Challenges to Central American economic integration

The Federation of Chambers and Industrial Associations of Central America and the Dominican Republic (FECAICA), led by entrepreneurs Eduardo Girón of Guatemala and Eduardo Cader of El Salvador, is organizing itself to address the issues and challenges affecting industries and economic integration efforts in the region.

According to the International Monetary Fund (IMF), although it is projected that Central America’s economy will grow at a rate of approximately 3.5% this year, challenges remain. Among the key factors affecting regional economic revival and integration is the joint effort being undertaken by Central American countries to purchase the Covid-19 vaccine and make it freely available to their citizens.

The pandemic has slowed the process of Central American economic integration

Although progress has been made with Central American economic integration towards the free transit of people and goods between Guatemala and Honduras, the pandemic has tested the Customs Union through government actions that have been taken unilaterally.  As a result, such actions have delayed and derailed trade integration in the region. This situation has been aggravated by the lack of alternative options to land trade, FECAICA has reported. The Federation emphasizes that there must be “true force of will and political coordination of all of the participating parties so that the Customs Union process progresses at a pace that will promote the shared goal of Central American economic integration.  In particular, FECAICA calls for El Salvador to play a more active role in the process,” according to Girón.

Another challenge to Central American economic integration is the fight against illicit trade (smuggling), which even endangers the public’s health. To advance efforts to curtail this activity, FECAICA has formed a commission that is specialized in the defense of formal trade. “To combat this, a coordinated public-private collaboration will be key to successfully achieving stated goals and objectives,” he said.

Eduardo Cader, president of the Salvadoran Association of Industrialists (ASI), has explained multilateral commissions are being formed to address the issue.  For example, Carmen Aída de Mardi and Andrea Menjívar, from the ASI’s legal team will participate in deliberations by the committee to eradicate illicit trade and smuggling. Cader noted the urgency of a Central American Economic Revival Plan, in which competitiveness and job creation are the basis for a revived and productive commerce.  The region’s governments would achieve this by using the process of Central American economic integration and highlighting procedures in areas such as biosecurity, trade facilitation, and digital commerce.

“Productive development is one of the pillars of FECAICA’s action. For instance, it seeks to boost the industrial and manufacturing sector that in El Salvador, at the end of 2020, accounted for 96.1% of that country’s exports,” the statement says.

FECAICA officials maintained that one of the main challenges facing Central American economic integration is the need to promote public policies that support the stimulation of the manufacturing sector (investment, training, equipment, energy efficiency, foreign trade) and the promotion of public policies that foster a more positive business climate in the region.

In the wake of the pandemic, sustainability has also been a much-discussed topic.   Central American governments must develop energy efficiency policies (clean and renewable energy) and better use productive capital to promote circular economies.  The Salvadoran Association of Industrialists is holding a conference on these two topics during the month of March.

Plan for 2023

FECAICA will continue to coordinate all sectors’ joint participation (private, public, academic, cooperative) in articulating solutions to common problems that hinder greater Central American economic integration.  The Federation also anticipates external threats and has plans to harness the business potential offered by Central America and the Dominican Republic. The organization seeks to promote and enhance industry and, therefore, improve each country’s quality of life through its efforts.