Can investing in Central America fix the U.S. border crisis?

Vice President Kamala Harris this week announced hundreds of millions of dollars of private sector investments in Central America, part of the Biden administration’s Call to Action initiative meant to address root causes of emigration from the region. Under the plan, launched in May, major companies such as PepsiCo, CARE International, Mastercard, and Microsoft will invest a total of $1.2 billion in technology, textiles, and agriculture.

Nespresso, for example, plans to spend at least $150 million on coffee purchases and more than double the number of coffee farms it works with. Microsoft intends to partner with local providers to expand broadband internet access to 4 million people and provide skills training for 100,000 others.

But despite the promises of private investment, millions in cash may not fix what some experts call the root cause of Central American problems—corruption in both neighborhood streets and government suites.

On the campaign trail in 2020, then-candidate Joe Biden said, “If the political will exists, there is no reason Central America cannot become the next great success story of the Western Hemisphere.” He identified a region known by the Cold War term “Northern Triangle” as an essential focus for U.S. economic policy. The Northern Triangle countries—Honduras, Guatemala, and El Salvador—rank in the bottom six of the 32 countries in Latin America and the Caribbean by gross national product per capita.

The Atlantic Council identified public corruption and rampant crime with weak law enforcement as some of the region’s enduring challenges. In Guatemala, an estimated 20,000 people belong to street gangs, the largest two being the Mara Salvatrucha (MS-13) and the Barrio 18. These groups traffic drugs and extort heavy fines from villagers and bus or taxi drivers.

Although Northern Triangle countries chart some of the highest murder rates in the world, citizens often cannot look to authorities for protection. Many crimes aren’t prosecuted because law enforcement lacks training or because officials are involved in financial crimes themselves.

Central Americans have left in droves over the past few years. According to the latest Congressional Research Service data, an estimated 709,000 moved out of the region in fiscal year 2019. The pandemic cut the rate to just over 100,000 in 2020, yet southwest land Border Patrol encounters with migrants from Northern Triangle countries surged to 701,000 for fiscal year 2021.

In 2007, Guatemala took a step toward fighting corruption by installing the International Commission against Impunity in Guatemala. It earned international praise as the most effective crime-fighting organization in the region, but former President Jimmy Morales refused to renew it in 2019 after the commission began investigating him for purported financial misconduct.

In a similar vein, in El Salvador, President Nayib Bukele and his allies ousted the country’s Supreme Court justices and the attorney general in May, reducing the likelihood of unimpeded investigations into government corruption.

There may be some hope for positive change in Honduras, though. Xiomara Castro won election earlier this month as the country’s first female president. Castro, the wife of ousted President Manuel Zelaya, is the leader of the leftist opposition, but she ran on an anti-corruption campaign. She promised to hold a referendum on whether to rewrite the constitution and to cooperate with the United States on addressing migration problems.

Matthew Rooney, the managing director of the Economic Growth Initiative at the George W. Bush Institute, said his team convened a group of 10 representatives from Honduras, Guatemala, and El Salvador in 2018. After weighing issues such as lack of adequate education and workforce training, insufficient infrastructure, and lack of transparent taxes, they concluded corruption was to blame for the region’s economic woes.

“It’s not just illicit payments or a beat cop taking a few dollars in exchange for overlooking an infraction. Institutions of public life simply lack credibility,” Rooney said. “There’s an underlying lack of trust among the people that those institutions will ever do what they promised. That contributes to a general sense among the people in these countries that there’s no future for them, so they leave to find it elsewhere.”

Rooney was a foreign service officer stationed in El Salvador during the negotiation of the Central America Free Trade Agreement (CAFTA). He acknowledges the trade pact has not worked as its creators hoped. The 2005 agreement was designed to integrate the economies of Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and the Dominican Republic. The goal was to encourage workers to unionize and demand better conditions, to unlock more jobs due to increased trade with the United States, and to stabilize the economy with consistent imports.

But manufacturing has stalled since the agreement took effect. Apparel imports have declined, and farmers have been unable to increase output sufficiently to compete with U.S. businesses. Investments have not resulted in better wages for workers, and gang-related extortion and murders remain high.

The latest stream of private sector investments might not address the root of the problems. And Rooney said it would be a mistake to make private investments without engaging in policy reform dialogue with Central American governments. While the investments would likely add jobs within a year, Rooney said the jury is out on whether private sector involvement is sustainable without also reforming anti-corruption efforts.

Writing for the Lawfare blog, Andrew Wainer, director of policy research at Save the Children USA, agreed that investments alone cannot solve the region’s problems: “Without addressing head-on the role of elites in perpetuating inequality and violence in the region, mass migration is likely to persist.”