Migrants cross the border from Honduras to Corinto, Guatemala, October 1, 2020.
Is the economic development of the northern triangle – Honduras, El Salvador and Guatemala – a lost cause? No, said the former World Bank Group Director.
Juan José Daboub.
A Salvadoran entrepreneur is driving efforts to boost development in the region by connecting foreign investors with locals willing to share their risks and experiences.
The HUGE Business Council – an acronym for Honduras, the United States, Guatemala and El Salvador – aims to create one million jobs over the next three to five years through short supply chains serving U.S. manufacturing. It also proposes to raise capital to build or rebuild facilities such as roads, ports and airports, and to bring American natural gas to the region.
The board already includes several large companies, including Parkdale, one of the world’s largest yarn producers, and the clothing company Intradeco.
The idea fits perfectly with the vision of a commercially connected Central America, Mexico and the US Gulf Coast – rail and shipping were highlighted in a 2017 report on Mexico-US relations by Mexico’s Council on Foreign Affairs.
Citing investments in logistics and transport infrastructure, the report calls for a full upgrade of the rail line connecting Guatemala to the tip of the Yucatan peninsula to open a new border with the eastern United States: Consideration should also be given to extending this line to Tegucigalpa in Honduras. Fibre optic cables can also be laid on these railway lines.
These are private initiatives, but they need public support, and that is a problem. American politicians on both sides of the aisle love to stand at the southern border and complain about the poverty and misery that drives desperate migrants north. But confronting the progressives who shape counterproductive U.S. foreign policy and the unions who side with the venture capitalists is another matter.
The challenge we face is restoring order and managing the large number of unaccompanied minors currently at the U.S. border. But the big picture will only change if Central America changes.
Great migration is about opportunity, and contrary to what American nativists think, the magnet that attracts so many people al Norte weakens when there are jobs closer to home. If you build it, they will stay.
Rising production costs in China and problems related to the use of forced labor are forcing Western manufacturers to look at America differently. The HUGE Business Council believes this creates new opportunities in a region that can benefit from the comparative advantages of proximity to the United States and a young, dynamic workforce.
HUGE members participate in investments in companies that meet labor, environmental and corporate governance standards. In a telephone interview from Washington on Friday, Daboub told me that the council estimates that infrastructure needs alone represent an investment opportunity of about $10 billion.
Corrupt bureaucracy in Central America makes headlines. But there is progress towards a market-oriented policy. The Honduran Congress has opened the electricity market to competition. The Electricity Commission is preparing to accept bids from private operators who want to invest in transmission and from wholesale energy suppliers who want to act as market makers. Consumers will soon be able to buy at a negotiated price from wholesalers or producers, whether national or regional.
Competitively priced electricity, which is essential for the manufacturing industry but was not available in Honduras, is now within reach.
A major obstacle to establishing a supply highway between Central America and the eastern United States is the Jones Act of 1920, which prohibits cabotage between U.S. ports unless the ships are uniformly built and manned. Incidentally, a 2017 report by the Mexican Council on Foreign Affairs noted that transforming the economy and psychology of the Gulf of Mexico and promoting development in Southern Mexico, Central America and Louisiana, Alabama and Florida would be particularly relevant.
The Jones Act, a relic of the protectionist past, survives on special interest politics. This is not the only example of the government doing more harm than good in the region. The U.S. Agency for International Development supports left-wing groups in Guatemala who advocate for a new multi-ethnic constitution that would create a parallel legal system and allow local communities to choose which law they wish to enforce. Proponents call it decentralization, but it would undermine the rule of law and encourage the return of Cactus, the local political boss.
The Biden administration has said it wants to address the causes of migration by cutting $4 billion from its budget for the region. But any effort that cannot free the animal spirits from capitalism will be dead in advance.
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Appears on the 22nd. March 2021 in the print edition.
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