In 2016 scheduled tariff reductions for rice imports begin as part of the DR-CAFTA, posing a threat to local producers.
Nicaraguan rice producers have pointed to the efforts made by the sector to achieve self-sufficiency in supplying the local market, and report that the main competitor unleashed by this tariff reduction is the US which they point out subsidizes rice production.
Nicaraguan businessmen have proposed that Central America as a whole operates a preferential tariff treatment in the US for imports of textiles in the region.
After trying to negotiate, through several formats, tariff preference levels (TPL), so far unsuccessfully, textile entrepreneurs are now appealing to the union of the region to address the issue with the US once again.
They are supporting Costa Rica in the dispute it has with El Salvador over the lack of respect for the DR -CAFTA and they are requesting action to be taken to end the paralysis of intraregional trade at Salvadoran customs offices.
The Federation of Chambers and Associations of Exporters in Central America (Fecaxca) is proposing that the fee of $18 being charged at customs offices in El Salvador be only imposed on goods which have the country as a final destination, and not everything that passes through Salvadoran territory which may be destined for other Central American countries.
A dispute over the failure to implement tariff benefits on the part of El Salvador on tires and juices exported by Costa Rica has not been resolved using other methods.
The Costa Rican Minister of Foreign Trade, Anabel Gonzalez confirmed that on January 20th El Salvador will be taken to court for not applying the tariff benefits negotiated in the FTA between the U.S., Central America and the Dominican Republic on tires and juices.
The country has invoked the dispute settlement mechanism of the CAFTA-DR, over alleged violation by El Salvador of the tariff reduction program.
From a press release issued by the Ministry of Foreign Trade of Costa Rica (COMEX):
The Ministry of Foreign Trade has requested the consultations mechanism against El Salvador, under the dispute settlement process of the Free Trade Agreement between Central America, the Dominican Republic and the United States of America (CAFTA), after a refusal, on the part of Salvadoran authorities to implement the tariff reduction program outlined in the aforementioned treaty on the import of products originating in Costa Rica.
Ten Salvadoran companies exporting to the Dominican Republic have agreed to forego the 6% subsidy in order to solve the trade issue between the countries.
Dominican Republic trade authorities had indicated that they would retain duties on various Salvadoran products as a response to the protectionist policies El Salvador provides its exporters.
"Most companies that export to the Dominican Republic gave up the 6% subsidy several days ago in order to avoid this problem and try to solve this conflict," confirmed Héctor Dada, Salvadoran Economy Minister, to Laprensagrafica.com.
Despite DR-CAFTA, the Dominican Republic has retained customs duty on various Salvadoran products.
The Dominican Republic's director of Foreign Trade, Yahaira Sosa, indicated that the measures taken are a response to subsidies paid by El Salvador's government to its exporters.
"She explained that the decision to retain the tariffs on paper, card, plastics and juices seeks to ensure a level playing field for bilateral exchange," reports Elsalvador.com.
In spite of globalization driving various forms of private economic integration, there still remain custom and tariff barriers.
International commerce experts agree that in order to fully take advantage of the benefits of free trade agreements with extra-regional blocks, Central America must complete the economic integration process started on October 14, 1951.
A group of Democratic senators proposed a law to eliminate tariffs on textile products from 14 Asian countries.
Textile imports from those countries currently pay up to 28% when entering the United States.
Should the proposal be approved, a very likely scenario, the Central American countries would lose the trade advantage obtained with the U.S. free trade agreement, as production costs are lower in Asian countries, because of lower social costs and cheaper energy.
Costa Rica will import raw alcohol from Brazil to dehydrate it and re-export it to the US with zero-tariff, in accordance with DR-CAFTA rules.
The Brazilian president's visit to Costa Rica formalized at the government level what was already in the works between businesses in both countries.
In his article in Nacion.com, Juan Fernando Lara S. stated: "Recently, the Agro-Industrial Sugar Cane League (LAICA) obtained a contract from a Brazilian firm that will bring raw alcohol to the country. It will be dehydrated in Punta Morales and then it will be placed as ethanol in the United States."
Sardimar and Calvo Group are involved in a dispute over tariffs generated by the implementation of the multilateral treaty imposed by the US-Central America Treaty.
The Spanish-owned Calvo Group has a tuna processing plant in El Salvador from which it exports to Costa Rica - among other places - having paid the country a customs duty of 15% until January 2009, and afterwards taking advantage of CAFTA benefits by not paying the tariff for tuna in oil and paying 2.2% for tuna in water. This will obviously hurt the local sales of Costa Rican-owned Sardimar, which is protesting, stating that the situation violates the provisions of the General Treaty of Central American Integration since Calvo Group operates in a free trade zone in El Salvador and is exempt from most national and municipal taxes and Sardimar considers this a subsidy in disguise.
Central America is blessed with natural resources and has a population of approximately 35 million people.
Nonetheless, poverty is a merciless scourge. 50% of Guatemala's population is in the poverty threshold. Nicaragua is the second poorest country in the Americas, surpassed only by Haiti. 8 out of every 10 Nicaraguan live on less than $2 per day, and 48% are below the poverty line. Honduras barely does better than Haiti and Nicaragua.