Central America: Progress on a Customs Union; A

UNCLAS TEGUCIGALPA 000708

SIPDIS

STATE FOR EB/TPP, EB/CPA, EB/TRA and WHA/CEN

E.O. 12958: N/A
TAGS: ECIN ETRD ELTN ECON EAGR HO
SUBJECT: Central America: Progress on a Customs Union; A
Step Towards Integration

REF: 04 Tegucigalpa 778


1. Summary: The Central American customs union is on its way,
slowly but surely. On Wednesday March 9 of this year, Honduras
and Guatemala consolidated the process of customs unification by
signing a bilateral agreement at El Florido, a border crossing
between the two countries in the Department of Copan in western
Honduras. This is the next step in a process that has recently
included signing a similar agreement with Nicaragua in February
2005, and the conclusion of a customs liberalization between
Guatemala and El Salvador in December 2004. End summary.

Honduras Consolidates Custom Union with Guatemala
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2. The presidents of Honduras and Guatemala, Ricardo Maduro and
Oscar Berger respectively, signed a bilateral agreement that
contemplates measures for the creation and application of
mechanisms to facilitate the transit of people and merchandise
between the two Central American countries. The signing of this
agreement follows similar resolutions taken by Honduras,
Guatemala, El Salvador, and Nicaragua (known as the CA-4) to
create a Central American passport for all the citizens of the
region and also to create a unique visa that will be required of
all foreigners that wish to visit these four countries.

Central America Marches Towards Integration
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3. At the March 9 ceremony, President Maduro highlighted both
the importance of CAFTA-DR to all the Central American countries
and how all the countries of the region are going to work
together to reach a similar trade agreement with Europe.
According to President Maduro, this is the first time in history
that the Central American countries have negotiated as one. "We
set the example to the world [with CAFTA-DR] and with this
success we are preparing ourselves to also do the same with
Europe". He expressed his satisfaction with the steps that have
been taken towards the issuance of a unique passport and visa
requirement for the Central American region.

Guatemala and El Salvador Set The Example
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4. At the end of 2004, Guatemala and El Salvador were the first
Central American countries to advance towards a customs union by
opening a single customs window for the movement of people and
merchandise between the two countries. On February 15 of this
year, Honduras and Nicaragua signed a similar agreement to
operate a unified customs window at the Guasaule border crossing
point, in the Choluteca Department in southern Honduras. This
agreement, which had sixteen points to be followed by both
nations, includes: the elimination of most requirements for
agricultural products that come from Nicaragua to Honduras, the
installation of one window to provide immigration services for
both countries, an entry/exit card that will be the only
requirement for the citizens of the CA-4 countries, and the
gradual elimination of all tariffs on products from both
countries. Honduran and Nicaraguan customs, police, immigration,
quarantine, and transportation officials signed the document.
The Central American countries are hoping that Nicaragua and
Costa Rica will establish a similar agreement in the near future.

5. Comment: As reported reftel, in 2004 Honduras was perceived
as lagging behind Guatemala and El Salvador in its enthusiasm for
the customs union, in part because of certain statements made by
GOH officials, including Director of Trade Policy Melvin Redondo.
In conversations with EconOffs at the time, Redondo stressed that
Honduras was indeed supportive of the customs union, but was
merely concerned that certain technical issues regarding customs
integration needed to be carefully worked through, not rushed
into without planning. It appears that these steps towards
integration, while slower at first than had been hoped, are
finally building a momentum towards a genuine customs union. It
remains to be seen if the technical implementation will keep pace
with the political declarations. End Comment.

Palmer