IDB Urges Central American Countries to Look Beyond the US

In a book titled “The Future of Central America: Challenges for Sustainable Development”, the bank has warned that the recent shift in US policies might reduce revenue for many Central American countries.

central American
A picture of US border security agents arresting illegal immigrants from Central America.

The Inter-American Development Bank (IDB) has urged Central American countries to diversify their economies away from the United States.

In a report titled “The Future of Central America: Challenges for Sustainable Development”, the bank has warned that the recent shift in US policies create new levels of economic risk, and that diversification is a critical component to financial independence.

Between 2014 and 2018, Central America, Panama and the Dominican Republic (CAPDR) outperformed the rest of Latin America and the Caribbean, posting an average 4.4% economic growth, according to the report. During the period, foreign direct investment (FDI) accounted for nearly 5% of their GDP.

“This robust showing is linked to the strength of the US economy, the region’s main trading partner, investor and source of remittances,” says the report.

To sustain the growth, CAPDR countries should try to integrate their economies and look at the markets beyond the United States. Although, many Central American countries are increasingly exporting their local products such as coffee, bananas, sugar and textiles, foreign remittances have remained a major source of income for many families.

The bank suggests CAPDR countries “consolidate what they have achieved” over the past decade and raise living standards for their people. The shift in US immigration policy might force the return of many immigrants. The IDB urges regional countries to avoid exporting natural resources and instead look for ways of using them for the well-being of their citizens.

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