Front Matter

Front Matter

Alfred Schipke, and Dominique Desruelle
Published Date:
June 2007
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    © 2007 International Monetary Fund

    Production: IMF Multimedia Services Division

    Typesetting: Bob Lunsford

    Figures: Bob Lunsford

    Cataloging-in-Publication Data

    Economic growth and integration in Central America / edited by Dominique Desruelle and Alfred Schipke — Washington, DC : International Monetary Fund, 2007.

    • p. cm.—(Occasional paper; 257)

    Includes bibliographical references.

    ISBN 978-1-58906-616-8

    1. Central America — Economic conditions. 2. Central America — Economic policy. 3. Debts, Public — Central America. I. Desruelle, Dominique. II. Schipke, Alfred 1959- III. Series: Occasional paper (International Monetary Fund); 257

    HC141 .E266 2007

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    The following conventions are used in this publication:

    • In tables, a blank cell indicates “not applicable,” ellipsis points (…) indicate “not available,” and 0 or 0.0 indicates “zero” or “negligible.” Minor discrepancies between sums of constituent figures and totals are due to rounding.
    • An en dash (–) between years or months (for example, 2005–06 or January–June) indicates the years or months covered, including the beginning and ending years or months; a slash or virgule (/) between years or months (for example, 2005/06) indicates a fiscal or financial year, as does the abbreviation FY (for example, FY2006).
    • “Billion” means a thousand million; “trillion” means a thousand billion.
    • “Basis points” refer to hundredths of 1 percentage point (for example, 25 basis points are equivalent to ¼ of 1 percentage point).

    As used in this publication, the term “country” does not in all cases refer to a territorial entity that is a state as understood by international law and practice. As used here, the term also covers some territorial entities that are not states but for which statistical data are maintained on a separate and independent basis.


    There is substantial optimism about Central America’s investment and growth potential, reflecting continuing political and economic stability, and deepening global and regional integration to achieve sustainable employment growth and poverty reduction. This optimism has already led to increased investment in the region, and was echoed by a diverse group of investors who, at a High-Level Conference on Investment on February 1–2, 2007, in Costa Rica, expressed a strong interest to start or expand operations in Central America.

    Given the increased international focus in Central America, policymakers have an opportunity to make the region even more attractive for investment by accelerating reforms to reach higher levels of economic growth and by fostering integration. These issues are at the center of this publication, which highlights the region’s progress and discusses—in light of the international experience—a number of key areas where further reforms are needed. International experience reveals, for example, that strengthening institutions and improving the business environment can substantially improve Central America’s growth potential, and thereby reduce still-high levels of poverty. It also argues that there is substantial scope to further develop capital markets, which would not only improve access to financing and facilitate growth but also reduce vulnerabilities and strengthen the effectiveness of monetary policy. Additional important topics covered in this publication include pension reform, monetary policy frameworks, and sovereign debt structures.

    As Central America advances, the IMF will continue to assist the authorities in their reform efforts through policy advice and technical assistance with the aim of improving the living conditions of all citizens.

    Rodrigo de Rato

    Managing Director

    International Monetary Fund

    Central America is moving forward with its integration efforts. Clear indications of this are the free trade agreement between the United States, Central America, and the Dominican Republic (CAFTA-DR), the initiation of negotiations on a partnership agreement with the European Union, and increasing integration among the Central American economies, including the establishment of a customs union. However, these efforts need to move hand-in-hand with reforms in other areas to ensure that the benefits of integration materialize and that the region is in a better position to face adverse shocks.

    This publication covers a number of policy priorities, including measures to increase the region’s growth potential to narrow the income gap with more developed countries, ensure the sustainability of public pension systems, improve the structure and functioning of public debt markets, and increase the effectiveness of monetary policy. The currently benign global environment provides a unique opportunity for policymakers in the region to press ahead with these reforms.

    This publication is the second volume on Central America coordinated by our team in the Western Hemisphere Department and reflects our increased focus on issues that are common across countries or directly related to Central America’s integration process.

    Anoop Singh

    Director, Western Hemisphere Department

    International Monetary Fund


    Reflecting our increased focus on cross-country issues and topics related to integration, this is the second publication on Central America produced by the IMF’s Western Hemisphere Department, complementing Occasional Paper 243. The production of this publication is the result of a team effort that included staff from a number of departments led by Dominique Desruelle and Alfred Schipke.

    The authors would like to thank Anoop Singh and David Robinson for their comments and guidance. The authors would also like to acknowledge the comments and suggestions from the Central American authorities and the participants at the Fifth Annual Regional Conference on Central America, Panama, and the Dominican Republic in Punta Cana (June 28–29, 2006).

    Special thanks go to Carmen Sanabia, who worked extremely hard to ensure the timely submission of the manuscript. Also, the authors would like to thank Cleary Haines and Ewa Gradzka for their outstanding research support. David Einhorn of the External Relations Department coordinated production of the publication.

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

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