The Dominican Republic-Central AmericaUnited States Free Trade Agreement (CAFTADR): Developments in Trade and Investment
J. F. Hornbeck
Specialist in International Trade and Finance
April 9, 2012
Security, Governance, Corruption, and Economic Freedom
Many CAFTA-DR countries suffer from structural problems in governance. First, tax systems in many countries are regressive and provide inadequate revenue to meet public needs, hindering development. The Costa Rican tax burden is roughly 23% of GDP, twice that of Guatemala, and significantly higher than the other countries except Nicaragua.
Inadequate and regressive tax systems, combined with a general bureaucratic ineffectiveness, are incapable of helping make adjustments that might diminish the region’s high levels of inequality. These deficiencies have been directly linked to the growing violence and crime much related to drug trafficking, which threatens the social fabric of society.