Good Neighbor Politics: Investing in Central America Benefits the US


TACOMA, Washington — Many often celebrate Central America for its lush forests, stunning wildlife and tropical climate. From Guatemalan bananas to Panama’s famous canal, investing in Central America remains essential for the average American’s quality of life. Over the years, a number of free trade agreements and rising cultural familiarities through sports like baseball built a genuine relationship between the two regions. In fact, annual trade was valued at almost $58 billion in 2018, according to The Office of the U.S. Trade Representative (USTR).

Unfortunately, despite a century of thriving commerce between Central America and the U.S., hostility between the two countries has grown. Refugee crises fueled by an illicit drug trade have destabilized vast regions of Central America. The U.S.’s reaction to these situations increasingly focuses on enhanced border security. However, with immigration remaining a top U.S. concern, new solutions that prioritize investment into Central America rather than bolstering border checkpoints are gaining steam. Paralleling the Marshall Plan that followed The Second World War in Europe, investing in Central America through an aid program could not only raise millions of people out of poverty but also enhance U.S. security and provide new markets for U.S. goods.

Central American Poverty

The nations of Guatemala, Honduras, El Salvador, Nicaragua, Panama, Belize and Costa Rica collectively make up Central America. With the exception of Costa Rica, many of these nations continue to suffer from an aggressive War on Drugs that has left deep scars in this region’s demographics. According to a 2019 report by the U.S. Global Leadership Coalition, nearly half of all Guatemalan and Honduran families live in poverty.

Extraordinary rates of youth unemployment are partially responsible for high rates of poverty. Unemployment affects around 16 million people younger than 24 in the nations of Honduras, Guatemala and El Salvador alone. High rates of unemployment are often prerequisites to crime, violence and harrowing living standards. All these factors lead to refugee crises and increased emigration.

The U.N., therefore, classifies many Central American nations with Human Development Index (HDI) levels similar to the least developed countries in sub-Saharan Africa despite the fact that their gross domestic product (GDP) levels per capita are typically valued much higher. With such high unemployment rates and violent drug trade, Central Americans can only turn northward for safety and stability.

Modern Responses to Poverty-Induced Migration

The anxiety of refugee crises and mass migration now aggravates U.S. politics. There are continued economic ties between Central America and the U.S. However, modern leadership has recently focused on enhanced border security and a more militarized approach to immigration. These trends are easily seen in the annual budgets for border enforcement, which rose from $363 million in 1993 to nearly $4.9 billion by 2020. This level of spending far outpaces the total foreign aid to Central America, which is .035% of the federal budget, or $1.68 billion.

While border security is incredibly important, the effects of this spending delivered limited positive effects. New appeals that focus on investing in Central America for poverty reduction are gaining popularity. This is in part due to the roaring success of the last major U.S. foreign investment program, the Marshall Plan.

The Original Marshall Plan

The Marshall Plan was a series of loans that the U.S. provided to Western European nations following the devastation of World War II. It is one of the U.S.’s finest post-World War II accomplishments. In just a few short decades, many of Europe’s most important industries, including tourism and manufacturing, were rebuilt from scratch with favorable U.S. loans and grants.

Some historians argue that the overarching goal of the Marshall Plan was to minimize the spread of communism in Europe. However, the primary goal was to see the reduction of Europe’s massive post-war poverty. No nation had previously attempted such a widespread and ambitious infrastructure and development plan. With an estimated cost of $13 billion, nearly $100 billion in today’s money, the stakes were high. Yet, the payoff was high as well.

Last year, America and Europe traded an estimated $807 billion with each other, a more than eight-fold return on investment. Furthermore, nearly $320 billion of that trade consisted of American exports, including technological products, automobiles and agricultural products. Today, Europeans enjoy some of the highest qualities of life in the world and many European nations are indispensable partners for the U.S.’s government and business community.

Investing in Central America is not only vital for the U.S.’s national security but it also presents an amazing opportunity for U.S. businesses and consumers. Reductions in poverty due to investment in education, infrastructure and economic freedoms often lead to reductions in violent crime and corruption. If invested correctly, a modern Central American Marshall Plan would bring prosperity to Central America and the U.S. This could offer the enticing prospects of future relationships built on mutual trust and respect.

Saarthak Madan
Photo: Flickr


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