The Central America Free Trade Agreement (CAFTA) has increased access and decreased tariffs for U.S. products in several Central American countries. In Costa Rica, however, there has been debate whether implementing CAFTA is in the best interest of local producers and businesses.
Some Costa Ricans fear providing duty-free access to large U.S. companies will run local owners out of business. So, the ratification and implementation of CAFTA in Costa Rica will be up to voters to decide on Oct. 7 in a referendum election.
U.S. Meat Export Federation (USMEF) Director, Central & South America and Global Strategic Coordination Ricardo Vernazza-Paganini expects CAFTA to be ratified, which would increase access for U.S. beef and pork products to this growing market.
For beef, all U.S. inspected plants will be approved to export Costa Rica, replacing the current system of plant inspections done by veterinarians from Costa Rica. Under CAFTA, U.S. beef muscle meat graded as prime or choice will have duty free access, replacing the current 18 percent duty.
“The beef muscle market is waiting to be developed,” said Vernazza-Paganini. “The economy in Costa Rica is growing and there are many expatriates living there who are loyal to U.S. products. Plus, many consumers are simply not aware of U.S. beef’s high quality.”
Costa Rica produces more beef than it consumes, but its beef is from the Cebu breed of cattle slaughtered at more than 30 months of age, which produces a tougher product. U.S. beef has an advantage since it is grain fed and comes from younger cattle.
“This is an area where USMEF educational efforts will inform consumers of the superior advantages of U.S. beef,” said Vernazza-Paganini. “Through marketing campaigns and complimentary beef samples, we want consumers to recognize U.S. beef’s difference so they can make informed purchasing decisions.”
The beef variety meat import market in Costa Rica is approximately 1,000 metric tons (mt) per year and Nicaragua currently has nearly 40 percent of the import market share. With U.S. beef variety meat entering Costa Rica duty free under CAFTA, the United States will have a good opportunity to displace Nicaragua as a main supplier of variety meat due to price competitiveness.
A sizable amount of pork imported by Costa Rica is for processing. Under CAFTA, the United States will have a 1,100 mt tariff-rate quota, which is similar to the total annual amount Costa Rica has imported in each of the last three years.
Currently, Canada has 85 percent of the import market share for chilled/frozen pork destined for processing in Costa Rica since it has a 33 percent duty compared to higher duties applied to competing products. U.S. pork products currently have a 45 percent duty. However, under CAFTA, the United States will have duty-free access up to 1,100 mt, giving it a 33 percent price advantage over Canada.
“Under CAFTA, the Costa Rica market for beef and pork will expand, but that expansion will be gradual since domestic production is strong,” said Vernazza-Paganini. “Our goal is to use the market access to our advantage and to increase consumer awareness of the quality attributes of U.S. red meat products.”
But from now until the referendum election, USMEF is in a holding pattern to see whether CAFTA will be implemented in Costa Rica.
“If 40 percent of the electorate votes in the referendum election, then the result will be binding,” said Katherine Nishiura, agricultural counselor for Costa Rica, Nicaragua and Panama. “If less than 40 percent of eligible voters turn out, then the National Assembly will ratify the agreement legislatively.”
Vernazza-Paganini said USMEF is using this time to conduct research to identify the best possible marketing strategies, to connect with meat buyers and importers who are apt to purchase U.S. red meat products and to develop good relationships with the Costa Rican agriculture industry to affirm the United States does not intend to supplant their industries and production.
“Even if 40 percent of voters say ‘si’ (yes) to CAFTA, Costa Rica still has a lot of work to do,” said Nishiura. “Thirteen pieces of legislation required to implement CAFTA provisions have to be passed by the National Assembly and entered into law by the deadline date.”
The CAFTA ratification deadline is two years after the initial agreement ratification, so Costa Rica has until Mar. 1, 2008, since the agreement was first ratified by El Salvador on Mar. 1, 2006.
The U.S. Meat Export Federation is the trade association responsible for developing international markets for the U.S. red meat industry and is funded by USDA, exporting companies, and the beef, pork, lamb, corn, sorghum and soybean checkoff programs.