News on Central America

The DR and Guatemala are still holding discussions aimed at resolving ongoing trade issues between the two DR-CAFTA signatories. The conflict began earlier this year after Dominican exporters complained of unfair trade and tariff practices at Guatemalan ports. A mission of Dominican experts from the Ministry of Industry and Commerce traveled to El Salvador to discuss the complaints with the Guatemalan authorities. Pablo Espinal, in charge of foreign trade at the Ministry of Industry and Commerce headed the local team that met with Guatemalan deputy minister for integration and development, Ruben Morales. He said a team headed by the Guatemala Minister of Economy Romulo Caballeros would travel to the DR to continue the talks.

10 June 2008 - DR1 Daily News

Industry and Commerce Minister Melanio Paredes has voiced his concerns to the Guatemalan government about the apparent blocking of imports of certain Dominican products. Paredes says that this is a violation of the DR-CAFTA agreement, and that he called Guatemalan Minister of Commerce Erasmo Velasquez last night to voice local manufacturers' concerns. Riovinyl Interamericana, Industrias de Suelas y Tacones Paar, Tecniplast, Tecnicalsa, Italmoda and Tojin Hermanos have reported experiencing irregularities with Guatemalan customs.

01 May 2008 - DR1 Daily News

DR Honorary Consul in Lahore Doris Montero and Dominican Ambassador to India Hans Dannenberg Castellanos have addressed the Karachi Chamber of Commerce and Industry (KCCI), encouraging Pakistanis to look into opportunities in tourism, apparel, farming and technology. Dannenberg also highlighted the possibilities of increased opportunities for pharmaceutical importers and exporters. KCCI senior vice president Iftikhar Ahmad Sheikh invited the Dominican business community to visit Pakistan and to take part in the KCCI International exhibition being held in June. See www.tradingmarkets.com/.site/news/Stock%20News/1474438/

01 May 2008 - DR1 Daily News

Central American imports are flooding the Dominican market. The lower cost of electricity and government incentives have given Central American manufacturers an advantage over Dominican manufacturers now that there are no tariffs as a result of the DR-CAFTA free trade agreement. El Caribe newspaper focuses on Central American imports in a feature and editorial today, highlighting the way in which local manufacturers are losing market share to the regional imports. The newspaper reports: "The competitive differences that favor Central America are large, as is the case of Guatemala where the country exempts companies that export from paying income tax, which converts them into truly free zones. The newspaper warns that the DR has to take measures to ensure that "we are no longer a country where it is expensive to live and to produce," echoing a warning from the president of the National Council Private Business (CONEP), Lisandro Macarrulla.
Furthermore, the former president of the Association of Industries, Celso Marranzini, in an op ed feature in El Caribe, pointed to the competitive advantages that Guatemala has over Dominican manufacturers. He mentioned that they negotiated the better hand of the free trade agreements, have cheaper electricity costs, lower interest rates, and the support of their governments in the way of incentives for freight, fewer tariffs and a value-added tax that does not affect them at the start of the productive cycle. Furthermore, he said that when Dominicans were paying 36% on capital goods, the Central Americans had no taxes on capital goods. He mentions that in addition to a decree that exempts exporting companies from paying income taxes, the Guatemalan government reimburses companies 6% of what they have reported as exports. As a result, he points out that Guatemala exported US$57.4 million to the DR, while Dominican exports to Guatemala totaled a mere US$10.4 million last year.

29 April 2008 - DR1 Daily News

CAFTA (Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua) barely grew its EU trade last year - 0.2 percent to 8.6 billion euro.

Three of the six CAFTA members decreased their trade with the EU last year. Nicaragua posted the best performance, expanding its EU trade by 20.9 percent.

El Salvador accounted for the worst results - a 15.9 percent decline in EU trade. Nicaragua's strong increase was largely related to its ethanol exports, which has gained a market  in Europe relatively fast, according to Cohen.  
 
Despite the overall weak CAFTA performance, it wasn't the trade group with the worst results  when it came to EU trade last year. That honor went to ALBA, the political-economic group that includes Bolivia, Cuba, Nicaragua and Venezuela. ALBA's EU trade fell by 4.1 percent to 12.1 billion euro.

08 April 2008 - Latin Business Chronicle

03 March, 2008 - European Commission

EU and Central America conclude successful second
round of negotiations for a bi-regional Association Agreement.
Brussels, 25 – 29 February 2008
The European Commission, negotiating on behalf of the European Union (EU), and Central America[1][1] met in Brussels from 25 to 29 February 2008 for a second round of negotiations of a bi-regional Association Agreement. These negotiations cover the three pillars of Political Dialogue, Cooperation and Trade.

The Association Agreement between the EU and Central America seeks to enhance the political dialogue between the EU and Central America, intensify the cooperation in a vast variety of areas and facilitate bi-regional trade and investments.

Building upon the first round which took place in Costa Rica in October 2007, the Parties have now entered an active phase of negotiations based on specific proposals.

The EU welcomed the most recent achievements in the Central America regional integration process, notably the signature of the Customs Union Framework Agreement by five Central American countries. The EU and Central America expressed their hope that Panama will soon join the negotiations as an active participant, recognizing this country’s efforts towards Central America regional economic integration process.

Reflecting their common values and ambitions, the Parties had an in-depth exchange of views on the objectives and principles upon which the Association Agreement will rest, in particular human rights, good governance and the rule of law, sustainable development as well as how to address asymmetries.

The Parties exchanged views on the objectives and the areas of Political Dialogue. They focused their discussions on a number of specific issues of interest to both sides.

In depth analysis of texts continued on Cooperation matters which had already been introduced in the first round, notably on the structure, the objectives, the principles and the modalities of Cooperation. The Parties had substantial exchanges of views on a large number of topics that had been first discussed during the first round. Discussions were also held on a set of cooperation issues that may allow to widen the spectrum of cooperation areas.

All twelve Trade sub-groups met during the course of the week and good progress was made. Both sides showed engagement and willingness to move the process further in the upcoming negotiating rounds. One of the key challenges emerging from the talks is the achievement, at the end of the process, of a region to region Association Agreement to the benefit of economic operators of the EU and Central America: both sides reiterated their shared ambition on this aspect.

With regard to the next immediate steps, the Parties aim at finalising the preparation of their respective offers on trade in goods and trade in services/establishment; these first offers will be exchanged on Monday 17 March 2008. Regarding the Political Dialogue and Cooperation pillars, the Parties agreed to proceed to a timely exchange of proposals and reactions in the run up to the third round of negotiations, scheduled mid April in El Salvador. Three other rounds are envisaged this year with the objective to conclude the negotiations if possible by 2009.

Finally, the Parties acknowledged the importance of the dialogue with civil society which was present in large numbers in the margins of the negotiations.

29 February, 2008

Economist Roberto Despradel, private sector trade representative for trade negotiations, writes in today's El Caribe about the way in which the DR has been the big loser in the FTA signed between five Central American countries and the DR that went into effect in 2000.
Despradel attributes the lame exporting activity to the contrast between the DR exporting capacity primarily in free zones and that of Central America where non-free zone industries and free zone industries were integrated. "There is a contradiction in the maintenance of a marked duality between companies inside and outside free zones when seen from the perspective of open markets, via free trade agreements," he writes. He explains that Central America, while maintaining a duality between both regimes, has maneuvered so that the differences are less pronounced, and even allows the same company to operate under both duty free and non duty free legislations.
The results are showing, and the DR should be concerned. In 2000 we had a US$70 million trade deficit with Central America. Six years later, this had increased to US$212 million. We export barely US$48 million to Central America, while we imported US$260 million, and maintain a trade deficit with each one of the five countries - Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua. "It is no surprise that in recent months there has been an avalanche of companies seeking the special free zones category, so that their exports are not penalized, and they can compete in neighboring markets, such as Central America," he comments.
Nevertheless, in his opinion this is not the solution to the problem, because it only increases the distortions in the market created by the two systems.
Despradel proposes that instead a legal framework needs to be created that promotes investment in industries and the instruments so that Dominican companies can compete. He mentions that the Executive Branch sent a Law of Competitiveness and Industrial Innovation to Congress that is awaiting approval. He also suggests creating a government entity that promotes exports, and thirdly, says that exporters need to be highly valued, a matter that this society has yet to accomplish.

3 September 2007 - DR1 Daily News

An antiquated mentality and resistance by Dominican businesses to work with Central American and Caribbean countries has impeded Dominicans from benefiting from the free trade agreements in effect with Central America and the Caribbean since 2001, panelists participating in a workshop on the "Progress and Obstacles in Benefiting from the FTA between Central America and the DR," sponsored by Hoy newspaper said yesterday. The conclusion was that Dominicans have dedicated themselves to serve the local market and protect their local market share, and have been timid to test export opportunities.
Panelist Diego Eleta, president of the Federation of Central American Chambers of Commerce, explained that the DR has acted with an island mentality and has focused more on serving the local market. "We have before us opportunities, and many times the barriers are more mental than real," he said.
Eleta says that the DR needs to stop focusing on the north-south relationship with the US. He said that despite the fact that 80% of the DR's trade is with the US, trade needs to be diversified. Markets in Central America, the Caribbean, Europe, and South America should be tapped by Dominican businessmen.
Central American exports to the DR in 1999 were US$100 million (excluding Panama). By 2006, they had increased to US$260 million. Meanwhile DR exports to Central American were US$20 million in 1999, but had only moved to US$48 million in 2006.
Other panelists were Manuel Madriz Forno, Trade Director of the Association of Caribbean States (ACS); Vinicio Mella, of the Federation of Central American Chambers of Commerce in the DR and Vilma Arbaje, manager of trade agreements for the Ministry of Industry and Commerce, and businessman Jose Corripio.
Vinicio Mella said Dominicans have resisted exploring business opportunities in Central America, despite this being an important market with millions of consumers. He mentioned that only nine Dominican companies signed up for an exploratory trade mission to Guatemala in June organized by the Center for Exports and Investment (CEI-RD).
He explained that the response from Central American businessmen to the FTA with the DR has been the opposite. He described as an "avalanche" the coming of Central American businessmen seeking to introduce their products to the Dominican market within the FTA. Mella is vice president of Molinos Modernos, the largest flour mill in the DR, now a Guatemalan company. Mella also highlighted that with the implementation of DR-CAFTA, there are new opportunities for exports and challenges to be competitive.
Madriz Forno, of the ACS, advocated that the DR can work with the Caribbean in regards to production and marketing of bananas, tobacco, sugar, rum and coffee. Madriz says that the DR as a member of Cariforum should serve as a connection point between CA and the Caribbean Community. He says that the follow up is what makes a trade agreement work. He explained the ACS has set the areas of transport, sustainable tourism, natural disasters and trade as the four focal points for regional collaboration. He highlighted that the difficulties of transport have been a major obstacle to increased trade and integration.
Vilma Arbaje, of the Ministry of Industry and Commerce, highlighted the inequality and trade and that Costa Rican exports to the DR represent 48.5% of the volume of Central American exports followed by those of Guatemala, El Salvador, Honduras and Nicaragua.
Businessman Jose Corripio said that the DR has become too dependent on expatriate remittances and tourism and says that it's not something that a country's economy should depend so heavily on. He urged Dominican businessmen to test export markets, with small pilot projects.

6 July 2007 - DR1 Daily News