Recently, the European Union began negotiating a free trade agreement with six Central American countries that include Honduras, Guatemala, El Salvador, Nicaragua, Costa Rica and Panama. The agreement consists of three central themes: cooperation, political dialogue, and free trade. Actual negotiations were supposed to commence in mid-June, but were delayed until October.

According to the Honduran Coalition of Citizenship Action, although the agreement includes the three themes, it’s evident that the main focus is on the free trade aspect. An agreement with Europe will not have much impact on Central American agriculture compared with outcomes of the DR – CAFTA, but there is no doubt an agreement of this nature will put natural resources and economic development in a precarious situation; European’s principal offer is to include as a priority the free investments, and the participation of European companies with equal conditions in public bidding processes (communications, supplies and medications, construction of hydroelectric structures, etc).

European representatives claim that this agreement is different than the agreement Central America signed with the United States; they assure that small and poor countries of the region have an opportunity to consolidate and develop their potential by providing a comprehensive, forward-looking perspective for the whole of both regions (the E.U. and Central America).

Principal objectives of the agreement will be to enhance bi-regional cooperation so as to reinforce the political, social and economic stability of the Central American countries, deepen the process of regional integration, help create conditions for reducing poverty, promote decent work and more equitable access to social services, as well as ensure an appropriate balance between economic, social and environmental components in a sustainable development context. This will be no easy task as, on several occasions, EU representatives have declared that they want no less privilege than those granted to the USA.

Central America has an approximate population of 35 million and is an important sub-regional group linking North and South America. The GDP per capita ranges below $1,000 USD in Nicaragua and Honduras to above $4,500 USD in Costa Rica and Panama. In recent years, GDP growth in Central America averaged 4.2% from 2003 to 2005, a period of relatively vigorous economic development. However, there is still a tendency to fall in recent overall performance due to the structure of natural resource endowments, the current world market situation and significant increases in oil prices.

The EU is the second mostRecently, the European Union began negotiating a free trade agreement with six Central American countries that include Honduras, Guatemala, El Salvador, Nicaragua, Costa Rica and Panama. The agreement consists of three central themes: cooperation, political dialogue, and free trade. Actual negotiations were supposed to commence in mid-June, but were delayed until October.

According to the Honduran Coalition of Citizenship Action, although the agreement includes the three themes, it’s evident that the main focus is on the free trade aspect. An agreement with Europe will not have much impact on Central American agriculture compared with outcomes of the DR – CAFTA, but there is no doubt an agreement of this nature will put natural resources and economic development in a precarious situation; European’s principal offer is to include as a priority the free investments, and the participation
of European companies with equal conditions in public bidding processes (communications, supplies and medications, construction of hydroelectric structures, etc).

European representatives claim that this agreement is different than the agreement Central America signed with the United States; they assure that small and poor countries of the region have an opportunity to consolidate and develop their potential by providing a comprehensive, forward-looking perspective for the whole of both regions (the E.U. and Central America).
Principal objectives of the agreement will be to enhance bi-regional cooperation so as to reinforce the political, social and economic stability of the Central American countries, deepen the process of regional integration, help create conditions for reducing poverty, promote decent work and more equitable access to social services, as well as ensure an appropriate balance between economic, social and environmental components in a sustainable development context. This will be no easy task as, on several occasions, EU representatives have declared that they want no less privilege than those granted to the USA.

Central America has an approximate population of 35 million and is an important sub-regional group linking North and South America. The GDP per capita ranges below $1,000 USD in Nicaragua and Honduras to above $4,500 USD in Costa Rica and Panama. In recent years, GDP growth in Central America averaged 4.2% from 2003 to 2005, a period of relatively vigorous economic development. However, there is still a tendency to fall in recent overall performance due to the structure of natural resource endowments, the current world market situation and significant increases in oil prices.

The EU is the second most important trade and investment partner for Central America at 9%, after the United States, with 45% of total trade. Exports from Central America consist of mainly agricultural goods; imports from the EU are predominantly industrialized goods. Central America’s traditional trade surplus with the EU has progressively increased since 2001, and reached about 1 billion Euros in 2005, according to official statistics.

European authorities have determined that Central America has traditionally received the largest share of European Community (EC) cooperation in the Latin American region, in both absolute and per capita terms. An average of EUR 145 million per annum was granted over the period 1995-2001. In addition to economic, financial and technical cooperation, other major initiatives have included the Central American Program for Reconstruction and Rehabilitation (250 million Euros) following Hurricane Mitch, a program of support to the Bank of Central American Economic Integration for the development of small and medium-sized enterprises.

120 million Euros, plus considerable support for human rights and democracy (in excess of 100 million Euros), all of which are funded from specific budget lines. In 2001, a series of Memoranda of Understanding were signed between the EC and the six Central American countries, establishing a five-year national and regional program of cooperation with an indicative allocation of 655 million Euros (during 2002-0006).

During the 2001 Latin America European Union Summit in Guadalajara, Mexico, it was announced that both regions would pursue and create association agreements.

Europe already has a commercial association agreement with Mexico. In the case of MERCOSUR the negotiation didn’t advanced because of the negatives of Brazil that refused to negotiate the related aspects of investments and equal treatment of the European companies in the public bid process, even though Europe already has an agreement with Chile.

The EU is still is trying to secure an agreement with South America, especially in the Andean Market. The process was interrupted because of political changes in the region (Ecuador, Venezuela and Bolivia) and because the compromise of some governments toward U.S. international politics (Colombia and Peru). Because of these problems, the EU has emphasized their intention of an agreement with the Caribbean and Central America.
At the European Union-Latin America and Caribbean Summit held in Vienna, Austria in May 2006, EU government officials along with their Central American counterparts decided to initiate negotiations on an Association Agreement between the two regions, including the establishment of a Free Trade Agreement.

The idea of the European Union, and supposedly of the Central American governments also, is to announce the ending of the negotiation at the Presidential Summit of Lima that should be a reality in 2009.

Honduras started the first regional efforts to unify all the sectors of society to discuss and formulate the regional expectations of an agreement with Europe. In March 2007, important social organizations representing both regions met in Tegucigalpa at what was called the “Foro Popular” (Popular Forum), an opportunity for various organizations to coordinate and produce the “Tegucigalpa Declaration.” In this Declaration, European and Central American people determined eleven points of importance, putting human rights above market ambitions.

The negotiations will take place during a series of meetings (the ones that are necessary, according to the first negotiation) in Central America (in rotating countries) and subsequent meetings which will take place in Brussels, Belgium.

The process has already started; the next meeting is going to be in Europe this next February.

2008 will prove to be a pivotal year in terms of the agreement.