Guatemala, El Salvador and Honduras Propose Joint Energy and Infrastructure Development Actions to Curb Emigration to United States

Sep 29, 2014

Central America Map

In late-September 2014, the Foreign Ministers of Guatemala, El Salvador and Honduras (the “Northern Triangle”) presented to United Nations (UN) Secretary General Ban Ki Moon and US Secretary of State John Kerry the “Plan of the Alliance for Prosperity in the Northern Triangle”. A press release from the Honduran Secretary of Foreign Relations and International Cooperation suggests that the Plan analyzes the structural causes for the emigration of children, youth and adults from the region to the United States, sets out the central themes of and strategic guidelines for the three countries’ response to this phenomenon, and identifies forthcoming national and regional action items stemming thereof. It is noteworthy that the Plan reportedly calls for greater investment in energy and infrastructure in the three Northern Triangle countries.

In regard to the national and regional action items identified by the Northern Triangle countries, the Plan focuses on four pillars: (i) improving youth training, (ii) increasing economic productivity, (iii) creating more jobs, and (iv) enhancing public safety in the region, according to a Guatemalan Ministry of Foreign Relations press statement. Press reports note that forthcoming national and regional actions under pillar (iii), i.e., job creation, include sizeable investments in energy, including the construction of a USD 1.2 billion Mexico-Guatemala liquefied natural gas (LNG) pipeline and increasing the capacity of the Central American Power Interconnection System (SIEPAC), a topic which Nexant has addressed in a previous blog posting. Likewise the Plan also calls for meaningful investments in such infrastructure as airports and air cargo terminals, highways, ports and border crossings.

Pointing to the United States as the principal consumer market for the narcotics linked to the violence which ostensibly causes the emigration north, Guatemala, Salvadoran and Honduran officials are reportedly asking the United States to provide 80 percent of the funds needed to implement the Plan; to date, Secretary Kerry has committed USD 50 million to this initiative, adding that the US Congress will need to allocate any additional resources. Additionally, UN Secretary General Ban Ki Moon has expressed his complete willingness to support the Northern Triangle countries in achieving the objectives contemplated under the Plan, and has directed UN technical teams to engage these governments in this regard, according to a Salvadoran Ministry of Foreign Relations press statement.

There is significant precedent for US investment in Northern Triangle energy and infrastructure. Specifically on energy, the US government has supported renewable energy development in Central America for many years, including through the US Agency for International Development’s (USAID) Regional Clean Energy Investment Initiative (RCEII) and the Regional Clean Energy Initiative (RCEI). In fact, as part of RCEII in Central America, USAID is co-financing the Central American Forum for Clean Energy Financing (CAFCEF), which will take place on October 22, 2014 in Antigua Guatemala. By bringing together clean energy project developers and financial sector representatives, CAFCEF aims to fill the so-called “missing middle” that exists between promising clean energy projects in such emerging markets as Central America and the debt and/or equity capital needed to realize such projects.

The Northern Triangle governments have yet to make public an official text of the Plan, which has been developed with the help of the Inter-American Development Bank (IADB). Guatemalan Foreign Minister Carlos Morales has said that the Presidents of the Northern Triangle countries could approve the final Plan in February 2015; further details on the energy and infrastructure investments contemplated under the Plan would likely become available shortly thereafter.