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C.A. Customs Union Advances

March 5, 2004

AS of May 1 of this year, El Salvador, Guatemala, Honduras and Nicaragua have agreed to implement a joint customs union. Costa Rica, which took part in the customs union discussions, is not part of the agreement.

“The customs union agreement attempts to set up uniform legislation, customs procedures and product entry regulations,” explained Oscar Santamaría, head of the Secretariat for Central American Integration (SICA). “The transition calendar will operate in several phases. All four countries agreed on that.

“Costa Rica will also participate, but in a progressive manner,” Santamaría said. “They believe it may take them longer than May.”

THE Costa Rican Foreign Trade Ministry (COMEX) announced the country needs additional time to conduct internal reforms to some of its laws before agreeing to set dates for the implementation of the customs union. No information was given on when that would be.

“We prefer not to commit ourselves to deadlines we might not be able to meet,” Gabriela Llobet, Costa Rica’s Foreign Trade Vice-Minister, told the daily La Nación last week.

President Abel Pacheco was absent during the Central American presidents’ summit held last week in Guatemala to discuss the customs union. Foreign Trade Minister Alberto Trejos went in his place.

Under the customs union, all products grown or manufactured in one Central American country would be able to enter any other Central American country free of tariffs. Foreign products that enter the region at one port of entry would be allowed to freely circulate throughout the region.

CUSTOM taxes would be paid at local banks in cash instead of at the port of entry. Customs procedures would take “only five minutes,” reducing the long lines at borders and making it easier to do business in the region, according to Salvadoran Economy Minister Miguel Lacayo.

Costa Rica needs more time to decide how it will charge sales taxes to incoming products, which are currently collected at customs offices. The country also needs to find a way of guaranteeing that the free movement of goods throughout the region does not limit the country’s ability to enforce existing plant and animal health standards and security procedures, Llobet said.

Costa Rica is requesting that all Central American countries finish harmonizing the tariffs charged to foreign products.

According to COMEX, 8% of the region’s tariff lines have yet to be harmonized.

Despite Costa Rica’s decision, the region remains optimistic the customs union will be succesful.

“We are telling the world Central America is one and is going to begin working as a bloc,” Guatemalan President Oscar Berger said following last week’s summit.

Guatemala and El Salvador have already agreed to implement the customs union agreement by March 10.

 

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