Lead Consultants’ Statement
  
February 1999

  
Both USAID and the EC have had programs of development assistance for Central America for many years. While elements of these programs have been very successful, they have not been coordinated.  At the same time, like most of the actors concerned with promoting development, these funding agencies are subject to constraints that make it difficult for them to take a long-term perspective. Central America 2020 is designed to address these two deficiencies. The analytical time frame is long-term (covering the years up to 2020) and the resulting recommendations will be presented to both funding agencies as well as others involved in Central American development.  

This provides the participants in Central America 2020 a rare opportunity: to think long-term and to plan strategically. At the same time it presents some notable difficulties. Previous models may not be of much assistance in thinking about Central American development over the next generation, while events inside the region will be conditioned to a large extent—as always—by developments outside the region. However, it is not impossible to develop plausible scenarios within which development in Central America will proceed between now and the year 2020.  The project research team seek to construct such scenarios, taking into account several trends that we believe shape the region’s development alternatives.  

First, the trend towards globalization will continue.  World product and factor markets will become more integrated in the next generation and the global architecture for overseeing these changes—the WTO, ILO, UN, World Bank, IMF, etc.—will become less imperfect.  In responding to this trend, the nation-state will become less relevant and regions will acquire greater influence.  For smaller economies, such as those in Central America, this trend poses special problems.  As marginal members of the world economy, even when grouped as a region, their influence on events will be very small; at the same time, the special trading arrangements established for exports to developed countries (e.g., the Caribbean Basin Initiative with the US and the Cooperation Agreement with the European Union) may not survive the shift towards multilateral trade preferences at the global level.  

Secondly, hemispheric integration will advance further.  This prediction may seem bold in the light of the difficulties facing the project to establish a Free Trade Area of the Americas (FTAA) by the year 2005.  However, hemispheric integration is simply the other side of the globalization coin.  It began before the FTAA project was launched and it will continue even if the FTAA is not established.  The issue for Central America, therefore, is how to position itself best to take advantage of the trend towards hemispheric integration.  Once again, the danger is one of marginalization from a process that will be dominated by larger countries and sub-regions.  

Thirdly, the demographic transition now under way in Central America will continue. The Crude Birth Rate and the fertility rate will fall, but not by enough to prevent an increase in population.  Most of this increase will take place in urban areas over the next generation, though the rural population will also experience some increase.  These demographic changes have implications for Central American development; the labor force will expand over the next generation, a higher proportion of the poor will be found in urban areas, and pressures on the environment—in both urban and rural areas—will be intense.  

Fourthly, migration patterns will become more complex and will affect a greater part of the population.  In addition to the standard migration route northwards to the United States, Central Americans are increasingly aware of opportunities elsewhere in the hemisphere.  We expect these patterns to intensify in the next generation; at the same time, there is likely to be reverse or circular migration along the lines found in some Caribbean states, where movement to and from the United States is very common.  These migration patterns provide opportunities that were previously not available as well as tangible resources through remittances, but they also pose a challenge for nation-building, educational advancement and the avoidance of inter-state conflict.  

Fifthly, minorities in Central America (in Guatemala, the Indian majority) will become more assertive in pursuit of their civil, political and economic rights.  This trend, common to the hemisphere as a whole, will place a great strain on the political system in each country as it is forced to become less exclusionary and more representative.  Recommendations which do nothing to further the process of inclusion in Central America or which are likely to exacerbate the problem through increasing concentration of income and wealth are not viable in the present and future context.  

It is important to be clear about the goals of Central America 2020 and the definition of terms.  We have defined Central America to include Panama and Belize as well as Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua.  The year 2020 should not be interpreted literally, but should be understood to demarcate an analytical time frame of about two decades.  Thus we adopt a broad definition of the region and seek to look one generation ahead.  

The principle underlying Central America 2020 and the choice of research themes is the promotion of development.  In the project’s initial formulation, we defined development as a dynamic, multi-dimensional process consisting of:  

We believe that this is a robust definition of development, but it was written before Hurricane Mitch hit the region with such devastating effect in November 1998.  We do not think that the definition should now be rewritten, but Mitch served as a terrible reminder of the vulnerability of the region to disasters and the limited capacity of the state to respond effectively when disaster strikes.  “Sustainability” has acquired special significance in the Central American context:  natural disasters in Central America cannot be avoided, but they should not be exacerbated by human action, nor should their consequences be made worse by state incapacity or incompetence.  

The research for Central America 2020 therefore pays special attention to both the environment and the role of the state, with the goal of generating a set of recommendations that can lead to a strengthening of environmental protection without placing unrealistic demands on the public sector.  These are legitimate concerns since the efforts by Central American countries to recover from the disastrous years of the 1980s have done little to reverse the cumulative damage to the environment and have revealed the limitations of the state to address economic, social and political problems in the current context.  

There are other issues that cut across all the individual studies.  First is the relationship between the market and civil society.  We do not intend to challenge the new orthodoxy in favor of market-friendly policies, which we believe to be an appropriate orientation and a viable goal for the next two decades.  We are, however, concerned that the new orthodoxy in support of free markets should encourage the strengthening of civil society and should not exacerbate social exclusion.  Some policies will enhance free markets and civil society, but this is not always the case—occasionally there is a trade-off. 

Another crucial issue is regionalism.  Central America 2020 has a regional focus, but does not ignore the national or sub-national levels of analysis.  However, special attention is given to identifying opportunities for a regional scope of action in the promotion of development wherever this seems appropriate.  

Finally, we intend for the recommendations that emerge from the project to be viable.  This does not mean they should be timid. On the contrary, as noted above, we believe that Central America 2020 offers a rare opportunity for being bold and pushing forward the boundaries of what is possible.  At present, few—if any—government leaders in the region can afford to take a long view and the result is a series of short-term measures unlikely to add up to a coherent long-term strategy.  We want to be able to propose development strategies to governments and key actors in the region that will go beyond the patchwork of measures currently in place and hold out the prospect of substantive improvements in each of the three facets of development identified above. 

 

A. Douglas Kincaid (kincaidd@fiu.edu)
Victor Bulmer-Thomas (V.Bulmer-Thomas@sas.ac.uk)
February 1999