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Issue #587

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2014 Media Kit
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CAFTA non-starter despite growth in Central American trade

By: | at 07:00 PM | Channel(s): International Trade  

Trade between the US and Central America is showing a modicum of growth although the new CAFTA agreement between the US and seven Central American nations is providing no impetus at present to this modest rise in volume.

“CAFTA tpday is more smoke and mirrors than a genuine contribution to US-Central American trade,” stated William Casas, District Manager at the Miami office of Target Logistic Services, a leading freight forwarder serving the Central American market. “Other factors are stimulating this small rise in cargo activity including a slowly rising standard of living in the seven nations making up Central America and early stages of industrialization to complement Central America’s humongous agricultural base,” he asserted.

To participate in this rise in US-Central American trade activity, Target has embarked jointly on an ambitious program to increase its business South of the border. It is coordinating activities with a Central American-based partner, Arce Campos; a leading freight forwarder with headquarters in San Jose, Costa Rica. Target and Arce Campos are winning business by creating cost effective supply chain solutions to shippers both in the US and Central America.

Casas believes the CAFTA agreement, in time, will generate more business between the US and Central America. “But like everything else South of the border, things move slowly,” he stated. “There is any number of obstacles to overcome,” he said. “Reducing tariffs and simplifying customs regulations is only part of the problem,” continued Casas.

He pointed to poverty, still endemic in much of Central America’s population despite a modest growth in GDP among the seven nations. “The countries comprising Central America total some 34 million people, slightly more than California’s population,” he said. “Yet, their per capita income is less than one tenth of the Golden State. The region remains overwhelmingly agricultural although the governments in Central America are making concerted efforts to attract industries to their countries.” Casas reported that factories making paint, inexpensive apparel, detergents, tires, paper, fertilizers and insecticides have been established in or near urban areas. “These efforts are starting to bear fruit and increased shipments of locally produced industrial goods are beginning to flow northward,” stated the Target district manager.

Panama stands somewhat apart from the other six nations of Central America. Principal reason; the Panama Canal. Marine parts and supplies often are required in a hurry for cruise ships and freighters traversing the Canal. Casas notes that a specialty of Target’s Miami office is marine shipments—often on an emergency basis. “It is not unusual for our Miami office to receive a phone call at 2 AM from the traffic manager of a cruise line to send ‘like yesterday’ items needed for one of its ships about to pass through the Canal. These items may consist of anything from multi-ton parts for the ship’s propulsion gear to cartons of dishwasher detergent to clean 3,000 piece of cutlery.”

Most of the growth in Central American trade is via ocean, with air freight volume generally flat. Target’s partner, Arce Campos, reports that volume out of its Limon office, Costa Rica’s largest port, is showing solid growth in ocean freight.

Interestingly, air freight volume is more dependent on the service airlines provide rather than strictly economic trends Because Central America is a relatively small market for passenger traffic, air freight gets relatively short shrift from the combination carriers serving Honduras, El Salvador, Nicaragua, Belize, Panama, Guatemala and Costa Rica. Continental Airlines, the US carrier with the most flights into and out of Central America, flies only narrow bodied 737s and MD-80s with very little space allotted to cargo. Indeed, comments Casas, there often is more cargo stowed in the passenger bins of the airplanes than in their cargo holds. Central Americans returning from the US load up on all types of consumer goods from television sets