CAFTA OVERVIEW


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CAFTA OVERVIEW

• Patricia Wagner

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Central America at a Glance
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The CAFTA-DR Region at a Glance

• 13th Largest Market for U.S. Exports
• U.S. Exports 19.6 Billion (2006)
• Larger Market Than India Russia and Indonesia
  combined
  
• Overall Population 49 million

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Why Export to Central America
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Why Export to theCAFTA Region

• 40 of Regions Imports Are From the U.S.
• On-going Market Liberalization
• Growing U.S. Hispanic Population
• Proximity and Receptivity to U.S.
• Stable Democratic Governments

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Myth vs. Reality Then Now
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Myths vs. RealityThe Region Then

• Banana Republics
• Civil war
• Political Unrest
• Traditional Agricultural Economies
• Economic Instability

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Myths vs. RealityThe Region Now

• Stable Democracies
• Sustainable Economies
• Tourism and Services
• Attractive Niche Markets
• Development of Non-Traditional Sectors

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Central America Trade Data
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U.S. Exports to CAFTA-DR Countries
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CAFTA Region at a GlanceGross Domestic Product
Source Summa Magazine. Sep. 2006
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CAFTA Region at a GlanceGrowth Rates 2006
Source Country Central Banks
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U.S. Exports to CAFTA-DR Countries
Apparel Computers and Electronics and Fabric
Mill Products Account for Nearly Half of the
Total U.S. Manufactured Exports to DR-CAFTA
Markets.
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Challenges

• Corruption
• Education
• IPR Protection
• Security
• Start-ups SMEs
• Leadership

• Financial Reform
• Respect for Contracts
• Investment Protection
• Judicial Reform
• Export Promotion

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CAFTA Countries Highlights
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CAFTA - DR
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CAFTA-DR DatesApproval/Implementation

• Legislatures Approval Implementation
• El Salvador 12/17/2004 3/1/2006
• Honduras 03/04/2005 4/1/2006
• Guatemala 03/11/2005 7/1/2006
• U.S.A. 07/28/2005 8/2/2005
• Nicaragua 10/11/2005 4/1/2006
• DR 09/06/2005 1/31/2007
• Costa Rica 10/07/2007 2/29/2008

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El Salvador Highlights

• Slightly smaller than Massachusetts
• Democratically-elected Government
• President Elias Saca (2004)
• Smallest country in Central
• America
• 3rd largest economy
• Remittances make up 15 of GDP
• Largest airport in the region

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El Salvador Highlights

• Smallest Country in CA Densely Populated
• Over 2 Million Salvadorans in U.S.
• Dollarized Economy
• U.S. is El Salvadors Leading Trading Partner
  (41 import market share)
  
• First country to implement CAFTA-DR (March 1
  2006)
  
• increase in U.S. exports since CAFTA entry into
  force 16.3

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Guatemala Highlights

• Largest Economy in CA
• Economy Nearly Completely Privatized
• Relatively Low Tariffs (1-17) for Almost All
  Products
  
• Increase in U.S. exports since CAFTA entry into
  force 17.5
  

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Guatemala Highlights

• In 2006 remittances (US 3.6 Billion) accounted
  for 10 of the GDP
  
• Implemented DR-CAFTA on July 1 2006
• Over 1.3 Million Guatemalans live in the U.S.

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Nicaragua Highlights

• Safest Country in Central America
• Price Controls Phased-Out
• Strong Privatization Program
• Rich in Natural Resources
• Lack of Diversity in Sector
• Development
• Post CAFTA increase in imports from the U.S.
  13.2
  

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Nicaragua Highlights

• Democratically-elected Government
• President Daniel Ortega January 07
  Policies
  
• Constitutional Government
• Formal Independent Court System

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Nicaragua Highlights

• Lowest Wage Rates in CA
• Benefiting most from CAFTA... early days (13.2
  rise in imports from U.S. 17.3 percent increase
  in exports to U.S.)
  
• Economic Diversification Just Beginning
• Needs Infrastructure
• New Government Words and Deeds

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Honduras Highlights

• Competitive Labor Costs
• U.S. Accounts for 50 of All Foreign Trade
• Maquiladora Industry Accounts for 15 of GDP and
  11 of Exports

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Honduras Highlights

• Largest Port in CA
• U.S. Has 40 of FDI in Honduras
• increase in U.S. exports since CAFTA entry into
  force 15.5

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Costa Rica Highlights

• 19652 square miles (size of West
  Virginia)
  
• 95 literacy rate
• Spanish Language (English Widely Spoken)
• Democratic Republic
• Life Expectancy 76 years

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Costa Rica Highlights

• President Oscar Arias May 2006
• Tourism is key for its economy
• Poor infrastructure
• 70 of FDI comes from the United States. (CINDE)
• High-tech companies and call centers/large
  employers
  

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The CAFTA-DR Region is an Open Market

• Tariffs Are Relatively Low (1-17) for products
  that are not duty-free under CAFTA
  
• VAT Averages - 12-16
• Few Import Restrictions
• Standards Are Similar to the U.S.
• Labeling/Testing Not a Problem
• Qualified Agents and Distributors Available
• Growing English Use in Business

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CAFTA-DRU.S. Benefits

• Comprehensive reciprocal trade agreement not
  unilateral like CBI/CBTPA
  
• More than 80 of U.S. manufactured exports
  duty-free immediately remaining over 10 years
  
• Market access to the services market such as
  telecommunications insurance
  
• Moving toward a better business and investment
  climate transparency procurement investment
  protection

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CAFTA-DRWhats Happening

• U.S. firms have regionalized operations
• Procter Gamble Abbott Labs
• Central American firms are regionalizing
• La Fragua/Paiz of Guatemala Grupo Roble Banco
  Cuscatlan and TACA of El Salvador BAC/GE and
  Banco Uno of Nicaragua COPA of Panama Grupo M
  Costa Rica
• Regionalization Power Grid Customs Highway
  
  
• Integration Security
• Countries Negotiating as a Group

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Opportunities Best Prospect Industries

• Automotive Parts and Service Equipment
• Food Processing Packaging Equipment
• Travel Tourism
• Hotel and Restaurant Equipment
• Medical/Dental Equipment
• Education
• Print Graphics
• Construction Equipment

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External Forces

• Chinas Impact on the Maquila Sector
• Central America Total Dependence on Imported Oil
  Particularly From Venezuela
  
• Increased Overseas Remittances
• El Salvador 2.8 Billion
• Guatemala 3.0 Billion
• Honduras 2.0 Billion
• Nicaragua 0.5 Billion
• Costa Rica 0.4 Billion

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Our Services in theCAFTA-DR Markets
COUNSELING AND ADVOCACY MARKET RESEARCH Indust
ry Sector Reports Market Insights
International Trade Leads Flexible Market
Research Country Commercial Guides FINDING
INTERNATIONAL PARTNERS Gold and Platinum Key Ser
vice International Partner Search
International Company Profile Contact
Lists TRADE EVENTS Catalog Shows Inter
national Buyer Program Trade Missions
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Useful ContactInformation

• U.S. Commercial Service in Central America
• www.buyusa.gov/centralamerica/en
• U.S. International Trade Administration
• www.export.gov
• Office of the United States Trade
  Representative
  
• www.ustr.gov
• USDOC CAFTA Website
• www.ita.doc.gov/cafta
• Trade Compliance Center U.S. Dept. of Commerce
• www.tcc.mac.doc.gov
• Cafta Documentation
• www.export.gov/fta (choose CAFTA)

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CS Central America Organization
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My contact info
Patricia Wagner Senior Commercial Officer Tel. (
011 502) 2326-4261 Fax. [phone] Emai
l Patricia.Wagner_at_mail.doc.gov
Web Page www.buyusa.gov/guatemala/en