CAFTA's Debt Trap
June 06, 2005
By Aldo Caliari June 2005 (reposted from Foreign Policy In Focus)
Criticism of the Central American Free Trade Agreement (CAFTA) currently being considered by the U.S. Congress has focused heavily on concerns that the treaty would devastate Central American farmers who would be forced to compete with heavily subsidized U.S. agribusiness.1 In addition, many Central Americans fear that the deal would perpetuate a low-road approach to development based on low wages and lax environmental enforcement and undermine government authority to ensure basic services and access to medicines. These are all valid concerns, but there is yet another danger posed by CAFTA that deserves greater attention.Buried in the technical language of the investment chapter of the agreement are rules that would make it more difficult for the six nations that have signed the trade deal with the United States to escape heavy debt burdens or to prevent or recover from debt crises. The investment provisions of CAFTA, like other deals such as the 1994 North American Free Trade Agreement, are based on the argument that strong protections for private foreign investors will help encourage investments needed for economic growth. To this end, they require governments to comply with a long list of investor protections and grant private foreign investors the right to sue governments for damages if these obligations are violated.
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