Why is so much of the region corrupt, violent and poorly governed? And is there a chance for change?. Central America struggles with corruption, violence and emigration. Costa Rica’s unique success offers lessons in development. Challenges persist due to weak institutions and historical factors.
In
recent years, Central American countries have been plagued by democratic
backsliding, corruption, gang activity, drug trafficking and violence. Seeking
economic opportunities and an escape from oppressive conditions, significant
numbers of Central Americans continue to emigrate. The roots of these problems
are complex and multifaceted, growing out of structural obstacles as well as
poor public policy, a tolerance for corruption and a lack of elite commitment
to liberal democracy. The experience of Costa Rica, a significant outlier from
the region’s pattern of dysfunction, may offer some lessons for promoting
development, although its exact recipe for success may be difficult to
replicate.
Democratic
deficits
The
region’s seven countries (Honduras, El Salvador, Guatemala, Belize, Nicaragua,
Costa Rica and Panama) have been in the news for all the wrong reasons. Since
2018, Nicaragua has become an authoritarian regime, with President Daniel
Ortega detaining and imprisoning political opponents, intellectuals, former
ministers, ruling party members, and even high-ranking members of the Catholic
Church. NGOs must register as “foreign agents” and the government has attacked
what remains of the free press.
Not to
be outdone, the leaders of El Salvador, Guatemala and Honduras have also
weakened their countries’ already fragile democracies by concentrating power in
the executive, attacking the press and dismantling independent anti-corruption
bodies. Since coming to power in 2019, El Salvador’s President Nayib Bukele, a
charismatic populist, has systematically removed institutional constraints on
his rule, eliminated an agreement to establish the International Commission
Against Impunity in El Salvador (CICIES) backed by the Organization of American
States, and proposed sweeping electoral changes designed to benefit his party.
In
Guatemala, the government disbanded the International Commission against
Impunity in Guatemala (CICIG) in 2019, while President Alejandro Giammattei has
undermined the justice system, fomented corruption and in 2023 barred nearly
all opposition candidates from running for office.
Meanwhile,
former Honduran President Jose Orlando Hernandez closed his country’s
OAS-backed Mission to Support the Fight against Corruption and Impunity in
Honduras (MACCIH) in 2020 and was extradited to the United States on drug
trafficking and firearms charges in 2022.
Tolerance
for corruption
Moreover,
corruption is dispiritingly common and even tolerated. Scandals have beset
governments in El Salvador, Honduras and especially Guatemala, and the official
response has been to attack the rule of law by undermining or co-opting the
justice system and the independent press. Not surprisingly, Central America
places well below the median in Transparency International’s 2022 Corruption
Perceptions Index, with Panama ranking 101 out of 180 countries, El Salvador at
116, Guatemala at 150, Honduras at 157 and Nicaragua at 167. Only Costa Rica
(48) ranks in the top 50 percent globally.
Weak
political institutions and poor governance have led to shoddy public services,
limited social mobility and rampant insecurity. Central America suffers from
some of the highest homicide rates in the world, with all seven countries among
the global top 20 in 2021 according to the Igarape Institute; Honduras comes in
a dismal second. In addition to each of the individual tragedies, the violence
also reduces confidence in politicians and in democracy, decreases
interpersonal trust, encourages migration and frustrates development.
The
economic situation is also challenging. Historically, Central American
economies have been dependent on commodity exports, making them vulnerable not
only to the vagaries of international markets but also to natural disasters.
And while the region’s economy grew at an average rate of more than 4.5 percent
a year from 1990 to 2017, powered by manufacturing and services, productivity
growth was sluggish. Labor accounted for two-thirds of the region’s gross
domestic product growth, fueled by rapid and unsustainable expansion of the
working-age population.
The
inequality, corruption and criminal violence have all been exacerbated by the
Covid-19 pandemic, and predictably, Central Americans continue to flee their
homes in search of better opportunities. Between October 2019 and March 2023,
El Salvador, Guatemala, Honduras and Nicaragua accounted for nearly one-third
of authorities’ 5.8 million migrant encounters at the U.S. southern border.
Oligarchy’s
long shadow
The
roots of these problems are deep and complex. Economically, Central America was
never a great source of mineral wealth. Its plantation societies featured a
small class of landed elites and a large landless peasantry, with high
political, social and economic inequality. In El Salvador, for example, the
Fourteen Families oligarchy controlled most of the economy, including land and
the banking sector, during the late 19th and early 20th centuries, and persists
today. Central American countries have some of the highest income inequality in
the world.
Attempts
to address this inequality through electoral politics were largely defeated by
a combination of elite resistance and pressure from the U.S. Throughout the
20th century, the landed oligarchy sought to preserve the status quo, resisting
democratizing pressures from below. In Guatemala, the election of progressive
ex-military officer Jacobo Arbenz in 1951 threatened both entrenched elites and
U.S. business interests after he seized fallow United Fruit Company (UFCO) land
with promises to redistribute it; he was ousted in a U.S.-backed military coup
in 1954. Driven by its fears of communism during the Cold War, the U.S.
supported right-wing authoritarian governments that maintained the status quo.
In this environment, democracy – and left-wing parties – found it nearly
impossible to take root.
Absent
institutional channels for political or economic change, peasants and other
political opponents joined popular resistance fronts and guerilla groups
against their governments, leading to deadly civil wars in Guatemala
(1960-1996; 200,000 killed), Nicaragua (1960-1990, 35,000-50,000 killed), and
El Salvador (1979-1992, 75,000 killed). The interrelated effects of these wars
were devastating: broken families and a traumatized citizenry, low economic
growth and limited labor opportunities, and massive migration to the U.S. –
and, after the migrants were deported back to the region, the emergence of
brutal transnational gangs.
This
combination of factors meant that with the exception of Costa Rica, Central
American states were late and incomplete democratizers. Even after its arrival
in the 1980s and 1990s, democracy was never deeply consolidated, and was
especially vulnerable to attacks by leaders seeking to concentrate power. And
the pervasiveness of violence has helped push jittery voters toward politicians
who promise law and order, regardless of their commitment to democratic ideals.
Lessons
from Costa Rica?
However,
there is at least one success story. Costa Rica achieved stable democratic rule
in 1949 as well as comparatively high levels of economic development, foreign
investment and public integrity. It is also a tourist mecca, drawing visitors
to its rainforests, mountains and beaches.
Part of
the country’s success is undoubtedly due to historical and structural factors.
Some scholars argue that a low population density and lack of mineral resources
made present-day Costa Rica unattractive to the Spanish Empire, helping produce
a more egalitarian community. Unlike the plantation societies in the rest of
the region, in Costa Rica, the rise of the coffee industry, in conjunction with
land abundance and labor scarcity, produced a large class of small and
medium-sized rural property holders. With fewer ethnic and class cleavages than
its neighbors, Costa Rica was largely free of the conflict between landlords
and landless peasants that led to repression and guerrilla warfare elsewhere.
Others
argue that Costa Rica’s outlier status has to do with elite behavior and the
state-building process. This perspective maintains that a small emerging elite
of business owners and urban professionals used public policy to deal with
social conflict and expand their own economic opportunities, helping create
high-quality public institutions and promoting democracy.
Costa
Rica also suffered less U.S. interventionism than its Central American
neighbors during the 19th and 20th centuries, saw its last military coup in
1917 and has been free of internal conflict since a 44-day civil war in 1948.
After that incident the country abolished its armed forces, freeing up
resources for other public goods such as education and healthcare.
It may
be difficult for countries in the region to replicate Costa Rica’s
achievements, which would require a change in political will. But the country
still offers important lessons about elite accommodation and respect for
democratic rules of the game; long-term investment in education; and the
benefits of a stable democracy. Drawing tourists, for example, requires
economic and political stability, low levels of violence, and adequate
infrastructure. This is not impossible:
while Panama is different due to its interoceanic canal, it is also something
of a success story. The region’s southernmost country abolished its military in
1990 and has drawn foreign investment in part through its reputation for stable
governance and protection for the banking industry.
Scenarios
Given
the entrenched nature of many of Central America’s problems, radical
improvement on the political or social fronts is unlikely. As in the past,
individual governments in conjunction with dominant elites will be responsible
for either making progress at the margins or overseeing further deterioration
through continued corruption, low public investment and democratic erosion.
Political
status quo
The most
likely scenario in the short term is that countries maintain their political
trajectories, whether positive or negative. Sadly, for much of the region, this
means democratic erosion or even autocracy. As recent experiences suggest, many
elites are more concerned about security (El Salvador, Honduras) or maintaining
impunity and access to power (Guatemala) than about guaranteeing liberal
democracy. In Nicaragua, where many elites who wish for political change are
imprisoned or in exile, this means President Ortega continues to rule as
dictator, with little pushback from an increasingly tiny inner circle.
Regardless of the country, adherence to existing patterns also means a lack of
commitment to fighting corruption or investing in institutions of transparency
and accountability, such as the justice system.
Of
course, while recent trends are not hopeful, deviation from this course is
possible, especially in places that still hold open elections and where
authorities are allowed to investigate and denounce corruption.
Deteriorating
security
The
security situation, one of the region’s most salient public policy concerns, is
also unlikely to see radical change. This means relying on an iron fist against
street gangs and violence. President Bukele in El Salvador and his Honduran
counterpart, Xiomara Castro, have militarized their security response and
opened or promised to open new mega-prisons for suspected gang members. This
strategy should appeal to electorates tired of worrying about their safety, but
by ignoring root causes, in the long run, it is less likely to actually curb
violence – and therefore migration to the U.S.
Violence
reduction requires a long-term, multipronged investment in improving education,
prosperity and labor opportunities, as well as greater social inclusion. While
the Biden administration has promised $4.2 billion in private-sector
commitments to Central America in an attempt to address the causes of violence
and migration, positive change will also require broad investments from
governments and the private sector across the region.
Economic
opportunities
Economically,
however, there are more reasons for optimism. Here, the region seems poised to
reap the benefits of engagement with both China and the U.S., as spelled out in
this GIS report.
Central
America’s pivot toward China is clear, with Costa Rica signing the region’s
first free trade agreement (FTA) with Beijing in 2010. El Salvador, Honduras,
Nicaragua and Panama have followed suit, cutting diplomatic ties with Taiwan,
striking cooperation deals and then beginning talks on FTAs. This benefits the
region not only by opening up trade but also by putting competitive pressure on
the U.S.; Panama’s decision to restart stalled FTA negotiations in 2022 is a
case in point.
Economic
reengagement with the U.S. through the revival of talks on a hemispheric trade
bloc, the expansion of guest worker programs and the promotion of nearshoring
would help diversify and revitalize Central American economies, as this GIS
report notes. Foreign direct investment in the region has already risen
post-Covid, and President Joe Biden issued an executive order in 2021
encouraging U.S. companies to bring production closer to home. For Central
American economies to gain the economic diversification, workforce upskilling
and higher productivity they need, private-sector investment in innovation will
be key.
***Dr.
John Polga-Hecimovich is a political science lecturer and researcher, with a
focus on governance, democratic institutions and stability in Latin America.
Currently,
he is an associate professor of Political Science at the U.S. Naval Academy and
an associate researcher at FLACSO-Ecuador.
He has
taught political science at Wake Forest University, the College of William and
Mary and FLACSO-Ecuador, and has conducted academic fieldwork in Venezuela,
Brazil, Ecuador and Colombia.
His
research is broadly focused on the effects of political institutions on
democratic stability, policymaking, and governance, especially in Latin
America. He has published peer-reviewed articles in top academic journals in
the U.S., U.K., and Latin America, and book chapters in both English and
Spanish.
Dr.
Polga-Hecimovich holds a PhD in political science from the University of
Pittsburgh, a master’s degree in Latin American studies from the Universidad
Andina Simón Bolívar (Ecuador), and a B.A. in government and Spanish from
Dartmouth College.
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