The European Union and Central American states reached an agreement to liberalize trade and cut import tariffs, giving total market access to industrial products on both sides.

The European Commission, the EU's executive in charge of the 27-nation bloc's trade policy, said the deal would formally be concluded by EU and Central American heads of state at a summit in Madrid.

"The agreement will offer new market access prospects for exporters from both sides in agricultural products, automobiles, electronics, banking, telecoms and environmental services," EU Trade Commissioner Karel De Gucht told a news conference in the Spanish capital.

Trade between the regions stood at nearly 10 billion euros ($12.3 billion) in 2009.

Nicaragua's leftist president, Daniel Ortega, praised the results and said he sees commercial opportunities from the deal.

"I can give the good news to the Nicaraguan people that we have achieved basic agreements that will benefit Nicaragua, despite the complexities of negotiating in the middle of a global (economic) crisis," Ortega said in a speech on Monday.

Central American states export mostly agricultural products such as coffee, bananas and other fruits to the EU and import machinery, chemicals, vehicles and fuels from Europe.

Cars, Coffee, Sugar
The European Union, Central America's largest trading partner after the United States, began trade negotiations with Panama, Guatemala, Costa Rica, El Salvador, Honduras and Nicaragua in 2007.

The negotiations nearly collapsed last week due to differences over the EU's dairy export demands. The EU subsequently agreed to reduce its quota demand from over 4,000 tonnes of milk and 4,000 tons of cheese to 1,900 tonnes for powdered milk and 3,000 tons for cheese.

European car makers will be given free access to Central American markets for 10 years, while EU companies in the services sector will also have better access in the region.

In return, the EU has offered to cut banana tariffs to 75 euros per tonne from 114 euros per tonne, as agreed in Geneva last year to end a long-running "banana war".

The EU also offered market access to new imports of 10,000 tons of beef and 20,000 tons of rice annually from the Central American states. This could create a potential new market worth nearly 50 million euros annually for Central American exporters.

Central American coffee producers like Costa Rica and Guatemala, known for their top-quality beans sold at high prices, pushed for denomination of origin rules to label coffee from specific countries as a specialty product.

"We are very satisfied because (the deal) included strict origin rules. The name of Costa Rican coffee will be protected there," Ronald Peters, the head of Costa Rica's coffee institute told Reuters on Tuesday.

The deal stipulates a 162,000-tonne import quota for Central American sugar, but producers were disappointed it was not larger, Carlos Melara, head of the Honduran sugar producers association said.

"There could have been better negotiations for Central American interests ... To save the negotiation politically they sacrificed our sector," Melara said. (Reuters)