Central America is once again trending. Economies are struggling, COVID is raging, and democracy is failing the people. Hope for a better life, and the hopelessness of current conditions, is a powerful motivator, and migration has spiked. A bit more aid for the region and a bit less corruption won’t change that. What might make a difference: increased trade and greater investment.
Vice President Harris has now waded into these intractable issues with a visit to Guatemala and Mexico. Her stern “do not come” directive to potential migrants across Central America drove the news cycle, and there was additional fanfare about vaccine donations, corruption and increased development aid. Yet there was curiously little discussion about things that might be achieved to improve the attractiveness of regional economies for investment and job creation. Nor was there much apparent appreciation among commentators of the direct linkage between sluggish economic growth and weak or venal governance, including the increasingly autocratic rule of Nayib Bukele in El Salvador, Juan Orlando Hernandez’ chaotic leadership in Honduras and the Ortega administration’s democratic dismantling next door in Nicaragua.
These topics are fraught. Politically, the United States requires partners on the ground in Central America willing to implement a common agenda that will ultimately reduce migratory urges, at some political risk to regional leaders themselves. That’s tough to do with the current crop of regional leaders.
The economic debate is equally challenging: migrants in the United States are often accused of “stealing jobs.” On the other hand, investors who create jobs abroad, thus encouraging migrants to remain in their home countries, are sometimes accused of undermining the U.S. economy. The Trump administration raised these accusations to an art form, but they have long existed in the United States on both ends of the political spectrum. To wit: in a bizarre move cheered by both left and right, one of the key objectives of turning the North American Free Trade Agreement (NAFTA) into the The U.S.–Mexico–Canada Agreement (USMCA) was to reduce, rather than expand, U.S. investor protections in Mexico.
When it comes to Central America, downplaying or simply ignoring the trade and economic agenda is therefore the politically-astute course, whereas most people, presumably, are against corruption. But that won’t create jobs or put food on the table for the impoverished and destitute who will continue to migrate, nor will it create enforceable rule of law and incentives for transparency.
In the wake of the vice president’s travel, the United States will have to think bigger and bolder. Making a lasting difference will require sustainable regional growth, including formal linkage between USMCA and the countries comprising the Central America-Dominican Republic trade agreement (CAFTA-DR). Taking this step would strengthen critical supply chains to support post-pandemic U.S. economic resiliency in cooperation with USMCA partners Mexico and Canada. It would assist Central Americans within Central America, discouraging travel northward. And it would build anti-corruption efforts and support regional democratic practices.
Unlike most trade agreements, USMCA is politically popular in the United States, passed overwhelmingly by Congress. CAFTA-DR is the product of an earlier day and requires updating to incorporate modern trade provision in sectors including the digital economy, while also including advances on labor rights and environmental protections. Merging them within the USMCA framework could be politically popular.
And here’s where things get really interesting. CAFTA-DR has been an economic lifeline for the region, but it hasn’t prevented a deterioration of democratic practices in some nations. Negotiations to bring CAFTA-DR into accord with USMCA would give the United States a significant carrot to encourage if not compel better regional results across various indicators. As a point of leverage, inviting nations with sound democratic practices to negotiate early accession, including Costa Rica and the Dominican Republic, would provide incentives for a regional “race to the top.” Nicaragua, a budding dictatorship, would not be invited to join until and unless democracy returns to that blighted nation. Others, including El Salvador, Guatemala and Honduras, would be given the opportunity upon reaching certain thresholds on governance, anti-corruption, labor rights and other democratic determinants.
Happily, private sector leaders would then emerge as potent allies of improved regional governance and practice, because they would have skin in the game, particularly U.S. textiles and agriculture and retail sectors dependent on trade with Central America and the Dominican Republic.
Trade isn’t a panacea. It’s a tool to improve people’s lives. What Washington has been doing in Central America for the past generation on a broadly bipartisan basis hasn’t worked; doing more of the same will achieve similar results. Now is the time for a fresh start, aligning incentives with interests, in both the public and private sectors. That is something that regional trade expansion is surely able to support.
Eric Farnsworth is Vice President at the Council of the Americas.
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