Jhon Fonseca Viceminister of Foreign Trade

WTO Conference & Exhibition 6 May 2015 Freeport, Bahamas

148 economías en una escala de 1 a 7

Global competitiveness report (Foro Económico Mundial)

País Ranking 2013-2014 Calificación

Panamá 40 4,50

Costa Rica 54 4,35

Guatemala 86 4,04

El Salvador 97 3,84

Nicaragua 99 3,84

Honduras 111 3,70

NOTA: califica 12 componentes: instituciones, infraestructura, ambiente macroeconómico, salud y educación primaria, educación superior y capacita-ción, eficiencia del mercado de bienes, eficiencia del mercado laboral, desarrollo del mercado financiero, avance tecnológico, tamaño del mercado, sofisticación de los negocios e innovación.

160 países en una escala de 1 a 5

NOTA: califica 6 áreas: aduanas (eficiencia de las agencias en frontera), infraestructura, envíos internacionales (competitividad en precios), servicios logísticos, trazabilidad de envíos, tiempo a destino final

País Ranking 2014 Calificación 2014

Panamá 45 3.19El Salvador 64 2.96Guatemala 77 2.80Costa Rica 87 2.70Nicaragua 95 2.65Honduras 103 2.61

Logistics performance index (Banco Mundial)

Simplification, harmonization, standardization and modernization of trade procedures, with the purpose of reducing trade transaction costs at the interface between business and government (Grainger 2011)

Common misconceptions• Elimination or reduction of controls

• Decrease of tax revenue

• Moderation of safety measures

• Large monetary investments

What is trade facilitation?

Central American Trade Facilitation Strategy

1. Short term measures (1-2 years)– Advanced lodging and exchange of customs declarations– Exchange of migratory information between countries– Exchange of SPS electronic certificates between countries– Use of radio frequency systems for cargo control– Use of video surveillance systems for border crossings

Instructed by Chief of States through the Punta Cana Declaration (June 2014) to the Council of Ministers of the Economic Integration

Central American Trade Facilitation Strategy

2. Long term measures (up to 6 years)– Infrastructure and equipment– Border procedure coordination-integration– Integral risk management– AEO programs

3. Central American Digital Trade Platform

Central American Digital Trade Platform

Goal: Integration of the customs, single window and immigration procedures and information in Central America.

Phase 1: interoperability of existing national systems.

Phase 2: innovative trade facilitation services especially designed for the region.

Digital trade platform viability

- Comparative analysis of the current state of automation for customs procedures in each country.

- Mapping of immigration procedures.

- Comparative analysis of the IT context.

- Identification of opportunities in terms of operational convergence, interoperability and accessibility.

Objective: to determine the technical viability of a digital trade platform that will facilitate trade in Central America

Methodology:

Main conclusions

Operator records

Risk management Declarations (lodging, data exchange, etc.)

Exchange of information

Immigration proceduresThe development of a Central American Digital Trade Platform is viable. Benefits in the following areas:

The development of the platform will entail the adoption of standards on business process management, business intelligence, and Model Driven Message Interoperability.

It is possible to develop the platform in two incremental scenarios: a Service Oriented Architecture based interoperability platform, and a set of building blocks for new services for the areas mentioned above.

Potential impacts of implementing a trade facilitation platform (ECLAC)

Objective:

to estimate the macroeconomic impact of a Central American platform of trade facilitation (TF) for:• Automation and streamlining of transit procedures• Reduction of import / export time

• Estimation of import / export time • Use of a gravitational model to estimate ad valorem equivalents (AVEs) by sector and country • Calibration of a Computable General Equilibrium Model (CGEM) to create baseline scenario

with the AVEs• Two simulations: very ambitious scenario (AVEs cut by 90-95%), and less ambitious scenario

(AVEs cut by 50%).• Goods aggregated in 8 sectors; both intra-CA trade and CA trade with 3rd countries were

considered

Methodology:

Elements beyond the scope of this analysis

Ad valorem equivalents: simulation scenarios

Source: ECLAC

Panamá El Salvador Centroamérica Costa Rica Honduras Guatemala Nicaragua0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

1.5 2.3 2.4 2.5 2.5 2.6 3.7

7.6

11.3 12.1 12.5 12.6 13.2

18.5

15.2

22.524.1 24.9 25.1

26.4

37.0

Central America: Ad valorem equivalents in both scenarios vrs statu quo

Very ambitious scenario Less ambitious scenario Statu quo

Central American ad valorem equivalent 24.1

Very ambitious scenario: changes in GDP by country

The very ambitious scenario would imply an

increase of 3% of Central America GDP

Source: ECLAC, on the basis of general equilibrium model calibrated for Central America with the GTAP database 8. Note: The time for trading, calculated as the average required to export and import, was obtained from the online World Bank database (Doing Business).

Guatemala3,0%

El Salvador 3,1%

Honduras 5,2%

Nicaragua 12,0%

Costa Rica 1,8% Panama

0,5%

Central America: changes in GDP, welfare, trade and employment

Variable Very ambitious Scenario

Less Ambitious Scenario

GDP 3.0% 1.4%Welfare (Million-US$) US$4.158 MM US$1.829 MM Welfare/GDP 3.7% 1.7%Exports 11.9% 4.2%Imports 11.9% 3.7%Total employment 4.2% 1.6% Non skilled labour 6.0% 2.3%

Central Americaa: expected effects on production, trade, welfare and employment

(Change from baseline scenario)

Source: ECLAC, on the basis of general equilibrium model calibrated for Central America with the GTAP database 8 aCosta Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama.

VariableVery ambitious

ScenarioLess Ambitious

Scenario

Central America: changes under a very ambitious scenario

VariableCosta Rica

El Salvador

Guatemala Honduras Nicaragua Panama

GDP (Change) 1.8 3.1 3.0 5.2 12.0 0.5Welfare (M-US$) 673 781 1,237 639 588 59 (% GDP) 2.8 4.4 4.3 5.7 11.0 0.3Exports (Change) 5.5 23.6 13.5 24.8 26.5 3.3Imports (Change) 8.0 18.7 14.9 17.3 18.1 1.6Total Employ (Change) 2.9 5.4 4.5 6.8 12.2 0.6 Non Skilled Labour 4.3 7.3 6.3 10.3 16.4 0.9

Central America, very ambitious TFP: expected effects, by country, on production, trade, welfare and employment

(Change from baseline scenario)

Source: ECLAC, on the basis of general equilibrium model calibrated for Central America with the GTAP database 8

Variable Costa Rica

El Salvador

Guatemala Honduras Nicaragua Panama

Central America: changes under a less ambitious scenario

VariableCosta Rica

El Salvador

Guatemala Honduras Nicaragua Panama

GDP (% Change) 0.8 1.4 1.3 2.3 6.1 0.3

Welfare (M-US$) 281 335 537 289 338 50

(% GDP) 1.2 1,9 1,9 2.6 6.3 0.3

Exports ((% Change) 1.8 8.2 4.4 7.0 6.8 1.3

Imports ((% Change) 2.7 6.7 5.3 5.5 8.1 0.7

Total Employ (% Change) 1.1 1.9 1.7 2.6 5.3 0.3

Non Skilled Labour 1.6 2.6 2.4 3.9 7.2 0.5

Central America, less ambitious TFP: Expected effects, by country, on production, trade, welfare and employment

(Change from baseline scenario)

Source: ECLAC, on the basis of general equilibrium model calibrated for Central America with the GTAP database 8

Variable Costa Rica

El Salvador

Guatemala Honduras Nicaragua Panama

Costa Rica: changes under both scenarios

Costa Rica, expected changes in production , welfare, trade and employment under the simulated scenarios

(Changes from baseline model)

 Main variablesVery ambitious

scenarioLess ambitious

scenarioProduction 1.8% 0.8%Welfare/PIB 2.8% 1.2%Exports 5.5% 1.8%Impors 8.0% 2.7%Tax collection (only ST and ST)/PIB 0.5%* 0.2%*Labor 2.9% 1.1%Non skilled labour 4.3% 1.6%Source: ECLAC, Based on results of a CGE model calibrated based GTAPST = Specifit Tax; VAT= Value Added Tax.

*Very ambitious scenario: US$ 232 MM; less ambitious scenario: US$ 85 MM

Main Variables Very ambitious Scenario

Less Ambitious Scenario

Main conclusions

The ad valorem equivalent in Central America is

A Trade Facilitation platform that reducedthe time of trade (Xs and Ms) hasa positive impact in Central America on:

Increase in GDP (3% in very ambitious scenario; 1.4% in less ambitious scenario)

Increase in welfare

(US$ 4.158 MM in very Ambitious scenario;

US$ 1.829 MM in less ambitious

scenario)

Exports (11.9% in very ambitious

scenario; 4.2% in less ambitious scenario)

Imports (11.9% in very ambitious scenario; 3.7% in less ambitious scenario)

For Costa Ricaalone, fiscal

Revenue would increase

(US$ 232 MM in very Ambitious scenario; US$ 85 MM in less ambitious scenario)

The more ambitious the program, the greater the expected effect, andthe sooner the benefits to take place

Jhon Fonseca Viceminister of Foreign Trade

Muchas Gracias