294
Financial Services and Preferential Trade Agreements
which a financial institution may supply a service in their territories. Because most countries require financial services suppliers to establish a particular kind of legal entity to enter the market, market access was, not surprisingly, the obligation from which CAFTA-DR-U.S. countries most often sought relief. Third, table 7B.1 shows that the country with the fewest reservations to chapter 12 was Costa Rica, whereas the United States demanded by far the highest number of nonconforming measures. Given the use of the negative list approach, chapter 12 of the agreement clearly represents an improvement compared to the GATS commitments assumed by the parties at the World Trade Organization. A relevant question to ask, however, is to what extent the commitments undertaken by the CAFTA-DR-U.S. countries in chapter 12 in fact represent a liberalization of trade in financial services and to what extent they just reflect the legal status quo in place before the negotiations started. Given the progress most countries had achieved in unilateral reforms, the overwhelming majority of commitments were not particularly problematic for any of the Central American countries or the Dominican Republic. In fact, despite a limited number of exceptions, they could comply with most of the obligations of chapter 12 without any reform of their domestic laws and regulations. Because Central American countries had a relatively open financial system even before the negotiations started does not mean, however, that CAFTA-DR-U.S. did not entail further liberalization of trade in financial services. In fact, contrary to negotiations in other contexts, CAFTA-DR-U.S. is an example of an agreement that did entail additional liberalization commitments for most of the countries involved—with the exception of the United States. With the obligation to open its state monopoly on insurance services, Costa Rica clearly undertook the greatest liberalization commitments. However, all the other Central American countries also assumed commitments that implied reforms of their domestic legal framework for financial services. Those commitments were centered in two main areas: portfolio management services and branching in the insurance sector. Regarding portfolio management services, the Dominican Republic, El Salvador, Honduras, and Nicaragua had no laws regulating collective investment schemes. Thus, most of these countries undertook the obligation to enact legislation within an agreed time.49 Furthermore, as mentioned previously, one of the key objectives of the United States in the negotiation was to provide its banks and insurance companies the possibility of establishing branches in each of the Central