ID21 Home page About ID21 Links Contact ID21 ID21News ID21 Insights Site map Central America's free trade flop. Why liberalisation failed to boost agricultural performance During the 1980s many developing countries adopted trade 'liberalisation' policies such as the lifting of exchange rate controls. They expected a boost to the agricultural sector's export performance to be among the gains, spurring higher levels of production. Liberalisation superseded interventionist trade policies such as import substitution, that were perceived to cause distortions and so work to agriculture's disadvantage. The SOAS study probed the performance of the agriculture sector in five Central American countries that have adopted liberalisation policies.
Various assumptions underpin the notion that liberalisation ought to favour agriculture.
Yet the research findings flatly contradict these orthodox notions. For all five countries in the study, exports grew most rapidly during the years when import substitution strategies were most rigorously implemented. The results also show that liberalisation had no real impact on growth of exports in general. As for agriculture, the study found that only in Costa Rica did liberalisation coincide with a rise in net agricultural exports. In four out of five cases, agriculture exports declined after liberalisation.