CAFTA Rules on Sovereign Debt: Cementing the Chains of Debt (May 2005)

Rethinking Bretton Woods | Wed, Apr 13, 2005

By Aldo Caliari
The rules of the Central American Free Trade Agreement (CAFTA) have been widely criticized by debt campaigners for embodying a model of development that is certain to maintain, if not worsen, the debt woes of its developing country members. In spite of this, CAFTA rules that directly govern the treatment of sovereign debt have received relatively little attention and exposure. In fact, by extending to sovereign debt the application of rules elaborated in the context of investment agreements and with the aim of protection of foreign investors (such as Most Favoured Nation, National Treatment and investor-state arbitration), CAFTA spares no effort to close all possible exits to the debt problems of Central American countries.

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