Central American Common Market

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PAPER NO. - 204
SPATIAL ECONOMIC SYSTEMS
IInd SEMESTER TERM PAPER ON
CENTRAL AMERICAN COMMON MARKET
Submitted By:
Aman Kumar Saini
Kamlesh Singh
Kirti Lohani
Md. Safir Ahmad
Neharika
Poumita Das
Purva Bhalla
Ram Kumar Dan
Ritu Gautam
Sheena Tangri
Tarini Mishra
Pradeep Kumar Sharma
CONTENTS
1. Introduction

2. Member States

3. Historical Background

4. Economic Background

5. Aims & Objectives

6. CACM Free Trade Agreement

7. Success & Failures in CACM

8. Revival of CACM

9. Economic Relations With Major Economic Blocs

10. Conclusion

INTRODUCTION
Central American Common Market (CACM), association of five Central American nations was formed to facilitate regional economic development through free trade and economic integration. Established by the General Treaty on Central American Economic Integration signed by Guatemala, Honduras, El Salvador, and Nicaragua in December 1960, its membership expanded to include Costa Rica in July 1962. It was one of four regional economic integration organizations created during the Latin American export boom of the 1960s. The CACM is headquartered in Guatemala City . The Central American Economic Council, the group’s chief policy-making organ, meets every three months. Composed of economic ministers, it coordinates regional economic integration. The council elects a secretary-general, who serves a three-year term. CACM, an organization formed by the developing countries of Central America for the purpose of gradually uniting the national economies of the member nations into one “common market.” The Central American countries embarked on economic integration before other developing countries, including those of Latin America. The General Treaty of Central American Economic Integration was concluded in Managua, Nicaragua, in 1960 and took effect on June 4, 1961. The member countries are Guatemala, Nicaragua, El Salvador, Honduras (prior to January 1971), and Costa Rica (from 1962 to September 1972 and since 1978). Under the treaty the CACM countries agreed to liberalize reciprocal trade gradually, to introduce a uniform Central American customs nomenclature, and to apply a uniform “common market” tariff to non-participating countries. The treaty forbids the subsidizing of exports and “disloyal competition,” considers the question of financing economic development on the basis of regional equality, establishes the procedure for transport and transit shipment, provides for uniform tax incentives for industrial development, and authorizes the free movement of workers and capital between the member countries. A uniform tariff was introduced in 1965. By the early 1970’s 98 percent of Central American customs items had been given free-trade status. The remaining 2 percent, however, accounted for one-fifth of the value of the intraregional trade turnover and included such commodities as petroleum products, wheat, sugar, coffee, electrical equipment, and vehicles. In 1977 the trade turnover within the CACM was valued at approximately $600 million, compared with $80 million in 1961. The share of intraregional exports in the overall exports of CACM countries rose from 7 percent to 28 percent during the same period. There was a significant growth of trade in finished industrial goods, especially those produced by industries processing non-agricultural raw materials. Integration is developing slowly in industry, agriculture, electric power generation, transportation, and communications. The first branches of industry to be integrated were those that were self-sufficient within the CACM. Measures have been taken to integrate enterprises for the production of tires, caustic soda, insecticides, fertilizers, plywood, and flour. The production of grain is being coordinated, and four plans have been drawn up for the unification of energy systems. In 1962 a system of accounting was introduced that was based on a common accounting...
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