The Economic Impact of the Caribbean Basin Initiative: Has It Delivered Its Promise?

By Potoker, Elaine; Borgman, Richard H. | Canadian Journal of Latin American & Caribbean Studies, July 2007 | Go to article overview

The Economic Impact of the Caribbean Basin Initiative: Has It Delivered Its Promise?


Potoker, Elaine, Borgman, Richard H., Canadian Journal of Latin American & Caribbean Studies


Abstract. The Caribbean Basin Initiative (CBI) is generally regarded as a system of trade preferences enacted through the Caribbean Economic Recovery Act in 1983 to allow duty-free imports into the U.S. from eligible countries in Central America and the Caribbean. The CBI was primarily intended to be a catalyst that would foster political and economic stability through U.S. direct foreign investment (DFI) in eligible countries. DFI, in turn, would generate economic growth and export diversification in targeted countries, particularly in non-traditional products. This article examines whether the CBI and related agreements have had the desired effects on economic growth, diversification of exports, import dependence, alleviation of debt, and direct foreign investment by analyzing those independent countries that remained designates of the plan since its inception--in total, 12 countries. Although economic results vary by country, generally the region has experienced increases in targeted exports and direct foreign investment, reductions in export concentration, and some reduction in debt. We conclude that while the objectives of the CBI have been modestly realized for the region, the success has obviously not been evenly distributed. The article also offers recommendations for further study.

Resumen. La Iniciativa para la Cuenca del Caribe (ICC) es generalmente vista como un sistema de preferencias comerciales establecida a traves del Acta de Recuperacion Economica del Caribe en 1983 con el fin de permitir las importaciones libres de impuesto a los Estados Unidos desde ciertos paises de America Central y el Caribe. El ICC tenia el objetivo original de promover la estabilidad politica y economica por medio de inversiones directas de los Estados Unidos en esos paises. Esas inversiones, a su vez, generarian crecimiento economico y diversificacion de las exportaciones, particularmente con respecto a productos no tradicionales. Este articulo observa si la ICC y los acuerdos relacionados han provocado los efectos deseados en el crecimiento economico, la diversificacion de exportaciones, la dependencia de importaciones, la reduccion de la deuda y la inversion extranjera directa, analizando los doce paises independientes que fueron designados como destinatarios del plan desde su comienzo. A pesar de que los resultados economicos varian de un pais al otro, generalmente la region ha experimentado aumentos en ciertas exportaciones y en la inversion extranjera directa, reducciones en la concentracion de exportaciones y cierta reduccion de la deuda. Se concluye que a pesar de que los objetivos de la ICC han sido cumplidos modestamente en la region, el exito no ha sido distribuido equitativamente. Este articulo tambien hace recomendaciones para futuros estudios.

Introduction

   The answer to the region's development problems are complex and
   DR-CAFTA is no panacea. (Federico Sacasa, President, President of
   Caribbean-Central American Action [CCAA]) (1)

   Central America is an emerging region.... The region has 10 ports,
   6 international airports, and moves approximately 7.5 million TEU's
   per year. We are the third largest market in Latin America and the
   10th largest market worldwide for U.S. exports. (Ana Vilma de
   Escobar, Vice-President, El Salvador)

   It is on the creation of such a prosperous and stable neighbourhood
   that I wish to concentrate my remarks this evening.... four
   summits, and several hundred mandates later, it is timely for us to
   ask: what is there to show for our collective efforts to enhance
   the security and development of our hemisphere? (Owen Arthur, Prime
   Minister of Barbados) (2)

The Caribbean Basin Initiative (CBI) is generally regarded as a system of trade preferences enacted through the 1983 Caribbean Economic Recovery Act (CBERA) to allow duty-free imports into the U.S. from eligible countries in Central America and the Caribbean.

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