News & Events | Costa Rica | CAFTA Ratification Would Expand U.S. Red Meat Access

Costa Rica

CAFTA Ratification Would Expand U.S. Red Meat Access

The ratification and implementation of the Central America Free Trade Agreement (CAFTA) in Costa Rica will be up to voters to decide in a referendum election scheduled for Oct. 7. Some Costa Ricans fear the agreement will hurt local producers and businesses by providing duty-free access to large U.S. companies.

“If 40 percent of the electorate votes in the referendum election, then the result will be binding,” said Katherine Nishiura, agricultural counselor for Costa Rica, Nicaragua and Panama. “If less than 40 percent of eligible voters turn out, then the National Assembly will have to ratify the agreement legislatively.”

The CAFTA ratification deadline is two years after the initial agreement ratification, so Costa Rica has until Mar. 1, 2008, since the agreement was first ratified by El Salvador on Mar. 1, 2006.

“Even if 40 percent of voters say ‘si’ (yes) to CAFTA, Costa Rica still has a lot of work to do,” said Nishiura. “Thirteen pieces of legislation required to implement CAFTA provisions have to be passed by the National Assembly and entered into law by the deadline date.”

USMEF Director, Central & South America and Global Strategic Coordination Ricardo Vernazza-Paganini expects CAFTA will be ratified by the deadline, which would mean increased access for U.S. beef and pork.

For beef, all U.S. inspected plants will be approved to export Costa Rica, replacing the current system of plant inspections done by veterinarians from Costa Rica. Under CAFTA, U.S. beef muscle meat graded as prime or choice will have duty-free access, replacing the current 18 percent duty.

“The beef muscle market is waiting to be developed,” said Vernazza-Paganini. “The economy in Costa Rica is growing and there are many expatriates living there who are loyal to U.S. products. Plus, many consumers are simply not aware of U.S. beef’s high quality.”

Costa Rica produces more beef than it consumes, but its beef is from the Cebu breed of cattle over 30 months of age, which produces a tougher product. U.S. beef has an advantage since it is grain fed and is derived from younger cattle.

The beef variety meat import market in Costa Rica is approximately 1,000 metric tons (mt) per year and Nicaragua currently has nearly 40 percent of the import market share. With U.S. beef variety meat entering Costa Rica duty free under CAFTA, the United States will have a good opportunity to displace Nicaragua as a main supplier of variety meat due to price competitiveness.

A sizable amount of pork is imported by Costa Rica for processing. Under CAFTA, the United States will have a 1,100 mt tariff-rate quota, which is similar to the annual amount Costa Rica has imported in the last three years. Currently, Canada has 85 percent of the import market for chilled/frozen pork destined for processing in Costa Rica since it has a 33 percent duty compared to a 45 percent duty currently applied to U.S. product. However, under CAFTA, the United States will have duty-free access up to 1,100 mt, giving it a 33 percent price advantage over Canada.

“Under CAFTA, the Costa Rica market for beef and pork will expand, but expansion will be gradual since domestic production is strong,” said Vernazza-Paganini. “Our goal is to use the market access to our advantage and to increase consumer awareness of the quality attributes of U.S. red meat products.”