CAFTA and the Rural Economies of Central America: A Conceptual Framework for Policy and Program Recommendations

Abstract

The net benefits of CAFTA and their distribution among sectors of the economy and social groups are major concerns of policy makers in Central America. The objective of the Bank’s support to Central America is to assist in the design of policies that maximize total net benefits while improving the welfare of the poorer segments of society, the majority of whom reside in rural areas. The purpose of this study is to provide a conceptual framework in order to identify policies that will meet these objectives. It is important to note that CAFTA has not been ratified yet by all congresses of the signatory countries, but throughout this paper we assume that all will ratify CAFTA as it stands today.