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Federal News Service

Washington, D.C.

OPERATOR: After the presentation, we will conduct a question-and-answer session. (Gives queuing instructions.)

Today’s conference is being recorded. If you do have any objections, you may disconnect at this time.

I’d like to introduce your host for today’s conference, Ms. Jessica Gordon. Ma’am, you may begin.

JESSICA GORDON: Good afternoon, and thank you for joining us for the webinar “Doing Business in Central America.” Today we are addressing “Doing Business in Central America: Best Prospects in Panama, Costa Rica, Honduras, El Salvador, Nicaragua and Guatemala.”

I’m Jessica Gordon, international trade specialist with the Mississippi Export Assistance Center, with the U.S. Commercial Service.

There will be six presentations today, and you will hear from: Daniel Crocker, the senior commercial officer, U.S. Commercial Service, Panama City, Panama; Michael McGee, the commercial counselor for Central America Region; Bryan Smith, commercial counselor for Costa Rica; Jennifer Gothard, commercial officer, U.S. Commercial Service, San Salvador, El Salvador; and Patricia Wagner, senior commercial officer, U.S. Commercial Service in Guatemala City, Guatemala.

At the end of all presentations, speakers will be able to answer your specific questions. We’re expecting the presentation to last about an hour and 15 minutes, so we ask you to stay a bit longer today.

A few housekeeping details: You’re going to be able to hear the presentation through your telephone and view it at the same time on your computer. If you’re not hooked up to both audio and video, please take a moment to do so. Your phones are in listen-only mode.

(Gives queuing instructions.)

We also invite you to type in your questions on your screen as they occur to you during your presentation. This presentation is being recorded. If you experience any technical difficulties, please press star-0 at any time during the presentation.

I would now like to turn it over to Daniel Crocker, who’s the senior commercial officer at the U.S. Commercial Service in Panama City, Panama. Daniel Crocker will give a brief overview of the Panamanian market. Thank you for joining us.

DANIEL CROCKER: Hi. Jessica, thanks so much. And I hope everyone can hear me okay. I know you can’t respond. But I really want to thank Jessica Gordon, first of all, for giving us the opportunity to talk about this. I also want to thank my colleague, Michael McGee, for allowing me to go first.

Panama is sort of in Central America, but it’s – but it’s handled a little bit separately, for reasons I think we’ll address during the presentation. But the more prosaic reason for me going first is that I have – that I have to leave a little bit early from the presentation. So I also want to – after the hour, I want to apologize and tell you to please contact me by e-mail should you have any follow-up questions regarding Panama as a market specifically. You can either pass those questions through Jessica, or send them directly to me at my e-mail. Thank you very much.

I also want to put my remarks in context here, and that is to say that I’ve been in Panama – we move around these countries every three or four years or so, and I’ve only been in Panama three months. So I hope you’ll take – I hope you’ll take my remarks with a grain of salt. At the same time, I think there’s a certain advantage to being here so newly arrived. First of all, it reminds me of the fact that we generally in the Commercial Service are really dedicated to helping U.S. exporters, but we really rely heavily on the decades of experience that our locally employed staff bring to the table. These are folks with very, very strong contacts in the market. And I’m sure you’ll hear that comment echoed by all my colleagues throughout Latin – throughout Central America. These are the folks who really know the market, know the opportunities, and have over the decades helped U.S. companies do more business, sell more. And that, the bottom line, is what we’re all here for.

It’s also – the recent arrival has also given me some – it’s just really sort of a new set of eyes with regards to looking at Panama as a set of opportunities for U.S. businesses. And I’ve worked at small-and medium-sized exporters before and it – and I’ve also worked in Brazil, Mexico, Dominican Republic. And so looking at Panama as a market relative to those markets really makes a couple of things stand out about Panama. And I’d like to address those in the course of this presentation.

So the first thing that – to keep in mind with regards to Panama is to look at it on a map and understand its historical importance. The bottom line is it’s the same reason why you pay “X” amount of dollars for your house, and why you can sell it for “Y” amount of dollars: It’s all about location. It’s all about location. Ever since Panama was discovered by the Spaniards, it’s been seen as a way to move goods. It’s been seen as a way to move goods. And increasingly, as a layer on top of that, the – sort of a platform for services. It’s a very service-oriented economy. And really, in the early part of the 1500s, it was already a major trade route for the world, because goods were – silver commodities, for instance, were being brought up from the west coast of South America, brought through the Panama Canal, literally on mule – on foot, in some cases – across to the Atlantic, and then put on ships and sailed over to Western Europe.

There have been some breaks in that. There have been some times when Panama slipped a little bit. But certainly, ever since the beginning of the 20th century, in the early 1900s, when the U.S. government, largely with a sort of a military approach, built the locks-based Panama Canal, Panama’s preeminence in world trade has been assured. I mean, it really is – it’s a critical cross point. And because of that, when you look at Panama, you can’t – there are two – there are two ways at least to look at Panama, and one is to look at it as a country and a market destination in isolation and say: Okay, here’s the – here’s the market here. But the other way to look at it is to understand its strategic importance and, because of that, certain market opportunities that allow it to punch way above its weight in terms of purchasing power, in terms of being a very attractive destination for certain types of services that you wouldn’t normally associate with a small Central American country.

So while the population is 3-1/2 million, the GDP in purchasing-power parity terms about 40 billion (dollars), it’s very, very much a service-oriented culture and a very pragmatic, trading-oriented culture; so a very high level of services, high level of sophistication. And then on the flip side of that, Panama has never experienced a time period where it tried to build up its own national champions in manufacturing or agriculture. Because it’s been so pragmatic for so long, and by both occupying powers and by its own government over the last few decades has – ever since its independence, really, from Colombia, it has always seen itself as a pragmatic trading nation. And as a result, as a flip side of that, it means that almost anything that you make is something that Panama does not make. Whether it’s food products or “widgets,” auto parts, you name it, they don’t make it here. And that makes it a very attractive market, for those reasons, because there’s no local protection.

So what are Panama’s advantages? Well, obviously, the Panama Canal defines these things, and then there are layers of advantages that are built on top of that. But first of all, it’s a – it’s essentially a logistics hub for the Americas, and the Panamanian government is very protective of that – calling itself quite frequently “the Singapore of the Americas.” It’s obviously based on the canal operations, but it’s also some interesting things like direct air routes. So the fact that Miami for decades was functioning as a regional air hub is slowly being supplanted. It’s losing some business, let’s say market share, even as the market grows, to Panama City as a logistics hub for transit. So you can get direct flights from Panama City to almost anywhere, and there’s a – there’s a very, very capable airline called Copa which uses Panama City as a regional hub, and that’s at the cost of Miami’s business.

It’s a very – the economy is interesting in the sense that it’s dollarized. And when I say dollarized, I don’t mean they have one-to-one parity between their local currency, called the balboa, and the dollar. The dollar is used as the currency. There is no central bank. There is no central bank. And that vastly simplifies your business planning, whether you’re a small-to medium-sized company just looking at export and offering terms and worrying about currency exchange fluctuations, you don’t have to worry about that kind of stuff. It certainly – it means that there’s been macroeconomic stability in Panama the likes of which Latin America has hardly ever seen over its history.

Latin America is characterized by periods of hyperinflation and poor mismanagement and even default on sovereign debt. That simply has not happened in Panama. Inflation has historically been in single digits. It’s been in single digits. They cannot print money to out-run their debt. And as a result, there – it’s a much more stable economy as a result.

And on top of that, as a layer on top of that, there’s a very sophisticated banking sector, which historically enjoyed a slightly shady reputation as a result of a, quote-unquote, “offshore haven,” or a tax haven, but is increasingly recognized – all the major banks are here – as a sophisticated and bona fide banking sector. So there’s – there are gobs of financial and credit availability. Several banks here know customer bases very well and have Master Guarantee Agreements with Ex-Im Bank, which means in the end, if you want to work with a – with a bank to offer, let’s say, terms underwritten by export credit insurance with Ex-Im Bank, Panama is a very easy place to do that. You could work with local banks here.

As I mentioned, a very stable economic environment, but also political environment. There’s not – the range of ideology I think stems from, again, centuries of very pragmatic approach to local and world politics. And with the exception of the Noriega regime in the late 1980s and Operation Just Cause by the American government in ‘89-’90, the political environment has been extremely stable. There have been multi-party elections, a strong presidential system, but in the end, a relatively – especially within the Latin American context, a relatively narrow range of ideologies. So when a new administration comes in and takes power, you don’t see a huge swing in ideology – you know, everything’s written off and everything’s nationalized, that kind of thing. That just doesn’t happen in Panama. And has not happened for decades, so there’s a long enough time period to kind of accept that as the status quo.

A very strong affinity for U.S. goods and services – again, springing from that pragmatism; also, from the proximity to the United States. But then finally – which is – which is, I think, true across Central America especially, as opposed to South America.

But finally, there’s that special historic relationship with the U.S., because of the fact that the U.S. government, for roughly a century, administered the Panama Canal. It built the Panama Canal; it employed tens of thousands of people; it brought sanitary water and sewage conditions and lighting, and eradicated malaria and yellow fever; and then by and large was seen as a stable force for good over the course of that century. And really, the U.S. government in full force did not give up the Panama Canal – control over the Panama Canal until 1999. So this is a very recent transition that we’ve seen in the last 10 years. But a very strong, lingering affinity for U.S. goods and services, and you’ll see that borne out in the imports and the franchises that are so widely available here.

In part, in keeping with that, I would say, to a certain extent, a bilingual and well-educated workforce – every time I read this bullet plan, I think I should take it out, because we do – we do – Latin America in general has a problem with good, well-educated, bilingual technicians, engineers. This is – this is always a challenge for Latin America.

But to a certain point, especially from the point of a U.S. exporter, you’re looking at things like distributors, agents and representatives, and there’s no problem with finding those folks. The multinationals who install themselves here and are looking to hire a thousand people to do a call-center operation, those multinationals have a problem, because they do run into an upper bounds in terms of the number of highly qualified bilingual Panamanian workers they can recruit, and they’re subject to pretty severe labor laws. But for folks, again, looking for representatives, agents, distributors – no problem in coming here. You talk to people in English. It’s no problem. And you can – you can find good reps and agents, and we can help you do that.

And then finally – again, relative to Latin American terms – it’s a very safe environment. Panama City has a million and a half people. It’s one of the smaller Latin American capitals out there. It’s very safe. And I can say this: Even with a – with a slight increase in recent violence, it’s very, very safe, relative to the cities I’ve lived in in Mexico and Brazil and Dominican Republic.

So the Panama Canal is sort of the underpinning. That’s the big anchor. You know, it’s like the Bloomingdale or the Macy’s or the Sears at any given mall, right? This is the big anchor on which so much is built for Panama. It’s Panama’s unique advantage. Panamanians often refer to it as their oil, which I think is a – is a term worth keeping in mind.

The Panama Canal alone does a quarter of a billion dollars a year in procurement, much of that for U.S. goods and services. There’s an ongoing $5 billion Panama Canal expansion, which is to allow for the passage of post-Panamax ships and which will have some impact, especially in the southeast and Atlantic coast I think, with regards to trade flows. And we’re studying the strategic implications of that as we go.

That’s a $5 billion, five-year project, and it’s going to roughly double the capacity of the Panama Canal; but most significantly, allow the largest ships that are being built – practically the largest ships that are being built for containers – to flow through the Panama Canal and use what’s called an all-water route to go to and from Asia to the East Coast and to the Gulf of Mexico. So that’s something we’re watching carefully.

But the big deal about it is this, is that the Panama Canal Authority, which since 1999 has assumed control over the Panama Canal from the U.S. government, is an – a semi-autonomous division of the – of the Panamanian government. And for the last 10 years, it has served as a shining beacon of how to run a government enterprise well: cleanly and with very, very little corruption; with multiple layers of project management, program management, engineering expertise; open and transparent procurement, such as we’re used to in the United States. It really is an impressive operation, and they’ve proven themselves to be very, very capable in the last 10 years. It’s really an impressive operation.

Unfortunately, the same can’t be said for government procurement in other parts of the Panamanian government. That’s something we work on. They’re embarked on some ambitious infrastructure plans. But with regards to the Panama Canal, it’s extremely impressive.

One of the other interesting things that I didn’t know about three months ago before I came was the fact that at the – on the Atlantic side of the Panama Canal – so on the – sort of the north side – you imagine Panama running East-West generally. On the north side there’s something called the Colon Free Trade Zone. And believe it or not, it’s the second-largest free trade zone in the world. It’s been growing very, very rapidly, and it’s currently doing about $19 billion in trade. So that – even in accounting for the dip in 2009 in the world recession.

What is amazing about this facility is – and we’re studying how we can take advantage of this for U.S. exporters, especially – especially – small-and medium-size ones – is the value added that – it’s already in the – it’s at the mouth of the Panama Canal to begin with, okay? So it’s already – it’s already right – it’s centered where there’s a lot of world trade flows. It can take Asian cargo. It’s primarily doing this with Asian cargo, but it certainly can do this with U.S. cargo.

We’ve seen some penetration for U.S. companies. And it can take a container’s worth – you know, a shipping container’s worth of stuff, and break it down and display the goods in a retail style environment. And then buyers from all over Latin America can come to this free trade zone and actually look at the goods and say, “I’ll take some of this, and some of that, and some of the other.” And then the merchants who are displaying the goods will go and build carton quantities, right, of, let’s say, shirts and jewelry and cosmetics and perfume and electronics, and ship to those buyers in Ecuador, Colombia or Peru, or wherever. And this business has been booming.

So you can see the value added there. They’ve essentially achieved critical mass within this hemisphere for a tax-free zone – because it’s not a taxable event in Panama – where the goods are broken down, displayed, and all the buyers come. So the buyers don’t have to go to Asia or to different points in the United States.

From a U.S. exporter, we think this is a tremendous opportunity, because where you might have to otherwise look at the eventuality of having representatives or agents in every single one of the Latin American markets that you want to penetrate, what you might be able to do instead is come down to Panama and identify a couple of merchants who could represent your products in the canal – in the Colon Free Zone, and sell to those merchants directly, who would then do all the paperwork and the re-export to those Latin American countries. So whereas you would have had to have, let’s say, seven or eight different reps in different countries, you might just be working with one or two merchant relationships in the Colon Free Zone.

As I mentioned, we’re helping companies, with matchmaking services there right now, to meet with merchants. We think it’s a tremendous opportunity. The U.S. penetration of this market right now is only about 9 percent. As I mentioned, the vast majority of it is Asian goods – electronics, for instance, moving in from the likes of Panasonic, Samsung, Aiwa – into this area, and then being broken down. But we see – we think there’s a tremendous opportunity, so we’re going to continue to explore it. And if that sounds interesting to you, by all means, contact Jessica or contact us directly.

So what are Panama’s principal trading partners? Well, as I mentioned, the affinity for U.S. goods and services really jumps out here. Of Panama’s imports, we have a 30-percent market share – 30-percent market share. China’s way behind, at 9 percent or 10 percent. We’re exporting – the United States is exporting $5 billion to Panama every year. And other major trading partners – the usual suspects, right? And then, the bilateral relationship is quite interesting, because Panama exports to the United States only 380 million (dollars).

And what that tells us is a couple of things. One is there’s a huge trade imbalance. But it’s not a sensitive issue. It’s about a 10-to-one – or over a 10-to-one trade imbalance, in the U.S.’s favor. But what it really tells you is it’s proof positive of the fact that we’re not – when we export goods and services to Panama – but especially goods – we’re not displacing. And so it’s seen in a very positive light, the U.S. exports to Panama. What it also means is the barriers to entry are relatively low. Customs is fast and clean, and the tariff rates are relatively low, and there aren’t significant non-tariff barriers to trade for U.S. exporters.

What it means is that you’re – if you’re looking to Panama as a new market especially, there’s not a large barrier to entry, because a lot of your colleagues throughout the United States are already selling there. So that’s a good thing to know. And it’s certainly – over the decades, we’ve helped companies tremendously with these types of opportunities.

So for best U.S. export prospects, I have this slide, but I do have to tell you, again, I would say the take-away is this: If you have something that’s not represented here among these best U.S. export prospects and you’re thinking about Panama as a potential market, please go ahead and contact us, because if you’re not selling auto parts, you don’t care about this slide necessarily, right? But the fact of the matter is, again, Panama is a competitive market for U.S. goods and services of every flavor, and Panama doesn’t make what you sell. (Chuckles.) It’s that simple. There’s very, very little manufacturing activity, very little processed-food activity here. So please do contact us, or through Jessica Gordon, if you have any questions about that.

And then, I can’t end without mentioning very briefly – and this is a note of distinction, because I’m going to be handing this over to Michael McGee, who’s going to be able to tell you about all the advantages that the Central America Free Trade Agreement has for U.S. exporters to Central America. Unfortunately, I can’t tell you about those things, because we have a pending free trade agreement – a trade promotion agreement – between the United States and Panama. It has not been ratified by the U.S. Congress yet. It has not been ratified. It’s a bit of a sensitive subject politically.

As I mentioned, with $5 billion of exports from the U.S. to Panama every year, it’s not necessarily slowing down trade, but we do think it will only help U.S. companies. And if the tariff is 10 percent and it drops to zero, well, you know, that makes your product 10 percent more competitive than your competitors from Europe or Asia, right? So it does matter to you. It does matter. It’s simply something that the administration, the U.S. administration, is working on currently, but perhaps in a year we’ll see come to fruition.

So with that, I’d like to conclude. And again, I want to apologize. Here’s my contact information. If you have any questions, unfortunately, I won’t be available at the end of the presentation, but please, either through Jessica Gordon, whose contact information you already have, or this contact information that you see on the screen – please don’t hesitate to get in touch with me. If I don’t think there’s a market, if my team here doesn’t think there’s a market, we’ll just tell you. But if we do think there’s a market, we want to talk to you and we want to see if we can get you down here because, like the other Central American countries, you know, Panama’s not Indonesia. It’s easy to get to. So come on down, and let’s take a look at helping you sell more. Thank you.

Thanks, Jessica.

MS. GORDON: Thank you.

At this time, we’ll have Mike McGee to share with us an overview of CAFTA.

MICHAEL MCGEE: Okay. Glad to have you all on this call.

You’re going to move me over to this – (inaudible) – presentation.

I’ve been in Central America now for about – coming on two years and – I mean almost – coming up toward three years. And I’ve seen that – but I have a history going almost 30 years, when I was a Peace Corps volunteer in Central America a long time ago. So it’s been an interesting time to come back to Central America, and watching things as they progress in the region. And we see a lot of the great effort that the countries have made change.

I’m going to talk specifically right now, and then some of my colleagues are going to talk about the individual countries. But first, I want to talk to you a little bit about CAFTA as an agreement and a general overview of what it means and what is involved. There’s – I’m sure most of you have heard about CAFTA and remember when it actually was being discussed. And I’m going to try to see if I can help you to understand what is important about it and why you might want to give it some consideration as you’re moving forward with your relationships.

CAFTA stands for the Central American Free Trade Agreement. Actually, there is another part of this called the DR, because the Dominican Republic is part of this agreement. They came in sort of at the end of this. But I’m going to just focus right now on the Central American countries, and that’s Guatemala, Honduras, El Salvador, Nicaragua and Costa Rica.

And if you look at these numbers here, you can see that that’s not a small market. It’s – if you take them all individually, they can be somewhat not necessarily impressive. But overall, when you’re talking about a population of – it’s closer to 40 million now, and the fact that it is one of the largest trading partners as a bloc in the – with the United States and the entire Western Hemisphere and, you know, among the highest around the world, you see it’s a good – it’s a very good – it’s something that you should give consideration to.

I think also, and something that is – I want you to try and take home and remember, is that it is one of the most receptive markets to the – to U.S. goods and services. When you’re here you – and if you come here, you will notice that people talk about going on vacation and they can afford to travel outside of the region or outside of their country, they’re probably going to the United States. If they are looking and can afford to have their children study, they probably having their children studying in the United States. The movies, the music, so many things, television programs, they’re all connected – there’s a huge connection. And as many of you all know, there is a very large population of Central Americans living in the United States as immigrants.

The agreement itself is a comprehensive reciprocal and I under – trade agreement, and I underline the word “reciprocal,” because I think that’s very important for you to remember. There was a lot of concern about the free trade agreement when it was being negotiated, and some opponents felt like that this was not a good thing. But because of historical trade policy of the United States, going all the way back to World War II, the Central Americans pretty well had free access to the U.S. markets, either by having no tariffs for their products or having extremely low. In some instances, there were some quotas, but that was because of things like sugar and coffee.

But on the other hand, we had a very – a great deal of barriers to our products, and then we also had to compete with European and Asian – not as much, except in some areas. But with this agreement, we got full access, and largely, as you can see there, most of our products now come in duty-free. And that is a very good competitive advantage to our competitor markets from the Far East and from Europe – or for that matter, even other parts of Latin America.

We – I think something that is also worthy of remembering is that the – the Central Americans went through the whole process of the free trade agreement negotiations with a lot of publicity, because it was controversial here – more here in Central America probably than it was in the United States. But it really stemmed – started a whole attitude change. A lot of people who had before made – produced something, or was involved in some maybe local manufacturing, they really got into the idea: Maybe I can make some products, something, and I can actually sell it in the United States. And we have actually seen industries that did not exist before, now are pretty thriving and are actually some of the strongest growing, and some of my colleagues may talk about this a bit later.

But some of the products – for instance, what are generally called nostalgic products – you know, they really are reaching out to the Central American market or the Mexican, Latin immigrant market in the United States, with the kinds of foods and products that they miss because they’re far away from home. And this is a product that they can export. That market did not exist before the free trade agreement.

Now, as you can see here, on an average, about 40 percent of their imports come from the United States. They, too, are very heavily dependent from the united – on the United States for much of what they consume here. Interestingly enough – and this may fit into your interests – but about 60 percent of what we export to these countries are capital equipment and raw materials; which means we’re helping them to be productive, because a lot of times, they may be selling something. So this trade relationship has been a very positive one for us.

Again, the proximity and openness – there have been some advantages for U.S. companies or other companies from elsewhere to come in here and invest under the free trade agreement, because they can take their products and get them to the United States very quickly. There may be some cost advantages – or there were some from Asia, particularly China. But this – Central American markets are very quick to be able to respond to producing something and getting it back to the United States, whether it’s in the assembly process or it’s just straight-out manufacturing.

There have been a lot of U.S. companies come into the region to work in the banking area and the retail area, power generation, power distribution. And those have been some – those have been very successful. And something else that I think is very important in this is that this has been a catalyst toward much more integration among Central Americans. And I’ll talk a bit more about that in a moment.

I put this up here – these are the chapters of the free trade agreement. And you can see from those as you glance through them, there’s not really one that talks about tariff reduction. It’s really more about making sure that the rules for doing business are clear, that there’s some predictability, that there’s more access than anything else. When we talk about reducing the tariffs, that is an important element and it does give us a competitive advantage, but it does very little to get into a market if you – you can’t be very dependent if the rules and the contracts and the regulations are not – are going to be changing, or that there’s going to be something that you can’t predict ahead of time when you’re making a business decision.

And so this has been a very, very important element as well; perhaps in many ways more important than the reduction of the tariffs and quotas that were around before. It has also made the Central Americans – has given them a lot better options in terms of selectivity, cost and quality for products that before they didn’t have. So it’s much more of a competitive environment now than it was before the agreement was put into place.

For those of you who want and need, there is more information; there’s some connections there. And I’m sure through the organizers they can get you copies of this, so that you’re able to participate or get this information if you want to read up more on it.

But I will stop at this point, and also say to you that I think it’s very important – the first step that you need to do is make sure that you – if you’re not already working with your USEAC, U.S. export assistance center, and know a trade specialist from those export assistance centers, that you get in touch with them now. They can help you to learn more about the products.

Very much – they are very good at cutting time and distance between us here on the foreign side of the operations and you who are trying to make some kind of decisions, set some priorities and determine some strategies. They will use their own experience, but they’ll also help you to find information. So they can help you to navigate through some of this information, or contact us or other – the Department of Commerce or U.S. government agencies, to help you to make decisions or find information that’s important for you to know as you try to make some decisions about which countries that you want to get into.

There are some external challenges. It is a – there are a lot of positive things, but there are some issues that do impact trying to do business in the Central American market. Some of these may be, I’d imagine pretty well, if you’ve paid much attention to international business, you will – none of this is very surprising.

These are things that we in the embassy, particularly in other sections of the embassy, are trying to work on, making sure that they do not affect the trade and business environment in the country. And whenever they do, we have a response to trying to deal with them, whether it’s Mr. Chavez in Venezuela, or whether it’s a government that decides to come in as democratically elected and decides maybe they like the job so well they don’t really want to give it up, or whether we’re trying to deal with some of the natural disasters that go on within the region. And so these are areas that you need to take into account. We are happy to answer specifics on any one of our countries and try to make sure that you can take that into account when you’re calculating your risk.

There are internal changes – challenges. We have made great progress. And I can tell you from, as I said in the beginning, many years – decades of experience working with this region, we have made tremendous advances. That does not mean that this is trying to do – like trying to do business in your neighboring state or in perhaps a European country or Canada. There are challenges here. They are – they’re probably not necessarily surprising. But we do have mechanisms, because of the CAFTA agreement, that we can call upon to resolve problems.

And there is a – if you recall from the – one of the earlier slides, there is a – there’s a whole area about dispute management. And despite how difficult and how big the changes have been in the six countries that are in the free trade agreement with the United States, we have had almost no instance where these dispute mechanisms did not work at the early stages where we were able to come and bring out an issue or the companies have said, you know, hey, you can’t do that, that’s not fair, that’s not included in the agreement.

In any event, we also have here an office which was opened up a little over a year ago called CAFTA Compliance Office, which is part of the Department of Commerce. And these people are monitoring specifically to see that all of the countries and all of our companies are being treated fairly and that we – that the countries are abiding by the terms of the agreement.

And again, these are areas where you need to know us and you need to know your USEACs, so that if you’re running into an issue, we get into it earlier rather than later; perhaps even trying to discuss it before you come into the market, so that you can have a – be walking around with your eyes wide open.

I’m going to give you just a bit of data here, just so that you – more not so much – necessarily the numbers, but more the trends. As you can see, there was a very positive trend for U.S. exports into the CAFTA region before the 2009 economic crisis. By and large – and I think if you look at the total numbers of this – we are still higher than we were when this agreement began, and that’s a very positive figure there that the agreement did have a very positive impact on our trade relationship, on our exports.

If you look at our sales to them, in some instances there are – now you can see that with the exception of Costa Rica – and that has to do primarily – and I’ll let Bryan talk about it a bit later. I think it was one particular product line there, and he’ll talk to you about that in there. But also, the trade did not fall off that much.

As a matter of fact, when you look at worldwide trade with the United States among our trading partners, if you look at Central America as a bloc, the trade fell less both ways between our – Central American countries and the United States than any other country in the world, with the exception of Ireland. And I think that has a lot to do with the strong relationship, itself.

There’s a slide that – just to let you know we have different ways. We will pretty well try to work with you and your company’s strategy, either what you are accustomed to using as a strategy to get into markets, or trying to help you to come up with a strategy that fits for your company and fits with the Central American market, to be successful in getting into this market. Again, your USEAC is your first point of contact. And they are a very critical element within this, because they are the partner and the liaison between us overseas and you in the United States and in your company.

This is to give you an idea about how we’re structured here. We have – up at the top there, we have a regional operation that’s based here in San Salvador. We also operate with two countries where we don’t have U.S. Department of Commerce staff. That’s in Nicaragua and Belize. But we do have a – we do manage the – their operations there. That’s run by the State Department. And we do oversee them administratively in providing – making sure that their – the products – the services that we offer in the Department of Commerce meet the same quality requirements in those two countries.

We have – as I mentioned earlier, we have a compliance office that’s run here with two staff. And they stay on the road quite a bit, trying to make sure that our companies – when they do run into an issue, they are (resolved ?) quickly – (inaudible) – countries do try to make them change because there’s a new legislature, or a new government official decides that he doesn’t – he wants to implement some kind of policy or some kind of law. And we have to let them know that’s not possible under this free trade agreement; we have access and we have these rights here, too.

And then at the bottom, you can see that we have four operations where there is Department of Commerce staff in each one of these countries who are standing by to work with you.

Here’s my information. So we’re happy, again, to talk with you. If – the USEACs can also tell you very quickly – I’m happy to talk with you and answer any of your questions and route information. But very often, your USEAC trade specialist will know which particular individual in our country or our countries manages the industry sector that you – your company represents. And they are a very important element in that process, because they’re the local experts that are here day in and day out, year in and year out. When we officers rotate through, we have to get up to speed, and we rely on them. But they know their industries, and some of them have been working them for decades. They know all of the major players in the government, and they know all of the major distributors here who you want to be working for – have working for you.

I will stop here and let them – we’ll go into the specifics of each one of the Central American countries now. Thank you.

MS. GORDON: Thank you.

Our next presentation will be on Honduras and Nicaragua.

MR. MCGEE: All right, I’m going to go – going back here at – I’m going to cover these two countries, because we don’t have an officer at this point in time in these countries. And I’m just going to try to give you a bit of information, just to give you a bit of a – more flavor for the country, for these two countries. And again, I think a lot of it has to do with the specifics of your products and the specifics of your company’s approach to exporting, or your experience within the region. You may be selling, and you just want to know more. So we’re going to try to give you a bit of information, to give you a better flavor for these countries.

We’ll talk first about Honduras. Honduras, as you can see from here, they have a new government. If you watched much of the news over the past year, they had an interruption of the – as we say here, the democratic process. But they now have a new administration that came into power in January, and is moving along very quickly to reestablishing normalized relationships and to trade across the region.

One of the important things that you notice there is that 17 percent of their GDP comes from remittances. Remittances are monies that their family members send home from the – primarily from the United States, to support their families or – whether it’s immediate family or extended family, back to this.

You can see that their exports – U.S. exports have increased dramatically since the beginning of the agreement, and that there also – another very notable quality about Honduras is that they have their own mega-port. It is – it’s the biggest port – there’s a large port also on – in Guatemala that’s not too often – (inaudible). But most of Central America – all of Salvador, much of Nicaragua and much of Costa Rica – receive their goods and export their goods through Honduras and through their port there.

This will give you some idea of the goods that we would consider the best prospects, and when we talk about best prospects, those are the sectors that we think have the greatest potential for U.S. companies to be successful in getting those products into these countries. They’re pretty diverse, and they link in very much into things that relate to these countries. There’s a high level of crime. There’s a lot of gang activity – throughout Central America, but in Honduras in this case. Therefore, safety and security equipment are very important.

Travel and tourism, we find, as I said earlier, that the Hondurans, if they can, will be traveling to the United States. And we’re trying to help them to reach into places that they’re not accustomed to going to like Miami, Los Angeles, or Houston and New Orleans – not that there’s anything wrong with those places, but we want them to find other places as well.

Renewable energy – these countries do not have oil, they do not have gas. They’re completely dependent. They have some hydro, some thermal energy. So we find these are good ways for the countries – the companies – the countries to reduce their dependence on energy, and we are producing more and more of these kinds of technology.

Automotive parts and equivalent service, you’ll find that most of the biggest source of vehicles are coming from the United States, mostly used vehicles. The fleets in these countries, and particularly here with Honduras, is a used vehicle from the United States and therefore – and they last longer and they keep these cars longer than we would perhaps in the United States, and so the after-market is a very important market.

Food processing and packaging, as I said earlier, as well – this whole growth in the nostalgic market has driven the opportunity for us to sell food packaging and processing equipment to the Hondurans, because they don’t make any of that and they need to get it in order for them to create their own exports.

I’ll switch over to Nicaragua. You can also get a bit of a picture from here. I think something you may again, if you hear news and if you follow the Central American or Latin American news – President Ortega really likes his relationship with Chavez, President Chavez from Venezuela. But he does not – he has not broken away; he has respected the terms of the CAFTA agreement. That has kept him on the side of free enterprise, which we think is very important.

Even after – he was also a very strong friend of President Zelaya, who was in Honduras and was ousted. Even though there was a free election and widely respected elected in Honduras recently and – President Ortega and Nicaraguan government does not recognize that government. Nevertheless, since they have to depend on CAFTA for a lot of their exports and imports coming through there, they still trade with (them ?). And that’s a very important element, too. Trade has been a very stabilizing factor in there. Again, you can see there our exports have increased 45 percent since it came into effect. And there are – it’s got a very poor infrastructure, so that presents a lot of opportunities in itself.

You’ll see again some similarities between the two countries that I’m talking about, and you’ll probably see some of these as we move along. Telecommunications equipment, computer equipment – technology, that’s something we compete with in all Central American countries. But these are the areas that we have worked with State Department that’s usually the best prospects for Nicaragua.

And it has – as Dan had said earlier, you know, if you’ve got – if you’re not in one of these areas, that does not mean that your product has a – does not have a good potential for getting into these markets. But all I would say is that you need to talk with the USEAC specialist and talk with us at post, in the embassies, for us to help you to assess whether this is a market or a set of markets that you want to try to get into.

And from there, I will close again, and be standing by for questions at the end.

MS. GORDON: Thank you, Michael, for those presentations.

At this time, we’ll have Bryan Smith, who is commercial counselor for Costa Rica, to give us an overview of the Costa Rican market. (Pause.) Bryan?

BRYAN SMITH: Yes, thank you, Jessica. Thanks for setting this up.

MS. GORDON: You’re welcome.

MR. SMITH: And – (good, we’re loading ?).

It’s a pleasure to be here. It’s great to have a chance to speak with you all about Costa Rica. For those of you from Mississippi, where my mother was born and raised, I’d just like to say: Hi, y’all. Don’t have much chance to do that. I’d also like to note that in this market there’s a serious lack of grits. So that’s an export opportunity for you.

Let’s move on. Costa Rica, I would say, is a study in contrasts. It’s a world leader in a lot of things, and it falls far behind in others. It’s got beauty, pitfalls, challenges, frustration, opportunities – the whole package. In fact, the challenges are the opportunity, as they usually are. And we’re going to go into that a little bit.

There tend to be a number of preconceptions about Costa Rica, some of which you might have heard and some of which are correct. I know for me, when I first heard I was going to be assigned here – I’ve been here for about a year and a half now – and I realized that they had shot “Jurassic Park” in Costa Rica, my main concern was the raptors. And I found out later that the really scary thing is the potholes. The potholes are so bad here that if the police catch you driving in a straight line, they arrest you for drunk driving. The potholes are just – they’re a part of the infrastructure, and infrastructure is one of those great areas here that offers, very seriously, challenges and opportunity. It’s been neglected for a long time – ports, road particularly – and now they’re ready to move forward on repairing and upgrading these, as we look to move Costa Rica into become a fully developed nation, according to President Arias, by 2021.

I’m going to ask Jessica if you can perhaps move the cursor to the slide, the other slide here that we have on country highlights. Thank you.

As a country, Costa Rica is fairly small. It’s less than half the size of Mississippi; it’s about the size of West Virginia. This 95-percent literacy rate means they can read and write, but the average person here doesn’t get past the eighth grade. Counterbalancing that is the fact that there are 10 universities in San Jose, the capital, and they’re quite good, and they’re accessible to the people in the population.

Speak Spanish here, of course, in Costa Rica, but there’s a lot of English around, which is helpful for the increasing numbers of U.S. multinationals that are locating offices here. Essentially, they’re called back-office or financial operations, where they use not only the bilingual benefits that they – they’ll find here in the local market, but also the good, well-educated people. This may be a little bit different from Panama. Panama has some tremendous advantages in some areas. I think that the people in this country tend to be an advantage. The idea of multinationals coming here and doing back-office operations really is not related to what we do in promoting U.S. exports, but it is an attractive aspect for American business in general.

Now, as for being a democratic republic, you know, Costa Rica is the only Latin American country that’s on the list of the world’s 22 older democracies, and that’s very important for (us ?) strategically. This is particularly the case when there are some antidemocratic players in the region. And Mike referred to this. These guys try to make mischief, spread their influence. And Costa Rica is a bulwark against that. It leads by example, and it is a wonderful example.

Life expectancy, 76 years, means they live long and prosper – well, at least three-quarters of them do, because the poverty rate at over 18 percent is fairly significant, but then extreme poverty is another 4-1/2 percent. And it makes for a populace nearly a quarter of the entire population which is in somewhat dire straits. But life goes on. GDP is about $30 billion. It’s not so much, but per capita GDP is roughly double that of the next-closest Central American country. So there is disposable income here, and there’s an appreciation, again, as Mike mentioned, of the value and quality of U.S.-made products. This comes from knowing us for a long time and being in close association with the U.S. over the years.

Also, with regard to the GDP, the growth has been whipsawed. In 2007, it was 8.8 percent. Tremendous. The following year, 2008, it went down to 2.6 percent. Then it plummeted to -1.3 percent last year. But then, they have the expectation that GDP growth is going to exceed 3 percent this year. So it really is an economy which is buffeted by the world economy to some extent. Inflation has also been pretty dramatic in its swings, because it was nearly 14 percent in 2008. And in 2009, last year, it dropped 10 percent; it was just 4 percent last year. And the expectation is it’ll stay in that same range this year.

Costa Rica, although as I mentioned it is susceptible to some of the slings and arrows of the world economic forces, it did weather the global recession fairly well. And that is because there are laws here restricting what they can do and invest in, particularly complex financial instruments. Because the laws just don’t allow those things, they weren’t into the types of products that caused loss in other countries; and so therefore, they did not go down as far and they’re already on the upswing. November-December of last year saw an increase in growth in GDP. So it’s very interesting.

Now, to the market and best prospects. The market in Costa Rica is also fairly small; has a total trade relationship with the United States of just over $10 billion. And that means we export about 5 billion (dollars) to them, and Costa Rica exports 4 (billion dollars) to $5 billion to the United States. We are Costa Rica’s biggest trading partner by far. We’re their biggest supplier of goods. About 40 percent of what they import is from the U.S. We are their biggest importer. We buy about 35 percent of their exports. We are their biggest investor. We invested somewhere between 3-1/2 (billion dollars) and $4 billion in this little country here. And we are their biggest source of tourist visits.

You’ll notice at the bottom of this slide that travel and tourism to the United States is 160 travelers. Well, we have nearly 2 million a year from the United States coming down here. Fairly interesting thing, and that’s nice for the Costa Ricans, it’s nice for the people who come down. Our interest is in getting Costa Ricans to the United States. But the American travelers and the European travelers that find Costa Rica as a fascinating place from an ecological standpoint bring money with them. And the $1.3 billion a year that the Americans spend and the Asians and the Europeans spend is a driving factor for a lot of the U.S. exports that come here.

I’ll call your attention to the third and fourth industries that are shown on best business prospects: construction equipment and building materials; 36 million (dollars) and $26 million last year, all of last year. That’s still a reasonably good shot for the future. It was dramatically higher until the economic situation worsened and – because much of the investment and much of the construction comes from the United States, and that which comes from Costa Rica and other investors, they still tend to buy most of their building materials from the States. That’s – what has happened has been a major downturn from 2008 to 2009, not unlike our own in the States; but with the upturn already beginning to take place, plus the public sector here, the government, building things to try to pick up the slack. And it has done so to some extent.

Let me go to medical equipment and give you a little background on that. We see medical equipment leading the parade of opportunity here: $44 million imports from the States. This relates to exceptionally good medical care provided in a sort of socialized-medicine fashion here in Costa Rica. They have the social security system, which owns and operates over a hundred hospitals and clinics throughout this little country. And the Costa Ricans – or the “Ticos,” as they’re known – know their medical products. And even though they’re getting the government care, they typically demand top-of-the-line medical equipment, and tend to get it. The Caja, as it’s called, the social security entity here that runs the hospitals, buys about 85 percent of all the medical products that are imported into the country.

Now, in addition to this, there are also some very fine private hospitals that are accredited by the U.S. Joint Hospital Commission. They operate on a first-world basis. Medical care tends to be a good deal cheaper than in the U.S., and this combination of quality and price has driven another dimension here called “medical tourism”: people coming from the U.S. and other places looking for cheaper, quality medical care. All the same, we’re trying to send Costa Ricans to the United States for specialized care. What this has done is closed the circle and driven the demand for U.S. medical equipment. So it’s a growing industry. Even though there are Americans coming here for medical care, the Costa Ricans are buying the medical instrumentation and such from the States.

Auto parts. Well, this is similar to a lot of Latin American countries, where import duties tend to be high. Now, with CAFTA in place, the import duties have gone down significantly. Over 80 percent of all the products are coming in here duty-free now. Unlike the other countries, CAFTA got underway in Costa Rica about two-and-a-half years later. It’s only been in place for one year, and that year, unfortunately, happened to coincide with the downturn in the world economy. And so whatever the beneficial results are has been obscured by that other major happening. But it’s generally felt that having this free trade agreement in place in Costa Rica helped to dampen the blow, in addition to the other factors that I mentioned that helped them to survive the downturn.

Automobile parts become a popular item when it’s extremely expensive to bring in new automobiles. And while we may not have duties on those automobiles, there may be excise taxes and other things that really drive the price up, so it makes more sense to repair your car, rather than to trade it in and buy another one. This has driven, as I said, throughout Latin America a strong demand for auto parts. This is definitely the case here in Costa Rica. Earlier this year, our specialist for the automotive industry recruited a delegation of 50 buyers from Costa Rica to go to the big AAIW auto-parts trade show in Las Vegas. And even in tough times, they’re out there looking for product.

I would then like to take a look at the telecommunications equipment. In this situation, I think the number is going to go up fairly significantly. Telecommunications, and specifically cellular telephony, or cell phone – the ability to operate cell phone companies in country, was made available through CAFTA. And the same is true – that had been a monopoly situation – the same is true with another part of the telecom industry, which is the Internet. That has also been de-monopolized, in my word, as well as the insurance industry. So telecommunications equipment is currently being imported, but as these new, private-sector competitors to the government cell phone system take hold, I fully expect telecom equipment numbers to go up fairly substantially.

Taking a look at food and packaging equipment, this relates also to the resort development, which was construction and building materials I was referring to, driven by investment in resorts and hotels in the northwest part of this country. And food and packaging – food processing and packaging equipment is all a part of that overall picture. And yet, there are quite a number of entities here that look to the United States to replace their existing equipments and they’re growing. So that is a phenomenon that I, too, believe, just as construction equipment and building materials, will have an upswing into higher numbers as we go along.

Electronic security equipment is an unfortunate reflection of a more difficult security situation here in country. While it’s by no means terrible, it is something that has affected one family in four, and for that reason the people that can afford it are buying electronic security equipment for their homes and for their businesses.

Okay. Now, I had mentioned challenges and opportunities. I’d like to give you a couple of ideas about this. Some of the challenges tend to be bureaucracy and red tape. The government monopolies have been a challenge, but some of the significant monopolies, as I just mentioned, are now coming into private hands, and so that will be better.

IPR enforcement has not been terribly good. The judicial system is incredibly slow here. If you have a problem, it will take a long time to resolve that if you end up in the court system. Aging infrastructure, as I was mentioning, is a challenge. Well, that’s an opportunity. Just wanted to go into a couple of things here that are relating to infrastructure projects that are on the drawing boards.

There are a pair of twinned ports, you might call them, on the Atlantic side of the country. One is the port of Limon, the other is Moin. They’re right next to each other; operated by the same entity. I believe they have been, unfortunately, at the top of the list when it comes to things that you don’t want to run into. The World Economic Forum places them, in terms of port infrastructure quality, 128th out of 133 countries. That is pretty bad. Well, efforts are being made right now to change that, and change it dramatically.

The port of Moin is going to be an $812 million expansion to accommodate four more ships – it’s basically building a new port – 74 million (dollars) to enlarge and modernize the existing port. And then the port of Limon is going to be converted to a cruise port itself. And there’s going to be a petroleum dock that’s going to be built, another $80 million. Hydroelectric project – this is a country where it relies on more than 80 percent of its electric power from hydroelectric sources. They’re building another 630-megawatt hydroelectric project here. Plus, there is a water – waste-water project, at a quarter of a billion dollars, which really is providing – or will provide – a world-class waste-water treatment system for the San Jose metropolitan area.

Now, the other thing before I finish with you, I just would like to mention quickly some of the unique aspects of this country, some of the top-of-the-world type situations. One is, Costa Rica is number one healthiest environment in the world. It is number one – that’s NASA gave that indication – number one most bio-intense place on Earth, according to National Geographic; number one in terms of U.S. Social Security checks sent; number one in stolen U.S. passports – the surfers come down and they – when they get back to shore, they have difficulty finding their stuff – number one biggest pineapple exporter in the world.

It’s number five global environmental performance index, according to Forbes; number – fifth-best environmentally friendly country in the world; (fifth ?) cleanest country in the world, according to Yale and Columbia. But at the same time, the government of Costa Rica says that they only treat 3 percent of the sewage, and the rest of it’s dumped into the water – the oceans and the rivers. So there’s some – there’s continuities here.

The World Health Organization says it’s one of the best places in the world to live. The U.N. says it’s one of the best places in the world for medical care. The Global Competitiveness Index has it number one in primary education, but worst in the world in some ways in infrastructure. Ease of doing business, according to World Bank, 121st out of 183. So really, it’s a fascinating, fairly complex place that has a great future, but is also a smallish market, which you can look to as – for its own unique demand, but also as a place from which to perhaps set up regional sales operations, as many companies have done, for Latin America and the Caribbean.

So those are some of the highlights for doing business in Costa Rica. Hope I’ve given you a flavor that gives you a bit of salt and pepper and has whetted your appetite. And with that, I will now turn it back over to Jessica. Thank you.

MS. GORDON: Thank you, Bryan.

At this time, we’re going to have Jennifer Gothard, from U.S. Commercial Service, San Salvador, to give us an overview of the market in El Salvador.

JENNIER GOTHARD: Thank you, Jessica. And thanks to you, everyone participating today.

I just want to touch briefly on some of the highlights in El Salvador, in the market here, and opportunities available for your companies. El Salvador was the first country to actually implement the U.S. and Central America Free Trade Agreement, which I think is very significant because it shows the very strong support in the private sector and by the government for working with the U.S. and working with U.S. businesses.

Additionally, El Salvador has not had its own currency for about 10 years, and has been using the dollar. This really facilitates trade and makes it easier for U.S. companies to do business here. You don’t have to worry about currency fluctuations. When you give a price quote in dollars, everyone’s very familiar with that. It definitely streamlines things here for doing business in El Salvador.

Additionally, El Salvador has TACA Airlines, which is the airline – one of the major airline carriers here in Central America. And El Salvador serves as a hub for all of Central America, with daily flights to Guatemala, Honduras, Costa Rica, as well as to major cities in the U.S. – California, San Francisco, Los Angeles, Houston, Atlanta, Miami. There’s a lot of transportation options, and in three or four hours you can easily be here and start doing business.

U.S. products in general have an excellent reputation here in the Salvadorian market. They’re viewed as having a high value, a high quality and a good value for the product. And consumers usually are willing to pay a little bit more for U.S. products because of the reputation for high quality. Sometimes you could be constrained if your product is of relatively high price, in terms of attracting new customers. But in general, U.S. companies do very well and their products do very well here.

And also, I want to mention – Bryan just mentioned Costa Rica’s ranking in the World Bank’s Doing Business report. El Salvador’s fairly high for Latin America. It’s rank 84 out of 183. And what the World Bank is looking at is cost and the time that’s required for doing business. So for example, in El Salvador the cost for importing a container worth of products is about $820, and this is the second lowest in all of Latin America. Additionally, in El Salvador it takes about 10 days to import a container; and the only country where this time is less in Latin America is Panama, where it takes about nine days. So there’s definitely issues, but it’s very receptive towards doing business with the U.S., and has tried to facilitate its business processes.

Additionally, there’s really not a problem with standards, with product labeling. The U.S. standards serve as a reference point, as well as Mexican standards. There’s very few import restrictions, and we don’t have a lot of problems in that area.

One particular item of note is remittances. Michael McGee mentioned this before, the money that Salvadorians living in the U.S. are sending back to El Salvador. There’s over 2 million Salvadorians living in the U.S., and remittances last year were 3.1 billion (dollars). That makes up about 20 percent of the Salvadorian economy, and exceeds all international assistance to El Salvador. It’s definitely an outstanding feature of the Salvadorian economy, and the country is very dependent on that. As a result, it just goes to show the strong ties that Salvadorians have to the U.S., and the strong influence U.S. culture has as Salvadorians living there come back and forth to visit their friends and family. U.S. consumer goods are – and brands are very widely available and very widely recognized here.

That being said, there are some challenges here. Definitely, the courts and the regulatory bodies are a growing concern for doing business. The court system here is very slow, and even when its court rulings are issued, it can be very difficult to implement them. However, we do have a number of – the Commercial Service has a number of products and services to help you find and vet a reliable distributor, representative. And that can help you avoid having to go to the courts and use the court system.

The other really big challenge El Salvador faces is the high level of violent crime. This affects individuals as well as companies. On average, it’s estimated that security and crime add an additional 10 percent to the cost of operating in El Salvador, for the needs of extra security equipment, extra guards. Companies have had to limit their operating hours. So that is a very big challenge for the country. It does offer some opportunities, if you are selling security equipment. I guess that’s one way to look at it.

The economic relations with the U.S. are very strong. The U.S. is El Salvador’s main trade partner, and it’s the primary investor here in the country as well. U.S. exports enjoy the majority market share. They were 2.2 billion (dollars) in 2008. That was an increase from 2007. They declined a little bit last year because of the economic crisis; however, we enjoy about a 30-percent market share. And El Salvador exports almost 50 percent of its exports to the U.S. Salvadorian imports to the U.S. in 2008 were about 2.5 billion (dollars).

So El Salvador is benefitting from the free trade agreement and selling a lot of products to the U.S., and these Salvadorian imports also offer advantages to U.S. exporters. As we’ll see here in our best prospects, one of the areas where there’s a lot of opportunity – talking about Salvadorian imports – is food processing and packaging. I’ll go through all of these, but just to skip down to that, I want to mention the fact that Salvadorian exporters are selling a lot of food products, particularly nostalgic food products, to the U.S., and they require food processing and packaging equipment. And U.S. firms really have a lot of opportunities in that area because Salvadorian exporters have to meet U.S. Food and Drug Administration requirement, and so if they buy U.S. equipment they’re more likely to meet those requirements. So there’s a significant amount of opportunity in that area, although U.S. companies do face competition from Brazil, Argentina and Europe.

Going to the top of the slide, automotive parts and services: As you’ve heard, definitely opportunities in all Central America. El Salvador doesn’t have any domestic production, so all of its vehicle parts and accessories are imported. Ninety percent of all used vehicles purchased in El Salvador come from the U.S. And because of poor road conditions here, you definitely need to maintain your car, and cars deteriorate a bit faster. So there’s lots of opportunities for vehicle parts and accessories as well.

Also, from the dental equipment market: Very receptive to U.S. products. U.S. products have nearly a 30-percent market share in dental equipment. There’s no local production, and Salvadorian dentists tend to follow developments in techniques, technology, equipment, from the U.S., and frequently travel to the U.S. for some American conferences for training, as well as to purchase dental equipment.

And lastly, as has been mentioned before, travel and tourism services: El Salvador is among the top 40 countries visiting the U.S. Historically, Salvadorian have traveled to the U.S. to visit family and relatives, for tourism, for business purposes. Last year, we participated in a bridal show here, and it was really amazing to see how many brides were interested in different travel options for honeymooning in the U.S. It was – we were a little bit overwhelmed with “bridezillas” looking for travel destinations. So there’s lots of opportunities for travel and tourism to the U.S. for Salvadorians.

Besides top prospects – (inaudible) – since I know some of – there’s also opportunities in other areas, as well. As has been mentioned before, if you’re outside of these best prospects, your best option is to work with your U.S. export assistance center, who can discuss with you the opportunities for your products in our market, and work with our commercial specialists here on the ground for your particular industry sector, to help work with you and evaluate the market and opportunities for your firm.

In addition, I did want to mention one upcoming opportunity we have is a U.S. product marketing exhibition that will take place in October of this year. The Salvadoran Association of Industries is organizing its sixth annual industrial congress, which is a local trade show here in El Salvador. And the Commercial Service will be having a booth, and will be having a display of U.S. products. And this is a good way for you to market your products here on the ground. There is a of $125. We offer to distribute your company brochures during the event, provide you with a list of companies that have visited our booth space. If we identify particular trade leads of interest to your company, we will send you that information as well, and post a brief description of your company on websites here at the Commercial Service Central America operations for two months. So that might be of interest to some of the participants today. And to take advantage of this opportunity, you can contact our office here, as well as your U.S. export assistance center, or contact information at the end.

Lastly, I just thought I’d mention a few useful resources. I imagine these presentations will be sent out. We strongly recommend taking a look at our country commercial guide. Also, the American Chamber of Commerce of El Salvador is very active here. They have a lot of useful information and a link to our U.S. Embassy website as well.

Lastly, here’s my contact information. I’d be glad to answer any of your questions and help – refer you to the appropriate commercial specialists in our office to meet your needs. Thank you very much.

MS. GORDON: Thank you, Jennifer.

At this time, we’ll have Patricia Wagner, senior commercial officer, U.S. Commercial Service, Guatemala City, Guatemala, to give us an overview of the market in Guatemala.

PATRICIA WAGNER: Okay. And Jessica, how much time do I have at this point?

MS. GORDON: We are running short, but we have – we have a few minutes.

MS. WAGNER: Okay. So do you want the five-minute version or the 15-minute version? What do I have?

MS. GORDON: Okay. Can you work with the – maybe the five-minute version?

MS. WAGNER: Okay. Just to let you know, we are one of the largest economies in Central America. We’ve got about 14 million folks in Guatemala, 3 million in the capital city. Our GDP is about a third of the entire region’s GDP, so Guatemala is a very large place to think about in Central America. Even though when you saw the (overall ?) numbers you saw Costa Rica very large, we’re still – we’re still an excellent market for folks.

Since the – our CAFTA came in in 2006, about 90 percent of products from the U.S. now enter duty-free. Guatemalans like U.S. products. Even though you see that we have a center-left administration, this administration is very focused on safety, security, education and health in the rural areas. So there are more and more opportunities in the rural areas that we’re starting to see come up. But not a – not a lot of big central projects, but just cleaning up the infrastructure, working on education and things like that.

Our VAT here is about 12 percent. So that’s something to think – take into account, the value-added tax here. When people are doing any kind of work with the government on any kind of projects, we strongly advise folks to verify it – where the revenue streams are coming from because they do have some issues on tax collection.

They only collected about 9.9 percent of GDP in 2009, when the regional projection is about 15 percent of GDP as far as tax collection. Our social conditions are a little bit of an issue here. We have a lot of the indigenous kids are malnourished. So there’s a big focus on health and education here.

International companies base their operations here in Guatemala. We have quite a few companies such as Proctor & Gamble, Pepsi, Frito-Lay, Coca-Cola, Colgate-Palmolive. Colgate-Palmolive has manufacturing facilities here, but we also have Nestle, Bayer, other folks with offices here.

Walmart of Central America, which just was sold to Walmart of Mexico, but they’ve got investments throughout the region in about six different sort of supermarket-type areas here. So everything from the big hypermarkets to smaller grocery stores.

We’ve seen imports – U.S. imports from Guatemala actually do pretty well. They raised, in – from 2007, 2008 about 14.4 percent. As you saw in the big slide that we had originally, they talked about the issue of you know, overall, the region’s seen a little bit of a decrease over the financial downturn with the economic problems throughout the world.

But actually, we did a lot better than the world average. We did not see as big of losses as they saw throughout the world. There is a huge propensity for U.S. products here. They do buy a lot of U.S. products and they like U.S. products because they like our service mentality. Price is still very important here.

We highly suggest, you know, people need to register their own trademarks here. Do not let local folks register your trademarks. And we suggest that pretty much worldwide. Contracts – we highly suggest making sure that people put in their contracts the possibility – (audio break) – arbitration.

Let me get to the note I have on here about the Guatemala and the U.N. having a joint commission here is because there have been problems with corruption in the government so that they’re trying to actually go after some of the biggest offenders.

You may have seen in the papers that the former President Portillo has actually been – the U.S. has actually asked for his extradition to the United States because some of the money that he took was sent through – laundered through U.S. banks. So the U.S. government is going after him for money-laundering. Why don’t you change to the next slide? Or can I change that or you change that? Okay, thank you.

As you heard from all of the folks in Central America, auto parts is one of our largest areas. In 2009, we imported over $331 million of parts and accessories for the auto industry. They don’t do hardly any manufacturing in this country, maybe packaging for agricultural products or plastics or bottling for beer and food products and things like that.

But really, almost everything has to be imported in that’s any kind of a good. So 35 percent of those automotive imports – automotive part imports came from the United States. We’ve had a very steady market share on that.

We take a huge mission like – like I think Jennifer or Bryan was mentioning to AAIW every year, Automotive Aftermarket Industry Week and I highly suggest if you have folks that are interested in those kinds of products, that – and interested in international delegations, that they come to that show in the United States.

They sell those parts to mechanic shops, services stations, refurbishers because one of the things they do a lot in Guatemala is they bring in damaged vehicles from auctions in the United States that you know, cars that have been damaged in an accident or something and then they repair them here and they keep them on average – owners keep cars here on average at least five to seven years.

Forestry and woodworking machinery – you might think that’s a little weird, but there’s a huge furniture industry here. And so – and we’ve seen – we have also very good climates for wood, so we have a lot of microclimates for a lot of specialty woods.

But they’re like – they want to do a lot more technology upgrades and capacity expansion. They import $21 million on woodworking machinery every year. We’ve worked very closely with some of the domestic offices, taking people (up to see ?) some of the furniture shows so they can see new techniques.

Safety and security equipment – we do have one of the country’s – I think El Salvador might be a little higher than us with security issues. But we’re – we have a huge security industry here. There’s about 20,000 police in Guatemala, but there’s about 200,000 private security. So we – we see a lot of equipment possibilities here. We took some folks up to ISC this year.

There was a really decent-sized delegation was interested in going up to look at security products. Everything from armoring vehicles to putting on plastics on windows to try to make the windows darker and things like that. We brought in over – about – in 2008, which the last year I’ve got figures for, we brought in about $129 million worth of these products. And 46 of that – 46 percent of that came from the United States.

Travel and tourism – we, like Costa Rica, send a lot of people up to the United States. Guatemalans are very loyal travelers to the United States. No matter – even with the economic turnaround, the U.S. is their preferred place to go on vacation.

We have over 70 direct flights a week to the United States from Guatemala and we have nonstop flights to Atlanta, Chicago, Fort Lauderdale, Dallas, Houston, L.A., Miami, New York, Orlando and D.C. And since these flights are so short, it makes it very attractive for Guatemalans to plan their vacations or business trips to locations they can get to so quickly. Some of those prospects we see in the United States for Guatemalan tourism is family attractions, hotel, shopping venues, entertainment shows, sporting events, cruise – cruise trips, et cetera, et cetera.

You know, I can give you all the stats and stuff but I know we’re very limited on time and I want to make sure you guys have a chance to ask questions of all of my fellow folks. Our country commercial guide, as Jennifer said, has a lot of the really basic stats so I didn’t want to bore you with too many of those.

But we – any industry that you’re interested in looking at to come into Guatemala, you know, we would love to talk to you, but we would prefer to do it through our folks like Jessica because they can work with you to manage the expectations and they also know when we’re in or we’re out because of missions and so forth.

And that way, we can make sure they give you the best customer service that – that we possibly can in the world because we think Central America’s an excellent place for your folks and we’d like you to come down and take a look at our countries.

MS. GORDON: Okay, thank you so much, Patricia. At this time, our program did run somewhat late today, so for those that would like to remain on the line, we now have time for a couple of questions. (Gives queuing instructions.)

MR. : So we either excited you or bored you. I’m not sure which – which one. (Chuckles.)

OPERATOR: (Gives queuing instructions.)

MS. GORDON: Okay, if there are no questions, please remember that this presentation was recorded and it will be available for all participants. I would like to thank everyone for joining the call today.

OPERATOR: We do have two questions. Do you want to take those at this time?


OPERATOR: Susan Wilkinson (ph), your line is open. Please check your mute button; Susan, your line is open.

Q: Jessica?


Q: Hey, are the slides going to be available with some of the information? I made some notes, but there’s some – some of the data I’d love to have copies of.

MS. GORDON: Yeah, sure. I can send you a copy of the presentation.

Q: Okay, that’s great. Did you have anything, Marvin, you wanted to ask? Nope, that’s it.

OPERATOR: I have one more question. Mary Ellicamatcha (ph), your line is open. You may ask your question.

Q: Yes, hi. Do you have any resources that can give us specific information on the vitamin market in this region by country? Like specific distributors and then large pharmacy chains would be very helpful. And also, would we be able to receive a copy of the slideshow?

MS. WAGNER: Oh, I guess this is Patricia. I guess I’ll take that. No, I don’t think there’s anything specifically talking about vitamins unless one of my other folks happens to have done something. Normally, something like that that’s very specific, we would do a customized market research for the company.

And depending on how many questions or how much information you wanted, we could do you a quote. So if you’re looking for a regional approach for that, that’s something we’d probably have Maria Rivera and the crew in El Salvador coordinate through Jessica.

Q: Okay. So I would be able to e-mail Jessica directly?

MS. WAGNER: Yeah, start with her. She’s your – if she’s your specialist. And then she can contact Jessica. I’d suggest you start with Maria Rivera in the El Salvador office, who’s the senior specialist here. I don’t know who has vitamins or stuff for El Salvador, but she can reach out to the specialists that would cover those industry areas and we could put together, maybe, some sort of a customized regional market-research report for you and give you quotes on that. Or if we thought one of the markets was probably bigger than the other that you should start with, maybe we would give you a quote for one of those specific markets.

Q: Perfect.

MS. WAGNER: But that we’d start with the regional office.

Q: Perfect. Thank you, Patricia.

MS. GORDON: Thank you. Also, if you would e-mail me, I can also send you a copy of the presentations today.

Q: Okay. And that would be Jessica, right?


Q: Perfect, Jessica. Thank you so much.

MS. GORDON: You’re welcome.

OPERATOR: AT this time, there’s no other questions.

MS. GORDON: Okay, once again, I would like to thank everyone for attending the call today. It has been recorded. Thank you.

OPERATOR: Today’s call has concluded. All parties may disconnect.


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