Milk production in Peru has
been steadily increasing at a rate of 7% per year over recent years, and the same
rate of growth is expected for 2000. Nevertheless, this recent expansion disguises
underlying weaknesses in the nation’s dairy industry. Peru remains heavily dependent
on imported dairy products. New Zealand is one of the leading sources of milk
and cheese, although substantial amounts of both also come from the US.

The lack of investment in
Peru’s dairy industry has resulted in a declining cattle population. According
to FAO statistics, the number of producing dairy cattle dropped from 553,017
in 1996 to 520,235 in 1999. Until profit margins improve, it is unlikely that
dairy herds will increase. Recovery of the dairy industry is also hampered by
the nation’s ongoing recession, which has resulted in a 4 to 6 percent drop
in overall consumption over the past 18 months.

Even though the number of
cattle in production has decreased in recent years however, total milk production
has actually increased. In 1995, production stood at 857,718 metric tonnes,
whereas in 1999 it reached 1,013,260 metric tonnes. Increased production can
be traced to improved production techniques and technology on the medium to
large dairy farms. Milk yields rose from 15,210 hectograms per animal in 1995
to 19,477 in 1999.

The demand for milk in Peru
stands at about 2.5m litres per year and the nation’s dairy industry produces
only half that amount at present. Guillermo Tomatis, head of Peru’s Holstein
Raisers Association, maintains that industry growth has been stunted by the
importation into the domestic market of dairy products from nations which subsidise
their dairy industries. The Peruvian economy is only beginning to emerge from
recession and the government simply does not have the resources to offer significant
subsidies. Tomatis maintains that, without subsidies or some form of protective
tariff, Peruvian dairy farmers simply cannot achieve an attractive level of

Dairy farmers in remote
areas of Peru are limited to selling cheese and butter because they are unable
to transport and sell their fresh milk. These small producers generally lack
the production technology needed to compete with imported products. Cheese production
declined slightly from a level of 6,141 metric tonnes in 1996 to 6,020 metric
tonnes in 1999. Tomatis and his association are therefore pressing the federal
government to raise tariffs on imported cheese and butter.

Protective tariffs and government
subsidies alone are not likely to stimulate investment in the dairy sector,
however. The government needs to establish an incentive program which underwrites
the technological advances that have already proven effective in improving yields.
Unfortunately though, the ongoing political turmoil in Peru makes it unlikely
that the government will be abe to implement any new dairy support programs
until well into 2001.

Statistical Source: FAO