Central America: Global Integration and Regional Cooperation

Occasional Papers, July 14, 2005

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Central America has received growing attention as a region that is integrating successfully into the global economy.
The paper examines the macroeconomic and fiscal implications of the Free Trade Agreement with the United States (CAFTA-DR), noting that the agreement will provide a boost to the integration process.
To maximize benefits—faster sustainable growth, poverty reduction, and social progress—the region needs ambitious structural reforms and enhanced regional cooperation.

CAFTA-DR is expected to provide a boost to the region’s integration into the global economy.
Achieving faster sustainable growth, poverty reduction, and social progress requires:
- Ambitious structural reforms to entrench macroeconomic stability.
- Ensuring an attractive environment for investment.
- Stepping up regional cooperation in specific areas (see below).

Taxes and tax administration:
- Strengthen tax policy and tax administration across the region to support revenue mobilization and fiscal stability.
Financial systems:
- Deepen and harmonize financial systems to improve resilience and integration.
Statistics:
- Improve statistical capacity and comparability to inform policy and regional coordination.
Structural reforms:
- Advance reforms that support macroeconomic stability and an investment-friendly environment.

Subjects: Exchange rate arrangements, Foreign exchange, Imports, International trade, Public debt, Revenue administration, Tariffs, Taxes
Keywords include: bank, Caribbean, Central America, Central American country, country, debt-to-GDP, definitions in El Salvador, Europe, exchange rate, Exchange rate arrangements, exchange rate regime, Imports, North America, OP, policy reform, Primer Banco del Istmo, tariff, Tariffs