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Region: free trade deals profilerate, logistics lag

Tuesday, March 19, 2013

Central America has become a trading region, following the approval of numerous bilateral and multilateral accords, including milestones such as Cafta in the middle of the last decade, and a deal with Europe about to enter into force.

Exporters and importers both win in trade. Every significant economist since Adam Smith in the 18th century has pointed out that trade boosts the wealth of nations.

But Central America will have a hard time experiencing the gains, which come from trade, unless the region improve its logistics - including delays in transporting exports and imports.

To do this, the region needs better roads, more efficient ports, and an end to red tape and corruption at customs barriers.

A World Bank report recently pointed out that tomatoes exported from San José, Costa Rica to San José, California, arrive faster than they do in neighboring Managua. Not only that but the transport costs are cheaper.

Worse still, small farmers who send tomatoes to Managua have to pay twice as much in transport costs, as their bigger competitors.