About CAFTADR

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About CAFTA-DR   The Central America-Domini
can Republic-United States Free Trade Agreement,
which was signed on August 5, 2004, is designed
to eliminate tariffs and trade barriers and
expand regional opportunities for the workers,
manufacturers, consumers, farmers, ranchers and
service providers of all the countries. CAFTA-DR
immediately eliminates tariffs on more than 80
percent of U.S. exports of consumer and
industrial products, phasing out the rest over 10
years. Eighty percent of CAFTA-DR imports already
enter the United States duty free under the
Caribbean Basin Initiative, Generalized System of
Preferences and Most Favored Nation programs th
e CAFTA-DR provides reciprocal access for U.S.
products and services.   In addition to tariff r
eduction, CAFTA-DR provides new market access for
U.S. consumer and industrial products and
agricultural products. It also provides
unprecedented access to government procurement in
the partner countries, liberalizes the services
sectors, protects U.S. investments in the region,
and strengthens protections for U.S. patents,
trademarks, and trade secrets. The Agreement
covers customs facilitation and provides benefits
to small and medium-sized exporters.
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Why CAFTA-DR?   Imagine an export market of near
ly 46 million people that is one of the most sta
ble regions in the world, with democratically
elected governments in place in each country
  You can travel to directly -- in a matter of
a few hours from such major U.S. airline hubs as
Atlanta, Miami, Dallas, Houston, Washington, DC,
and Los Angeles and Denver.   Represents the 13
th largest destination for U.S. goods worldwide,
and where the U.S. was the dominant exporter at
US19.6 billion in 2006 takes in more U.S.
product than Indonesia, Russia, and India
combined and, perhaps most importantly, under
the recently implemented free trade agreement, an
area to which more than 80 percent of U.S. goods
can now be imported duty-free.
  Six countries that make up the Central American
-Dominican Republic Free Trade Agreement
(CAFTA-DR) the Dominican Republic, Guatemala, El
Salvador, Costa Rica, Honduras and Nicaragua. It
should be noted that Costa Rica has not yet
approved the agreement, which will be the subject
of a national referendum this month.
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Introduction to the CAFTA-DR market
Central America connects to the Colombian Pacific
Lowlands in northwestern South America.
Alternatively, the Trans-Mexican Volcanic Belt
delimits the region on the north. Central America
has an area of some 592,000 square kilometers
(367 851.746 miles). The Pacific Ocean lies to t
he southwest, the Caribbean Sea lies to the
northeast, and the Gulf of Mexico lies to the
north.   Central America has a population of nea
rly 36.5 million add to that the Dominican
Republic and the population for the CAFTA-DR
Region is nearly 45.8 million people and an
aggregate GDP of nearly 160 billion. The United
States is Central America's biggest trading
partner exporting nearly 19.6 billion in goods
to Central America in 2006, more than U.S.
exports to Russia, India and Indonesia combined.
Two-way trade was over 32 billion in 2006. This
strong trading partnership helped to increase
Central America's 2004 per capita income of about
1,240.
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HONDURAS
    Strengthening Honduras' IPR protection regim
e to conform with and in many areas exceed WTO
norms. CAFTA-DR obligations also provide stronger
deterrence to piracy and counterfeiting by
criminalizing end-user piracy and requiring
Honduras to authorize the seizure, forfeiture,
and destruction of counterfeit and pirated goods
and the equipment used to produce them.
  U.S. Investment in Honduran Financial Sector
CAFTA has expanded regional opportunities for
financial service providers, particularly in the
commercial banking sector. Implementation of th
is FTA has encouraged U.S. corporate groups such
as GE Finance and Citigroup to finalize important
acquisitions as part of their expansion
strategies for emerging markets. The country is
committed to promote regulatory transparency in
financial services, and banking supervision has
also been strengthened through Honduras National
Banking Commission.   In an effort to facilitat
e dissemination of public bidding opportunities,
the Honduran government recently established an
online Contracting and Procurement Information
System known as "Honducompras", where companies
can obtain information on Product or service req
uirements for different government agencies
whether it be at the national, departmental, or
municipal level.     Honduras claims the larg
est port in Central America, Puerto Cortes, which
is part of the Container Security Initiative.
U.S. companies account for over 40 percent of
foreign direct investment. The U.S. is also the
chief trading partner for Honduras, accounting
for nearly half of the countrys trade.   U.S.
exports to Honduras in 2006 amounted to 3.7
billion, up approximately 14 percent from the
previous year.
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GUATEMALA
In Guatemala CAFTA has been in the vision of
investors for more than 5 years. Investors are
establishing a presence and increasing their
operations in Guatemala as a platform to the
largest market in the region, the largest port of
entry to the SE of Mexico, Central America and a
great location to take advantage of the access
that DR-CAFTA offers to the U.S.
  Companies like WalMart are increasing their hol
dings in the last year. GE Capital and Citibank
have set up operations not only in Guatemala and
Honduras but also in all of Central America.
Citibank strategically bought Banco Uno for their
credit cards portfolio and Banco Cuscatlán for
the corporate business portfolio. GE Capital
bought BAC with a large regional presence and the
largest presence in Guatemala. They will be
focusing on housing development in the region.
  According to US Ambassador to Guatemala James D
erham Guatemala has become a very attractive
destination for foreign companies seeking to
operate and sell in Central America. It is
expected that direct investments in Guatemala for
2007 will reach 570 million dollars compared to
the 325 million dollars generated in 2006 and the
208 million in 2005.   Guatemala has the second
largest economy (37.9 billion GDP) in the
CAFTA-DR grouping. The economy has grown at a
solid pace over the last several years and
increased by 4.6 percent in 2006. U.S. exports to
the country are growing and amounted to 3.5
billion last year.
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EL SALVADOR
El Salvadors inward investment agency, PROESA
reported that from June 2004 to May 2006, El
Salvador attracted 56 foreign companies that
created 242.8 million in investment and 13,850
jobs, according to the National Agency for
Investment Promotion of El Salvador most of the
investments came from the textile and garment
industries, in which 33 companies created 172
million in investment and 7,233 jobs. Four
electronics/auto parts makers created 22 million
in investment and 3,000 jobs 10 call
center/business process outsourcing/ software
development firms created 17.1 million in
investment and 2,418 jobs three agro industry
firms created 16.5 million in investment and 554
jobs and five distribution centers invested
12.2 million and created 575 jobs. And the
businesses keep coming.   Saturn announced it w
ould invest 2 million in an auto components
operation in El Salvador, creating 500 jobs.
  Saturns Vice- president of Operations Mario Ok
ubo We found in El Salvador competitive and stab
le labor, a labor market open to foreign
investment, and government plans and private
initiative well focused on investment
attraction, said Okubo. CAFTA-DR also
contributed to Saturns choice of El Salvador,
according to the VP of Operations.
  El Salvador has the most open trade and investm
ent environment in Central America, according to
the Heritage Foundation. El Salvador has a
dollarized economy and enjoys excellent
macroeconomic stability, low inflation, and
relatively low interest rates. The U.S. is the
countrys leading trading partner, with a 40
percent import market share while consuming 57
percent of its exports. As the headquarters for
TACA Airlines, El Salvador serves as the hub for
air travel in the region.
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NICARAGUA
Nicaragua appears to be the early winner in
attracting new investment interest as a result of
the CAFTA hope, low labor costs, and relative
personal security. U.S. Cone Denim has planned
a 100 million textile investment (yarn of US
origin) that will create numerous jobs in
Nicaragua, with other companies looking at the
country thanks to the attention CAFTA has
brought. Nicaragua offers considerable business o
pportunities in the tourism sector that are
augmented by attractive tax incentives. Nicaragua
's emerging tourism industry allows for good
opportunities for those entrepreneurs who are
willing to make a long-term investment.
  The Millennium Challenge Corporation Compact, w
ith a total value of 175 million, was signed by
the US and Nicaraguan governments in July 2005,
and it promises to upgrade transportation
infrastructure both along the Pacific Corridor
highway and among rural secondary roads in order
to provide better links between producers and
commercial markets.   Besides tourism investmen
t there are other market opportunities in the
following sectors vehicles, auto parts and
equipment, construction equipment and materials,
consumable goods, computer equipment and
peripherals, telecommunication equipment and
services, medical and dental equipment,
agricultural inputs, food processing and
refrigeration equipment, wheat, yellow corn for
animal feed, and rice.   Nicaragua enjoys a rep
utation of safety and security and is attempting
to diversify its economy and shift to other forms
of production and services, particularly tourism.
The U.S. is the major investor, with Cone-Denim
recently initiating a 100 million plant near
Managua.
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COSTA RICA
Costa Rica used to be known principally as a
producer of bananas and coffee. Its principal
exports are still listed as coffee, bananas,
cocoa, sugar, lumber, wood products and beef. In
recent years, however the country has
successfully attracted important investments by
such companies as Intel Corporation, which
employs nearly 2,000 people at its custom built
300 million microprocessor plant Procter
Gamble, which is establishing its administrative
center for the Western Hemisphere in Costa Rica
and Abbott Laboratories and Baxter Healthcare
from the health care products industry likewise.
Manufacturing and industry's contribution to GDP
overtook agriculture over the course of the
1990s, led by foreign investment in Costa Rica's
free trade zones. Well over half of that
investment has come from the U.S. Tourism also is
booming, with the number of visitors up from
780,000 in 1996 through more than 1 million in
1999 to 1.5 million by 2004. Tourism now earns
more foreign exchange than bananas and coffee
combined.   The country has not discovered sourc
es of fossil fuels--apart from minor coal
deposits-- but its mountainous terrain and
abundant rainfall have permitted the construction
of a dozen hydroelectric power plants, making it
self-sufficient in all energy needs, except oil
for transportation. Costa Rica exports
electricity to Central America and has the
potential to become a major electricity exporter
if plans for new generating plants and a regional
distribution grid are realized. Mild climate and
trade winds make neither heating nor cooling
necessary, particularly in the highland cities
and towns where some 90 of the population
lives.   Costa Rica boasts the second largest pe
r capita income after El Salvador in the CAFTA-DR
region, along with the longest period of
political stability. Last year, the countrys
growth rate rose by 6.8 percent. The economy is
diversified with Tourism/hospitality services,
information technology, and medical
Equipment/instrumentation taking prominent roles.
English is the dominant second language, and over
one million tourists visit this country annually.
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DOMINICAN REPUBLIC
The United States remains a vital economic and
cultural partner of the Dominican Republic, with
over one million Dominicans residing in the US.
The U.S. and the Dominican Republic enjoy a very
strong commercial relationship. Bilateral trade
amounted to US 9.3 billion in 2005. This
represents United States exports totaling US4.7
billion and imports from the Dominican Republic
totaling US4.6 billion. Representing a 60
market share for U.S. goods. In the Western
Hemisphere, the Dominican Republic is the seventh
largest trading partner of the United States
(following Canada, Mexico, Brazil, Venezuela,
Chile and Colombia). Furthermore, the Dominican
Republic is the 28th largest commercial partner
of the United States in the world. During the
past two administrations, the government has
increasingly adopted policies directed toward
economic liberalization, including privatizing
most state-owned enterprises, improving
intellectual property rights protection, and
working constructively in multilateral form, such
as the World Trade Organization (WTO), the Free
Trade Area of the Americas (FTAA) and DR's recent
inclusion in the Central American Free Trade
Agreement. Dominican Republic has the largest eco
nomy of all six of the CAFTA-DR countries and is
the seventh largest trading partner for U.S.
goods in the Western Hemisphere, taking in 5.3
billion in U.S. goods in 2006, the countrys
economy jumped by 10.7 percent last year. During
the past two administrations, the government has
increasingly adopted policies directed toward
economic liberalization, including privatizing
most state-owned enterprises and improving
intellectual property rights protection.
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Does CAFTA-DR work?
The initial results of CAFTA-DR have been
impressive U.S. exports to these countries have
jumped compared to 2005 levels and, with the
exception of Nicaragua, U.S. trade deficits have
turned into trade surpluses, regionally and
bilaterally. For the four countries that
implemented CAFTA-DR during 2006, U.S. exports
were up 16 percent to El Salvador 13 percent
to Honduras 20 percent to Nicaragua 24 percent t
o Guatemala U.S. exports to the entire CAFTA-DR
region increased by 16 percent in 2006, and rose
by 11 percent for the first five months of 2007.
Leading U.S. exports included petroleum products,
machinery, textile fabrics/yarns, plastics,
grains, and motor vehicles.
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Benefits by State
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Benefits by State
The CAFTA-DR region, as an export destination,
represented the largest market for the state of
Florida in 2006. In addition, CAFTA-DR was the s
econd largest export market for North Carolina,
fifth largest for both Louisiana and Mississippi,
seventh largest for Georgia, and eighth largest
for New Mexico and Alabama. Florida was the la
rgest state exporter to the CAFTA-DR region in
2006, shipping 3.8 billion worth of merchandise
(19 percent, or almost one-fifth, of the U.S.
total to the region). Florida was followed by
Texas (2.5 billion, or 13 percent of the U.S.
total), then by North Carolina (1.8 billion, or
9 percent of the U.S. total), Louisiana (1.7
billion, or almost 9 percent), and California,
New York and Georgia, each with over 700
million, or nearly 4 percent each of the U.S.
total. In dollar terms, Texas exports to the C
AFTA-DR region grew the most of any states in
2006 compared to 2005, increasing by 495
million. Other states that had the largest dollar
increases were Florida (up 459 million in 2006),
Louisiana (up 352 million), Oregon (up 340
million), New York (up 180 million), North
Carolina (up 159 million), and Arizona (up 113
million). In percentage terms, several states
with modest 2005 base values had the fastest
growth to the CAFTA-DR countries in 2006, led by
Hawaii (up 2,377 percent), Alaska (1,487
percent), Wyoming (208 percent), and South Dakota
(158 percent). Other states with substantial
percentage increases in 2006 include Kansas (121
percent), Oregon (120 percent), Washington (88
percent), Arizona (72 percent), Colorado (59
percent), Nevada (51 percent), Nebraska (48
percent), New Hampshire (45 percent), Idaho (37
percent), Rhode Island (37 percent), Iowa (36
percent), and New York (33 percent).
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Benefits by State
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Best prospects by region
Honduras Telecommunications equipment and Service
s Security and Safety Equipment Automotive Parts
/ Service Equipment Franchising Textile Machine
ry, Equipment and fabrics Food Processing and Pac
kaging Computer and Peripherals Electrical Power
Systems and Components Hotel and Restaurant Equi
pment  
El Salvador  Consumer-Oriented Products, Wheat,
Rice, Corn, Soybeans Automotive Parts and Servic
e Equipment Electrical Power Systems Textile F
abrics and Machinery Telecommunications Equipmen
t Medical Equipment Travel and Tourism  
  Nicaragua Agricultural, Food Processing and
Refrigeration Equipment Corn (for animal feed)
Rice Wheat Tourism Vehicles, Auto Parts and
Equipment Construction Equipment and Materials
Computer Equipment Telecommunication Equipment
   
Guatemala Automotive Accessories and Service Eq
uipment Food processing and Packaging Construc
tion Equipment and Building Products
Hotel and Restaurant Equipment
Franchising Computers and Peripherals Apparel
Textile Machinery and Supplies
Medical Equipment Electric Power Systems
Costa Rica Consumer-Oriented Products, Wheat, R
ice, Corn, Soybeans Automotive Parts and Service
Equipment Electrical Power Systems Textile Fab
rics and Machinery Telecommunications Equipment
Medical Equipment Travel and Tourism
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Many Countries, One Program
The five countries of Central America are
increasingly seen as one regional market. The
countries cooperate on a number of different
programs, ranging from electricity sharing to
highways and customs. Similarly, the private
sector operates or is established in a number of
different countries in the region, including the
likes of Citibank, Walmart, the POMA group of El
Salvador, and several franchises.
The Commercial Service has taken the same
approach, regionalizing its operations and
programs for the five Central American countries
participating in CAFTA. The regional CS office is
based in El Salvador and oversees operations in
Costa Rica, Guatemala, Honduras, and Nicaragua.
(The Economic Section of the U.S. Embassy
represents the Commercial Service in Nicaragua.)
The current Regional Senior Commercial Officer is
Michael McGee. His contact information is in the
section on Web Resources below.
The Commercial Service offers programs on a
regional basis in the five CAFTA-DR countries,
which minimizes the time and maximizes the
results for a visiting U.S. exporter. Perhaps
most prominent among these programs is the
Regional Gold Key Service (GKS). Under a normal
Gold Key, a company pays a first-day fee of 735
and a second-day fee of about half that amount --
in one post/country. Under the Regional GKS, the
company pays the first-day fee for its first
stop, and then a second-day fee for subsequent
stops in other countries. In other words, if an
exporter visits El Salvador as his/her first stop
and then Guatemala as the second, etc., s/he
would pay the first-day fee only in El Salvador.
The second-day fee would apply for Guatemala and
all other stops. The Commercial Service also offe
rs Contact Lists on a regional pricing basis and
coordinates International Buyer Programs to
Certified Trade Shows in the U.S. For more
information on current and future regional
programs in the CAFTA countries, please check our
(regional!) website at www.buyusa.gov/centralameri
ca.
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Success Stories
Contours Express (Fitness Centers for Women)
"I attended a Gold Key program last December
(2005) in Central America on behalf of and in my
capacity as President of Contours Express
International. I am writing to report to you how
extremely impressed and pleased I was with the
extra efforts and complete professionalism from
each one of the commercial specialists from your
offices in Guatemala, El Salvador, and Costa
Rica. The marketing counsel that I received from
each specialist certainly paid off more than any
other previous Gold Key program. We not only had
a full list of qualified candidates for each day
from each country, but we also had a waiting list
on call in the event of cancellations! The
meetings were all well organized and each of the
candidates with whom I met had been briefed on
the nature of our business, which saved valuable
time in our short meetings.
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Success Stories
Softee Supreme Diaper Corporation
Softee Supreme Diaper Corporation, a small to
medium-sized company located in Dec