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Financial Services and Preferential Trade Agreements
Central America, the Dominican Republic, and the United States as one integrated market, attracting market-seeking FDI and increasing the demand for logistical services within the region. This integration scheme will generate greater opportunities for financial services suppliers in Costa Rica and the region. However, it will also likely generate greater competition among them by fostering the integration of financial markets in Central America. As a result, the pressure for harmonization of regulations, including those dealing with supervision of financial activities, will increase. With the United States as a key player in this integration scheme, this harmonization can be expected to proceed upward, prompting the authorities of the Dominican Republic and the Central American countries to gradually adopt internationally accepted standards for financial regulation. Third, one of the most important contributions of CAFTA-DR-U.S. will be strengthening of the rule of law and transparency in the public administration of the region’s countries. The different chapters contain several provisions on transparency and the rule of law, and once public institutions have acknowledged and internalized them, spillover effects in other areas may occur. This outcome can be expected in most countries of Central America, in particular, where CAFTA-DR-U.S. will directly affect the domestic legal system, enabling every resident to invoke any right derived from the agreement in local courts. Thus, for instance, the obligations included in article 12.11 of chapter 12, although originally crafted with international investors in mind, will also apply to national citizens and residents in each Central American country and the Dominican Republic. Although the transparency standards set out in article 12.11 may seem basic and fundamental, national authorities in many of these countries have not always granted such rights to their constituents. With CAFTA-DR-U.S., this situation will change for good. There are reasons for confidence about positive developments in the region. One is that the standards of protection and treatment included in chapter 12 will definitely have an effect, and those standards will have teeth because financial investors will be able to enforce most of the guarantees included in chapter 12 through international arbitration, without requiring their home state to sponsor their claim against the host country. Another reason to be confident about the strengthening of transparency and the rule of law in the region is that the agreement will set a precedent in trade negotiations. Negotiations of future trade agreements between Central America and other countries, such as the already announced negotiations with the