Central America under Trump’s shadow
- The Trump administration’s policies will have an outsized impact on Central American countries
- Tighter U.S. border security could exacerbate violence and economic distress in the region
- Trade disputes with Mexico and China could benefit its economies
- The U.S. will likely continue to spend a lot on regional anti-drug trafficking measures, and buy limited success
More than three months into the presidency of Donald Trump, most of his administration’s specific policy plans, as well as its ability to cooperate effectively with Congress, remain uncertain. Aside from naming a new Supreme Court justice, the government’s most prominent actions so far have been tweets or non-binding executive orders. A fragmented Republican party failed to pass a new health-care bill despite President Trump’s support. As a result, it is still unclear which of his policies will eventually stick.
What is certain is that many of the Trump administration’s moves will have a profound effect on the countries of Central America, intentionally or otherwise. These states are small, economically dependent on the United States and have societies and politics that are deeply enmeshed with their gargantuan neighbor. Given what Mr. Trump has said and done so far, the impact will be felt in three main areas: immigration, trade and regional security.
One of the Trump administration’s flagship projects is tightening U.S. border security. The president has issued five controversial executive orders mandating stricter controls and the construction of a wall along the U.S.-Mexican border. In another executive order, Mr. Trump dramatically widened the criteria agencies can apply to deport people residing in the U.S. illegally.
In recent years, approximately two-thirds of the unauthorized immigrants that have come to the U.S. from the south have arrived from Central America. Fewer Central Americans working in the U.S. will mean reduced remittances – a major source of income in those countries. In El Salvador and Honduras, remittances account for about 17 percent of the economy; in Guatemala, the figure is about 10 percent. A significant decline would have a brutal impact. Worse, there are parts of these countries where emigration and remittance rates are much higher than the national average. Those communities could be devastated by new restrictions.
Returning hundreds of thousands of people to the region would exacerbate its crisis of crime and violence
Repatriating hundreds of thousands of people to Guatemala, El Salvador and Honduras, most of whom would be low-skilled and returning to economically deficient communities they have not visited or lived in for years, would exacerbate the current regional crisis of crime and violence. The organized crime groups that control many communities, particularly in El Salvador, would prey upon these vulnerable people, many of whom originally fled to escape exactly that fate. Many of the deportees will migrate again, either back to the U.S. or elsewhere.
This would create ripple effects across the region. More developed countries like Costa Rica and Panama would likely experience a surge of immigration. As a result, their informal economies would grow, low-income groups would be pinched, government services would be strained and crime would worsen. Over time, such immigration would complicate these countries’ ability to sustain economic growth and compromise their social cohesion.
So far, the regional reaction to Mr. Trump’s border security rhetoric has been muted. During the U.S. election campaign, Guatemalan President Jimmy Morales quipped that he could provide the workers for the wall President Trump wants to build. Anti-immigration sentiment has long been a feature of U.S. conservative politics. Illegal residents in the U.S. and their families back home have grown accustomed to anxiety and uncertainty. Central Americans are also savvy observers of U.S. politics. They recognize that Mr. Trump’s actions are not far removed from former President Barack Obama’s, and efforts to build a wall at the border are largely symbolic.
The Bush and Obama administrations also invested billions of dollars into strengthening the border, and illegal immigration has risen and fallen regardless. As U.S. congress members from border districts have pointed out, most undocumented immigrants do not sneak in by crossing open land, anyway. The cartels and other smugglers ship them across in containers, trucks, boats, and on legal transport with forged papers – or pay off border control agents. What border security measures change are the fees that the smugglers – also known as coyotes – charge to get them across.
Assault on NAFTA
President Trump has singled out trade with Mexico under the North American Free Trade Agreement (NAFTA) as a major factor holding back the U.S. economy and has promised radical revisions to the deal. Several key members of his cabinet and many in Congress openly disagree, raising questions about whether this is more political rhetoric than policy substance.
A tit-for-tat trade dispute with Mexico would pose huge costs for the U.S. Hurting Mexico’s economy and reducing cross-border exchange would hit U.S. border states hard. It would also worsen the immigration that President Trump rails against by increasing the pressure for Mexicans to seek jobs abroad. Bilateral security cooperation would be hampered, improving the freedom of maneuver for cross-border trafficking cartels.
Over the long run, the worst result may come in the form of a strategic disaster: the election in Mexico of a fervent anti-American president. Andres Manuel Lopez Obrador, a fiery nationalist promising to roll back free trade, has seen his popularity surge in Mexico since Mr. Trump’s election.
Nevertheless, the Trump administration seems set on revisiting NAFTA and raising tariffs on imports from Mexico. These prospects, as well as low oil prices and other factors, have already stalled Mexico’s economy. If the relationship between the U.S. and Mexico sours significantly, it would hurt Central America’s economic prospects as well.
It appears likely that U.S. economic growth will continue and perhaps accelerate over the next few years. One-third of Central America’s exports go to the U.S., while its trade with Mexico is relatively insignificant. President Trump has not yet targeted the Central American Free Trade Agreement (CAFTA) for scorn and scrutiny as he has NAFTA. Higher risks and lower returns from investments in Mexico could enhance the attractiveness of investment in Central America, particularly if a bilateral trade war erupts. Mr. Trump’s oft-promised revision of trade policy with China could have a similar effect, if the region manages to remain out of the spotlight. The region’s deficiencies in infrastructure, administration, and human capital would limit its competitiveness, but in the medium term Central America could benefit somewhat as a substitute for U.S. investment that otherwise would have gone to Mexico or elsewhere.
Other economic forces will also be in play, both for better and worse. A strengthening dollar should benefit Central American exports (although for Panama and El Salvador, which use the U.S. dollar as their currency, this effect will be muted). On the other hand, the Trump administration could impose taxes or tariffs on all imports, or it could subsidize domestic manufacturing, dulling the allure of investment in Central American export sectors.
Any turmoil in Central America resulting from a shift in U.S. policies will occur amid a surge in the northward flow of cocaine, due to booming coca cultivation in Colombia, estimated at an annual value of about $60 billion. President Trump and the Republicans will almost surely continue the same U.S. counter-narcotics policies as his predecessors, pouring money and training into regional police and militaries and halting a limited share of regional drug flows. The U.S. Southern Command estimates that international efforts stop less than 20 percent.
Central American criminal networks are branching into more sophisticated operations, including politics
This means that the U.S. will continue to spend significantly (it allocated $750 million in 2016) on programs to improve police, criminal investigation and judicial systems in Central America. Multiyear training, equipment and advisory programs are building administrative and operational capacities that contribute to falling rates of homicide, kidnapping and extortion, professionalizing police, reducing corruption and raising rates of successful criminal prosecution.
Over the last two years, these efforts have coincided with local movements protesting rampant corruption at the highest levels of government. Assistance and funding from the U.S., Europe and development banks have bolstered anticorruption commissions across the region. These initiatives have had their greatest success in Guatemala, where the International Commission against Impunity in Guatemala (CICIG) – funded chiefly by Washington and the European Union – has successfully investigated several major cases, including that of a corruption ring involving the former president and vice president. In other countries, the progress has been slower. In Honduras, the government of President Orlando Hernandez has delayed and diluted a commission formed to examine various allegations of corruption, while El Salvador’s government has refused such outside interference.
Whereas in the past foreign interference, especially from the U.S. government, was blamed for propping up corrupt Central American governments controlled by the elite (or worse), today such engagement from the outside is widely welcomed. These countries’ societies are so penetrated by foreign interests, funding and assistance, and their economies so dependent on exports and remittances, that the people look more to external actors than their own elected politicians in search of reform.
Amid these gains, however, the ever-present, lucrative illegal market for narcotics will continue to support criminal enterprise across the region. Looking for profit and protection, Central American criminal networks are branching into more sophisticated operations, including politics. While blending legal and illegal activities is a longstanding practice in the region, the addition of drug money and violence raises the stakes.A punitive approach, aimed at catching drug traffickers and funded largely by the U.S. but viewed with ambivalence by Central American governments (whose essential problem is public security, not drugs), offers only long-term, aspirational goals for overcoming this challenge.
Given their vulnerability, the governments of Central America may try to work with the Trump administration and explain that U.S. problems with unauthorized immigration, drug trafficking and transregional criminal organizations are their problems as well. Under the Obama administration, the U.S. dramatically expanded its development assistance and security cooperation with these countries.
Homicide rates have fallen in Honduras and Guatemala (and very recently appear to be falling in El Salvador), but that by itself is not enough. These governments can improve the skills of their police, criminal investigation agencies and judiciaries over the long-term – including when their investigations become politically sensitive. In Guatemala, CICIG has helped clean up national politics, especially at the top level. Doing so at the local levels, however, will take an army of prosecutors and judges. The Honduran government has built up its police force to take on gangs and traffickers, but a recurrence of unsolved, politically motivated killings undermines confidence. The increasing sophistication of El Salvador’s gangs, which have permeated the country’s industries and politics, presents a formidable obstacle.
Governments could focus their resources on fighting local crime, not chasing fast boats or manning border crossings
The most likely future scenario is the continuation of the status quo. U.S. funding for Central American security is modest, at a few hundred million dollars a year. Compared to the tens of billions sunk annually into Afghanistan and Iraq, cooperating with neighbors to address violence and organized crime that crosses the U.S. border is an easy decision. Also, U.S. Secretary of Homeland Security John Kelly worked closely with the governments of Central America in his previous position directing regional U.S. military operations, and strongly favors robust cooperation. President Trump’s people appear eager to slash funding at the U.S. State Department, but the Homeland Security budget is likely to grow, potentially supporting regional programs Secretary Kelly sees as critical.
However, if the Trump administration proves uncooperative and acts unilaterally in ways that negatively affect Central America, governments there have at least two strategic options. First, they could increase their efforts to court trade, investment, and support from China or other partners in East Asia, Europe and South America to mitigate the pressure from Washington. Some diversification in their trade and investment would be positive. Nevertheless, given the historic domination of U.S. capital and trade in their economies, it is unlikely that new patterns could significantly alter their economic or political situations.
A more dramatic, high-risk – and therefore less likely – strategy would be to raise the prospect of ending their cooperation in the fight against narcotics trafficking. Governments could then focus their scarce resources on fighting local crime instead of chasing fast boats or manning border crossings. Floating such a possibility would make it clear to Washington that these nations are not without leverage. Such a scenario would be especially potent if it involved Mexico as well, and possibly some expression of interest from China, to help replace the security assistance the region would stand to lose. The strategy would risk the hundreds of millions of dollars the region receives annually in U.S. development and security assistance.
Much will depend on the Trump administration’s effectiveness in realigning longstanding policies on immigration and trade. Despite the rhetoric, none of its actions so far have differed dramatically from those under Presidents Obama or George W. Bush. Central America is profoundly vulnerable to U.S. policies, but on the other hand, the deep social and economic integration between Central America and the U.S. also makes the U.S. more sensitive to threats from the region. If contention and crisis prevail, this could usher in a new, troublesome era in regional relations.
Ralph Espach is the director of Latin American Strategic Studies at the Center for Naval Analyses (CNA), a not-for-profit policy research center in Arlington, Virginia. The opinions expressed in this piece are his own and independent of CNA.