Central America needs a bold gesture from the US

The isthmus connecting the Americas may be small and far from Washington but it has a capacity to create alarm in the US out of all proportion to its size.

Ronald Reagan evoked a “mounting danger in Central America that threatens the security of the United States” when appealing for military aid in 1986 to fight the Soviet-backed Sandinistas in Nicaragua. More than three decades later, a big wave of migration from the region has created a major crisis for President Joe Biden. Over 569,000 migrants have been encountered at the southwestern US border since October 1, more than double the number in the same period a year earlier. Particularly distressing is the plight of tens of thousands of unaccompanied children.

What has not changed since Reagan’s day is the inability of most central American governments to build stable, prosperous, secure nations. Per capita GDP has grown only modestly in Guatemala, El Salvador, Nicaragua and Honduras over the past two decades, and they remain far poorer than Mexico or most of South America. 

Poor government plagues Central America: evidence in a US court has implicated the president of Honduras in drug trafficking. The long-ruling president of Nicaragua, Daniel Ortega, has turned increasingly repressive. A pioneering UN anti-corruption commission abandoned Guatemala in 2019 after a vicious campaign. El Salvador’s president marched troops into congress to intimidate lawmakers. A small, predatory regional elite controls business. Gang violence is pervasive and murder rates are high.

Climate change has hit Central America especially hard, creating a “dry corridor” inland from the Pacific coast from northern Costa Rica to Guatemala, where farmers struggle to subsist and food insecurity is high.

The US has made mistakes in the region as well. Last century, it was too willing to overlook the excesses of brutal regimes there, as long as they held the line against Moscow. More recently CAFTA, a trade agreement with the region signed in 2004, boosted trade but failed to generate lasting prosperity; critics blame overly restrictive rules.

Despite the huge challenges, there are positive stories. Costa Rica and Panama have far outgrown their central American peers; the former has pioneered eco-tourism and the latter reinvented itself as a regional business and financial services hub, albeit one criticised for lax controls. Both are prosperous enough to avoid the large exodus of labour which hurts the “northern triangle” of Guatemala, El Salvador and Honduras, where about 1 per cent of the population migrates every year.

The Biden administration’s answer to Central America’s woes is a major initiative to tackle the root causes of migration, backed by $4bn of aid. It correctly stresses the need to work with business and civil society as well as governments, and rightly emphasises democracy, the rule of law and fighting corruption.

Yet given the scale of the problems, this is unlikely to be enough. What is lacking is a bold gesture which would transform the climate for business and investment in the region and take advantage of the opportunities for nearshoring. Such a gesture would also offer Latin America a constructive alternative to the ever-closer embrace of China.

So Washington should cast aside protectionism and invite Central America to join the successor agreement to Nafta, the USMCA. That would be a step towards the original Clinton-era vision of a free trade area covering all of the Americas, a vision as compelling today as it was in 1994.