July 28, 2005

Central America leaders laud CAFTA, farmers worry

By Herbert Hernandez

GUATEMALA CITY (Reuters) - Central American leaders said on
Thursday a trade deal passed by the U.S. House of
Representatives would save tens of thousands of jobs in the
impoverished region, but farmers said U.S. exports would drive
them off their land.

El Salvador's president, Tony Saca, a close U.S. ally with
troops in Iraq, said the trade treaty would guarantee jobs in a
region that sorely needs them.

"We woke up today with the certainty of a free trade
agreement that has been a dream for the country for many
years," he told reporters.

Honduran President Ricardo Maduro called the pact "a
victory for Central America," and industry groups predicted it
would bring fresh investment to the region.

Textile factories in Costa Rica, El Salvador, Guatemala,
Honduras, Nicaragua and the Dominican Republic will not be able
to export much more to the United States. But the agreement
locks in the temporary duty-free access the region already

The U.S.-Central America Free Trade Agreement, or CAFTA,
scraped through the House 217-215 early on Thursday. The Senate
approved CAFTA last month but has to vote again because the
U.S. Constitution requires bills affecting government revenues
to begin in the House.

It has not yet been approved by Nicaragua and Costa Rica,
where it faces stiff opposition.


Apart from Costa Rica, the countries in the pact are among
the Western Hemisphere's poorest with high levels of
unemployment and malnutrition.

CAFTA eliminates tariffs on U.S. exports to the six nations
in the pact, and there is concern a flood of new imports will
drive small-scale rice, bean and corn farmers out of business.

Its supporters say cheap agricultural imports will help the
region's poor feed themselves more cheaply. Critics warn
subsistence farmers will be driven off their farms.

"The death of grains is a death foretold," said Jorge
Gonzalez, who heads Guatemalan growers group Conagrab.
"Fighting CAFTA is like trying to plow the sea."

Patricia Zamora, a rice farmer from Costa Rica, said CAFTA
was disastrous for farmers like her.

"We are left at a total disadvantage. We cannot compete
with the rice growers of the United States, who receive big
subsidies," she said.

U.S. exports to the six countries combined currently amount
to more than $15 billion a year and farm groups estimate CAFTA
will boost agricultural exports by $1.5 billion a year.

The United States imports almost $18 billion a year of
goods from its CAFTA partners.

Ratings agency Standard & Poor's said the trade deal could
boost private investment in the region and improve its credit
ratings, giving it access to cheaper loans.

Industrial groups said the deal was already attracting

Carla Caballeros of Guatemala's textile export association
said a U.S.-Korean company had promised to create 800 new jobs
with a $2 million investment once the treaty was approved.