At the beginning of August, South Korea ratified the Free Trade Agreement (FTA) with El Salvador, Costa Rica, Honduras, Nicaragua and Panama; all indications are that the FTA will be effective from October 1st. Korea is the first Asian nation to reach an FTA with the five countries of the Central American region, which will expand its trade network throughout the Americas.
The trade instrument, in addition to opening the markets for services and investment, will eliminate 95% of the encumbrances in the exchange of goods. It will also provide adequate and effective protection, enforce intellectual property rights and create effective procedures for the implementation and enforcement of the Treaty for joint administration and dispute settlement.
For the Central American countries, the treaty will give greater facilities for commercial income to a market of more than 50 million people with per capita incomes above $33,000, which defines South Korea as the fourth largest economy in Asia. With this FTA, Korea hopes to grant duty-free market access for about 80.1% of Honduras’ trade, as well as timely elimination of Korea’s immediate tariff on coffee, sugar, electrical harnesses and apparel.
Honduran exports to that market last year totaled $35.8 million, which represented a year-on-year increase of 30%. The Embassy of the Republic of Korea and the Secretary of Economic Development plan to develop socialization days to expose the scope of the FTA to businessmen, so that they can take advantage of all the benefits.
It is expected that the Treaty between South Korea and the five Central American countries, upon entering into force in Honduras, will provide more Korean investment to the country and that this will be beyond the textile sector, with which Honduras already has 26 Korean companies, most of them in this sector and with facilities in the north, and this may bring more jobs in Honduras.
Managing Partner
García & Bodán
Honduras