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Central America: what is going wrong?

Summary:
Central America, from Panama to Guatemala is one of the poorest and most troubled regions of the world.  GDP per capita in current US dollars is in the range of 00 (Guatemala) to 000 (Costa Rica).  When you travel around it feels poorer than India despite the fact that there are obviously educated and able people everywhere. The first thing that strikes you when travelling through this region is that prices are very high.  Fruit and bread are little cheaper than in Europe and the USA and restaurant, hotel and taxi fares are quite comparable with the West.  It is not like India, where for a £1 you can get a bag of pastries for a picnic, in Costa Rica or Honduras the £1 only gets you a couple of donuts, if you are lucky.  An economist would immediately be suspecting a huge Trade and

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Central America, from Panama to Guatemala is one of the poorest and most troubled regions of the world.  GDP per capita in current US dollars is in the range of $3000 (Guatemala) to $10000 (Costa Rica).  When you travel around it feels poorer than India despite the fact that there are obviously educated and able people everywhere.

The first thing that strikes you when travelling through this region is that prices are very high.  Fruit and bread are little cheaper than in Europe and the USA and restaurant, hotel and taxi fares are quite comparable with the West.  It is not like India, where for a £1 you can get a bag of pastries for a picnic, in Costa Rica or Honduras the £1 only gets you a couple of donuts, if you are lucky.  An economist would immediately be suspecting a huge Trade and Current Account Surplus for these countries that pushes up the exchange rate so than Lempiras, Quetzales and Colones are greatly overvalued. But the Balance of Payments is vaguely in balance, not in massive surplus. So why are prices so high compared with wages?

Why cannot local producers, who have the advantage of rock bottom labour costs, produce essentials such as flour for bread at prices that are lower than global norms?  When you fly over these countries it is striking that the fertile lowlands are covered in banana and palm oil plantations.  Ordinary agriculture is banished to relatively unproductive hilly and mountainous areas.  The plantations are enormous and homogeneous so are clearly in the hands of giant agribusiness. The words "Banana Republic" spring to mind.  Banana Republics were and apparently, still are, real menaces.  Giant agricultural corporations hold much of the political and economic power in Central America although nowadays they are being forced to share with cocaine smuggling cartels.  The ruthlessness of these corporations is legendary.

Central America: what is going wrong?
Honduras palm oil. See Rainforest Rescue

The situation is yet more complicated because of corruption.  Corruption is evident on the street and in the buses, let alone in the halls of government.  If you catch an ordinary, "non-stop", express bus in Honduras you only need to wait fifty kilometres before the driver is stopping everywhere taking cash from passengers and stuffing it in his pocket. There is a seamless join between shady business practices and outright criminality.  The brother of the President of Honduras is a major league drug smuggler.  The governing classes really only care about themselves and the population has absorbed this message.

In Guatemala the indigenous Maya are 51% of the population but are still being treated as an unwelcome ethnic minority.  Outright genocide such as occurred until thirty years ago has largely ceased but the Maya are still often unregistered and so denied access to health and education services and excluded from employment.  In a country with an average wage of c.$3000 pa and huge income disparities the discrimination against the Maya results in terminal poverty where the only "solution" appears to be to flee the country.  Unfortunately their plight is being used to cast Trump as a villain for refusing to allow entry to the refugees rather than to ask questions about the racist Guatemalan Government.  Western journalists collude in racism if it seems to be to the advantage of their patrons, we saw the same approach in the UK with the Calais migrant crisis.

Is there any solution for Central America?  A good start would be to stop blaming Trump and ask why people are fleeing these fertile and potentially rich countries.  I wandered round San Pedro Sula (the murder capital of the world) without an armed guard, its not that dangerous, but journalists stay on the US side of the "wall" screaming about their pet hate figures rather than finding out the truth.

3/2/2020

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