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SMALL BUSINESS SUCCESS
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Once the ultimate destination spot
or busy executives interested inadventure or a relaxing time, Central America and the Dominican Republic(Caribbean) are rapidly becoming the hot new hubs or international ree trade. Withmore than 47 million people and 80 percent o goods rom the U.S. now imported tothis region duty-ree, this area is an economic orce to be reckoned with. Here’s acloser look at why and how a new trade agreement is propelling this region to getback its global groove. The Central America-Dominican Republic-United States Free Trade Agreement(CAFTA-DR), signed on August 5, 2004, is a trade agreement between the UnitedStates and the countries o Costa Rica, Dominican Republic, El Salvador, Guatemala,Honduras and Nicaragua. It is designed to eliminate tarifs and trade barriers, and toexpand regional opportunities or workers, manuacturers, consumers, armers,ranchers and service providers in all these countries. Like the North America Free Trade Agreement (NAFTA) did or the United States, Canada and Mexico, CAFTA-DR ofers new hope or accessing emerging markets, reducing poverty, securingdemocracy, strengthening trade, building up economies, stabilizing strategic interestsand creating jobs.
Benefits Abound
“American small businesses operating successully in [the CAFTA-DR] markets areagood test or market success urther aeld, as these economies are physically closeand plugged in economically and nancially to the United States,” says AntonEdmunds, executive director o the Washington, DC-based group Caribbean CentralAmerican Action (CCAA; c-caa.org). “Visas are not required or U.S. citizens [totravel there], and CAFTA-DR-based businesses are actively seeking partners andinvestments rom the United States.”According to the U.S. Census Bureau and the Bureau o Economic Analysis, U.S.exports increased by 13.1 percent to $1.649 billion in the 12 months ending January2008. Imports also increased 6.8 percent to $2.359 billion, and the trade decit nar-rowed 5.5 percent during the same time period.CAFTA-DR immediately creates the second-largest U.S. export market to Latin
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Doing business in Central America andthe Dominican Republic
BY LAUREL DELANEY
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SMALL BUSINESS SUCCESS
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America, behind only Mexico and biggerthan trade with Brazil, and is the 13th-largest U.S. export market in the world.Just or perspective: America is theworld’s No. 1 exporter. The most recentfgures indicate that in 2007, the UnitedStates exported $22.4 billion in goods tothe fve Central American countries andthe Dominican Republic–a 22 percentincrease compared to the prior year.Even as the U.S. struggles with a marketslowdown, this region is still poised orsteady growth throughout 2008. TomO’Malley, vice president o Air Cargo,UPS Americas, notes that CAFTA-DReliminates oreign taxes on exports to theregion, saving more than $1 billion annu-ally or U.S. exporters.
The China and India Factor
China’s and India’s growing promi-nence as cheap and plentiul producers iscreating global shortages in many com-modities. Many areas in the U.S. areeeling the crunch o competing againstthese two powerul countries—or com-panies, i you will—when asked to bidon projects ranging rom abrics to pack-aging. China, in particular, appears tohave a primary competitive advantagewhen it comes to making most compo-nents o apparel and other textile prod-ucts.One o the major benefts o CAFTA-DR is to help that region cope with theindustrial downward spiral resultingrom China’s increasing industrializa-tion and its dominance in the textile andapparel industries. Hence, CAFTA-DRhas become a sustaining orce in theeconomies o these six countries.
Easy Street
Is qualiying complex? Actually, it is theopposite. Companies need only generatesupporting documentation, including acertifcation stating that your productmeets the relevant origin criterion o theAgreement, to qualiy. For example, i goods contain only U.S. or CentralAmerican-originating inputs, they areeligible.I you are not sure where your productalls, a global shipper such as UPS canhelp determine prequalifcation by ask-ing the right questions. Since UPSalready has a large global suite o cus-tomer solutions ranging rom packagesto reight, customs clearance and tech-nology, they can simpliy the entiretransport process. And remember,though a shipper can help you, it is stillyour responsibility, as the importer, touse and submit a written claim as proo to customs authorities o preerentialtreatment.From entrepreneurial artisans to per-sonal businesses, globalization has cre-ated a whirlwind eect or many smallbusinesses, turning them upside down intheir local neighborhoods, and landingthem wobbly on one oot without anysense o oreign market direction. Theear o closing up shop due to disinte-grating local sales and profts is enougho an incentive or many small business-es to move into uncomortable interna-
To successfully do business in the CAFTA-DR region, it’simportant to follow these tips:
1. LOOK BEFORE YOU LEAP.
You need to do your research and become acquainted withthe country. If possible, spend a month in the region getting to know the locals.
2. BE FLEXIBLE.
If you don’t know how the markets operate, find out–fast. Stay sensi-tive to the cultural values of the area. If things appear one way today and another to-morrow, shift gears and work with conditions as you find them. Flexibility mixed witha little bit of perseverance will give you strength and confidence to carry you throughto even bolder efforts in the future.
3. LINK UP WITH APPROPRIATE IN-COUNTRY U.S. AGENCIES.
“Join mailing lists andmembership rolls of American Chambers of Commerce, and meet with U.S. commer-cial officers at the embassy.That way, you know you are meeting and plugged intoa network that is interested in helping you succeed,” says Anton Edmunds, executivedirector of the Washington, DC-based group Caribbean Central American Action(CCAA).
4. TO LEARN THE ROPES,
hire local experts to give you advice or have someone on yourteam spend serious time in the country, well in advance. Experts might tell you thatthere is no market under CAFTA-DR for dog food—and they could be wrong. Listento your gut, and if you believe strongly in your vision, go for it. But checking your gutinstincts with someone on your team who has spent serious time in the region willbe integral to your marketing success.
5. CHECK MARKET DEMOGRAPHICS
in advance to ensure customers have the moneyto buy your product. “Do your own extensive market research and analysis,” says Ed-munds.
6. “WHEN RE-IMPORTING PRODUCT INTO THE UNITED STATES,
do not underestimatethe importance of a good [third-party logistics] provider who has knowledge ofCAFTA-DR requirements,” says Global Product president Rebecca Herwick.
7. “PROVIDE MORE SHIPMENT INFORMATION
earlier in the process so customs canperform security screening to efficiently enable the process,” says Tom O’Malley,vice president of Air Cargo, UPS Americas.
8. TAKE YOUR TIME UNDERSTANDING
and entering the market. Do it right the first timeto avoid costly and time-consuming mistakes. “While the region is indeed open to newinvestment and business opportunities, it is worthwhile to do the appropriate researchon competitors, either local or international, and recognize that issues such as trans-portation logistics can impact one’s success,” says Edmunds.
9. GET HELP FROM THE U.S. EXPORT-IMPORT BANK
(exim.gov), which offers insur-ance policies to protect small businesses against the risks of dealing with foreign buy-ers. Minimize your overhead and financial exposure–especially at the beginning.
10. RECOGNIZE THAT THE REGION IS RELATIVELY SOPHISTICATED.
“Government [em-ployees], as well as the private sector, are well educated and traveled,” says Edmunds.“Treat them with respect, even if you are dissatisfied with the pace of action.”
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