CENTRAL AMERICA & CARICOM: The Challenges Of Business
Any strategy that would facilitate the expansion of trade between countries, especially developing nations, should be regarded as significant by all concerned since it could mean improving Gross Domestic Product (GDP) and by extension the standard of living and ultimately the alleviation of poverty.
With this in mind, in October 2010 the Trinidad and Tobago Chamber of Industry and Commerce in collaboration with the Association of Caribbean States and Camara de Industria de Guatemala hosted the “ Connecting the Caribbean and Central America: Exploring and Seizing New Opportunities” Conference. The key objective was to engage major entrepreneurs from the Caribbean and Central America and to identify and promote new business and trade opportunities.
However, as is to be expected in any such venture, there resides within the prescribed parameters, both pros and cons as a balance to successful completion. While the similarities of both regions are myriad and wide-ranging, there are also a great number of dissimilarities.
For instance both regions have a reliance on a few key products and services. As far as trade is concerned, the United States is the major trading partner for both economies, with statistics showing more than 60 percent of total trade, while intra-regional trade registers a dismal five percent. Another similarity is that both regions are susceptible to natural disasters like hurricanes and earthquakes.
Transportation: Among the obstacles which exist at present are the serious limitations posed by almost non-existent transportation facilities. Up until a few years ago the shipping line NAMUCAR operated between Costa Rica and various Caribbean ports bypassing Miami. That service has been discontinued and there no longer exists any direct sea link between both regions, which has resulted in an escalation in all transportation costs. As far as air connections are concerned only the Panama-based COPA Airlines offers service between Piarco and Panama with onward connections to all Central America countries as well as some in South America. To counter this deficiency, efforts can be made to develop a regional transportation policy, with avenues for co-operation in maintenance and equipment management and joint sharing of airport facilities, especially if something can be done about developing greater co-operation among airlines operating close by like Caribbean Airlines/Air Jamaica, TACA and American Airlines.
Crime Levels: A major challenge faced by Central Americans wishing to do business in CARICOM is the crime rate. The tourism industry is one of the major attractions of the Caribbean, and an attractive area for investment. However, high crime levels in several countries are a deterrent for tourists, and thus act as a disincentive for investors in this sector. In particular, Jamaica is known for its notoriously high crime rate. Statistics show that in 2010, Jamaica recorded 3,000 robberies and 1,700 murders.
Crime is also an issue faced by investors wishing to do business in Central America. High crime levels hinder investment opportunities as they escalate the security costs of doing business. Many Central American countries are reporting increase in their crime rates. For example, the US Department of State has changed its evaluation of crime in Panama to “high” and refers to crime in Costa Rica as being “of significant concern.” Belize and Nicaragua are also identified as countries with significant and increasing crime rates.
Language barriers: An issue which seems simple, but which has serious implications is that of language. The mother tongue of all the Central American countries is Spanish, while the CARICOM member states are all English-speaking, except for Haiti (French and some English) Suriname (Dutch and some English) and the Dominican Republic. There is also the issue of culture and business practices.
To overcome the language hurdle it is necessary to establish bi-lingual programmes at all educational levels there is a critical need to develop school curricula to include elements of comparative history, geography and politics of each region.
As is stands, English-speaking Caribbean investors may encounter difficulties in communicating and locating information. A significant amount of the online resources related to Central America are available only in Spanish, and this may pose a problem for potential investors seeking to conduct preliminary online research into business opportunities in the region. In addition, many hard copy documents are also available only in Spanish, thus requiring the services of a translator.
A key way to overcome the language barrier is to make the content on websites available in several languages making information more easily accessible to both Spanish-speaking and English-speaking investors. The Caribbean in particular must focus on making translation services more readily available.
Lack of Finance: Another potential hindrance to investment, both in Central America and CARICOM, is a lack of finance. Without sufficient monetary resources, business opportunities cannot be brought to fruition. In today’s economic context, it has become increasingly difficult to attract the necessary financial capital, particularly in the agricultural sector. Central American countries such as Honduras, Belize, Guatemala and Nicaragua rely on agro-industry for a significant part of their income. CARICOM members such as Saint Lucia, Dominica and Grenada also rely heavily on their agricultural sectors as a source of foreign exchange.
The agricultural sectors in many Central American countries have seen a decline in investment. Prices of agricultural products tend to fluctuate on the world market, and, of course, Central American and CARICOM agricultural products face international competition. What’s more, since both regions rely significantly on agribusiness, Central American investors may be more prone to invest in the agricultural sectors at home than in the Caribbean. The same applies to CARICOM investors.
Registration and Labelling: Speaking at the “Connecting to Central America” conference, Kama Maharaj, founder of Sacha Cosmetics discussed the registration process in Central American countries. Unlike Trinidad and Tobago, where it is sufficient to only register his company, Mr. Maharaj notes that in some of the Central America countries it is mandatory that every shade of cosmetic be registered. Because Sacha is always evolving, he says, the company is constantly introducing new products, making it highly challenging to keep up-to-date with the registration laws. The problems associated with registration can often result in huge losses: according to Mr. Maharaj, if one product isn’t registered, an entire container of cosmetics can be held up at the port. Registration often takes time and money.
Registration of a company’s trade mark is also time-consuming in Central America, with red-tape and bottlenecks frustrating the process. CARICOM investors would like to see a singe process/ruling for all countries in Central America, instead of different laws and requirements in each country – a situation similar to the laws in CARICOM where a company can come into business in one day.
In conclusion, the development of trade and commerce between both regions has gone mainly unnoticed. However no one on either side is responsible for this. As the saying goes, “there is no time like the present,” and for CARICOM now is the most appropriate time to capitalize on trade and investment into the Central American markets.
