Graduate School of International Studies Ajou University
The Central American and Dominican Republic Free Trade Agreement with the United States (DR-CAFTA or simply CAFTA), is the most important FTA signed by the region, this work suggests that there has been a general positive effect of CAFTA for the services sector of El Salvador. We found increases for El Salvador in FDI levels, particularly in those areas in which liberalization had been agreed, the same improved growth rates can be found in employment in the services sector and economic growth, where positive correlations are discovered between these indicators and overall services trade and services FDI. For most Central American countries that placed into force CAFTA before 2009, statistics show that trade in services as a whole has increased and important changes in growth are observed. Although trade deficits in services have become more profound during the first years of implementation of the FTA, we found a positive correlation between employment level and trade in services, thus our analysis also suggests that fostering trade in services should increase employment levels in Central America.