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 Salvador's 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

• 19,652 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
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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