The CAFTA Report
New access to services in treaty nations
New Access to Government Contracts
The Central American countries will accord substantial market access across their entire services regime, offering new access in sectors such as telecommunications, express delivery, computer and related services, tourism, energy, transport, construction and engineering, financial services, insurance, audio/visual and entertainment, professional, environmental, and other sectors. That is the general summary of the agreement as it relates to services.
In Costa Rica, the agreement generated strong opposition among employees of the Instituto Costarricense de Electricidad, which is the telecommunications monopoly as well as the principal electrical power generator.
Less but still significant was the opposition from the employee union of the Instituto Nacional de Seguros, the insuarance monpoly. In both cases, local legislation opened these markets to outside competition, although the regulatory framework is not yet in place.
In other changes relative to the rree trade treaty, Central American countries have agreed to loosen restrictions that lock U.S. firms into exclusive or inefficient distributor arrangements.
U.S. suppliers are granted non-discriminatory rights to bid on contracts from Central American government ministries, agencies and departments. Low-value contracts are excluded.
The agreement covers the purchases of most Central American central government entities, including key ministries and state-owned enterprises. The pact requires fair and transparent procurement procedures, such as advance notice of purchases and timely and effective bid review procedures.
The trade treaty ensures that bribery in government procurement is specified as a criminal offense under Central America and U.S. laws.
The Central American Free Trade Treaty is designed to lock in economic reforms, strengthen the rule of law, promote good governance and strengthen democratic institutions in Central America, according to a summary by the U.s. Trade Reporentative. Here are some other provisions of the summary:
Open services markets across the region
The Central American countries will accord substantial market access across their entire services regime, subject to very few exceptions.
Central American countries have agreed to dismantle significant distribution barriers. Changes in the dealer protection regimes will loosen restrictions that lock U.S. firms into exclusive or inefficient distributor arrangements. Such laws have been used to ban imports of U.S. products when a dispute arose with a local distributor.
Market access commitments apply across all sectors, including but not limited to:
-- Telecommunications services
-- Financial services, including banking, insurance and securities
-- Distribution services, such as wholesaling, retailing and franchising
-- Express delivery services
-- Computer and related services
-- Audiovisual and entertainment services
-- Energy services
-- Transport services
-- Construction and engineering services
-- Advertising services
-- Professional services (architects, engineers, accountants, etc.)
-- Environmental services
U.S. financial service suppliers have full rights to establish subsidiaries, joint ventures or branches for banks and insurance companies, according to the agrteement.
The pact removes most local residency requirements, which had imposed significant barriers to U.S. professionals.
Central America will allow U.S.-based firms to supply insurance on a cross-border basis, including reinsurance; reinsurance brokerage; marine, aviation and transport insurance; and other insurance services.
Central America will allow U.S.-based firms to offer services cross-border to Central Americans in areas such as financial information and data processing, and financial advisory services. In addition, Central American mutual funds will be able to use foreign-based portfolio managers.
The commitments in services cover both cross-border supply of services (such as services supplied through electronic means, or through the travel of nationals) as well as the right to invest and establish a local services presence.
Market access to services is supplemented by requirements for regulatory transparency. Regulatory authorities must use open and transparent administrative procedures, consult with interested parties before issuing regulations, provide advance notice and comment periods for proposed rules, and publish all regulations.
The financial services chapter includes core obligations of non-discrimination, most-favored nation treatment, and additional market access obligations. It also includes additional provisions on transparency of domestic regulatory regimes.