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El Gasto Público en el Sector Agropecuario de América Central: Cómo mejorar su Efectividad y Eficiencia. (S)
Hotel Intercontinental. Guatemala City, February 5-6, 2008

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Agricultural Support Policies and Programs in Central America and the Dominican Republic in Light of Trade Liberalization .” Diego Arias. (February 2007, in PDF Format).

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Research and Publications: CAFTA and the Rural Economy

CAFTA Overview

The Rural Labor Market

The Agricultural Sector

The Rural Nonfarm Sector

Natural Resources and the Environment

Miscellaneous Research

(s) indicates the document is in Spanish.

CAFTA Overview

Diao, Xinshen, Eugenio Díaz-Bonilla and Sherman Robinson. 2002. “Scenarios for Trade Integration in the Americas.” TMD Discussion Paper No. 90. Trade and Macroeconomics Division, International Food Policy Research Institute. February.
Summary: This study uses a standard neoclassical Computable General Equilibrium (CGE) model to simulate an FTAA scenario that involves the removal of all tariff barriers to trade in the Western Hemisphere, holding constant other trade policies, such as quotes, producer supports and sanitary requirements. The base year is 1998 and the data are from the Global Trade Analysis Project, version 5. For Central America, the results are an increase in real GDP, a reduction in the consumer price index, increases in unskilled and skilled employment and in total exports and imports. Only one household per country/region is modeled, so the model is unable to capture the different types of agricultural producers. The model also does not capture changes to poverty or income distribution and suggests that the microsimulation models hold great promise for modeling these results.
Region: Central America; Latin America; Mexico; European Union.

Latin America Working Group. 2003. “NAFTA in Mexico: Lessons for a Central American Free Trade AgreementFair Trade of Free Trade? Understanding CAFTA. Washington Office on Latin America. December.
Summary: The report summarizes the findings of other organizations’ research on NAFTA’s impact on Mexico, providing lessons learned from Mexico’s experience that are relevant for Central America in CAFTA. Of main concern is the potential for CAFTA to increase hunger, unemployment and migration, due to the impact of free trade on small-medium producers. The environment is also at risk since Central American producers may increase the use of chemicals in agriculture to remain competitive with United States producers. The report states that CAFTA may generate hunger, unemployment and environmental degradation in the Central American countries due to the pre-existing asymmetries in development between Central America and the United States.
Region: Costa Rica; El Salvador; Guatemala; Honduras; Mexico; Nicaragua.

Monteagudo, Josefina and Masakazu Watanuki. 2003. “Impact of Agricultural Reform in the Western Hemisphere and the European Union on Latin America: Bright Prospects or Distant Illusions?” Inter-American Development Bank. Presented at the Sixth Annual Conference on Global Economic Analysis, The Hague, The Netherlands. June.
Summary: This paper uses an applied CGE model to look at the effects of completely eliminating tariffs, domestic support and export subsidies in the agricultural sector in Latin America and the Caribbean (LAC), holding all else constant. The model used to simulate the complete elimination of each factor individually and all three together using 1997 as a benchmark. The results show that (1) light manufactures (including agricultural processed products) are leading sectors for all LAC countries; (2) removing tariffs in the Western hemisphere increases LAC agricultural exports by 11 percent; (3) eliminating domestic supports results in a small positive effect on LAC exports; and (3) removing export subsidies alone has no effect.
Region: Central America, North America, South America, E.U.

Rutherford, Thomas F. and Josefina Martinez, 2000. “Welfare Effects of Regional Trade Integration of Central American and Caribbean Nations with NAFTA and MERCOSUR.” The World Economy. 23(6): 799-825
Summary: Uses a CGE model to estimate the net welfare effects if Central American were to join NAFTA or MERCOSUR. The model assumes perfect competition, constant returns to scale and product differentiation by consumers. The study finds that the major source of gains is increased market access. Larger net gains accrue when the trade agreement is with a “natural” trading partner. These simulations do not separate at the country level, nor do they disaggregate by region or sector; therefore, the results cannot be used to determine the distribution of gains and losses.
Region: Costa Rica; El Salvador; Guatemala; Honduras; Nicaragua.

Taylor, Edward J. 2002. “Trade Integration and Rural Economies in Less Developed Countries: Lessons from Micro Economy-wide Models with Particular Attention to Mexico and Central America.” Report to the Latin America and Caribbean Regional Office of the World Bank. May.
Summary: Uses a micro economy-wide model of three types of households (landless, commercial and subsistence) to estimate the effects of trade integration on rural economies of Mexico and Central American to capture the fact that not all local economies or households are fully integrated with all goods markets and that trade liberalization influences local prices differently. The study simulates a 10% change in the prices of staple and cash crops, finding that staple good price changes have small effects on household income when there is perfect price transmission since rural households diversify their sources of income. If cash crop production is labor intensive, then increases in the prices raise wages and reduce migration. The report also simulates the effect of income transfers going to each of the household types and of a 10% currency devaluation.
Region: Costa Rica; El Salvador; Guatemala; Honduras; Mexico; Nicaragua.

J.Edward Taylor, Antonio Yúnez Naude and Nancy Jesurun Clements. 2006. " Los Posibles Efectos de la Liberación Comercial en los Hogares Rurales Centroamericanos a partir de un Modelo Desagregado para la Economía Rural." Economic and Sector Study. Inter-American Development Bank. February.(S)
Summary: A partir de un modelo macroeconómico del comportamiento de los hogares, la metodología utilizada toma en cuenta la heterogeneidad de los hogares rurales de Nicaragua, las vinculaciones económicas entre ellos y sus relaciones con los mercados. El modelo es de equilibrio general, y captura los efectos directos e indirectos de cambios de política en los hogares rurales.
Region: El Salvador; Guatemala; Honduras; Nicaragua.

J. Edward Taylor - Antonio Yúnez Naude - Nancy Jesurun-Clements - Eduardo Baumeister - Edgar Lara - Enrique Merlos - Réne Rivera - Jose Angel Tolentino, 2006. "Los Posibles Efectos de la Liberalización Comercial en los Hogares Rurales Centroamericanos a Partir de un Modelo Desagregado para la Economía Rural: Caso de El Salvador." Economic and Sector Study. Inter-American Development Bank. August. (S)

J. Edward Taylor - Antonio Yúnez Naude - Nancy Jesurun-Clements - Eduardo Baumeister - Arie Sanders - Julio Bran, 2006. "Los Posibles Efectos de la Liberación Comercial en los Hogares Rurales Centroamericanos a Partir de un Modelo Desagregado para la Economía Rural: Caso de Honduras." Economic and Sector Study. Inter-American Development Bank. April. (S)

J.Edward Taylor - Antonio Yúnez Naude - Nancy Jesurun Clements, 2006. "Los Posibles Efectos de la Liberación Comercial en los Hogares Rurales Centroamericanos a Partir de un Modelo Desagregado para la Economía Rural. Caso Nicaragua." Economic and Sector Study. Inter-American Development Bank. February. (S)

J.Edward Taylor - Antonio Yúnez Naude - Nancy Jesurun Clements, 2006. " Los Posibles Efectos de la Liberación Comercial en los Hogares Rurales Centroamericanos a Partir de un Modelo Desagregado para la Economía Rural. Caso Guatemala." Economic and Sector Study. Inter-American Development Bank. February. (S)

Todd, Jessica, Paul Winters and Diego Arias. 2004. "CAFTA and the Rural Economies of Central America: A Conceptual Framework for Policy and Program Recommendations." Economic and Sector Study. Inter-American Development Bank. December.
Summary: This paper presents a conceptual framework of for the development of policies that maximize the net benefits from CAFTA which generating a positive distributional effect. The literature predicting the effects of NAFTA on Mexico and evaluating the impact of NAFTA on Mexico is reviewed, from which lessons learned from NAFTA are extracted. Through a review of the literature predicting the effects of CAFTA on the rural economies of Central America, policy and program recommendations are offered.
Region: Costa Rica; El Salvador; Guatemala; Honduras; Mexico; Nicaragua.

Washington Office on Latin America. 2003. “What People are saying about CAFTA…” Fair Trade of Free Trade? Understanding CAFTA. December.
Summary: Provides brief statements made by representatives from various NGOs regarding the implications and effects of CAFTA on the agricultural sector, the environment, gender inequality, labor rights, poverty, and sustainable development.
Region: Costa Rica; El Salvador; Guatemala; Honduras; Nicaragua.

Yúnez-Naude, Antonio and Raúl Hinojosa-Ojeda (eds.). 2000. Cambio estructural y apertura comercial en América Central, en la República Dominicana y en Norteamérica: un enfoque de equilibrio general aplicado. México, D.F: Colegio de México. Centro de Estudios Económicos.
Summary: A compilation of many country-specific CGE studies that estimate the effect of various degrees of unilateral trade liberalization, including complete tariff removal. The models for each country vary in their assumptions. Data is mainly from the early 1990s, so it is slightly out of date for drawing conclusions for the effects of CAFTA.
Region: Costa Rica; Dominican Republic; El Salvador; Guatemala; Honduras; Mexico; Nicaragua.

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