Latin America Advisor

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Will U.S. Pledges to Central America Lower Emigration?

U.S. Vice President Kamala Harris on June 7 announced more than $1.9 billion in new private sector commitments in an effort to increase economic opportunity in northern Central America, bringing the total of such commitments to more than $3.2 billion. The pledges follow a Call to Action that Harris made in May 2021 as a way to address the root causes of migration from Central America. What are the most significant commitments in response to this initiative, and what do the pledges entail? How different is this effort by the U.S. government from its past investment drives in Central America? How much will this initiative lower emigration from Central America, and what advances in economic opportunity have been made in the initiative’s first year?

Jonathan Fantini-Porter, co-founder and executive director of the Partnership for Central America: “The Partnership for Central America has a clear mission: mobilize investment and deliver social impact in northern Central America by nearshoring supply chains and creating the enabling environment to support economic opportunities across the Americas. In our first year, the partnership has mobilized more than $3.2 billion in the region and served more than two million people. These investments have translated into Internet access for more than 1.9 million families who were previously disconnected, 310,000 individuals brought into the formal economy with bank accounts and access to credit, nearshoring of more than $500 million in a manufacturing capacity, economic empowerment and skill-building services to over 450,000 individuals, and more than $250 million in new investments across agricultural production to create jobs and improve the livelihoods of farmers in the region. These outcomes, which we announced last week at the Summit of the Americas, are measures of tangible progress in our first year. Meanwhile, we are conscious of the many challenges that lay ahead in achieving our shared vision. We believe that only through a systemic approach—that unites the full potential of the public, private and social sectors—can we deliver meaningful impact against root causes of migration.”

Manuel Orozco, director of the Migration, Remittances and Development Program at the Inter-American Dialogue: “Overall, one could say that anything that helps is welcome. From afar, however, the effort seems more a media exercise in public relations than a cohesive development strategy in motion. Apart from the immediate ‘show me the money!’ reaction, the announced commitments are not directly connected to the most important economic challenges that the region faces: low productivity leveraged by domestic oligopolies in food and export sectors controlled by a few corporations, where the overwhelming majority of businesses and labor are informal, with scant access to credit or financing and a noncompetitive enabling environment (in technology, rule of law and know-how). It seems as if these commitments are separate and detached from the Root Causes of Migration strategy. Overall, the magnitude of economic challenges dwarfs any effort so far concerning economic opportunities, and much more given the prevailing focus. But more importantly, this commitment seems to be dealing with problems elsewhere, but not Central America, and at the same time, Central American governments are amiss and averting in confronting their own demons: inequality in the 21st century that has made one in 100 people leave every year since 2012. There is still time for the Biden administration to take a turn toward solutions and use its economic might to prevent history from repeating itself in the region.”

Alfonso José Quiñonez Lemus, Guatemala’s ambassador to the United States: “It is widely accepted that the main cause of irregular migration is the lack of opportunity. Therefore, the focus and efforts to reduce that ‘push factor’ must be the creation of prosperity and job opportunities. It is certainly a responsibility that primarily belongs to the countries from which people migrate. However, the United States, where there is also a very strong ‘pull factor,’ should play an important role in supporting countries’ efforts to create the ‘enabling environment’ that will generate greater prosperity. Hence, the ‘Call to Action’ of Vice President Harris to attract investment to Central America and thus generate jobs and thereby reduce migration is a key effort to achieve it. This must be accompanied by other measures to make it more effective, such as providing benefits for making ‘nearshoring’ a reality. Guatemala has done its part. We have the largest and most resilient economy of the region and have implemented the ‘Guatemala Moving Forward’ development plan. It is a tripartite alliance among the government, the municipality of Guatemala City and the private sector, aimed at increasing exports and attracting foreign investment on a scale to spur economic growth and job creation. The Call to Action is a perfect complement to this plan, including recognition of the key role that the private sector plays. I am sure that if all the tools available to President Biden’s administration to promote investment and increase trade are aligned, coupled with a narrative conducive to promoting these objectives, the Call to Action will be a great success, and Guatemala wants to be an integral part of it.” 

Javier Bu, chargé d’affaires at the Embassy of Honduras in the United States: “This initiative sets aside previous ones by mobilizing investment from the private sector, a different approach that goes beyond the traditional schemes of cooperation, so the expectation is to have a faster impact on creating opportunities. Including other sectors such as civil society also makes it a more comprehensive effort that includes the views and proposals of all important stakeholders. Being the right complement of the Root Causes Strategy and basing the Call to Action on the reasons as to why our people are migrating, plus recognizing the exacerbation of those due to the Covid-19 pandemic and natural disasters, makes it a cohesive effort that we hope is accomplished swiftly to respond to the urgency of the situation. Commitments such as CASC and In Her Hands are crucial for achieving success. Youths are the most prone to migration and are meaningful drivers of the economy. We refuse to keep losing entire young generations. Additionally, investing in women is a win for all of society. Countering economic inequality and achieving women’s economic empowerment will be significant, as it transcends not only the financial aspect of their lives but targets a reduction in gender-based violence. Our government welcomes this approach and is committed to making this a reality. If the initiatives and pledges remain consistent and are fulfilled, while bringing in other development and economic tools like DFC, the DR-CAFTA agreement and nearshoring, we will achieve a much-needed transformation in our countries, resulting in the safer and more prosperous hemisphere we all desire.”

Michael Paarlberg, assistant professor of political science at Virginia Commonwealth University and associate fellow at the Institute for Policy Studies: “I’m skeptical that a sudden injection of foreign direct investment (FDI) by U.S. corporations will resolve structural barriers to economic growth in the Northern Triangle. First, it represents a tiny fraction of the economy, about 1 percent to 3 percent of GDP. Domestic businesses employ far more people, and around three-quarters of the workforce is in the informal sector. Informal businesses lack credit and investment, and are subject to extortion by gangs. Providing financing and some security to existing businesses will help more people directly. Having more job options is certainly good, and formalizing the economy is a laudable long-term goal. But today, the biggest engine of economic growth in the region is not FDI. Nor is it foreign assistance or loans from international financial institutions. It’s remittances, which make up as much as a quarter of GDP. The most effective economic development strategy is to simply let migrants in the United States stay and continue sending money home, which means reining in our deportation regime. There are also pitfalls to foreign investment projects, which involve public-private partnerships with often corrupt governments or the exploitation of natural resources, which generates public fears of things like water privatization. This can be disastrous in countries that lack food and water security. It can also be politically destabilizing, as we saw a couple decades ago in Bolivia. Combined with worsening climate crises and democratic backsliding in the region, this can lead to increasing migration flows in the future.”

Darren Ware, senior vice president of government engagement for MasterCard: “For more than a decade, MasterCard has used the power of its global technology to engage in partnerships that promote paths toward economic opportunity for more than 500 million people. According to The World Bank, financial inclusion is a key enabler to reduce poverty and boost shared prosperity. With the goal of generating impact specifically in northern Central America, last year Mastercard joined the Partnership for Central America with a pledge to bring five million people in El Salvador, Guatemala and Honduras into the formal financial economy and to digitize one million micro- and small businesses through a $100 million investment. And we are advancing in several following ways. Last year, we signed an MOU with Guatemala’s Economy Ministry to facilitate digital acceleration in areas such as commerce, social benefit payments and transportation, among others. In May, we launched a new financial inclusion program to enable our partner banks to offer financial tools and solutions to unbanked individuals and the owners of micro-, small- and medium-sized business. During the In Her Hands event hosted by Vice President Kamala Harris, we announced several new commitments and programs to deliver economic empowerment tools and resources to more than one million women in Northern Central America, which includes digitizing 300,000 women-owned and led businesses over the next five years, among other objectives. To close, we recently announced a collaboration with USAID, DFC, BAC and Fundación Génesis to continue increasing access to finance for small businesses in the region.” 

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