Economic relations between the European Union and Central America: building a bi-regional association. Jean Monnet/Robert Schuman Paper Series Vol. 9, No. 11, October 2009

Unlike the United States, the European Union (EU) did traditionally not have motivations to privilege its relations with Central America.1 The economic, political and geostrategic interests in the region are modest, as compared with those existing in other groups of less developed countries (LDCs) such as the so-called African, Caribbean and Pacific countries (ACP countries) and the Southern and Oriental Mediterranean countries (MEDA countries). Nevertheless, the threat of an internationalization of the Central American conflict after the victory of the Sandinista Front in Nicaragua in 1979, was able to attract EU’s attention towards the region and encourage a greater involvement in it. The EU took the initiative in institutionalizing a political dialogue –the San José Dialogue–,2 which has facilitated the signing of three multilateral cooperation agreements between the two regions in 1985, 1993 and 2003. The subscription of the last Political Dialogue and Cooperation Agreement in 2003 opened the possibility of strengthening the bi-regional relations, which had been losing dynamism since the end of the Central American conflict. The chosen way has been the negotiation of an Association Agreement (AA), including –in addition to political dialogue and cooperation – the establishment of a bi-regional free trade area. The results of this negotiation initiated in 2007, will condition the future of the relations between both regions. This paper aims at assessing the bi-regional economic relations in the context of the aforementioned negotiation. With this purpose, the paper is divided into four sections. The first two ones present respectively, the state of the trade and financial relations. After that, the third section analyzes the background to the negotiation of the AA and the major negotiation issues. The fourth and last section provides the main conclusions drawn from that analysis