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Central America: All Eyes on the Future

Can Central America overcome its past and work toward peace and prosperity?

August 31, 2005

Can Central America overcome its past and work toward peace and prosperity?

Almost 18 years ago, the presidents of El Salvador, Guatemala, Honduras, Nicaragua and Costa Rica signed a peace plan identifying democracy as the key to resolving our region's fratricidal conflicts.

We were convinced that only through democracy would the Central American people be able to enjoy the benefits of peace. Time has proven us correct. The authoritarian regimes of the 1970s and the military conflicts of the 1980s have passed into history.

Citizens now elect their governments democratically. Armed forces — where they exist — are subordinated to civil power. Countries are strengthening new forms of political and institutional controls.

One of the most significant advances since the peace accords has been the recovery of Central America's economies. While regional growth rates were stagnant or even negative in the 1980s, all countries have registered positive GDP growth rates in the past decade and a half.

Economic recovery in the region has been mainly due to the growth of the export sector, which has achieved remarkable diversification. For countries that were traditionally dependent on three or four primary products, new products and services now play a central economic role.

This is an important step in Central America's journey to becoming a region of self-sustaining democracies.

The end of armed conflict has also allowed governments to finally turn their attention to a variety of urgent tasks: pursuing macroeconomic stability, reform agendas and rebuilding war-ravaged infrastructure.

Most importantly, Central America is still struggling to confront its very old, very stubborn legacies of social marginalization, exclusion and poverty.

Today, anyone who has the good fortune to visit the region will meet people who are passionate about building secure and prosperous societies. Yet, the hard work of democratic consolidation is endangered by the economic crisis in which over half of all Central Americans remain submerged. How much poverty can these fragile democracies endure?

The question is not rhetorical. Every nation enjoys periodic and transparent elections. But, at the same time, almost 30% of Central Americans do not have enough income to buy the most basic foodstuffs. Despite the end of armed conflict, the majority of families are losing the struggle to get ahead in life.

Thus, the basic equation of liberal democracy remains out of balance. Despite notable advances, Central America's democracies are failing to provide economic opportunities along with peace.

As Latin America experiences a deepening wave of populism and political instability, neither we — nor the United States — can afford to leave Central American democracy on tenterhooks. It is the time to move on to the long-term phase of peace building, that of establishing the foundations of prosperity for future generations.

Difficult times demand clear leadership. I would like to invite the United States to join us in building a better future for our people — one in which democracy and opportunity go hand in hand.

We ask not for charity, but enlightened self-interest from our northern neighbors. For there is no doubt that the United States is affected by the fortunes of our small isthmus, so closely tied by geography, history — and now by millions of Central Americans who have made their home in the United States.

Although fostering a peaceful, prosperous and equitable hemisphere is clearly in the best interests of the United States, the United States has not always supported Central America's struggle for economic survival. Only two decades ago, the region was a top foreign policy priority for the U.S. Congress and the president.

In the early 1990s, as our civil wars came to an end, U.S. aid to Central America evaporated. In effect, we were punished for achieving peace. The absence of significant development aid has only increased the importance of trade for Central America's future.

With a tiny market of 37 million people — who produce what they do not consume and consume what they do not produce — Central America's economies cannot survive in isolation. Central America is ready to tackle the challenge of development — can we count on the United States to stand with us?

This is where the Dominican Republic-Central America-United States Free Trade Agreement — or CAFTA —comes in. Above all, the CAFTA represents an unparalleled opportunity to transform Central America into a dynamic economy deeply integrated with worldwide flows of trade and technology.

We have not had a better shot at modernizing our institutions and boosting productivity since the creation of the Central American Common Market over four decades ago.

Clearly, it would be irresponsible to claim that free trade by itself is enough to cut through the Gordian knot of underdevelopment. What matters most is how society cooperates in rising to the opportunities and responsibilities of living in an open and often competitive world.

In his second inaugural address, Franklin Roosevelt said, "The test of our progress is not whether we add to the abundance of those who have much — it is whether we provide for those who have too little."

Similarly, CAFTA will serve as a sort of unfolding test of the region's young democracies and their ability to translate economic growth into broader social progress.

In order to reverse the trends of poverty and stem the flow of emigration, we must be able to provide Central America's talented young workers with real job opportunities.

In Guatemala, over 70% of the population survives in the informal sector. A recent survey in Nicaragua found that three out of five households have a member who has tried — and failed — to find employment. Over 60% of adults in that country said they were willing to work in absolutely anything, as long as they could have a job.

Costa Rica faces the distinct, but no less serious, challenge of providing opportunities for a growing number of young professionals who, despite their university educations, are unable to find stable work.

To create more and better paying jobs, we must quicken the pace of private investment, which can only be achieved by deepening Central America's integration with the world economy. Job creation is one of the most important potential benefits of CAFTA.

For the people of Central America, the long-term impact of open markets and regional integration has yet to be determined. As Victor Hugo once wrote, the future has many names: "For the weak, it is the unreachable. For the timid, it is unknowable. For the brave, it is an opportunity."

For all the uncertainties surrounding CAFTA, we must remember that it does offer the possibility of a better future.

Adapted from the author’s remarks at the Council of the Americas, in Washington D.C., on June 7, 2005.

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