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Originally published:
Oct-22-2007
by Orpha Robledo
Senior Account Executive - International Department
CCAA Certified Senior Collection Professional
ABC-Amega Inc.
Until recently, Costa Rica was the only signatory to the Central American Free Trade Agreement (CAFTA) that had not actually ratified the agreement between the governments of Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, the Dominican Republic, and the United States.
Since the signing of CAFTA on May 28, 2004, all of the participating countries, with the exception of Costa Rica, have proceeded with implementation. Costa Rica's delay in ratifying the pact is the result of significant opposition and nationwide debate on the advisability of entering into the kind of trade relationships outlined in the agreement and their effect on the Costa Rican economy. The situation eventually led to an announcement by President Oscar Arias advising that his government would hold a national referendum on the ratification of CAFTA.
The referendum was held on October 7, 2007. Not only was it the first referendum in Costa Rica's history, it is the first time any country has used this mechanism to decide the outcome of a commercial treaty.
In a May 1, 2007 article, the Latin Business Chronicle quotes Otton Solis, leader of the opposition to CAFTA and a presidential candidate in the 2006 election won by Mr. Arias. Confident that the pact would be defeated, Mr. Solis said, "The Costa Rican referendum means the first truly democratic test to these trade agreements." Although incorrect in his prediction of the outcome, many would agree with his statement, and with the process used to determine the adoption of a policy that will have far reaching effects on all Costa Ricans.
After the votes were counted, the Electorate Tribunal of Costa Rica officially declared that the majority of the Costa Ricans favored the ratification of CAFTA.
In the same Latin Business Chronicle article, Jose Carlos Quirce, Costa Rica's Special Envoy for CAFTA in Washington is recorded as saying, "They [Costa Ricans] understand the importance of close trade relations with the US because more than 40 percent of our exports go to the American market. In addition, more that 50 percent of foreign direct investment is originated in the United States. Costa Ricans know that they have a comparative advantage to compete not only in exporting agricultural and industrial products, but also in providing services of international quality. They understand that the agreement will allow our people to take advantage of their education, health standards, and skills to compete in international markets and create economic growth and social development."
Supporters see approval of the referendum and subsequent ratification of CAFTA as a positive move toward opening the benefits of one of the world’s largest free trade commercial areas to Costa Rica and toward moving the country forward as a participant in the global economy.
Ratification of CAFTA, however, is just the first step. There are still several challenges to be met. The most immediate of those challenges is the approval of implementation legislation currently being discussed in the Costa Rican Congress.
The scope of the implementation legislation is quite broad. It covers aspects pertaining to the amendment and/or enactment of laws in sensitive areas such as intellectual property, telecommunications, insurance, commercial transactions, environmental protection, etc.
The corresponding bills have already been submitted to the Costa Rican Congress. Some of them have been thoroughly discussed and are well on their way to being approved. Discussion related to others is still in its preliminary stages. All of the legislation, however, needs to be implemented on or before February, 2008 in order for CAFTA to become a reality for Costa Rica.
We are monitoring the development of the discussion and approval process of the implementing legislation now before the Costa Rican Congress, and will provide you with an update to keep you apprised of this pivotal legislation.
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Credit-to-Cash Advisor is sponsored by ABC-Amega, a commercial receivable management firm providing 1st and 3rd-party receivable management services in the U.S. and more than 200 other countries, including Costa Rica, worldwide.
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