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The Central America-Dominican Republic-United States Free Trade
Agreement (CAFTA-DR) includes seven signatories: the United States, Costa
Rica, Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua.
CAFTA-DR provides:
- Tariff reduction
- New market access for U.S. consumer and industrial products and agricultural products Unprecedented access to government procurement in the partner countries
- Liberalizes the services sectors
- Protects U.S. investments in the region
- Strengthens protections for U.S. patents, trademarks, and trade secrets.
CAFTA-DR creates the third-largest U.S. export market in Latin America,
behind only Mexico and Brazil, and the 14th largest U.S. export market in
the world.
Costa Rica (top)
In 2005, the US Congress approved establishment of the Central American
Free Trade Agreement (CAFTA-DR). CAFTA-DR confers benefits providing
disciplines for the non-discriminatory treatment of investors, dispute
resolution, protection of intellectual property rights and other areas.
Oil is supplied primarily by Mexico and Venezuela under the auspices of
the San Jose Pact and the Caracas Energy Accord.
Costa Rica is very open to foreign investment and a favorite choice for a
number of high-tech companies. A comprehensive tax reform has been under
consideration. Negotiations on a free-trade agreement with China are
underway and could lead to further market expansion and foreign
investment.
Agriculture employs nearly half the work force. Approximately 60% of the
coffee crop is regarded as “top quality”, though only 6% of world
production meets this definition. The country is the world's second
largest exporter of bananas. There has been some progress in agricultural
diversification and farm exports have risen. Agricultural production has
shifted from rice, beans, and yellow corn for domestic consumption to the
highly successful production for export of pineapples, melons,
strawberries and winter vegetables .
Tourism is the country's largest industry, employing more than 13% of the
work force. Eco-tourism accounts for nearly 40% of the industry's revenues
in a typical year .
Costa Rica exports electricity to Nicaragua and has the potential to
become a major electricity exporter if plans for new generating plants and
a regional distribution grid are realized. Other major industries include
the production of electronic components, food processing, textiles and
apparel, construction materials, cement and fertilizer.
Dominican Republic (top)
In 2005, the US Congress approved the establishment of the Central
American Free Trade Agreement (CAFTA-DR) which includes the Dominican
Republic.
The Dominican Republic is one of the main centers of clothing “assembly
for export”, or maquiladoras, and depends mainly on the US market for
sales of both clothing and textiles. Clothing producers have suffered
greatly from Asian competition and termination of the Multi-Fiber
Agreement (MFA).
The island is the US's seventh largest export market in the Western
Hemisphere and a major destination for US foreign direct investments. The
government has recently begun to implement tax reforms aimed at
simplifying excise taxes and reducing tax evasion. New fiscal policies,
including the planned sale of government-owned assets equivalent to 6% of
GDP, should help to reduce public debt. The government also intends to
raise certain taxes and to improve collection efforts .
El Salvador (top)
It is Central America's largest producer and consumer of geothermal
energy. The country has two main geothermal facilities. Thermal generation
accounts for 42% of generated electricity while hydropower provides 26%.
It is participating in the Puebla-Panama project. The goal of this
initiative is to unify the electricity grids of Central American countries
to reduce costs and the frequency of power disruptions, as well as to
attract private sector investment.
The government pursues an export-led strategy which includes trade
agreements with the USA, Chile, the Dominican Republic, Taiwan, Mexico,
Panama and Colombia. Textiles and apparel, shoes, and processed foods are
among the industries that are benefiting.
Agriculture accounts for around 11% of GDP. Cash crops include sugar,
cotton and especially coffee. Industry makes up over 30% of GDP. Leading
industries include textiles, food processing, beverages, petroleum,
chemicals, fertiliser and furniture manufacture. Growth of maquiladoras,
which are firms engaged in the assembly of products, mainly textiles and
apparel, for re-export, has helped to offset the decline in farming. The
establishment of free-trade zones has encouraged the development of
several industries.
Economic reforms have allowed the government to reduce public debt. The
goal is to cut this debt to 30% of GDP by 2013 .
Guatemala (top)
Both the US Congress and the Guatemalan government ratified the Central
American Free Trade Agreement (CAFTA-DR) in 2005 and Guatemala has
concluded a free-trade agreement with Mexico.
The country is participating in the Puebla-Panama project. The goal of
this initiative is to unify the electricity grids of Central America to
reduce costs and the frequency of power disruptions, as well as to attract
private sector investment for the development of new power plants.
The government launched a major reorganization of the banking system and
strengthened financial supervision. The new laws have led to significant
improvements in the health of the banking sector. This makes the country
makes attractive for foreign investment.
The industrial sector is dominated by small-scale manufacturing geared
mainly to serve the domestic economy. Clothing, textiles, pharmaceuticals
and construction materials are the main industries.
Guatemala is Central America's largest oil producer, producing almost
16,000 barrels per day. The country has 83 million barrels of proven oil
reserves located primarily in the country's northern jungles. Efforts are
also underway to explore and exploit potential reserves near Lake Izabal,
Guatemala's largest lake .
The agricultural sector accounts for two-thirds of exports, and employs
half of the work force. The country's main exports are coffee, sugar,
bananas, cardamom and beef, but coffee is by far the most important .
International reserves have risen to record levels, boosted by strong
remittances and capital inflows. The government is known for its sound
fiscal management with public debt being one of the lowest in the region.
Guatemala is reportedly negotiating a trade agreement with the Andean
Community .
Honduras (top)
The Central American Free-Trade Agreement (CAFTA-DR) between the USA
and Honduras took effect in 2006. The country also has free-trade
agreements with Panama, Central America, Colombia and Taiwan. In 2008, the
country joined Petrocaribe and the Bolivarian Alternative for the
Americas, two programs organized by Venezuela.
Honduras is one of the main centers of clothing “assembly for export”, or
maquiladoras. By volume, it is the world's third-largest exporter of
clothes to the USA and its economy is especially reliant on textiles and
clothing production, which goes mostly to the USA.
Agriculture is the largest sector of the economy. In a typical year,
farming accounts for about one-quarter of GDP and up to 60-70% of export
revenues. Bananas and coffee are the major exports.
Structural reforms to improve the efficiency of the public sector and the
stability of the financial system have been approved. The intention is to
provide stronger institutional support for economic growth. A national
competitiveness plan places top priority on the development of
agribusiness, forestry, and tourism, which are all areas with growth
potential. An income tax surcharge was introduced in 2008.
The country's tiny tourism sector has potential but is underdeveloped.
However, more than US$100 million is being spent to develop hotels, luxury
villas and golf course near Tela, Honduras. The new resorts will target
wealthy visitors who are willing to pay premium prices. Foreign investment
is continuously being sought out.
Nicaragua (top)
The country has a trade agreement called the Dominican Republic-Central
American Free Trade Agreement (CAFTA-DR) with the USA. The CAFTA-DR gives
the country better access to the US market.
Agriculture accounts for one-third of GDP and employs 42% of the
workforce. Major exports include coffee, cotton, sugar and bananas. Food
processing, coffee roasting, textiles, timber and handicrafts are other
important activities. Under the Central American Free Trade Agreement,
policy makers hope that export niches will emerge for peanuts, rum, cigars
and cheese .
Fossil fuels account for around 80% of country’s electricity generation,
with hydropower and other renewable sources, mainly geothermal, which
accounts for 7.6%. The government plans to boost investment in the
electricity industry while reducing distribution losses and improving the
regulatory framework .
The government has introduced a number of fiscal reforms to support its
medium-term plans. These moves have substantially improved public finances
and make it more attractive to foreign investment and market expansion.
Services account for 47% of GDP . Tourism has emerged as one of the
country’s most dynamic sectors with the number of visitors growing
significantly every year. The country is continuously seeking foreign
investment in assist in the development of this sector.
United States of America (top)
It is a member is NATO (The North Atlantic Treaty Organization), which
provides a forum in which the USA, Canada, and European countries can
consult together on securities issues of common concern and take joint
action in addressing them.
The country is a member of APEC, which is the premier Asia-Pacific
economic forum with the primary goal to support sustainable economic
growth and prosperity in the Asia-Pacific region.
The United States is a part of the North American Free Trade Agreement
(NAFTA), which helps facilitate trade with Mexico and Canada. It is the
world's largest free trade area, which now links 444 million people
producing $17 trillion worth of goods and services.
The U.S. is a federation of 50 states which spans the land mass between
the Pacific Ocean and the northern Atlantic. In the north it borders on
Canada, and in the south with Mexico.
Agriculture accounts for just 1.0% of GDP and is predominately large scale
and efficient. The US is a major exporter of foodstuffs and processed
foods. The country's manufacturing sector contributes 12.1% of GDP and
leads the way in the information technology revolution. Prominent
industries include aerospace, telecommunications, chemicals, electronics
and computers. The most important activities in the service sector include
real estate, transport, finance, healthcare and business services.
Congress expects to enact a series of financial reforms in the near future
in hope of strengthen the service market even further.
The USA has 21.8 billion barrels of proven oil reserves, which is the
eleventh highest in the world. Domestic oil exploration and development
spending by US oil companies has rebounded as oil prices rise. Overall,
production from deepwater areas of the Gulf of Mexico has been increasing
rapidly, with deepwater wells accounting for about two-thirds of total US
Gulf output .
Most growth and economic activity takes place in metropolitan areas. An
estimated US$225 billion is needed each year for upkeep however funding is
difficult to find, therefore creating opportunity for foreign investment .
There are several tax advantages in individual states. States such as
Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wyoming New
Hampshire, and Tennessee offer no the advantage of no income taxes.
Instead of paying the state approximately 7-15% of your income, you can
use that money for an investment. The top six states with the lowest
Property Taxes are Louisiana, Alabama, West Virginia, Mississippi,
Arkansas, and Oklahoma. The state of Delaware has low income tax levels
and provides tax incentives to US corporations. The state also has
partnership taxation laws which make it favorable to non-US entities,
generally allowing taxation at 0% where the partners are registered in
non-US jurisdictions .
Euromonitor International
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