In This Review

Unleashing Central America’s Growth Potential
Unleashing Central America’s Growth Potential
By Hulya Ulku and Gabriel Zaourak
World Bank, 2021, 60 pp.
U.S. Strategy for Addressing the Root Causes of Migration in Central America
U.S. Strategy for Addressing the Root Causes of Migration in Central America
By the National Security Council
White House, 2021, 20 pp.

Two policy reports probe the reasons why so many people leave Central America to come to the United States. Both advance reasonably well-integrated economic models of development grounded in recent history. Both propose comprehensive reforms; each package is reasonable in isolation but utterly daunting when considered in combination. The World Bank study dismisses the common notion that development in Central America has failed; rather, for nearly three decades, annual economic growth rates have averaged over 4.5 percent in the region, exports have expanded robustly, per capita incomes have risen, and poverty has fallen. But future growth will depend on confronting formidable challenges in those areas in which the region lags significantly behind: the quality of education and the productivity of labor; the infrastructure for transportation, power, and digital connectivity; the transparency and efficiency of public institutions and regulatory regimes; and, in El Salvador, Guatemala, and Honduras, the ability to bring down the high rates of violent crime. Addressing these shortcomings should help attract foreign investment and multinationals looking to shorten supply chain lead times. Powerful global value chains can upgrade the sophistication of the region’s exported goods (apparel, medical devices, auto parts) and services (outsourced business processes, call centers, tourism) and add value to traditional agricultural exports. Pragmatic public-private collaborations can help businesses raise labor productivity and create well-paying jobs. The report warns, however, that achieving these goals “demands a strong strategic vision, policy coordination and building state capacities.”

The Biden administration aims to attack the root causes of illegal immigration (even though, in the post-pandemic recovery, the U.S. economy faces crippling labor shortages)—broadly identified as soul-crushing poverty, public and private corruption, and violent crime. The U.S. strategy paper’s economic assessments and prescriptions are generally in line with those of the World Bank. But for the U.S. government to propose to liberate regional governments historically tied to Washington from “entrenched networks of corruption and impunity” by empowering civil society and independent media is a startlingly radical, ambitious shift. The United States also advocates the rights of workers to bargain collectively (whereas the World Bank prefers fewer restrictions on labor markets). Further reflecting the intersection of the Biden administration’s foreign policy and its domestic agenda, the United States will give priority to combating sexual, gender-based, and domestic violence in Central America. The U.S. paper issues this warning to regional governments: “Partnership requires a shared commitment to inclusive and transparent democratic governance.”