Columbia International Affairs Online: Working Papers

CIAO DATE: 07/2012

Competitiveness in Central America: The Road to Sustained Growth and Poverty Reduction

José Luis Guasch, Liliana Rojas-Suarez, Veronica Gonzales

June 2012

Center for Global Development


Central American countries have made a lot of progress in the past decade stabilizing their economies and improving their business climates. By doing so, they have weathered the most recent crises relatively well, but they are still host to certain vulnerabilities and weakness: per-capita growth rates lag behind the rest of Latin America; poverty and inequality rates remain worrisomely high; and some signs are emerging that macroeconomic and democratic stability are weakening. In this report, senior fellow Liliana Rojas-Suarez and José Luis Guasch, senior regional advisor on regulation and competition at the World Bank, investigate what donors can do to help the region secure sustained growth, alleviate poverty, and reduce inequality, and what the role is for the private sector. They focus their recommendations on five areas in which policy changes can make Central American economies more competitive: 1) Innovation, Knowledge Transfer, and Quality Systems 2) Infrastructure and Logistics 3) Mainstreaming the Activities of Small and Medium Enterprises 4) Education and Human Capital 5) Crime, Violence, and Weak Governance In all five areas, the authors find essential roles for international donors to complement the efforts of national authorities and the local private sectors.