The EU and the Central American region have concluded a new Association Agreement, signed on 29 June 2012. The Association Agreement is based on three complementary and equally important pillars, namely political dialogue, cooperation and trade, which reinforce each other and reinforce their effects. These are the right tools to support economic growth, democracy and political stability in Central America.
Central American countries: Panama, Guatemala, Costa Rica, El Salvador, Honduras, Nicaragua
The trade pillar of the Association Agreement has been applied provisionally since August 1, 2013 with Honduras, Nicaragua and Panama, since October 1, 2013 with Costa Rica and El Salvador and since December 1 with Guatemala .
According to the date of EUROSTAT, the trade flow between the EU and Central America amounts to 10.7 billion euros in 2020. The trade balance of the EU with Central America shows a trade deficit s amounting to €0.9 billion in 2019 (the year before there was a surplus of €0.4 billion). Bilateral trade with Central America was particularly affected by the Covid pandemic in 2020.
EU exports to Central America decreased by -21.7% in 2020. This drop is mainly due to the poor performance of exports of mineral oil, machinery and equipment, chemicals, which decreased by 16.8%, 13.9% and 35.9% respectively.
In comparison, the EU’s main imports from Central America by HS Section held up well and fell by only -0.4%. EU imports are, in order of importance: Plant products; optical and photographic instruments, etc., foodstuffs, beverages, tobacco; Animal or vegetable fats and oils.
The main EU exports to Central America by HS section are, in order of importance: Products of the chemical or related industries, Machinery and appliances, Transport equipment, Food products, beverages, tobacco.
The EU and Central America exchange their respective statistics each year to develop a joint analysis, because given the importance of the Panamanian free zone (the second in the world), EUROSTAT data tends to overestimate exports from the EU to Central America.
We recommend consulting the Commission’s annual report for a detailed analysis.
EU and Central America
The EU and Central America have enjoyed close and comprehensive relations for decades, dating back to EU support for the region’s successful peace process in the 1980s.
The central objective of EU trade policy for Central America is to increase bilateral trade and use it to strengthen the regional integration process between the countries of the region. Concretely, this means the creation of a customs union and economic integration in Central America. The EU has supported this process through its trade agreement and trade-related technical cooperation programmes.
This new agreement aims to promote sustainable development and deepen their regional integration process. This closer economic integration between countries in the Central American region is important for attracting investment to the region and helping local businesses develop their regional market strength to compete internationally.
The trade component of the Association Agreement will replace the unilateral preferential access to its market granted to Central America under the EU’s General Scheme of Preferences.
Benefits of the deal
- Elimination of most import tariffs.
- improved access to public procurement, services and investment markets
- better conditions for trade through new disciplines on non-tariff barriers to market access, competition and intellectual property rights
- a more predictable business environment with a mediation mechanism for non-tariff barriers and a bilateral dispute resolution mechanism
- strengthen regional integration, for example by setting up a single import law for the whole region and using a single administrative document for customs
- support for sustainable development, including consultation with civil society actors
Highlights of the agreement
Committees and dialogues
The EU and Central America meet regularly to discuss issues and best practices and oversee the proper functioning of the agreement.