Central American economic integration is a good case study field for small, underdeveloped countries trying to cope with the globalization of production and regionalization of the world trade. Despite their initial success in improving economic perfor...
Central American economic integration is a good case study field for small, underdeveloped countries trying to cope with the globalization of production and regionalization of the world trade. Despite their initial success in improving economic performances through the subregional integration, Guatemala, Honduras, Nicaragua, Costa Rica, and El Salvador saw their 1960s' efforts to integrate under the Central American Common Market(CACM) scheme being deadlocked as early as late in the decade and finally fail principally because of industrial structural contradiction between their agricultural bases and industrial projects, unbalanced distribution of integration benefits among the five CACM member countries, and sociopolitical and international factors which negatively influenced on their possibly self-determined policymaking.
With the peace being reestablished in the region in the late 1980s, Central American countries found a new model of subregional integration definitely necessary for reconstruction of their society and economy. Their 1990s' integration formula is quite different from the 1960s' version in terms of its open-market orientation and wide range of cooperation areas including infrastructure rebuilding and economic reform coordination as shown in details in the Central American Economic Action Plan(PAECA) of June 1990.
The most challenging issues that Central America faces at this turn of the century include the substantiality of opening their uncompetitive industries under the new development model, and manageability of the North American Free Trade Agreement's impact on the subregion's trade with the United States. Under the current global trade regime, however, Central America does not seem to have other alternatives rather than undertake deeper integration initiative in the subregion and in a wider region in the Americas given the limited size of their economies, low purchasing power, and underdeveloped industrial bases. Among others, A Harmonized Economic Area may be a viable and promising option for them to implement their ambitious integration initiative in the sense that the Area would comprehend a wider economic territory of common rules and enhanced efficiency in investment, production, distribution and transportation. A real integration policy will is being tested. Yet the recent, wider policy coordination in the subregion makes this Area look more probable to be created ultimately.