Costa Rica Plans to Extend Trade to More Countries

Costa Rica’s 2008 decision to ratify the Central American Free Trade Agreement (CAFTA, or TLC in Spanish) with the United States was not the only free trade agreement on this year’s agenda. In fact, with eyes on possible international markets, the nation has already signed an agreement with Panama and has set China as its next mark for free and open trade.

On October 24, Costa Rica and Panama signed their mutual free trade agreement. Among other things, the agreement permits the Costa Rican Electricity Institute (ICE) to provide telecommunication services in Panama. Previously, Panama, like Costa Rica, allowed only national, state-run telecommunications service providers to operate in-country. In addition to a new telecommunications market, the agreement will allow Costa Rica to export 91 percent of its merchandise to Panama — the remaining nine percent of categories are not covered by the agreement — including industrial goods, medicine and food. Predictions indicated that Panamanians will be most interested in Costa Rica’s electrical goods and gadgets.

The Costa Rica-Panama free trade agreement will go into effect in November 2009. Both nations believe that it will allow them to become more attractive for investment amidst the global financial crisis. This most recent agreement is Costa Rica’s seventh, preceded by agreements with Mexico, Chile, the Dominican Republic, Canada, Central America and the Caribbean (Caricom). In late 2008 or early 2009, Costa Rica hopes to finally begin its agreement with the United States. In the meantime, Costa Rica looks to the future, where it has set its sights on China, a goal that it will pursue with the help of a seasoned free trader, Chile.

Negotiations with China will begin in six months, and Chile, which has negotiated more than 50 such agreements, has signed on to help. Chile has previously aided Costa Rica in its negotiations with both Central America and the European Union. A recent visit from the Chilean president, Michelle Bachelet, helped secure the South American nation’s help for the upcoming free trade agreement with Costa Rica’s newest political ally.

Bachelet explained that trade diversification is very good for a country like Costa Rica; having a wide range of trade partners, some complimentary and others competitive, will help Costa Rica’s economy to stay strong. Indeed, each free trade agreement emphasizes the participating countries’ priorities, how to determine short and long-term customs and tax rates and any other applicable goal or trade standard. Mutual benefit is the goal, and in today’s economy, more trade agreements mean more trade partners working toward mutual goals.

In addition to a strong resume and wise words, Costa Rican president Óscar Arias explained that Costa Rica values Chile’s economic model, and hopes to emulate their methods and success. Chile currently holds many global free trade agreements, including ones with India, China, Singapore, South Korea and South America. Over the next years, Costa Rica business will have the opportunity to expand to such markets, thereby diversifying its trade base and strengthening its economy.

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Filed under: Costa Rica News on October 29th, 2008