Foreign Trade, FDI, and Capital Flows Study
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Publication Costa Rica : Five Years after CAFTA-DR, Assessing Early Results for the Costa Rican Economy(Washington, DC, 2014-06-13) World BankThe Dominican Republic - Central America - United States Free Trade Agreement (CAFTA-DR) has been fundamental in creating a stable framework for Costa Rica's trade with the United States. For Costa Rica, CAFTA-DR is more than a trade agreement. Besides eliminating tariffs and reducing non-tariff barriers between member countries, CAFTA-DR also introduced major changes to the legal framework of member countries, reducing barriers to services, promoting transparency, and ensuring a secure and predictable environment for investors. This report analyses how CAFTA-DR has impacted the Costa Rican economy in the five years after ratification, both on a macro level and in key specific sectors. The report shows that CAFTA-DR is yielding benefits to the Costa Rican economy, but it is too early to provide a complete account just after five years. The agreement has succeeded to further trade integration between Costa Rica, the US, and other CAFTA-DR countries. Exports to the US began increasing several years before the agreement, but CAFTA-DR accelerated the trend. Costa Rica continues attracting FDI above levels observed in other CAFTA-DR countries, with an increasing share from US investors and a focus on medical devices and business services. Online survey and interviews of high-tech firms in free trade zones found that CAFTA-DR was an important factor in the investment decisions. CAFTA-DR ignited an explosion of changes in the telecom and insurance sectors, bringing new regulatory frameworks, competition, product innovations, and price reductions. Consumers are reaping the benefits of improved telecom and insurance services. But some issues remain for those markets to mature. Finally, the concern regarding the potential negative impact on the Costa Rican Social Security Administration's finances due to the intellectual property rights measures have not been observed.Publication Dominican Republic, Central American Free Trade Agreement (DR-CAFTA) : Challenges and Opportunities for Central America(Washington, DC, 2005-12) World BankThis report provides a preliminary assessment of DR-CAFTA (the , 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 report focuses on the developing countries of Central America, namely Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua. The analysis presented in the report shows that the vast majority of the population in Central America is likely to experience welfare gains from implementation of DR-CAFTA, even in the short run. At the same time, the removal of trade barriers in sensitive agricultural crops could adversely affect a small share of the population living in rural areas in Central America. Although provisions in DR-CAFTA will allow for long timetables in reducing tariffs for the most sensitive products, appropriate support programs may need to be designed. In addition, selective investments in education, rural infrastructure, rural finance, and technical assistance will be required to ensure that the rural poor have the means to take full advantage of the new opportunities arising out of DR-CAFTA. Chapter 1 of the report reviews the main findings of the chapters in the order in which they appear. Chapter 2 places DR-CAFTA in the historical context of the economic reforms that Central American countries have been undertaking since the late 1980s. Chapter 3 provides a summary overview of the recently negotiated DR-CAFTA, with special attention on the extent to which the agreement's provisions would significantly change market access for Central American goods and services, and also on how far they could be expected to consolidate prior reforms. Chapter 4 reviews various analyses that assess the potential impacts of DR-CAFTA on the developing countries of Central America. Chapter 5 focuses on the identification and quantification 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 that might be produced by the removal of import taxes and the treaty's potential 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.