At a time of global uncertainty, Central America presents opportunities for growth and sustainable recovery driven by its dynamism and economic integration. On 29 October, policy-makers and trade experts from the region and beyond discussed the bloc’s economic performance. They acknowledged the vital role integration has played in strengthening resilience and unlocking investment opportunities. The OMFIF meeting marked the launch of ‘Central America: Integration, investment and trade opportunities’, the inaugural edition of an annual publication that intends to keep track of the region’s development and highlight ways to bolster investor access and sustainable growth.
In the words of Gloria Hooper, UK trade envoy to Costa Rica, the Dominican Republic and Panama, ‘The report is a tool for anyone who is interested in doing business in Central America, and we want to do business.’ The region presents myriad investment opportunities, particularly in green transport and energy, which have fuelled considerable interest around the world.
Dante Mossi, executive president of the Central American Bank for Economic Integration, said that the bloc is accelerating the deployment of electric buses and vehicles. Costa Rica, he noted, is making good progress on its plans for an electric railway. Countries are preparing several energy infrastructure projects, such as the use of natural gas as a cleaner source of energy for heating and electricity generation.
The OMFIF report, produced jointly with CABEI, revealed that Central America stood out from the rest of Latin America and the Caribbean as the only bloc to have year-on-year export growth in the first quarter of 2020, despite the pandemic. Mossi explained that economic integration had been crucial to the region’s performance. The US is Central America’s main export destination, though intraregional trade is almost as important. During the pandemic, Central American countries kept their borders open exclusively for trade with each other. A number of projects are underway to further enhance these trading links, such as a ferry between Costa Rica and El Salvador, aimed at shortening commercial routes and lowering freight rates.
Dongjoon Kim, executive director of CABEI representing the Republic of Korea, highlighted the region’s geography as one of its key advantages. Every country in the bloc has direct access to the sea. South Korea, eager to help the region make the most of this benefit and forge relationships with new trading partners, has invested in the construction of ports throughout the Caribbean coast of Central America.
South Korea was the first Asian country to establish a free trade agreement with Central America, though its links to the region extend beyond commerce. It is a key partner for co-operation and foreign investment. Kim noted that Central America offers great promise for internet and communications technology infrastructure as it is host to more than 40m internet users. He detailed a project aimed at combining Korea’s ICT competitiveness with Central America’s growth potential.
As integration intensifies, Central America could develop a single market with important weight in global economic terms for investment and trade. Among opportunities highlighted in the OMFIF report, countries could work together to make Europe a top destination for the region’s coffee exports. Hooper said coffee was one of the most recognisable Central American products found in the UK. Mossi announced the launch later this year of an initiative to boost exports of speciality coffee from the region to the world. He stressed that importance had been given to growing the coffee responsibly, as well as its social impact as most beans are hand-picked by indigenous women.
About the ‘Central America: Integration, investment and trade opportunities’ report
The report covers eight countries: Belize, Costa Rica, the Dominican Republic, El Salvador, Honduras, Guatemala, Nicaragua and Panama. It presents a wide-ranging view of the region through five pillars: a macroeconomic overview; commerce, external trade and foreign direct investment; integration; finance, tax and transparency; and sustainable investment. The report looks at the results of an integration project that goes back more than 60 years, and aims to highlight the region’s potential by identifying growth opportunities and evaluating countries based on quantitative and qualitative indicators that are important to foreign investors.
Natalia Ospina is Research Assistant at OMFIF.