Spurring Economic Opportunities in the Northern Triangle

This past summer, the United States saw a dramatic increase in the number of unaccompanied children crossing the U.S. southwest border from the Northern Triangle nations of Guatemala, Honduras, and El Salvador. According to the U.S. Customs and Border Protection Agency, the present year has so far seen 51,705 unaccompanied alien children from this region, compared to 20,805 in 2013. This phenomenon has been attributed to discouraging economic prospects and violence back home, which in turn begs the question: what are the governments of Guatemala, Honduras, and El Salvador doing to address these issues?

Data source: U.S. Customs and Border Protection Website
Data source: U.S. Customs and Border Protection Website

The solution they’ve developed is the Plan of the Alliance for Prosperity in the Northern Triangle, an ambitious regional strategy that seeks to spur social and economic development in the region. Recently, presidents and dignitaries from Guatemala, Honduras, and El Salvador traveled to Washington, D.C.  to present a draft of The Plan. On November 20th, 2014,the Guatemalan and Salvadorean foreign ministers were at the Atlantic Council discussing the key components of The Plan. Meanwhile, the heads of state of the three Northern Triangle countries, along with the U.S. Vice President, visited the Inter-American Development Bank (IDB) to formally reveal and raise support for The Plan.

The Plan of the Alliance for Prosperity in the Northern Triangle is framed as a medium-to-long-term solution to the outflow of illegal immigrants from the region, particularly children. It centers on four broad objectives: (i) creating economic opportunities, (ii) fostering human capital, (iii) tackling violence, and (iv) strengthening institutions.

In order to spur economic opportunities in the region, the governments of the three countries are betting on cheap energy and adequate infrastructure as the bait that will attract investors. But how will they manage to provide cheap energy? Essentially, the three countries plan to regionalize the production of electric energy through the Regional Electric Market (MER) initiative. In addition, the Central American Electrical Interconnection System (SIEPAC) that currently supplies energy to the three Northern Triangle countries, among others, is expected to operate at twice its current capacity. The idea of natural gas as an alternative source of energy that is both relatively more efficient and environmentally friendly is also gaining popularity among the three governments.

Image source: http://www.abengoa.com/htmlsites/boletines/en/octubre2011_ext/desarrollo_sostenible.html
Image source: http://www.abengoa.com/htmlsites/boletines/en/octubre2011_ext/desarrollo_sostenible.html

With regards to infrastructure, the focus will be on extending and improving transportation such as roads, ports, and airports. Investments in secondary and tertiary roads will be primarily focused on eight specific corridors that promise to facilitate inter-state trade and commerce. The clamor for infrastructure investments in the Northern Triangle region is validated by the fact that approximately half of the roads in Guatemala and El Salvador were not paved as of 2011.

Data source: World Bank Development Indicators
Data source: World Bank Development Indicators

Another important component of the economic development equation put forth is the promotion of specific industries and geographical areas. More specifically, The Plan seeks to advance the agriculture, textile, and tourism industries through policies that encourage the adoption of technology in production and business management processes, as well as policies that facilitate access to credit.  In the case of the agro-industry, the regional strategy prioritizes investments in irrigation and storage systems, and mechanisms for producers to better access meteorological and pricing information. Insurance schemes against natural disasters caused by climate change are also included. Moreover, through the “special economic zones” initiative, The Plan promises to tap the economic potential of some of the region’s most impoverished areas, especially those that see the largest outflows of immigrants to the U.S. This will be done by courting the private sector with adequate public services and infrastructure in those areas.

But how much will the Plan of the Alliance for Prosperity in the Northern Triangle cost? And equally important, how will the bill get split and among whom? The answers are still unclear. First, when asked about The Plan’s price tag during the event at The Council last week, Guatemala’s and El Salvador’s foreign ministers circumvented the question by saying that too much focus on one (hefty) figure may compromise people’s optimism for The Plan. Their strategy is to first further develop The Plan step by step with the help of the IDB. At the same event, the two ministers said that they had not come to the U.S. just to beg for money. Rather, they are looking to create a sort of partnership with the U.S., as well as other countries like Mexico, under the premise that everyone in the region will eventually benefit from the Plan of the Alliance for Prosperity in the Northern Triangle.

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