Implementing the TIM in Central America

MAY 2010 Public Disclosure Authorized ABOUT THE AUTHORS Automating the Control of Goods in ALVARO SARMIENTO International Transit: Implementing the TIM in is the Project Coordinator for the TIM in Central America. He previously served as Counselor Central America to the General Secretary of the Central American Economic Integration Agency and holds a Regional Initiatives to Advance the measures and to give priority to economic Masters in Economics from Integration Process geography approaches and regional planning UFM Guatemala. as a means of deepening integration at the In recent years, the Latin America and the regional level.2 KRISTA LUCENTI Caribbean (LAC) Region has undergone a is a consultant in the process of commercial and political integration Integration and Trade Sector of Speeding Up the Delivery of Goods the IDB, specializing in freight that has increased connectivity and encouraged through Central America logistics and trade facilitation. physical integration initiatives. In 2008, the Public Disclosure Authorized Prior to joining the IDB, Krista Mesoamerica Project—an initiative that In 2008, the Integration and Trade Sector (INT) worked in the Geneva office of includes nine countries in Central America, of the Inter-American Development Bank the World Bank after receiving her PhD in economics from the from Mexico to Colombia (and including the (IDB) designed an innovative project in Central University of Bern, Switzer- Dominican Republic)—was expanded from America called International Goods in Transit land. the original Plan Puebla Panama (established (or TIM, its Spanish acronym), which has in 2001) in an effort to integrate the Central dramatically improved the speed and AURELIO GARCIA American Corridor and Mexico through efficiency of border clearance for goods in is a consultant in the infrastructure and social projects. transit. The TIM is an electronic system for Integration and Trade Sector of the IDB, specializing in customs managing and controlling the movement of modernization projects. Prior More than 95 percent of commercial goods in goods in transit that harmonizes previously to joining the Bank, Aurelio the Mesoamerican region—approximately $6 cumbersome procedures into a single worked as a trade promotion billion—are transported overland using the electronic document, consolidating officer for the government of Spain. He holds an MBA from Pacific Corridor. This highway, which runs from information and certifications from various The George Washington Puebla, Mexico, to Panama, crosses six national authorities including migration, customs, and University. borders, which means it is destined to become health/agriculture. Public Disclosure Authorized the backbone of commercial trade in Mesoamerica. Moreover, it will cut the distance The project is based on three main pillars: (1) from Panama to Mexico by approximately 300 Process reengineering: TIM harmonizes kilometers. However, the right conditions multiple paper-based declarations into a must be created for this to happen, inasmuch unique and comprehensive electronic as the infrastructure at the border crossings document that gathers all data needed by along the Pacific Corridor is unreliable and customs, migration, and phytosanitary inefficient, and the facilities are substandard. agencies; (2) Information technology: TIM These conditions are amplified by limited connects the Intranet systems of all agencies logistical and operational planning at the participating in the project. It includes state- borders, lack of information, and lack of of-the-art risk analysis and cargo control regulatory harmonization.1 systems; (3) Cooperation: TIM improves cooperation within the country and between The initiative seeks to move beyond the the different agencies operating at border physical integration of its participating crossings in the Mesoamerican Region. countries and into areas of trade facilitation Public Disclosure Authorized and increased investment in social services, The TIM is supported by the IDB through a $2 such as health, education, and environmental million nonreimbursable technical coopera- protection. The project now coordinates more tion that financed system design and process than 100 regional integration projects worth mapping as well as implementation in one $8 billion with the objective of increasing border crossing (El Amatillo) between intraregional trade through trade facilitation Honduras and El Salvador. For the second 1 IDB and WTO (2009) “Implementing Aid for Trade in Latin Ameri- 2 See Guerrero, Lucenti and Galarza (2009) “Trade Logistics and ca and the Caribbean, The National and Regional Review Meetings Regional Integration in Latin America & the Caribbean,” IDB 2008–2009.” http://idbdocs.iadb.org/wsdocs/getdocument.asp Working Paper 148. www.iadb.org SMARTLESSONS — MAY 2010 1 Single Customs Procedure for Goods in International Transit phase of the project, the Bank is providing an additional contributes to a friendly environment based on mutual €950,000 to extend the project to other border crossings in trust. Likewise, the executing agency must work closely Mexico, Guatemala, El Salvador, Honduras, Nicaragua, with governments to ensure sustained interest and Costa Rica, and Panama. commitment. For example, in the case of the TIM, the IDB supported the decision of governments to include From 62 Minutes to 8 the project as one of the priorities highlighted in the Joint Declaration of Chiefs of State at the Presidential Partially based on the highly successful European system, Summit of Tuxtla in 2008. In this respect, the choice of the TIM allows goods in transit to move smoothly across project coordinator is also critical to the success of the borders to their final destination, rather than be delayed by project. In the case of the IDB, the senior consultant redundant processes in transit countries, including multiple (Alvaro Sarmiento) had experience working in the forms and certifications—a process that used to take an region, had very good relationships with top average of 62 minutes per border crossing. Since its government officials, and had the support and implementation at El Amatillo, the TIM has reduced the confidence of the countries and of the IDB to lead the crossing time for goods in transit to an average of eight project with minimal involvement from headquarters. minutes and decreased the number of documents This is often difficult to accomplish when international submitted. This greatly improves the predictability and consultants or firms are hired to undertake lengthy, quality of the risk analysis of the goods being transported, complicated, and politically sensitive regional activities. reduces waiting times drastically, ensures traceability and predictability of goods, improves private-sector • Given the number of countries and agencies involved competitiveness, optimizes revenue collection, and reduces in regional activities, rationalization of actors is the the environmental footprint of transportation services. first step in ensuring progress. In the case of the TIM, Following TIM’s implementation in El Amatillo, cargo multiple agencies with heterogeneous characteristics passage times were reduced by 90 percent, tax and quasi- and mandates created competition and conflict that tax oversight has improved, and the traceability and security of operations have been strengthened. What Has the Implementation of the TIM Taught Us? The results of the implementation of the TIM in El Amatillo are promising, and the IDB is optimistic that the returns on investment for the second stage of the project will be fruitful. That notwithstanding, the IDB’s experience in the design and implementation of the TIM is relevant for identifying a few best practices, both for the implementing countries and for the executing agencies: • Political support for harmonizing regulations and processes is critical. Real and full commitment from the Source: IDB highest authorities in every participating country 2 SMARTLESSONS — MAY 2010 were resolved only by a clear outline of upgrades. Power and speed are essential, the legal and institutional character of but more important is the system’s ability the implementation mechanism. Rather to accommodate items in the rapidly than create a regional legal framework changing logistics industry (e.g., radio for all countries and agencies for frequency devices, the Global Positioning implementation, the IDB proposed System (GPS), and electronic locks). For devising an execution mechanism that example, the TIM was able to accommodate did not involve changes in national the shift from a six-digit tariff classification legislation. Despite lengthening and, to of o goods t an eight-digit one, following some extent, complicating the process, its implementation. In addition, IT experts this approach reassured all agencies that shoulde b familiar with the specificities of participation in the project would not the region and design customized result in changes to the status quo programs. In the case of the TIM, the IDB through legislative amendments. did not follow the initial advice from foreignT I experts to simply replicate the • To coordinate and harmonize execution, transit system in the European Union (EU). the technical committee should represent In the EU, transport service providers all participating agencies, e.g., customs, choose the route that best fits them for migration, sanitary and phytosanitary, goods transiting from, say, Russia to represented by senior officials. Decisions

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