The agreement is seen as a political boost for Garcia, right [AFP]

Alan Garcia and George Bush, the presidents of Peru and the US, have signed a free trade agreement between their two countries.

Both men hailed the deal on Friday saying it would stimulate exports and create jobs.

"The bill will help increase opportunities for workers, ranchers, farmers and business in both our countries," Bush said, standing with Garcia.


"The champions of false populism will use any failure to approve these trade agreements as evidence that America will never treat other democracies in the region as full partners," Bush said in a veiled attack on Hugo Chavez, the president of Venezuela, who has strongly opposed free trade agreements with the US.

Garcia said: "It's a great day for democracy and social justice and freedom. On the contrary, it's a bad day for authoritarianism and those who against the democracy and free trade."

Bush used the signing ceremony in Washington to urge US politicians to pass similar accords with Panama and Colombia, saying that all of Latin America was watching "to see what this congress will do when it comes to how we treat our friends".

The deal is
an economic and political coup for Garcia who promises the pact will usher in a foreign investment windfall, stimulate exports and create a million jobs.

Farmers concern

The agreement removes duties on almost $9bn in annual trade between Peru and the US, but some say the deal could be devastating for farmers in the Andean country.

Agriculture employs nearly a quarter of Peru's 27 million people and under the agreement, more than 80 per cent of US-made goods and products coming into Peru will become duty-free overnight.

The influx of US subsidised goods particularly produce like wheat, maize and cotton have left many Peruvian farmers sceptical about how this pact will benefit them.

"We don't know exactly when this agreement bringing trade with other countries will fully come into place - so that we can start exporting our national products," Benedicto Romani Quispe, a maize farmer, said.

All but a fraction of Peru's exports already come into the US under a separate trade agreement passed in the 1990s and some analysts say the new pact will not generate new revenues.

"It will force farmers from their land to grow illicit crops," Stephanie Burgos of Oxfam said.

Vegetable farmers in the US fear they will also lose business, but unlike Peruvian farmers, they are entitled to $11bn in annual government subsidies.

'Political motivation'

"Economically when you look at it there are definitely more losers than winners," Burgos says. "So when you ask the question why would this occur I think the motivation is more a political one."

Garcia pointed out the free trade agreement was modified under pressure from the Democratic-controlled congress in May to take into account environmental and human rights concerns.

"It has been enhanced in the dialogue with the US congress, which leads to an extension for the environment and labour chapters, which will favour the poor, the population in the Andes and the small enterprises," he said.

Bilateral trade between the US and Peru amounted to $8.8bn in 2006, according to US government data.

Source: Al Jazeera and agencies