The U.S. House of Representatives passed the Central American Free Trade Agre...

The U.S. House of Representatives passed the Central American Free Trade Agreement (CAFTA) early Thursday morning by a narrow margin, 217-215. CAFTA eliminates immediately, or over a period of time, nearly all tariffs and other trade barriers to U.S. beef and pork products sold in the region.

“Faced with high duties on beef and pork, U.S. producers have had encumbered access to this market for years. These duties are going to be ratcheted down over the next 15 years to zero,” USMEF President and CEO Philip M. Seng said.

CAFTA includes Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and the Dominican Republic. The Senate approved it last month and it now goes to the president for his signature.

“USMEF has identified major importers, retailers, and distributors in these markets and is very excited about increased access CAFTA allows to this region,” Seng said.

Improving economies in Guatemala, El Salvador and Costa Rica over the past 10 years have boosted per capita income in three of the largest Central American countries. As standard of living increases, foodservice and tourism expand to create new opportunities for niche markets. U.S. beef is finding its niche in five-star restaurants and large retail stores.

“As economies are appreciating and border protection is going down, we see a proliferation of big box stores like Costco, which are the main delivery systems for U.S. red meat,” Seng said. “This is extremely fortuitous for U.S. beef and pork.”

Rising incomes allow more consumers to purchase U.S. prime and choice beef cuts. Approximately 10 percent of monthly beef sales at PriceSmart retail chain in Guatemala are from the United States and consist of rib-eyes, strip steaks, top sirloin, outside skirt and hamburgers.

For the last five years Guatemala has been the most important market in the region for U.S. beef exports. Since 1999, annual U.S. beef and beef variety meat exports have been stable at around $4 million.

Cattle in Central America are grass fed and normally slaughtered at older ages, producing beef with differences in taste, tenderness and consistency from the young, grain-fed beef the United States produces.

Grain-fed beef has a higher degree of marbling that creates juiciness and tenderness absent from Central American beef. Although U.S. beef prices can be 50 to 170 percent higher than regional beef, its unique characteristics create a demand for it.

CAFTA increases affordability of U.S. beef by eliminating tariffs on U.S. prime and choice beef exports while other tariffs are reduced and phased out over the next 15 years. Prior to the agreement, tariffs on U.S. beef and beef variety meat were as high as 18 percent.

Costa Rica, the most developed economy in Central America, is the largest market for U.S. beef variety meat, with tongues and livers increasing in demand. Since 1999, annual beef and beef variety meat exports increased by 283 percent.

CAFTA immediately eliminates tariffs on bacon and most offal products while remaining tariffs on U.S. pork products are phased out over a 15-year period. Import tariffs for U.S. pork and pork variety meat ranged from 40 to 53 percent.

Guatemala has been the largest market for U.S. pork and pork variety meat in the last five years as exports increased 100 percent from $4.5 million up to $9 million.

Processed pork, such as bacon and chicarron (pork rind that has been deep fried twice) are popular items in Central American daily diets. Fresh pork is not widely consumed since it is perceived to be unsafe and unhealthy due to poor food safety conditions among domestic operations.

U.S. pork is perceived by consumers as safer and of higher quality than pork from regional sources – a perception USMEF will use to increase demand for U.S. pork.

The U.S. Meat Export Federation is the trade association responsible for developing international markets for the U.S. red meat industry and is funded by USDA, exporting companies, and the beef, pork, corn, sorghum and soybean checkoff programs.

– USMEF –