瓜地馬拉在中美洲自由貿易協定中的經濟安全分析 - 政大學術集成

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(1) . International Master’s Program in International Studies National Chengchi University 國立政治大學國際研究英語碩士學位學程. ‧. ‧ 國. 學. An Analysis of Guatemala’s Economic 政治 Security Under The Central America大立 Dominican Republic- United States Free Trade Agreement (DR-CAFTA) n. er. io. sit. y. Nat. 瓜地馬拉在中美洲自由貿易協定 al 中的經濟安全分析 iv Ch Un engchi. ANA LUCÍA BARRIENTOS CASTILLO (貝妍娜) Advisor: 柯惠敏. July 2015. .

(2) . Acknowledgements . As I am about to conclude my Master’s Degree, I realize that there are many people and institutions I have to thank for these past two wonderful years. First of all, I would like to thank God and the Virgin Mary for all the blessings I have received throughout my life, for guiding me in the right path, and giving me the strength and courage to follow my dreams. Second I would like to thank the Taiwanese Government’s Ministry Of Foreign Affairs for believing in me and granting me a scholarship to pursue my Master’s Degree. I would also like to acknowledge National Chengchi University, the IMPIS program, teachers and staff for their unconditional support throughout these two years, particularly to IMPIS Director, Bai-‐Ku Wei and IMPIS Manager Chafie Chi-‐Hui Wei. . ‧. ‧ 國. 學. I would like to especially recognize Professor Ariel Ko, my thesis advisor, for her brilliant academic guidance, strong insight and support in making this 政治大 project possible. She’s not only 立 a resilient professional role model but a personal as well. Very important in the process of completing this project, Professor Kwei-‐ Bo Huang, Professor Yeh-‐Chung Lu, and Professor Chung-‐Chian Teng’s insights and guidance. . y. sit. io. n. er. Nat. None of this would have been possible without the unconditional support of my mom, Silvia Patricia Castillo; my brother, Victor Manuel Barrientos; my dad, Victor Barrientos and my wonderful family; particularly Hugo Sandoval, María al v Isabel and Carmen Castillo. They are the reason why I push myself to become a ni Ch U i of my life. n g cdhay better person and professional every seingle Last but not least, eternal gratitude to all my wonderful classmates and friends, without you this experience wouldn’t have been as extraordinarily as it was; particularly to María Fernanda Mejia, Emile Blasberg, Isabel Sagastume, Melissa Rodriguez, Elaine Martinez, Tina Tsai, Leanne Castillo, Ping-‐Chia Feng and Oscar René Vargas Delgado. Thank you for always believing and encouraging me to keep working hard on this project. . . . i .

(3) . Abstract The Central American countries have a key geopolitical location; they are located in the same continent as the world’s largest importer. Having a privileged geographic position, has come with it challenges and benefits. This thesis intends to analyze the impact of the Dominican Republic –Central America Free Trade Agreement with the United States. Contemplating Guatemala’s particular political motivations and economic incentives to sign this regional Free Trade Agreement. This paper also intends to compare Guatemala’s exports performance to the United States with the rest of the Central America, to analyze the exports performance, in order to determine patters and visualize the export diversification process. This will be done to evaluate this regional Free Trade Agreement performance ten years after its signature. Followed by an analysis on the DR-‐CAFTA as a mechanism that promotes Guatemala’s economic security by guaranteeing the best access possible to the United States market Key words: DR-‐CAFTA, Guatemala, Central America, and Economic Security. . . 立. 政治大. ‧. ‧ 國. 學. n. er. io. sit. y. Nat al. . Ch. n engchi U. iv. ii .

(4) . Table of Contents ACKNOWLEDGEMENTS . I . ABSTRACT . II . TABLE OF CONTENTS . III . LIST OF FIGURES . V . LIST OF TABLES . VI . LIST OF ACRONYMS . VII . CHAPTER I: INTRODUCTION . 1 . 1.1 Background and Motivation 1.2 Research Question . 4 . ‧ 國. 學. 1.3 Methodology . 立. 1 . 政治大. 1.4 Purpose of the Study . 7 . ‧. 8 . sit. y. Nat. 1.5 Research Limitations . 5 . n. al. er. io. CHAPTER II: LITERATURE REVIEW . n engchi U. Ch 2.1 Evidence on the Current State of Literature . iv. 9 9 . 2.2 Evidence on the topic . 16 . 2.3 Contribution to the DR-‐CAFTA Literature . 16 . CHAPTER III: CENTRAL AMERICA AND GUATEMALA’S BACKGROUND . 18 . 3.1 Political Background . 18 . 3.2 Economic Background . 21 . 3.3 Economic Patterns . 24 . 3.4 United States Relations with Central America . 25 . 3.5 DR-‐CAFTA Negotiation’s Process . 25 . CHAPTER IV: GUATEMALA AND THE DR-‐CAFTA . 29 . 4.1 Economic Incentives . 29 . . iii .

(5) 4.2 Political Motivations . 48 . 4.3 Winners, Losers & Exceptions . 51 . CHAPTER V: CONCLUSION . 56 . 5.1 General Conclusions . 56 . 5.2 Research Findings . 57 . 5.3 Recommendations . 57 . REFERENCES . 59 . Books . 59 . Journal Articles & Reports . 60 . Web . 62 . APPENDIX . 立. ‧ 國. 學. . . ‧. n. al. er. io. sit. y. Nat. . 64 . 政治大. Ch. n engchi U. iv. iv .

(6) . List of Figures Figure 3.1 Map of Central America’s Northern Triangle . 19 . Figure 3.2 High Homicide Rates in Central America and the United States . 20 . Figure 4.1 Central America’s Exports to the United States . 31 . Figure 4.2 Costa Rica’s Exports to the United States . 32 . Figure 4.3 El Salvador’s Exports to the United States . 35 . Figure 4.4 Guatemala’s Exports to the United States . 38 . Figure 4.5 Honduras’ Exports to the United States . 41 . Figure 4.6 Nicaragua’s Exports to the United States . 44 . Figure 4.7 The United States’ Imports from the world . 46 . Figure 4.8 The United States’ FDI to Central America . 53 . . . 立. 政治大. ‧. ‧ 國. 學. n. er. io. sit. y. Nat al. . Ch. n engchi U. iv. v .

(7) . List of Tables Table 4.1 DR-‐CAFTA Signature, Ratification and Entering into Force Dates . 29 . Table 4.2 DR-‐CAFTA significant years for analysis . 30 . Table 4.3 Costa Rica’s Top 5 Export Products to the United States . 33 . Table 4.4 El Salvador’s Top 5 Export Products to the United States . 36 . Table 4.5 Guatemala’s Top 5 Export Products to the United States . 39 . Table 4.6 Honduras’ Top 5 Export Products to the United States . 42 . Table 4.7 Nicaragua’s Top 5 Export Products to the United States . 45 . Table 4.8 The United States Top 10 Imports from the World . 48 . Table App 1 Costa Rica’s International Trade Agreements . 64 . Table App 2 El Salvador’s International Trade Agreements . 65 . 政治大. 66 . Table App 3 Guatemala’s International Trade Agreements . 立. 67 . Table App 5 Nicaragua’s International Trade Agreements . 學. ‧ 國. Table App 4 Honduras’ International Trade Agreements . ‧. Comparison Between Costa Rica and Guatemala . n. al. . sit. n engchi U. Cicaragua Comparison Between Guatemala and N h . er. io. Comparison Between Guatemala and Honduras . y. Nat. Comparison Between El Salvador and Guatemala . iv. 68 69 72 75 78 . . vi .

(8) . List of Acronyms . BZ . Belize . C-‐5 . Central America: Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua . CR . Costa Rica . DR-‐CAFTA . Dominican Republic—Central Agreement . FTA . America . . . Free Trade Agreement . GATT . . General Agreement on Tariffs and Trade . GDP . . Gross Domestic Product . GT . . . Guatemala . HN . . . Honduras . NAFTA . . North American Free Trade Agreement . Free . Trade . 治and Honduras NORTH TRIANGLE Guatemala, El S政 alvador, . 大. . . Nicaragua 立. PA . . . Panama . RFTA . . Regional Free Trade Agreement . ‧ 國. ‧. . . El Salvador . UN . . . l C United Nations . . a. iv n U hengchi United Nations Conference on Trade and Development . n. UNCTAD . io. SV . sit. y. Nat. Secretaría de Integración Económica de Centro América (Secretary of Economic Integration for Central America) . er. SIECA . 學. NI . UNESCO . United Nations Educational, Scientific and Cultural Organization . WB . World Bank . WTO . . . World Trade Organization . vii .

(9) . Chapter I: Introduction 1.1 Background and Motivation When we ask ourselves why trade matters? It is important to recognize that “[i]nternational trade amounts to a sixth of the total economic activity in the world. About $19 trillion of goods and services cross international borders each year.” (Goldstein & Pevehouse, 2014) Such an amount constitutes about 12 times the world’s military spending. (Goldstein & Pevehouse, 2014) Although the role of trade in the economy varies from one country to another, the great volume of international trade reflects the fact that this activity is profitable. . 治. 政is profitable In order to understand if trade 大 for a specific country, it is . 立. ‧ 國. 學. important to establish the mechanisms the country is utilizing to trade with its . ‧. partners. Ever since the creation of the General Agreement on Tariffs and Trade . sit. y. Nat. in 1948 until the establishment of its successor the World Trade Organization in . al. er. io. 1994, more and more governments believe that by lowering their “[…] trade . n. v ni U barriers on a non-‐discriminatory basis through unilateral action or e n g c(either hi Ch. through negotiations at the global level that adhere to the WTO’s principle of non-‐discrimination)” (Ravenhill, 2014) an economy’s welfare can be maximized. A state can lower its trade barriers in the following for ways: unilateral, bilateral, minilateral and global. (Ravenhill, 2014) “Regionalism, as conventionally understood, is a minilateral relationship, that is, one that involves more than two countries, on a geographically concentrated basis […] however, two other forms of minilateral groupings have emerged among members that are geographically dispersed.” (Ravenhill, 2014) The first one is trans-‐regional groupings, whose main goal is to link countries located in . 1 .

(10) different parts of the world. The second one is inter-‐regional grouping, and its goal is to link two established minilateral economic arrangements (geographically concentrated). (Ravenhill, 2014) In order to comprehend why countries decide to join bilateral, minilateral or global trade agreements is it prominent to accept that trade is not only limited to economic matters, it is highly political. “It crosses state-‐defined borders, is regulated by states that are pressured by interest groups, and occurs within trade regimes maintained by and negotiated among states.” (Goldstein & Pevehouse, 2014) The United States is the largest importer country in the whole world; in 2013 the amount imported was 治around $2.3 trillion. (International . 政. 大立 Trade Centre, 2014) Its purchasing power is one of the main characteristics, that . ‧ 國. 學. makes the United States an attractive market. Almost every country in the world . ‧. wants to do business with them. Central America is no exception. . io. sit. y. Nat al. er. This thesis will analyze the Dominican Republic-‐Central American Free Trade . n. v ni U i eng Agreement with the United States. This is ca hminilateral mechanism to decrease Ch. trade barriers among these seven countries. The main focus of the research will reside in the main political and economic motivations that encouraged the Guatemalan government to sign this Free Trade Agreement, DR-‐CAFTA, on August 5, 2004. Guatemala is Central America’s economic hub due to competitive advantages such as the geographical location, rich natural resources, quality of the workforce and high logistical performance. (Guatemala's Ministry of Economy, 2014) On the first aspect, geographical location; Guatemala is a logistics and a regional services center given its proximity to the United States and access to . 2 .

(11) both the Pacific and Atlantic Oceans. (Guatemala's Ministry of Economy, 2014) Guatemala’s port system accounts for 33% of total maritime cargo from Central America, its infrastructure is used as a bridge for exports and imports from El Salvador, Honduras, Nicaragua, Belize, and México. (Guatemala's Ministry of Economy, 2014) Guatemala’s richness in natural resources allows the country to export more than 4,075 different products to more than 140 markets worldwide, the main industries being manufacturing and agriculture. Guatemala’s flagship products in terms of export are clothing and textiles, sugar and coffee; achieving world known recognitions for its quality and 治 efficiency. (Guatemala's Ministry of . 政. 大立 Economy, 2014) Its economic and population (market) size gives Guatemala an . ‧ 國. 學. advantage over the other Central American countries, in terms of being the most . ‧. competitive in the region. . io. sit. y. Nat al. er. Nevertheless, its size is still significantly small compared to markets as the . n. v ni U n g c h iThis is why major Free Trade United States and the European eUnion. Ch. Agreements, are following the pattern of regional FTA’s where Central America acts as a single actor. This has become a double edge sword for the developing countries, in a positive side it is promoting the region’s access and visibility between the major league players; but on a negative aspect, it intensifies the competition to excel and differentiate among them. This is why it will be extremely important to analyze Guatemala’s economic and political motivations to join the DR-‐CAFTA and, especially, what is the country doing to excel from its main competitors (other Central American countries) to guarantee the best access possible to the United States market. . . 3 .

(12) . 1.2 Research Question The main research question of this thesis will be: How is the DR-‐CAFTA a mechanism that promotes Guatemala’s economic security? In order to answer this question, it is very important to define the term economic security and how it will be used throughout this research. The definition comes from the book The Foreign Economic Policies of Singapore, South Korea and Taiwan by Christopher M. Dent. Even though the book focuses on a completely different region, the author came up with eight typologies of economic security that help analyze a country’s foreign economic policy. The definition that 治best fits this research purpose is the . 政. 大立 one provided for market access security. Dent defined “Market economic . ‧ 國. 學. security: concerns securing the best access possible to key foreign markets. This . ‧. is particularly crucial for export-‐orientated economies with small domestic . al. er. io. sit. y. Nat. markets […].” (Dent, 2002) . n. v ni U h i DR-‐CAFTA is a mechanism that n g cthe This thesis research statement is e that Ch. promotes Guatemala’s economic security by guaranteeing the best access possible to the United States market. “This is an important issue, not only because the U.S. is these nations’ major trading partner, but also because the treaty holds the potential of increasing trade and investment in the region, which in turn is key to lifting economic growth and improving the welfare of the people of Central America and the DR, including those living in poverty.” (Central America Department and Office of the Chief Economist Latin America and the Caribbean Region, 2005) . . 4 .

(13) In order to answer this research question and address the research statement, it will be highly important for this thesis to address the following questions as indicators and research guidelines: 1. What is the political and economic relationship between Central America and the United States? 2. What is Central America’s export pattern? (How do these economies complement and compete with each other at the same time?) 3. What are Guatemala’s specific economic incentives and political motivations in pursuing the DR-‐CAFTA? . 立. 政治大. ‧ 國. 學. 4. How does Guatemala differentiate from its neighboring countries? Are these characteristics giving a significant competitive advantage? . ‧ er. io. sit. y. Nat. 1.3 Methodology . n. a l this thesis will create By answering these questions, i v a general background in Ch. n engchi U. the relations between Central America and the United States. Highlighting the political and economic motivations of the region, but taking into consideration the role the United States has been playing in this countries’ foreign policy. This is highly important as a preamble for this thesis main argument because it will show the limitations Central America faced when dealing with their biggest trading partner. This explanation will also help develop Guatemala’s specific role and motivations in the Central America–United States relationship. Understanding Guatemala’s political and economic interests in the DR-‐CAFTA are crucial steps to investigate the country’s export performance. This thesis . . 5 .

(14) intends to focus on the two sectors that have greater potential, manufacture, and agriculture. This will also help assess if Guatemala is differentiating from its neighboring countries, and if the answer is positive it means this thesis will be able to support the research statement. Affirming that the DR-‐CAFTA is a mechanism that promotes Guatemala’s economic security by guaranteeing the best access possible to the United States market. For this thesis, when it refers to Central America it will be focusing mainly in the C-‐5, El Salvador, Costa Rica, Guatemala, Honduras, and Nicaragua. The first element of the case selection criteria is the resemblance to current policy problem. The Dominican Republic is excluded from this process because it does 治. 政. 大立 not belong to the Central American Common Market. Some of the other . ‧ 國. 學. significant differences that only the C-‐5 countries share are location and similar . ‧. colonization history; which after the colonial era lead to the institution of similar . er. io. al. sit. y. Nat. economic and political governing institutions. . n. v ni U e n g c hciriteria is data richness, the C-‐5 are The second element of this case selection Ch. founding members of the Secretary of Economic Integration for Central America, SIECA, which is the main authority and source of economic documents and policies concerning the interests of the region. These two values are highly recommended for testing or inferring theories, as well as antecedent conditions. (Van Evera, 1997) After analyzing and presenting the information, this thesis intends to generate conclusions and interesting findings of what’s going on under this regional Free Trade Agreement. . . 6 .

(15) . 1.4 Purpose of the Study Before entering into detail about the studies and publications analyzed in this thesis’ Literature Review, it is important to highlight Central America’s Gross Graduation Ratio in tertiary education (percentage for both sexes) and how it influences the motivation to perform this academic research. With Costa Rica being the only exception, the rest of the Central American countries didn’t even reach a 10% Gross Graduation Ratio from first-‐degree programs in tertiary education in the years 2002 and 2003. The C-‐5 Gross Graduation in tertiary education for the year 2002 occurred as follows: Costa Rica 30.2%, El Salvador 6.33%, Guatemala 1.76%, Honduras 3.17% (year 2003) and Nicaragua 3.09%. . 政治大. (UNESCO Institute for Statistics, 2015) . 立. ‧ 國. 學. These numbers not only represent an alarming tertiary educational deficit in . ‧. the Central American region, but they can provide the reader of this thesis a . sit. y. Nat. er. io. better understanding as to why there are only a few studies analyzed in this . n. a. v. l C Literature Review. With the exception of the United States, Central America has ni hengchi U. failed to provide economic or political analysis on this regional free trade agreement. The majority of the studies analyzed in this section come from the United States or International Organizations, like the World Bank and United Nations, whose main donor is also the United States of America. This data collected from UNESCO’s Institute for Statistics, is highly relevant because it portrays the region’s educational crisis, emphasizing why it is so important to continue with this academic research to provide an analysis coming from the other side of the spectrum. How is the DR-‐CAFTA a mechanism that promotes Guatemala’s economic security? . . 7 .

(16) The intention of this thesis is to analyze the current state of the DR-‐CAFTA. In the year 2014 it has been ten years since its signature, therefore the impact on these developing economies should be evident. Out of the findings of this research, it is intended to generate foreign economic policies addressing Guatemala’s needs, either to maintain or increase its economic security. . 1.5 Research Limitations This thesis main limitation is that there is no universal method to analyze the performance of a Free Trade Agreement. Over the years, Regional Free Trade Agreements have evolved, not only included economical matters but also incorporating regulations concerning the 治 environment, labor, and even . 政. 大立 cooperation. Therefore, creating a universal method in order to analyze all Free . ‧ 國. 學. Trade Agreements has resulted in a challenge. Trade analysts have resorted to . ‧. different methods in order to analyze the effect of a Regional Free Trade . sit. y. Nat. n. evaluated. . . al. er. io. Agreement on a determined region, period of time, and even the subject being . Ch. n engchi U. iv. . 8 .

(17) . Chapter II: Literature Review 2.1 Evidence on the Current State of Literature The literature available for trade and regional trade agreements is overwhelming; it ranges from simple concepts to complex models that can predict gains and losses for a determined region. For this thesis, the Literature Review won’t cover the main theories and models of trade. It will focus directly on studies about the DR-‐CAFTA, due to space and time constraints. In order to classify the existing literature about the DR-‐CAFTA, they were divided in three main groups. The first group includes academic papers and reports whose main focus is the political motivation for entering this regional 政治. 大立 Free Trade Agreement, the second group focuses mainly on studies analyzing the . ‧ 國. 學. economic incentives for signing the DR-‐CAFTA, and the third group includes . ‧. sit. y. Nat. studies that try to contemplate both the political and economic side of this . n. al. er. io. regional Free Trade Agreement. This thesis belongs to the third group in this . iv. Ch section because it analyzes political motivations as well as economic incentives Un engchi. for Guatemala. By dividing the literature in these three main groups, it is easier to identify the trends and arguments that scholars and some international organizations have about this regional Free Trade Agreement. The limited literature analyzing the DR-‐CAFTA can be divided pretty much evenly into the first two groups, however there are only two publications by the World Bank one in the year 2006 and the second one in 2011, that contemplate both aspects, making this thesis value more attractive. In order to provide a better understanding of each type of motivation, the arguments provided by John Ravenhill in the chapter “Regional Trade Agreements” in the book Global . . 9 .

(18) Political Economy will be used for classification reference. Ravenhill presented seven typologies for entering a regional free trade agreement under political motivations, which are listed below: 1. Economic cooperation and confidence building 2. Regionalism as a Reward for Security Partners 3. Regional economic cooperation and the ‘new security agenda’ 4. Regionalism as a bargaining tool 5. Regionalism as a mechanism for locking-‐in reforms 6. Regionalism to satisfy domestic political constituencies 7. Ease of negotiating and implementing 治 agreements . 政. 大立 Some of the literature analyzing the DR-‐CAFTA’s motivations as a political . ‧ 國. 學. one, include James M. DeVault argument that “[t]he CAFTA vote is significant in . ‧. that the context in which it occurred was on in which campaign contributions . sit. y. Nat. er. io. were more likely to influence votes.” (DeVault, 2010) DeVault’s argument clearly . n. a. v. i l eCxplained it like nthis: fits typology number 6. Ravenhill U hengchi. “In contrast to a unilateral lowering of tariffs, which is usually politically difficult for governments because domestic groups believe that the government is giving something away (tariff protection) and not receiving anything in return from other countries, a regional trade agreement provides a means for a government to ensure that it receives concessions (reciprocity) from its partners in return for those that is has offered.” (Ravenhill, 2014) By evidencing the important role of interest groups and their motivations in signing the DR-‐CAFTA, DeVault provided an argument that helps to clearly comprehend the political motivations behind the signature of this regional Free Trade Agreement. On a similar way, Cori Madrid analyzed the motives for signing this regional trade agreement. In the paper, the author explained the motives of . . 10 .

(19) why the United States was willing to sign and the particular motivation from El Salvador in the whole process. (Madrid, 2009) As a significant conclusion, we can link this article with Ravenhill’s argument that regionalism can be appreciated as a reward for a large power’s security partners. (Ravenhill, 2014) Not to mention, the significant participation and linkage with typology number six, contemplating the role of interest groups. Just like the previous authors, Mary Finley-‐Brook and Tucker Thomas presented arguments related to the political motivations behind the DR-‐CAFTA. Both of their arguments could fit Ravenhill’s argument that regional trade agreements sometimes are signed for economic cooperation and to pursue a 治. 政. 大立 “new security agenda.” Finley-‐Brook’s argument stated that “[t]he Central . ‧ 國. 學. American Free Trade Agreement (CAFTA) exemplifies interconnections and . ‧. contradictions between geopolitical and geoeconomic agendas, including . sit. y. Nat. er. io. security, democracy, and resource marketing.” (Finley-‐Brook, 2012) As for . n. a. v. i Thomas, he analyzed the role l C of the United nStates and the International hengchi U. Monetary Fund in reducing poverty in Central America, focusing on the possible consequences of not attending this ‘possible threat.’ (Thomas, 2006) In order to classify the literature utilizing an economical motivational argument, I’ve also resorted to John Ravenhill’s classification, listing below the typologies within this category: 1. Economic reasons for choosing regionalism over multilateralism a. Regionalism enables continued protection of sectors that would not survive in global competition b. Regionalism provides opportunities for ‘deeper integration’ . . 11 .

(20) 2. Economic reasons for preferring regionalism to unilateralism or the status quo a. Larger markets and increased foreign investment The article presented by Stanley and Bunnag portrayed the different export trend diversification that some Central American countries applied during the 90s. (Stanley & Bunnag, 2001) This argument is very important in analyzing, how these Central American countries were preparing their economy before the signature of the regional Free Trade Agreement with their largest economic partner. This argument can be clearly related with Ravenhill’s first typology of economic motivations. Specifically with the fact that regionalism provides . 治 integration. opportunities for a more concise and harmonized 政. 立. 大. ‧ 國. 學. On the other hand, Don P. Clark examined the changes in intra-‐industry . ‧. specialization indicators from 1992-‐2006 to assess any adjustment problems . Nat. er. io. sit. y. with the implementation of the DR-‐CAFTA. His argument, however, fits more . n. with the first premise of the first typology, in the sense that regionalism enables a v. i l C hengchi Un continued protection of sectors that would not survive in the global competition. . (Ravenhill, 2014) He stated that “[w]hen adjustment problems are indicated, extended phase-‐out periods for tariffs, tariff-‐rate quotas, and import safeguards are used to ease factor adjustment pressures in import-‐sensitive industries.” (Clark, 2009) It is important to keep in mind, that even though these authors are analyzing the DR-‐CAFTA from its economical motivations, some present favorable and other’s not so favorable outcomes. In this sense, J. Edward Taylor, Antonio Yúnez Naude and Nancy Jesurun-‐Clements “[…explored] the rural welfare effects of . . 12 .

(21) agricultural trade liberalization called for under the Central American Free Trade Agreement (CAFTA), using a disaggregated rural economy-‐wide model nesting a series of agricultural household models.” (Taylor, Yúnez Naude, & Jesurum-‐ Clements, 2010) For this study, the authors concluded by removing tariffs on agricultural imports could create more challenges in less developed countries, in some even leading to migration. This study didn’t present a favorable future for the Central American countries, despite their slight development differences. On the other hand, the authors Alisa Dicaprio and Santos-‐Paulino presented an innovative argument after studying the economic motivations of regional Free Trade Agreements. They investigated “[…] 治the components of two prominent . 政. 大立 highly asymmetric negotiations – the Dominican Republic – Central America Free . ‧ 國. 學. Trade Agreement and the European Union – Caribbean Forum Economic . ‧. Partnership Agreement – to assess the channels through which the resulting . sit. y. Nat. er. io. organization of trade may impact the vulnerability profile of the developing . n. a. v. l C country partners.” (Dicaprio & Santos-‐Paulino, 2011) n i hengchi U. This article stated that “[…] as the economic distance between negotiating partners increases, the likelihood that the resulting trade agreement will reflect the preferences and needs of the developing country partner decline.” (Dicaprio & Santos-‐Paulino, 2011) However, this thesis intends to not only contemplate the challenges in the DR-‐CAFTA but to understand how this regional FTA is a mechanism that promotes Guatemala’s economic security? A single book published in the year 2006 by the World Bank makes up the third literature group that contemplates both, economic and political, aspects of the DR-‐CAFTA. This extensive study “Challenges of CAFTA: Maximizing the . 13 .

(22) Benefits for Central America” provides the reader with a background in Central America’s trade policies since 1990, analyzing the market implications for each of the countries signing the agreement. However, it is very important to highlight that when this book was published everything were assumptions on how this regional FTA would impact Central America because not every country had ratified it by then. (SIECA, 2008) El Salvador was the first country to ratify it on December 17th, 2004; followed by the Honduras March 3rd 2005; Guatemala March 10th, 2005; the United States June 30th 2005; Nicaragua on October 10th 2005 and Costa Rica on October 7th 2007. The former was the only country 治 to submit its ratification through a . 政. 大立 referendum. (SICE, 2015) This book innovative approach consists in providing . ‧ 國. 學. policies to manage the economic transition, which are highly political. This thesis . ‧. will intend to generate some foreign economic policies as the result of this . al. er. io. sit. y. Nat. research. . n. v ni U e nthird As for the second book that fits this g c hciategory in the literature review, is Ch. also a publication by the World Bank. The book “Getting the Most Out of Free Trade Agreements in Central America” portrays an analysis of some of the impact the DR-‐CAFTA has had on the region on matter of trade openness, labor, and environment. This book is made up of different publications compiled together, some of them touch upon Ravenhill’s political motivations to pursue an FTA like economic cooperation and confidence building, regionalism as a mechanism for locking-‐in reforms and ease of negotiating and implementing agreements. (Ravenhill, 2014) These political motivations are very visible in the book’s Chapter 5 “Power Integration in Central America: From Hope to Mirage” . . 14 .

(23) were the high energy prices have pushed the Central American governments to pursue, through political means, a deeper cooperation and policy reforms on the matter. By doing so, they have strengthened their intraregional trade; as well as continue to generate coordinated commercial policies. (López & Shankar, 2011) The previous classification of the literature into these three main groups, political motivations, economic incentives and both, will be very useful in analyzing and determining the main reasons behind the signature of the DR-‐ CAFTA. The value in these elements lies beyond the literature review. It not only helps in the understanding of Central American regional economic policies, but also provides a window for individual assessment of the countries’ involvement 治. 政. 大立 in the process in order to generate a better scope, on both the political . ‧ 國. 學. motivations and economic incentives behind the DR-‐CAFTA. . ‧. io. sit. y. Nat. This is highly important to the thesis’s main research question: How is the . al. er. DR-‐CAFTA a mechanism that promotes Guatemala’s economic security? Because . n. v ni U engchi to fully comprehend a country’s foreign policy, it is essential to understand that Ch. political motivations are usually encouraged by economic incentives and vice versa. And by analyzing Central America’s motivations, in particular, the case of Guatemala, providing a wide scope of the motivations behind the signature of the DR-‐CAFTA. This will support the research statement: that the DR-‐CAFTA is a mechanism that promotes Guatemala’s economic security by guaranteeing the best access possible to the United States market in two different but complementary perspectives; the political motivations and the economic incentives. . . 15 .

(24) . 2.2 Evidence on the topic As the literature review has come to show, there are no articles directly on the United States and Guatemala’s economic security. The literature that covers specifically Guatemala and the United States relation under the DR-‐CAFTA focuses on labor provision matters that surged after the implementation of this regional Free Trade Agreement. For time and space matters, this literature is not analyzed on this thesis. On a second aspect, most of the literature analyzing the DR-‐CAFTA was written between the years 2002-‐2006, leaving a huge gap afterwards. No in depth analysis has been made after that 治 for the particular case of Guatemala, . 政. 大立 most of the studies analyze the impact in the whole region. . ‧. ‧ 國. 學. 2.3 Contribution to the DR-‐CAFTA Literature . sit. y. Nat. As the current literature on the DR-‐CAFTA has been reviewed, this thesis has . al. er. io. not only come to the conclusion that it is not abundant, but also that most of the . n. v ni U engchi publications and studies come from institutes and journals in the United States. Ch. Studies on this regional Free Trade Agreement are lacking in Central America, a big factor contributing to this matter in the low gross graduation ratio in tertiary education for the region. (UNESCO Institute for Statistics, 2015) There are a couple of publications were done with the cooperation of the World Bank, and this institution principal donor is the United States. This aspect could lead to bias in the information presented. This thesis will contribute highly to the existing literature on the DR-‐CAFTA in three aspects. First of all, it will be written from the perspective of a developing country, analyzing the direct impact of the DR-‐CAFTA as a . 16 .

(25) mechanism that promotes Guatemala’s economic security by guaranteeing the best access possible to the United States market. Second, it will be recent. Most of the literature on the topic ranges from the year 2002 and 2006; contemplating initial negotiations, preparation from the parties and possible predictions after its implementation. Few articles have been written ever since. The third element is innovation. This research intends to analyze Guatemala’s exports structure to determine how it competes and complements with the rest of the Central American countries and how this is a unique element that guarantees better access to the United States market. . . 立. 政治大. ‧. ‧ 國. 學. n. er. io. sit. y. Nat al. . Ch. n engchi U. iv. 17 .

(26) . Chapter III: Central America and Guatemala’s Background 3.1 Political Background The Central American region has undergone major political changes in the last thirty years. By the late 1980s, four out of the C-‐5 were still involved in armed conflicts that took the life of hundreds of thousands of citizens, deepening the social and economic differences in Central America. Costa Rica was the exception. Just in the case of Guatemala, the armed conflict led to the death of 200,000; more than 45,000 people disappeared, and almost 100,000 were displaced from their lands and country. (Así Es, 2004) “[…I]t was not until the Esquipulas Agreement (1987) that a framework for peaceful resolution of the . 政治大 conflicts emerged.” (López & Shankar, 2011) This Agreement served as a pillar 立. ‧ 國. sit. y. Nat. n. al. er. However, the Peace Accords signed in 1996 couldn’t end the crippling . io. . ‧. (Así Es, 2004) . 學. for the Peace Accords that were signed in December 29th, 1996 in Guatemala. . iv. C h of right (The Economist, 2011) polarization U nand left that the countries engchi. experienced in the previous decades during the civil war. Proof of this was the coup d’état that the Honduras President Manuel Zelaya suffered in the year 2009 due to his close friendship with the Venezuelan President Hugo Chávez. Unfortunately, this was not the only challenge that the Central American governments needed to face. “But its underlying problems—which include poverty, torpid economies, weak states, youth gangs, corruption and natural disasters—never went away.” (The Economist, 2011) One of the reasons the violence in Central America has deteriorated in the past couple of decades comes as a result of the United States Coast Guard . . 18 .

(27) shutting down the Caribbean Cocaine Route, shifting the trade to Mexico. (The Economist, 2011) Just as Mexico’s government has been putting pressure on the organized crime, trying to decrease the drug smuggling through its territory, the violence has migrated south, to Central America. (The Economist, 2011) Figure 3.1 Map of Central America’s Northern Triangle . 立. 政治大. ‧. ‧ 國. 學. n. er. io. sit. y. Nat al. Ch. n engchi U. iv. . Source: Google Images . Central America’s Northern Triangle, Guatemala, El Salvador and Honduras (See Figure 3.1); have been the greatest impacted by the drug contraband, creating permanent challenges to the ruling political parties. These countries “[…] face challenges ranging from some of the world’s highest homicide rates, rampant extortion, communities controlled by youth gangs, domestic violence, impunity for most crimes, as well as economic despair and lack or opportunity.” (Eguizábal, Curtis, Ingram, Korthuis, Olson, & Phillips, 2014) The situation in Nicaragua and Costa Rica has seen some slight increases in violence; however . . 19 .