Preferential liberalization and its economy effects in Honduras

This paper quantifies the likely benefits of trade and investment liberalization in a small, poor, open economy, using the accession of Honduras to the Dominican Republic-Central American Free Trade Agreement as a case study.

Thursday, January 31, 2008

The results show that bilateral trade liberalization with the United States is likely to have almost no effect on welfare in Honduras, while the reciprocal removal of protection vis-a-vis the rest of Central America would lead to significantly larger gains. Potential gains from increased net foreign direct investment inflows overwhelm those expected from trade reform alone, particularly if the new foreign direct investment generates productivity spillovers. However, if it is to replace Honduran investment rather than complement domestic capital formation, growth performance is unlikely to improve and may even suffer. The paper's results identify several areas for policy attention by Honduran policy makers to make the Dominican Republic-Central American Free Trade Agreement more development-friendly. These include carefully considering the budgetary implications of trade reform, widening social safety nets to counter the trends toward increasing income inequality, and sequencing the reforms to ensure a close alignment of Honduras'comparative advantage on the regional and global markets.

More on this topic

Central America-Dominican Republic Trade and Competitiveness Conference

April 2010

Bringing together leaders of the public and private sector to address critical issues challenging competitiveness in Central America.

Washington, DC – Caribbean Central American Action (CCAA) is pleased to announce the dates for a special conference event that will look at competitiveness in Central America and the Dominican Republic and its impact on the region's trade and development.

Costa Rica: SUTEL completes integration

January 2009

After months in a difficult process, the Superintendence of Telecommunications has finally be formed.

According to reports by MIPUNTO.com, "The institution was created as a result of the privitization of mobile telephone and internet services as contemplated in the Free Trade Agreement between Central America, the Dominican Republic and the United States, which came into effect in Costa Rica on January 1.

Discussion about technical and financial assistance for CAFTA-DR

November 2008

Representatives from the US, CA and the Dominican Republic met in Santo Domingo to analyze the need for technical assitance for the signed in CAFTA-DR 2004.

The director of Foreign Trade and Administration of the Treaty from the Dominican Ministry of Industry and Trade, Pablo Amaury Espinal, said that one of the objectives of the meeting is for the Committee for the Strengthening of the Commercial Capacity of the FTA to present an operational plan in 2009 that will allow the signatory countries to the agreement to access more resources.

Trade with US up by 20 percent in two years of Cafta

July 2008

Trade in some of the countries involved has grown by 20 percent since the introduction two years ago of the Cafta accord between the United States and Central America and the Dominican Republic, according to US Department of Trade figures.

The Cafta countries – excluding Costa Rica, which las a latecomer to the pact – by the end of last year had registered exports of US18.75 billion to the United States, while recording imports of close on US$22.41 billion.

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