Costa Rica Comes Back On Board Cafta Deal

by Leroy Baker, Tax-News.com, New York

04 February 2004

After pulling out of the Central American Free Trade Agreement (Cafta) talks at the end of last year, Costa Rica has struck a deal with the United States and the four other trading partners allowing the pact to be sealed pending governmental approval.

Costa Rica pulled out of the negotiations in December, objecting to a US proposal that the country’s monopolistic telecommunications sector be broken, enabling American firms to enter the country’s market. The US also wanted to see Costa Rica’s insurance sector opened up.

However, the Costa Rican government has since relented and agreed to a gradual liberalisation of most of its insurance market in addition to allowing less restricted access to three major areas of its telecoms sector.

If the Cafta deal is subsequently approved, around 80% of the goods that the US exports to the five Central American nations (Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua) will immediately become duty free, and the amount of trade flowing between the two blocs will be considerable.

The US exports $9 billion worth of goods to the five nations annually, an amount which roughly equates to the value of US exports to Russia, India and Indonesia combined, according to the New York Times. Meanwhile, the exports of the Cafta nations to the United States total some $11 billion per year.

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