Toledo said he had had 'sleepless nights' over signing the deal due to the asymmetry of trade between Peru and Mercosur. Peru had a negative trade balance of US$946m with Mercosur in 2002: exports were worth US$212m (91% of these to Brazil) while imports totalled US$1.16bn. As much as 97% of Peru's exports to Brazil are minerals like zinc or copper.
Peru is important to Brazil for two reasons. Firstly, it fits neatly into Lula's hemispheric vision. Brazil is keen to assert its regional leadership ahead of free-trade talks with the US towards the Free Trade Area of the Americas: 'Peru's integration with Mercosur, under the `4 plus 1' scheme, signals a gesture that can change South America's physiognomy,' Lula said.
Secondly, Brazil sees Peru as an export gateway to the Asia-Pacific region. The Brazilian Banco Nacional de Desenvolvimento Econômico e Social (BNDES) has agreed to finance two massive infrastructure projects: one linking Peru's northern coast to the Amazon free port of Manaus; the other a Pacific corridor linking Peru's southern coast to Brazil. For the time being, Brazil's proposal to allow goods from Manaus to be exported through Peru has been put on the backburner.
From Peru's point of view, the most attractive option is supplying northern Brazil's consumer market, which is closer to Peru than the Brazilian industrial centres. There are half a million inhabitants on the border - small by Brazil's standards but significant enough by Peru's.
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