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DR-CAFTA: The Downfall of Costa Rica’s
Economy?
What
is DR-CAFTA about?
The purported aim of DR-CAFTA (Dominican Republic-Central
American Free Trade Agreement) is to liberalize
U.S. and Central America markets, creating a free-trade
zone alike to the North American Free Trade Agreement
(NAFTA) that was formed between the US, Mexico and
Canada.
The agreement predominantly affects the rural sector
throughout Latin America where small businesses
and farmers are unable to compete with the large,
subsidized agricultural imports from the U.S. This
has caused many worries by Costa Rica for poverty
and development in a region that is predominantly
rural and agricultural based.
As said by
the U.S. Chamber of Commerce hype, CAFTA gives
“American businesses, workers, and farmers
greater access to 44 million Central American
consumers,” showing positive exports for
the U.S. but not explicitly pledging itself what
benefits Central American economies are likely
to receive, or at what cost.
John G. Murphy says that CAFTA offers Costa Rica
“unparalleled opportunities” as other
CAFTA-approved countries have proved. Sine instigating
CAFTA, El Salvador, has seen its economic growth
increase by 68%, and in 2006, the economic growth
rate increased by 6% among CAFTA members. Although
the increases, there is a need to create new textile
markets in order to remain competitive with Asia.
According to the Office of the U.S. Trade Representative,
the CBI “is intended to facilitate the economic
development and export diversification of the
Caribbean Basin economies.”
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Advantages
• Introduction of Costa Rica into a more global
economy.
• Failure to ratify the pact will result in
Costa Rica at a competitive disadvantage in global
markets.
• A wider availability of goods at cheaper
prices.
• A more varied community with ease of crossing
borders for workers and travelers.
• Failure to sanction CAFTA would place 73,000
jobs and $1 billion dollars in exports at risk in
Costa Rica.
Disadvantages
•
CAFTA could have a harmful effect on Costa Rica’s
agricultural sector as small-scale farmers will
not be able to compete with subsidized agricultural
imports from the U.S., which could, possibly, annihilate
Costa Rica’s rice industry.
• A more internationalised market to have
access to Costa Rican products, local farmers would
be competing against U.S. producers.
• Though telecommunications are inefficient,
maintaining regional control, has kept costs low,
and if international multinationals had power over
the industry, costs would certainly increase.
• Ottón Solis, founder and president
of the Costa Rican Citizen’s Action Party
states that lack of transparency in negotiations,
failed past political promises, insufficient parliamentary
discussion and his belief that Costa Rica will lose
something substantial through CAFTA’s implementation
is not backing up the case.
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It may threaten up to 200,000 service, agriculture
and manufacturing jobs, which CAFTA has not taken
into consideration.
If
Costa Rica accepts CAFTA due to a fear of losing
business, it would set a worrisome precedent for
U.S.-Costa Rican relations.
• If Costa Rica authorises CAFTA as it currently
stands, it shows that the U.S. is able to intimidate
a small, less developed country through pressure
and bully tactics that lead to decisions that are
not necessarily in the country’s best interests.
If
Costa Rica were in a position where it was in need
of economical help to attract more foreign investment
and to expand its economy, CAFTA would be a rational
next step, but as a stable country not particularly
in need of such help, Costa Rica might better serve
its cause by continuing to act independently and
waiting for certain CAFTA provisions to be more
usefully renegotiated.
Costa Rican’s fear is that large US companies
will run locals out of business and voters will
decide in a referendum election on 7th October 2007.
However just a month ago, many Costa Rican’s
were unaware of the state of the debate. How can
the citizens vote for something they are unsure
about? Maybe CAFTA has provided a lot of information
that has not been obvious or maybe CAFTA are hiding
away the truth hoping that Costa Rica will ratify.
The ratification deadline for CAFTA is two years
after the initial agreement ratification so Costa
Rica has until 1st March 2008 to form an agreement.
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We hope this
has given you some reasons why to use a local travel agent
in the destination country. If you have any questions
please feel free to call Holidays
in Costa Rica on 0207-1933930.
This article was written
by Caroline Wilson a specialist Consultant for Holidays
in Costa Rica.
If you want to reproduce
this article please make sure you provide a back link
to Holidays in Costa Rica
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