Union makes strength: the secret of the northern triangle’s economy

Guatemala, Honduras, and El Salvador already agglomerate 70% of Central American trade and aspire to more through the creation of a customs union

Union makes strength: the secret the northern triangle’s economy

Last year, Guatemala and Honduras formalized a customs union with the plan to strengthen the position of both countries in international markets. A customs union implies that the participating countries coordinate a common commercial policy to deal with non-member countries, meaning that frequently the countries involved in the customs union will share a common external tariff.

Leer en español: La unión hace la fuerza: el secreto de la economía del triángulo norte

In July of this year, El Salvador was integrated in this same customs union, which demonstrates a general intention of the countries of the northern triangle to work together in international markets.

The customs unions also allow the exchange between the member countries to be more dynamic, since the merchandise must not undergo bureaucratic procedures to pass from one member country to another, since they all share the same commercial standards. The newspaper El Heraldo de Honduras reported that last year, the implementation of the customs union between Guatemala and Honduras reduced the transit time of goods traveling between these two countries from 10 hours to just 15 minutes.

Regional power through integration

At the time, the customs union of Guatemala and Honduras grouped 52% of the Central American territory, 58% of its population and 73,000 million dollars, the combined GDP of both countries, which represented 46% of the GDP of the Central American region.

Now, with El Salvador in the mix, the GDP accumulated by the three countries integrated through the customs union jumped to 62.5%. According to commissioner, Eny Bautista of Coprisao, the main Honduran customs entity, 70% of Central America's trade will pass through the recently expanded customs union of the northern triangle.

Also read: Guatemala: One of the most unequal Latin American economies has the lowest unemployment rate

For these three countries, a union of this size brings considerable advantages in terms of trade. In the first place, it makes it more attractive to trade with any of these countries, since previously it was necessary to negotiate terms of trade individually with each one, a costly and expensive activity, in order to access a relatively small market: 14 million potential customers in Guatemala, 7 and a half million in Honduras and 6 million in El Salvador.

Now, with a single negotiation effort, other countries can access an already considerable market of almost 30 million people.

For this same reason, the customs union allows the member countries better conditions when negotiating in block, because together, the markets are attractive enough to merit terms of exchange that favor more countries within the customs union. The privileged condition offered by belonging to a considerable customs union can lead the countries of the northern triangle to advance comparatively within the region, solidifying their position as a joint commercial power in Central America.

The customs union of the northern triangle will enter into force in December this year, according to an announcement by the customs and commercial authorities of the three countries to Prensa Libre journalists.

The next step: agreements on migration

At the request of the United States government, the northern triangle’s governments have now set themselves the task of building joint migratory agreements that will allow stopping, or at least regular, the exodus of people to the United States, particularly through illegal channels, reports the EFE agency.

LatinAmerican Post | Pedro Bernal
Translated from “La unión hace la fuerza: el secreto de la economía del triángulo norte”

Top
We use cookies to improve our website. By continuing to use this website, you are giving consent to cookies being used. More details…