Sen. Rodrick Bray (IN)

Moderator Tom Finneran

Sen. Bob Peterson (OH)

Charles Call

Matthew Rooney

JANUARY 3–6, 2019

Instability of Central America & the US Response (Part 1)

Introduction to the Region/Northern Triangle/
Historical Perspective

Charles Call, PhD

Associate Professor of International Peace and Conflict Resolution
American University

The Forum heard expert reports on the political, social, and economic situations in the Northern Triangle, comprised of Guatemala, El Salvador, and Honduras and discussed the implications for the States. Putting the size of the region into perspective, Dr. Call noted that Guatemala is the size of Tennessee, Honduras is similar to Georgia, and El Salvador is the size of Massachusetts.

Central America – Northern Triangle

Dr. Call set the stage for the discussion, providing the background on Central American history in relation to the US, including the causes and outcomes of the wars of the 1970s-1990s, and the social and economic realities in the aftermath of peace in the 1990s-present.  He detailed the impacts of immigration from the region, as well as the evolution to peace, democracy, and capitalist economies. However, he noted that while slow economic growth is occurring, prospects are dim due to the sustained insecurity and impunity in the region, arising from the persistence of organized crime intertwined with the corrupt states, and the hegemony of gangs.

Migration to the US

Understanding Central America is important to State legislators because 1 in 100 people in the US are of Central American origin, with almost 3.4 million Central Americans migrating to the US by 2015. Some US cities are home to more than 300,000 people born in Central America. The Northern Triangle accounts for 85% of the immigration from Central America to the US.

Central American Immigrant Population in the United States (1980-2015)

SOURCES: Data from U.S. Census Bureau 2006, 2010, and 2015 American Community Surveys (ACS), and Campbell J. Gibson and Kay Jung, "Historical Census Statistics on the Foreign-born Population of the United States: 1850-2000" (Working Paper no. 81, U.S. Census Bureau, Washington, DC, February 2006), available online.

Proportion of Central American-Born Population in the United States

SOURCES: 2011 American Community Survey, US Census Bureau. ©2013 Migration Policy Institute.

The Region’s Recent History

Central America is the “Near Abroad” to the US, and its proximity has given the US a strong role and influence in Central American conflicts and economies. For most of the Twentieth Century, Central America was a combat zone, as indigenous peoples struggling for land rights clashed with ruling elites, with the USSR, Cuba, and the US taking sides on the conflicts.

Poverty, Violence, and Immigration

Overlaying the areas of poverty and homicides paints a bleak picture of the region. Per capita income in the region ranges from $2,000 in Honduras to less than $4,000 in El Salvador. Economic prospects are grim and young people have to migrate to the US and send money back to families. In El Salvador, for example, such remittances account for one-sixth of the GDP. The region has the highest homicide rate in the world. More people are dying now during “peace time,” than in the wars—victims of gang violence, drug trafficking, and lack of law enforcement, as a result of organized crime being deeply intertwined with corrupt states. Driven by poverty and fear of violence, people are fleeing the region.

Illicit Trade

Violence in the region is driven largely by illicit trade, controlled by cartels. The scale of illicit trade is indicated in this 2016 map of non-commercial maritime events from Columbia and Ecuador to Guatemala and Mexico, on route to the US. The purple lines indicate illicit shipments to Guatemala and Mexico. The trade consists of drugs, human trafficking, cigarettes, firearms, and unlicensed products. For example, 90% of cocaine entering the US in 2015 came through Central America to Mexico and then to the US.

Non-commercial Maritime Events (2016)

Non-commercial maritime events from Columbia and Ecuador to Guatemala and Mexico, on route to the US (2016). The purple lines indicate illicit shipments to Guatemala and Mexico.

Fear of violence and hope for better economic opportunities are the drivers that put caravans of people on the road to the US from this troubled region, Dr. Call concluded.

 

Trade and the Economies of the Region

Matthew Rooney

Managing Director
Bush Institute-SMU Economic Growth Initiative
George W. Bush Institute

Mr. Rooney served as Counselor during development of the Central American Free Trade Agreement (CAFTA). He reported that the Central America had the most skewed income distribution in the world, with those of European origin controlling the wealth and opportunities, to the exclusion of indigenous peoples. CAFTA worked to hasten and strengthen regional economic integration, industrial development, and opportunities to attract Foreign Direct Investments (FDI). Mr. Rooney described the successes and challenges of economic development in the region.

Putting the region into perspective, Mr. Rooney pointed out that Central America has 45 million people, similar to California’s population, and a GDP of $360 billion, akin to that of Indiana or Maryland. The US has a positive trade balance with the region, which purchases $26 billion in exports from the US.

The Central American Free Trade Agreement

Prior to CAFTA, the region faced key structural issues. Its reliance on agricultural products, particularly coffee, did not support sustained growth. Furthermore, each country offers too small a population and a market to attract FDI independently. Therefore, CAFTA was designed to integrate the countries economically.

Officially called the Dominican Republic–Central American Free Trade Agreement (DR-CAFTA, commonly known as CAFTA), the agreement has seven members: Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and the US. It took effect on January 1, 2006, for all signatories except Costa Rica, which approved it in October 2007.

CAFTA’s Objectives• Expand and diversify trade• Eliminate trade barriers• Promote fair competition• Increase investment opportunities• Protect and enforce intellectual property rights• Establish a framework for further bilateral, regional, and multilateral cooperation

Successes

Some structural transformation has occurred with industrial development and exports increasing. Industry is more sophisticated, expanding beyond tariff-free manufacturing maquiladora factories to car subassembly manufacturing. A regional supply chain has been established within the region, allowing a better flow of goods and capital. The rules of CAFTA have constrained government from “going off the rails,” Mr. Rooney said, and have kept free market policies in place. While borders stops are still required, the region is moving toward a Customs union, which would provide a larger scale of business and more attractive investment opportunities for FDI.

Challenges

Corruption and violence have been major barriers to the success of CAFTA. Corruption is a central challenge and is key to instability. Without respect for the rule of law, corruption in customs, taxation and trade is pervasive. In addition, the formerly state-owned monopolies on power, telecommunications, airlines, ports, and transportation have become vested interests of private sector monopolies.

Summary

CAFTA could foster economic growth in the region, as it did in Mexico, Mr. Rooney pointed out, offering new opportunities, which could reduce the incentives to join drug gangs and reduce immigration pressure on the border.

Sen. Susan Wagle (KS) and Sen. Tom Alexander (SC) during the Winter 2019 Senate Presidents’ Forum.

Discussion

Sen. Rodrick Bray (IN): What is happening with the El Salvador government with one former President in jail and another under indictment? What is the US role in this scenario?

Dr. Call: Corruption is a major problem in the region, and people are mobilizing in the streets to protest it. Former El Salvadoran President Antonio Saca (2004-2009) was sentenced to 10 years in prison for embezzlement and money laundering charges and his successor as president, Mauricio Funes (2009-2014), is also accused of embezzlement and money laundering. Four Peruvian Presidents have been indicted and, in Brazil, many in government have faced corruption charges. The Guatemalan president and vice-president are accused of cutting deals with importers and taking money under the table for political campaigns. Such corruption with impunity is “business as usual” because the region’s court systems are ineffective or corrupt. It is customary for judges and witnesses to be bribed.

However, the Courts are becoming more active with the support of international missions, including the United Nations’ International Commission Against Impunity in Guatemala. The Organization of American States (OAS) is conducting corruption investigations in Honduras.

For decades, the US strongly supported clean politics and helped to strengthen law enforcement in the region. But recently, that support has been reduced and uncertain, because the countries have not cleaned house. The message from the US to Central America is “Clean up politics or US funding will be withdrawn.”

Mr. Rooney: There are historical precedents to explain why the region’s justice institutions are so weak. In the 1700’s, the courts were instruments of Spanish control; in the 1800’s, control passed to the ruling elites. It is a new concept that the courts should be instruments of the public trust.

For example, in El Salvador, a fiscal crisis and high debt led to major reforms in the government pension program, which shifted from a defined benefit fund to a contribution-based fund that was well managed by international banks. However, the last government weakened those controls and stole hundreds of millions of dollars. Today, pensioners can expect to see 24 cents of each pension $1.

Moderator Tom Finneran: How do the gangs and cartels of the Northern Triangle differ?

Dr. Call:  Gangs such as MS-13 and the 18th Street Gang have outposts in US cities, states, and schools. They are neighborhood gangs whose core business is extortion—a protection racket. They tax children going to school, teachers and hospital workers on route to work. If they don’t pay, they or their families may be killed. They often have initiation practices that require a murder before acceptance into the gang.

The cartels are more sophisticated and organized. They engage in drug manufacturing and drug transportation industries, human trafficking, and unlicensed products. The US worked with Columbian authorities to push drug lords out of Columbia, but the drug lords found an easy entry into the Northern Triangle, where there are few courts and no justice infrastructure to stop them.

Sen. Bob Peterson (OH): Why is there such discrepancy in income between Panama and Costa Rica—where income is adequate and rising—versus Central America—which faces such poverty?

Mr. Rooney: Panama has enjoyed the benefits of a long positive relationship with the US. Its currency is the dollar and, since taking control of the Panama Canal in 1999, the country has seen an influx of investment and increase in wealth. Costa Rica has avoided civil conflicts, has protected land tenancy, and developed a thriving coffee industry. Its policies have enabled more distributive systems, so more of the wealth goes to the grower. There is less social violence. And the country does not support an Army.

Dr. Call: Violence is the biggest problem in the Northern Triangle and this directly interferes with economic development.

Moderator Tom Finneran: Is China a risk factor in the region?

Dr. Call: Taiwan gave millions of dollars in aid to Central America as a ploy to gain UN recognition. Investment from China also could be helpful to the region, but China is more focused on Silk Road development. China also is more cautious not to provoke the Trump Administration. However, China’s assistance, in contrast to funding from the US, comes without any requirement for reforms on corruption and human rights violations.

Mr. Rooney:  Central America is a low priority for China but they are buying key assets in the region. The Chinese currently control ports at both ends of the Panama Canal and have proposed building a port in El Salvador. There are many opportunities for corruption in these ventures. The US is giving China an opening with Central American countries that are culturally related to the US should be close and friendly with us.

Speaker Biography

Charles Call

Dr. Charles “Chuck” Call, an associate professor of International Peace and Conflict Resolution, focuses on post-war peacebuilding, statebuilding, democratization, human rights and police and justice reform. He has conducted field research in Central America, West Africa, the Balkans, Colombia, Haiti and Afghanistan. In 2012-14 he served as senior advisor in the State Department. In 2017 he was senior external advisor to the World Bank/UN report Pathways for Peace: Inclusive Approaches to Preventing Violent Conflict, and spent 2004-05 working at UN headquarters. He has consulted for Human Rights Watch, the UN Development Programme, and the European Commission.

Matthew Rooney

Matthew Rooney joined the Bush Center in June 2015 following a career as a Foreign Service Officer with the U.S. Department of State. At postings in Washington and abroad, he focused on advocating market-driven solutions to economic policy challenges in both industrialized and developing countries, and on protecting the interests of U.S. companies abroad.

In Washington, Rooney was on loan to the U.S. Chamber of Commerce to create a high-level private sector advisory body for the Summits of the Americas, working closely with the U.S. private sector and with companies and business associations from throughout the Americas to negotiate an agenda to promote economic integration in the region.  Previously, he was Deputy Assistant Secretary responsible for relations with Canada and Mexico and for regional economic policy. In prior Washington assignments, Rooney worked for then-Senator Fred Thompson, and supported negotiations to open global markets to U.S. airline services.

Abroad, Rooney was Consul General in Munich, a Consulate General providing a full range of Consular and export promotion services, supporting a permanent presence of 30,000 U.S. forces in two major base complexes, and carrying out a media and public relations initiative in support of U.S. diplomatic objectives in Germany. As Counselor for Economic and Commercial Affairs at the U.S. Embassy in San Salvador, El Salvador, he laid the groundwork for free trade negotiations between the United States and the five countries of Central America, and promoted market-based reforms for electrical power. Prior to this, he served in various posts in Germany, Gabon and Côte d’Ivoire.

Rooney studied Economics, German and French at the University of Texas at Austin and received his Master’s Degree in International Management at the University of Texas at Dallas.

Fear of violence and hope for better economic opportunities are the drivers that put caravans of people on the road to the US from this troubled region.

Corruption and violence have been major barriers to the success of CAFTA.

The message from the US to Central America is “Clean up politics or US funding will be withdrawn.

CONTACT

Senate Presidents’ Forum

579 Broadway

Hastings-on-Hudson, NY 10706

 

Tel: 914-693-1818

Copyright © 2019 Senate Presidents' Forum. All rights reserved.

JANUARY 3–6, 2019

Instability of Central America & the US Response (Part 1)

Introduction to the Region/Northern Triangle/
Historical Perspective

Charles Call, PhD

Associate Professor of International Peace and Conflict Resolution
American University

The Forum heard expert reports on the political, social, and economic situations in the Northern Triangle, comprised of Guatemala, El Salvador, and Honduras and discussed the implications for the States. Putting the size of the region into perspective, Dr. Call noted that Guatemala is the size of Tennessee, Honduras is similar to Georgia, and El Salvador is the size of Massachusetts.

Central America – Northern Triangle

Dr. Call set the stage for the discussion, providing the background on Central American history in relation to the US, including the causes and outcomes of the wars of the 1970s-1990s, and the social and economic realities in the aftermath of peace in the 1990s-present.  He detailed the impacts of immigration from the region, as well as the evolution to peace, democracy, and capitalist economies. However, he noted that while slow economic growth is occurring, prospects are dim due to the sustained insecurity and impunity in the region, arising from the persistence of organized crime intertwined with the corrupt states, and the hegemony of gangs.

Migration to the US

Understanding Central America is important to State legislators because 1 in 100 people in the US are of Central American origin, with almost 3.4 million Central Americans migrating to the US by 2015. Some US cities are home to more than 300,000 people born in Central America. The Northern Triangle accounts for 85% of the immigration from Central America to the US.

Central American Immigrant Population in the United States (1980-2015)

SOURCES: Data from U.S. Census Bureau 2006, 2010, and 2015 American Community Surveys (ACS), and Campbell J. Gibson and Kay Jung, "Historical Census Statistics on the Foreign-born Population of the United States: 1850-2000" (Working Paper no. 81, U.S. Census Bureau, Washington, DC, February 2006), available online.

Proportion of Central American-Born Population in the United States

SOURCES: 2011 American Community Survey, US Census Bureau. ©2013 Migration Policy Institute.

The Region’s Recent History

Central America is the “Near Abroad” to the US, and its proximity has given the US a strong role and influence in Central American conflicts and economies. For most of the Twentieth Century, Central America was a combat zone, as indigenous peoples struggling for land rights clashed with ruling elites, with the USSR, Cuba, and the US taking sides on the conflicts.

Poverty, Violence, and Immigration

Overlaying the areas of poverty and homicides paints a bleak picture of the region. Per capita income in the region ranges from $2,000 in Honduras to less than $4,000 in El Salvador. Economic prospects are grim and young people have to migrate to the US and send money back to families. In El Salvador, for example, such remittances account for one-sixth of the GDP. The region has the highest homicide rate in the world. More people are dying now during “peace time,” than in the wars—victims of gang violence, drug trafficking, and lack of law enforcement, as a result of organized crime being deeply intertwined with corrupt states. Driven by poverty and fear of violence, people are fleeing the region.

Illicit Trade

Violence in the region is driven largely by illicit trade, controlled by cartels. The scale of illicit trade is indicated in this 2016 map of non-commercial maritime events from Columbia and Ecuador to Guatemala and Mexico, on route to the US. The purple lines indicate illicit shipments to Guatemala and Mexico. The trade consists of drugs, human trafficking, cigarettes, firearms, and unlicensed products. For example, 90% of cocaine entering the US in 2015 came through Central America to Mexico and then to the US.

Non-commercial Maritime Events (2016)

Non-commercial maritime events from Columbia and Ecuador to Guatemala and Mexico, on route to the US (2016). The purple lines indicate illicit shipments to Guatemala and Mexico.

Fear of violence and hope for better economic opportunities are the drivers that put caravans of people on the road to the US from this troubled region, Dr. Call concluded.

Fear of violence and hope for better economic opportunities are the drivers that put caravans of people on the road to the US from this troubled region.

Trade and the Economies of the Region

Matthew Rooney

Managing Director
Bush Institute-SMU Economic Growth Initiative
George W. Bush Institute

Mr. Rooney served as Counselor during development of the Central American Free Trade Agreement (CAFTA). He reported that the Central America had the most skewed income distribution in the world, with those of European origin controlling the wealth and opportunities, to the exclusion of indigenous peoples. CAFTA worked to hasten and strengthen regional economic integration, industrial development, and opportunities to attract Foreign Direct Investments (FDI). Mr. Rooney described the successes and challenges of economic development in the region.

Putting the region into perspective, Mr. Rooney pointed out that Central America has 45 million people, similar to California’s population, and a GDP of $360 billion, akin to that of Indiana or Maryland. The US has a positive trade balance with the region, which purchases $26 billion in exports from the US.

The Central American Free Trade Agreement

Prior to CAFTA, the region faced key structural issues. Its reliance on agricultural products, particularly coffee, did not support sustained growth. Furthermore, each country offers too small a population and a market to attract FDI independently. Therefore, CAFTA was designed to integrate the countries economically.

Officially called the Dominican Republic–Central American Free Trade Agreement (DR-CAFTA, commonly known as CAFTA), the agreement has seven members: Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and the US. It took effect on January 1, 2006, for all signatories except Costa Rica, which approved it in October 2007.

CAFTA’s Objectives• Expand and diversify trade• Eliminate trade barriers• Promote fair competition• Increase investment opportunities• Protect and enforce intellectual property rights• Establish a framework for further bilateral, regional, and multilateral cooperation

Successes

Some structural transformation has occurred with industrial development and exports increasing. Industry is more sophisticated, expanding beyond tariff-free manufacturing maquiladora factories to car subassembly manufacturing. A regional supply chain has been established within the region, allowing a better flow of goods and capital. The rules of CAFTA have constrained government from “going off the rails,” Mr. Rooney said, and have kept free market policies in place. While borders stops are still required, the region is moving toward a Customs union, which would provide a larger scale of business and more attractive investment opportunities for FDI.

Challenges

Corruption and violence have been major barriers to the success of CAFTA. Corruption is a central challenge and is key to instability. Without respect for the rule of law, corruption in customs, taxation and trade is pervasive. In addition, the formerly state-owned monopolies on power, telecommunications, airlines, ports, and transportation have become vested interests of private sector monopolies.

Corruption and violence have been major barriers to the success of CAFTA.

Summary

CAFTA could foster economic growth in the region, as it did in Mexico, Mr. Rooney pointed out, offering new opportunities, which could reduce the incentives to join drug gangs and reduce immigration pressure on the border.

Sen. Susan Wagle (KS) and Sen. Tom Alexander (SC) during the Winter 2019 Senate Presidents’ Forum.

Discussion

Sen. Rodrick Bray (IN): What is happening with the El Salvador government with one former President in jail and another under indictment? What is the US role in this scenario?

Dr. Call: Corruption is a major problem in the region, and people are mobilizing in the streets to protest it. Former El Salvadoran President Antonio Saca (2004-2009) was sentenced to 10 years in prison for embezzlement and money laundering charges and his successor as president, Mauricio Funes (2009-2014), is also accused of embezzlement and money laundering. Four Peruvian Presidents have been indicted and, in Brazil, many in government have faced corruption charges. The Guatemalan president and vice-president are accused of cutting deals with importers and taking money under the table for political campaigns. Such corruption with impunity is “business as usual” because the region’s court systems are ineffective or corrupt. It is customary for judges and witnesses to be bribed.

However, the Courts are becoming more active with the support of international missions, including the United Nations’ International Commission Against Impunity in Guatemala. The Organization of American States (OAS) is conducting corruption investigations in Honduras.

For decades, the US strongly supported clean politics and helped to strengthen law enforcement in the region. But recently, that support has been reduced and uncertain, because the countries have not cleaned house. The message from the US to Central America is “Clean up politics or US funding will be withdrawn.”

The message from the US to Central America is “Clean up politics or US funding will be withdrawn."

Mr. Rooney: There are historical precedents to explain why the region’s justice institutions are so weak. In the 1700’s, the courts were instruments of Spanish control; in the 1800’s, control passed to the ruling elites. It is a new concept that the courts should be instruments of the public trust.

For example, in El Salvador, a fiscal crisis and high debt led to major reforms in the government pension program, which shifted from a defined benefit fund to a contribution-based fund that was well managed by international banks. However, the last government weakened those controls and stole hundreds of millions of dollars. Today, pensioners can expect to see 24 cents of each pension $1.

Moderator Tom Finneran: How do the gangs and cartels of the Northern Triangle differ?

Dr. Call:  Gangs such as MS-13 and the 18th Street Gang have outposts in US cities, states, and schools. They are neighborhood gangs whose core business is extortion—a protection racket. They tax children going to school, teachers and hospital workers on route to work. If they don’t pay, they or their families may be killed. They often have initiation practices that require a murder before acceptance into the gang.

The cartels are more sophisticated and organized. They engage in drug manufacturing and drug transportation industries, human trafficking, and unlicensed products. The US worked with Columbian authorities to push drug lords out of Columbia, but the drug lords found an easy entry into the Northern Triangle, where there are few courts and no justice infrastructure to stop them.

Sen. Bob Peterson (OH): Why is there such discrepancy in income between Panama and Costa Rica—where income is adequate and rising—versus Central America—which faces such poverty?

Mr. Rooney: Panama has enjoyed the benefits of a long positive relationship with the US. Its currency is the dollar and, since taking control of the Panama Canal in 1999, the country has seen an influx of investment and increase in wealth. Costa Rica has avoided civil conflicts, has protected land tenancy, and developed a thriving coffee industry. Its policies have enabled more distributive systems, so more of the wealth goes to the grower. There is less social violence. And the country does not support an Army.

Dr. Call: Violence is the biggest problem in the Northern Triangle and this directly interferes with economic development.

Moderator Tom Finneran: Is China a risk factor in the region?

Dr. Call: Taiwan gave millions of dollars in aid to Central America as a ploy to gain UN recognition. Investment from China also could be helpful to the region, but China is more focused on Silk Road development. China also is more cautious not to provoke the Trump Administration. However, China’s assistance, in contrast to funding from the US, comes without any requirement for reforms on corruption and human rights violations.

Mr. Rooney:  Central America is a low priority for China but they are buying key assets in the region. The Chinese currently control ports at both ends of the Panama Canal and have proposed building a port in El Salvador. There are many opportunities for corruption in these ventures. The US is giving China an opening with Central American countries that are culturally related to the US should be close and friendly with us.

Speaker Biography

Charles Call

Dr. Charles “Chuck” Call, an associate professor of International Peace and Conflict Resolution, focuses on post-war peacebuilding, statebuilding, democratization, human rights and police and justice reform. He has conducted field research in Central America, West Africa, the Balkans, Colombia, Haiti and Afghanistan. In 2012-14 he served as senior advisor in the State Department. In 2017 he was senior external advisor to the World Bank/UN report Pathways for Peace: Inclusive Approaches to Preventing Violent Conflict, and spent 2004-05 working at UN headquarters. He has consulted for Human Rights Watch, the UN Development Programme, and the European Commission.

Matthew Rooney

Matthew Rooney joined the Bush Center in June 2015 following a career as a Foreign Service Officer with the U.S. Department of State. At postings in Washington and abroad, he focused on advocating market-driven solutions to economic policy challenges in both industrialized and developing countries, and on protecting the interests of U.S. companies abroad.

In Washington, Rooney was on loan to the U.S. Chamber of Commerce to create a high-level private sector advisory body for the Summits of the Americas, working closely with the U.S. private sector and with companies and business associations from throughout the Americas to negotiate an agenda to promote economic integration in the region.  Previously, he was Deputy Assistant Secretary responsible for relations with Canada and Mexico and for regional economic policy. In prior Washington assignments, Rooney worked for then-Senator Fred Thompson, and supported negotiations to open global markets to U.S. airline services.

Abroad, Rooney was Consul General in Munich, a Consulate General providing a full range of Consular and export promotion services, supporting a permanent presence of 30,000 U.S. forces in two major base complexes, and carrying out a media and public relations initiative in support of U.S. diplomatic objectives in Germany. As Counselor for Economic and Commercial Affairs at the U.S. Embassy in San Salvador, El Salvador, he laid the groundwork for free trade negotiations between the United States and the five countries of Central America, and promoted market-based reforms for electrical power. Prior to this, he served in various posts in Germany, Gabon and Côte d’Ivoire.

Rooney studied Economics, German and French at the University of Texas at Austin and received his Master’s Degree in International Management at the University of Texas at Dallas.

CONTACT

Senate Presidents’ Forum

579 Broadway

Hastings-on-Hudson, NY 10706

 

Tel: 914-693-1818

Copyright © 2019 Senate Presidents' Forum. All rights reserved.

JANUARY 3–6, 2019

Instability of Central America & the US Response (Part 1)

Introduction to the Region/Northern Triangle/
Historical Perspective

Charles Call, PhD

Associate Professor of International Peace and Conflict Resolution
American University

The Forum heard expert reports on the political, social, and economic situations in the Northern Triangle, comprised of Guatemala, El Salvador, and Honduras and discussed the implications for the States. Putting the size of the region into perspective, Dr. Call noted that Guatemala is the size of Tennessee, Honduras is similar to Georgia, and El Salvador is the size of Massachusetts.

Central America – Northern Triangle

Dr. Call set the stage for the discussion, providing the background on Central American history in relation to the US, including the causes and outcomes of the wars of the 1970s-1990s, and the social and economic realities in the aftermath of peace in the 1990s-present.  He detailed the impacts of immigration from the region, as well as the evolution to peace, democracy, and capitalist economies. However, he noted that while slow economic growth is occurring, prospects are dim due to the sustained insecurity and impunity in the region, arising from the persistence of organized crime intertwined with the corrupt states, and the hegemony of gangs.

Migration to the US

Understanding Central America is important to State legislators because 1 in 100 people in the US are of Central American origin, with almost 3.4 million Central Americans migrating to the US by 2015. Some US cities are home to more than 300,000 people born in Central America. The Northern Triangle accounts for 85% of the immigration from Central America to the US.

Central American Immigrant Population in the United States (1980-2015)

SOURCES: Data from U.S. Census Bureau 2006, 2010, and 2015 American Community Surveys (ACS), and Campbell J. Gibson and Kay Jung, "Historical Census Statistics on the Foreign-born Population of the United States: 1850-2000" (Working Paper no. 81, U.S. Census Bureau, Washington, DC, February 2006), available online.

Proportion of Central American-Born Population in the United States

SOURCES: 2011 American Community Survey, US Census Bureau. ©2013 Migration Policy Institute.

The Region’s Recent History

Central America is the “Near Abroad” to the US, and its proximity has given the US a strong role and influence in Central American conflicts and economies. For most of the Twentieth Century, Central America was a combat zone, as indigenous peoples struggling for land rights clashed with ruling elites, with the USSR, Cuba, and the US taking sides on the conflicts.

Poverty, Violence, and Immigration

Overlaying the areas of poverty and homicides paints a bleak picture of the region. Per capita income in the region ranges from $2,000 in Honduras to less than $4,000 in El Salvador. Economic prospects are grim and young people have to migrate to the US and send money back to families. In El Salvador, for example, such remittances account for one-sixth of the GDP. The region has the highest homicide rate in the world. More people are dying now during “peace time,” than in the wars—victims of gang violence, drug trafficking, and lack of law enforcement, as a result of organized crime being deeply intertwined with corrupt states. Driven by poverty and fear of violence, people are fleeing the region.

Illicit Trade

Violence in the region is driven largely by illicit trade, controlled by cartels. The scale of illicit trade is indicated in this 2016 map of non-commercial maritime events from Columbia and Ecuador to Guatemala and Mexico, on route to the US. The purple lines indicate illicit shipments to Guatemala and Mexico. The trade consists of drugs, human trafficking, cigarettes, firearms, and unlicensed products. For example, 90% of cocaine entering the US in 2015 came through Central America to Mexico and then to the US.

Non-commercial Maritime Events (2016)

Non-commercial maritime events from Columbia and Ecuador to Guatemala and Mexico, on route to the US (2016). The purple lines indicate illicit shipments to Guatemala and Mexico.

Fear of violence and hope for better economic opportunities are the drivers that put caravans of people on the road to the US from this troubled region, Dr. Call concluded.

Fear of violence and hope for better economic opportunities are the drivers that put caravans of people on the road to the US from this troubled region.

Trade and the Economies of the Region

Matthew Rooney

Managing Director
Bush Institute-SMU Economic Growth Initiative
George W. Bush Institute

Mr. Rooney served as Counselor during development of the Central American Free Trade Agreement (CAFTA). He reported that the Central America had the most skewed income distribution in the world, with those of European origin controlling the wealth and opportunities, to the exclusion of indigenous peoples. CAFTA worked to hasten and strengthen regional economic integration, industrial development, and opportunities to attract Foreign Direct Investments (FDI). Mr. Rooney described the successes and challenges of economic development in the region.

Putting the region into perspective, Mr. Rooney pointed out that Central America has 45 million people, similar to California’s population, and a GDP of $360 billion, akin to that of Indiana or Maryland. The US has a positive trade balance with the region, which purchases $26 billion in exports from the US.

The Central American Free Trade Agreement

Prior to CAFTA, the region faced key structural issues. Its reliance on agricultural products, particularly coffee, did not support sustained growth. Furthermore, each country offers too small a population and a market to attract FDI independently. Therefore, CAFTA was designed to integrate the countries economically.

Officially called the Dominican Republic–Central American Free Trade Agreement (DR-CAFTA, commonly known as CAFTA), the agreement has seven members: Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and the US. It took effect on January 1, 2006, for all signatories except Costa Rica, which approved it in October 2007.

CAFTA’s Objectives• Expand and diversify trade• Eliminate trade barriers• Promote fair competition• Increase investment opportunities• Protect and enforce intellectual property rights• Establish a framework for further bilateral, regional, and multilateral cooperation

Successes

Some structural transformation has occurred with industrial development and exports increasing. Industry is more sophisticated, expanding beyond tariff-free manufacturing maquiladora factories to car subassembly manufacturing. A regional supply chain has been established within the region, allowing a better flow of goods and capital. The rules of CAFTA have constrained government from “going off the rails,” Mr. Rooney said, and have kept free market policies in place. While borders stops are still required, the region is moving toward a Customs union, which would provide a larger scale of business and more attractive investment opportunities for FDI.

Challenges

Corruption and violence have been major barriers to the success of CAFTA. Corruption is a central challenge and is key to instability. Without respect for the rule of law, corruption in customs, taxation and trade is pervasive. In addition, the formerly state-owned monopolies on power, telecommunications, airlines, ports, and transportation have become vested interests of private sector monopolies.

Corruption and violence have been major barriers to the success of CAFTA.

Summary

CAFTA could foster economic growth in the region, as it did in Mexico, Mr. Rooney pointed out, offering new opportunities, which could reduce the incentives to join drug gangs and reduce immigration pressure on the border.

Sen. Susan Wagle (KS) and Sen. Tom Alexander (SC) during the Winter 2019 Senate Presidents’ Forum.

Discussion

Sen. Rodrick Bray (IN): What is happening with the El Salvador government with one former President in jail and another under indictment? What is the US role in this scenario?

Dr. Call: Corruption is a major problem in the region, and people are mobilizing in the streets to protest it. Former El Salvadoran President Antonio Saca (2004-2009) was sentenced to 10 years in prison for embezzlement and money laundering charges and his successor as president, Mauricio Funes (2009-2014), is also accused of embezzlement and money laundering. Four Peruvian Presidents have been indicted and, in Brazil, many in government have faced corruption charges. The Guatemalan president and vice-president are accused of cutting deals with importers and taking money under the table for political campaigns. Such corruption with impunity is “business as usual” because the region’s court systems are ineffective or corrupt. It is customary for judges and witnesses to be bribed.

However, the Courts are becoming more active with the support of international missions, including the United Nations’ International Commission Against Impunity in Guatemala. The Organization of American States (OAS) is conducting corruption investigations in Honduras.

For decades, the US strongly supported clean politics and helped to strengthen law enforcement in the region. But recently, that support has been reduced and uncertain, because the countries have not cleaned house. The message from the US to Central America is “Clean up politics or US funding will be withdrawn.”

The message from the US to Central America is “Clean up politics or US funding will be withdrawn."

Mr. Rooney: There are historical precedents to explain why the region’s justice institutions are so weak. In the 1700’s, the courts were instruments of Spanish control; in the 1800’s, control passed to the ruling elites. It is a new concept that the courts should be instruments of the public trust.

For example, in El Salvador, a fiscal crisis and high debt led to major reforms in the government pension program, which shifted from a defined benefit fund to a contribution-based fund that was well managed by international banks. However, the last government weakened those controls and stole hundreds of millions of dollars. Today, pensioners can expect to see 24 cents of each pension $1.

Moderator Tom Finneran: How do the gangs and cartels of the Northern Triangle differ?

Dr. Call:  Gangs such as MS-13 and the 18th Street Gang have outposts in US cities, states, and schools. They are neighborhood gangs whose core business is extortion—a protection racket. They tax children going to school, teachers and hospital workers on route to work. If they don’t pay, they or their families may be killed. They often have initiation practices that require a murder before acceptance into the gang.

The cartels are more sophisticated and organized. They engage in drug manufacturing and drug transportation industries, human trafficking, and unlicensed products. The US worked with Columbian authorities to push drug lords out of Columbia, but the drug lords found an easy entry into the Northern Triangle, where there are few courts and no justice infrastructure to stop them.

Sen. Bob Peterson (OH): Why is there such discrepancy in income between Panama and Costa Rica—where income is adequate and rising—versus Central America—which faces such poverty?

Mr. Rooney: Panama has enjoyed the benefits of a long positive relationship with the US. Its currency is the dollar and, since taking control of the Panama Canal in 1999, the country has seen an influx of investment and increase in wealth. Costa Rica has avoided civil conflicts, has protected land tenancy, and developed a thriving coffee industry. Its policies have enabled more distributive systems, so more of the wealth goes to the grower. There is less social violence. And the country does not support an Army.

Dr. Call: Violence is the biggest problem in the Northern Triangle and this directly interferes with economic development.

Moderator Tom Finneran: Is China a risk factor in the region?

Dr. Call: Taiwan gave millions of dollars in aid to Central America as a ploy to gain UN recognition. Investment from China also could be helpful to the region, but China is more focused on Silk Road development. China also is more cautious not to provoke the Trump Administration. However, China’s assistance, in contrast to funding from the US, comes without any requirement for reforms on corruption and human rights violations.

Mr. Rooney:  Central America is a low priority for China but they are buying key assets in the region. The Chinese currently control ports at both ends of the Panama Canal and have proposed building a port in El Salvador. There are many opportunities for corruption in these ventures. The US is giving China an opening with Central American countries that are culturally related to the US should be close and friendly with us.

Speaker Biography

Charles Call

Dr. Charles “Chuck” Call, an associate professor of International Peace and Conflict Resolution, focuses on post-war peacebuilding, statebuilding, democratization, human rights and police and justice reform. He has conducted field research in Central America, West Africa, the Balkans, Colombia, Haiti and Afghanistan. In 2012-14 he served as senior advisor in the State Department. In 2017 he was senior external advisor to the World Bank/UN report Pathways for Peace: Inclusive Approaches to Preventing Violent Conflict, and spent 2004-05 working at UN headquarters. He has consulted for Human Rights Watch, the UN Development Programme, and the European Commission.

Matthew Rooney

Matthew Rooney joined the Bush Center in June 2015 following a career as a Foreign Service Officer with the U.S. Department of State. At postings in Washington and abroad, he focused on advocating market-driven solutions to economic policy challenges in both industrialized and developing countries, and on protecting the interests of U.S. companies abroad.

In Washington, Rooney was on loan to the U.S. Chamber of Commerce to create a high-level private sector advisory body for the Summits of the Americas, working closely with the U.S. private sector and with companies and business associations from throughout the Americas to negotiate an agenda to promote economic integration in the region.  Previously, he was Deputy Assistant Secretary responsible for relations with Canada and Mexico and for regional economic policy. In prior Washington assignments, Rooney worked for then-Senator Fred Thompson, and supported negotiations to open global markets to U.S. airline services.

Abroad, Rooney was Consul General in Munich, a Consulate General providing a full range of Consular and export promotion services, supporting a permanent presence of 30,000 U.S. forces in two major base complexes, and carrying out a media and public relations initiative in support of U.S. diplomatic objectives in Germany. As Counselor for Economic and Commercial Affairs at the U.S. Embassy in San Salvador, El Salvador, he laid the groundwork for free trade negotiations between the United States and the five countries of Central America, and promoted market-based reforms for electrical power. Prior to this, he served in various posts in Germany, Gabon and Côte d’Ivoire.

Rooney studied Economics, German and French at the University of Texas at Austin and received his Master’s Degree in International Management at the University of Texas at Dallas.

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