While shuttled around in CRROBS vehicles you may have seen graffiti with the initials TLC and wondered what it means and why is it there. TLC stands for Tratado de Libre Comercio, in English: Free Trade Agreement, and the graffiti you see is referring to the October 2007 national referendum to see if Costa Rica would support the Central American Free Trade Agreement - CAFTA to include the United States. Not only did this spawn graffiti for both sides - si and no - but there were huge protests and political debates that captured international attention. Locally, this was the first time that a TLC was brought into the limelight and into the minds of every Costa Rican - mainly because it was a hotly debated issue leading up to the 2006 Presidential Elections, which divided the population.

Steps of Economic Integration (and examples):

1. Preferential Trading Area (the Andean Community)


2. Free Trade Area (Central European Free Trade Agreement)


3. Customs Union (MERCOSUR)


4. Common Market (CARICOM)


5. Economic & Monetary Union (Eurozone)


6. Complete Economic Integration (closest to it is Benelux)

History of Economic Integration in Costa Rica

In 1963 Costa Rica joined the already established CACM – Central American Common Market, which called for much more integration than just a TLC, including economic and political unification. CACM collapsed after a war between Honduras and El Salvador, but was reinstated in 1991, and since has succeeded in removing duties on most products moving among the member countries. Furthermore, CACM has largely unified external tariffs and increased trade within the member nations, though political unification has never been put forth. On April 5, 1994 Costa Rica signed a TLC with Mexico, which saw Costa Rica provide less than 20% of Central American products exported to Mexico in 1995 to almost 70% in 2005, as Costa Rica replaced Guatemala, Mexico’s neighbor, as Mexico’s top Central American importer.

In 1994 at the Summit of the Americas in Miami the Free Trade Area of the Americas (FTAA) was first discussed, as recent world economic trends - European Union was formed in 1993 - called for further integration. But not until the 2001 Quebec Summit did the FTAA become public knowledge and nations began looking toward hemispheric integration. On April 23, 2001 Costa Rica signed a TLC with Canada (CCRFTA) with the goals of creating economic development opportunities, eliminating trade barriers, and promoting fair competition. In the first 3 years of the CCRFTA, trade increased 36% between the two countries from $324million to $440million, and Costa Rican pineapples were selling in Canadian supermarkets. On February 14, 2002 Costa Rica signed a TLC with Chile and Chilean wine now dominates Costa Rican supermarkets; and on March 9, 2004 Costa Rica signed with CARICOM as both sides looked to duplicate those same results. In total, Costa Rica has trade agreements with 24 different countries prior to the one proposed with the US, that has caused so much debate and graffiti.

Costa Rica and CAFTA

In 2002 the US Congress gave the Bush Administration “fast track” authority to negotiate CAFTA, a free trade agreement between the CACM and the US. Negotiations began in January 2003, and agreement was reached with El Salvador, Guatemala, Honduras, and Nicaragua on December 17, 2003 and with Costa Rica on January 25, 2004. That same month negotiations began with the Dominican Republic to join CAFTA and on May 28, 2004 the CACM nations signed the agreement. On March 1, 2006 El Salvador led the way as CAFTA went into effect for that country, after completing all necessary steps; Honduras and Nicaragua fully implemented the agreement on April 1, 2006 and Guatemala followed on July 1, 2006. Fifteen months later, in a referendum, the voters of Costa Rica narrowly backed the TLC, with a 51.6% “si” vote.

The goal of the agreement is the creation of a free trade area where tariffs on about 80% of US exports to the CACM will be eliminated and the rest will be phased out over a decade. CACM exports to the US are already duty-free due to the US Government’s Caribbean Basin Initiative. The agreement has a much broader scope than just the elimination of trade taxes, and includes intellectual property rights, labor standards, environmental protection, transparency, and investment and financial service rights. These additional topics require all countries to ratify or accede to several international agreements, laws, organizations, and existing standards. With open markets to US manufacturers, there is the possibility that CACM nations will be able to modernize their economies much faster, create worker rights protections that will enforce and improve labor laws, and improve environmental standards.

However, not everyone has this same belief, and opposition for CAFTA is strong as many believe that TLCs push ahead the corporate globalization model at the peril of labor and environmental standards. Furthermore CAFTA promotes privatization and deregulation of key public services, which politicians used to feed the fears of citizens who are already familiar with US dominance in their markets. There is a general fear that this US product dominance in the CACM will eventually lead to US product dependency, which would put more power into the hands of US companies and potentially lead to increased poverty. Greater fears for local businesses that cannot compete with big companies became present as examples were stated of independent farmers throughout the US, Canada, and Mexico being wiped out as farmland shifted into the hands of huge agribusiness, after NAFTA was put into effect.

Currently Costa Rica is negotiating other TLCs with the EU, Peru, Colombia, and China – if you were making the decision would you sign them?

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