Free Trade Area of the Americas - FTAA


Trade Negotiations

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October 27, 2003

Original: Spanish
Translation: FTAA Secretariat




Project title:
Impact study: costs/benefits of exporting Dominican products to the countries of Central America.

The project consists of performing an impact study of the costs/benefits of exporting Dominican products to the Central American Common Market (CACM), with a view to identifying market niches in the five (5) countries that belong to this Central American trading block, namely: El Salvador, Guatemala, Honduras, Costa Rica, and Nicaragua.

The main interest of the Dominican Republic is to improve on the results obtained so far from the implementation of the FTA that was signed with Central America on 16 April 1998 and that came into force on 3 October 2001. Currently, trade among the three main CACM countries, Costa Rica, Guatemala and El Salvador, is around ten times as high as their trade with the Dominican Republic.

The Central American Common Market (CACM) is a market of around 36 million consumers with huge potential to purchase Dominican products, thanks to the Dominican Republic’s excellent geographical location with respect to Central America and vice-versa, and to the reciprocal desire to boost trade between the parties, through factors such as a shared language, culture, and religion. The impact study of the costs/benefits in each of the Central American countries (Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua) proposed here will provide the Dominican Republic with all the information on characteristics and parameters required to make a fair assessment of each of the target markets selected. The information obtained in this respect will be as follows:

1. Import volumes and the origins of imports
2. The quality and kind of products in the market
3. Containers and packaging requirements
4. Selling prices
5. Production and export capacity (goods and services)
6. Breakdown of the imports and exports of the companies operating within and outside the free zones

There are three (3) main objectives to this project, all the components of which are listed in detail in the section on the scope of the project. The basic aspects of the project are as follows:

A-  An exhaustive study shall be conducted on the internal and external markets of the priority products previously selected by the Dominican Republic as having the largest potential for export to the countries of Central America in light of their comparative and competitive advantages vis-ā-vis products from other countries in the target markets under study. This study will identify buyers per sector (agriculture, agro-industry, and industry) and determine the volume of their demand and supply, as well as their prices.

B-  Using the information obtained from the aforementioned study, as well as other information, the opportunities for the Dominican Republic’s priority products in the largest import markets of each of the countries under study shall be determined, while striving through all means possible to achieve an appropriate and objective segmentation of each of those markets and, at the same time, establishing clear and objective distinctions among the selected products.

C-  The sea and air transport system will be evaluated, as well as the various kinds of contracts available and their respective costs. Costs shall be studied particularly in light of the efficiency and profitability of the export operations pursued by the Dominican Republic. This efficiency and profitability depends largely on the frequency of air and sea transport services between the Dominican Republic and Central America, as well as on the maritime and air freight charges that can be negotiated with shipping companies and airlines, respectively. The goal of this initiative is to apply a scale economics model to the Dominican Republic’s exports to the Central American markets, as this will be essential for ensuring their competitiveness.

D-  Direct contacts will be made with importers, producers and exporters in each of the target markets of the countries selected for the study. A list of companies interested in signing supply and/or import contracts for Dominican products at attractive prices will be drawn up. Our firm will subsequently be able to advise local companies through suitable contractual arrangements on matters related to the negotiations that will arise as a result of any projects undertaken between Dominican exporters and Central American importers.

Expected results
The proposed study of the internal markets of the Central American Common Market (CACM) and their importation of products from external markets will allow a comparative analysis to be made of priority Dominican products that have export potential in the countries of Central America. The study of the internal market will carried out at the same time as the study of imports from international markets, but the former will be completed first within 90 days of the signing of the consultancy contract, while the latter will be completed within 120 days. The project is intended to provide the “National Competitiveness Council” with all the necessary details for Dominican companies to be able to successfully commercialize their products. The most relevant elements will be covered one by one, in order to establish a technically sound marketing policy oriented towards knowing what each target market in the selected countries needs, so as to be able to produce what those countries demand and purchase, and to be able to meet all their requirements in terms of quality, presentation, and prices.

It should be pointed out that the Dominican Republic’s exports are very similar to those of Central America. The latter’s markets are driven by the effects of decreasing returns and the constant optimization of production factors in Central American companies, which means that the Dominican Republic will have to do its utmost to obtain both comparative and competitive advantages.

The approximate cost of the project is US$ 74,842.21

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