EFTA-Central America Free Trade Agreement in force – opportunities for Swiss companies

The EFTA (The European Free Trade Association) States: Switzerland, Liechtenstein, Norway and Iceland signed a free trade agreement with Costa Rica and Panama. The first 3 countries have already implemented it and the latest country will do the next 5th of September 2014.

Several opportunities arises with this new Agreement, especially the simplification in export procedures will certainly push the trade between these countries. The original idea was to include other countries like Guatemala and Honduras which are still in consideration.

The antecedent of the successful establishment of an FTA (Free Trade Agreement) between Peru and the EFTA (2011) provides also a positive perspective for the untapped opportunities that the Central American countries can provide to SME’s in Switzerland. According to Ms. Antje Baertschi (Seco) the main exported products to Peru were electronic, instrumental, watches and jewelry. They represented an increase of export to Peru only in 2012 of 42% . Today, a representation of Peru is visiting Zürich, with the goal of expanding the Agreement and to include for example services that were not considered in the previous agreement.

The Central American FTA covers trade in the following areas:

Main components of the FTA agreement

Main components of the FTA agreement

Central America is represented with Costa Rica and Panama, these countries may look like two small countries; nevertheless the current international trade with the EFTA countries is of a significant importance, according to the statistics from the EFTA

LATAMBUSINESSNETWORK_Trade balance of commerce EFTA-Central America

 

The Swiss international trade of balance of commerce (see diagram under) shows Panama’s current importance with a significant trade surplus, nevertheless still latent opportunities should be considered for Swiss SME’s including: the strategic geographical position of Panama, the International Financial District of Panama, the Colón Free Trade Zone, which for example could be an opportunity to develop a warehouse to export products to be distributed at the rest of the Latin American region. Since the FTA entered in force last 28th of August, Panama shall grant tariff concessions to agricultural products originating in Switzerland (ANNEX XIV). Opposite to Costa Rica that shows a trade deficit with main exported products: bananas and coffee.

LATAMBUSINESSNETWORK_Trade balance of commerce SWITZERLAND-Central America

For the Central American countries is an opportunity to enter developed markets, as The Central American Foreign Ministers expressed: Ms. Anabel González (Costa Rica) and Mr. Ricardo Quijano (Panama) who are very optimistic with the opportunity to trade with these European countries and are intending to promote the foreign investment in their countries.

Even though, Switzerland has already a good relationship with these Central American countries, differences in business culture still exists and has to be taken in consideration, when for example seeking to establish local offices or thinking to invest in local projects. As both, Costa Rica and Panama, are well known locations for the establishment of Regional Headquarters.

But what are the real opportunities these Agreements can represent for your company? How can you take advantage of them? Contact us LATAM BUSINESS NETWORK and we will be glad to accompany you in the creation, development and implementation of a successfully internationalization strategy.

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