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The Importance of US Leadership in Central America’s Recovery

The difference between Biden and Trump is as black and white as their administration’s policies. Biden has pledged $1.9 trillion for his American Rescue Plan, inducing fiery angst across the aisle. His sharp focus on the 2030 and 2050 climate targets is a political ‘180’ to Trump’s withdrawal from the Paris Agreement. These policies grab headlines and drive opinion polls. Media noise distracts us and makes us naïve to the reality that governments face. Only 100 days have passed since Biden’s inauguration, and the challenges his administration must confront are the same that faced Trump.


One of the most pressing issues is the US-Mexico border. The current administration must tackle the Central American migration crisis in order to prevent more human rights violations and promote regional stability. COVID-19 has condemned more and more Central Americans to brutal poverty traps. A severe hurricane season struck a blow to the solarplexus of Honduras and Nicaragua. Migration shelters on the Mexico-US border are at triple capacity. The unrelentless pressure has forced Biden’s hand – more than 600,000 migrants have been expelled from the US under his premiership. The Trump and Biden approach are so far not dissimilar, so how can the latter make the progress that his predecessor could not?


The answer, much like the issue itself, is complex and interconnected. In order to devise solutions to problems, one must always understand why they exist.


The key issues

Central Americans are amongst the world’s most vulnerable to cyclical traps. Regional poverty rates are severe. Honduras’ 2018 GINI coefficient was 52.1, amongst the highest in the world. In the same year, Guatemala’s GDP per capita was only $4,549. Since 2000, El Salvador’s economic growth has only twice exceeded 3%.


Whilst every country is unique, they share common political trends that can be identified within their political structures. First, the vast majority of Central American states suffer from institutional weakness. The difference between a strong institution and a weak one is that the former has the capacity to invoke behavioural change. This can be represented as a state’s ability to collect tax revenues. Guatemala, for example, only collected 9.7% of its GDP in taxes in 2019. The extent to which this depletes state capacity should not be underestimated. Without money, states are severely limited in their ability to enforce laws and provide infrastructure. If a state cannot fulfil its basic functions, then its people do not receive the aid they need to prosper, and poverty thrives.


In many ways, a state is much like a living entity. If its vital organs – education, economy, healthcare – are weak, then it will fail. Furthermore, the body is more susceptible to political viruses. Central America is particularly prone to the ‘corruption strain.’


For development scholar Jack Goldstone, corruption magnifies and entrenches weak institutionalism. Every day that corruption persists within a political framework, it festers and decreases the state’s chance to overcome it. In Nicaragua, Daniel Ortega’s tight grip on power is widely seen as illegitimate, and corruption scandals are common. Nicaragua was always institutionally weak, but the uproar at Ortega’s constitutional tampering has provoked civil unrest since 2017 , sparking violence and economic contraction. Its northern neighbour, Honduras, epitomises state corruption. The national economy is controlled by a minority of wealthy families, and President Juan Orlando Hernandez’s presidential campaigns were proven to be funded by convicted narco-financiers. Over 50% of Hondurans believed that national corruption had increased in 2019.


In a broader sense, none of the Central American states are likely to pass Goldstone’s ‘test’. From a theoretical framework, each state could potentially fail. Indeed, some have already begun to.


External Pressures

With a weak and corrupt political framework, these states are extremely vulnerable to external threats, the main one being climate change. In 2020, Hurricanes Eta and Iota completely wiped out Honduras’ fragile infrastructure. Nicaragua suffered similar wounds; its economy contracted by 2.5% due to hurricane damage. Where wind and rain have disrupted the eastern regions, droughts and heat have scorched western economies. Guatemala’s key agricultural regions, such as Chiquimula and Esquipulas, have suffered from severe rainfall disruptions. This decreases coffee yield, a key Central American export. Unsurprisingly, the economic future of the dry corridor, is stark, thus many of its inhabitants seek the wetter, more fertile lands further north.


Prisoners of their geography, Central American states are ideal for narcotic transit. Narcotrafficking and narco-corruption have become primary economic activities for Central American governments. For example, more than 12.5%, of the Honduran state budget is lost on an annual basis to corruption, and 80% of US-bound cocaine is deposited on the shores of Honduras and Nicaragua. Elitism and low-public investment are fuelled by the narcotics trade network. For the millions of Central Americans who are victim to the violence and poverty this framework induces, it is no surprise why migration is popular. In a land of danger and poverty, physical escape is the only way out of these vicious poverty traps.


What Can Biden Do?

Given such an embedded and impregnable framework, there is little optimism for clear-cut solutions. Whilst we must remember that no single strategy will work on its own, one facet is undoubtedly clear: change must come from within these state systems. No matter how much aid is given to a country, if it is governed by a corrupt framework, there is little chance these investments will reach the people who need it.


With this being said, there is still hope, and scholars have identified potential mechanisms that kickstart economic growth. One is targeted venture capitalism; whereby regional business networks are set up with rural communities. Another is ‘territorial governance’, where communities can operate as a self-sufficient entity, driven by common economic practices which deter the temptations of corruption and stimulate growth. The pressing issue of our age is not the challenges themselves – humans will always have the innovation to engineer solutions. Instead, our worst enemy is the limited time we have to develop and implement these strategies. This article has given a brief overview of the drivers behind mass migration, but many more pages ought to be written to do Central America analytical justice.


For Biden’s administration to have any chance of devising effective solutions, it must understand why migration push-factors exist. With the US border under increasing pressure, a global pandemic, and the world’s leaders tasked with a green recovery, now is the time to formulate Central America’s revival.


Written by Hector McKechnie


Hector McKechnie is a columnist at DecipherGrey.