Courtesy Reuters

Union or Disunion in Central America?

LYING between the Panama Isthmus and the southern border of Mexico are five tiny republics. Having a combined population of less than six millions and raw materials of little value, these republics are of international importance largely because of the accident of geography. Should they fall under the control of a foreign power, the position of the United States at Panama might be threatened under prevailing international standards. The maintenance of the "independence" of these republics is therefore a "vital interest" of the American government. Central America has much the same political importance to the United States that Egypt has to Great Britain and Manchuria to Japan.

It has been customary to regard the Central American republics as "backward." Except in Costa Rica, the rate of illiteracy is high, revolutions are frequent, financial difficulties are chronic, per capita trade is extremely low. The course of the present international depression, however, has unsettled traditional judgments; many countries which have been regarded as "progressive" have fallen into the dumps; many "backward" countries have shown a high degree of stability and capacity to survive. It is not too much to say that Central America has weathered the economic and political storm of the last few years more successfully than supposedly further advanced countries in South America.

Nevertheless, in common with the rest of the world, Central America has suffered from the depression. The five republics have experienced difficulties in raising foreign exchange to meet their debts, and in balancing their budgets. During 1932, Salvador, Nicaragua and Costa Rica declared partial moratoria. No republic of Central America is however in complete default, in contrast to many countries elsewhere and to the bankrupt condition which existed in Central America twenty years ago. Central America's two leading exports -- bananas and coffee -- have slumped heavily. But the world price of coffee declined less during the last two years than that of any other of the world's raw materials; while the market for the mild variety which Central

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