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Central American Regional
>> Regional Overview >> Central American Regional Program Overview Activity Data Sheet
PROGRAM: Central American Regional
TITLE AND NUMBER: Increased Central American Participation in Global Markets, 596-001
PLANNED FY 2001 OBLIGATION AND ACCOUNT: $2,900,000 (DA)
PROPOSED FY 2002 OBLIGATION AND ACCOUNT: None
STATUS: Continuing
INITIAL OBLIGATION: FY 1995 ESTIMATED COMPLETION DATE: FY 2001Summary: The strategy responds both to USAID's Agency-wide goal of broad-based economic growth and to Central America's pursuit of an outward-looking, export-led strategy as the best way to achieve rapid, sustainable, and equitable economic growth. It promotes U.S. foreign policy objectives of the establishment of the Free Trade Area of the Americas (FTAA) by 2005 and advancement of the trade liberalization agenda negotiated globally through the World Trade Organization (WTO). USAID's Program Supporting Central American Participation in the FTAA (PROALCA) aims to increase Central America's readiness to join and honor commitments made under hemispheric free trade agreements (i.e., FTAA and North American Free Trade Agreement--NAFTA) and seeks to accelerate regional integration into hemispheric and global markets. Only through greatly expanded trade will Central America attain economic growth rates required to effectively combat poverty. PROALCA Phase I will be completed in FY 2001. Phase II activities will be initiated in FY 2002.
Key Results: (1) Improved trade and investment policies, including lower tariff rates, fewer non-tariff barriers for both intraregional and world trade, stronger intellectual property rights protection (IPR), and an enhanced investment climate; (2) More equitable and better functioning labor markets, requiring improved labor relations, stronger protection of core labor standards, and negotiated deregulation; and (3) Increased private investment in energy and telecommunications, which is essential as public sector savings are insufficient to finance needed infrastructure investment.
Performance and Prospects: Overall performance has exceeded expectations. PROALCA has contributed to the continued adoption of an outward-oriented regional integration model. Through 53 regional seminars, PROALCA has trained 1,118 people in services and investment, competition policy, administration of treaties, training of negotiators, and FTAA and WTO processes. 90% of the products on the tariff universe list have been harmonized. Guatemala and El Salvador ratified the Customs Union Agreement in October 2000. El Salvador and Honduras have established a customs union. Nicaragua has also expressed its desire to join the union. Central American (CA) countries are also working to harmonize their trade negotiating positions vis-a-vis third countries. Mexico and the three CA Northern Triangle countries (Guatemala, El Salvador and Honduras) signed a free trade agreement in June 2000, which was ratified in February 2001. The treaty provides that 72% of 6,000 articles from the CA countries will be eligible to enter Mexico duty-free and 60% of 12,000 Mexican articles will be eligible to enter CA countries duty free.
On tax harmonization issues, tax authorities in Guatemala and El Salvador are reviewing comparative tables of the laws related to Value Added Tax (VAT), and specific taxes (cigars, liquor, beverages). The Intellectual Property Rights (IPR) component of PROALCA contributed significantly to the enactment of modern IPR laws in Guatemala and Honduras, the reduction of processing time to register patents and trademarks in Nicaragua, wider public support for IPR in the region, and regulations to strengthen the regional governments' capacity to comply with their ongoing IPR obligations under international trade agreements. PROALCA also sponsored the creation of IPR courses at two universities in the region, a quarterly magazine, and a book on IPR to appear in 2001. The Vice Ministers of Economy of Guatemala, El Salvador, Honduras, and Nicaragua agreed to continue efforts to harmonize IPR Laws and to evaluate a Central American trademark system.
The labor situation in several CA countries continues to be an issue. CA countries came under strict scrutiny with respect to their labor standards this past year as a result of passage of the enhanced Caribbean Basin Initiative (CBI). All CA countries were found eligible for CBI benefits, but Guatemala will be reviewed by the U.S. Trade Representative again in April 2001. In order to strengthen information systems under the labor component, PROALCA installed computer information systems in the CA Ministries of Labor. More than 2,000 labor officials were trained through videoconferences, workshops and courses on labor inspections, the labor market, workers rights, occupational safety and health matters, alternative dispute resolution, and the labor standards requirements of free trade agreements. With PROALCA support, CA Labor Ministers signed an agreement of cooperation with the Labor Secretariat of Mexico, which benefited from World Bank and Inter American Development Bank (IDB) support to modernize its labor market upon Mexico's entrance in NAFTA. The benefits of the Mexican experience are being transferred to CA countries at a minimal cost. PROALCA initiatives led to the development of an occupational health and safety center in El Salvador. The Child Labor Eradication Program is being successfully carried out, with eight local NGOs having signed agreements, endorsed by local authorities, to implement pilot projects in each of the region's eight countries.
Using tools provided by PROALCA, the CA governments are restructuring their energy sectors. New electricity laws, regulations, procedures, and management structures for newly created private entities are promoting private sector-led electrification and other energy sector investments. PROALCA's technical support to the El Salvador Ministry of Economy in charge of the power sector has resulted in greater stability in the power sector and reduction on electricity tariffs to the consumers during this period. Technical support to the Guatemala regulatory commission helped develop Quality of Service Regulations, essential to assure customers a reliable and efficient electricity service, and assisted the Power Pool Administrator to develop a system for the monitoring and control of the operation of the power system. In Nicaragua, PROALCA aided development of the institutional structure and organization of the newly created public Transmission Company and the power pool administrator. In Honduras, PROALCA supported the drafting of the Electricity Law. This Draft Law has become the framework for a new competitive power sector in the country and was included as a covenant for the International Monetary Fund (IMF) program in Honduras.
In FY2001, a total of $2,900,000 in Development Assistance (DA) funds will support PROALCA Phase I activities. Of this amount, $1,255,000 will promote trade and investment policy reform, intellectual property rights and economic analysis activities; $755,000 will be used for technical assistance to strengthen CA Ministries of Labor and labor market modernization activities; and $890,000 will support regulatory reform and restructuring, facilitation of private investment and development of competitive energy markets in the region.
Possible Adjustments to Plans: In July 2000 the Regional Strategic Plan was approved. Design for the new regional competitiveness program's second phase, "Increased Central American Competitiveness in Global Markets" is underway. Procurement actions will come on line during 2001 so as to begin implementation of PROALCA II in October 2001, thus assuming a seamless transition from PROALCA I.
Other Donor Programs: USAID and the IDB are implementing a joint activity to help modernize labor markets. USAID maintains close contact with the United Nations Economic Commission for Latin America (ECLA)-Central American Office, which provides research and technical analysis on Central American economic integration issues.
Principal Contractors, Grantees, or Agencies: USAID coordinates with the Office of the U.S. Trade Representative (USTR), the U.S. Patent and Trademark Office (USPTO), the U.S. Department of Labor, the U.S. Customs Service, and the Economic/Commercial Sections of U.S. Embassies in the region. The Permanent Secretariat for Central American Economic Integration (SIECA) is a grantee, as are several Central American governments. Contracts and grants have been awarded to U.S. and local firms including PA Consulting Group (formerly Hagler Bailly). Through USAID support and encouragement, SIECA negotiated a Memorandum of Understanding with the USPTO to cooperate toward strengthening intellectual property rights protection.
Central America Program: 596-001
Performance Measures:
Indicator FY97
(Actual)FY98
(Actual)FY99
(Actual)FY00
(Actual)FY00
(Plan)FY01
(Plan)FY02
(Plan)Indicator 1: Composite score on trade readiness 3.26 3.46 3.54 (e) 3.64 (p) 3.50 3.7 TBD Indicator 2: Total Central American Merchandise Trade as a Percentage of GDP 49.24 52.04 51 54 (p) 54.0 55.0 TBD Indicator 3: Intra-Regional Merchandise Trade as a Percentage of GDP 8.82 (r) 9.54 9.9 9.94 (p) 8.40 9.98 TBD Indicator 4: Private investment in energy and telecommunications 630 2600 4400* 4942 4000 5000 TBD Indicator Information:
Indicator Level (S)or(IR) Unit of Measure Source Indicator Description Indicator 1: S Average of Central American countries' scores Regional Central Banks; Secretariat for Central American Integration, Central American Monetary Council; IDB, Social and Economic Progress in Latin America, 1995-1998; UNDP, HDI of 1993-1999; Freedom House, Annual Survey of Political Rights and Civil Liberties, 1992-1999; IMF, International Financial statistics, 1990-2000; ECLAC, CEFSA-COPADES report of April, 2000; and USAID staff estimates Countries are scored on a scale of 0 to 5, with five being the most ready for participation in a free trade agreement. The readiness indicator is based on the methodology developed by the Institute for International Economics. It is a composite score of eight factors: price stability, budget discipline, external debt, currency stability, private savings, market-oriented policies, reliance on trade taxes, and policy sustainability (Freedom House and UNDP's Human Development Index). Indicator 2: S Percentage For 1994-1998, Secretariat for Central American Economic Integration, Statistical Bulletin 7.3 September 1999. For 1999 and 2000 Central Banks and CEFSA-COPADES estimates Sum of total exports f.o.b. and imports c.i.f. for each country (Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua), divided by the sum of GDP for each country. Annual figures for 1995 through 1999 have been adjusted to compensate for the abnormally high international prices for coffee. Exports and imports don't include maquilas (drawback). There is a change in the external trade of Honduras that now includes total trade with Central America that was not shown during previous years. Indicator 3: IR Percentage Data from 1994-2000 is from the Secretariat for Central American Integration, CEFSA-COPADES and TEA Office Estimates. Data from 2001 onward is from the Central American Monetary Council. Sum of total merchandise exports f.o.b. and imports c.i.f. to and from Central America (5 CACM countries), divided by the sum of GDP for each country. Data reflects an adjustment in the case of Honduras, which before did not include total intra-regional trade. Indicator 4: IR US$ millions invested (cumulative) Grantees and contractors working in the region All private investment will be counted, including revenues from privatization of state-owned facilities as well as new private investments in both sectors. *This amount includes the cumulative investments (1997+1998). (e) estimates
(p) preliminary
(r) revised using updated trade and GDP data from Secretariat for Central American IntegrationU.S. Financing
(In thousands of dollars)
Obligations Expenditures Unliquidated Through September 30, 1999 11,676 DA 6,343 DA 5,333 DA 0 CSD 0 CSD 0 CSD 0 ESF 0 ESF 0 ESF 0 SEED 0 SEED 0 SEED 0 FSA 0 FSA 0 FSA 0 DFA 0 DFA 0 DFA Fiscal Year 2000 3,200 DA 5,269 DA 0 CSD 0 CSD 0 ESF 0 ESF 0 SEED 0 SEED 0 FSA 0 FSA 0 DFA 0 DFA Through September 30, 2000 14,876 DA 11,612 DA 3,264 DA 0 CSD 0 CSD 0 CSD 0 ESF 0 ESF 0 ESF 0 SEED 0 SEED 0 SEED 0 FSA 0 FSA 0 FSA 0 DFA 0 DFA 0 DFA Prior Year Unobligated Funds* 0 DA 0 CSD 0 ESF 0 SEED 0 FSA 0 DFA Planned Fiscal Year 2001 NOA 2,900 DA 0 CSD 0 ESF 0 SEED 0 FSA 0 DFA Total Planned Fiscal Year 2001 2,900 DA 0 CSD 0 ESF 0 SEED 0 FSA 0 DFA Future Obligations Est. Total Cost Proposed Fiscal Year 2002 NOA 0 DA 0 DA 17,776 DA 0 CSD 0 CSD 0 CSD 0 ESF 0 ESF 0 ESF 0 SEED 0 SEED 0 SEED 0 FSA 0 FSA 0 FSA 0 DFA 0 DFA 0 DFA
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Last Updated on: May 29, 2002 |
