Central America today, an evaluation

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Central America today, an evaluation
Series Title:
CTA staff paper
Chinchilla Aguilar, Ernesto
University of Florida -- Center for Tropical Agriculture
University of Florida -- Center for Latin American Studies
Place of Publication:
Center for Tropical Agriculture, International Programs, Institute of Food and Agricultural Sciences, University of Florida
Publication Date:
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19 p. : ; 28 cm.


Subjects / Keywords:
History -- Central America -- 1951-1979 ( lcsh )
History -- Central America -- 1821-1951 ( lcsh )
bibliography ( marcgt )
non-fiction ( marcgt )


Includes bibliographical references.
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"In cooperation with the Center for Latin American Studies, University of Florida."
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by Ernesto Chinchilla Aguilar.

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Full Text


Center for Tropical Agriculture
International Programs
Institute of Food and Agricultural Sciences
University of Florida
Gainesville, Florida 32611

in cooperation with



Ernesto Chinchilla-Aguilar

CTA Staff Paper 1

January 1981

Center for Tropical Agriculture
International Programs
Institute of Food and Agricultural Sciences
University of Florida
Gainesville, Florida 32611

The Center for Latin American Studies
University of Florida

Staff Papers are circulated without formal review
by the Center for Tropical Agriculture. Content
is the sole responsibility of the author.




Short definitions of Central America are easy to formulate: the South-

ern barrier of the Caribbean Sea; a bridge between North and South America;

a thin wall between the Atlantic and the Pacific Oceans; that bunch of small

nations in the middle of nowhere.

The five republics of Central America are Guatemala, Honduras, El Sal-

vador, Nicaragua and Costa Rica. The geographical area includes Southern

Mexico and the Yucatan Peninsula; Belize or British Honduras, over which

Guatemala maintains a soveriengty claim; Panama, the Panama Canal and the

Panama Canal Zone, both becoming Panamanian after the Carter-Torrijos Trea-


Putting aside its Indian monuments, mountains, volcanoes and beautiful

lakes, the main geographical characteristic of the area is its penetrability.

Economically, it is agricultural, underdeveloped and dependent. Socially,

not completely integrated, with large Indian groups in Guatemala and Black

majorities in Belize and Panama. Because of various factors, which are to

be analized in this article, instability is corroding the whole Central

American system.

Reviewing the characteristics of the area, as they have evolved from

the past, is necessary to understand what is happening in Central America

today. Some important features of this region have their origins in pre-

- Professor of History, State University of New York, Stony Brook, New York.
This paper was presented at the University of Florida, Gainesville on April
10, 1980.

Columbian times: consumption crops of maize, beans, potatoes, tomatoes,

cocoa, squashes, avocados, chili and pineapples; Indian costumes and lang-

uage, particularly in Guatemala, and the role of Central America in the

transit of cultures between North and South America, probably also the Carib-

bean Islands. The possibility that various struggles took place in the area,

between peoples of North and South America,is strong. There were enclaves

of Nahuatl language in Southern Guatemala, El Salvador, Nicaragua, even

Costa Rica. The knowledge of metallurgy from the south probably came

through this route. Caribbean Indians told the Spaniards of the existence

of continental lands in Central America. During his fourth voyage, Colum-

bus explored the coasts of Honduras, Nicaragua, Costa Rica and Panama.

Izabal, in Guatemala, was explored early by Juan Diaz de Solis and Vicente

Yanez Pinz6n. And Spanish 'Merodeadores' came to Central America looking

to capture Indians even before Balboa's discovery of the Pacific, in Panama,

in 1513.

During colonial times, Central America was organized under the Real

Audiencia and General Captaincy of Guatemala, but Panama had its own govern-

ment until the creation of the viceroyalty of New Granada. The area suffer-

ed various attacks from British expeditions following Drake's sudden appear-

ance in Panama after his passage through the Strait of Magellan and after

his death navigating near Panama, in Portobelo. Attacks were increased

when Jamaica was conquered in 1655.

Not a major mining region, except for Honduras, various Indian crops

were intensively exploited in Central America during colonial times; cocoa,

indigo, tobacco, cochineal. Also new products were introduced: wheat,

sugar-cane, citrus, coffee, rice, various spices, 'guineo' or bananas, pigs,

sheep, donkeys, mules, horses and cows.

A Central American canal was a dream from the early days of the six-

teenth century. Most of the South American commercial output was sent to

Spain through the transisthmian route. From remote places located as far

away as Buenos Aires, Potosi in Bolivia and Santiago, the capital of Chile,

everything in this rich area of the Spanish imperial system was concentrated

in Peru then brought to Guayaquil and Panama, to be transported to Portobelo

or Cartagena, in New Granada, and shipped to Spain. Because of this concen-

tration, the Caribbean trade became a target for the buccaneers, privateers,

marauders and pirates.

After independence,a Nicaragua Canal project became the first priority

of the Central American federal government from the mid 1820's to the mid

1830's. This project increased foreign interest in the area.

Frederick Chatfield expanded the British presence from Belize to the

Bay Islands and Mosquitia, to the point that it became a real threat to the

existence of the Republic of Central America itself.

On the American side, various entrepreneurs visited Central America,

among them John L. Stephens and Ephraim E. Squier, who made important contri-

butions to the knowledge of Central American archaeology and to the construc-

tion of the first Central American railroad in Panama, 1849-1855. But this

also invited the adventure of William Walker, a medical doctor from Tenessee,

who proclaimed himself president of Nicaragua, permitted the establishment

of slavery and made the English language official in that country. Walker

seized the ships of the Transit Company of Commodore Cornelius Vanderbilt of

New York, who armed Central Americans against the filibuster. When Walker

was finally defeated and shot to death by a Honduran squad, the whole matter

had to be settled between the British and the Americans who had signed the

Clayton-Bulwer Treaty (1850), by which both nations promised to abandon

colonial claims on the area and to guarantee that if a canal was ever

built in Central America it had to be neutral and open to the traffic

of ships from all nations.

The French were also tempted to try their luck in Central America

after the failure of establishing the Maximilian empire in Mexico and the

successful completion of the construction of the Suez Canal. Ferdinand de

Lesseps provided his name and reputation to organize the Universal Inter-

oceanic Canal Company (1879), reorganized as the New Panama Canal Company

(1894), which in the end sold its rights and stocks to the United States


In the last quarter of the nineteenth century some human and mater-

ial German resources were assembled by individual investors for the develop-

ment of coffee plantations in the Coban-Polochic-Panzos area of Verapaz,

Guatemala, not far away from the region of the attempted British and Bel-

gian colonization of 1841. In the meantime, banana companies began to oper-

ate in Costa Rica and Honduras under the entrepreneurship of Minor C. Keith,

the Vaccaro brothers, Samuel Zemurray and others.

As a consequence of the Spanish American War, the United States, al-

ready interested in the construction ofthe Panama Canal, forced, and recog-

nized the establishment of the republic of Panama (1903) and celebrated

the Hay-Buneau Varilla Treaty that permitted the construction of the inter-

oceanic waterway from 1904 to 1914.

In the meantime, as Central Americans celebrated the first centennial

of their Independence, in 1921 the Unionist political party was able to

organize a strong popular movement against the dictatorship of Manuel Es-

trada Cabrera, president of Guatemala (1898-1920); the first labor unions

were put together and workers newspapers were published. Even though these

labor movements became organized by the Central American Workers Confedera-

tion, COCA (Con federation Obrera Centro Americana), based in Guatemala,

they quickly disintegrated during the euphoric 1920's, or fell under the

control of governments which easily understood their use as political in-

struments, that could be destroyed whenever it was considered pertinent or


But in Nicaragua, after the election of 1924, supervised by the presence

of U.S. marines, a strong guerrilla movement started and was able to survive

under the leadership of Augusto Cesar Sandino. This movement has been stud-

ied in the excellent book written by professor Neill Macaulay from the Univer-

sity of Florida. During almost six years (1927-1933), Sandino fought against

Nicaraguan government forces, U.S. marines which deployed airplanes and heli-

copters, and the National Guard organized by General Anastasio Somoza, under

U.S. supervision. At the end, the U.S..marines had to abandon the country

under heavy criticism abroad and at home; Dr. Juan Bautista Sacasa, who was

Sandino's candidate, became president of Nicaragua; the guerrilla leader sur-

rendered his weaponry, disbanded his forces, and after attending an official

dinner, was assassinated by members of Somoza's National Guard.

After the crash of 1929, the economic crisis facilitated the implemen-

tation of a period of dictatorship in Central America, as happened elsewhere

during the 1930's and 1940's. Local headlines of this process were the crush-

ing by General Maximiliano Hernandex Martinez of a workers' and peasants'

rebellion in El Salvador (1932); the execution or incarceration of communist

leaders by General Jorge Ubico in Guatemala and the recognition by the United

States government of General Tiburcio Carias Andino in Honduras and General

Anastasio Somoza in Nicaragua.

World War II permitted the successive reelections of the Central American

rulers. By mid 1944 a strong popular revolt was able to force the resignation

of General Jorge Ubico from the presidency of Guatemala, following which a

ten year revolutionary process took place in that country, that deeply af-

fected the economic, social and political life of Central America.

Living Conditions before 1944

The majority of the Central American population lived on subsistence

crops of maize, beans, tomatoes, chili, rice, potatoes, squashes, fruits,

sugar, and scarce meat and milk. This population was concentrated in the

highlands of Guatemala and Honduras; on crowded Salvadoran Pacific slopes;

the fertile Nicaraguan fringe south of the lakes; central axis of Costa

Rica; Panama City and the Canal Zone. These lands, once very rich, were not

anymore among the best, as they had been depleted by intensive cultivation

by rudimentary means that permitted erosion and deforestation. A few fami-

lies controlled the best lands of the pacific slopes and coastal areas,

where large coffee plantations flourished since the second half of the nine-

teenth century. In smaller scale, there were also sugar-cane plantations

since the sixteenth century, pastures for cattle raising, cocoa and fruit

plus some exploitation of forests that provided wood (mahogany, cedar, pine,

oak) or charcoal. Large banana plantations had been developed in Costa Rica

(Puerto Lim6n), northern Honduras, Bananera and Tiquisate in Guatemala, as

well as in other areas of Belize, eastern Nicaragua and northwestern Panama.

About one:eighth of the population lived in cities or other minor urban

conglomerates, the most important of which were Guatemala City, Quezaltenango,

Totonicapan and Puerto Barrios; San Salvador, San Miguel and La Uni6n; Tegu-

cigalpa, Comayagua and San Pedro Sula; Managua, Le6n, Granada and Rivas; San

Jose, Cartago, Alajuela, Heredia; Colon and Panama City. This urban popula-

tion was integrated by economic elites and professionals, or by government

employees, commerce clerks, workers in transportation and service, industries

(such as cement, beer, mills, cigarettes, liquor), small shop owners, domes-

tic servants or persons working in hotels and entertainment, particularly in

San Salvador, San Jose and Guatemala City, or in the Canal Zone areas.

Electric power supply and transportation by railroad, airplane or ship,

were controlled by American companies (Irca, Panam, White Fleet, Grace

Line). Communication by cable, telephone, telegraph or teletype were also

controlled and operated by foreign firms. But national radio stations had

been developed by governments or local entrepreneurs.

Controlled by foreign enclaves and highly dependent on external markets,

the economy could decline rapidly, from one year to the other, as traditional

exports (coffee, bananas, sugar, even meat) experienced lower external demand

or prices. Because of these vicissitudes, salaries were kept at the lowest

possible level. And, in the 1930's, workers were not permitted to organize

so strikes were practically unknown.

Bank loans went very often to the commercial sector, to facilitate im-

port-export transactions, but agriculture and cattle raising obtained lower

support and the same happened to the incipient industry and even to housing.

Personal loans were generally geared to health emergencies or the purchase

of sumptuous imported goods, such as cars, boats, home utilities or travel

to foreign countries.

State spending and investment, sometimes made with loans from foreign

governments orlending institutions, were used in road construction, elec-

trification and urban improvements. These expenses temporarily softened

the impact of recessions, unless the countries found themselves in com-

plete incapacity to borrow, because their economies became seriously en-

dangered by the amount of foreign debts, mainly due to high interest rates.

The Guatemalan Revolution, 1944-1954

The Guatemalan revolution came at an opportune time. As has tradition-

ally happened, it began in San Salvador, with the fall of Maximiliano Hernan-

dez Martinez in May of 1944. By the end of June, university students, teach-

ers, professionals and some workers were able to force the resignation of

General Jorge Ubico.

In El Salvador, military and police leaders consolidated their power

after Maximiliano Hernandez Martinez was overthrown, and it was possible that

the same could happen in Guatemala, where General Federico Ponce Vaidez had

succeeded General Ubico; but on October 20, 1944, two young officers, Major

Francisco Javier Arana and Captain Jacobo Arbenz Guzman, started the Guate-

malan revolution.

Neither they nor Jorge Toriello Garrido, a civilian merchant who was

added to the the revolutionary government 'junta', had a clear idea of what

a revolution was about; but their advisors were able to promote basic

changes in the new Constitution that was drafted. Among its novelties were

democratization of the university, now opened to school teachers; univer-

sity autonomy or self government; the right of workers to unionize; and a

genuine attempt to improve social conditions, through better salaries and

better distribution of riches.

Under the new Constitution, Dr. Juan Jose Arevalo, a well known educa-

ter, was elected president. He had lived in Peron's Argentina during the

previous years and favored the organization of workers, the draft of a labor

code and the establishment of a social security system. Land owners and

industrialists protested the employer's social security contribution as well

as the minimum wage laws that established 60 cents a day for plantation

workers and 75 cents a day for city workers. There was not imminent pres-

sure for land distribution, since the government controlled the 'fincas'

that were expropriated from German citizens during the World War II. For-

tunately, coffee prices were high and there was a feeling of economic growth

and abundance.

At the end of Arevalo's presidential period, Arana and Arbenz disputed

the succession. Arana was backed by the right and Arbenz by the left. The

political assassination of Arana paved the road to the presidential ambi-

tions of Arbenz, elected in 1951, with a simple and concrete program to

maintain the gains of the revolution: agrarian reform and the opening of

a highway to the Atlantic. The former was clearly directed against the

oligarchical landowners and the United Fruit Company, the last one against

the monopoly of the railroad company in the transportation to the main sea-

port in the Atlantic, Puerto Barrios. Labor and peasant organizations, as

well as the army, enthusiastically backed Arbenz, but small and large land-

holders and foreign companies strongly opposed the two projects of his attemp-

ted program.

On July 2, 1954, President Arbenz was overthrown by diplomatic pressure

and the CIA organized 'Liberation Army', under the command of Carlos Cas-

tillo Armas, an army officer of Arana's party. The whole operation has been

always considered the most successful carried out by CIA agents in Latin


Although the Guatemalan revolution was crushed, a process of social

change had been started: in El Salvador by Major Oscar Osorio, in Costa

Rica by Jose Figueres and in Honduras by Dr. Ramon Villeda Morales. In

Guatemala a new constitution was drafted, which repudiated communism; but

basic gains made by workers and peasants during Arevalo's regime were

sustained, including minimum wages, social security and the labor code.

Also during Arevalo's period a central bank system had been developed

which abandoned the gold standard and began important changes to increase

money circulation and facilitate economic growth. Arbenz had continued

these policies and American economists prepared, with Guatemalan counter-

parts, a general plan to change the infrastructure and promote economic de-

velopment. Similar studies were made in El Salvador and Costa Rica.

The Central American Common Market

The United Nations Economic Commission for Latin America (ECLA or CEPAL)

seems to have been the first officially authorized institution to recognize

the urgent need of organizing a central American Common Market, in order to

promote industrial development in the area. A Central American achievement

of this nature would provide to all kinds of investors the incentives of a

new and unspoiled market rapidly approaching 25 million potential consumers.

Among its recommendations ECLA included a gradual integration to minimize

disturbances on the existing national economies and a plan of reciprocal in-

dustrialization, based on the consideration of regional resources, so it

would not benefit one or various nations, in or outside the area, at the ex-

pense of others.

Then came the AID regional office for Central America and Panama (ROCAP),

established in Guatemala in July, 1962; SIECA (Secretaria de Integracion

Economic Centro Americano); and BCIE (Banco Centroamericano de Integracion

Economica. These institutions were able to put together the regional common

market after ten years. By 1969, the bank resources reached 250 million dol-

lars, of which 86 percent came from foreign sources (three fourths from the

United States and the Interamerican Development Bank 'BID' and one fourth

from Western European countries and Mexico). The BCIE had been more success-

ful in attracting foreign capital than in mobilizing regional resources, as

was the initial proposal of ECLA. Among the incentives provided by BCIE

were low interest loans and tax exemptions to industries, including those

which assemble, mix or repack imported components. Nevertheless, the Cen-

tral American Common Market began to operate like an economic miracle that

vivified the otherwise dormant economy of this whole area. Incidentally,

Panama has never been admitted to the Central American Common Market be-

cause of the large scale international financial operations that are based


Unfortunately, in the same year of 1969, the Central American Common

Market suffered its first backward economic crisis when a war exploded be-

tween El Salvador and Honduras following a soccer game. Some 300,000 Sal-

vadorans had emigrated from their overpopulated country and competed for

jobs with Hondurans in their own country. Some 11,000 Salvadorans had been

expelled from Honduras on the eve of the soccer game. The fighting that

followed left approximately 1,200 casulaties and embittered the otherwise

traditionally cordial relations between these two sister nations. Since

El Salvador and Honduras are located in the middle of Central America, the

efficient operation of the common market was severely affected.

Three years later, when the tension between El Salvador and Honduras

began to diminish, on December 23, 1972, severe earthquakes destroyed most

of the city of Managua, killing an estimated 10,000 of its residents, in-

juring about 15,000 and leaving half the city's population homeless. On

this occasion, General Anastasio Somoza, Jr., was accused of widespread

corruption in the administration of the foreign aid provided to Nicaragua

by various nations. In February, 1976, severe damage and 22,500 dead was

the toll of a series of earthquakes in Central Guatemala. And, after

careful deliberations, but with some opposition in both the United States

and Panama, not to mention the Canal Zone itself, on June 16, 1977, presi-

dent Jimmy Carter and General Omar Torrijos Herrera signed the new Panama

Canal Treaties in Washington, providing for the transfer of the canal to

Panama, in the year 2,000, and guaranteeing its future nuetrality. At the

last moment the United States reserved its right to intervene unilaterally

in Panama if the canal operation is ever threatened.

The Fall of Somoza

Nicaraguan economic, social and political conditions seriously began

to deteriorate after the earthquakes of 1972. By 1975, President Somoza

had to impose martial law following kidnapping of prominent officials of

the government by members of the left wing Sandinista Liberation Front (SLF).

In 1977, guerrillas made a series of attacks on National Guard barracks at

different places. In 1978, widespread civil unrest followed the assassina-

tion, in January, of the conservative opposition leader Pedro Joaquin Chamo-

rro, publisher of the newspaper La Prensa. The national palace was seized

by leftist guerrillas who held hostage various members of Congress. From

that point the insurrectional movement won broad support to oust president


On July 19, the revolutionary army of the Sandinista National Libera-

tion Front entered Managua. At its head were Bayardo Arce, Tomas Borge

and Eden Pastora (commander "Zero'), members of the SNLF directorate.

A broad based government was then organized, including Violeta de Cham-

orro, widow of the slain publisher of La Prensa; Moises Hassan, leader of

the United People's Movement, a Sandinista mass organization; Sergio Ramirez,

university professor; Alfonso Robelo, an industrialist; and Daniel Ortega,

a leader of the Sandinista National Liberation Front.

The 'junta' immediately nationalized all domestically owned banks and

prohibited foreign banks from accepting Nicaraguan deposits. Most export

trade was nationalized as were the holdings of the Somoza family, includ-

ing over 75 enterprises, ranging from sugar mills and meat packing plants

to transportation companies. Land reform was not considered urgent by the

revolutionary government, as the Somozas' holdings seemed to suffice for

a better distribution of accumulated capital.

The Aftermath in Central America

The first impact of the Sandinista victory was felt in El Salvador,

where members of the Popular Revolutionary Block took over six factories

in the capital city; another group started a hunger strike in the cathe-

dral of San Salvador; 150 more supporters joined in various other churches;

and in early September, Popular Liberation Forces assassinated the brother

of President Carlos Romero. Archbishop Oscar Arnulfo Romero (not related

to the President) and a number of priests gave support to the outbursts de-

manding social justice and the war between the two Romeros reached its peak

when the President was ousted in October 15, 1979, by a group of young mili-

tary officers who seized precarious control of the national government, in

an apparent effort to avert civil war. They installed a five member 'junta'

with two military men: Colonel Adolfo Arnoldo Majano and Colonel Jaime Ab-

dul Gutierrez and three civilians. Shortly after Christmas, the 'junta'

came to include Morales Erlich and Hector Dada, Christian Democrats, and

the liberal doctor Ram6n Avalos. Christian Democrat leaders seem to be the

only political force behind the 'junta'. But military forces, under conser-

vative defense minister, Colonel Jose Guillermo Garcia, do not support it

enthusiastically, although they gave grudging approval to the nationaliza-

tion of private banks and seizure of large landholdings to start a general

agrarian reform. Popular forces also oppose the 'junta' as too moderate

for their taste. The clash between official and insurgent forces in El Sal-

vador has become commonplace both in the city and in the country. The

assassination of Archbiship Oscar Arnulfo Romero on March 24 of this year,

has dramatized the strained conditions under which Salvadorans have lived

since the fall of Somoza,

Although slightly less critical than El Salvador's tragedy, Guatemala

and Honduras have suffered the consequences of the generalized unrest in

Central America. In Guatemala, conservative Aranista forces came to power in

popular elections after 1970. Four years later they had lost political ground,

but forced a second degree election in Congress, with General Kjell Eugenio

Laugerud GarcTa, as head of the government. The winner of the election, Gen-

eral Efrain Rios Mont, was the candidate of the Christian Democrat party.

In 1978, the powerful Aranistas again forced the elections in Congress, with

General Romeo Lucas Garcia as President; and Colonel Enrique Peralta Azurdia,

a moderate conservative, as the loser.

Conditions in Guatemala were recently dramatized by the seizure over a

month ago of the Spanish embassy by a group of terrorists. Policemen tried

to force an entrance to the embassy. The terrorists counterattacked with a

Molotov cocktail which burned the building and killed 39 persons, including

all terrorists and hostages, with the only exception being the Spanish em-

bassador. Among the Guatemalan victims were an ex-vicepresident and a former

foreign affairs minister.

In Honduras, President Ramon Villeda Morales was overthrown by a military

coup led by Colonel Oswaldo Lopez Arellano, in 1963. Lopez Arellano was then

elected President for a six year period, in 1965. The next elected President

was Colonel Ramon Ernesto Cruz, but two years later a bloodless coup again

brought Lopez Arellano to power. In 1975, Lopez Arellano was overthrown after

reports that he had accepted a million and a quarter dollar bribe from United

Brands, a banana company. Juan Alberto Melgar became President, as the Comman-

der in Chief of the armed forces. In 1978, Melgar was replaced by a three

member military 'junta' headed by General Policarpo Paz Garcia. The 'junta'

has promised free elections in 1980 to have a new Constituent Assembly by May.

In Costa Rica, President Rodrigo Carazo Odio, elected after the second

term of Jose Figueres, in 1978, helped the Sandinistas in their efforts to over-

throw Somoza's regime in Nicaragua. Three soviet diplomats were expelled last

fall for fomenting local strikes and the communists are strong particularly in

the railroad, banana, port, government and teachers' unions. Recriminations

for the participation of Costa Rica in precipitating the Nicaraguan crisis are

frequent and the government has considered breaking diplomatic relations with

Cuba and the Soviet Union if the labor tensions continue.

Other International Factors

Notwithstanding the political, economic and social tensions already exist-

ing in the whole Central American area, years ago the governments of Guatemala,

Nicaragua and Panama were requested to cooperate in the loosely conceived Bay

of Pigs operation against communist Cuba. As a direct consequence, Fidel Castro

has provided technical advice, military supplies and training to sustain various

guerrilla movements that began to operate consistently in Guatemala and Nicargua

and may threaten the safety of the Panama Canal operation.

More recently, after receiving medical attention in the United States, the

Shah of Iran was not permitted to return to Mexico but was provided instead with

refuge in Panama. Popular protests against his presence in the island Contadora

were silenced, and in view of the political tensions and his need for urgent

medical treatment, the Shah finally abandoned Panama and went to Egypt. But the

prestige of Panamanian leaders was eroded at the time when there was still con-

cern over the various delicate matters and diplomatic negotiations related to the

recent Panama Canal Treaties.

Central America, like other regions of the world, has been badly hit by the

energy crisis since 1974, with its dramatic price increases in transportation,

electricity, housing, imported and local commodities. Even worse, daily consump-

tion foodstuffs such as maize, beans, rice, cheese, wheat, sugar, meat, milk,

fruits and vegetables, also showed spiraling prices. The cost of living was mod-

erated, to a certain degree, because coffee and cotton, the two main cash crops

of the region, also increased consistently in price. In the most fortunate

cases, salaries have been partially adjusted by the government, coffee and cot-

ton plantations, as well as in some industries; but it was impossible to keep -

this trend in domestic services or among small farm workers or producers and in

various other sectors, negatively affecting the less privileged segments of

society. Unemployment reached 30 to 40 percent of the total population. Hous-

ing has become almost a dream in cities like Managua or Guatemala, recently de-

stroyed by earthquakes, as has been mentioned. Lately, high interest rates have

added to this gloomy picture.

The nature or international character of four of the most important factors

affecting this area today (nationalization of the Panama Canal, fall of the

Somoza regime, exportation of the Cuban revolution and the energy crisis) have

made Central American particularly vulnerable to various nations that have not

always mixed in the politics of the area, like Colombia, Ecuador, Peru and Cuba.

The interest of Mexico and Venezuela, as oil producing countries has become ob-

vious. The Central American Common Market is now threatened by the growth of

these two local economic giants. The Andean republics have also made inroads in

Central America, for the first time since the Congress of Panama in 1826. And

communist Cuba has made Central America one of its prime targets.


If the various factors involved in the current Central American situation

are considered, is there any hope to restore order in this area without sacrifi-

cing democracy and the basic principles of human rights? Is it possible that

Central Americans can ever recover from the extremes of political violence and

the accumulation of all kind of abuses and economic frustrations? Is it possible

to save the economic miracle of the Central American Common Market? It is the

opinion of the author that there are remedies for the maladies of Central America

today. There is also a sense of urgency.

First, nobody knows what the policies of the United States are toward Cen-

tral America. Up to now, they seem to have been misleading, hesitant and very

often contradictory. The enunciation of clear U.S. policies in the area is a

first priority.

Among short run economic measures that can be taken are subsidies on con-

sumption articles such as maize, beans, rice, sugar, meat and milk. In a

similar category, subsidies to transportation, electricity and housing ought

to be available; and probably the establishment of price controls on some

carefully selected consumption articles will be necessary. An increase in

government programs to fight unemployment is required. It is also imperative

to stop the abuses of large planters, mainly in the spraying of pesticides to

control cotton crops. Above all, stop corruption.

Long range economic cures would have to include the stabilization of

domestic grain markets through an increase in the production of consumption

crops, mainly maize and beans. A review of the taxation system is also recom-

mended, it has to be adequate to the needs, but also appropriate to local tradi-

tion, and not just a copy of unrealistic foreign patterns improper to the

needs and limits of local economic conditions. The development of light in-

dustry has to be encouraged through incentives. But industries that only

assemble, mix or repackage imported components cannot be considered at the

same level of exoneration as real processing industry, that generates economic

change and develops new jobs and skills. Finally, it is imperative to continue

the orderly redistribution of land. But agrarian reform by itself is not to be

considered a panacea.

On the political side, the most urgent need of Central America to reestab-

lish confidence in public institutions is to restore the practice of democratic

elections, with civilian candidates. Permitting the free organization of poli-

tical parties and the discussion of political issues, will help settle the

general academic unrest, and restore to the universities their priority role

in higher education--not in politics.

The alternative is what Central American history demonstrates: the fre-

quent use of dictatorship to solve all kinds of problems. If Central Americans

do not find other means to overcome the crisis of survival with which they are

faced, it is not impossible that they will feel inclined to try the only alter-

native being skillfully presented to them, the proletariat's dictatorship.

At this point, Central America, as other regions where agriculture is the

main source of income, seems to have been caught in the trap of a kind of anar-

chism--which only offers destruction and death--as is demonstrated by the typical

example of El Salvador today: a nation of solid democratic traditions, which

just a few months ago enjoyed the strongest and most prosperous conditions of the

entire area here studied.


Franklin D. Parker, The Central American Republics (London, 1964).

Mario Rodriguez, Central America (Englewood Cliffs, N.J., 1965).

Ralph L. Woodward, Jr., Central America, A Nation Divided (New York, 1976).

John Tate Lanning, The Eighteenth Century Enlightenment in the University

of San Carlos de Guatemala (Ithaca, N.Y., 1956).

Murdo MacLeod, Spanish Central America, A Socioeconomic History (Berkeley,

California, 1973).

Neil Macaulay, The Sandino Affair (Chicago, 1967).

Thomas P. Anderson, Matanza, El Salvador's Communist Revolt of 1932 (Lincoln,

Nebraska, 1971).

Susanne Jonas, "Guatemala, Land of Eternal Struggle", in Latin America edited

by Ronald H. Chilcote and Joel C. Edelstein (Cambridge, Mass., 1974).

Donald McClelland, The Central American Common Market (London, 1972).

North American Congress on Latin America, Guatemala (New York, 1974).

See also NACLA Report on the Americas, Vol. X, No. 2, on Nicaragua; and Vol.

XII, No. 5, on Panama