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CENTRAL AMERICA
Puebla-Panama on the rocks?
LADB
7/26/2002
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Mexican President Fox’s grand plan has encountered more obstacles than expected.

Almost two years after Mexican President Vicente Fox first proposed a project for regional economic development and integration between Central America and Mexico known as Plan Puebla-Panama, his government has encountered more obstacles than initially expected.

The plan’s main objective is to attract new investment to southern Mexico and Central America by building highways, railways, gas pipelines and electric power lines to connect the two areas (LP, Aug. 6, 2001).

But Florencio Salazar, Mexican coordinator of the project, has tacitly acknowledged that his government has not sufficiently convinced people of the plan’s value. Salazar said that the main problem is that the public lacks information about the plan’s objectives.

The European Union (EU), however, has refused to provide additional funding, saying that the Inter-American Development Bank (IDB) has indicated that the plan has already received enough money. The EU said that regional governments must improve fiscal discipline to generate their own funding for the plan.

Fox launched the scheme in June 2001 with lofty expectations, saying that its implementation would "beat all speed records."

Central American politicians also expressed great optimism. Martín Torrijos, head of Panama’s Democratic Revolutionary Party (PRD), said that his country was "a vital point ... because we have the ideal transportation infrastructure to drive this project."

At the signing ceremony, Central American presidents and Fox hailed the plan as a "great alliance" to improve life in some of the hemisphere’s poorest areas.

Even then, however, obstacles were evident. When Costa Rican President Miguel Angel Rodríguez (1998-2002) was asked about how the plan would be funded, he simply said, "These are projects that have merit, and therefore I believe the financing will be obtained."

Even the IDB, billed as a major source of financing for the project, was unclear about the details. IDB president Enrique Iglesias said the important thing was the political will to go ahead with the plan.

In Central America, however, the project also faced political opposition. Some Salvadoran lawmakers said that only Mexican businesses and investors stood to benefit.

By March, 22 Nicaraguan organizations, including the National Federation of Cooperatives (FNC) and Sandinista Workers Central (CST), had joined to oppose the plan, saying that it would benefit US transnational corporations while further marginalizing the poor.

Battered by natural disasters, high oil prices and low world prices for the region’s exports, Central American economies have been in a slump for several years. None is growing sufficiently to significantly reduce poverty rates, which range from about 20 percent in Costa Rica to between 37 and 58 percent in the rest of the region (LP, Feb. 19, 2001).

Initial discussions of Plan Puebla-Panama were accompanied by Mexico’s pledge to respect the human rights of Central American immigrants. Immediately after signing the agreement, however, the Fox administration was dogged by accusations that Mexico was militarizing its southern border to stop the flow of undocumented immigrants heading for the United States.

Environmentalists, including Costa Rica-based Oil Watch, said that Plan Puebla-Panama would encourage US oil exploration in Central America. Oil Watch contends that oil exploration on Costa Rica’s Atlantic coast has caused destruction of marine life. Environmentalists have praised a recent government decision blocking drilling off the Caribbean coast (LP, May 6, 2002).

Plan Puebla-Panama has made limited progress. The IDB allotted US$300 million to interconnect Central America’s electric power grids. Honduran Economy Minister Juliette Handal de Castillo said the investment will reduce the costs of electricity, which are high throughout the region (LP, May 6, 2002). Handal de Castillo contends that high electricity costs have prevented Central American countries from being competitive economically. — LADB


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