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Getting the Most Out of Free Trade Agreements in Central America


  • J. Humberto Lopez
  • Rashmi Shankar


Peace came accompanied not only by the end to the human drama associated with the conflicts, but also by a significant economic dividend, a much needed development in a region where per capita gross domestic product (GDP) had stagnated between 1970 and 1990 and where two countries (El Salvador and Nicaragua) had been experiencing negative average growth rates for more than two decades. The social dimension of the dismal growth performance is well captured in the poverty rates. According to World Bank statistics, in the first half of the 1990s the average poverty rate in the region was close to 60 percent in countries such as Honduras and Nicaragua; almost three-quarters of the population lived on less than US$4 a day. Several lessons emerge from getting the most out of free trade agreements (FTAs) in Central America, but the author will like to stress three. First, Central America should not take the positive results of signed FTAs as a given. Second, trade promotion needs to be complemented by a strong focus on the poor. In some cases, this focus is because of the challenges brought by additional external competition, which may negatively affect some industries or sectors. Third, is the need for more competitive markets? Although many of us tend to think about the benefits of growth in terms of quantities (that is, more exports, more employment, and increased access to goods) many of the welfare effects of FTAs are transmitted through prices (such as lower prices for imported goods).

Suggested Citation

  • J. Humberto Lopez & Rashmi Shankar, 2011. "Getting the Most Out of Free Trade Agreements in Central America," World Bank Publications, The World Bank, number 2322, June.
  • Handle: RePEc:wbk:wbpubs:2322

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    References listed on IDEAS

    1. Nektarios Aslanidis, 2009. "Environmental Kuznets Curves for Carbon Emissions: A Critical Survey," Working Papers 2009.75, Fondazione Eni Enrico Mattei.
    2. Aslanidis, Nektarios, 2009. "Environmental Kuznets Curves for Carbon Emissions: A Critical Survey," Working Papers 2072/15847, Universitat Rovira i Virgili, Department of Economics.
    3. Werner Antweiler & Brian R. Copeland & M. Scott Taylor, 2001. "Is Free Trade Good for the Environment?," American Economic Review, American Economic Association, vol. 91(4), pages 877-908, September.
    4. Aslanidis Nektarios, 2009. "Environmental Kuznets curves for carbon emissions: A critical survey," wp.comunite 0051, Department of Communication, University of Teramo.
    5. Elif Akbostanci & G.Ipek Tunç & Serap Türüt-Asik, 2004. "Pollution Haven Hypothesis and the Role of Dirty Industries in Turkey’s Exports," ERC Working Papers 0403, ERC - Economic Research Center, Middle East Technical University, revised Feb 2004.
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    Cited by:

    1. World Bank, 2014. "Costa Rica : Five Years after CAFTA-DR, Assessing Early Results for the Costa Rican Economy," World Bank Other Operational Studies 20010, The World Bank.
    2. Elizabeth Ruppert Bulmer & Claire H. Hollweg, 2016. "The Labor Impact of Lao Export Growth," World Bank Other Operational Studies 24020, The World Bank.
    3. repec:wbk:wboper:22034 is not listed on IDEAS
    4. Pedro Caldentey & Manuel Alejandro Cardenete & Adolfo Cristóbal & Olexandr Nekhay, 2016. "Intra-regional vs extra-regional liberalization trade in Central America," Working Papers 2016-004, Universidad Loyola Andalucía, Department of Economics.
    5. Adolfo Cristobal Campoamor & Olexandr Nekhay & Manuel Alejandro Cardenete Flores & Pedro Caldentey del Pozo, 2016. "Intra-regional versus Inter-regional Trade Liberalization for Central America," EcoMod2016 9422, EcoMod.

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