# Presentation: 663522

## CAFTA OVERVIEW

- James McCarthy

## Central America at a Glance

## 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

## Why Export to Central America?

## Why Export to theCAFTA Region?

- 40% of Region’s Imports Are From the U.S.
- On-going Market Liberalization
- Growing U.S. Hispanic Population
- Proximity and Receptivity to U.S.
- Stable Democratic Governments

## Central America Trade Data

## U.S. Exports toCAFTA-DR Countries

## CAFTA Region at a GlanceGross Domestic Product 

- Source: Summa Magazine. Sep. 2006

## CAFTA Region at a GlanceGrowth Rates 2006 

**CAFTA Region at a Glance****Growth Rates 2006**

- Source: Country Central Banks

## 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.

## Challenges

- Financial Reform
- Respect for Contracts
- Investment Protection
- Judicial Reform
- Export Promotion

- Corruption
- Education
- IPR Protection
- Security
- Start-ups; SMEs
- Leadership

## CAFTA Countries Highlights

## 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

## El Salvador Highlights

- 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%

## 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%

## 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.

## Nicaragua Highlights

- 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%

## Nicaragua Highlights

-  Democratically-elected Government
-  President Daniel Ortega – January 07 – Policies?
-  Constitutional Government
-  Formal Independent Court System

## Nicaragua Highlights

- 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

## 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
- Largest Port in CA
- U.S. Has 40% of FDI in Honduras
- % increase in U.S. exports since CAFTA entry into force: 15.5%

## 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

## 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

## CAFTA-DR Dates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		31/1/2007
***Costa Rica – Referendum **

- CAFTA-DR DatesApproval/Implementation

## Opportunities: Best Prospect Industries

-  Automotive Parts and Service Equipment
-  Food Processing & Packaging Equipment
-  Electric Power Generation & Distribution
-     Equipment
-  Hotel and Restaurant Equipment
-  Franchising
-  Security and Safety Equipment and Services
-  Telecommunications Equipment and Services
-  Construction Equipment