Financial Times
Monday, June 18, 2001, p. 9

Fox plan aims to give boost to Central America
By Andrew Bounds

Panama City — If President Vicente Fox of Mexico had conducted his three-day tour of Central American neighbours by road rather than private jet, it would have taken more than a week, possibly a few hundred dollars in bribes and courage against the threat of armed robbers.

Mr Fox, who left Panama on Saturday after a raucous reception, wants to end that situation. His "Plan Puebla-Panama" aims to transform the impoverished and fragmented region, spreading the benefits of Mexico's links with the US economy further south, mainly through huge infrastructure projects. The plan could "end the backwardness of the region in order to incorporate it fully in the corridors of world commerce", Mr Fox said at a summit with seven central American countries last Friday. The countries signed an agreement to implement the plan promoting trade, tourism, education, the environment and a single power grid across nine southern states of Mexico and central America.

President Francisco Flores of El Salvador hailed the plan, which would include new roads and better ports and telecommunications links, as a new era "marked by a vision that we all share - a vision of integration".

Amid criticism that the plan so far exists only on paper, the summit agreed to set up a commission to identify concrete projects within 90 days and find financing for them. The aim is to attract private investors.

Enrique Iglesias, head of the Interamerican Development Bank, the regional multilateral lending institution, will act as chairman. The IADB has already pledged Dollars 2bn (Pounds 1.4bn) to the plan, the bulk to finance electrical interconnection.

Mr Fox hopes eventually for a single grid from Panama to Canada with electricity generated from Mexican gas. The plan covers 28m people in Mexico and 37m in Guatemala, El Salvador, Honduras, Belize, Nicaragua, Costa Rica and Panama.

Central America has been working towards integration along European Union lines since civil wars ended in the early 1990s. But old rivalries and insecurity have undermined the process. Nicaragua has territorial conflicts with Honduras and Costa Rica, El Salvador has one with Honduras and Guatemala with Belize.

Nicaragua has fractured the Central American Common Market with a 35 per cent "sovereignty tax" on Honduran imports and the two have clashed militarily. It is hoped the intervention of their large northern neighbour will help overcome such differences.

"We sometimes need someone to knock our heads together," said one Central American foreign minister. Central America is enjoying the most world attention since the civil wars of the 1980s, in which the US intervened, fearing communism in its backyard.

The threats the US now sees from the region include drugs, illegal migration, money laundering and social instability.

Not all Latin leaders support the US and Mexican strategy. Grass-roots groups, environmentalists and others have attacked it as neo- colonialism, laying Central America bare to developers wishing to exploit its biodiversity and cheap workforce.