August 20, 2013 Hiroaki Isobe Executive Vice President

August 20, 2013 Hiroaki Isobe Executive Vice President

Today s topics 1. Overview of the Pacific Alliance 2. The Pacific Alliance to Japan -The 13th Survey on Business Conditions of Japanese Companies in Latin America- 3. Changes and hopes brought about by the Pacific Alliance -Changes to the business environment- 1

1. Overview of the Pacific Alliance 2

1 Overview of the Pacific Alliance 1GDP comparison of major countries 4 member countries of the Pacific Alliance India, Russia 5 member countries of Mercosur 9 major countries of Latin America (above 2 groups) 10 ASEAN member countries Japan COPYRIGHT 2013 JETRO. All rights reserved GDP (Billions of U.S. dollars) GDP per capita (U.S. dollars) Population (thousand) 2011 2012 2013(Est.) Ranking 2011 2011 2020(Est.) Pacific Alliance 1,915 2,010 2,170 208,549 233,271 Chile 251 268 286 46 14,551 17,275 18,669 Colombia 328 366 388 77 7,114 46,961 53,078 Mexico 1,158 1,177 1,275 63 10,184 114,888 128,421 Peru 178 199 221 84 5,947 29,425 33,103 MERCOSUR 3,324 3,329 3,384 276,935 302,149 Argentina 445 475 499 60 10,959 40,778 44,237 Brazil 2,493 2,396 2,457 56 12,676 196,744 212,723 Paraguay 24 26 31 108 3,687 6,575 7,779 Uruguay 47 49 52 50 13,866 3,381 3,520 Venezuela 316 382 346 61 10,886 29,457 33,890 ASEAN10 2,182 2,306 2,526 599,286 665,027 Brunei Darussalam 16 17 16 22 41,662 406 472 Cambodia 13 14 15 156 853 14,331 16,518 Indonesia 846 878 946 113 3,510 242,477 266,440 Lao P.D.R. 8 9 10 147 1,320 6,302 7,384 Malaysia 288 304 328 64 9,941 28,877 33,475 Myanmar 51 53 57 159 824 48,367 52,446 Philippines 225 250 284 127 2,386 94,938 112,171 Singapore 266 277 287 11 50,000 5,185 5,535 Thailand 346 366 425 92 5,394 69,547 72,769 Vietnam 123 138 156 144 1,374 88,856 97,816 Japan 5,897 5,964 5,150 17 46,107 126,449 123,686 China 7,322 8,227 9,020 91 5,434 1,348,068 1,398,165 India 1,838 1,825 1,973 139 1,523 1,242,579 1,414,971 Russia 1,899 2,022 2,214 53 13,335 142,768 139,279 South Africa 402 384 376 72 7,951 50,495 53,497.Source: Made by IMF World Economic Outlook Database (April 2013),United Nations,World Population Prospects2010 3

1 Overview of the Pacific Alliance 2FTAs between member countries of Pacific Alliance and observing countries Member country Early observer Observer Mexico Colombia Peru Chile Costa Rica Panama Japan Mexico (Jan. 1995) (Feb.2012) (Aug. 1999) (Jan. 1995) None (April 2005) Colombia (Jan. 1995) (Jan. 2006) (May 2009) Essentially agreed upon Under negotiation Under negotiation Peru (Feb.2012) (Jan. 2006) (Mar. 2009) (June 2013) (May 2012) (Mar. 2012) Chile (Aug. 1999) (May 2009) (Mar. 2009) (Feb. 2002) (Mar. 2008) (Sep. 2007) Costa Rica (Jan. 1995) Essentially agreed upon (June 2013) (Feb. 2002) (Nov. 2008) None Panama None Under negotiation (May 2012) (Mar. 2008) (Nov. 2008) None Japan (April 2005) Under negotiation (Mar. 2012) (Sep. 2007) None None Already taken effect Source: Data from SICE of the Organization of American States (OAS) and trade ministry website of each country, etc. 4

1 Overview of the Pacific Alliance 3 Differences of system structure from Mercosur Mercosur -Common external tariffs created while free trade expected inside the region -Protectionism increased in recent years Image of differences Pacific Alliance -No common external tariffs and elimination of tariffs for 92% of products inside the region -Exceptional sensitive products are the same throughout the region (among member countries) -Increased transparency in the region 5

1 Overview of the Pacific Alliance 4 The ease in doing business in Latin America Total The annual report of the World Bank Doing Business 2013 2007 2012 2013 Chile 28 39 37 Peru 65 41 43 Colombia 79 42 45 Mexico 43 53 48 Panama 81 61 61 Urguay 64 90 89 Paraguay 112 102 103 Costa Rica 105 121 110 Argentina 101 113 124 Brazil 121 126 130 Ecuador 123 130 139 Venezuela 164 177 180 Paying Taxes Rank Payments (number per year) Time (hours per year) Profit tax (%) Source : World Bank Labor tax and contributions (%) Other taxes (%) Total tax rate (% profit) Chile 36 6 291 21.1 3.8 3.2 28.1 Peru 85 9 293 26.7 11 2.8 40.5 Colombia 99 9 203 19.2 28.8 26.4 74.4 Mexico 107 6 337 24.6 26.5 1.4 52.5 China 122 7 338 6.2 49.6 7.9 63.7 Costa Rica 125 23 226 18.9 29.5 6.6 55 Japan 127 14 330 26.9 17.4 5.6 50 Uruguay 140 33 310 23.6 15.6 2.9 42 Argentina 149 9 405 2.7 29.4 76.2 108.3 Brazil 156 9 2,600 24.6 40.8 3.8 69.3 Venezuela 185 71 792 6.1 18 38.5 62.7 6

2. The Pacific Alliance to Japan -The 13th Survey on Business Conditions of Japanese Companies in Latin America- 7

2 The Pacific Alliance to Japan 1 Companies by industry Distribution 17% Securities 23% Distribution 23% Banking 5% Securities 17% Real estate 3% Agriculture and forestry 7% Telecommunica tions/it 3% PERU Unknown 3% COLOMBIA Sales 20% Telecommunicat ions/it 3% Manufacturing industry 20% Sales 26% Fishing and fisheries 4% Manufacturing industry 26% Agriculture and forestry 2% Telecommunicati ons/it 3% Fishing and fisheries 5% Unknown 2% Unknown 2% Transportation/ warehouse 5% Telecommunicati ons/it 0% Trading 1% Trading 21% Banking 0% Securities 5% Fishing and fisheries 5% Manufacturing industry 37% CHILE Securities Banking 2% Mining 2% 2% MEXICO Real estate 0% Distribution 12% Other 2% Sales 30% Construction/plan t 1% Manufacturing industry 24% Sales 37% 8

2 The Pacific Alliance to Japan 2Japan exports to Pacific Alliance Japan - Exports to Peru Millions of US Dollars Japan - Exports to Chile % Share % Change % Share % Change HS Description 2010 2011 2012 2010 2011 2012 12/11 HS Description 2010 2011 2012 2010 2011 2012 12/11 Peru 995 918 1,038 0.1 0.1 0.1 13.0 Chile 2,725 2,343 1,993 0.4 0.3 0.3-14.9 Motor Cars And Other Motor 8703 Vehicles Motor Vehicles For The 8704 Transport Of Goods New Pneumatic Tires, Of 4011 Rubber Motor Vehicles For The 8702 Transport Of Ten Or More Flat-Rolled Iron Or Nonalloy 7210 Steel Products, 600 M 412 302 417 41.4 32.9 40.2 38.3 8703 146 146 132 14.7 15.9 12.7-9.5 2710 55 76 89 5.5 8.2 8.5 17.1 4011 65 70 75 6.5 7.6 7.2 7.3 8704 54 58 45 5.4 6.3 4.4-21.7 8429 Motor Cars And Other Motor Vehicles Petroleum Oils& Oils From Bituminous Mins New Pneumatic Tires, Of Rubber Motor Vehicles For The Transport Of Goods Self-Propelled Bulldozers, Angledozers, Graders 1,065 800 651 39.1 34.2 32.7-18.7 835 577 322 30.7 24.6 16.2-44.1 114 154 199 4.2 6.6 10.0 29.2 158 189 182 5.8 8.1 9.2-3.7 119 130 107 4.4 5.5 5.4-17.2 Japan - Exports to Colombia Japan - Exports to Mexico % Share % Change % Share % Change HS Description 2010 2011 2012 2010 2011 2012 12/11 HS Description 2010 2011 2012 2010 2011 2012 12/11 Colombia 1,242 1,500 1,502 0.2 0.2 0.2 0.1 Mexico 9,580 10,238 10,569 1.2 1.2 1.3 3.2 Motor Vehicles For The 8704 Transport Of Goods Motor Cars And Other Motor 8703 Vehicles New Pneumatic Tires, Of 4011 Rubber Parts And Accessories For 8708 Tractors, Public-Transpo Flat-Rolled Iron Or Nonalloy 7208 Steel Products, 600 M Source of Data:Japan Customs 211 357 292 17.0 23.8 19.5-18.2 8708 Parts And Accessories For Tractors, Public-Transpo 211 213 255 17.0 14.2 17.0 19.5 9013 Liquid Crystal Devices Nesoi; Lasers 97 115 141 7.8 7.7 9.4 22.2 8703 Motor Cars And Other Motor Vehicles 77 85 91 6.2 5.7 6.1 7.5 8529 Parts For Television, Radio And Radar Apparatus 45 76 90 3.7 5.1 6.0 18.4 7210 Flat-Rolled Iron Or Nonalloy Steel Products, 600 M 1,711 1,933 2,016 17.9 18.9 19.1 4.3 469 863 962 4.9 8.4 9.1 11.5 998 1,002 847 10.4 9.8 8.0-15.4 958 695 613 10.0 6.8 5.8-11.8 392 437 417 4.1 4.3 4.0-4.5 9

2 The Pacific Alliance to Japan 3 Japan imports from Pacific Alliance Millions of US Dollars Japan - Imports from Peru Japan - Imports from Chile % Share % Change % Share % Change HS Description 2010 2011 2012 2010 2011 2012 12/11 HS Description 2010 2011 2012 2010 2011 2012 12/11 Peru 2,180 2,332 2,795 0.3 0.3 0.3 19.9 Chile 7,762 9,814 9,330 1.1 1.2 1.1-4.9 2603 2711 2301 Copper Ores And Concentrates Petroleum Gases And Other Gaseous Hydrocarbons Flours, Meals And Pellets, Of Meat Or Meat Offal, 1,292 1,242 1,349 59.2 53.3 48.3 8.6 2603 0 274 698 0.0 11.8 25.0 154.4 0303 204 136 173 9.4 5.8 6.2 27.1 4401 2608 Zinc Ores And Concentrates 184 173 123 8.4 7.4 4.4-29.0 0304 2710 Petroleum Oils& Oils From Bituminous Mins 135 81 101 6.2 3.5 3.6 24.8 2613 Copper Ores And Concentrates Fish, Frozen, Excluding Fish Fillets And Other Fish meat of heading 03.04 Fuel Wood In Logs, Faggots Etc.; Wood In Chips Fish Fillets And Other Fish Meat Molybdenum Ores And Concentrates 4,404 5,037 5,195 56.7 51.3 55.7 3.1 591 809 792 7.6 8.2 8.5-2.0 505 605 620 6.5 6.2 6.7 2.5 406 565 583 5.2 5.8 6.3 3.3 377 457 357 4.9 4.7 3.8-21.9 Japan - Imports from Colombia Japan - Imports from Mexico % Share % Change % Share % Change HS Description 2010 2011 2012 2010 2011 2012 12/11 HS Description 2010 2011 2012 2010 2011 2012 12/11 Colombia 541 696 452 0.1 0.1 0.1-35.1 Mexico 3,488 3,975 4,400 0.5 0.5 0.5 10.7 0901 0603 2101 Coffee, Whether Or Not Roasted Or Decaffeinated; Cut Flowers And Buds Suitable For Bouquets Or Orna Extracts, Essences And Concentrates Of Coffee, Tea Coal; Briquettes, Ovoids And 2701 Similar Solid Fuels Manufactured from coal Insecticides, Rodenticides, 3808 Fungicides, Herbicides Source of Data:Japan Customs 356 413 249 65.8 59.4 55.1-39.8 9018 72 74 90 13.2 10.6 19.9 21.9 8517 16 17 19 2.9 2.5 4.2 8.2 7106 7 48 18 1.3 6.9 3.9-63.5 0203 4 6 17 0.8 0.9 3.7 177.6 8703 Instruments And Appliances Used In Medical, Surgic Electrical Apparatus For Line Telephony Silver (Including Silver Plated With Gold Or Platinum) Meat Of Swine (Pork), Fresh, Chilled Or Frozen Motor Cars And Other Motor Vehicles 327 391 470 9.4 9.9 10.7 20.1 187 219 359 5.4 5.5 8.2 64.1 216 433 305 6.2 10.9 6.9-29.6 246 274 302 7.1 6.9 6.9 10.0 160 159 247 4.6 4.0 5.6 55.5 10

2 The Pacific Alliance to Japan 4 74% of Japanese companies in Pacific Alliance are in the black Jan-Dec 2012 Operating Profit Forecast Profit Break even Loss Latin America Total(n=312) 64.7 19.9 15.4 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Pacific Alliance(n=129) 74.4 20.2 5.4 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Peru(n=9) 77.8 22.2 0.0 Colombia(n=11) 81.8 18.2 0.0 Chile(n=36) 77.8 22.2 0.0 Mexico(n=73) 71.2 19.2 9.6 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 11

2 The Pacific Alliance to Japan 5 Diffusion index (DI) values in Latin American countries Peru ranks highest 60 30 0-30 10.6 Latin America Total 33.3 31.6 27.3 19.5 3.3 2.2 Peru Mexico Colombia Chile Argentima Brazil Venezuela -60-58.3-90 12

2 The Pacific Alliance to Japan 6 The Outlook for Business in the Next One or Two Years(World) China ASEAN Southwest Asia Oceania USA Central & South America Pacific Alliance Western Europe Central & Eastern Europe Africa Expansion 41.9 45.9 44.0 52.3 57.1 58.7 61.4 65.0 61.7 77.6 China ASEAN Southwest Asia Oceania USA Central & South America Pacific Alliance Western Europe Central & Eastern Europe Africa 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 1.5 2.0 1.9 1.9 Reduction & Transfer / withdrawal 2.3 2.7 0.0 2.8 4.0 0.0 0.0 0.0 0.9 5.5 0.5 1.4 6.9 1.8 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 0.4 Reduction Transfer / withdrawal 2.6 13

2 The Pacific Alliance to Japan 7 Current Management Problems Intellectual property problems (including counterfeits) Other Protectionist policy (import restrictions and tariff increase, etc.) 70.0 Foreign capital policy (investment restrictions, etc.) 60.0 Financing (including restrictions on 50.0 foreign capital) Customs clearance and logistics Security deterioration 40.0 30.0 20.0 10.0 0.0 Remittance restrictions (including restrictions of foreign currency ratio) Labor problems (lawsuits, etc.) Fraud and corruption of government officials Increase of labor costs Rules of origin Increase of raw material costs Exchange rate fluctuation Environmental regulation Energy supply Taxation system problems Central & South America Pacific Alliance Peru 14

2. 2 The Pacific Alliance to Japan 8 Peruvian environment suitable for foreign investment (voices of Japanese companies who have already launched operation in Peru) 1. Member country of EPA (effective March 2012) 2. Proactively cooperative to the Business Environment Building Subcommittee, convening follow-up seminars 3. Supportive of trade liberalization: participant country in TPP negotiations and the Pacific Alliance 4. National treatment of foreign direct investment (FDI) (liberalized except for some sectors such as broadcasting and the military) 5. Pro-Japan country, trust placed in Japanese descendants 6. Well-maintained public safety, abundant in tourism resources 7. Promising market (Lima is the largest city on the Pacific coast in Central and South America, growing consumption) 8. Liberalized and stable financial institutions (dollar accounts allowed) 9. Expectations for Peruvian Government (1) Deregulation in the field of labor (ratio of foreigners, deregulation of profitsharing system) (2) Enhancement of industry development measures (introducing preferential taxation, building industrial parks) (3) Conclusion of double taxation agreement (4) Building of social and economic infrastructure (ports, logistics, roads, etc.) (5) Collection of more statistical data (detailed data regarding FDI) COPYRIGHT 2013 JETRO. All rights reserved. Source: Hearing by JETRO Lima 15

3.Changes and hopes brought about by the Pacific Alliance -Changes to the business environment- 16

3.Changes and hopes brought about by the Pacific Alliance 1Revision of intra-regional tariffs- from bilateral to multilateral rules <In the existing bilateral FTAs > No tariff benefit for some trade items in the region (E.g. export of automobiles from Mexico to Peru) Schedule for Mexico-Peru FTA tariff elimination (Major export items from Mexico to Peru) 3-1 Revision of intra-regional tariffs - from bilateral to multilateral rules (Unit:%) Name of product MFN Base Category 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Color TVs 6.0 12.0 A 0.0 Automobiles 6.0 12.0 C 10.8 9.6 8.4 7.2 6.0 4.8 3.6 2.4 1.2 0.0 Medical products 6.0 12.0 A 0.0 Refrigerators 13.0 20.0 B 16.0 12.0 8.0 4.0 0.0 Shampoo 6.0 12.0 B 9.6 7.2 4.8 2.4 0.0 (Note) In cases that the FTA tax rate is higher than the general (MFN) tax rate, the MFN rate is applied. Tariffs will be reduced on January 1 every year following the year it takes effect. (Source) Created based on Mexico-Peru FTA provisions extracted from the tariff rate search function of the Latin American Integration Association (ALADI) website. <If a schedule is set for multilateral tariff cuts > In the case that Peru does not specify automobiles as a sensitive item in a round of the Pacific Alliance: The export tariff for Mexican automobiles (6%) may be abolished within 2013!! (Reference) Export of automobiles from Mexico to Peru (results in 2012) Nissan (13,191) + Volkswagen (675) + Chrysler (237) + Honda (61) = Total 14,164 (Unit: Cars) 17

3.Changes and hopes brought about by the Pacific Alliance 2 Unification of rules of origin (ROO) - from bilateral to multilateral rules <ROOs vary depending on the partners even for the same item> 1 Different ROO for individual partners must be identified 2 ROO requirements must be cleared between two partner countries (E.g.) ROO in the existing bilateral FTAs regarding export of automobiles (HS8703) from Mexico A. Mexico-Colombia FTA: 40 % TVM of RVC B. Mexico-Chile FTA : 32% TVM of RVC or 26% NCS of RVC C. Mexico-Peru FTA : 35% TVM of RVC TVM:FOB Transaction Value Method, NCS : Net Cost Standard, RVC: Regional Value Content <If ROO are unified among multilateral partner countries > 1 No need to understand individual rules but the unified rules in the alliance, making management easier!! 2 In addition to bilateral accumulation, production processes in all member countries can be accumulated as originating processes!! E.g. Automobiles assembled in Colombia using components made in Mexico can be exported to Peru as products originating in the Pacific Alliance 18

3.Changes and hopes brought about by the Pacific Alliance 3 Improvement of business environment Various kinds of deregulation measures related to trade and investment have been examined in working groups 1 Electronic certificate of origin 2 Collaboration of centralized contacts for trade procedures (Ventanilla Única) 3 Mutual authorization of Authorized Economic Operators (AEO) 4 Promotion of cooperation between customs authorities 5 Cooperation regarding the sanitary and phytosanitary (SPS) and technical barriers to trade (TBT) from a regulatory perspective (unification of standards, mutual authorization and technical cooperation) Facilitating mutual trade and investment between companies within in Pacific Alliance countries Promotion of trade and investment within the member countries Economic growth Expansion of market 19

3.Changes and hopes brought about by the Pacific Alliance 4 Expectation for leadership exercised by Peruvian Government Peru is an advanced country in terms of FTAs which has trade agreements in effect with 50 countries. 90% of total trade is with FTA partners. With regard to the business environment, Peru ranks second in Latin America. It has been highly evaluated internationally in the fields of investor protection and creditworthiness. If trade within the Pacific Alliance region is further liberalized, expansion of Peruvian exports will accelerate. This will also build an environment where Japanese companies, with advanced technologies and high capability to create valueadded products, can collaborate with Peruvian companies to enter new markets within the region. From this perspective, it is expected the Peruvian Government will exercise leadership in negotiations for trade liberalization. 20

Thank you very much! Hiroaki Isobe Executive Vice President of JETRO Contact: Tel:03-3582-4690 (Latin America Div., Overseas Research Dept.) http://www.jetro.go.jp 21