The Central American market, due to its proximity to North America, appears as a gold mine of business opportunities. Not only is it strategically positioned but it has also managed to maintain amicable ties with the United States and this has certainly worked to its advantage. However, just like anything else, there are opportunities that can be found here, but equally rampant are some difficulties, typical to the Central American business environment.
The Central American Economies
It is true that though the economies of Central America continue to grow, the region remains somewhat vulnerable. From the period 2006 to 2014, Central America registered a steady growth. In fact, by 2012, it was valued at about 202 Billion USD. Over the years, the nation has advanced in aspects such as education, healthcare, and international trade which positively impacted the economy.
Central America is low on oil reserves which make its economy sensitive to the prices of international oil, the current low price situation in oil offers a ray of hope. It lowers energy prices and costs of imported goods while increasing domestic consumption and disposable income.
One proof of the improving economies of the countries in Central America is the GDP growth in 2014 as compared to the GDP of 2013. Belize had 2% GDP growth, 3.4% for Costa Rica, 1.7% for El Salvador, Guatemala has 4% GDP growth, Honduras had 3%, there was a 4% growth for Nicaragua and Panama had 6.6% growth. The per capita income of Panama and Costa Rica are very close to those of the other emerging economies such as Mexico’s. With Cuba opening up there are also business opportunities there.
Agriculture businesses may have a low contribution to the economy but it employs more than 25% of the population. The export business is a growing economic activity in Costa Rica, El Salvador, and Panama. The main exports of the region include coffee, sugar, and banana. Panama is also considered as the most business friendly country and it is the only economy that belongs in the higher 30% index although all Central American countries outperform Argentina, Brazil, and Venezuela.
The main concerns when building a business in Central America are natural disasters such as active volcanoes, earthquakes, hurricanes and flash floods, security, poverty barring Costa Rica. Low education rates and limited access to healthcare and electricity in some rural areas are also deterring factors.
National priorities for Central American countries are healthcare, infrastructure, and energy which are the areas of opportunity in the region. These opportunities lie in the direct business lines and related industries.
Overall, it can be said that Central America is showing business promise with the latest improvements in the economy which are yet to completely manifest. The Central American Healthcare, Energy and Infrastructure industries are recommended for business. Many large businesses seeking to serve the Central American markets often do so from US cities such as Houston (or more often Miami) in order to avoid some of the financial, security and judiciary risks.
It would, however, be more beneficial to conduct detailed market research for specific gauging and assessment of the industry of your choice. That is one way to protect not only your investment but ensure success in unchartered territory.