Central America
Australia's relations with Central America
Australia enjoys good relations with all the countries of Central America but political and trade links are currently modest. We cooperate on various multilateral issues and we have a good relationship on issues of trade liberalisation. As members of the Cairns Group, Australia cooperates with Costa Rica and Guatemala to promote our common commitment to agricultural trade reform. Central American communities within Australia, such as the large El Salvadoran population, help promote links between our two regions. Belize is a fellow member of the Commonwealth, with whom we share positive and friendly ties and work together in various Commonwealth organisations and events. We also cooperate with Central American countries, to varying degrees, in the United Nations and a range of other international fora on important issues such as the environment, whaling, fisheries management, human rights and security. As part of the Australian Government's commitment to enhance relations with Latin America, Australia became an extra-regional observer to the Central American Integration System (SICA) in July 2011. SICA member countries are Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama. Dominican Republic is an associate member.
In 2001, the Australian Government established the Council on Australia-Latin America Relations (COALAR) which aims to enhance commercial, political and cultural relations between Australia and Latin America. Since its inception, the Council has been active in promoting Latin America as a market for Australian exporters. Its current priorities are to influence corporate Australia and assist in developing government policies so as to enhance Australia's economic, political and social relations with Latin America, particularly in the areas of tourism, investment, and agribusiness; to support Australia's broader diplomatic and economic objectives in the Latin American region through cultural promotion and education; and to foster a greater awareness of Australia in Latin America, and of Latin America in Australia.
The Forum for East Asia – Latin America Cooperation (FEALAC), is another body through which Australia can expand and strengthen relationships with Central America. It aims to increase and improve mutual understanding, trust, political dialogue and friendly cooperation among member states. The Forum has 36 member nations including Australia, Costa Rica, El Salvador, Honduras, Panama, Guatemala and Nicaragua.
Australia's Embassy in Mexico City and High Commission in Trinidad and Tobago (which covers Belize) are responsible for the countries of Central America on a non-resident basis. No Central American country has an Embassy in Canberra, though Belize, Costa Rica, El Salvador, Guatemala and Panama have consular representation in various Australian cities.
Political overview
Background
Central America is an isthmus connecting North and South America, running from Mexico to Colombia. It consists of seven nations - Guatemala, Belize, El Salvador, Honduras, Nicaragua, Costa Rica and Panama – and covers an area of 524,000 sq km. The total population of Central America is estimated at over 30 million. Guatemala is the largest and most populous nation in Central America with 109,000 sq km and 14.4 million people (2010).
The economies of Central America are diversifying considerably. While agriculture is still the largest employer, the tourism, industrial and service sectors have become increasingly important. Bananas, coffee, and cacao are the principal crops of Central America. However, there is also a small industrial and mining base and some services industries. An important economic feature of Central America is the Inter-American Highway that enables trade flows to the United States through Mexico, running along the western side of the isthmus. Panama also serves as a major trade hub for the region, with active ports servicing trade between North and South America.
Political history
In the colonial period, Central America was part of the colony of New Spain and under the control of the Spanish Viceroy in Mexico City. The modern political history of Central America is one of conflict and at times turmoil. In the early 1800s, a group of Creole rebels fought to establish an independent nation. In 1823, the United States of Central America was founded based on the areas we know today as Guatemala, Honduras, Nicaragua, Costa Rica and El Salvador. However, the liberal democratic experiment was short-lived. When Honduras withdrew from the Union, a three-year civil war ensued. Throughout the 19th and 20th centuries, Central America experienced wars, border disputes and civil unrest.
Despite some enduring border conflicts, the past two decades have, however, seen the rise of more democratic governments and greater stability. While the prospect of a return to the Union is now remote, despite the establishment of a regional advisory government, the political efforts, and economic integration have seen the region gradually move to more cooperative ties and economic advancement.
Economic and trade relationship
Overview
Australia's trade and investment ties with Central America are growing, albeit from a very small base. Opportunities to expand trade exist in agribusiness, food commodities and the provision of professional services.
For further information, refer to individual fact sheets:
While still modest, two-way merchandise trade with Central America has increased steadily over recent years to around $238 million in 2010-11. Australia's main exports to Central America are dairy products, in particular milk, cream, whey and yogurt. Other major exports are pharmaceutical products (excluding medicaments) and aluminium. Our major imports include electronic integrated circuits, coffee, and medical instruments.
Costa Rica is Australia's major trading partner in Central America. In 2010-11, two-way merchandise trade between Australia and Costa Rica was $132 million (exports $16 million, imports $116 million), an increase of $48million when compared with 2006-07. Australia's principal exports to Costa Rica included , electrical circuits equipment, medicaments (including veterinary), and milk and cream. Principal imports from Costa Rica included electronic integrated circuits and medical instruments (including veterinary).
Trade policy
Ratified by the US Congress in July 2005, the Central America-Dominican Republic-United States Free Trade Agreement (CAFTA-DR) is one of the key structural elements underpinning Central America's trade relations with the United States. The Agreement includes seven signatories: the United States, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua. It creates an export zone that is the United States' third largest free trade zone in Latin America after Mexico and Brazil, and the tenth largest US export market in the world. The Multi-Country Agreement is now fully in force. CAFTA-DR requires important reforms of the domestic legal and business environment that encourage competitive business development and investment, protect intellectual property rights, and promote transparency and rule-of-law in the democratic systems that have solidified in the region over the past decade. CAFTA-DR is thus an important instrument to support growing economic and political cooperation between Central American states and the US.
Export opportunities
Despite the modest nature of two-way trade, Australian companies are taking advantage of niche opportunities to provide professional services throughout the region. The Australian Government, through our post in Mexico City and our Austrade representation there, helps raise the profile of Australian companies and ensures that Australian businesses and exporters are well positioned to make the most of emerging opportunities.
Education
There is scope to promote the Australian education system as an attractive option for Central American tertiary students and students wanting to study English.
Mining and resources
Australian exploration company Graynic Metals entered into a joint venture with a Canadian company to undertake nickel projects in Guatemala. The company sees this as an opportunity to take a regional strategic position in Central America.
Panama Canal expansion
A significant Central American project in which Australia has been directly involved is the design and construction of the second bridge over the Panama Canal. In January 2002, Baulderstone Hornibrook, in joint venture with parent company Bilfinger Berger, was commissioned with a A$180 million contract to build a second bridge over the Panama Canal. The Centennial Bridge was launched and opened to traffic in 2004.
In order to allow modern container vessels through the canal, to improve efficiency and remain competitive, an expansion has been approved by popular referendum for the Panama Canal. There are several contracts to be put out for tender covering dredging, dry evacuation and the construction of the locks. Companies from Spain, France, the UK, Russia, Germany, US, Canada, Mexico, Argentina, Brazil, Chile, Japan, China and ROK have expressed interest in participating in the bidding process.
Food
Apart from dairy products, Central America continues to import significant quantities of food commodities and processed products. These markets have traditionally been dominated by US and European exporters. However, as the Australian commercial presence in Mexico grows, new opportunities to expand food export markets are likely to arise.
Agricultural inputs
With a strong agricultural base, many Central American countries demand farm inputs and other related technologies. Agribusiness is a potential growth area for Australian companies, which are already taking advantage of some opportunities to provide animal genetics and farm technologies in Costa Rica and Guatemala.
Information technology and communications
As the Central American countries move into the digital age there is an increasing demand for IT products, including broadband internet, computers, cables, routers and cellular services equipment. A number of foreign companies have established call centres in Costa Rica.
Infrastructure development
Infrastructure renewal in Central America, particularly Panama and Costa Rica, may provide opportunities for Australian involvement. Projects include airport terminal expansions, new highways including toll roads, port infrastructure, canal development and public transport.
Clean energy and environment
Several Central American countries, including Panama and El Salvador, are developing potable water and wastewater treatment plants. Opportunities in this sector are likely to continue to grow.
Updated November 2011