• August 1, 2005
  • By Coreen Bailor, (former) Associate Editor, CRM Magazine

A Glimpse at DR-CAFTA

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The Dominican Republic-Central America Free Trade Agreement (DR-CAFTA) is a heavily debated topic, but some CRM industry pundits contend that it could have little effect on outsourcing. The agreement's objective is to create a free trade zone between the United States and Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and (most recently) the Dominican Republic. DR-CAFTA resembles the also controversial North American Free Trade Agreement (NAFTA), which includes Canada, Mexico, and the U.S., and is seen as essential to the proposed Free Trade Area of the Americas (FTAA), which would include all Central American, South American, and Caribbean countries, except Cuba. Some of the arguments for the strongly opposed agreement, which the Senate approved last month, are that it will open markets, as DR-CAFTA countries are major export markets for U.S. manufacturers, and modernize the Central American economy. However, "there are benefits that are not necessarily economic like the promotion of a more democratic and a more stable society," says Renato Beninatto, a principal and COO of Common Sense Advisory, a research and consulting firm specializing in international business. It also promotes transparency and improves environmental and labor standards. Naysayers claim DR-CAFTA would promote corporate globalization, severely damage farmers in Central America and the U.S., lead to lower wages and job loss, privatize public services, and worsen environmental and labor conditions. Regardless of the alleged advantages or disadvantages, Peter Bendor-Samuel, founder and CEO of outsourcing consultancy Everest Group, says that DR-CAFTA will have no impact on outsourcing to the region. "Outsourcing has more to do with linguistics or the language than it has to do with the trade regulations. In terms of the free trade agreement, it doesn't really make any difference." Outsourcing to Central America was "growing at a steady, but modest rate," he says, "and it's not going to get an acceleration really from this." Beninatto takes a similar stance: "The main [negative] is the fact that you're relocating jobs, but they are usually low-wage jobs that are being transferred. We're talking about very small economies with not many skilled laborers. The impact of CAFTA is not really significant."
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