the end of that decade because of the country's inability to pay its foreign debt. Perhaps this is the reason why Japanese ODA to Peru in the latter half of the 1980s shrank even as technical assistance was on the rise. Overall, Japanese aid to Peru increased steadily throughout the 1990s, and the data from Table 5 show the loans Peru received, which made it the largest recipient of government yen loans in Latin America.

The presence of Japanese immigrants has been a major force in influencing Japanese foreign aid to Peru. Immigrants abroad are politically important to Japan because of the national concern for Japanese descendants. This concern is reflected in the fact that Peru and Brazil, the countries with the most Japanese descendants, have consistently received the most aid. The consistency in giving more aid to countries with larger Japanese-descendant populations shows the extent to which ethnic ties mitigate the purely pragmatic approach. Japan gave more aid to Peru than to any other Latin American country of comparable size and economic characteristics, apparently valuing it as a country with citizens of common ancestry and cultural interests.

The influence of the ethnicity factor only goes so far, however. Japan's economic interests and, in the late 1990s, its political concerns largely overwhelmed the effect of its ethnic ties with Peru. Many authors (see, e.g., Orr 1990; Potter 1997; Rix 1980) have pointed to the correlation between aid and economic interests of various kinds. Studies have supported the claim that ODA is given to secure resources, to safeguard market potential for Japanese companies, and to support those countries that have borrowed heavily from Japan.

Tuman, Emmert, and Sterken (2001) reported a low correlation between trade and investment with ODA in Latin America, but their study looked at the region as a whole from 1979 to 1993 and did not capture some of the variations in Peru. There was a strong link between trade and aid in the 1970s and early 1980s in Peru, but less so in the second half of the 1980s and 1990s, when reciprocal trade as a percentage of both countries' overall trade total decreased. Trade fell off as risk-averse Japanese business interests backed away in the face of regime change, political upheaval, and terrorism in the late 1980s. The fact that aid did not fall off as sharply during this period may again point to the importance of the cultural bond that kept the government contributing to Peru. The breakdown in the 1990s is attributed to poor economic conditions, terrorism, and the effects of the Fujimori scandals. Nevertheless, as of the end of 2003 Peru remained among the top five recipients of Japanese ODA in Latin America, again attesting to the strength of a bond that was sorely tested and may finally have reached the breaking point.

Japanese FDI

Japanese foreign direct investment (FDI) in Peru began at the end of the 1960s and flourished in the 1970s. During those years, Japan was undergoing a period of rapid economic growth. According to Kamiya (1998), the goal was initially to secure a source for raw materials and, later, to put Japan in an advantageous position within the emerging subregional Andean market (Andean Pact). During the 1965-75 period, Japanese firms were interested in penetrating the consumer market. Investments were made in light assembly plants. Investments in appliances and other lines of manufacturing were associated with such firms as National (Panasonic), Matsushita Electric, Honda, and Ajinomoto. Auto manufacturers such as Nissan and Toyota also began to assemble automobiles for the subregional Andean market. In petroleum, three Japanese trading companies (Mitsui, Marubeni, and Mitsubishi) formed JAPECO (Japan Peru Oil Corporation) to construct the TransAndean oil pipeline to transport oil to the coast. In return for the $340 million credit provided by this consortium, the companies obtained the right to ship oil from Peru at an attractive price. In mining, where the bulk of Japanese investment was found, Mitsui signed the first mining agreement with the Peruvian government, and a number of other Japanese firms soon became actively engaged in mining copper, lead, and zinc (de la Flor 1993). Some of these firms made lines of credit available to Peru's state enterprises, thus tying these loans to a desire to be awarded contracts and to make it easier for them to invest in this sector (Torres Cuscano 1994).

It is interesting to note that important investment decisions were made in coordination with the Japan Export Import Bank (JEXIM) and the Overseas Economic Cooperation Fund (OECF), both of which facilitated loans for some of Peru's investment projects with Japanese participation. Initially these types of investments, along with development assistance, were tied to the needs of companies. As Kamiya puts it, "investments were made in tandem with financing from a Japanese governmental agency, with private business, and with Japanese contractors in a well-integrated package" (1998, 9).

Until 1976 Peru was the second largest recipient of Japanese FDI in Latin America. After 1977 Japanese investments increased in Mexico, surpassing Peru. During the second half of the 1980s, Peru suffered the sharpest degree of Japanese net disinvestment in the region (Tuman and Emmert 1999). This change is evident in Table 2. Other countries, such as Mexico and Chile, had become larger recipients of Japanese investment. Japanese FDI had been stimulated by the appreciation of the yen in the mid-1980s and the effects of a booming "bubble economy" (Mizuno 1993). However, doing business in Peru became increasingly risky as the country went through a period of escalating violence and an unfavourable economic climate.

As payments for earlier loans came due in the 1980s, Peru made only partial payments and had to reschedule. By 1988, Peru's debt to Japan was approximately $1.7 billion, or about 8% of Peru's total public debt, which at the time stood at $20.9 billion. Moreover, during the second half of that decade no further loans were issued to Peru because of its inability to pay them back. Peru's financial standing was further complicated when President Alan Garcia announced that Peru would only pay its creditors 10% of its export earnings on debt service. The Japanese made it clear that Peru had to comply with its outstanding obligations if it was to receive new funding.

It can be argued that Peru enjoyed special consideration because of the long-standing presence of a sizeable Japanese population. However, the nikkei factor was not enough to outweigh other considerations that began to make economic dealings with Peru a bad bet, including political turmoil and economic ills. Japan was willing to assist Peru as long as the country represented a reasonable risk, but drew back, just as it did in other similar situations (e.g., in Brazil and Mexico), when risk became the overriding factor (Kuwabara 2003).

Economic Relations under the Fujimori Administration (1990-2000)

The Fujimori decade provides the best opportunity for examining how Japan-Peru relations were influenced by the bond of common ethnicity. It could be said that the presence of Alberto Fujimori prompted the Japanese to engage Peru more fully than they ever had. Yet Japanese caution and pullbacks during the 10-year administration of Fujimori indicates, once again, that realism always trumps ethnicity in trying situations.

Although there are no precise figures, estimates put the Japanese population in Peru in 1990 at between 55,000 and 85,000. That year, Alberto Fujimori became the first descendant of Japanese parents to be elected president of Peru. Initially the nikkei community in Peru was not very receptive to Fujimori's bid for the presidency. He was considered a dark horse. And yet, tired of politics as usual and the false promises of Peru's traditional political parties, the electorate saw in Fujimori a very determined and diligent Japanese-Peruvian. Fujimori was portrayed as hard-working, reliable, and honest. While his success and achievement soon became a source of pride to the nikkei community, there was also fear of impending failure because of his lack of government experience.

Japanese diplomatic memorandums in the early 1990s stressed that increasing aid to Peru would boost the image of Japanese descendants and Japan (Andrade 1992). Similarly, the Japanese realized that the failure of Fujimori would have serious consequences for nikkei and for Japan's image in the region.

When Fujimori was elected president, the Japanese public was elated. Magnier (2000) notes that "surveys ranked his election among the most exciting foreign news stories of 1990." During his campaign Fujimori had pledged to restore the values of honesty, integrity, and hard work, virtues that the Japanese could relate to. They were strongly behind him and enthusiastic about his presidency and the hopes of bettering Peru. The new president appointed a number of prominent nikkei to key government posts, the first time nikkei had secured such positions.

Under the Alan Garcia administration at the end of the 1980s, Peru's economy had drastically deteriorated. But, lacking a clearly defined policy of development assistance in the newly emerging international order, the Japanese government was cautious because Fujimori was facing serious political and economic challenges at home. While some Japanese citizens were collecting humanitarian aid for distribution in Peru, Japan insisted that Peru's economic crisis was severe enough to warrant caution. Less than three weeks before his inauguration, Fujimori arrived in Japan and was greeted by enthusiastic crowds everywhere he went, yet the Japanese government made no commitments. Asked by the press about the official reaction he had received, Fujimori revealed that it had been "neither hot nor cold, but lukewarm" (Smith 1990, 38).

According to Murakami (1995), Japan was placed in a unique situation because Fujimori's success could be associated with Japan's image. However, the Ministry of Foreign Affairs stressed that Japan was looking for ways to help Peru not because Fujimori was nikkei but because of his far-reaching liberal economic policies. These policies helped Peru achieve economic stabilization, but reinforcement was needed to achieve growth and to reduce poverty. As a result, the government of Japan began to search for ways to help alleviate Peru's pressing financial insolvency. The first order of business was to mediate a bridge loan to help Peru improve its financial position.

During his pre-inaugural trip in July 1990, Fujimori sought to reassure the US and Japan, as well as multilateral financial institutions, that Peru wanted to restructure its foreign debt and get back on track financially. Upon arrival in Tokyo, Fujimori was received by Emperor Akihito and later by Japanese government officials to whom he explained Peru's disastrous economic situation and the need for financial assistance (Aquino 1994). The financial problems inherited by Fujimori were threatening to become an obstacle for new funding sources and future foreign investment. The intention was not simply to renegotiate a debt package but to restore Peru's standing in the international financial system.

Peru had resumed interest payments on international obligations and wanted to restore its external credit rating. With the help of then-Secretary General of the United Nations, Javier Perez de Cuellar, Fujimori was able to meet with the directors of the International Monetary Fund (IMF), the World Bank, and the Inter-American Development Bank (IDB). These directors made it clear that, in exchange for sympathetic treatment, Peru would have to agree to the conditions set by these financial institutions. While in Japan, Fujimori was also persuaded to reach an agreement specifically with the IMF. The Japanese insisted that any new loans would be negotiated only after Peru had met the conditions set by these multilateral financial institutions.

A support group of creditors, the Grupo de Apoyo, was formed in 1991 to help Peru improve its financial position. It consisted of several developed countries (Japan, United States, Germany, Spain, Canada, France, Italy, Belgium, The Netherlands, Sweden, and Switzerland), with the US and Japan taking the initiative to help assist Peru to become "reinserted" into the international financial system. Fujimori made a formal commitment to refinance Peru's arrears with creditor countries. Negotiations continued through 1992 under IMF supervision and monitoring.

Peru first negotiated its debt and normalized its relations with the IDB by securing a bridge loan in 1991 and, later, three other loans from the World Bank for balance of payment support. In March 1993, the US Department of the Treasury and Japan's Export Import Bank provided a bridge loan so that Peru could pay back $878 million that it owed its creditors. Peru was able to settle its debt with Japanese concerns such as JAPECO, which had built the oil pipeline to the northern coast. Japan had made it clear that settling this debt was crucial if Peru were to receive any future credit (Bowen 2000). Two months later, Peru was also able to restructure loans owed to foreign governments and institutions represented in the Paris Club.

The high level of consultation between the US and the Japanese government concerning Peru is worth noting here. Throughout the 1990s both countries promoted a common agenda concerning Peru and their development assistance objectives. While Prime Minister Ryutaro Hashimoto was visiting Peru in 1996, he announced that Peru had been earmarked for a new strategy of development. Peru would be the only country in Latin America to receive annual financial support from the OECF (now JBIC, the Japan Bank for International Cooperation). Japan stressed that its aid policy toward Peru emphasized poverty alleviation, assistance for the social sector, and improvements to the economic infrastructure.

There is no question that Japan did provide a larger sum of economic assistance to Peru after 1990--as discussed below--because of Fujimori and what he represented. Murakami (1999) argues that Peru would not have received this assistance if Fujimori had not been elected. Alan Garcia's government decision not to pay Peru's foreign debt had isolated Peru in the international financial community. Japan had not provided any loans during Garcia's tenure (1985-90) and had reduced its investments. Although Peru has not always been Japan's top aid recipient even in Latin America, Japan has generally been one of the leading aid donors to Peru. Of the Latin American countries receiving Japanese ODA in FY2000, Peru ranked third among recipients of grant aid, fifth for technical assistance, and first for loans. The presence of a Japanese descendant as president was a pivotal factor in Japan's decisions to reach out to a country that was in such poor economic shape.

Bilateral relations with Japan under the two Fujimori administrations were warm and cordial, albeit not without problems. The first incident occurred in 1991 in Huaral, where three JICA agricultural experts were assassinated by Sendero Luminoso (Shining Path) insurgents. In reaction to this violence, Japan recalled its aid personnel and froze technical cooperation in Peru. Lacking advisers to conduct feasibility studies, projects faced delays, and Japan's technical assistance witnessed a gradual reduction from 1990-91 (Hosono 1998). Non-reimbursable financial assistance, however, did increase, facilitating the provision of equipment (see Table 3). The number of scholarships for Peruvians traveling to Japan for short training courses also substantially increased.

In April 1992, the president launched a self-administered coup (autogolpe) that led to the suspension of Congress, the judiciary, and the Constitution of 1979. The dramatic measures adopted by Fujimori caught the Japanese by surprise, since he had just visited their country a few weeks earlier (Murakami 1995). There was no immediate negative reaction by Japan to the emergency measures taken by Fujimori. Prime Minister Kiichi Miyazawa declared that Japan was not going to review its aid policy to Peru. Instead, Japan emphasized the importance of returning promptly to the democratic process. In June of that year, Tesuruke Tanaka, head of the Latin American division of Japan's Ministry of Foreign Affairs, traveled to Lima to talk with Fujimori and try to prevent possible OAS sanctions.

By 1995, Fujimori was back in office with a comfortable margin of the vote. Bowen (2000) notes that in the middle of that year, polls showed that 71% of Peruvians chose Japan as the country they most admired. In Japan, however, sentiment toward Peru began to change. In 1996, Movimiento Revolucionario Tupac Amaru (MRTA) guerrillas seized the residency of the Japanese ambassador, Morihisa Aoki, and held him, several Japanese businessmen, and dozens of other hostages for 127 days. The guerrillas had targeted Japanese interests in Peru precisely because of that country's close ties to the Fujimori government. Public opinion in Japan began to turn against the Japanese presence in Peru. To make matters worse, Japan's Ministry of Foreign Affairs again advised Japanese travelers to avoid Peru because it was not considered safe. After the hostage crisis, Morihisa Aoki, who was a friend of Peru, was forced to resign as ambassador and assume responsibility for the incident. Although Fujimori bestowed upon him the country's highest decoration, Aoki returned to Japan in shame and was reassigned to Kenya. The hostage taking was the most serious in a series of incidents that had damaged Peru's image for prospective Japanese investments. Coverage of Peru in the Japanese media during these months was unprecedented, and in view of the magnitude of the crisis, the image of Peru for the Japanese public was once again seriously affected (Andrade 1998; Murakami 1999).

Trade Relations

Although the US is Peru's most important trading partner, Japan has frequently been its second most reliable partner, and China has recently become important because of its large purchases of minerals and fishmeal. The Asia-Pacific region is now one of the main destinations of Peruvian exports (Gonzalez Vigil 1994; Carrillo, Gonzalez, and Hernandez 1999). Although there has been some deterioration in the balance of trade since the liberalization of the Peruvian economy in 1990, a trade surplus has been maintained with Asian countries, even though in recent years Japan has gained more weight as a source of Peruvian imports. This process has resulted in greater trade diversification for Peru, away from its traditional trading partners such as the United States.

A key condition for success in a relatively new market is the promotion of exports. Japan, through its JETRO offices in Lima, has been promoting ways to bolster trade with Peru. At the same time, Peruvian trading groups interested in entering the Japanese market have at various times displayed a wide variety of their products in exhibition halls in Tokyo and Lima. In the case of Peru, such promotion has been the responsibility of PROMPEX, a government agency. One private entity that has been promoting Peruvian exports, ADEX, has been working on behalf of small exporters without much government support.

Even such combined efforts to promote Peruvian exports do not have the resources of, for example, PromChile, which is actively supported by the state. Furthermore, PROMPEX does not have the qualified personnel needed to promote Peruvian goods in Japan. Chile has been a success story because it has a coherent and well-defined trade policy, something that Peru lacks. For example, when JETRO puts on an exhibition of Peruvian products, rather than displaying products for which there is high demand in Japan, it mounts a museumlike display of arts and crafts: beautiful to look at--the Japanese go to see it--but not to place orders. Most importantly, Peru still does not often have high-quality goods to offer, and, even when it does (for example, fruits), it has faced impediments from Japanese authorities. The Peruvian embassy in Tokyo has only one junior diplomat, who also acts as a commercial representative, while the Chilean embassy has a commercial office with three MBAs who know the market well, two Japanese employees, and a full secretarial staff. In a span of 10 years, Chile has more than quintupled its exports to Japan, making that country its largest export market, while Peru's exports to Japan have not grown proportionally.

Japan knows the Latin American market much better than Latin America knows the Japanese market because its firms have been operating there for many years. Japan also has JETRO offices in many countries, which work with its embassies' commercial offices as a team. Latin America has much to learn from Japan, which is not itself an easy market to penetrate.

When Peru was finally admitted to the Asia Pacific Economic Cooperation (APEC) in 1998, there was exuberant optimism because of the economic benefits that could be reaped from a more dynamic relationship with the Asia-Pacific region (Embajada del Peru en Japon 1999). Peru would certainly benefit, as have members such as Chile and Mexico. Besides the US, the key players are mostly the more dynamic countries of East Asia (Japan, China, Korea, Hong Kong, and Taiwan). APEC as a whole represents more than half of all world trade. Under APEC, Peru could increase its trade with Asia even further due to its privileged position as a member of the association, much like Mexico and Chile. For this trade relationship to materialize, Peru needs to redefine its trade policy, be more aggressive in its export policy, have in place a better trade infrastructure, and provide assurances that it can meet orders for high-quality goods at competitive prices.

Peru's more active engagement with the Asia-Pacific region and its acceptance into APEC are two of the most significant achievements in Peruvian foreign policy in recent years (Ferrero Diez Canseco 2000; Mols 1999). As is widely known, APEC is a grouping that promotes consultation and cooperation rather than a customs union or common market. Time will tell whether Peru can reap the benefits of participation in such an association.

Development Assistance

After Fujimori assumed the presidency, Peru became one of the biggest beneficiaries of ODA from Japan in the Latin American region. Japan provided non-refundable aid (mainly in the form of grants) for development projects, dispatched technical experts, and donated equipment. There were also non-reimbursable "non-project" loans toward economic restructuring, and an increasing number of scholarships for specialized technical training (Hosono 1998; JICA 1999, 2002; Yamada 1994).

Technical assistance, which is channeled through JICA, experienced its ups and downs. In 1991, after the three Japanese agricultural experts were assassinated in Huaral, JICA was forced to suspend some of its projects and had to send its experts and volunteers home. Without the presence of technical experts, the number of scholarships increased to compensate for the withdrawn experts.

Japan was supportive of Fujimori's efforts to reduce pockets of extreme poverty, even if these efforts fell short of their objectives. Peru continued to receive non-refundable grants from Japan. However, the grant element as part of ODA was small. Although Peru technically did not qualify for grants because its per capita income was too high ($1,500), Japan continued to give Peru a small number of grants and included Peru in the program for specific humanitarian donations. In August 1996, as a result of an official visit by Japanese Prime Minister Ryutaro Hashimoto to Peru, security measures had improved, and Peru was classified as an "annual programming country"--the first of its kind in Latin America. This classification provides an opportunity to send annual missions to propose and discuss new cooperation projects (Embajada del Japon 2001; Hosono 1998). Japan even assigned an economic adviser who was posted at Peru's Ministry of Economics and Finance to facilitate coordination of the aid process, new projects, and loan-related procedures of Japan's ODA.

ODA data reflected in Table 4 show that in 1991 and 1992, Japan ranked first among aid donors to Peru, but this ranking was due in part to structural adjustment loans made to Peru. In subsequent years Japan's status dropped, and Peru remained first in Latin America only as the largest recipient of development loans. Although in 1996 Japan was Peru's main donor, the figure in actual dollar value was the lowest received that decade. Japan ranked first again in 1999 and 2000, but ODA statistics show that throughout the 1990s, both Mexico and Brazil received more than Peru in grant aid and technical assistance. The figures seem to indicate that economic size matters. Interestingly, in Asia, the top recipients of Japanese ODA are China and Indonesia.

Although official development cooperation funds increased during the 1990s, in no way are they substantial amounts. As shown in Table 3, of all the forms of aid Peru has received from Japan until 2000, repayable loans have been the most common. From 1989 to 1999, the net amount of loans Peru received was $890 million, while the amount of grant aid was $359 million and technical aid was $299 million. In 1999, grant aid decreased to $6.6 million from $45 million the previous year, while the disbursement of loans increased from $22 million in 1998 to $164 million in 1999.

Ambassador Aoki, upon assuming his post in Peru in 1994, began to work diligently to see that Peru be given special consideration and that aid be designated to support specific programs for three years at a time, conditions that only Japan's Asian neighbours had been offered. The seizure of the ambassador's residence in December 1996 was a setback for restoring the deployment of Japanese technical experts and volunteers to work in Peru. Instead, Japan had to slowly reconsider its aid policy in Peru, taking more precautions and freezing some of its technical cooperation programs. The Ministry of Foreign Affairs Annual Report (1999, 243) proclaimed that, in Peru, "future development assistance should focus on gradually shifting cooperation to the form of loan aid."

From 1973 to the end of 2002, Japan approved a total of 30 project loans and 2 structural adjustment loans. The total commitment was $2.8 billion, and there was an outstanding balance of $1.3 billion. Of these approved loans, 11 were implemented and completed, but 19 were still pending, and disbursement would follow if Peru could overcome current budgetary constraint problems. These projects are mainly aimed at reducing poverty and improving infrastructure. Between 1983 and 1994, Peru was in arrears, unable to pay its foreign debt. Under such circumstances, Japan did not issue any new loans until Peru had met the conditions set by the IMF.

Under Fujimori, several loans were approved and several projects implemented. In his 1999 visit to Japan, Fujimori was able to secure $416 million in new credits from OECF and $242 million from JEXIM. If another $300 million agreed to jointly with the IMF are added, these credits total $958 million. Although these are mainly soft loans, this financing translates into more accumulated debt for Peru as opposed to capital inflows in the form of investment. As can be seen in Tables 5 and 6, the list of loans from JEXIM and OECF (now JBIC) is long.

Japanese Foreign Direct Investment

In the 1990s, efforts were made to enhance commercial contacts between Japan and Peru and to persuade Japan to invest in Peru. But even with all the diplomatic efforts made by Fujimori, Japanese confidence in Peru was still tenuous. Japanese firms lagged behind European and American companies in investment. To some extent this gap was due to the economic slowdown of Japan, the political climate in Peru, and the legacy of terrorist attacks against Japanese interests in Peru. Diplomatically, Japan was also taking more precautions, and its development policy toward Peru was under greater scrutiny.

But economic cooperation and foreign policy are quite different from private investment. Even tourism was severely affected, as Japanese citizens were advised at various times not to travel to Peru because their safety could not be guaranteed. There is no way of knowing if investment would have been higher had there not been so many incidents against Japanese diplomatic and economic interests in Peru. Kamiya (1998) believes that Peru's failure to promote itself, more than the political and security situation there, was responsible for the disappointingly low levels of Japanese investment. Japanese authorities, however, would argue it is the other way around.

While Peru received generous amounts of Japanese development assistance, private investment was almost non-existent in the 1990s. According to the UN Economic Commission for Latin America and the Caribbean (ECLAC), Peru's privatization program brought in $8.4 billion through the sale of some 150 state-owned enterprises (ECLAC 1998; CEPAL 2000). Peru had one of the most liberal foreign investment regimes in the region. However, Japanese firms showed little interest in Peru's privatization efforts during the 1990s. Compared to the FDI stock of other Latin American countries, Japan ranked very low, and, therefore, the figures are so insignificant that they do not even appear in the statistics kept by the Ministry of Finance (see Table 2).

Peru was not an exception. Despite the improved climate for foreign investment in much of Latin America, Japanese firms have been skeptical about the long-term economic prosperity of the region. Although many of the Japanese companies operating there were restructured, very little new investment was generated (CEPAL 2000). According to Peruvian investment statistics released by CONITE (Consejo Nacional de Inversion y Technologia), Japanese FDI amounted to about $100 million at the end of 2001. This places Japan twelfth on the list of foreign country investors. Over 50% of Japanese investments are in mining and 30% in industry. Mizuno (1993) and CEPAL (2000) argue that many Japanese firms did not par-ti-cipate in the privatization process underway in Peru (and much of Latin America, for that matter) mainly because of their style of management. The decision-making process of Japanese firms is typically slow, and competing in privatization bids often requires quick decisions.

In spite of Peru's political troubles with subversion, Peruvian-Japanese relations remained strong as Fujimori tried to promote closer economic ties with Japan. The mere fact that Fujimori traveled ten times to Japan during his first two administrations is an indication of the importance he placed on economic relations with Japan. However, one of the biggest frustrations of the Fujimori administration was that it was unable to attract Japanese foreign investment even though the president was able to secure project loans and technical assistance.

The Dekasegi Phenomenon

The Fujimori years were also the period in which migration from Peru to Japan began to increase substantially. The international flow of labour, or transnational migration, has been driven primarily by economic pressures and income disparities between the industrialized countries of the North and the less developed countries of the South. The main reason for immigrating to high-income countries such as Japan has been higher wages (Ninomiya 1992). While Latin America was barely emerging from its economic woes at the end of the 1980s, Japan's economy was still growing. However, Morimoto (1999) has argued that perhaps one other reason that the reverse migration accelerated was that the nikkei community felt vulnerable to the anti-Japanese sentiment during the 1990 presidential campaign. As Kushner puts it, "some nikkei worried that a Fujimori victory would bring new attacks on the community" (2001, 32).

During the first part of the twentieth century, thousands of Japanese migrated from Japan to Peru. Their presence increased over the years and numbers some 80,000 at present. Almost a century after this migration began, there has been an exodus in reverse--a so-called return migration--of young contracted factory workers (Locklin 2001; Take-naka 1999; Tsuda 1999; Watkins 1999). When Japan's Immigration Law changed in 1989 to allow foreigners of Japanese descent (nikkei-jin) to work in the land of their ancestors, Japan started to receive a flood of Japanese Brazilians and Peruvians in search of work. The vast majority of these workers (dekasegi) were of the second and third generations (nisei and sansei, respectively). Japan was attractive because unemployment was very low and the yen was strong relative to the US dollar. While the new migration law was seen as an international display of Japan's generosity toward its own people, it also achieved the objective of meeting the country's demand for low-skilled labour. Recent studies have examined how these workers who went to seek opportunities also found hardship. The situation was even worse for those who tried to take advantage of opportunities in Japan by entering with false documents. Watkins (1999) argues that of the recent Latin American immigrant community working in Japan, the largest number of "false nikkei," or illegal workers, are Peruvians.

According to official Japanese figures, in 1988 there were 864 Peruvians in Japan. In 1990 the number increased to 10,279, and by 1997 the figure was 40,394 (see Table 7). According to the most recent estimate, there are currently 52,000 Peruvians working in Japan (International Press 1999). While approximately 45,000 were registered with the Immigration Bureau in 2000, the rest were not, and are thus considered illegal. One reason is that although most of them are nikkeijin, some managed to come with false proof of Japanese ancestry (Altamirano 1996). Peruvian estimates are much lower, because they are based on the number of people who have registered with the Embassy of Peru in Japan. Many of the workers dispersed throughout the islands do not make the necessary trip to Tokyo simply to register.

One of the benefits that Peru receives from this transnational migration phenomenon is income remittance to the home country, even if it comes at a high cost of human capital, because many of those who leave are well-educated. Aquino (1999) estimates that 50,000 Peruvian labourers (dekasegi) are working in Japan and that they sent home about $500 million in 1998. But that figure would seem overly optimistic. Considering that in that year the Japanese economy was mired in recession, the assumption that almost all the dekasegi were actually working and sent home a significant part of their earnings seems unwarranted. That year Peru's primary export was gold, with $925 million in sales. Second was copper, with $772 million in sales. If correct, Aquino's figures would mean that the remittance of money from Japan would be the third-largest source of capital inflow to Peru, perhaps more significant than the total amount of recent Japanese investments. If one were to add remittances from the United States, home for more than 200,000 Peruvian workers in 1998, remittance of foreign earnings would surpass Peru's earnings from any export commodity. This scenario is doubtful.

The Fujimori Saga in 2000-2001

Fujimori's decision to run for a third term as president set off a crisis that eroded his popularity. As Fujimori muscled his way into a third term, he was criticized for his autocratic style and his desire to stay on indefinitely. Amid myriad charges of corruption and scandal within his administration, Fujimori sought asylum in Japan and resigned. In a parallel development, Fujimori's brother-in-law, Victor Aritomi, also resigned. He had been appointed to the post of ambassador to Japan by Fujimori in February 1991, despite his lack of qualifications. Out of a job because he was not a career diplomat, Aritomi was accused in the press of being an intermediary for Fujimori who channeled donations for needy Peruvians to the president under questionable circumstances (Patrian 2003).

The final collapse of the Fujimori era came when his right-hand man and intelligence chief, Vladimiro Montesinos, was caught bribing politicians to change sides. Montesinos had been a controversial figure from the start and was considered the real power behind the executive for a decade (Bowen 2000). After being on the run for eight months before his capture in June 2001, Montesinos faces about 80 charges ranging from arms and drug-trafficking, to money laundering, bribing officials to fix the elections, wiretapping, and running a paramilitary squad. His trial is still underway, and prosecutors are seeking a 20-year sentence. Montesinos' web of corruption controlled large portions of the military, the police, the Congress, and the judicial system. His trial has become an important source of information that has implicated Fujimori, as Montesinos attempts to gain a lighter sentence. His continuing revelations have become deeply embarrassing and politically lethal to those associated with the spychief, including Fujimori.

For more than three years since Fujimori's departure in November 2000, the Peruvian government has been pressing Japan for the extradition of the former president to answer accusations leveled against him. Japan had said during these years that it would deny any request to send Fujimori back unless there was a legal procedure in place, and the Peruvian government finally submitted a formal request in August 2003. Because Fujimori's name was entered in Japan's consulate registry in Lima after his birth, according to Japanese law he is a Japanese citizen. To complicate matters, Japan and Peru have not signed an extradition treaty. Although Tokyo has been facing mounting pressure, all indications are that, because of his Japanese citizenship, Japan will not send the former president back to Peru.

Although Peru's Congress accused Fujimori of crimes against humanity arising from incidents during the war against Sendero Luminoso, there has been no evidence to link Fujimori to the proceeds of Montesinos' corruption. The charges against Fujimori centre on abuse of power. All along, Fujimori has denied that he had direct command over a death squad unit that carried out two attacks in the early 1990s in which 25 people were killed. This denial has been corroborated by Maj. Santiago M. Rivas, who said that he "never had reported to the president" (Brooke 2002). However, according to the findings of the Truth and Reconciliation Commission, Fujimori's government is guilty of waging a dirty war.

The Japanese community in Peru, which had been initially lukewarm about Fujimori's campaign and then full of pride after he won, found itself in the painful position of seeing one of their own humiliated. The Japanese public, so enthusiastic over his election, were stunned a decade later by his resignation and flight to asylum in their country. Some urged him to go back, but others, among them the nationalist politicians, welcomed his presence (Sims 2001). Thus, while he is discredited and criticized by many in Peru, he is still admired in Japan.

Although Fujimori did a great deal to bring Japan and Peru closer together, his stay in Japan since November 2000 has soured the relations that he cultivated for 10 years. Peru's transitional government (2000-2001) and the new administration of President Alejandro Toledo have put added pressure on Japan to hand over Fujimori to be brought to trial, but Japan has not budged.

The feeling in Japanese government circles is that Peru cannot guarantee a fair trial for Fujimori because it has a weak judicial system. Peruvian government officials have noted that they find Tokyo's protection of Fujimori disconcerting. Japan's relations with Peru were strained even further when at mid-year 2001 Tokyo granted citizenship to Victor Aritomi, two weeks after Peru had put out a warrant for his arrest. This action irritated the Peruvian government, and relations took a turn for the worse as Peru sent a note of protest and recalled its ambassador for consultations.

Peru feels impotent in these matters because Japan remains an important partner and supporter of Peru's development efforts. The Fujimori case has generated antipathy against Japan in Peruvian circles. Shimizu (2001) raises the issue in terms of cost-benefit analysis. He notes that the cost of allowing Fujimori to stay in Japan exceeds the benefit. The cost is Japan's financial stake in Peru as well as Peru's support of Japan in international forums. As Peru keeps up the pressure, relations are likely to become even more strained. If Peru wants to prevent relations from deteriorating any further, it will have to tread lightly and be patient with Japan.

The antipathy against Japan in Peruvian government circles is due to the indiscreet attitude of the Japanese government, the support Fujimori receives from conservative politicians, and the Japanese media that has downplayed the issue (Ogura 2002). So far Japan has not taken any steps on the formal request for Fujimori's return. It took nearly three years to translate the voluminous documentation into Japanese. The political climate in Japan is such that Japanese scholars doubt that Fujimori will ever be extradited or put on trial in Japan. The wrangling over Fujimori and how to handle the case shows in some respects the lack of understanding between the two countries (Shimizu 2001).

The fact that Fujimori enjoys the legal protection and support of Japan, and is seen in a much more benign light there than in his own country, indicates again the strength of the ethnic tie. This time, however, that tie is working against Peruvian interests. It is clear that pragmatic considerations in Japan still carry the most weight when it comes to its decisions about economic policy.

Concluding Remarks

There is some evidence of a Japan-Peru relationship that is stronger than would be predicted using the realism hypothesis. As the evidence presented here has shown, Fujimori's ascension to the presidency led to closer relations between Peru and Japan. The presence of a significant nikkei population had already had an influence, at times leading Japan to take a somewhat less cautious economic approach than it took toward other developing countries. Fujimori's fall and subsequent flight to Japan led to a rapid deterioration of economic and diplomatic relations. However, the evidence also makes clear that economic pragmatism always superseded the desire to aid fellow Japanese and help a country with a nikkei leader succeed. Even during periods in which relations between the two countries were good, Japan never took substantial risks. Its trade was modest, foreign assistance came mainly in the form of loans, investment was conspicuously absent, and it stood ready to pull back at signs of trouble.

Peru for its part failed to grasp that it needed a sophisticated understanding of Japan and the way its market works in order to succeed as a significant Latin American trading partner. Peru failed to develop unified strategies for pursuing its economic and diplomatic objectives. The fostering of improved relations will depend mainly on Peru, which needs to re-examine its trade policy and address its lack of knowledge of the Japanese market, which has become a serious impediment to expanding exports. Additionally, Peru will have to resolve diplomatic tensions with Japan over the latter's protection of former president Fujimori.

Economic relations between Peru and Japan can only improve if bilateral trade, aid, and investment are further promoted. For this to happen, it will be necessary to go beyond mere diplomatic efforts and to specify clear and well-defined actions to foster increased knowledge of what each has to offer the other and how to market it.

A major challenge for Peru (and the rest of Latin America) is to sustain its level of economic growth, to fully develop legal structures and regulations to make investment more attractive, and to make exports more competitive. Japanese investors are still reluctant to invest in Peru because of its geographic distance, concern for their security and safety, changing regulations in the host country, and the small size of Peru's internal market. On the Peruvian side, opportunities to enter the Japanese market have not been fully explored or properly researched. The challenge is to study the long-term opportunities by improving the understanding of Japanese policies, customs, and demand patterns. Japan is productive, efficient, and of much interest to countries like Peru, but that interest cannot bear fruit without cultivation. The potential for growth in Peruvian exports will require active promotion from and direct participation by the state; small private companies on their own are unlikely to succeed unless they can rely on a well-defined, coherent trade policy aimed at enhancing exports and promoting investment.

Notes

(1.) The author is grateful to the Institute of Developing Economies (Tokyo) and the Japan Center for Areas Studies (Osaka), where he was Visiting Research Fellow during the summer of 1999 and the winter of 2001 respectively. This article was written in late 2003. The author is also grateful to Marco Kamiya, Yusuke Murakami, and Tatsuya Shimizu for reading and commenting on an earlier draft.

(2.) The realist paradigm is based on a premise that states act in the international arena to promote their national self-interest. A leading exponent of realism was Hans Morgenthau (1948). For a comprehensive analysis of the realist approach, see Daugherty and Pfaltzgraph (1990).

(3.) One example is Japan's development aid programs in Thailand and the Philippines, where the donor responds to those countries' requests as long as it accommodates the economic interest of the donor. See Potter (1997).

(4.) For instance, Kawachi, the hometown of Fujimori's parents, donated $1 million for the education of poor children in Peru. Okinawa and Yamaguchi also made donations to schools and health posts. On various visits to Japan, Fujimori received small donations from private citizens or groups for the construction of schools, health centres, and other purposes.

(5.) In New York, Javier Perez de Cuellar, then Secretary General of the United Nations, had convened a meeting of the IMF, the IDB, and Japanese banking officials. Although Japan was supportive of Peru's economic restructuring, Japanese officials were concerned about whether Fujimori would follow through on his promises.

(6.) In 1998 Peru was the seventeenth largest recipient in the world of Japanese bilateral aid (based on cumulative net disbursement), which was the largest in Latin America.

(7.) Throughout the 1980s and 1990s there was a climate of social instability in Peru. The better known cases of attacks against Japanese businessmen are the attempt on the life of the chief executive officer of the Bank of Tokyo in 1987 and the attack on the Nissan plant that same year by Sendero Luminoso. The Bank of Tokyo eventually closed its offices and left Peru. As a result of these incidents and others that followed in the early 1990s, some Japanese firms were forced to reduce the scale of their business.

(8.) Banco do Brasil in Tokyo has stated publicly that it channels $2 billion from Brazilian dekasegis in Japan, who number about 200,000. This means that there are four times as many Brazilians as Peruvians in Japan, which is why these rough estimates are made. (For more on the Brazilian story see Romero, New York Times, 16 October 1999.) In the Peruvian case, it is more difficult to come up with an accurate figure because the agencies that provide dollar remittance services (Convenio Kyodai, Agencia Yamakawa, Japonesito Express), which are not banks, do not reveal their information. In August 1999, Japanese authorities investigated these businesses for tax evasion. Two of the agencies mentioned above have closed.

(9.) As a result of the warm reception Fujimori received during his trip to Japan in 1990, an NGO, APENKAI, was created to handle private donations. For that purpose an account was opened at the Bank of Tokyo. While Aritomi was assigned as ambassador, he, along with his wife, Rosa Fujimori, and the President's brother, Santiago Fujimori, were in charge of the funds. Audits later showed that a portion was never accounted for (Patrian 2003). APENKAI's main purpose was to build schools and promote grassroots development projects. In 1992, another NGO was created, AKEN, which served similar functions. A congressman who led an investigation of these NGOs has noted that some of the money received by these agencies is still unaccounted for.

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Yamada, Gustavo. 1994. Estrategia de desarrollo, asistencia financiera oficial e inversion privada directa: La experiencia japonesa. Lima: Universidad del Pacifico, Centro de Investigacion, Documento de Trabajo 17.

RUBEN BERRIOS

Clarion University of Pennsylvania
Table 1

Trade between Peru and Japan, 1971-2000 (annual averages, US$ millions)

 1971-75 1976-80 1981-85

Exports to Japan 219.9 364.2 474.0
Foodstuffs 8.7 38.2 27.0
Raw materials 163.5 179.1 296.0
 Textiles (2.7) (5.7) (12.4)
 Metal products (160.5) (173.1) (184.7)
 Petroleum (0) (0) (97.4)
Manufactured goods 47.3 144.8 150.4
 Textiles (0.2) (0.9) (5.2)
 Metal products (45.8) (143.8) (144.3)
 Others (0.3) (0.2) (0.6)
Re-exports 0.3 0.3 0.5
Imports from Japan 134.3 161.5 231.1
Food/raw materials 9.3 16.5 13.8
Light industry 11.8 8.7 17.7
Heavy industry 113.0 135.1 198.3
 Chemicals (9.8) (12.7) (8.1)
 Metal products (41.6) (50.0) (41.9)
 Machinery (61.6) (72.5) (148.3)
Re-exports 0.1 1.2 1.3
Balance +85.7 +202.7 +242.9

 1986-90 1991-95 1996

Exports to Japan 426.4 409.5 541.3
Foodstuffs 46.9 83.4 119.1
Raw materials 192.3 146.1 187.3
 Textiles (13.0) (5.3) (8.2)
 Metal products (176.6) (131.7) (158.1)
 Petroleum (0) (1.2) (0)
Manufactured goods 186.4 178.8 234.2
 Textiles (16.1) (1.9) --
 Metal products (169.8) (159.9) (158.4)
 Others (1.4) (0.2) (22.0)
Re-exports 0.3 0.2 0.1
Imports from Japan 142.6 243.5 299.8
Food/raw materials 5.6 2.6 0.3
Light industry 11.3 15.0 25.0
Heavy industry 124.9 196.2 273.3
 Chemicals (6.7) (6.5) (7.5)
 Metal products (23.0) (9.4) (8.5)
 Machinery (95.2) (206.6) (257.1)
Re-exports 0.8 1.1 1.1
Balance +283.8 +274.0 +241.4

 1997 1998

Exports to Japan 545.0 290.8
Foodstuffs 155.8 70.6
Raw materials 218.0 102.0
 Textiles (7.0) (1.3)
 Metal products (719.6) (96.4)
 Petroleum (0) (0)
Manufactured goods 172.4 117.3
 Textiles (17.0) (11.8)
 Metal products (149.6) (100.4)
 Others (3.1) (1.3)
Re-exports 0.2 0.6
Imports from Japan 337.7 381.0
Food/raw materials -- 2.0
Light industry 8.2 5.0
Heavy industry -- 343.4
 Chemicals (7.6) (8.8)
 Metal products (25.6) (22.3)
 Machinery (266.5) (312.0)
Re-exports 2.4 2.0
Balance +207.2 -90.0

 1999 2000

Exports to Japan 292.4 352.9
Foodstuffs 91.7 94.7
Raw materials 105.7 127.6
 Textiles (2.8) (3.7)
 Metal products (98.9) (110.4)
 Petroleum (0) (0)
Manufactured goods 94.9 94.7
 Textiles (11.1) (11.6)
 Metal products (98.9) (108.5)
 Others (1.1) (1.0)
Re-exports 1.1 6.4
Imports from Japan 313.5 351.8
Food/raw materials -- --
Light industry 3.1 0.1
Heavy industry 305.8 287.0
 Chemicals (6.7) (8.8)
 Metal products (18.2) (25.9)
 Machinery (262.8) (282.0)
Re-exports 2.3 2.3
Balance -20.4 -1.1

Note: Total numbers do not always round off to total amount of exports
or imports.

Source: JETRO, White Paper on International Trade, various issues.

Table 2

Japan's FDI in Latin America and the Caribbean (US$ millions)

 To 1966- 1971-
 1965 1970 1975

Argentina 20 4 4
Brazil 185 103 1,247
Chile 13 60 16
Peru 33 41 378
Mexico 16 24 101
Venezuela 1 2 49
Panama 0 26 64
Cayman Is 9
Bahamas 0 2 19
Bermuda 0 0 311
LAC 281 285 2,314
World 949 2,628 12,365
LAC/World 29.6 10.9 18.7

 1976- 1981- 1986-
 1980 1985 1990

Argentina 12 117 272
Brazil 1,374 1,680 1,973
Chile 34 56 132
Peru 36 205 1
Mexico 678 503 545
Venezuela 62 18 208
Panama 598 5,763 9,804
Cayman Is 175 166 6,982
Bahamas 35 399 3,004
Bermuda 61 228 977
LAC 3,287 9,468 24,847
World 20,554 47,151 227,157
LAC/World 16.0 20.1 10.9

 1991- 1996- 1951-
 1995 2000 2000

Argentina 230 247 908
Brazil 2,590 3,409 12,559
Chile 256 78 645
Peru 694
Mexico 1,125 2,207 5,207
Venezuela 182 186 708
Panama 200 5,881 29,325
Cayman Is 577 13,052 22,961
Bahamas 422
Bermuda 2,439
LAC 18,541 29,914 88,939
World 203,494 258,012 772,312
LAC/World 9.1 11.6 11.5

Source: Japan's Ministry of Finance, various years

Table 3

Japan's ODA Disbursements to Peru (US$ millions)

 Grants
Year Grant Aid Tech Coop Total

1989 6.11 19.66 25.77
1990 20.35 19.09 39.44
1991 31.60 18.79 50.39
1992 40.13 15.02 55.15
1993 36.07 11.08 47.15
1994 26.79 9.81 36.60
1995 37.22 12.78 50.00
1996 28.65 13.65 42.30
1997 16.17 11.40 27.58
1998 45.83 12.15 57.97
1999 6.63 18.06 24.70
2000 26.13 18.62 44.75
Total ac- 321.68 180.11 501.79
cumulated

 Loan Aid
Year Gross Net Total

1989 2.21 2.09 27.86
1990 0.46 0.35 39.79
1991 304.57 302.42 352.85
1992 103.09 99.65 154.80
1993 89.94 83.45 130.60
1994 95.44 17.96 54.56
1995 18.15 16.14 66.14
1996 17.52 14.07 56.37
1997 15.38 10.84 38.42
1998 26.46 22.16 80.14
1999 173.13 164.42 189.12
2000 150.97 146.94 191.68
Total ac- 997.32 880.49 1382.33
cumulated

Source: Ministry of Foreign Affairs, Japan's Official Development
Assistance, various years.

Table 4

The Top Five Aid Donors to Peru (US$ millions)

 1990 1991 1992 1993

1st Italy Japan Japan Ger.
 (80.60) (352.9) (154.8) (142.7)

2nd USA USA Ger. Japan
 (79.0) (82.0) (40.9) (130.6)

3rd Ger. Ger. Neth. USA
 (60.42) (55.0) (35.7) (100.0)

4th Japan Spain Italy Italy
 (39.79) (23.3) (35.0) (34.0)

5th Neth. Switz. USA Neth.
 (29.97) (19.8) (32.0) (27.6)

 1994 1995 1996 1997

1st USA USA Japan USA
 (85.0) (81.0) (56.4) (119.0)

2nd Japan Japan USA Ger.
 (54.6) (66.1) (42.4) (85.1)

3rd Ger. Ger. Ger. Japan
 (51.7) (45.6) (42.4) (38.4)

4th Neth. Neth. Neth. Neth.
 (25.8) (26.0) (31.5) (29.8)

5th Italy France Spain Spain
 (21.7) (22.6) (30.2) (22.5)

 1998 1999 2000

1st U.S.A Japan Japan
 (121.0) (189.1) (191.7)

2nd Japan USA USA
 (80.1) (124.0) (92.3)

3rd Ger. Spain Ger.
 (50.4) (34.9) (34.0)

4th Neth. Neth. U.K.
 (36.5) (12.4) (10.0)

5th Spain Ger. Canada
 (22.7) (11.3) (8.8)

Source: Ministry of Foreign Affairs, Japan's Official Development
Assistance, Annual Report, various issues
Ger. = Germany; Neth. = Netherland; Switz = Switzerland

Table 5

Financial Support to Peru by JEXIM

 Type of
Project Finance Closing

I. Supporting Infrastructure Development
Bank loan number 2 to COFIDE Export loan Sept. 1993
San Gaban Hydroelectric Power Untied loan March 1995
Plant Project
Transmission of Electricity Untied loan March 1995
El Nino credit line Export loan March 1998
Bank loan number 3 to COFIDE Export loan May 1999

II. Supporting Macroeconomic Development and Financial Needs of Private
Sector

Multisector Credit Program Untied loan Feb. 1996
Co-financing with World Bank Untied loan Feb. 1997
Pension Reform Adjustment Loan
Parallel Lending with IMF Untied loan Feb. 1997
 Extended Fund Facility
Multisector Credit Program, Untied loan May 1999
Stage II

 Amount/
Project co-lender

I. Supporting Infrastructure Development
Bank loan number 2 to COFIDE US$50 m. (J[yen]5 bn)
San Gaban Hydroelectric Power US$155 m.
Plant Project
Transmission of Electricity US$22.5m./IDB
El Nino credit line US$50m. (J[yen]7000)
Bank loan number 3 to COFIDE J[yen] 5 billion

II. Supporting Macroeconomic Development and Financial Needs of Private
Sector

Multisector Credit Program US$100m./IDB
Co-financing with World Bank US$80m./IBRD
Pension Reform Adjustment Loan
Parallel Lending with IMF US$38m./IMF
 Extended Fund Facility
Multisector Credit Program, US$200m/IDB
Stage II

III. Supporting Japanese Foreign Direct Investment
(Participation of Japanese companies in the mining sector)

* Huansala Mines Development Project (Mitsui Mining & Smelting)
* Rifineria Cajamarquilla S.A. Modernization Project (Mitsui & Co.)
* Antamina Copper/Zinc Mining Complex Development Project
(Mitsubishi Corporation)

Source: Export-Import Bank of Japan

Table 6

List of OECF Loans to Peru (J[yen] millions)

 OECF
Project * Financing

Lima-Chimbote Transmission Line 5,400
Lima-Chimbote Transmission Line II 1,500
Telecommunication System Installation 3,600
Project
Cargo Handling Machinery Project 1,743
Road Improvement Project 2,310
(equipment supply)
Transmission Lines Improvement Project 1,646
Lima Telephone Line Expansion Project 9,870
Health Service Strengthening Project 2,240
Lima-Callao Water & Sewage Project 8,427
Callao Port Development Project 16,624
Irrigation Sub-Sector Project 6,723
Yuncan Hydroelectric Power Plant 33,000
Rural Road Improvement Project 16,421
Southern Lima Sewage Improvement Project 12,660
Sierra Natural Resources Mgt., Poverty 5,677
Alleviation
Rural Road Rehabilitation Project (II) 9,184
Social Sector Development in Amazon 5,976
 Region
Pomacocha Water Resources Project 11,640
Electric Frontier Expansion Project I 10,140
El Nino-affected Highway Rehabilitation 15,833
 Project
Sierra Natural Resources Mgt & 7,259
 Poverty Alleviation (II)
Social Sector Development in Sierra Region 7,003
Piura-Castilla, Chimbote Water Supply 13,901
 & Sewage
Electric Frontier Expansion Project (II) 13,157

 Executing
Project * Agency

Lima-Chimbote Transmission Line Electro Peru
Lima-Chimbote Transmission Line II Electro Peru
Telecommunication System Installation Entel Peru
Project
Cargo Handling Machinery Project Enapu Peru
Road Improvement Project Ministry of Transport
(equipment supply)
Transmission Lines Improvement Project Electro Peru
Lima Telephone Line Expansion Project Co. Peruana de
 Telefono
Health Service Strengthening Project Ministry of Health
Lima-Callao Water & Sewage Project Sedapal
Callao Port Development Project Ministry of Transport
Irrigation Sub-Sector Project COFIDE
Yuncan Hydroelectric Power Plant EGECEN
Rural Road Improvement Project Ministry of Transport
Southern Lima Sewage Improvement Project Sedapal
Sierra Natural Resources Mgt., Poverty Ministry of
Alleviation Agriculture
Rural Road Rehabilitation Project (II) Ministry of Transport
Social Sector Development in Amazon Ministry of Energy
 Region
Pomacocha Water Resources Project Sedapal
Electric Frontier Expansion Project I Ministry of Energy
El Nino-affected Highway Rehabilitation Ministry of Transport
 Project
Sierra Natural Resources Mgt & Ministry of Agriculture
 Poverty Alleviation (II)
Social Sector Development in Sierra Region FONCODES
Piura-Castilla, Chimbote Water Supply Ministry of the
 & Sewage Presidency
Electric Frontier Expansion Project (II) Ministry of Energy

Project * Dates

Lima-Chimbote Transmission Line 1979 *
Lima-Chimbote Transmission Line II 1981 *
Telecommunication System Installation 1982 *
Project
Cargo Handling Machinery Project 1983 *
Road Improvement Project 1983 *
(equipment supply)
Transmission Lines Improvement Project 1985 *
Lima Telephone Line Expansion Project 1990 *
Health Service Strengthening Project 1994 +
Lima-Callao Water & Sewage Project 1996 +
Callao Port Development Project 1996
Irrigation Sub-Sector Project 1996
Yuncan Hydroelectric Power Plant 1996
Rural Road Improvement Project 1996
Southern Lima Sewage Improvement Project 1996
Sierra Natural Resources Mgt., Poverty 1997
Alleviation
Rural Road Rehabilitation Project (II) 1997
Social Sector Development in Amazon 1997
 Region
Pomacocha Water Resources Project 1997
Electric Frontier Expansion Project I 1997
El Nino-affected Highway Rehabilitation 1999
 Project
Sierra Natural Resources Mgt & 1999
 Poverty Alleviation (II)
Social Sector Development in Sierra Region 1999
Piura-Castilla, Chimbote Water Supply 1999
 & Sewage
Electric Frontier Expansion Project (II) 1999

* completed, + co-financing IDB (1994), IDRC (1996).

In 1991 Japan provided $421 million for structural adjustment

Source: OECF, Lima Office

Table 7

Number of Peruvians Registered in Japan

 1988 864 1996 37,099
 1989 4,121 1997 40,394
 1990 10,279 1998 41,317
 1991 26,837 1999 42,773
 1992 31,051 2000 44,856

Source: JETRO, Nippon various years; Immigration Bureau, Ministry of
Justice of Japan for the 1996 to 2000 data.

Figure 1.

Technical Cooperation from Japan (JICA) to Peru, 1979-1989
(US$ thousands)

1979 4,464
1980 5,023
1981 6,391
1982 8,284
1983 9,393
1984 10,490
1985 10,318
1986 11,742
1987 15,780
1988 15,479
1989 17,909

Note: Table made from bar graph.
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