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The US-Central America Free Trade Agreement, commonly referred to as “CAFTA,” was signed in December 2003 after twelve short months of negotiation. The negotiations involved the US, Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua. Costa Rica at first refused to join the agreement, then changed its position in late January 2004. The US separately negotiated a bilateral treaty with the Dominican Republic, with a view to folding the deal, and the country itself, into the US-CAFTA scheme.

The US-CAFTA was signed late May 2004, and the Dominican Republic became an additional party to it in August 2004. Since then, the accord has been officially renamed the “United States-Dominican Republic-Central America Free Trade Agreement” or US-DR-CAFTA. But the overall agreement — which a lot of people continue calling just “CAFTA” — still needs ratification by all parties to go into force.

CAFTA is a wide-ranging agreement covering many areas: agriculture, telecommunications, investment, trade in services (from water distribution to gambling), intellectual property, the environment, etc. It essentially serves US business interests by giving them a concrete and high-level set of rights to operate in Central America. Some US sectors, such as sugar producers, feel threatened by the treaty. But by and large, the threats are mainly against the Central American countries which signed on, as it opens the depths of their economies — public and private — to the interests and power of US companies.

In July 2005, US Congress approved the DR-CAFTA and Bush signed it into law in early August. The Central American parliaments eventually also approved it. For the Dominican Republic, the treaty took effect in 2006.

Costa Rica was the Central American country with the strongest resistance to DR-CAFTA. There were large public demonstrations and information campaigns, and a broad grouping of civil society organizations, from trade unions to small farm organizations, signed on. This coalition successfully pushed for a referendum on ratification, which was held on 7 October 2007. The result: 51.62% in favour and 48.38% opposed. The result was considered binding since more than 40% of the electorate voted. In view of these results, CAFTA was ratified.

On December 23, President Bush issued a proclamation to implement the DR-CAFTA for Costa Rica as of 1 January 2009.

last update: May 2012
Photo: Public Citizen

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DR-CAFTA: Challenges and Opportunities for Central America (World Bank study)
Co-authored by World Bank economists Carlos Felipe Jaramillo and Daniel Lederman, provides an assessment of the agreement negotiated by Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua with the US.