WorldCity, DR-CAFTA nations help propel Miami growth | Connecting Local Business Leaders To The Global Economy

DR-CAFTA nations help propel Miami growth

September 15th, 2006

First semester trade results are in and the news is good.

Miami saw its trade jump to more than $35 billion for the first half of 2006. That’s an 11 percent spike compared with 2005, according to WorldCity analysis of U.S. Census data.

Commerce with the countries covered by the U.S.-Dominican Republic-Central America Free Trade Agreement contributed to the gains.

If the fast pace continues for the rest of the year, South Florida could near or even exceed a $70 billion trade total for the first time. Along the way, its surplus will grow.

Already it was $2.9 billion at the end of June, which is more than all of 2005, when Miami galloped to a $65.9 billion trade total and closed the year with a surplus of $2.2 billion.

Rank	Total Trade	June 2006 YTD	June 2005 YTD	Dollar Change	Percent Change
	World Total	$35,066,617,164	$31,550,801,787	$3,515,815,377	11.14%
1	Brazil	$4,277,577,531	$4,469,317,739	$(191,740,208)	-4.29%
2	Venezuela	$2,363,457,319	$1,941,903,327	$421,553,992	21.71%
3	Colombia	$2,202,402,039	$1,955,498,566	$246,903,473	12.63%
4	Dominican Republic	$2,080,710,726	$2,011,411,365	$69,299,361	3.45%
5	Costa Rica	$2,007,015,722	$1,655,908,126	$351,107,596	21.20%
6	China	$1,871,673,266	$1,580,722,330	$290,950,936	18.41%
7	Honduras	$1,729,464,377	$1,616,236,468	$113,227,909	7.01%
8	Chile	$1,212,182,221	$952,074,074	$260,108,147	27.32%
9	Guatemala	$1,120,557,875	$1,113,115,021	$7,442,854	0.67%
10	El Salvador	$910,593,137	$881,981,481	$28,611,656	3.24%
11	United Kingdom	$901,717,918	$778,438,582	$123,279,336	15.84%
12	Argentina	$786,886,679	$682,769,058	$104,117,621	15.25%
13	Peru	$731,067,123	$616,209,702	$114,857,421	18.64%
14	Italy	$705,747,429	$611,945,548	$93,801,881	15.33%
15	France	$704,201,492	$677,116,763	$27,084,729	4.00%
16	Mexico	$681,431,153	$607,568,605	$73,862,548	12.16%
17	Ecuador	$642,989,091	$646,128,470	$(3,139,379)	-0.49%
18	Bahamas	$623,334,269	$562,439,180	$60,895,089	10.83%
19	Netherlands	$600,738,392	$548,688,233	$52,050,159	9.49%
20	Germany	$528,922,337	$447,704,694	$81,217,643	18.14%
21	Panama	$480,470,397	$436,508,032	$43,962,365	10.07%
22	Haiti	$476,940,132	$392,714,190	$84,225,942	21.45%
23	Japan	$472,698,908	$442,795,968	$29,902,940	6.75%
24	Nicaragua	$404,749,544	$324,746,175	$80,003,369	24.64%
25	Trinidad and Tobago	$404,300,892	$281,836,379	$122,464,513	43.45%

Although it is too soon to feel the effects of DR-CAFTA, the six nations involved in the free trade pact with the United States posted across the board gains in the first six months of the year. As a bloc, they account for about 24 percent of all South Florida’s trade.

The Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua and Costa Rica are signatories to DR-CAFTA, although Costa Rica has not yet ratified the agreement. The pact entered into force for El Salvador on March 1, for Honduras and Nicaragua on April 1 and for Guatemala on July 1.

“I can’t predict how much more business we will have, but I’m guessing we will see continuous volumes of trade in 2007 once the Dominican Republic and, hopefully, Costa Rica join CAFTA. It will be very healthy for this region,” said Jos Perez-Jones, senior vice president of Seaboard Marine and an instrumental player in the effort to push the agreement through Congress last year.

In the first six months of 2006, Central America’s biggest trade jump 24.6 percent came from Nicaragua. Trade between Nicaragua and the United States had slowed slightly in 2005 to 14 percent, for an annual total of $1.8 billion, thanks to apparel-related commerce. That had followed a robust 2004 that saw overall trade gain 24.4 percent with imports rising 29 percent and exports up 18 percent.

Recently, Cone Denim, part of International Textile Group, announced it would open a $90 million manufacturing plant in Managua. It will be the largest facility ever constructed in Nicaragua. Because of tariff relief under the Caribbean Basin Initiative and local incentives, including tax breaks, there are now about 100 textile and apparel companies operating in the country. In 1992, there were just five, according to ProNicaragua, a public-private economic development entity.

Some experts believe that once the pact is implemented, Nicaragua has the most to gain because it has lower wages than most Central American countries, putting it in a better position to fend off competition from Chinese products. It also enjoys special exemptions for the next 10 years that allow it to use fabric with components sourced from outside the CAFTA countries. However, rising oil prices have already sparked inflation in the country, which is an oil importer.

Seaboard’s Perez-Jones was also apprehensive about the Nicaraguan presidential elections in November. Daniel Ortega, the leftist Sandinista leader who ruled the country from 1985 to 1990, is seeking another shot at the presidency. Recent opinion polls have put him in a dead heat with former banker Eduardo Montealegre of the Nicaraguan Liberal Alliance.

“We are kind of concerned with the possibility of Ortega winning these elections,” Perez-Jones said. “It could jeopardize business involvement and expansion of U.S. companies in Central America. It could have a ripple effect in the entire Central American region.”

Rank	Exports	June 2006 YTD	June 2005 YTD	Dollar Change	Percent Change
	Total, All Exports	$18,979,511,298	$16,335,691,376	$2,643,819,922	16.18%
1	Computer parts	$1,272,802,089	$943,610,544	$329,191,545	34.89%
2	Computers	$1,258,463,475	$1,026,468,860	$231,994,615	22.60%
3	Transmission apparatus for cellular phones	$872,203,317	$791,145,473	$81,057,844	10.25%
4	Electronic integrated circuits	$819,805,371	$673,058,838	$146,746,533	21.80%
5	Aircraft parts	$719,766,000	$506,771,183	$212,994,817	42.03%
6	Regional jet parts	$664,406,190	$666,842,499	($2,436,309)	-0.37%
7	Medical instruments for surgeons, dentists, vets	$369,947,024	$287,629,497	$82,317,527	28.62%
8	Motor vehicles for transporting people	$354,313,802	$349,719,522	$4,594,280	1.31%
9	Machinery parts	$351,689,261	$291,890,085	$59,799,176	20.49%
10	Electric equipment for line telephony	$349,690,988	$362,108,300	($12,417,312)	-3.43%
11	Medicine	$330,609,046	$289,064,792	$41,544,254	14.37%
12	Exports of charitable items, returned as imports	$246,249,561	$92,751,362	$153,498,199	165.49%
13	Motor vehicle parts	$240,097,601	$207,679,710	$32,417,891	15.61%
14	Self-propelled heavy construction machinery	$207,519,809	$104,048,067	$103,471,742	99.45%
15	Cotton , 85% cotton	$205,350,448	$154,896,436	$50,454,012	32.57%
16	Parts for cellular communications	$189,027,988	$127,200,400	$61,827,588	48.61%
17	Yachts and other boats	$179,163,712	$171,783,501	$7,380,211	4.30%
18	Aircraft	$171,121,319	$201,170,776	($30,049,457)	-14.94%
19	Misc. knitted or crocheted fabrics	$161,564,361	$189,466,312	($27,901,951)	-14.73%
20	Jewelry, parts	$157,236,291	$178,051,608	($20,815,317)	-11.69%
21	Electrical supplies, apparatus, less than 1000V	$129,535,783	$88,029,285	$41,506,498	47.15%
22	T-shirts, tank tops, knit or crocheted	$128,534,703	$122,254,517	$6,280,186	5.14%
23	Drawing, measuring instruments, parts	$123,017,107	$83,491,931	$39,525,176	47.34%
24	Medical equipment for physicals, including anal exams	$122,584,416	$101,442,913	$21,141,503	20.84%
25	Recorded music	$122,338,585	$87,826,254	$34,512,331	39.30%

Costa Rica also saw its trade with South Florida rise double digits in the first six months of the year. It grew more than 21 percent to push just past the $2 billion mark.

Although Nicaragua and Costa Rica emerged as the fastest growing of the DR-CAFTA countries in the first semester of 2006, the Dominican Republic is South Florida’s top trader in the bloc. In the first six months of this year, the Miami Customs District and the Caribbean nation exchanged $2.1 billion in products, mostly apparel. That was a 3.4 percent gain from the first six months of 2005.

While the Dominican Republic and the CAFTA countries saw first semester gains in their trade with the United States, that was not the case in 2005. Most of the countries posted much smaller, single-digit increases and El Salvador saw its trade fall 1.1 percent. From January to June 2006, El Salvador’s trade with South Florida rose 3.2 percent.

Central American countries have been struggling against competition from China in the apparel sector. Trade experts says this not only hurts the volume and value of shipments to the United States from those nearby nations, but it also cuts into U.S. exports destined to supply Central America’s textile sector.

“If there’s not a viable and flexible textile sector in the Americas the U.S. textile industry will lose its market for fabric,” Jonathan Fee, a partner at law firm Alston & Bird in Washington, D.C., said at a recent trade discussion hosted by the Council of the Americas (see “Elusive agreements,” p. 39).

China’s trade with the Miami Customs District in the first semester rose 18 percent with imports far outweighing exports, leaving a $1.6 billion trade imbalance

Despite that, South Florida’s overall trade surplus for the first six months of the year was up. And the robust trade set the stage for Miami to step over Cleveland to become the nation’s 12th most important Customs district. Miami had been No. 11 until 2004, when it slipped two spots.

Rank	Imports	June 2006 YTD	June 2005 YTD	Dollar change	Percent Change
	Total, All Imports	$16,087,105,866	$15,215,110,411	$871,995,455	5.73%
1	Oil, not crude	$2,036,938,190	$1,108,598,791	$928,339,399	83.74%
2	T-shirts, tank tops, knit or crocheted	$626,708,687	$598,799,525	$27,909,162	4.66%
3	Transmission apparatus for cellular phones	$584,127,045	$505,000,040	$79,127,005	15.67%
4	Sweaters, pullovers, vest, knit or crocheted	$560,537,799	$588,055,855	$(27,518,056)	-4.68%
5	Exports of repaired imports Imports of returned exports	$548,928,374	$660,026,500	$(111,098,126)	-16.83%
6	Men's or boys' suits, not knit	$453,776,501	$632,753,665	$(178,977,164)	-28.29%
7	Aircraft	$441,778,128	$1,023,757,713	$(581,979,585)	-56.85%
8	Fish fillets, chilled or frozen	$372,919,536	$309,693,089	$63,226,447	20.42%
9	Fresh-cut flowers	$356,788,819	$343,069,518	$13,719,301	4.00%
10	Computers	$328,353,701	$320,855,671	$7,498,030	2.34%
11	Medical instruments for surgeons, dentists, vets	$311,161,953	$283,115,108	$28,046,845	9.91%
12	Jewelry, parts	$255,997,031	$229,645,035	$26,351,996	11.48%
13	Women's or girls' suits, not knit	$242,739,511	$334,602,505	$(91,862,994)	-27.45%
14	Yachts and other boats	$241,791,589	$215,382,026	$26,409,563	12.26%
15	Computer parts	$231,137,413	$213,807,060	$17,330,353	8.11%
16	Scrap of precious metal	$206,841,064	$55,352,008	$151,489,056	273.68%
17	Regional jet parts	$191,386,481	$130,965,037	$60,421,444	46.14%
18	Gold	$184,194,120	$231,688,224	$(47,494,104)	-20.50%
19	Perfumes	$178,076,945	$168,498,630	$9,578,315	5.68%
20	Furniture, parts	$167,917,438	$182,897,867	$(14,980,429)	-8.19%
21	Stone monuments, similar artwork	$162,932,436	$140,200,333	$22,732,103	16.21%
22	Rum, gin, vodka, other liquors	$162,078,526	$146,087,576	$15,990,950	10.95%
23	Live crustaceans	$155,990,216	$169,174,724	$(13,184,508)	-7.79%
24	Men's or boys' underwear	$153,871,102	$175,964,206	$(22,093,104)	-12.56%
25	Pantyhose, socks	$148,408,578	$77,015,521	$71,393,057	92.70%

In other trade highlights, Chile made the biggest leap among South Florida traders. The South American country and the Miami Customs District posted a 27.3 percent jump in trade.

Last year Venezuela moved up four spots on South Florida’s roster to become the Customs district’s second-most-important trading partner behind Brazil. In the first six months of 2006, that dramatic growth continued as trade between Venezuela and South Florida rose 21.7 percent to nearly $2.4 billion largely as a result of a 24 percent leap in exports to the oil rich nation.

Although the U.S. government and Venezuela President Hugo Chvez continue their political sparring, trade between the two nations is skyrocketing. For the United States, the growth is fueled by the increasing value of petroleum imports from Venezuela. For South Florida, however, exports are driving the up-tick.

The ongoing oil windfall has boosted Venezuela’s economy and restored consumer confidence. The Venezuelan government is buying construction equipment shipped from South Florida while Venezuelan residents are clamoring for U.S.-made consumer products.

Ambler Moss, in the global trade practice group of law firm Greenberg and Traurig in Miami, described the U.S.-Venezuela relationship as “two married people who really hate each other but couldn’t possibly afford to get divorced.”