PREVIEW / CENTRAL AMERICAN SUMMIT : Latins Turn Attention to Economics

Pity Honduras. After sinking millions of foreign aid dollars into a dam, Central America’s poorest country finds itself rich in electricity but unable to sell all the surplus.

Costa Rica, the region’s most prosperous nation, is the logical customer. But between buyer and seller sits Nicaragua, with a power grid frayed by neglect and guerrilla sabotage.

As a result, much of the electricity Honduras exports simply gets lost somewhere over Nicaragua. The Hondurans can charge only for what reaches Costa Rica. Nicaragua is too broke to fix its lines or pay for power itself.

This waste of energy is a symptom of the physical and economic disintegration of Central America during the last decade of civil strife. It is the kind of problem the region’s new leaders are eager to solve now that most of the fighting is over.

For the first time in six summit meetings since the so-called Esquipulas peace accord of August, 1987, the five Central American presidents who gather here Saturday and Sunday will focus mainly on economics. Having ended the Contra war in Nicaragua and coaxed the combatants in El Salvador and Guatemala to start talking peace, they will ask how they can help each other grow out of the poverty that fed those guerrilla conflicts.

The time is ripe. El Salvador, Honduras, Nicaragua and Costa Rica have installed elected civilian presidents in the last 12 months. These leaders share a conservative, technocratic outlook.

The Background

As an ideological battleground, Central America got billions of superpower dollars during the 1980s, only to suffer what a U.N. report calls “an unprecedented social and economic crisis.” Regional per capita income is down 20% from 1978, the report says, and two of every five people live in “extreme poverty.” Two million are refugees.

The hope of the 1960s, the Central American Common Market, barely functions. Trade among the five countries has declined from $1.1 billion in 1981 to $600 million last year.

The Agenda

Regional agencies spawned by the Common Market have proposed an ambitious agenda for the five presidents. It calls for reviving the market, moving toward a single monetary system and setting up a joint “mechanism” to coordinate development projects and seek outside aid.

“Central Americans ought to aspire to the total integration of this region as an economic unit if we really want to move ahead,” said Guatemalan President Vinicio Cerezo Arevalo, the only one of the five Esquipulas signatories still in office.

A more united Central America--the isthmus was a single federation, ruled from Guatemala, until 1838--is “something of a holy grail” for the region’s statesmen, a foreign economist noted.

The Obstacles

But the rhetoric masks the same contradictions that derailed the Common Market.

The market’s trade barriers with the outside allowed El Salvador and Nicaragua to develop nascent industries and export manufactured goods within the region. Restoring such uniform protection could help them revive those industries, largely idled by war.

Opposing such an inward-looking Common Market are Costa Rica and Honduras. They lost the early race to industrialize, became burdened by huge trade deficits and went their own way.

Honduras abandoned the Common Market and got by on heavy doses of U.S. military and economic aid. Borrowing heavily from commercial banks, Costa Rica developed export markets outside Central America to become the region’s only 1980s success story.

But Costa Rica’s economic record is not as envied as its democracy--the model held up by its ex-president, Oscar Arias Sanchez, for the regional peace accord that he drafted. The cost of Costa Rica’s painful belt-tightening to overcome a mid-1980s debt crisis probably exceeds what the more fragile neighboring democracies can pay.

With Arias out of office, no one has stepped forward to lead the region.

“In the peace process, everyone had a sense that by agreeing to the Arias rules, they would all benefit,” said Albert Fishlow of the University of California at Berkeley. “On the economic side, you’re talking about trade-offs between countries in terms of relative benefits from a new system. There is no acknowledged broker.”