Integration efforts date back to 1958, when Central American Free Trade Area was launched. Integration was set back in the 1970s and 1980s as a result of political and civil conflict. The peace agreements of the early 1990s spilled over into a re-start of the integration process. The Treaty of Tegucigalpa of December 1991 established the Central America Integration System (SICA). But political support for integration faltered in the second half of the 1990s.

The new integration thrust owes much to the taking of office of new Presidents in three of the five Central American states since January 2002. Presidents Bolanos of Nicaragua, Maduro of Honduras and Pacheco of Costa Rica all come from a business background and all three are committed to the trade liberalization process.

Another factor has been signals from Central America's principal external trading partners. The United States and the European Union have both indicated that they will negotiate free trade agreements with Central America as a whole, rather than with individual countries. Discussions with the U.S. have already started, while those with the EU are envisaged for 2004.

Central America's population and Gross Domestic Product are about the twice that of CARICOM's and its foreign trade is about one-third larger. The projected Customs Union would create a significant new player in sub-regional economic life.

*Includes Haiti

The accelerated time-table for Central American integration was formally launched with the San Salvador Plan of Action of March 2002. It sets out the following objectives:

• Implement agreements on common rules for dispute resolution, trade in services and investment, and the establishment of the Central American Unified Customs Code (CAUCA); by December 31,2002.

• Establishment of common customs administration and the free movement of goods including elimination of border customs posts by December 31,2003.

• Harmonization of customs duties by December 31, 2002; except for Nicaragua, which is given until December 31, 2003.

• Extension of free trade in the majority of products by December 31, 2002.

• Establishment of a common external trade policy by December 31, 2003;

• Implementation of mechanisms for the collection of taxes on foreign trade by December 31, 2003.

The revitalization of the Central American integration process is good news for the region. Like CARICOM's drive towards the Single Market and Economy, it will constitute a building block for the construction of an enhanced economic space in the Greater Caribbean.

Professor Norman Girvan is Secretary General of the Association of Caribbean States. The views expressed are not necessarily the official views of the ACS. Feedback can be sent to mail@acs-aec.org.

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July 19, 2002