Figure 1.--This family lived in Waspam, northern Nicaragua, during 1980. Nicaragua is the poorest and least developed of the Central American countries. The Somoza family ruled the country for 43 years The economy was healty and Nicaragua had strong commercial relationship with the United States and other trade partners. The Sandinista Revolution (FSLN) had a huge impact on the Nicaraguan economy (1979). The country by a right-wing dictatorship controling the economy as a personal fiefdom to a left-wing dictatorship by a group of left-wing idealogues with no knowledge of economics. The Sandinistas proceeded to nationalize private companies and implemented a state-controlled economy with the Sandinistas intervening in every important economic decision. The policies that the Sandinistas implemented proved no more successful in Nicaragia than they had in Cuba.

All of Central America except for Belize (British Hondurs) are Spanish speaking and part of the former Spanish Empire. Central American was a neglected part of the Spanish Empire. With independence in the early 19th century the region entered the world economy. Central America including Mexico although geographically close to the United States is generally classified as part of the developing world. Geographically, Mexico is part of North America, but culturally and economically it makes more sence to consider it as part of Central America. Agriculture predominted the economies and two export crops becme importnt, first coffee and thn bananas. During the 20th century coffee has been the single most important export commidity throughout the region. Bananas became important during the 20 century (Honduras, Panama, and Costa Rica), giving rise to the term 'banana republics'. Most of the production was exported to the nearby United States creating strong trade links between the United States and Central America. In recent years, the countries of the region have had some success in diversifying both the products exported as well as expanding trading partners. The countries are still, however, clssified as developing countries. This means that the population was generally poor using percapita GDP as an a measure, short life expectancies, low literacy and education levels, inadequate diet, and poor health care. Based on these and other pertiment indicators, there is significant economic diversity within the region. Nicaragua is generally considered to be the leat developed of the seven countries because it ranks lowest in the key indicators. Panama and Costa Rica are the most developed. This is interesting becuse Panama and Costa Rica, especially Panama, are the two countries with the greatest contact with the Unites States. The Cubans and Nicaraguan communist insusts that the United States and free market capitalism have impeded development, yet the richest countries are those most connected with America (Panama and Costa Rica) and the poorest country is the coontry most connected with Socialiam and Communist Cuba (Nicaragua). Another important factor in Central America is ethnicity. Costa Rica has a relatively small Native American population while Guatemala has a large Native Americn population. Democrahpics is another favtor. El Salvador is densely populated while neighboring Honduras is lightly populated.

Belize

Costa Rica

The pre-Colombia economy was primarily hunter gathering by primitive Native American tribes. The modern territory of Costa Rica was beyond the extent of the Maya to the north. There are no important Mayan sites in Costa Rica. There mut have been, however, trade connections. The name Costa Rica means 'rich coast' in Spanush. However most of the country's population don't live near the coast. The coast of Central America was theColumbus' first land fall on the mainland of the Americas. The name was based on the Spanish seeing gold jewerly being worn by the the natives they spotted along the coast. Costa Rica was the first Central American country to achieve a modicum of stability. In this, Costa Rica is different than much of Centra America which has been relected in the economy. The economy as in other Central American countries has been based on agricultural commodities. Coffee is especially important. Since World War II, tourism has become increasingly important along with foreign retirees. Here stability is an important factor. Unlike many other Latin American countries, Costa Rica does not have importnt natural resources like oil or metals. Tourism has become an importnt part of the country's economy. Among the activities that tourists enjoy is whale watching. They are also attracted by the country's biodiversity, in part because of the large protected areas. Costa Rica is a very small country. It has just about 0.1 percent of the world's total area, but 5 percent of the biodiversity. Costa Rica is an imprtnt exporter of agricultural products, especially bananas and coffee. Despite the country's small area, it accounts for 10 percent of the total exports of banana worldwide. That is the second place just behind Ecuador, another small country. Costa Rica is also the biggest producer of pinapple worldwide. Costa Rica is developing a mixed economy. It is one of the world's biggest producer of medical equipment, specially body prothesis. Several companies of the industry like St Jude Medical, Boston Scientific, among others manufacture their products here which are then exported to the rest of the world. Since the Great Recession 2010, Costa Rica has impressiveif not spectacular economic growth, 3.8 percent (2017). The masjor exports are still bananas, coffee, sugar, and beef. Exports of industrial and processed agricultural products are diversifying export shipments to include value-added goods. A bright spot is medical devices. Costa Rica's impressive biodiversity also makes it a key destination for ecotourism. Foreign investors are attracted by the country's political stability and high educational levelscompasredto other couintries in the rergion. The Government has offered incentives in free-trade zones. Investors face, however, many of the same issues concerning the political culure of the region which prevent Latin American countries from relicastion the success of the Asiazn tigers, opnrr some of the same problemns: inadeqwuate infrastructure, high energy costs, a complicasted and unfriendly beauracracy, weak investor protection, and weak contract enforcement. Therte is also rising fiscal deficit, rising public debt, and relatively low levels of domestic revenue.

Guatemala

Honduras

Mexico

Mexico is one of the three principal countries of North America. It has developed a sustantial economy. The ramking varies froim year to year, but is usually ranked about the 20th largest world economy. Even so, it is by par the poorest of the three North ASnerican countries. And while percapita income is substantially below that of America and Canada, it has the highest per capita income in Latin Anerica. This raises a variety of historical and economic questions. Left wing popularism has a considerable following in Latin America, including Mexico. Yet left-wing rulers like Castro in Cuba and Chavez in Venezuela have trouble explaining why, Mecico which is the Latin Ameican country most integrated with the United States, is the most prosperous. Still the question of desparity between America/Canda and Mexico remains. And here the siffering historical/ecomomic experience surely is the principal reason. Nexico was the heart of the Spanish Empire until independence in the 1880s. Unlike America which had aong historical experience with both democracy and capitalism, Mexico became independent with an almpst feudal economy. America art the time began to enter the modern economy with capitalist inctitutions and individuals who began important industrial innovations. Even in the 18th century, people like Benjamin Franlkin (lighting rods and stoves) and Ely Witney (cotton gin) patentened important devices. And this only increased in the 19th century. Nothing like this occurred in Mexico. This is not only the result of the feudal ecomomy, but also the Inquisiton which deterred free thought in southern Europe and Latin America. After the French were expelled (1860s), Porfirio Díaz and the Cientificos sought to modernize Mexico. Here they accomplished a great deal in terns of industry and infrastructure, but failed to address the summering social inequities. This led to the Mexican Recolution. Unfortunately for Mexico, the Revolution occurred a a time with Socialist thought was gaining currency and the Mexican leasers following the Revolution adopted many statist socialist policies which proved to be a huge drag on the Mexican economy. One reform was to create ejidos to protect the land holdings of Native Americans. But the ejido sydtem resulted in the Native Americans be denied access to capital and thus their agricultural operations continued to be highly inefficent resulting in very low incomes.

Nicarcagua

Nicaragua is generally considered to be the least developed of the Central American countries, measured interms like percapita income--$1,200 (2011). The country has few natural resources. There are gold, timber and fishery resources alomg both coast. Most of the exports are from agriculture or fisheries (coffee, beef, gold, sugar, fisheries, and some industrial goods--mostly textiles). Trade contacts existed with the Myain Mesoamerica. Nicaragua as was the rest of Central merica, a neglected backwater of the Spanish Empire. The Somoza family ruled the country for 43 years The economy was healty and Nicaragua had strong commercial relationship with the United States and other trade partners. The Sandinista Revolution (FSLN) had a huge impact on the Nicaraguan economy (1979). The country by a right-wing dictatorship controling the economy as a personal fiefdom to a left-wing dictatorship by a group of left-wing idealogues with no knowledge of economics. The Sandinistas proceeded to nationalize private companies and implemented a state-controlled economy with the Sandinistas intervening in every important economic decision. The policies that the Sandinistas implemented proved no more successful in Nicaragia than they had in Cuba. Thinking that they would surely win an election, the Sandinista allowed a free election and after two decades were voted out of office (1990). The country was left with massive unemployment and a huge external debt. Despite years of Sandinista rule or perhps because of it, income distribution is one of the most extreme in Latin America. The country has made some progress in improving its debt load. The growth rate has, however, been enemic. Many investor are hrsitant to put their capital at risk in a countey in which the Sandinistas are still influential. Nicaragua is dependent on international aid and debt relief offered through the Heavily Indebted Poor Countries (HIPC) initiative. The post-Sandinsta Governments has launched important economic reforms needed to qulaify foe HIPC debt relief. This brought in some $4 billion in foreign assistance (2004). Sandinista leader Daniel Ortega won the presidential election (November 2006). He won 38 percent of the vote against a divided opposition. We note rosy assessments of the Nicaraguan economy under the ASandinistas, A dishonest Wkilpidia paragraph read, "Nicaragua has transformed itself into one of the safest and fastest-growing countries in Latin America. A stable, multi-party democracy, Nicaragua has ratified Free Trade Agreements with major markets such as the United States, the Dominican Republic (DR-CAFTA), Taiwan and Mexico, among others. As evidence of continuous efforts in improving the business climate, Nicaragua has been ranked favorably in a variety of independent evaluations. The 2011 Doing Business Report, published by The World Bank Group, a report that benchmarks various indicators of the investment climate in 183 nations, ranked Nicaragua as the top location in Central America in starting a business, investor protection, and closing a business. Additionally, the country improved in the following categories: ease of doing business, registering property, paying taxes, trading across borders and enforcing contracts." This was not a neutral or honrst assessment of modern Nicaragua. The country is certainly not not a free multi-Party democracy. The country's elections have been question by international observers. President Ortega was reelected in clear violation of the Constitution. The 2014 Index of Economic Freedom found, "Since 2009, however, Nicaragua’s economy has fallen back to 'mostly unfree'. Anti–free market policies are bolstered by economic and political populism that drives class warfare. Institutional weaknesses persist in protection of property rights and combating corruption." Nicaragua continues to be the poorest country in Central America and the second poorest country in the Hemisphere despite massive Venezuelan and other international aid. The Nicaraguan Central Bank in recent years has been reporting high growth rates and relatively low inflation rates. The accuracy of the Central Bank data is largely unknown.

Panama

(El) Salvador

Sources

Index of Economic Freedom

Created: 3:59 AM 3/11/2012
Last updated: 5:08 AM 2/9/2019