Central America – December 2007
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 Salvadorean population, help promote links between our two regions. Belize is a fellow members of the Commonwealth, with whom we share positive and friendly ties with Belize 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 forums on important issues such as the environment, whaling, fisheries management, human rights and security.
In 2001, the Australian Government establishmed of 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 30 member nations including Australia, Costa Rica, El Salvador, Panama, Guatemala and Nicaragua.
Australia's Embassy is responsible for the countries of Central America on a non-resident basis. Australia's Embassy inMexico City and Australia's High Commission in Trinidad and Tobago 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 13.0 million people.
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. In practice, Central America was administered from Antigua, Guatemala, and later Guatemala City by an independently appointed Captain General. During this period, Belize won its separation from Spain and remained the colony of British Honduras until 1973.
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. It was modelled directly on the United States of America. 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. With the exception of Costa Rica, the nations of the region followed a pattern of dictatorship, conflict and economic hardship.
However, despite some enduring border conflicts, the past two decades have 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 Central American Common market (CACM) 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 FactSheets: El Salvador (pdf), Costa Rica (pdf), Guatemala (pdf) and Belize (pdf).
Whilst still modest, two-way merchandise trade with Central America has increased significantly over recent years to around AUD$197 million in 2006-07. Australia’s main exports to Central America are dairy products, in particular milk, cream, butter and cheese. Other major exports are recreational boats, medicaments and paper and paperboard. Our major imports include integrated circuits, coffee, and clothing, computer parts and medical instruments. There is also scope to promote the Australian education system as an attractive option for Central American tertiary students and students wanting to study English.
Costa Rica is Australia’s major trading partner in Central America (excluding Mexico). In the 2006-07 financial year, two-way merchandise trade between Australia and Costa Rica was AUD84 million (exports AUD33 million, imports AUD51 million), an increase of AUD35 million when compared with 2005-06. Australia’s principal exports to Costa Rica included ships, boats and floating structures, medicaments (including veterinary), starches, insulin and wheat gluten, paper and paperboard. Principal imports from Costa Rica included integrated circuits, computer parts, medical instruments and coffee and coffee substitutes.
Central American Free Trade Zone
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’ second largest free trade zone in Latin America after Mexico, and the tenth largest US export market in the world. CAFTA-DR is being implemented on a rolling basis. Costa Rica is the only signatory yet to implement the Agreement. On 7 October 2007 Costa Rica held a national referendum on the CAFTA-DR. A subsequent recount by the Supreme Court confirmed the victory of the “yes vote” by a narrow margin. Eleven pieces of CAFTA-implementing legislation need to be approved by the end of February 2008 in order for the FTA to enter into force in Costa Rica.
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 posts in Mexico City and Port-of-Spain, as well as through our Austrade representation, help to raise the profile of Australian companies and ensure that Australian businesses and exporters are well positioned to make the most of emerging opportunities.
Panama Canal Expansion: The most significant Central American project that Australia has been directly involved in recently 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, who are already taking advantage of some opportunities to provide animal genetics and farm technologies in Costa Rica and Guatemala.