United States – Central America – Dominican Republic Free Trade Agreement (CAFTA-DR)

Nicaraguan exports to the United States have increased by approximately 70% since the United States – Central America – Dominican Republic – Free Trade Agreement (CAFTA-DR) went into effect for the United States and Nicaragua on April 1, 2006. Other signatories of the agreement are Costa Rica, the Dominican Republic, El Salvador, Guatemala, and Honduras. CAFTA-DR creates the second-largest U.S. export market in Latin America, behind only Mexico.

Most Dominican Republic and Central American exports into the United States have benefited from duty-free treatment as a result of a trade preference program provided by the U.S. Congress to promote regional economic development (the Caribbean Basin Initiative, CBI). CAFTA-DR reciprocally reduces tariff and non-tariff barriers for U.S. exports into the region.  CAFTA-DR also ensures that U.S. companies are not disadvantaged by the trade agreements that Central America has already negotiated with our NAFTA partners and other countries.

CAFTA-DR requires important reforms of the domestic legal and business environment that encourage competitive business development and investment, protect intellectual property rights, and promote transparency and rule-of-law in the democratic systems that have solidified in the region over the past decade. CAFTA-DR is an important instrument to support U.S. national security interests; the FTA promotes closer economic cooperation among the Central American countries, thereby advancing regional integration and contributing to greater peace and stability in the region.

Trade and Tariff Data

CAFTA-DR Background Information

CAFTA-DR Fifth Anniversary Highlights Nicaragua’s Forward Trajectory

On April 5, 2011, the United States Agency for International Development (USAID), INCAE Business School of Nicaragua, and the Economic Section of the U.S. Embassy in Managua collaborated to host a conference in commemoration of both the fifth anniversary of the United States – Central America – Dominican Republic Free Trade Agreement (CAFTA-DR) and the twentieth anniversary of a free market economy in Nicaragua. The Ambassador’s opening remarks highlighted the positive impact the agreement has had on trade flows between the United States and Nicaragua: Nicaraguan exports to the United States increased by 70% from 2005 to 2010. U.S. exports to Nicaragua increased by 57% during that period. Similarly, Nicaraguan exports to other CAFTA-DR countries increased by nearly 50% during the past five years.  The Ambassador also discussed progress on the Pathways to Prosperity Initiative ahead of the May Ministerial in Santo Domingo. He pointed out that Pathways is not another assistance program, but rather a means for all participating countries to share and implement best practices to take advantage of the economic benefits of trade. He echoed President Obama’s message in Chile about Latin American countries and the United States working as equals to solve problems.

USAID representatives underscored successes under their “Enterprise and Employment” program, which supports small and medium enterprise development, trade capacity building, and job training. Private sector and academic representatives underscored the importance of political stability and the rule of law for economic growth. The celebration publicized the fact that free trade has provided significant benefits to Nicaragua in terms of economic growth. Speakers discussed not only CAFTA-DR, but the immense challenges in trying to reconstruct the economy after communist rule ended in 1990.

In his opening remarks, Presidential Delegate for Investment Promotion Alvaro Baltodano discussed the positive
effect CAFTA-DR has had on investment promotion for Nicaragua. He discussed in particular the huge growth in
Nicaragua’s free trade zone as a result of CAFTA-DR and the large number of better-paying jobs this growth had provided.  Trade Minister Orlando Solorzano also attended the event and spoke with the press about the benefits that Nicaragua has enjoyed under CAFTA-DR. A series of panel presentations and discussions followed the opening remarks, which described how trade can promote inclusive growth and sustainable development. The panels underscored the importance of political stability, a legal framework that improves competitiveness, and the rule of law as essential for economic growth.  They also discussed the need for good infrastructure, financing, and strong institutions in order to take full advantage of the benefits CAFTA-DR offers.

In the atrium outside the conference venue, nearly three dozen booths featured exporters supported by USAID,
export development programs, and business associations. The ceremony concluded with the DCM and USAID officials recognizing the Nicaraguan CAFTA-DR negotiators with plaques of appreciation for their efforts.

News coverage of the Anniversary Event: