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STRATEGY

Going South

Opportunity is in season as CAFTA opens up Central America.
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Many entrepreneurs have their eyes fixed on China, but it may make sense to look south as well as east. The recent passage of the Central American Free Trade Agreement gives the U.S. six new free-trade partners--Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and the Dominican Republic. The treaty immediately reduces or eliminates 80% of tariffs on U.S. exports--including IT, medical equipment, and telecommunications supplies--opening a new world of opportunity. And risk.

Guatemala

Population: 14 million

Imports from U.S.: $2.5 billion

The economy remains largely agricultural, though makers of textiles and auto supplies have recently set up shop. Chronic political instability and corruption remain big problems.

Honduras

Population: 6.5 million

Imports from U.S.: $2.8 billion

U.S. textile manufacturers take advantage of cheap labor by exporting yarn and cotton and re-importing finished products. U.S. franchises like Holiday Inn are growing, despite severe violent crime in urban areas.

Dominican Republic

Population: 8.8 million

Imports from U.S.: $4.3 billion

Home to the region's largest printing and publishing industry, the D.R. has high demand for paper, ink, and printing machinery--but the power grid suffers frequent blackouts.

El Salvador

Population: 6.4 million

Imports from U.S.: $2.3 billion

In an effort to bring electricity to rural areas, the country is investing in solar, hydroelectric, and geothermal energy. A sluggish judicial system favors national interests in business disputes.

Costa Rica

Population: 4 million

Imports from U.S.: $3.3 billion

With a robust communications network and an educated work force (the literacy rate is 96%), Costa Rica is a call center substitute for India. E-commerce also offers promise, though the country has a weak record on enforcing intellectual property rights.

Nicaragua

Population: 5.5 million

Imports from U.S.: $503 million

Predominately rural with a largely poor and unskilled work force, Nicaragua is expanding its tourism industry, promoting "eco-lodges," such as Morgan's Rock on the Pacific Coast.

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Last updated: Oct 1, 2005

DARREN DAHL

Darren Dahl is a contributing editor at Inc. magazine, which he has written for since 2004. He also works as a collaborative writer and editor and has partnered with several high-profile authors. Dahl lives in Asheville, North Carolina.




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