Costa Rica has been stepping up its efforts to increase its trading partners, especially in Asia and South America, throughout the world during the past five years.
Five years ago, Costa Rica shrugged off Taiwan, a trade partner of nearly 60 years, in order to begin relations with the People’s Republic of China. Additionally, it has recently entered into negotiations with Colombia and Perú without its normal Central American partners.
President Laura Chinchilla has announced that Costa Rica and South Korea will negotiate its own free trade agreement
Here’s what’s going on now:
Although Costa Rica and Canada have had a free trade agreement on books since 2002, the two countries are in the final stages of renegotiating the treaty to modernize it, update its rules and incorporate new technology.
The new treaty is currently in its final round of negotiations. The process began in November last year and seems to be moving faster than the original agreement, which took about three years to go into effect. However, even after negotiations have concluded, there will still be more details to settle, and the new treaty must be approved by both legislatures.
According to information from the Ministerio de Comercio Exterior, Costa Rica exported $83 million worth of products to Canada in 2010 under the existing treaty, mostly in the form of electronic equipment, tires, coffee, pineapple and cotton undergarments. Conversely, Canada exported to here $115 million worth of wheat, frozen cut potatoes, paper, cars, fertilizer, prescription drugs and plastic.
The free trade agreement being negotiated between Costa Rica and Colombia has been one of the more recent and controversial trade treaties proposed by the Chinchilla administration.
Although a bilateral agreement has existed between the two countries since 2002, many manufacturers in Costa Rica are concerned that the competitive advantage will rest with their Colombian counterparts who may access cheaper raw materials and pay lower wages. Conversely, farmers are concerned that Colombian raw materials and crops will flood the Costa Rican market.
Announced in June, the two countries quickly began the first round of negotiations. The next round is scheduled to take place late this month. The ministry of foreign trade will hold forums for representatives of industries to air concerns and comments.
Trade between the two countries has grown dramatically over the past decade, to $503.9 million in 2010, but again, this is mostly in the form of imports to Costa Rica. That year Colombia exported $455.7 million of primarily oils, from petroleum and other sources, as well as medicine, fertilizer and fungicides. Costa Rica exported processed food, prosthetic equipment, lead, vodka, medicine, paper, plastic, seeds, fruit and tires.
This free trade agreement is a relatively unique treaty in that it encompasses two blocs: a group of Central American countries (Costa Rica, Guatemala, Honduras and Panamá) and a group of European countries (Norway, Iceland, Switzerland and Liechtenstein), none of whom are part of the European Union.
The two blocs began negotiating the treaty earlier this year. During the third round, which was in Costa Rica last month, Guatemala joined the negotiations. The next round will take place in Geneva, Switzerland, in late October.
In 2010, the value of trade between Costa Rica and all four of these nations was about $144.5 million in products, Switzerland being the largest partner. However, the lion’s share of these products was imported to Costa Rica, $141.8 mostly in medicine, medical equipment and coins. That same year, Costa Rica exported $2.7 million worth of products consisting of metal (mostly steel and other metallic scrap), cigars, unroasted coffee, computer parts and machinery parts.
Treaties pending legislative approval:
Like many of Costa Rica’s treaties with the rest of the world, the country shares this agreement with its Central American neighbors, Guatemala, Honduras, El Salvador and Nicaragua. This treaty, which was completed last November and sent to all governments for approval, simply updated and merges treaties that México already had in place with Costa Rica and the other countries.
The legislative assembly received the treaty in February, and, as procedure dictates, it was almost immediately passed off to the committee of foreign relations and trade. That committee unanimously approved the agreement last month, and the treaty is currently heading back to the full assembly.
In 2011, Costa Rica exported $318.6 million in products to Mexico, consisting primarily of palm oil, processed food, small manufactured items like plugs and gaskets, tires and packaging materials. Mexico exported $1.1 billion worth of products in the form of electronics, medicines, cars, paper, plastic and home appliances. Additionally, $182 million in investments flowed from México to Costa Rica last year, making it the third largest source of investments in Costa Rica.
This is a free trade agreement that has been completed under the Chinchilla administration. This treaty set the framework for free-trade negotiations with Colombia. As with Colombia, trade between Costa Rica and Perú has been growing for decades, although again the majority is imported. The trade ministry staff sees room for continued growth as Perú has a population that is six times larger than that of Costa Rica.
The agreement was completed in May of 2011 and was presented to the legislative assembly less than a month later. In April, the foreign relations and trade committee recommended that the agreement be approved and sent it back to the full assembly, where it has been since awaiting approval.
In 2011, Costa Rica exported $15.8 million worth of products to Perú, consisting primarily of medicine, tires and other rubber products, plugs and other plastic products, packaging materials and medical instruments like syringes. Perú exported to here freighters, paper, plastic, unroasted coffee, avocados, safety fuses and other products totaling $50.8 million in value.
Costa Rica’s free trade agreement with Singapore is part of Costa Rica’s efforts to establish more trading partners in Asia over the past five years. Although trade has not grown substantially between the two countries over the past decade, the ministry sees potential given that both countries are fairly small (Singapore is actually a city-state), have similar-sized populations, and Singapore has the third highest gross domestic product per capita in the world.
Negotiations on the agreement concluded early in 2010, and it was introduced to the legislative assembly that February. According to the assembly’s Web site, the treaty went to the foreign relations and trade committee which recommended that the full assembly approve it, but no actions have been taken with regard to the treaty since it was reintroduced to the full assembly last September.
In 2010, the value of Costa Rica’s exports to Singapore amounted to $43.9 million in the form of a wide assortment of computer and electrical equipment parts, timber and coffee. Singapore’s exports to Costa Rica amounted to $31.2 million that year, and included plastics, ether-alcohol, medicine as well as machine and electrical equipment parts.
Treaties under review:
European Union – Central American Association Agreement
As with the European Free Trade Association, this is a treaty between two blocs, all of the countries in the European Union and Central American countries. According to the trade ministry information, the European Union is one Costa Rica’s most important trade partners given the value of goods flowing between the two with or without the treaty. Additionally the European Union contributed 12 percent of Costa Rica’s direct foreign investment, with Spain being the leader of those countries.
While the European Union already has policies in place that basically allow for free trade of some goods with Central
America, this treaty is meant to simplify and consolidate the process.
Negotiations between the two blocs concluded May, 2010, but the treaty has since been under review by the 27 European countries and seven Central American countries that must approve it before it goes into effect.
Costa Rica exported $1.7 billion worth of products to the European Union in 2010, mostly in the form of fruit like pineapples and bananas, computer and electrical equipment parts, coffee, palm oil, steel wire, beef, filters, pencils and others. Countries of the European Union exported $1.1 billion worth of products, mainly medicine, parts for motors and generators, and oils based on petroleum and other sources.
Treaties in effect:
At least five countries in Central America have been unified under an economic integration treaty since the 1960s. The agreement has had many names since then, including the Central American Common Market, the Central American Economic Integration Treaty Protocol and the Central American Integration System. In general the idea has been to establish a uniform trade policy with the rest of the world by which members would abide in order to jointly improve their collective economies and the quality of life of their people.
The agreement was originally established in the 1960s between Guatemala, El Salvador, Nicaragua, Honduras and Costa Rica, and again, Costa Rica was the last member to approve the treaty. According to the ministry, trade continued to grow between the members during the following decades despite political and economic turmoil, particularly in the 1980s, but the region reestablished integration agreements in the 1990s that also came to include Panamá.
Although the ministry does not track trade between Costa Rica and its Central American counterparts in this agreement on its Web site.
Better known as the Dominican Republic — Central America Free Trade Agreement (CAFTA-DR), this agreement includes Costa Rica, the Dominican Republic, Honduras, Guatemala, Nicaragua, El Salvador and the United States. This treaty is arguably the most important for Costa Rica, because the United States is Costa Rica’s largest trading partner. Trade between the two countries had a net value of nearly $12 billion last year, according to ministry data.
While the other countries in the treaty had approved it and put it into effect between 2005 and 2007, Costa Rica was the last country to approve the document, and did not do so until January 2009. Costa Rica was also the only country to have put the controversial treaty to a referendum in which it was barely approved, with 51.6 percent of the voting populace in favor.
In 2011, Costa Rica exported $4 billion worth of products to the United States, largely in the form of electronic parts, equipment and accessories, medical supplies and appliances like syringes, pineapples, bananas and coffee. Conversely, the United States exported $7.8 billion worth of electronic parts and gadgets, oil products, corn, soybeans, paper and other products. In addition, almost $1.5 billion of direct foreign investment came from the United States last year, which is about 61 percent of investments of this kind that Costa Rica receives globally.
Caribbean Community (CARICOM)
This treaty is unique for Costa Rica in that it individually has an agreement with a regional bloc of nations, while Costa Rica is usually grouped with other Central American countries for free trade treaties. This treaty includes the Caribbean nations of Antigua and Barbuda, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Suriname and Trinidad and Tobago. Costa Rica has individual agreements with some of these countries, but for others it unilaterally allows their products to be imported duty-free.
This treaty went into effect in November, 2005, more than three years after negotiations began on the treaty. Other nations, including Guyana and Barbados in 2006 and Belize in 2011, joined the treaty afterwards
Costa Rica exported $156.9 million worth of products to the members of CARICOM in 2011, in the form of products that include medicine and medical supplies, processed food, bottles, jars, closures like lids, vegetables, fruits, cooking appliances and paper products. Caribbean countries exported $120.7 million worth of products that primarily consisted of iron and steel products and crude oil.
This treaty is again a negotiation between a faraway country and the usual five Central American states (Costa Rica, El Salvador, Honduras, Guatemala and Nicaragua). Although exports from Costa Rica to Chile have been growing, the value of Chile’s imports to Costa Rica is nearly 11 times the value of Costa Rica’s exports there.
For Costa Rica, this treaty began the legislative process in January, 2001, and was put into effect in February, 2002. Although no actions have been taken yet, the ministry’s Web site says that some of the countries involved with this treaty are discussing revising it.
Last year, Costa Rica exported $24 million worth of products such as processed foods, tires, pasta, tampons, sanitary supplies for babies such as diapers, aluminum and fruit. Chile exported $258 million worth of copper wire, lumber, paper, wine, apples, milk products, tanks, barrels and aluminum.
In just over a year, China has become one of Costa Rica’s most lucrative trading partners with about $1.5 billion flowing between the two countries per year, even though the majority of that is coming from China. This treaty is particularly important because Costa Rica had to sever ties with its long-time partner Taiwan in order to enter negotiations with China. China and Taiwan have been bitter rivals since the losing side of their civil war escaped to Taiwan in 1949, and China still rejects diplomatic ties with countries that recognize Taiwan.
Although Costa Rica and China had been trading since the 1990s, the two countries officially forged diplomatic ties in 2007 and quickly began negotiating a free trade agreement. They completed negotiations in February 2010, and the treaty moved relatively quickly through Costa Rica’s government and was approved in August, 2011.
Costa Rica exported $199.7 million worth of products last year in the form of electrical and computer gadgets and parts, fruit, timber, scrap copper and aluminum, leather and other products. At the same time, China exported nearly $1.3 billion worth of goods to Costa Rica, which primarily consisted of cellular phones and computers whole and in parts, toys, routers, footwear and beans.
Because of Costa Rica’s close proximity and their complimentary economies, the ministry said on its Web site that it sees Panamá as a natural trading partner. The ministry also says that the partnership with Panama is particularly good for small and medium-sized Costa Rican businesses to export their products.
Also fairly new, the treaty was approved in November 2008, and includes an annexed program that went into law the following January that is meant to reduce tariffs between the two countries.
In 2010, Costa Rica exported $442.9 million worth of medicine and medical supplies, processed food, electrical conductors, paper hygiene products, disinfectants, fertilizers, insecticide, iron and steel, additives for cement, bananas, plantains and other products. Conversely, Panama exported $233.5 million in medicine, aluminum containers, computer and electrical parts, yellow fin tuna, cheese, combustible fuel, chemical contraceptives and other goods.
Independent of its other treaties that include the two nations or regions, Costa Rica has had its own free trade agreement with the Dominican Republic for just over a decade. Although Costa Rica trades with the majority of the Caribbean under CARICOM, the ministry says on its Web site that the Dominican Republic is one of Costa Rica’s most important trading partners in the region and this treaty was in effect well before those with other Caribbean nations.
Although this treaty began the legislative process in the summer of 1999, it was not put into effect until March, 2002. Trade between the countries has continued to grow and the Dominican Republic is a common destination for goods in the Caribbean.
Costa Rica exported $221.2 million worth of products to the Dominican Republic in 2010 which principally comprised of tampons, medicine and medical supplies, home appliances, glass containers, electrical conductors, processed food and numerous other products. The Dominican Republic exported $26.8 million in products including iron and steel in various forms, liquefied natural gas, crude palm oil, alkyd resins and PVC pipes.
In addition to these free trade agreements, Costa Rica also has bilateral investment agreements with 13 other countries. With some it also has free trade agreements. According to the ministry’s Web site, these countries are: Argentina, Canada, Chile, the Czech Republic, France, Germany, Korea, the Netherlands, Paraguay, Spain, Switzerland, Taiwan and Venezuela