A snack food company in Guatemala increasing production capacity and growing its export business into the Dominican Republic and Nicaragua may not sound like a free trade success story that involves the United States – but it is.
“That snack food company in Guatemala buys No. 1 and No. 2 U.S. corn,� explained Marri Carrow, the U.S. Grains Council’s regional director for the Western Hemisphere. “Thanks to CAFTA-DR [the Dominican Republic-Central America-United States free trade agreement], the company has improved access to a reliable supply of U.S. corn – corn that’s at a tariff advantage and gives the company an edge in the marketplace.�
That production and marketing edge helped the company grow, which meant new jobs, expanded exports and additional purchases of U.S. grain to meet the demand, Carrow said.
“It’s exactly the type of story we like to hear,� she said. “It fits perfectly with the Council’s mission and shows how improved trade within one country can lead to expanded trade within an entire region.�
This is just one of many success stories that have their roots in CAFTA-DR, an agreement that was finalized 10 years ago. It was implemented beginning in 2006 on a rolling basis across six countries: El Salvador, Guatemala, Honduras and Nicaragua in 2006; the Dominican Republic in 2007; and Costa Rica in 2009.
There are nearly 50 million people in CAFTA-DR countries, about the same as South Korea, and according to the USDA’s Foreign Agricultural Service (FAS), the six countries have a combined gross domestic product (GDP) of $317 billion, comparable to the GDP of Vietnam. Retail sales of food and beverages in the CAFTA-DR region are estimated at $45 billion, similar to the Philippines.
According to Global Insight, the CAFTA-DR region’s combined GDP is forecast to grow 21 percent to reach $386 billion by 2019. During that same time, total retail food and beverage sales are expected to increase 20 percent, and middle class households are projected to expand by 24 percent.
“The CAFTA-DR market is growing. It’s gaining economic strength and growing its middle class purchasing power. And the fact we have a free trade agreement in place is good news for U.S. farmers and agribusinesses. It gives us a tariff advantage right in our backyard,� said Alan Tiemann, USGC chairman and a farmer in Nebraska.
FAS year-end export figures show sales of U.S. corn to CAFTA-DR countries reached 3.5 million metric tons (137.8 million bushels) this year, a 19 percent increase over last year. When looked at together as one market, that total makes the CAFTA-DR region the fifth-largest market for U.S. corn.
As for all agriculture products, FAS said in a March report that at a combined $4.4 billion, the CAFTA-DR countries rank as the seventh-largest agricultural market for U.S. exports. Led by prepared food, dairy, poultry and pork products, U.S. exports of consumer-oriented products more than tripled between 2006 and 2014, while total U.S. agricultural exports doubled during the same period, FAS said.
“Free trade agreements matter to agriculture, and we’ve proved that time and again with CAFTA-DR and other agreements around the world,� Tiemann said. “We must continue to work toward new agreements and keep them moving in the right direction.�