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November 20, 2023

The Hidden Prowess of Central America

Over the past six decades, the Central American region has made remarkable strides in terms of economic and social integration. It is important to recognize the resilience and potential of this region, as Central American economies have showcased impressive growth, maintained stable inflation rates, and significantly improved living standards. They have also displayed responsible fiscal management, with low public deficit to GDP ratios and manageable levels of external debt. Furthermore, the region has experienced consistent growth in exports, building strong trade connections with the United States and fostering a thriving intra-regional trade environment.

The food and agricultural systems of Central America have achieved remarkable success in reducing global poverty and hunger, generating employment opportunities, and fostering economic growth. In 2022, the agricultural sector’s average GDP contribution in the Central American countries reached an impressive 7.7% with Nicaragua leading at an impressive 16.8%. The region’s agricultural exports, mainly tropical fruits and vegetables, have grown substantially, maintaining a consistently positive trade balance. The value of exported agricultural products surged from $28.0 billion in 2010 to a substantial $58.0 billion in 2021. While challenges like protectionist policies and inadequate investment have posed obstacles to agricultural growth, Central American governments have significant potential to improve infrastructure, marketing, research, finance accessibility, and weather-risk prevention to maximize their impact.

Central America is at a truly exciting crossroads in shaping its energy future. With an abundance of natural resources and welcoming regulatory frameworks, it’s become a magnet for foreign investors, which is driving remarkable progress in electrification and energy capacity. Over 50% of the region’s energy in 2019 hailed from renewable sources, with some nations like Costa Rica leading the way at nearly 87% renewable generation. A brighter future beckons, with ambitions to raise renewable energy capacity to 75% by 2030 and a remarkable 90% by 2050. Exciting collaborations, such as the Central America Clean Energy Corridor and partnerships with esteemed organizations like the International Energy Agency, are expected to further enhance progress.

The region’s financial markets are thriving, marking a significant journey towards self-reliance and global recognition. Initiatives like the Regional Debt Market (MRD) and successful bond issuances illustrate the region’s financial progress. Central America is actively adopting international standards, with some countries implementing Basel III and adhering to global financial reporting norms. These promising developments showcase the region’s growing financial potential, backed by strong indicators that surpassed minimum international benchmarks, even during the COVID-19 economic downturn.

In 2024, Central America will be in the spotlight. The region’s resilience and determination to overcome economic challenges and harness its growth potential have not gone unnoticed. Through impressive advancements in finance, renewable energy, and agriculture, Central America is drawing interest and investment from around the world. The region will be a focal point for those seeking growth, and Delphos is proud to be at the forefront of this exciting transformation.

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