A trade agreement signed last year between the EU and three Central American states came into effect on Thursday (1st August), coinciding with anther agreement signed with Colombia and Peru, also in 2012.

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The Central American deal, signed between the EU on one side and Honduras, Nicaragua and Panama on the other, will open up markets and create a "stable business and investment relation" between the partners, as well as promoting sustainable development in the region, EU officials said on Thursday.

EU Trade Commissioner Karel De Gucht commented, "This Association Agreement is another proof of our interest and involvement in Central America. It will further cement our strategic alliance based on common values and mutual respect. The benefits are not just economic: as European unification has shown, economic integration has a positive impact on political integration, so this agreement should bring more stability to the region. I am glad that Honduras, Nicaragua and Panama are now taking a step in this direction and I am looking forward to seeing other partners in the region joining in very soon."

They said the Central American states are likely to feel more tangible benefits of the agreement due to the relative size of the economies involved (Central American GDP represents less than 1 percent of the European GDP.) The EU is already Central America's second largest trading partner.

The Central American countries involved in the deal export mostly agricultural and fisheries products (principally coffee, bananas, pineapples, sugar and seafood) as well as some industrial products (microchips, medical and optical instruments).

The agreement signed with Andean states Columbia and Peru has been tipped to save exporters €500m each year by the EU executive. EU exports will mostly be made up of cars, luxury foods and items and chemicals, in return for agricultural produce and minerals.   

However, the trade talks have not been without controversy, the prospect of trade liberalisation with Columbia, where labour abuses are rife and right-wing death squads have killed large numbers of trade unionists, has caused serious concern within Europe. The EU has assured it will endeavour to protect human rights through the deal, and said trade unionists and human rights NGOs will be involved in monitoring the deal.

The trade part of the agreements will open up markets for goods, public procurement, services and investment on both sides, while provisions negotiated alongside will guarantee the protection of human rights, commitments on labour standards and environmental protection to underpin sustainable development, Commission officials said.