Central American Economic Integration Treaty

The governments of the republics of Guatemala, El Salvador, Honduras, and Nicaragua signed this treaty on December of 1960 which represents a commercial link supporting the economic development of these countries referred to as CA-4. This treaty has as a main objective to unify the economies of these four countries and foster the development of Central America to improve the living conditions of its inhabitants. This treaty’s stipulations included the establishment of a common market that would adopt uniform tariffs between the nations and the start of a customs union conformed by these countries. The treaty established a deadline to reach these objectives. This treaty also stipulated the establishment of BCIE (Central American Bank of Economic Integration) for the financing and the promotion of growth in the region. The treaty provided various incentives supporting investment and economic development. The Central American Economic Integration Treaty served as a platform for free trade movements currently taking place in Honduras and the rest of the Central American nations.


Mexico and CA-3 Free trade Agreement

The free trade agreement between Mexico and CA-3 encompasses Mexico, Guatemala, Honduras, and El Salvador. This agreement was signed on June 29, 2000 and it was fully implemented on March 15, 2001 in the countries of Mexico, Guatemala, and El Salvador, and on June 1, 2001 in Honduras. This free trade agreement was signed with the purpose of eliminating the commercial barriers between the parties and stimulating investment under the favorable conditions offered by free markets. Some of the requirements for the execution of this treaty were labor reforms and modification of legislation protecting intellectual rights among others. Trade between these parties has grown significantly during recent years surpassing $1 billion. With the passing of this treaty trade in this market experienced a growth of 123% and has shown constant growth since then. This was an important step forward for Honduran international trade since Mexico represents one of its main commercial partners in the world. Additionally, this treaty has served as a reference for other treaties of further importance such as DR-CAFTA by establishing norms and requisites that have facilitated the execution of such agreements.


Dominican Republic and Central America Free Trade Agreement

This free trade agreement between Central America and Dominican Republic was signed on November 29, 1998 in the city of Miami, FL with the inclusion of the countries of Dominican Republic, Costa Rica, El Salvador, and Guatemala. Honduras was later adjoined to the agreement after finalizing negotiations with between Honduran and Dominican authorities. Consequently, Nicaragua was also included in the treaty. This was the first agreements signed between the Central American nations and Dominican Republic. As its main objectives, this agreement included the elimination of commercial barriers existing prior to the treaty, the creation of favorable procedures for free commerce, and the promotion of free commercial competition, among others. This treaty identified products free of tariffs, exempted products, products with gradual discharge of tariffs, and products subject to quotas. After 2004, these categories were condensed into products free of tariffs, products with restrictive quotas and favorable tariffs, and exempted products.

This important agreement was also a great basis for subsequent free trade agreements like the ones signed with Mexico and DR-CAFTA which is the most recent one and of highest significance. Protection of intellectual rights and other laws were passed as a result of this agreement and they have gradually gained strength for the implementation of these free trade zones.


Free Trade Agreement between Central America and Chile

This free trade agreement was established in 2001 conformed by Chile, El Salvador, and Costa Rica. In 2006, Honduras joined the protocol immediately eliminating tariffs on 94% of Chilean products exported to Honduras representing around 5300 Chilean products that would be traded with Honduras free of tariffs. The rest of these products will be gradually freed of restrictive tariffs during a period of 14 years. Among these products are seafood, exotic fruits, fuels, and wines. As a result of this agreement, Chile will grant the access of 1,000 tons of sugar coming from Honduras annually free of tariffs. Some of the other main products exported from Honduras to Chile include textile products, timber, and crustacean flours. Honduras is a significant commercial partner for Chile since trade among these countries reached $46 million in 2005 and it is expected to grow considerably with this agreement. Additionally, Honduras and Chile signed an agreement for the promotion and reciprocal protection of investments in these countries.


Free Trade Agreement between Panama and Central America

In 2001, the normative texts for the free trade agreement between Panama and Central America were signed. This agreement includes the countries of Nicaragua, Costa Rica, Guatemala, Honduras, and Panama (Panama had signed a treaty with El Salvador in 2003). In 2006, negotiations between Panama and these Central American countries are still taking place in order to establish the products that will be included in the agreement and for the negotiation of the annexes of the treaty. Among the topics that are being scrutinized by the authorities of these countries are the access to the markets, and financial services for investment. Central American is the third commercial partner in importance for Panama after the U.S. and the European Union. Panama’s exports to this region amount to $100 million annually.

Tariff Preference Systems

  • SGP: General System for Tariff Preferences.

Central America enjoys tariff preferences subscribed under this system with the United States, the European Union, and Canada.

  • CBI: Caribbean Basin Initiative

Signed in 1984, this agreement granted many Central American countries tariff preferences and commercial benefits.

Partial Coverage Agreements

  • Honduras-Colombia: This agreement is regulated by Art. 25 of the Montevideo Treaty of 1980. This agreement of partial coverage includes a system of tariff preferences for Honduras and a compromise to provide the same benefits to Colombia when conditions allow Honduras to do so. This agreement aims to strengthen the commercial activity between these two nations and support the economic development of both parties. This agreement has a partial coverage of the products traded between these countries.
  • Honduras-Venezuela: This agreement has as a main objective the granting of tariff preferences and the elimination or reduction restrictive commercial barriers other than tariffs that existed between these countries in order to fortify commerce and economic development. This agreement stipulates the reduction or total elimination of tariffs in the products negotiated which partially represent total trade between the parties.This agreement is also regulated by Art. 25 of the Montevideo Treaty.

Current Pending Commercial Negotiations 

  • FTAA: The Free Trade Area of the Americas. This initiative would encompass all of the countries in the American continent with the exception of Cuba and it has as a main objective the establishment of a free trade zone in the whole continent to promote economic development throughout the region.
  • FTA Colombia-Central America: This agreement is being negotiated and will be conformed by the nations of Guatemala, Honduras, and El Salvador, known as the Northern Central American Triangle, and Colombia. Commercial movement between these parties has experienced constant growth during recent years and it is expected that this treaty will stimulate trade in the region significantly.
  • FTA Canada-Central America: In observance of the considerable economic growth in Central America and Canada, and the significant commercial movement among them, a free trade agreement between these parties has been proposed which would eliminate tariffs in this market. This agreement is being negotiated.
  • FTA Panama-Central America: The normative texts for the FTA between Panama, Honduras, Guatemala, El Salvador, and Nicaragua have been signed in 2001 but the final negotiations on the annexes and stipulations for the implementation of such agreement are pending and are being scrutinized by the respective authorities.

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