Trade liberalisation, market deregulation and agricultural performance in Central America

One frequently encounters the argument that trade liberalisation and deregu lation of domestic markets in developing countries result in increased ince ntives for agriculture. This proposition is considered for the Central Amer ican countries, all of which passed through fundamental policy change eithe r in the 1980s or 1990s. After characterising the policy regimes in each co untry over various periods, the analysis moves to an inspection of agricult ural trade performance. The evidence indicates that liberalisation of forei gn trade and deregulation of domestic markets has not been associated with improved agricultural performance, It is suggested that the failure of agri culture to respond positively to policy changes can be in part explained by an unfavourable trend in world prices of the region's major tradable commo dities.