Doing Business in Central America
Central America is a region rich in opportunity. Firstly, it is blessed with ample natural resources – Honduras and Nicaragua both have gold and silver. In addition, Honduras has large deposits of copper, lead, iron ore, and zinc, whereas Nicaragua has large deposits of natural gas. Guatemala can boast of nickel as well as petroleum deposits, while Panama has substantial copper deposits. The opportunity, however, is found in the fact that despite these endowments the extraction of minerals is small.
Secondly, international trade has acquired increased relevance in the economic activities of the region. Central America’s leading imports include cars, chemicals, electrical equipment, farm machinery, and pharmaceuticals, while its leading exports are bananas, coffee, cotton, meat, wood and rubber.
Thirdly, a powerful attraction for doing business in Central America is the low cost pool of labour that drastically reduces the cost of doing business. Furthermore, all Central American countries have a constant need for imported goods, such as computers and software, and medical and diagnostic equipment. Levels of poverty continue to drop as Central American economies develop and the levels of education increase with increasing proficiencies in English and other languages which are widely used in business and international investment.
The region offers a variety of trade opportunities in different sectors. For instance, most of the countries export sugar, bananas and seafood. Costa Rica, Panama and Nicaragua are very well-known exporters of coffee, while other products such as meat, agri-products, citrus, melons and cocoa are also being exported. But the exports are not only limited to foodstuff, for the region also concentrates on textiles and clothing, which is a strong export processing industry that is primarily focused on assembling textile and apparel goods for re-export, for example in Honduras.
As far as the pharmaceutical industry is concerned, Central America is also an important player. El Salvador is a good example of a country that is involved in the production of medicines, soaps and detergents, as well as ethyl alcohol and other pharmaceutical products, while Costa Rica exports medical equipment. Meanwhile, the rest of the region remains dependent on the imports of chemical products and pharmaceuticals in general, which represents an opportunity for companies abroad that wish to distribute in the region. Similarly machinery and transport equipment imports are critical, in particular for Honduras and Nicaragua.
El Salvador is the leading exporter in the region of paper and cardboard products. On the other hand, Central America has relied on distributors and partners abroad to provide the region with integrated circuits and electronic components in general.
Meanwhile, Central American countries have continued to make strides to improve the business climate. In recent years, the region has achieved significant advances in this area. For instance, in Belize the government offers a menu of incentives for attracting foreign investment, in which the foreign investor may own 100% of a property ownership and of a company’s assets. In Guatemala, a collateral registry became operational in Guatemala City in February 2009. The registry allows secured creditors to make their security rights in all types of movable assets known to third parties. The government also passed a new law which guarantees borrowers’ the right to access their data in any public registry. Guatemala also introduced regulations mandating the use of electronic systems for tax payments and filings, reducing the number of tax payments thereby making it easier for an entrepreneur to start a business in this Central American country.
Additionally, Central America is immersed in a series of initiatives to expand its international market. Guatemala has signed four free trade agreements and four partial-scope agreements while Costa Rica has signed a bilateral trade agreement with CARICOM and was an active participant in the negotiation of the Hemispheric Free Trade Area of the Americas. Central America, of course, has also signed and implemented a free trade agreement with the United States along with the Dominican Republic.
It is evident from the above, that Central America is a rich region which offers not only a wide range of opportunities for international investors, but which is also committed to the expansion of international trade and investment. It is open to the Caribbean business sector in particular. Working together businesses in Central America and the Caribbean can create new opportunities for approaching larger markets, improve the competitiveness of both regions and become important players in markets in the region and beyond. This, in turn, can facilitate the achievement of the economic development objectives of Central America and the Caribbean.
