Source: USDA-FAS Global Trade Atlas, BICO HS-10
CAFTA?DR — the United States’ free trade agreement with Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua — has strengthened U.S. ties with Central America and helped spur economic growth, trade, employment, and expansion of the region’s middle class.
Since implementation of the agreement began in 2006, U.S. farm and food exports to the CAFTA?DR countries have doubled, reaching $4.3 billion in 2016, according to the USDA. Exports to the three Northern Triangle countries have seen the fastest growth, doubling from $1.1 billion in 2006 to $2.2 billion in 2016.
The Northern Triangle imported $5.9 billion of agricultural products from the world in 2016. The United States was the top supplier, providing approximately 40% of those imports. Major U.S. competitors in the region are Mexico, E.U., Chile, and Uruguay. Top U.S. agricultural exports to the Northern Triangle include corn, soybean meal, wheat, poultry, rice and prepared foods.
The Northern Triangle countries have a collective real gross domestic product (GDP) of nearly $225 billion. Guatemala, the most populous, has the largest GDP at $135.9 billion, followed by El Salvador with $49.7 billion, and Honduras with $39.2 billion. Agricultural exports play a significant role in the economic stability of the Northern Triangle, with much of the agricultural production there focused on export-oriented commodities, mainly coffee, sugar, bananas, and other tropical fruits. Consequently, bilateral trade with the United States under CAFTA-DR continues to be an important factor in the economic development of El Salvador, Guatemala, and Honduras alike.
“As local economies expand and more people move into the formal labor sector, the labor force is expected to increase from 13.5 million people in 2016 to more than 15 million in 2021, providing additional purchasing power and increasing the demand for imported goods,” the USDA said. “Although the majority of the Northern Triangle’s population earns less than $20,000 per year, buying power may be higher than indicated due to unrecorded income from sources including remittances from family members (primarily in the U.S.) and work in the informal sector.”
Participation in CAFTA-DR has created jobs and spurred economic growth across the Northern Triangle. Since 2006, the number of households in the region earning more than $20,000 per year has increased 40%, to nearly three million. Within the next five years, that number is expected to grow another 20%, to more than 3.5 million households. This is significant for U.S. exporters, since families with household incomes above the $20,000 threshold are likely to make their food purchases at modern retail centers and have more discretionary income to spend on imported foods.