Want to Solve the Immigration Crisis? Invest in the Central American Economy
Vice President Kamala Harris visited Guatemala this week amid surges in U.S. border crossings, immigrants dying while trying to cross the border, and a chaotic, problematic federal response. It would be a mistake, though, to blame the Biden or Trump administrations for our current crisis: this is a crisis borne from the lack of opportunities in many Central American nations and especially in the northern triangle of El Salvador, Guatemala, and Honduras.
What the people of the region need most is jobs. Welfare programs and spending policies to ameliorate poverty provide only temporary relief. Redistribution does not do much to address these issues, either. In the long term, a job – along with an environment that fosters more job creation and economic opportunity – is the most important factor necessary for upward social mobility. If more residents of the region saw their economic futures tied to a job in their home country, fewer would make the perilous trek northward. Geographic mobility becomes a necessity when social mobility is not possible.
The northern triangle labors under the weight of decades of misguided economic policies, high crime, and corruption that has led to its continued underdevelopment and lack of opportunity. Guatemala, Honduras, and El Salvador all rank poorly in the World Justice Project’s Rule of Law index, the World Bank’s Doing Business Index, and the World Economic Forum’s Global Competitiveness Index, indices which measure the economic health and vitality of nations, and which investors study closely when deciding where to put their money internationally.
Imagine bringing millions of jobs to the region by nearshoring or re-shoring jobs from China and other countries outside of the Americas to the Western Hemisphere. While this sounds daunting, the rewards would be immense for opportunity and job creation. The pandemic-induced slowdown in international logistics and production chains shined a glaring light on the over-reliance of the United States on Chinese manufacturing. Suddenly the thought of having logistics and production systems in Central America – much closer to home for the U.S. – goes from inconceivable to a winning proposition for everyone involved. Some might argue that it’s even a matter of U.S. national security to find more congenial international partners.
For this to happen, however, the Central American countries and their local businesses must commit to clear rules of the game: labor codes that allow for people and businesses to adapt to a fast-evolving world, effective market-based regulations, less bureaucracy, stronger institutions and rule of law, broad access to credit and markets, competitive energy markets, and reliable transportation infrastructure. The pandemic has provided an opportunity to review the inflexible and barrier-ridden Central American labor-market model. Reforms could include doing more e-commerce, using electronic signatures, and digitalizing various government services.
To make these ideas actionable, an investment strategy would envision more private partnerships and collaboration among businesspeople in Central America and the U.S. One such example is the recently created ThinkHUGE initiative. (HUGE stands for Honduras, USA, Guatemala and El Salvador Business and Investment Council) This is a private-sector-led effort for impact investment that will create thousands of jobs in the region by fostering conditions for capitalizing on nearshoring opportunities in textiles, pharmaceuticals, and other industries, as well as investing in key infrastructure projects, including U.S. technology-based energy and telecommunications. ThinkHUGE envisions that small and medium enterprises in the United States run by Central American immigrants will also be encouraged to expand their markets and work with local businesspeople in Central America. The initiative also plans to take advantage of the opportunities available under the Central America Free Trade Agreement and other agreements to increase job and opportunity creation. The initiative could be a phenomenal success for hard-working Central American immigrants, who will also be giving back to their countries of origin by helping them lift their citizens out of poverty.
The human tragedy occurring on America’s southern border is solvable. The solution lies in tackling challenges to investment so that the region can once more retain and grow its workforce and keep people flourishing in their own countries – and no longer feeling the need to head north.
Dr. Juan Jose Daboub is the president of the HUGE Business and Investment Council and a distinguished fellow of the Atlas Network Center of Latin America. Gonzalo Schwarz is the president & CEO of the Archbridge Institute and general manager of the Atlas Network Center for Latin America.