Walter Molano | A new Marshall Plan

The Marshall Plan was one of the most successful foreign-policy initiatives devised by the United States. It was a $12-billion programme meant to rebuild Europe following the devastation of World War II.

Members of the Roosevelt administration recognised that the devastation of the German economy following the end of World War I was one of the driving factors behind the destabilisation of the Weimar Republic. Furthermore, the economic distress associated with the Great Depression led to social and political unrest throughout the continent.

It was in the national interest of the United States to preclude further instability in Europe. This would be achieved by providing funds, mainly in the forms of loans, to boost manufacturing, expand housing and repair transportation systems that had been destroyed by the war.

The measures quickly stabilised the refugee problem that had plagued the continent since the start of the conflict. It led to more economic integration between the countries and sowed the seeds of a new and vibrant Europe.

The success of the Marshall Plan could serve as a blueprint for Central America, a region that has also been convulsed by violence and produced a wave of refugees seeking a better form of life.

By Latin American standards, Central America has a very small land mass and a very large population. It has a similar population to Colombia, but with less than half the landmass. The countries with the three largest populations are Guatemala, El Salvador and Honduras.

This region is also known as the Northern Triangle, and it is considered to be one of the poorest regions in the world. Poor infrastructure, overcrowded conditions and high levels of corruption have led to high levels of narco-trafficking, violence and displacement. Not only has it become a humanitarian nightmare, it sent millions of refugees into neighbouring countries and towards the US. This resulted in a political backlash that had social repercussions. Illegal immigration has become a hot political topic, driving the rhetorical agenda on both sides of the aisle.

Criminal networks, such as the Maras, have facilitated the transportation of illegal narcotics. Former President Trump tried to address the situation through a show of force. Funds were appropriated for the construction of a border wall. The military was deployed. Border forces were beefed up. The new Biden administration may have a nicer rhetoric, but remains steadfast against unrestricted immigration. His administration’s strategy is to create the conditions such that people won’t have the incentives to make the perilous and expensive journey to the US.

Risky endeavour

The distance from the Guatemalan border to the United States is 2,400 kilometres, or 1,500 miles, across treacherous deserts and cold mountain passes. It is strewn with wild animals, predators and criminals. Their situation must be very dire for Guatemalans to take on such a risky endeavour.

This is where a Marshall Plan could serve as an important guide to attend the problems in Central America. There have been previous attempts by the Right and the Left to direct funds to the region. The Trump administration committed US$5.8 billion to a regional project, with additional commitments by Mexican President Andrés López Obrador. President Biden has promised another US$4 billion. However, it still has not had the desired effect.

The International Monetary Fund is providing support, with ongoing negotiations with El Salvador and Costa Rica for much-needed balance of payments funding. The World Bank recently committed US$70 million for vaccination programmes in El Salvador and Honduras. Other regional multilaterals are providing capital for social inclusion programmes and digital coordination. The objective is to provide coordinated support at the balance of payments, infrastructure and microeconomic levels to jump-start the region.

There are rays of hope. In Guatemala City, a sleepy neighbourhood is being turned into a mini-Silicon Valley, with programmers and entrepreneurs setting up offices to develop new platforms for fintech, digital payments and online retailing. And Guatemalans who immigrated with their parents and grew up in the US and Europe are bringing their education, knowledge and experiences to Central America to help modernise services and the quality of life.

If successful, the result will be stronger economies and governments that can stem the tide of violence and the spread of narco-trafficking activities.

There is an ulterior motive for the US as well. This will be an opportunity for it to push back against the intrusion made by the Chinese government and state-owned enterprises to establish a more prominent presence in the US’s backyard. By restoring its primacy, the US would make a stronger and cohesive region.

Dr Walter T. Molano is a managing partner and the head of research at BCP Securities LLC.wmolano@bcpsecurities.com