BLP’s summary of the most important regional news and opportunities offers an overview of the economic, social, and political landscape of Central America at just a click away.
Costa Rican production outside free trade zones grows for 10 consecutive months. Costa Rica’s economic production outside the special regime registered an inter-annual growth of 4.2% in July 2023. This was reported by the monthly Economic Activity Index (IMAE), published by the Central Bank of Costa Rica (BCCR). Companies operating under the definitive regime, that is, those that pay income taxes, showed an increase in their production of 2.3 percentage points (p.p.) for July 2023 compared to the same month last year, and exceeding by 0.3 percentage points (p.p.) the growth recorded in June of this year, which was 3.9%. The Central Bank pointed out that performance varies by industry in this sector of the economy. Click for more information
Government requests a meeting with the Comptroller’s Office to analyze the construction of Government City. With the firm intention of continuing the construction process of Ciudad Gobierno, the ministers of National Planning and Economic Policy of the Treasury seek to coordinate a working session with the Comptroller General of the Republic to directly explain the scope and benefits of the project, as well as the legal framework that supports it. The technical details include concentrating on at least 35 public institutions, which would have approximately 10,000 employees in five buildings in Plaza Víquez. The construction project would cost approximately $450 million and would generate significant savings in rent for the country. The project, still in the formulation stage, is in compliance with the national legal system, especially with the provisions and requirements of law. Click for more information
Costa Rica leads among countries that stand out in attracting foreign investment. The attraction of foreign direct investment (FDI) has been one of the main drivers of the Costa Rican economy in recent decades. The rise of trends such as nearshoring (location of production in countries close to the target market) and friendshoring (location of production in countries with good foreign and political relations) after pandemics has generated millions of dollars for the local economy, as well as thousands of jobs. In the most recent history, Costa Rica stands out as one of the best countries to locate operations of both regional and global multinational companies. Click for more information
Crecimiento Verde promotes the sustainable development of 55 Costa Rican SMEs. More Costa Rican companies join initiatives that promote sustainability and productive transformation. On this occasion, 55 Costa Rican SMEs will benefit from non-reimbursable funds to implement their projects, after being selected as winners of the 9th edition of the Green Growth (Crecimiento Verde) program, promoted by the Foreign Trade Promotion Agency of Costa Rica (PROCOMER), the CRUSA Foundation, the Development Banking System (SBD) and the National Learning Institute (INA). The Crecimiento Verde program seeks to promote business initiatives with export potential in markets with environmental requirements and expectations. Click for more information
The Treasury will restructure 54% of the short-term debt. The Ministry of Finance will restructure 54% of the short-term debt, whose total balance to date amounts to approximately $2.8 billion, according to the head of the portfolio, Jerson Posada. This percentage corresponds to the securities held by the banks, i.e. $1.5 billion, the official specified. This same week, the Ministry of Finance announced the operation after accepting a proposal from the Salvadoran Banking Association (ABANSA) for the management of this debt, made up of Treasury Bills (LETES) and Treasury Certificates (CETES). Click for more information
The State of Exception is extended to guarantee citizen security. “This year will become the safest in our history. We are no longer the most violent country.” This is how the president of the Legislative Assembly, Ernesto Castro, summarized the importance of extending the emergency regime for another 30 days, a measure that has enabled the government to reduce homicides in El Salvador and has placed it among the safest nations in Latin America. Click for more information
Construction has become the mainstay of El Salvador’s economy. Despite critical remarks by opponents, the monthly measurement of the country’s economic dynamics shows encouraging results in the first semester, which is reflected in the rise to 4.7 percent of the IVAE, where construction is leading the way. The BCR indicated in a message on the social network X, formerly Twitter, that “the Economic Activity Volume Index registered a growth of 4.7 percent in June 2023 compared to June 2022, reflecting a positive trend in Salvadoran economic activity.” The increase in the IVAE was driven by the development of private construction in residential projects and public construction in road infrastructure, as well as works related to the XXIV Central American and Caribbean Games San Salvador 2023, among other elements that favored its good performance. Click for more information
Inflation in El Salvador fell to 3.09% in August, according to the Central Bank. The inter-annual inflation rate in El Salvador moderated in August to 3.09% and became the lowest rate since June 2021, according to figures from the Central Reserve Bank (BCR) consulted Tuesday by EFE. BCR data indicate that the consumer price index parameter, which is the indicator used to measure inflation, added at least 11 months registering decreases since August 2022. The inflation record of August 2023 is lower than that of the same month of 2022, when the index registered 7.66%, according to official figures. Click for more information
Lower country risk reopens the doors of the market to El Salvador. Three years after restrictive conditions, the international market reopens its doors to El Salvador amid enthusiasm for the agreement with private banks to extend the maturities of short-term debt and the “arrival” of Google Cloud. The last time El Salvador went to the international market was in July 2020, in the midst of the Covid-19 health emergency, with a $1 billion issue placed at an interest rate of 9.5%, the highest since 2002. The Emerging Bond Bond Indicator (EMBI) soared to unprecedented figures, peaking at 35.12 points (an interest calculation if it had issued debt) on July 15, 2022. Gradually that high has been reduced and on September 7, 2023, it stood at 7.75 points, very similar to the levels it had in 2021.
SIT conducts an auction of 5G frequencies. The Superintendence of Telecommunications (SIT) conducted the public auction of frequencies SIT-SPF02-2023, of the radioelectric spectrum for mobile services in the 700 MHz band, intended for the exploitation of the fifth-generation technology (5G). According to the SIT, 60 MHz was commercialized in three blocks in order to take full advantage of the connection network. According to Marco Antonio Baten, Superintendent of Telecommunications, this is the second auction held in 2023 that is aimed at maximizing the use of the State’s resources, after having issued national and international invitations. Click for more information
Exports to July total 8.744 billion US dollars. The country’s sales in the international market closed at $8.744 billion as of July 31 of this year, according to statistics from the Bank of Guatemala (Banguat). The most important products according to their share in the total value of exports were clothing, with $917.1 million (10.5 percent); coffee, $773.9 million (8.9 percent), and edible fats and oils, $624.1 million (7.1 percent). Bananas recorded $588.2 million (6.7 percent), and sugar, $482.6 million (5.5 percent).
(5.5 percent). “These items accounted for 38.7 percent of total exports,” the central bank noted. Click for more information
Macroeconomic environment presented to investors. Authorities of Banco de Guatemala (Banguat) met with representatives of Barclays Bank and delegates of international investment funds specialized in emerging markets, who were presented with the macroeconomic environment of the national territory and the prospects for 2024. According to the president of Banguat, Alvaro González Ricci, the purpose of the meeting was to strengthen the country’s image, in the search to attract foreign direct investment (FDI) and strengthen local investment, in order to generate jobs and thus avoid irregular migration. It was emphasized that the country’s projected growth is 3.5 percent, “double the forecast for Latin America, which is 1.7 percent”. Meanwhile, regarding inflation, he assured that it remains within the target range established by the Monetary Board (JM), which, for August, stood at 4.47 percent. Click for more information
Guatemala expects to close 2023 with $20 billion in remittances. This figure is equivalent to 20% of the country’s gross domestic product (GDP), remarked the president of the financial institution, Alvaro González, in statements to the press. The flows are mainly destined for consumption, construction, and trade, said the official about the main national economic engine, ahead of dominant exports such as clothing, coffee, and bananas. Click for more information
Central America is Guatemala’s main export destination. The region reported $2. 999 billion (34.3 percent of the total value), the United States $2.745 billion (31.4), while the Eurozone follows with $854.7 million (9.8 percent), said the National Bank (Banguat) in a report. Mexico followed with $383.5 million (4.4 percent) and Panama with $188.5 million (2.2 percent), while between them, they represented 82.1 percent of the overall amount captured, the financial institution detailed. Clothing items ($917.1 million, 10.5 percent) and coffee ($773.9, 8. 9%) topped foreign sales in that month. Guatemala’s economy continued to grow in 2022 and its gross domestic product (GDP) reached four percent. Banguat, when presenting its Monetary Policy Report in March 2023, maintained the GDP growth estimate in a range of 2.5 to 4.5 percent for the current period. Click for more information
The largest increases in allocations are for infrastructure, education, and health. Two of the main public entities of the central administration register the largest increases in their allocations in the General Budget of Income and Expenditures of the Republic for 2024. According to the fiscal instrument, the annual allocation of the Ministry of Education (Seduc) will increase by 2,643.1 million lempiras and 40,752.6 million lempiras. The Ministry of Health (Sesal), which was allocated 26,638.8 million lempiras for this year, will have 29,129.8 million lempiras, an increase of 2,491 million lempiras. Another of the institutions that reported more growth in its budget was the Ministry of Security, specifically with 2,449.5 million lempiras, which for the next 12-month period will have 11,651.7 million lempiras. Only 723 million lempiras was the increase in resources for the Ministry of Defense (Sedena), allocating 11,385.7 million lempiras for the next fiscal year. Click for more information
New provisions in foreign currency auctions complicate the economic activity of companies. The manager of economic policy of the Honduran Council of Private Enterprise (COHEP), Santiago Herrera, said that the new provisions in foreign exchange auctions complicate the economic activity of companies. Herrera pointed out that from the private sector “we have been very favorable or favorable to the way the foreign exchange market was being managed, which was through the banks which handled 100 percent of the rotation of foreign exchange assigned to the dollars according to the clients.” The business source cited that the Bank of Honduras (Banco Nacional de Banca Privada) has been very favorable to the way the foreign exchange market was being managed. The business source mentioned that the Central Bank made the decision to return to an administered mechanism, which “I think should be managed more in terms of monetary policy instruments than through an administrative mechanism, which is the auction.” Click for more information
CABEI approves $135 million to strengthen the hospital network in Honduras. The Central American Bank for Economic Integration (CABEI) approved financing of up to $135 million for the implementation of the Hospital Network Support Program of the Republic of Honduras (PARH), which includes the design, construction, equipment and start-up of two new hospitals in the municipalities of Choluteca and Tocoa, in the south and northeast of the country, respectively, with the objective of strengthening the capacities of the Honduran health network and benefiting more than 841,000 people. The hospitals have initial studies conducted through non-reimbursable cooperation from CABEI, and with this funding, the final designs and construction, including access and mitigation works, will be carried out. Click for more information
CABEI seeks to generate a guarantee mechanism for sovereign bonds, assures Dante Mossi. Although he cannot give interviews to the media and is limited to using his social networks, the president of the Central American Bank for Economic Integration (CABEI), Dante Mossi, announced that it is seeking to generate a guarantee mechanism for the issuance of sovereign bonds. “We are working to develop a regional debt market and generate a 100% guarantee mechanism for sovereign bonds of each of the (member) countries so that they can generate financial needs without resorting to conditions outside the region,” he said during the inauguration of the Great Hall in the annex building of this multilateral financial institution. Click for more information
Honduras will become a full member of the CAF Bank this week. President Xiomara de Zelaya announced that Honduras will become a full member of the Andean Development Corporation (CAF) Bank this week. By joining the development bank of Latin America, Honduras will have access to $5 billion in loans, according to official sources. In addition, funds will be granted without conditions that imply privatization of resources, as has been imposed by other financial organizations. Click for more information
The VI edition of Expopyme 2023 is being held in Nicaragua. The fair is being held at the Olof Palme Convention Center in the capital and will be attended by agribusiness, technology, handicraft, carpentry, textile, gastronomy, trade, and service companies. Organized by the National Commission for the Creative Economy, the three-day event includes lectures with national and foreign experts to strengthen commercial ties and business networks, as well as practical workshops and gastronomic tastings. Click for more information
Nicaragua greets Central American countries for national holidays. The Sandinista government sent messages to the presidents of Guatemala, Alejandro Giammattei; El Salvador, Nayib Bukele; Honduras, Xiomara Castro; and Costa Rica, Rodrigo Chávez, whom it greeted based on the ideals of national heroes and heroes. Through three letters signed by President Daniel Ortega and Vice President Rosario Murillo, the Nicaraguan Executive congratulated the families of the four countries of the area and affirmed that these patriotic dates are shared and of deserved fraternity. He expressed his wishes for peace and the right to well-being that the Central American populations deserve after so much struggle and effort. Click for more information
ECONOMIC INDEX
| Country | Exchange rate (x USD) | Basic passive rate in local currency | Current monetary policy rate | S&P sovereign debt indicator | Moodys Sovereign Debt Indicator | Fitch indicator |
|---|---|---|---|---|---|---|
| Costa Rica | 535,56 | 5,63% | 6,50% | B+ | B2 | BB- |
| El Salvador | – | 6,20% | Not available | CCC+ | Caa3 | CCC |
| Guatemala | 7,87 | 1,75% | 5,00% | BB | Ba1 | BB- |
| Honduras | 24,61 | 3,43% | 3,00% | BB- | B1 | No rating |
| Nicaragua | 36,51 | 3,30% | 7,00% | B | B3 | B- |
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