Centam says trade pact stalled by medicine rules

GUATEMALA CITY, Jan 11 (Reuters) - Implementation of a new U.S.-Central American trade pact could be delayed by U.S. demands that its partners tighten their rules on cheap drugs that compete with the products of U.S. pharmaceutical firms.

The Central American Free Trade Agreement, or CAFTA, was to take effect on Jan. 1, but in December the United States said it was delayed while El Salvador, Guatemala, Honduras, Nicaragua and the Dominican Republic changed their laws.

Battles over stricter patent rules for U.S. drug firms have cropped up repeatedly in bi-lateral trade negotiations. This week thousands of Thai protesters demanded an end to talks critics say threaten the Asian nation's generic drug industry.

In Guatemala, legislators just passed new laws last year extending the length of time firms can protect the test data of their brand name drugs, but Vice President Eduardo Stein says the country is under renewed pressure to change its laws.

The issue of test data is "a very critical stumbling block," Stein said in an interview with Reuters.

"Multinational corporations have been pressing their case and they want extra protection for their patents. We already have legislation that adheres strictly to the World Trade Organization guidelines," he said.

"They are trying to force us to change that legislation again when we already went through a heap of trouble during the negotiations to safeguard popular access to generic medications," Stein said.

The patent term set by the WTO for pharmaceuticals is 20 years. Drug companies say they need more protection to protect their investment in developing new drugs.

Peter Hakim, of the Washington-based think-tank Inter-American Dialogue said U.S. drug companies were taking a hard line in Central America to set a precedent for future trade deals with larger nations.

NAILED BY A SLEDGEHAMMER

"They now are negotiating IP (intellectual property) in Honduras but the next negotiation could be in Brazil," he said. "That's why this is so hard for people in Guatemala or El Salvador to accept. It's really using a sledgehammer to knock in a small nail."

The United States Trade Representative says intellectual property is only one issue out of many that need to be resolved before the agreement can move forward.

"We want to make sure that all the i's are dotted and the t's are crossed," said USTR spokesman Steve Norton. "We are hoping this happens sooner rather than later but we also want to make sure that it is done right."

Melvin Redondo, Honduran deputy minister for trade, said the pact also calls for changes to the country's penal code, as well as new public tender and conflict resolution rules.

"We hope that once the requirements are fulfilled ... it will take effect by March or April at the latest," he said.

El Salvador's Congress is closest to passing the necessary package of legislation but wrangling between political parties has held up the process. The Dominican Republic says it could delay for up to eight months.

Costa Rica has yet to ratify the agreement and is unlikely to take it up until after the February presidential elections.

While most analysts agree that the countries will eventually implement the treaty, bureaucratic delays could scare off some investors.

"When you are a businessman and you are considering where to invest you want everything to work like a clock," said Standard & Poor's analyst Roberto Sifon Arevalo. "This delay is sending the wrong signal to the market."