France and Central America

Disparities between the north and south of the isthmus
Economic growth and social inequalities
TOTAL
The ravages of delinquency and organized crime
Spain’s presence and North American influence
Venezuela’s influence under President Chavez in the area
Regional integration efforts
Central America’s relations with France
Economic and trade challenges
A dynamic French cultural establishment

Central America covers an area of approximately 522,000 km², shared by seven countries, the smallest of which - such as El Salvador and Belize - have a territory equivalent to two or three French departments. With a total population of less than 40 million inhabitants and an average population growth rate that does not exceed 2% a year, this region, flanked to the north by Mexico (nearly 2 million km²) and to the south by Colombia (1.1 million km²) forms a heterogeneous group:

  Four countries, Guatemala, El Salvador, Honduras and Nicaragua, structurally weakened by internal conflicts, deal with chronic underdevelopment, despite favourable economic indicators. More than 50% of the population lives below the poverty line and GDP per capita does not exceed USD 1,600. These countries are also hit the hardest by the new wave of delinquency and organized crime;

  An English-speaking enclave, Belize, which is oriented more toward the Caribbean and the United States than its Central American neighbours, is experiencing fast economic growth, in spite of the ravages of major corruption.

  The most developed country, Costa Rica, appears to be an exception in the region. It dissolved its army in 1948 and enjoys democratic institutions that are already long-standing. With GDP per capita of USD 5,627 (2007), it can boast the highest standard of living in the region. Extreme poverty is limited to 7%, life expectancy is 79 years, and the social welfare system covers nearly 80% of the population. This economic and social model attracts numerous immigrant workers, many of whom are from Nicaragua. This country is seeking to modernize itself by opening up to free trade (CAFTA-DR, draft association agreement with the EU) and reforms (specifically in the telecommunications and insurance sectors). However, in recent years, the capital, San José, and the entire country have in turn been victims of violence and insecurity, related especially to increased drug trafficking;

  A strategic country, Panama, is experiencing unprecedented economic expansion. Work to expand the canal, undertaken by President Torrijos, began in Autumn 2007. Panama guarantees freedom of movement through the inter-oceanic canal, to which France is very attached. Five percent of world trade passes through its canal. These flows bring strong and sustainable economic growth (more than 8% in 2007), which generates considerable revenue and reinforces related activities: the Colon Free Zone, the second-biggest free trade area in the world after Hong Kong, and a very developed international banking centre. These services account for 75% of Panama’s GDP. Today, Panama enjoys real political stability, despite the prevailing atmosphere of wheeling and dealing and social inequalities.

For 2007, Central America’s gross domestic product (evaluated at USD 111.18b) was comparable to that of Chile and Colombia. Guatemala is in front (USD 32.7b), because of its population (13.3 million inhabitants, or more than 25% of that of the isthmus), and its agricultural, hydraulic and mining resources, and is followed by Costa Rica (USD 22b), El Salvador (USD 20.3) and Panama (USD 19b).

Agriculture continues to play a decisive economic role. The subsoil contains oil in Guatemala, but in small quantities. In today’s context of globalization, the region’s main asset is the low cost of its labour close to the large North American market. The United States has relocated several types of activities to this region: dressmaking shops in the countries in the northern part of the isthmus, manufacture of electronic components and service activities - call centres - in the country with the highest level of education, Costa Rica.

Moreover, the lack of jobs in countries in which public and private investments remain very inadequate forces a large portion of the labour force of the four countries in the northern part of the isthmus to emigrate to the United States. These migrants transfer amounts that in 2007 reached 18.6% of El Salvador’s GDP with USD 3.7b, 10.1% of Guatemala’s GDP with USD 3.6b, and 12% of Honduras’ GDP with USD 1.01b.

In all of the countries of the isthmus, economic indicators mark an increase in GDP, which nevertheless is unable to reduce the economic and social inequalities.

Central America in figures(2007)

For the past decade, delinquency has been growing considerably in the countries in the northern part of the isthmus (especially in Guatemala, El Salvador, and Honduras), and, to a lesser degree, in Belize and Costa Rica. Fuelled by drug trafficking, organized crime and the insecurity that it generates are of great concern to the populations and constitute a formidable challenge for the governments, which seem at a loss in the face of this real threat.

Central America has one of the highest average homicide rates in the world (45 per 100,000 inhabitants). There are many causes of this violence, but poverty plays a fundamental role. Behaviours that have resulted from civil wars and the swing, in Guatemala and El Salvador, of paramilitary groups to delinquency, also play a role. In the 1990s, in El Salvador and Honduras, the phenomenon of maras (gangs), born in the ghettos of the big cities in the southern United States, appeared. These gangs of very dangerous young delinquents engaging in transnational activities share the delinquency markets of Guatemala and Panama violently. Finally, drug trafficking, which is definitely on the rise, has increased the scope of these phenomena. In Honduras, for example, there is a real risk of drug traffickers destabilizing society and controlling the state apparatus.The takeover of political parties - and thus of the State through elections - would have tragic consequences. The sums generated by money laundering are enormous and difficult to control.

Spain’s influence remains significant in Central America, whether it be the language, culture, or economic or political ties. It is also a tempting “gateway” to Europe for applicants for emigration.

From an economic and trade standpoint, the United States is the leading partner of every country in the isthmus in every field. Two countries in the area have “dollarized” their economy: El Salvador (since 2001) and Panama, whose currency, the “Balboa” is actually the dollar. This relationship became stronger with the implementation on 1 January 2006 of the free trade treaty between the United States, Central America and the Dominican Republic (CAFTA-DR).

Japan, Taiwan, China, India and South Korea, as well as Colombia, Brazil, Argentina and Chile have become essential partners of the Central American market. They are among the main users of the Panama Canal and invest in the region’s port, communication and transport infrastructures.

Venezuela is attempting to attract the countries of the isthmus to ALBA (the Bolivarian Alternative for the Americas), to deter ALCA (the Free Trade Area of the Americas), promoted by the United States. Only Nicaragua has responded to President Chavez’s proposals. In exchange for deliveries of oil at favourable prices, Nicaraguan President Daniel Ortega is offering his Venezuelan counterpart strong support in the international arena. Honduras has entered into negotiations to integrate the Petrocaribe organization (Hugo Chavez went to Tegucigalpa in January 2008 to support this issue), but President Zelaya is having a difficult time getting this agreement accepted. Venezuela’s influence in the area does not seem to have an impact on countries like Guatemala, Costa Rica, Panama and El Salvador, which first and foremost want to protect their relationship with the United States and to keep their distances from Bolivarian ideology.

Progress is being made slowly in the area of regional integration. It is a priority for Guatemala, Nicaragua, El Salvador and Honduras. Costa Rica and Panama are more reticent and feel that they do not have the same needs as their neighbours to the north. Central America has tools for regional integration: the SICA (Central American Integration System, a political forum), SIECA (Central American Economic Integration System), the Central American Customs Union, and the Parlacen (Central American Parliament). Negotiations currently concern customs and economic union, market openness, the issue of regional economic preferences, protection of the environment, and development of free trade treaties, with the European Union, in particular.

France enjoys genuine sympathy in Central America. Panama, in particular, has not forgotten the work of Ferdinand de Lesseps, inter-oceanic canal pioneer. Likewise, the governments and the people truly appreciated our involvement alongside the European Union in the Esquipulas peace talks and the trips made by President Chirac (1998 and 2004), to Guatemala in particular (meeting with Ms. Rigoberta Menchu), and to the countries affected by Hurricane Mitch in 1998 (Honduras and Nicaragua).

Because of the proximity of France’s American Departments, our country would not be able to lose interest in the fate of this region, all the more so as increased drug trafficking and its destination in Europe are a real threat to our interests.

Moreover, France wants to maintain a political dialogue with certain Central American countries (Guatemala, El Salvador, Nicaragua and Honduras) on many topics, including the issue of human rights, strengthening the state of law, the fight against impunity and drug trafficking, and regional cooperation with France’s American Departments.

Economic growth, combined with recovered political stability, a certain agricultural potential, a young work force, substantial European aid (€175M/year), and major infrastructure needs may be of interest to French companies. Salvadorian airline TACA has chosen to equip itself solely with Airbus equipment. Accordingly, TACA has become the European manufacturer’s leading customer in Latin America: it has acquired a total of 89 Airbus aircraft and has just ordered 15 A-320 and A-319 aircraft.

For France, the Panama Canal is the shortest and safest seaway to Asia. For the design and completion of new canal locks, a 3.5 billion dollar deal, Bouygues, Alstom and Vincihave formed a consortium, together with a few other partners. Prequalified, it will pit its strength against candidates from the US (Bechtel) and Japan (Mitsubishi), in particular, in the next few months.

France has a major network of educational and cultural institutions in terms of numbers and quality: five secondary schools (Guatemala City, San Salvador, Managua, San José in Costa Rica and Tegucigalpa), a secondary school planned in Panama, and 11 Alliances françaises: three in Guatemala (Guatemala City, Antigua and Quetzaltenango), two in Honduras (Tegucigalpa, San Pedro Sula) two in Nicaragua (Managua and León), one in San Salvador, one in San Jose and two in Panama (Panama City and David). These very dynamic structures are key ways to spread our language and culture, factors for developing training and university exchanges.

The European Union (UE), political partner and leading funder

Relations were established between the EU and Central America when the San José Peace Process was set up in June 1983, during the European Council in Stuttgart. They were then strengthened on the occasion of the Esquipulas agreement in 1988, the creation of the SICA in Tegucigalpa in 1991, and with the signing of the political dialogue and cooperation agreement in Rome on 15 December 2003.

The objective of EU/Central American cooperation, which is today substantial, is the stabilization of the region through regional integration, economic development and targeted cooperation. The EU has maintained significant aid, totalling 660 million euros for the period 2002-2006, and has committed cooperation in the amount of 570 million euros for 2007-2013.

The European Union is Central America’s second-biggest trading partner, after the United States. Central America accounts for only 0.5% of the EU’s foreign trade. Eighty-five percent of Central American exports to Europe are agricultural products and foodstuffs (bananas, coffee, and shrimp). The EU exports mainly machines and chemicals. Costa Rica and Panama are the EU’s main partners.

The countries of Central America have been asked to continue their efforts in terms of regional integration and to honour the commitments that appear in the declaration of the SICA Summit in Panama in March 2006 and in the fourth EU-Latin America and Caribbean Summit in Vienna in May 2006 (strengthening of the judicial mechanism, ratification of the Treaty on services and investment, deepening of the Customs Union).

The initial negotiations for an EU-Central America association agreement, entered into in San José, Costa Rica in October 2007, have made it possible to open a dialogue on the EU/CA partnership in the context of regional integration. The main stumbling blocks in the negotiations are concentrated today on the banana issue, sanitary and phytosanitary measures, and the strengthening of regional institutions. This agreement is essential for revitalizing our investments in the region.