IMPACT OF CAFTA ON INVESTMENT OPPORTUNITIES

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IMPACT OF CAFTA ON INVESTMENT OPPORTUNITIES

• Marvin Taylor, Ph.D
• Chief Economist, CABEI
• mtaylor_at_bcie.org

October, 2003
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Content of the presentation

• CABEI Mission and Background.
• Our Vision of CAFTA.
• CAFTA Impact and Investment Opportunities.
• CABEIs Role in CAFTA.

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CABEI Mission and Background
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• Founded in 1960 in order to promote development
  and integration in Central America
• 5 founding member countries
• Costa Rica
• El Salvador
• Guatemala
• Honduras
• Nicaragua
• 4 extraregional member countries
• Argentina
• Mexico
• China (Taiwan)
• Colombia
• Initiatives under way to involve
• New extraregional countries
• Non-founding beneficiary member countries
• With disbursements of US1.1 billion in 2002,
  which equaled to 93 of FDI directed to the
  region that year.

• The Central American market has the following
  characteristics
• Population 35 million
• GDP US68 billion
• Imports US21 billion

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Our Vision of CAFTA
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A. Negotiation and Ratification
B. Preparation and Implementation
STAGES
C. Maturity and Sustainability
Destruction of Employment Sources
EFFECTS
Temporal asymmetry
Creation of Employment Sources
Geographic
BALANCES
Sector
Social
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CAFTA Impact and Investment Opportunities
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Central Americas market share in the United
States has been growing steadily
Source Magic, ECLAC
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Why?

• CBI.
• Geographic location proximity to the US market.
• Improvement in the business climate.
• Off-Shore Assembly.
• Natural resources.
• Human resources.

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CAFTA will provide a new context that will

• Increase sales to and from the United States.
• Improve market access for the regions products
  (from a unilateral concession under CBI to a
  permanent treaty with the CAFTA).
• Reverse trade and investment deviations that
  resulted from NAFTA.
• Increase FDI flows towards the region.
• Allow for greater knowledge, technology and
  management sharing.
• Institutionalize clear rules for investment and
  trade in a variety of sectors.

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Towards greater Partnership

• and if we manage the potential geographic,
  sector and social imbalances, the CAFTA will
  foster greater growth and prosperity in Central
  America and closer political, economic,
  financial, social and cultural ties between
  Central America and the United States.

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Some Challenges

• Strengthen institutions.
• Improve the business climate.
• Foster greater macroeconomic stability.
• Promote human resource development.
• Reduce poverty.
• Protect the natural environment.
• Seek greater social integration.
• Improve business strategy and operations.

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Opportunities in productive sectors

• Agribusinesses.
• High value added products Fruits, vegetables.
• Agribusiness processing Fishery, forestry,
  furniture.
• Support services Technology, innovation, human
  resource development, research.
• Tourism.
• Niche market tourism arqueology, culture,
  nature, adventure, health, business.
• Tourism services hotels, transport, restaurants,
  entertainment, shops, training institutes
• Infrastructure in support of tourism roads,
  telecommunications, energy, water.
• Textiles and clothing.
• Mens, women's and children's clothing.
• Accessories.
• Raw materials cotton, wool, silk, fiber.
• Electronics and high technology sector.
• Software development.
• Electronic circuits.
• Computer components.
• Biotechnology and medical research.

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Opportunities in services and infrastructure

• Financial services.
• Leasing.
• Investment banking.
• E-banking.
• Investment funds.
• Central Americas Logistic Corridor (PPP).
• Roads and highways.
• Ports.
• Energy.
• Telecommunications.
• Transport.
• Services.
• Trade services.
• Information technology.
• Housing.
• Social development

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INVESTMENT OPPORTUNITIES

• CABEI HAS IDENTIFIED CLOSE TO US2.5 BILLION IN
  INVESTMENT OPPORTUNTIES WITHIN THE CENTRAL
  AMERICAN COUNTRIES.
• CAFTA WILL OPEN GREATER BUSINESS OPPORTUNITIES,
  AS OUR COUNTRIES WILL NEED TO DEVELOP KEY
  INFRASTRUCTURE AND TRADE SERVICES, STIMULATE
  PRODUCTIVE SECTORS AND PROMOTE HUMAN DEVELOPMENT,
  IN ORDER TO INCREASE COMPETITIVENESS AND GROWTH.

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GUATEMALA(IN MILLIONS OF US)
Investment opportunities identified by CABEI
US605 Millions
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EL SALVADOR(IN MILLIONS OF US)
Investment opportunities identified by CABEI
US223 Millions
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HONDURAS(IN MILLIONS OF US)
Pipeline and investment opportunities identified
by CABEI US692 Millions
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NICARAGUA(IN MILLIONS OF US)
Investment opportunities identified by CABEI
US304 millions
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COSTA RICA(IN MILLIONS OF US)
Investment opportunities identified by CABEI
US630 millions
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CABEIs Role in CAFTA
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What does CABEI offer?

• High market share, with 43 of multilateral
  lending to the region.
• A regional strategic focus, with a physical
  presence and knowledge in the five CAFTA
  negotiating countries.
• Attends to different market segments, given the
  nature of clients and the variety of projects
  that are financed.
• Credit facilities, such as direct co-financing,
  two tier lending, and new financial products and
  operations.
• Financial soundness, with investment grades,
  assets of US3.4 billion, a loan portfolio of
  US2.4 billion, and a net worth of US1.2
  billion.
• Different investment funds.
• Specialized and well trained human resources.
• Modern technological platform that connects all
  the Central American countries and these
  countries with the rest of the world.

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Strategic initiatives under consideration to
support CAFTA

• For the Ratification and negotiation Phase.
• For the Preparation and Implementation Phase.
• For the Maturity and Sustainability Phase.

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IMPACT OF CAFTA ON INVESTMENT OPPORTUNITIES

• Dr. Marvin Taylor, Ph.D
• Chief Economist, CABEI
• mtaylor_at_bcie.org

October, 2003