The plan to impose a 5% tariff on Mexican products entering the U.S. would open up opportunities for Central American countries to increase their sales to the U.S., but there are fears that similar measures could be taken against the region.
On May 30, President Trump announced on his Twitter account that he plans to impose a 5% tariff on Mexican products entering the U.S.
The complex economic and political situation that has affected Nicaragua since April continues to affect Central America, where exporters report losses of $45 million.
In the past months, cargo transport faced difficulties in moving goods along Nicaragua's highways due to demonstrators' blockades and insecurity, seriously affecting Central American companies.
Trade in goods in the region is showing signs of recovery with an increase in exports to third-party trading partners and an increase in intraregional imports.
From the Trade Monitor report by the Economic Secretariat for Central American Integration (SIECA):
Central America, July 10, 2017.Trade in goods in Central America shows signs of recovery with an increase in exports to third-party trading partners and an increase in intraregional imports, according to figures from the most recent Central American Trade Monitor for the first quarter of 2017.The main results derived from the Monitor are as follows:
A requirement has been eliminated which previously obliged companies exporting goods to submit records which indicated the customs procedure under which the company operates.
From a bulletin by the Chamber of Industries of Costa Rica:
The Ministry of Foreign Trade announced that it has been agreed with the authorities of El Salvador that in bilateral trade the requirement to submit records which indicate the customs procedure under which the exporter of the goods operates has been eliminated. The elimination of the requirement will be effective for both parties from February 16 this year.
Despite the antiquity of the efforts for Central American integration and for the Customs Union the obstacles to trade between the countries on the isthmus presented by customs offices are notorious.
The Federation of Chambers and Associations of Exporters of Central America (Fecaxca) is once again calling for policies and common strategies for standards and customs procedures.
Central America's trade dynamics in 2013 showed a slight cooling off mainly due to weak growth in external demand from trading partners out of the region.
From the executive summary of the Central America Annual Foreign Trade Report by SIECA:
In 2013 world trade in goods and services registered a moderate recovery, having experienced annual growth of 3.0% which is slightly higher than the trade growth in 2008 prior to the global economic crisis. Signs of recovery in the global commercial activity have been confirmed by the relative improvement in macroeconomic conditions in the advanced economies. In the commercial context described, Central America experienced a real growth of the economy equivalent to 4.1% in 2013, showing a slight slowdown compared to that observed in 2012, the year in which the regional economy grew by 5.2% annually.
To date the Trade Pillar Committee has not yet been formed with representatives of each of the Central American countries, despite the entry into force of the Association Agreement on January 1st 2014.
Central America has not managed to harmonize and standardize regional interests in order to make use of the Agreement with the European Union. Nearly six months after its entry into force, they have not institutionalized mechanisms to comply with even short term commitments related to regional trade, such as the harmonization of trade regulations, customs administration and trade policy. This failure has consequences.
The difficulties and obstacles highlighted by exporters in intraregional trade reveal the serious shortcomings of the much vaunted concept of Central American Integration.
Chambers representing exporters in Central American countries believe that instead of moving towards the integration of the region, the slow progress of the customs union and the high costs of transport is retracting from it.
"We cannot continue to be a region where trade is moving at 15 kph when developed countries have cargo moving at 60 kph."
Employers believe that border points and customs offices in Central America are limiting their work and reducing their competitiviness despite the fact that they have been selling products to each other for over a decade.
"We cannot continue to be a region where trade is moving at 15 kph when developed countries have cargo moving at 60 kph," said Jorge Daboub, president of the Federation of Private Entities of Central America, Panama and the Dominican Republic (FEDEPRICAP).
FECAEXCA has submitted a regional strategy for the Association Agreement to be an effective tool of investment, business and employment generation.
From a press release issued by the Guatemalan Association of Exporters (Agexport):
Central American exporters meeting in the Federation of Chambers and Associations of exporters from Central America and the Dominican Republic, FECAEXCA, has delivered to its governmental and private initiative authorities a regional strategy for the Association Agreement to be an effective tool for investment, business and generating employment for regional countries.
Differences in customs processes between Central American countries to date are preventing them from trading as a block, in this case, with the EU.
According to the manager of the Integration and Trade Sector at the Inter-American Development Bank (IDB), Antoni Estevadeordal, trade agreements themselves are not a guarantee of success."It is not enough to have a policy of openness.
In the past 20 years intraregional trade grew at a rate of 12% per year, indicating an opportunity to deepen integration by finally fully adopting the customs union.
However, experts believe that Central America still faces challenges, specifically in customs matters.
"Exports to Central America have grown over the past 20 years at a rate of 50% more than exports to the rest of the world." "...at an average of 12% annually, and our exports to the world have grown at an average of 8% annually. This underlines the importance of intraregional trade dynamics in this space of Central American integration," said Hugo Beteta, CEO of the subregional site of the Economic Commission for Latin America and the Caribbean (ECLAC) in Mexico.
The Central American Federation for the Beef Industry is promoting the creation of traceability protocols that would allow them to export meat to the EU.
Regional leaders in the cattle industry and beef marketers "came together to promote the creation of a traceability protocol that would allow them to export meat to the EU."
Christopher Navas, president of the Federation, said: "We met to discuss the problem of the meat sector in Central America, seeing as the agreement for a free association with the European community has been signed, and that gives countries in the region the right to export a quota of meat. However, to do this we have to meet certain requirements. "
The FOB value of Central American exports totaled $7,919 million in the first quarter of 2012 seeing a growth rate of 8.5%.
AMERICAN FOREIGN TRADE
Bulletin: January-March 2012
Executive Summary
Exports
Exports in Central America reached a FOB value of U.S. $7.91 billion during the first quarter of 2012, an year on year increase of 8.5%, less than that from January-March 2011, which was of 22.0%.
The canal country's accession will be formalized on 29 June and will accelerate the elimination of tariffs and regional trade facilitation.
The incorporation of Panama to the Secretary for Economic Integration of Central America (Sieca), will allow Central American countries to sign the Association Agreement with the European Union (EU).
"The EU required Panama’s integration into the agreement, it is a country with an economic growth of 10%, a canal through which 5% of world trade passes, it has a robust banking system and a free zone situated in the Atlantic city of Colon ", reported Laprensa.com.ni