While the Central American Free Trade Agreement has been greeted with skepticism by many in the U.S., the political reaction among the Central American nations has been much more enthusiastic. The pact, which goes into effect on January 1, 2006, is widely seen as means to enhance the economies of the region. However, the road ahead will still be a long one since Central America is not really an integrated region, but rather two or three un-integrated areas.
On the north side of Central America — the Triangle of the North, as it's known — Guatemala, Honduras and El Salvador are the three CAFTA signatories. Previously, Mexico helped these countries with regional integration programs, such as President Vicente Fox's Puebla-Panama Plan, with its goal of establishing a land link in the area by means of new roads and, eventually, railways. For now, there's scarcely a commercial link between the region's main partners.
To the south are Nicaragua and Costa Rica, both of which are ambivalent about CAFTA. Their local congresses are discussing finer points of the treaty, which they claim will be harmful to some sectors of their economies. Though signed, only the Nicaraguan congress has ratified the treaty.
Carlos Gutierrez, the U. S. Secretary of Commerce, plans to go to Costa Rica in January to fine tune many of the rough spots, improve salient points and seek ratification. The very fact that CAFTA has not been sent to the Costa Rican Congress for ratification indicates President Abel Pacheco has yet to be convinced that the treaty will be beneficial to his country, according to a Costa Rican source.
To further complicate matters, Nicaraguan tanks and soldiers are posted along the San Juan River, which separates it from Costa Rica. Too, the Nicaraguan ambassador to Costa Rica is back in Nicaragua indefinitely. Relations between the two countries are tense, to say the least.
These actions come in the wake of Costa Rica's decision to turn to the International Court of Justice at The Hague to resolve a dispute over navigation rights on the river. This issue is one many nations fear will not only freeze CAFTA, but may also pose a major impediment to a similar treaty between Central American nations and the European Union.
Needless to say Customs relations on both sides of the San Juan River are strained. Costa Rica, known as "The Switzerland of the American Continent," doesn't have an army, while Nicaragua has troops along the border and is threatening war.
Costa Rica's foreign relations minister, Roberto Tovar, is appealing to Nicaragua to solve this issue "the civilized way." Nicaraguan president Enrique Bolaos has been mum on the matter.
In the Caribbean, the Dominican Republic (DR) participates in CAFTA as its sixth signatory, but in practice, the country has nothing to do with Central America. This is not just because of its distance from the mainland, but also due to the DR having enjoyed a free trade status with the U.S. since 1988 under the Caribbean Basin Initiative. The DR's situation thus is markedly different from that of its CAFTA brethren.
This leads back to the three nations who are actually enthusiastic about CAFTA implementation. Guatemala, Honduras and El Salvador are looking for ways to link up with Mexico, the main thoroughfare to the U.S., such as a newly opened road in Honduras that leads to lush Puerto Cortez (www.puertocortez.com), the only deep-sea port in the Caribbean Sea.
Experts view Guatemala's Port Quetzal (www.port-quetzal.com) on the Atlantic as small and outmoded. Its main function these days is to receive containers from Mexico and the Far East and move them into the region. The port has very poor traffic management with delays of as long as 52 hours per container, according to Enrique Lacs, vice president of the Guatemala Carriers Chamber. "At the port, there's bothersome red tape, which delays importers and exporters and hikes prices to the final customer," he says.
Port Quetzal moves an average of 365,000 containers a year. Its shortcomings are seen by Salvadoran president Ricardo Saca as presenting an opportunity to develop a port on El Salvador's Pacific coast, which would directly compete with Port Quetzal. A political rift over this is in the making, as some contend that Central America doesn't need another small port, but rather a major world-class port.
There is only one major road (if you can call it major) from Mexico to Guatemala. The first bottleneck starts at that point, as Mexican carriers have not shared containers with their Guatemalan counterparts due to a long history of container theft. Goods have to be moved from one container to another with an average daily flow of 250 containers. An army of stevedores carries out this work, with additional cost to the merchandise owner.
This problem, however, has been resolved as the carrier chambers of Guatemala and Mexico signed an agreement establishing company-to-company liaisons so that both containers and trailers may cross the border without needing to be unloaded and reloaded. When CAFTA goes into effect companies will work toward a seamless merchandise flow, which is expected to soar to an average of 1,500 containers and trailers a week under treaty operations.
Studies of Central American Customs habits indicate it takes an average of 48 hours for a container to move from Guatemala to Honduras or El Salvador. It's expected that in the future all problems these nations face will be solved through the Central American Uniform Customs Code (CAUCA). Definite routing has been established for traffic moving to Customs facilities in each nation. It's hoped this will ease the flow of traffic.