Central America Briefing

Covering Guatemala to Panama, Central America Briefing provides our subscribers and members with a fortnightly rundown of the key business opportunities and political developments affecting foreign investors with business operations or capital investments in the region.

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Follow the links below to read a selection of recent articles featured Cuba Briefing.

10th March 2023

Nicaragua has formally joined the EL Salvador-Panama Integrated Stock Market and will now have access to a US$54bn market. The overall plan is for a regional stock market but will require legislative fine tuning in Costa Rica, Guatemala and Honduras. A CABEI-backed regional debt market is hoping to begin operations this year. The integrated stock market idea began in 2015 and from 2017 to date has carried out over US$500mn in transactions so far. The General Manager of the Nicaraguan Stock Exchange, Gerardo Argüello, hoped the move would see a 60-fold growth in their local market.

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24th February 2023

Burkhan World Investment has announced an alliance with Costa Rican real estate company Stone Alliance worth up to US$1bn. A range of projects will be considered with Burkhan World Investment beginning with sustainable investments in Marina Tambor and Cobano Preserve on the Southern Nicoya Peninsula. The portfolio consists of mixed eco-development including a marina, hotel, commercial and residential areas. Burkhan World Investment consists of investors from the United Arab Emirates, Bahrain, Saudi Arabia, Oman, Qatar, and Kuwait. The initial investment is in a 360-hectare property with 4.5kms of coastline.

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10th February 2023

Panama President Laurentino Cortizo has authorised the establishment of two new tax free economic zones. The Tech Valley Free Zone and Panama Digital Gateway will be able to house up to 740 companies. Hyundai has already been confirmed as one of the new arrivals. The total investment is believed to be around US$111.5mn, creating at least 4,710 direct jobs. The Panama Digital Gateway will be strategically placed near the new Curie submarine cables and is designed for content providers such as Netflix, Amazon, Facebook and Cloudflare.

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27 January 2023

The World Bank has warned that the Northern Triangle of El Salvador, Guatemala and Honduras face economic difficulties. According to analysts, El Salvador and Honduras faced 2022 with negative growth rates of 8-9%, with Guatemala’s around 2%. Should a worldwide recession become a reality, investment would be more complicated and the cost of debt increase. Any problem with the US’s economy would be felt in Central America through lower demand for exports and a possible fall in remittances. However, remittances have remained record breaking during the pandemic and any export decrease could be offset by nearshoring. Guatemala’s macroeconomic stability is offset by limited public investment and El Salvador’s ability to cover a US$800mn loan payment suggests cause for regional optimism.

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13th January 2023

According to official sources from each country, the total amount of violent deaths in 2022 fell 7.15% from 10,487 in 2021 to 9,737. El Salvador, which has embarked on a social crackdown that has seen over 2% of its adult population jailed, saw its homicide rate of 7.8 per 100,000 inhabitants. The lowest rate in a decade. 496 murders were officially recorded in El Salvador, Security Minister Gustavo Villatoro claimed 65% of those were committed in the first three months of 2022. Panama also saw a decrease while Costa Rica and Guatemala endured increases. Between Guatemala (4,274 deaths) and Honduras (3,397 deaths) they accounted for 81.86% of the region’s homicides. Costa Rica’s 656 homicides was the highest since records began.

Photo by David von Diemar

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9th December 2022

A regional study by the Japan International Cooperation Agency (JICA) suggested that El Salvador spend up to US$8.5bn in mobility by 2035. Of this, US$3bn would go towards the country’s road system. This would include the expansion of the Pan-American highway and Coastal highway. The rest would be spent on ports, airports and other infrastructure. “Other” could include the proposed ferry system with Costa Rica that has failed to be passed by previous governments. The first draft of the final report has been delivered to the respective Central American administrations. The study cost US$4.5mn and was paid for by the Japanese government. JICA hoped its master plan would be passed by each country in 2023.

Photo by Erik van Dijk

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25th November 2022

El Salvador, Nicaragua and Panama have agreed to an integration of their security markets. The Superintendency of the Financial System of El Salvador (SSF), Superintendency of Banks of Nicaragua (Siboif) and the Superintendency of the Panama Stock Market (SMV) agreed to let investors acquire and negotiate securities registered in any of the three countries. It also allows stock market institutions to work in the area covered by the agreement. Regional sources suggest this could see an increase in trading on the Nicaraguan stock market up to 60 times its current level. 98.25% of transactions in Nicaragua are public titles and bonds.

Photo by Maxim Hopman

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11th November 2022

El Salvador and China discuss Free Trade Agreement; confusion over debt

Discussions have already started on a free trade agreement between El Salvador and China. President Nayib Bukele stated that the FTA would help end international isolation and the agreement would be fast tracked to be signed as soon as possible. Meanwhile, Taiwan’s FTA with El Salvador, which had been kept afloat by legal means, has ended. Vice President Félix Ulloa announced that China had offered to buy all of El Salvador’s external debt but the Chinese foreign ministry claimed they were unaware of this offer. El Salvador’s external debt amounts to US$1.6bn.

Photo by Ian Taylor 

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28th October 2022

Central American judges have issued a plea for independence to carry out their functions. Supreme court elections are currently ongoing in Costa Rica and Panama against a backdrop of interference in El Salvador and Guatemala. Of the 25 members of Guatemala’s judicial service that have fled the country in the past 18 months, the majority are either judges or prosecutors. El Salvador has seen alleged illegal appointment of Supreme Court magistrates and the enforced retirement of those over 60. The Seattle International Foundation has warned of increasing authoritarianism in Central America at a forum in Tegucigalpa. Director Adriana Beltrán warned about the criminalization of human rights, the restriction of press freedom and of expression in the region.

Photo by Michael Dziedzic

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14th October 2022

Hurricane Julia’s path through Central America caused an expected level of havoc, leaving dozens dead, millions affected, and repair bills estimated in the billions of dollars. The Honduran government alone reported needing at least US$ 2bn for its recovery efforts. With hundreds of roads and bridges affected, infrastructure repairs will be of a high priority. Guatemala’s agricultural ministry reported that 250,000 families have lost basic food crops with bananas, cardamom and coffee also severely affected. Nicaragua, where Julia made landfall at its strongest, reported US$ 160-200mn in damages and no deaths. Many of the areas affected also suffered damage during Hurricane Eta and Iota in 2020.  

Photo by NASA 

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30th September 2022

Prior to the effects of Hurricane Ian, Honduras had already implemented a state of emergency as heavy rains battered Central America. Guatemala was considering issuing a similar decree with El Salvador also suffering loss of life and structural issues. Sinkholes have appeared across Guatemala causing the deaths of at least two people. Collapsing buildings and landslides have killed dozens more. So far the rainy season has killed 45 and affected over four million in Guatemala. Classes were suspended in El Salvador, as Guatemala endured the fourth wettest rainy season in 40 years.

Photo by Ruslan Zh 

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16th September 2022

Panama’s judicial system is under the spotlight with the opening of the Odebrecht case.
Considered the largest corruption scheme in the country’s history, the preliminary hearing
has opened and will spend days being read out. A total of 48 people are accused of money
laundering and corruption including former presidents Ricardo Martinelli and Juan Carlos
Varela. Charges against a further 29 defendants have been dismissed. The investigation
began in 2015 and after Odebrecht admitted to bribery charges in the US, Martinelli’s sons
Ricardo Alberto and Luis Enrique are serving jail sentences having been captured in
Guatemala and extradited. In July 2017, Odebrecht signed an agreement with the
Panamanian Prosecutor’s Office to pay a US$220 million fine to the State over 12 years.

Photo by Darren Miller

Photo by Alexander Aguero 

12th August 2022

Yesterday, President Rodrigo Chaves announced that Costa Rica had officially applied to join
the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP),
becoming the first Central American country to do so. The CPTPP currently consists of eleven
countries across Asia, Oceania, and the Americas. “The CPTTP will allow Costa Rica to share
commercial strategies, attract investment, and create linkages for small and medium-sized
companies,” Chaves told the press yesterday. The CPTTP entered into force in 2018 (after the
US pulled out of the Trans-Pacific Partnership, the CPTTP’s predecessor) and currently
comprises nearly 20% of international trade.

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Photo by Luka Slapnicar 

29th July 2022

According to a study released this week by ForwardKeys (a Spanish firm that monitors travel industry trends), Central America (along with the Caribbean) are the “recovery pacemakers” of the aviation sector, seeing as flights to Central American destinations have risen across the board year-on-year and are projected to keep increasing through the summer. For instance, Central America as a whole received 5% more air travellers this past quarter than during the same span in 2019. Costa Rica is the best-performing Central American locale so far, having experienced a 25% climb this quarter. This data complements recent findings from Hostelworld (per the lead story in our previous issue) indicating that Central America as a region is currently leading global hostel bookings for the first time ever, with total bookings having jumped 40% since before the pandemic.

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Photo by Rikin Katyal 

6 May 2022

This week, the Panama Canal Authority (ACP), which governs the waterway, announced the continuation of its record growth. The Canal witnessed its “highest-ever shipping flows in fiscal year 2021.” During the first half of this new fiscal year, ACP reported that “new tonnage rose 0.8%, container ship tonnage rose 8.5%, and liquefied petroleum gas tonnage increased 11.1%.” However, “liquefied natural gas carrier tonnage plunged 31.1%,” which ACP attributes to mounting Western-led sanctions against Russian natural gas in response to its invasion of Ukraine. Ilya Espino de Marotta, Deputy Administrator of ACP, was quick to note that “we have seen other market segments compensating for the drop in LNG.” Marotta admitted that China’s “zero COVID strategy,” which has resulted in the lockdown of its largest port city, Shanghai, “will have near-term effects on the Canal’s volume” as well. “We don’t know what’s going to happen with the COVID situation in China,” she said, “but we think that we will feel a decline in April and maybe May. Then, after China reopens, I think there’s going to be a flood of merchandise arriving to both coasts.” “We’re also looking at inflation rates and the increase in bunker prices,” Marotta continued. “It’s very volatile. We are not sure how the consumer is going to react to this inflationary pressure and how demand is going to behave.” Marotta remains optimistic since this week’s figures show that growth has largely persisted despite these obstacles. “We are at about 70% of capacity,” she noted. “We still have room to grow [and] I’m still confident we’ll do as good as last year, if not better.”

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Photo by Joshua Sukoff

22 April 2022

On Tuesday, April 19, the White House released a fact sheet and progress report to update the public on its Root Causes Strategy that was launched in July 2021 to “align US Government efforts to address the economic, governance, and security drivers of irregular migration from Central America,” namely by facilitating investment into the region. According to the White House, the Strategy has made “significant progress toward creating hope for people in El Salvador, Guatemala, and Honduras that a better life can be found at home.” Achievements it cites include $1.2bn worth of “commitments” from the private sector, $100mn in financing for MSMEs via “US initiatives,” “US Government support [that] helped create more than 70,000 jobs,” a $40mn “Young Women’s Empowerment Initiative” led by USAID, and “collaboration” on developments with other countries including the EU, Canada, South Korea, Japan, and Israel. Noting “these are long-term efforts,” the fact sheet and progress report strike an optimistic tone about what has been accomplished already and what is in the pipeline for the future.

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Photo by Element5 Digital

8th April 2022

Last Sunday, 3 April, Costa Ricans took to the polls to elect their new President. The candidates, who came out on top in the first round of voting in February, were José María Figueres, the former President of Costa Rica (1994-1998) and Director of the World Economic Forum (2000-2004) of the centre-left PLN party, and Rodrigo Chaves, the former Minister of Finance (2019-2020) of the centrist PPSD party who resigned following frequent clashes with President Carlos Alvarado Quesada, the incumbent of the centre-left PAC party. Chaves emerged victorious, defeating Figueres by less than 6%, garnering 52.9% of the vote to Figueres’ 47.1%. Upon the results being announced, Chaves reiterated his pledge to “rework” the country’s nearly $2bn agreement with the IMF, declaring that the current deal was “not ambitious enough.” However, Chaves’ ability to achieve this and other campaign promises will be limited by the fact that his party only won 10 of the 57 seats in the Costa Rican Congress. 

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Photo by Nicholas Doherty

25th March 2022

According to a study released this week by the International Renewable Energy Agency, Central American countries could cut systemic costs by $20bn between 2018 and 2050 “by pursuing a more ambitious energy transition.” The study estimates Central America’s collective “renewable energy potential” to be 180GW, which is ten times more than its current “installed capacity.” Harnessing that full potential would entail shifting grids to 90% renewables and vehicles to 75% electric by 2050, which equates to expanding the use of renewables “three-fold” or 1.4GW per annum. The results of such a shift, in addition to the cost savings, would be a 70% reduction in regional emissions by 2050. Further measures recommended by the study include phasing in the use of green hydrogen for lorries and ships that comprise regional supply chains. If you are interested in entering the renewable energy market in Central America, contact our consulting arm, Colibri. 

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