Front Matter

Front Matter

Author(s):
Dominique Desruelle, and Alfred Schipke
Published Date:
November 2008
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    ©2008 International Monetary Fund

    Typesetting: Alicia Etchebarne-Bourdin

    Cataloging-in-Publication Data

    Central America: economic progress and reforms/Dominique Desruelle and Alfred Schipke, editors—Washington, D.C.: International Monetary Fund, Western Hemisphere Dept., 2008.

    p. cm.

    Includes bibliographical references.

    ISBN 9781589067653

    1. Economic integration—Central America. 2. Economic development—Central America. 3. Central America—Economic policy. I. Desruelle, Dominique. II. Schipke, Alfred, 1959–III. International Monetary Fund. Western Hemisphere Dept. HC141 .C468 2007

    Disclaimer: This publication should not be reported as representing the views or policies of the International Monetary Fund. The views expressed in this work are those of the authors and do not necessarily represent those of the IMF, its Executive Board, or its management.

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    Contents

    Foreword

    Central America has come a long way toward creating the conditions for dynamic and open societies. Political dialogue has replaced civil conflicts, the smooth transition of power from one administration to the next has become the norm, and there is broad consensus on the importance of maintaining macroeconomic stability, while making poverty reduction a top priority. This has been accompanied by substantial progress in economic reforms, at both the national and the regional level.

    The fruits of these efforts are now becoming increasingly apparent. Over the past few years, Central America has experienced a strong pickup in economic growth, sustained capital inflows, and some reductions in poverty rates. Still, there is further work to be done. The recent surge in petroleum and food prices, combined with the potential adverse implications of a protracted U.S. slowdown could put at risk the hard-won gains of recent years and pose new and complex policy challenges. The good news is that, today, Central America is in a better condition to weather the storm and the authorities are taking swift actions to mitigate the impact of external shocks on the poor, while preserving economic stability. But at the same time, the region needs to continue implementing productivity enhancing reforms and reducing income inequality in order to lift people out of poverty.

    The IMF stands ready to continue supporting the region through analytical work, policy advice, technical assistance, and, where needed, financial support. To this end, we plan to establish a regional technical assistance center for Central America, Panama, and the Dominican Republic (CAPTAC-DR) in Guatemala in early 2009, that should allow us to further deepen and strengthen our technical assistance across the region.

    Dominique Strauss-Kahn

    Managing Director

    International Monetary Fund

    * * *

    Our publications on Central America have become the cornerstone of our analytical work and are an integral part of our policy dialogue with the authorities in the region. This volume is the third publication on Central America that was coordinated by our team in the Western Hemisphere Department, addressing a number of issues that are currently high on the authorities’ policy agenda.

    For example, at a time when Central America has signed a framework agreement for the establishment of a customs union and started negotiations on an Association Agreement with the European Union, a number of chapters in this publication discuss integration-related topics. They include the potential spillovers from a protracted slowdown of the U.S. economy and practical issues related to the implementation of the customs union. Because poverty reduction remains the number one challenge for the region, the publication also analyzes whether and to what degree fiscal policy can play a role in reducing inequality and improving the living conditions of the poor. Furthermore, with a view to improving the growth potential of the economy, the publication looks at issues related to the development of the financial system.

    Central America has advanced significantly over the past decade. It will now be important to maintain the reform momentum to further reduce poverty and remaining vulnerabilities.

    Anoop Singh

    Director, Western Hemisphere Department

    International Monetary Fund

    Preface

    This publication reviews Central America’s integration efforts, its cyclical links with the United States, and progress made in implementing key economic reforms in selected areas, and complements two previous volumes on Central America (IMF Occasional Papers Nos. 243 and 257). The publication team was led by Dominique Desruelle and Alfred Schipke, respectively Chief of the Western Hemisphere Department’s Central America Division and Regional Resident Representative in Central America, and includes authors from the Fiscal Affairs, Monetary and Capital Markets, and Western Hemisphere Departments.

    The authors would like to thank Anoop Singh and David Robinson for their comments and guidance, and also many colleagues in the IMF’s functional departments for their feedback. The authors would also like to acknowledge the comments and suggestions received from the authorities in the region, as well as from participants at the Sixth Annual Regional Conference on Central America, Panama, and the Dominican Republic in San José, Costa Rica (June 28–29, 2007).

    Special thanks go to Kate Jonah, Xiomara Jordan, Carmen Sanabia, and Alicia Etchebarne-Bourdin for producing the print-ready manuscript under extremely tight deadlines. Also, the authors would like to express their gratitude to Ewa Gradzka and Mynor Meza Duering for their outstanding research support. Marina Primorac of the External Relations Department coordinated production of this publication and Sheila Gagen of EEI Communications spearheaded the editing process.

    The opinions expressed in this publication are solely those of its authors and do not necessarily reflect the views of the International Monetary Fund, its Executive Directors, or the authorities of the Central American countries, Panama, or the Dominican Republic.

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