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By
Andres Oppenheimer
The Miami Herald - April 9, 2007
PANAMA CITY, Panama - For the
first time in many decades, Central America, Panama
and the Dominican Republic are enjoying a series
of favorable economic winds that - if they don't
blow it - may lead the region to a long period of
prosperity.
My optimism may be somewhat influenced
by the building boom I saw along the highway from
Panama City's airport. Huge luxury condominiums
are being built for the growing number of Americans
and Latin Americans - many from Venezuela - who
are buying real estate here for their retirement
years, or to protect themselves from instability
at home.
But there are other factors that
bode well not only for Panama, but for the five
Central American countries (El Salvador, Costa Rica,
Guatemala, Honduras and Nicaragua) and the Dominican
Republic. Among them:
-
Panama's recent vote to start a $5.2 billion expansion
of the Panama Canal
will result in a huge injection of money into Panama's
economy, which may spill over to some of its neighbors.
Canal officials say the expansion, due to be concluded
in 2014, will create up to 40,000 jobs. By 2014,
the Canal is to contribute $1.3 billion a year to
the nation's treasury, up from $580 million today.
- The U.S. free-trade agreement with Central America
and the Dominican Republic, known as CAFTA-DR, while
not yet in place in all member countries, is likely
to increase the region's exports to the world's
biggest market. While CAFTA-DR exports to the U.S.
market rose by only 2.8 percent last year, U.S.
officials say they will grow significantly this
year following the removal of bureaucratic hurdles
that slowed down shipments during the treaties'
first months of implementation last year.
In addition, Central America is in the final stages
of a free trade agreement with the 27-country European
Union, which could further boost the region's overall
exports.
- Family remittances from the region's migrants
living in the United States reached more than $13
billion last year, and - as in the rest of Latin
America - are scheduled to continue rising by an
average of about 15 percent a year until at least
2010, according to a new study by the Inter-American
Development Bank (IDB). Remittances are among the
top income sources of several countries in the region.
- The recent U.S.-Brazilian agreement to produce
sugar-cane-based ethanol in Central America and
the Caribbean - with Brazilian technology and U.S.
financial aid - is likely to boost several economies
in the region. Thanks to existing U.S. Central American
trade preferences, countries such as El Salvador
will be able to export ethanol to the U.S. market
without paying a 54 cents a gallon U.S. tariff on
ethanol imports applied to non-Caribbean Basin producers.
- Projections that more than 100 million American
baby boomers will reach retirement age over the
next three decades will generate golden opportunities
for Panama, Central America and the Dominican Republic,
alongside Mexico, to provide low-cost healthcare
services to millions of U.S. retirees.
Most economists forecast a steady
rise in already sky-high U.S. healthcare and retirement-home
costs, which could help Central American countries
- much like Spain does in Europe - to become a magnet
for northern retirees.
My opinion: Granted, Central America
still has some of Latin America's worst poverty
rates, and there are many other factors that could
spoil the region's progress.
A bigger than expected downturn
in the U.S. economy could hurt regional exports;
a continued rise in gang and drug-related violence
may scare away tourism and investments, and childish
historic disputes among several countries in the
region could delay implementation of a common market,
without which individual countries' markets will
be too small to attract major investments.
But if leaders in the region stay
the course and allow their countries to benefit
from favorable economic trends, the expanded Central
American region may soon give us a surprise. It
could start a period of sustained economic growth,
and begin a dramatic reduction of its obscene poverty
levels.
Andres Oppenheimer is a Latin
America correspondent for the Miami Herald. Reach
him at aoppenheimer@miamiherald.com.
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