CENTRAL AMERICA: ECLAC Recommends Integration with North America

By Fabiana Frayssinet Reprint | | Print |

Fabiana Frayssinet

GUATEMALA CITY, Sep 28 1995 (IPS) - The United Nations Economic Commission for Latin America and the Caribbean (ECLAC) recommends that Central America undertake a long-term strategy of integration into the North American Free Trade Agreement (NAFTA).

The proposal, put forth in the document “Central America and NAFTA, Immediate Effects and Future Implications”, was presented on Thursday to the region’s economy ministers in the heaquarters of the Secretariat of Central American Economic Integration (SIECA) in Guatemala City.

The director of ECLAC in Mexico, Oscar Santamaria, said the most desireable short-term goal for Central America continues to be the reaching of trade accords with NAFTA, as foreseen, for example, in the “Crane bill” presented in the U.S. Congress early this year.

The bill drawn up by Phil Crane would grant greater access to the U.S. market by those products that are excluded from the Caribbean Basin Initiative, which already provides Central American countries with preferential tariffs and other benefits.

In an interview with IPS, the general secretary of SIECA, Haroldo Rodas, criticised the questioning of the bill by some U.S. legislators, which he said indicates “a policy totally contradictory to the aim of hemispheric integration.”

Nevertheless, the ECLAC report, coordinated by economist Juan Alberto Fuentes, says the preferential tariffs enjoyed by the members of NAFTA – Canada, Mexico and the United States – did not have a significant negative impact on Central American exports to the United States during the first nine months of 1994.

While Central American exports to that country dropped around five percent, that cannot be exclusively attributed to NAFTA, the ECLAC report states.

The document links that drop to problems suffered by Central American exports, which are mainly products that are losing weight in the U.S. market.

Rodas, meanwhile, said the weak negative impact of NAFTA on the subregion’s exports can be attributed to the Mexican economic crisis.

“But once Mexico achieves its pre-crisis levels, it is probable that investment” will begin to flow more strongly towards that country at the expense of Central America, he predicted.

Rodas said the subregion must boost its export capacity of non- traditional products, such as textiles, clothing and agroindustrial goods, with the aim of joining NAFTA in the future, and eventually becoming part of a continent-wide market.

He also stressed the need for Central American countries to improve their infrastructure.

“When we talk about preparing ourselves for NAFTA, we are not only referring to commercial preparation, but also to the major investment Central America must make in order to have abundant energy, modern telecommunications, specialised cargo ports, etc.

“That would provide a base for Central America’s entire productive sector, to improve investment and thus permit access to the U.S. market,” he added.

The ECLAC report states that countries in the area must undertake joint negotiations with other trade blocs.

Bilateral negotiations by each Central American country with NAFTA “would have a centrifugal effect on integration in the area, eroding intra-regional preference and introducing unequal norms for trade and investment,” the document warns.

According to the U.N. agency, preparing for integration with the North is equivalent to liberalising subregional economies:

“It requires advancing towards stabilising Central American economies, negotiating a broad but gradual process of liberalisation of imports and goods, and carefully defining criteria for the negotiation of the liberalisation of other services.”

ECLAC predicts that textile and clothing exports will be hardest-hit by NAFTA, if an accord with Central America is not reached.