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Challenges of CAFTA : maximizing the benefits for Central America (English)

The report provides a preliminary assessment of DR-CAFTA (the Dominican Republic and Central American Free trade Agreement), with particular attention to three key themes: (1) expected trade and non-trade benefits, (2) actions that Central American countries need to pursue to capitalize optimally on the new opportunities, and (3) identification of the population groups that may require assistance to adapt to a more competitive environment. The Introductory Chapter reviews the main findings of the report. Chapter 2 places DR-CAFTA in the historical context of the economic reforms that Central America has been undertaking since the late 1980s. Chapter 3 provides a summary overview of the recently negotiated DR-CAFTA. Chapter 4 reviews various analyses that assess the potential impacts of DR-CAFTA in Central American countries. Chapter 5 focuses on the identification of potentially affected populations from the easing of trade restrictions in sensitive agricultural products and analyzes policy options to assist vulnerable groups. Chapter 6 reviews evidence related to key macroeconomic implications of DR-CAFTA, namely the potential revenue losses and effect on the patterns of business-cycle synchronization. Chapter 7 reviews evidence from each Central American country in the areas of trade facilitation, institutional and regulatory reforms, and innovation and education, in order to identify key priorities for the complementary agenda for DR-CAFTA.


  • Author

    Jaramillo,Carlos Felipe, Lederman,Daniel

  • Document Date


  • Document Type


  • Report Number


  • Volume No


  • Total Volume(s)


  • Country

    Central America,


    United States,



    Dominican Republic,

    El Salvador,

  • Region

    Latin America & Caribbean, Rest Of The World,

  • Disclosure Date


  • Disclosure Status


  • Doc Name

    Challenges of CAFTA : maximizing the benefits for Central America

  • Keywords

    general agreement on tariffs and trade;economies of scale in production;advantage of economies of scale;free trade agreement;removal of trade barriers;macroeconomic policy implications;business cycle synchronization;trade minister;representative household survey data;International Trade and Investment;commodity trade;trim trade;improvements in expenditure efficiency;constant elasticity of transformation;constant elasticity of substitution;macroeconomic and fiscal;access to service markets;sanitary and phytosanitary standards;intellectual property rights;foreign direct investment;Computable General Equilibrium;conditional cash transfer;technical assistance program;rules of origin;regional integration effort;market access;impact of trade;tax revenue ratio;partial equilibrium model;bundle of goods;macroeconomic policy issue;civil society stakeholders;partial equilibrium analysis;relative producer prices;unilateral trade reforms;incentive for farmer;poor rural household;quality of public;reduction of corruption;tariff preference level;living in poverty;public sector agency;process of adjustment;ex ante analysis;removal of barrier;total factor productivity;regional integration arrangement;purchasing power parity;preferential market access;excise tax rates;export processing zone;double taxation treaty;macroeconomic policy coordination;impacts on agriculture;rural financial service;trade in services;regional trade integration;improved working condition;access to investors;trade and growth;barriers to trade;investments in education;areas of trade;expansion of trade;bilateral trade agreement;agricultural commodity;dynamic gains;trade restriction;trading partner;fiscal response;regulatory environment;static gains;Trade Policies;vulnerable group;domestic reform;agricultural crop;Trade Policy;poor household;fiscal loss;income opportunity;production diversification;trade preference;institutional strengthening;private finance;trade intensity;agricultural product;public good;Public Goods;grace period;economic reform;trade levels;empirical study;static analysis;price change;unilateral preferences;fiscal revenue;factor price;legislative change;positive impact;international transport;trade structure;consumption side;trade flow;import tax;policy option;tariff-rate quota;financial market;fiscal incentive;adjustment period;short period;targeted transfer;income loss;debt sustainability;public expenditure;infrastructure needs;labor skills;fiscal performance;tax policy;poor infrastructure;information exchange;Rural Poor;Basic Education;vulnerable population;safeguard mechanism;secure access;political interference;agricultural activity;household welfare;poultry meat;eliminating tariffs;bovine meat;trade protection;important policy;gradual approach;remove trade;commodity price;subsidiary right;targeted program;Labor Market;adjustment program;debt level;fiscal situation;domestic sensitivity;public finance;transition period;nutrition outcome;customs union;impact analysis;tariff-free access;dynamic effect;econometric challenge;tariff reduction;duty-free access;restrictive rule;explaining change;program delivery;tax enforcement;trade diversification;traditional commodity;dynamic process;apparel export;Economic Mobility;local economy;foreign investor;rural inhabitant;regional concentration;human capital;tax ratio;high debt;fiscal stance;political condition;significant challenge;aggregate growth;agricultural quotas;institutional change;rural economy;financial globalization;technology adoption;largest markets;apparel trade;domestic legislation;relative price;Gender Inequality;gender inequalities;Social Protection;trade negotiation;welfare gains;public policy;textile product;regulatory change;research assistance;policy priority;diversified exports;quota barriers;trade area;donor agencies;binding constraint;insurance market;translation services;domestic investment;innovation policy;Innovation Policies;reform effort;government regulation;nontariff barrier



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Jaramillo,Carlos Felipe Lederman,Daniel

Challenges of CAFTA : maximizing the benefits for Central America (English). Directions in development. Trade Washington, D.C. : World Bank Group.