Central America
Central America’s external ties
The dynamism of the isthmus’s external trade relations was evident over the last few weeks, with
the signing of the Single Free Trade Agreement (FTA) with Mexico, the launch of the modernization
of the agreement between Costa Rica and Canada, and the close of the negotiations between
Guatemala and Peru.
FTA with Mexico
The Central American countries signed the FTA with Mexico in El Salvador, November 22. The
negotiations, which had been initiated in May 2010 reached a conclusion last October after seven
rounds. As mentioned in INTAL Monthly Newsletter No. 183, the agreement not only harmonizes
Costa Rica, Nicaragua, and the Northern Triangle’s treaties with Mexico, but also updates the rules
by streamlining operations for trade in goods and services, and facilitating the flow of investments.
The FTA’s most important achievements include the definition of the rules of origin, allowing the
use of inputs from any of the five countries for exports to Mexico, and the preferential access to
products formerly excluded in the original treaties, including sugar.
Although trade with Mexico has a low share in the isthmus’s total flows, the landscape changes if
we exclude United States, Central America’s main trading partner. It should also be stressed that
trade has expanded at a healthy pace in recent years (19.5% c.a.) between 2004 and 2008). Once
the new agreement enters into force, fresh impetus for trade is expected, as well as greater
diversification of the products traded.
More information at the following links: [1]; [2].
Related articles
•
INTAL Monthly Newsletter No. 183: “Central America-Mexico FTAs converge,” November
2011.
Modernization of the Costa Rica–Canada FTA
The countries embarked on a process to update the FTA (in force since 2002) with the aim of
modernizing the rules and adjusting them to the realities of production.
In 2010, a preparatory work was produced, identifying the areas to be negotiated, namely:
e-commerce, financial services, investment, government procurement, and market access.
During the Canadian prime minister’s visit to Costa Rica in August 2011, four negotiating rounds
were planned that are expected to be completed by mid-2012, ten years after the FTA came into
force.
The first round was held November 10. It discussed issues such as dispute settlement, electronic
certification, technical barriers to trade, and greater cumulation of origin. It also identified areas
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INTAL Monthly Newsletter N° 184 - December 2011 - All rights reserved
Central America
where there must be improvements in trade facilitation and other issues covered, such as
institutional services and arrangements. Among the more controversial matters was the Costa
Rican proposal to include free-trade-zone production in free trade and the easing of rules of origin
in textiles. Last, it analyzed several normative texts and identified follow-up actions for the next
round to be held in February in San José, Costa Rica.
As mentioned in INTAL Monthly Newsletter No. 181, while the isthmus is of no great significance to
Canadian trade flows, the modernization of the FTA with Costa Rica, as well as the recently-signed
agreement with Honduras and the other negotiations Canada is holding in Latin America, are part
of a broader strategy of deepening ties with the region, launched in 2007.
Trade between Costa Rica and Canada has seen great expansion in recent years. Most of the growth
between 2000 and 2008 was explained by rising Costa Rican imports from Canada, resulting in a
growing bilateral deficit for the Central American economy (US$105.6 million in 2008). Trade
between Costa Rica and Canada peaked in 2009, when flows totaled US$209.5 million, surpassing
late-1990s levels. In 2010, once the contraction caused by the international crisis had been
overcome, trade recovered, but this time with a greater share of Costa Rican exports to Canada,
which more than doubled in a year (Graph 1).
Graph 1. Evolution of Costa Rica’s trade with Canada, 1994-2010
In millions of US$
Source: Based on SIECA data.
Over half Costa Rica’s external sales to Canada are accounted for by electrical cables, cane or beet
sugar, and orthopedic items. Other relevant exports mainly feature fruit and vegetables. Purchases
include wheat, vegetables, paper, mineral fertilizers, automobiles, and medicines. Imports from
this destination, it should be noted, show greater diversification than shipments to it (Table 1).
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Central America
Table 1. Composition of Costa Rica’s trade with Canada, 2010
Total and accumulated percentage shares
Exports
Description
Share
Accumulated
Wires, cables, and other
20.4%
insulated electrical conductors
20.4%
Cane or beet sugar, and
chemically pure sucrose
16.1%
36.4%
Orthopedic items and
14.4%
appliances, prosthetic devices,
hearing aids
50.8%
Coffee
8.5%
59.2%
Tires
7.0%
66.3%
Dates, figs, pineapples,
avocadoes, guavas, mangos
5.3%
71.6%
Live plants, cuttings, and
grafts; mycelia
4.0%
75.6%
Books, leaflets, and similar
printed matter
3.5%
79.0%
Cassava roots, sweet potatoes 2.1%
and similar roots and tubers
81.2%
Vegetables, fresh or
refrigerated
1.9%
83.0%
Others
17.0%
100.0%
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INTAL Monthly Newsletter N° 184 - December 2011 - All rights reserved
Central America
Imports
Description
Share
Accumulated
Wheat and meslin
11.6%
11.6%
Other prepared or preserved
vegetables
9.5%
21.1%
Newsprint in rolls or sheets
8.2%
29.3%
Mineral or chemical fertilizers 6.9%
36.2%
Automobiles for personal
transport
6.4%
42.6%
Medicines
4.8%
47.4%
Pork meat
4.1%
51.5%
Malt (barley or other cereals)
and roasted malt
3.2%
54.7%
Potassium-based mineral or
chemical fertilizers
2.7%
57.5%
Boxes, bags, and other paper,
cardboard, etc. packaging
1.6%
59.1%
Others
40.9%
100.0%
Source: Based on SIECA data.
More information at the following links: [1]; [2]; [3].
Guatemala–Peru FTA
Guatemala signed a commercial agreement with Peru, December 6, as part of the Andean country’s
ongoing negotiations with the isthmus’s economies.
The negotiating process had started in November 2010 and had different modalities depending on
the aspect in question. There were thus bilateral discussions on market access, trade in services,
investment regulations and government procurement, tariff offers and the specific rules of origin,
with other areas being negotiated multilaterally. As detailed in INTAL Monthly Newsletter No. 177,
Costa Rica and Panama managed to close negotiations in May this year, while Honduras and
Panama still have outstanding issues.
According to Peru’s Ministry of Foreign Trade and Tourism, 95% of its exports will be able to enter
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Central America
Guatemala tariff-free in a five-year elimination period, with the Peruvian economy opening its
borders to 81% of products from the Central American country over the same period.
Guatemala exported US$52 million to Peru in 2010, equaling its historical high and resulting in a
surplus for the first time in ten years. Purchases from the Andean country had risen sharply
between 2004 and 2008, increasing tenfold to US$174 million. However, the international crisis
affected imports from this destination, and they did not recover in 2010 (Graph 2).
Graph 2. Evolution of Guatemala’s trade with Peru, 1994-2010
In millions of US$
Source: Based on SIECA data.
The composition of Guatemalan purchases from Peru goes a long way to explaining their evolution
over recent years. They mostly consist of petroleum oils and one might therefore infer that the price
of these products has driven the value of imports from the Andean country. However, in 2010,
there was a greater diversification of purchases: in addition to petroleum products zinc products,
plastics, inks, tires, etc. were also imported. As Table 2 shows, exports are highly concentrated in
sugar and natural rubber.
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Central America
Table 2. Composition of Guatemala’s trade with Peru, 2010
Total and accumulated percentage shares
Exports
Description
Share
Accumulated
Cane or beet sugar
71.3%
71.3%
Natural rubber
22.7%
94.0%
Bulldozers, graders, loaders,
excavators, etc.
1.7%
95.7%
Zinc waste and scrap
0.5%
96.2%
Flat-rolled iron or non-alloy
steel products
0.3%
96.5%
Articles for the transport or
packaging of plastic
0.3%
96.8%
Recyclable paper or cardboard 0.3%
97.1%
Perfumes and toilet waters
0.3%
97.3%
Machinery for working rubber 0.2%
or plastic
97.6%
Other papers, cardboards
0.2%
97.8%
Others
2.2%
100.0%
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Central America
Imports
Description
Share
Accumulated
Petroleum or bituminous
mineral oils
15.9%
15.9%
Zinc plates, sheets, and strips
11.6%
27.4%
Other non-cellular plastic and 9.4%
unreinforced plates, sheets,
film, foil, and strips
36.8%
Unwrought zinc
8.7%
45.6%
Printing inks, and inks for
writing or drawing
4.8%
50.3%
New rubber tires
3.7%
54.0%
Retreaded or used tires
3.6%
57.6%
Safety glass consisting of
toughened glass
2.9%
60.5%
Generator sets and electric
rotary converters
2.5%
63.0%
Plant- or animal-based
colorings
2.0%
65.0%
Others
35.0%
100.0%
Source: Based on SIECA data.
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INTAL Monthly Newsletter N° 184 - December 2011 - All rights reserved