Central America: Global Integration and Regional Cooperation

Abstract

This Occasional Paper is the product of a team effort led by Markus Rodlauer and Alfred Schipke, both staff members of the IMF's Western Hemisphere Department. The team includes authors from a number of other departments in the IMF, as well as an outside co-author from the region.The authors would like to express their deep appreciation for the valuable guidance provided by Olav Gronlie, who-as the head of the Central American Division-was instrumental in moving the project forward as part of the IMF's increased emphasis on regional issues and those related to regional integration. They would like to thank and acknowledge the comments received from Agustín Carstens. Also, the authors are grateful to Tamim Bayoumi, Michael Keen, Anoop Singh, Teresa Ter-Minassian, and Philip Young for their comments and advice.Particular thanks go to Susan McCuskey and Hildi Wicker Deady, who worked extremely hard to ensure the timely publication of this paper, and to Mauricio Bourdin for valuable research assistance. The authors would like to thank the authorities of the respective countries in Central America and the Dominican Republic, the Central American Monetary Council, and the participants of an internal IMF Workshop on Central America for helpful comments and suggestions. Marina Primorac of the External Relations Department coordinated the production of the publication.The opinions expressed in this paper are solely those of its authors and do not necessarily reflect the views of the International Monetary Fund, its Executive Directors, or the authorities in the respective Central American countries and the Dominican Republic.

Implications of the Central America-Dominican Republic-Free Trade Agreement for the nutrition transition in Central America

“…International financial institutions, the U.S. Department of Agriculture (USDA), the Office of the U.S. Trade Representative (USTR), and farm business groups predict that, for most products, CAFTA-DR measures will further boost exports from the United States into Central America (9,12,(28)(29)30). The American Farm Bureau Federation estimates the value of agricultural exports will increase by $1.5 billion annually until 2024 (the year the agreement will be fully implemented).…”

“…It is predicted that these imports will have lower prices than foods produced in Central America, and are thus likely to lower farm gate 5 prices (9, 28-29). Financial institutions also predict the agreement will boost U.S. direct investment in Central America and attract U.S.-based TFCs (28). It thus seems likely that CAFTA-DR will have an overall effect on food trade and investment and, therefore, food availability and prices.…”

Free Trade and Social Citizenship

“…Research published by the IMF and World Bank has primarily focused on predicting trade and economic effects of CAFTA-DR utilizing methodologies from economics (Canales-Kriljenko et al, 2003;Corbacho and Davoodi, 2002;Marques, 2005;Rennhack and Offerdal, 2004;Rodlauer and Schipke, 2005;Stotsky and Mariam, 2002;World Bank, 2005c), i.e. modeling and political economy 'guess work'.…”

Economic Growth and Integration in Central America

“…3 This paper complements Occasional Paper 243 (Rodlauer and Schipke, 2005), which covered the macroeconomic implications of the Central America-Dominican Republic Free Trade Agreement with the United States, trade liberalization and tax coordination, fiscal sustainability, regional integration and exchange rate arrangements, financial system issues, and issues related to the political economy of reforms and macroeconomic statistics. growth performance, reaching on average 5 percent in 2005 and around 6 percent in 2006.…”