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Central America is the isthmus connecting North and South America, and though geographically considered part of the North American continent, it is rarely included in cultural, economic, or political mentions of North America. The North American Free Trade Agreement, for instance, does not include any Central American country. Some discussions of Central America include Mexico, which shares a Spanish heritage with the Central American nations that it does not with the bulk of North America (though this glosses over the long Spanish history of much of the United States and the interconnections of American and Mexican history). With the exception of Belize and Panama—neither of which yet existed—the nations of Central America were members of the Federal Republic of Central America, a democratic state that existed from 1823 to 1840, after the region became independent from Spain. Political instability prevented not only the survival of the republic, but the planned construction of an inter-oceanic canal, an idea that was not realized until the construction of the Panama Canal in the 20th century.

That was not the last gasp of Central American integration, though. Throughout the 20th and 21st centuries, region-wide institutions have developed, moving toward the possibility of a European Union–

like regional unity. The Central American Court of Justice that was instituted in 1907 was first proposed by Mexico and the United States, and was hashed out at the Central American Peace Conference that was hosted by Secretary of State Elihu Root. Rather than attempt political union at that time, Root and others suggested that they agree to a common court of justice. The experiment lasted 10 years, until Nicaragua terminated its involvement and the other countries decided not to continue without it; member state governments were unhappy with the extent of the court’s jurisdiction, while judges were unhappy with their governments’ influence on their decisions.

In the aftermath of World War II, as the world reorganized itself in light of the end of European empires and the beginning of European union, and amidst the growing global conflicts of the Cold War, more serious discussions of integration began. Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua signed a 1951 treaty creating the Organization of Central American States (ODECA) to promote regional cooperation, and reinstituted a regional court, the Corte Centroamericana de Justicia (CCJ). In 1960 the governments of Central America made plans for the Secretariat for Central American Economic Integration, the Central American Bank for Economic Integration, and the Central American Common Market, but when war broke out between Honduras and El Salvador in 1969, integration came to a halt.

It was revived again in 1991, in the aftermath of the Cold War. The Central American Integration System (SICA) was instituted by the countries of Central America with the addition of the Caribbean nation of the Dominican Republic. The CCJ’s role was refined to promote peace among member-states, and has jurisdiction over cases between member-states, between member and non-member states when the latter consents to jurisdiction, between any state and any resident of a member-state, and cases that involve the integration process. Significantly, it also has the power and responsibility to consult with the Supreme Courts of member-states, for the purpose of promoting a common legal philosophy in the region. There is also a Central American Parliament (Parlacen), with directly-elected members, though Costa Rica has not yet ratified its charter and remains a non-participant. Though not as unified as the European Union, SICA certainly represents an intent and goal of Central American unity to a similar degree.

Of the Central American nations, Guatemala is the most populous with about 13 million people, though El Salvador, at half the size, is twice as densely populated. Primarily rural Belize, with 300,000 people, is both the smallest and by far the least densely populated (13 people per sq. km versus the 330 of El Salvador). Critical to the Central American economy is the Panama Canal, which remains one of the most ambitious engineering projects ever undertaken. Proposed for years, not until the advances of the late Industrial Revolution (as well as the resulting adoption of faster ships and impatience at having to travel around the continent) did the canal come to fruition. The canal saves some 8,000 miles of travel, and even today, when air travel has reduced the role of water travel, the canal remains so busy and such an integral part of the international shipping industry that ships over a certain size (the Panamax size, the largest the canal can accommodate) are called super-Panamax ships. In 2008, 14,702 ships passed through the canal, roughly a 10-hour journey.

Country Profiles

Belize is the only Central American country where English is the official language (Spanish, and the local Creole, are “recognized languages”), a reflection of its heritage as a part of the British Empire from 1638 to 1981, during most of which time the country was known as British Honduras. Though one of the least-populated countries in the world, it also has one of the highest population growth rates. The economy is focused on the private sector, especially agriculture; bananas and sugars account for the largest part of the economy. The climate, coast, and Mayan ruins have all contributed to the tourism industry, which grows steadily. The ramifications of the 2006 discovery of oil in the Mennonite town of Spanish Lookout have not yet become clear. The Belize Dollar is pegged to the U.S. dollar at 2:1.

Though Costa Rica has a higher per-capita GDP than many other developing nations, it suffers from rampant inflation (just under 10 percent) and chronic trouble with its infrastructure. Sixteen percent of the country lives below the poverty line, but with the economy growing steadily, it has pioneered social aid and welfare, with its per capita spending on the poor and struggling comparable to that of Western European countries. In an effort to attract foreign investment, tax exemptions have been offered, and companies like Procter & Gamble and Intel have recently opened large facilities. The currency is the colon, which trades at a floating exchange rate, a free market initiative that the government hopes will discourage the long practice of citizens relying on American dollars instead of domestic money.

El Salvador faces significant economic and social problems. More than 30 percent of the population lives below the poverty line, with underemployment widespread (unemployment hovers around 6 percent). One of the poorest Latin American countries, El Salvador is frequently troubled with natural disasters—not only hurricanes, but the earthquakes that result from being on the Caribbean Plate. The government is committed to free market initiatives and has privatized the banking system and much of the infrastructure, including telecommunications. The domestic currency, the Salvadoran colon, was abandoned in 2004, three years after the U.S. dollar was adopted as legal tender and the unit of currency for all accounting and bookkeeping purposes.

The developing company of Guatemala has 29 percent of its population living below the poverty line, and a trade deficit so significant that remittances from Guatemalan expatriates—sending money back home to their families—outweigh export and tourism revenues combined. The export sector of the country is in flux, struggling to find a successful export good. Currently most exports are agricultural—fruits, vegetables, flowers, coffee, and sugar—with textiles secondary. The currency is the Guatemalan quetzal, previously pegged to the U.S. dollar but currently traded at a floating exchange rate.

Honduras enjoys greater economic growth than most of Latin America, about 7 percent a year—but half the country lives below the poverty line, and unemployment sits at a staggering 28 percent. The country is deeply in debt, with international subsidies necessary to keep the government-operated electrical services operating, and price controls on basic commodities to avoid commodity crises. Nevertheless, there are significant natural resources, especially biological resources, from which the country can benefit once its infrastructure is improved and economy stabilized. The currency is the Lempira, which trades at a floating exchange rate.

Primarily an agricultural country, Nicaragua is known worldwide for its Flor de Cana rum; other sources of revenue include cash crops like coffee, sugar, and tobacco, fisheries, mining, and remittances from expatriates. As much as 28 percent of the population lives below the poverty line, and half of them are either unemployed or underemployed. Most of the indigenous population lives on less than $1 a day. Like much of the region, though, Nicaragua has experienced steady economic growth in the 21st century, though thanks to the infrastructure damage and general problems of the civil war of the 1980s, the economy is best described as “recovering” more than “developing.” The cordoba trades at a floating exchange rate.

The fastest growing economy in Latin America after Peru, Panama nevertheless has a 28 percent poverty rate. The presence of the canal plays into the fact that the economy is mainly service-based, but other major services apart from shipping and trading include banking, finance, and tourism. Trade is high and inflation low. The balboa is pegged to the U.S. dollar, but the dollar itself is used as often as domestic currency.

Bibliography:

John A. Booth, Christine J. Wade, and Thomas W. Walker, Understanding Central America: Global Forces, Rebellion, and Change (Westview Press, 2005);
Eliana Cardoso and Ann Helwege, Latin America’s Economy: Diversity, Trends, and Conflicts (MIT Press, 1995);
Jeffry A. Frieden, Manuel Pastor Jr., and Michael Tomz, Modern Political Economy and Latin America: Theory and Policy (Westview Press, 2000);
Hector Perez-Brignoli, A Brief History of Central America (University of California Press, 1989);
Ralph Lee Woodward, Central America: A Nation Divided (Oxford University Press, 1999).

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