They are a group of countries that have a lot in common both in history and geography. However, two of those states appear to be more developed than the rest. We invite you to find out what happens with Costa Rica and Panama: is it a myth that life is better there than in the rest of Central America?
Today we are going to talk about this subcontinent and what better way than to do it from here. Yes, we are in Greece, whose capital is Athens, and there is a city in the center of Costa Rica that has the same name as it is and serves as a distance connection for us. Central America is a region of the continent located, obviously, between North America and South America.
At a geographical level it is not entirely easy to mark the limits. In general, it is usually taken as a reference to the isthmus of Tehuantepec in the north and the Atrato River in the south. In this way, some regions of Mexico and Colombia belong to Central America.
However, on a political and cultural level these countries are more linked to North and South America respectively, so we will not delve into them in this video. In this way, we are left with seven independent countries: Guatemala, Belize, Honduras, El Salvador, Nicaragua, Costa Rica and Panama. Of those, there is one that is distinguished by its cultural heritage: Belize was a British colony and does not belong to Latin America like the rest.
Another, Panama, also differs, since it did not become independent from Spain but from Colombia. It was part of that country until the beginning of the 20th century. The other five have a more obvious common history.
In fact, they formed the Federal Republic of Central America, a state that extended between 1824 and 1841. However, currently, the biggest difference seems to be located at this point: Costa Rica and Panama have achieved greater development in several matters. We can see the number of people living below the poverty line, with Honduras at one end and Panama at the other.
Another economic data that goes along the same lines is the GDP per capita of these countries. Panama leads again and Costa Rica follows. The rest appear far behind in the statistics.
And it is not only something current, but it has been going on for more than half a century. In fact, the gap widened in favor of the two most advanced countries. But the difference is not only economic, but is seen in several fields.
Costa Rica and Panama are those with the most literate population with values close to developed countries. The rest, likewise, have shown progress in recent decades. Another useful statistic is the human development index, which mixes economic, health and educational variables.
Again in this case we see a difference in favor of the two countries that are furthest south in Central America and Honduras at the bottom of the table. With all this data present, the question seems valid: why did Costa Rica and Panama achieve greater takeoff than their neighbors if they have points of contact in their history and geography? It is possible that the first argument that arises regarding Panama is the canal.
This connection between the Pacific and Atlantic oceans was inaugurated in 1914 and marked a before and after for international trade. It was an unprecedented work of engineering that gave the country great opportunities. Especially since 1999, when the United States transferred the administration.
The canal, along with associated developments and infrastructure, has generated income and jobs and has been attractive to foreign investment, but it is not the only thing. It was also possible to diversify the economy, with important service sectors, such as those related to finance and tourism. In addition, the country built a democratic and solid political regime.
And what happened to Costa Rica, which does not have the advantage of the canal? In this case it was also possible to have a diversified and thriving economy. The sector that had the most traction was tourism, especially that linked to nature and ecology.
In addition, services were developed and foreign investments were attracted, especially thanks to the political stability achieved. There is a very striking point about this country: every December 1st it celebrates the abolition of the Army, which happened in 1948. Since that year, Costa Rica does not have armed forces.
According to their authorities, they have invested that money in education and health, which explains the good results in those areas. In fact, of the seven Central American countries, it is the one that invests the most in education by quite a bit. Another issue in which Ticos usually stand out is political indicators.
In the democracy index prepared by The Economist magazine, Costa Rica is in 17th place among 167 countries surveyed. It is considered a full democracy and surpasses not only its regional neighbors, but many developed countries. On the American continent it is only ranked behind Uruguay.
Meanwhile, what is happening in the rest of the Central American countries? In principle, as a general feature, they were not able to diversify their economies and depend more on traditional agriculture, which has not allowed them to take off. In addition, they have high levels of informal economy, have suffered violence and internal conflicts, and have not been able to develop states as efficient as their southern neighbors.
And this is not because there is a substantial difference in terms of natural resources. Guatemala and Honduras have minerals, Nicaragua has fertile lands, Belize has tropical forests and all have potential for tourism. But of course, it is true that only Panama has a canal that connects the two largest oceans in the world.
And Nicaragua tried to take away that exclusivity. In 2014, it announced an ambitious project to build a new Central American canal. In this case, the idea was for it to begin at the mouth of the Brito River, in the Pacific, and reach Punta Gorda, in the Atlantic.
It was estimated that $50 billion was needed, that construction would conclude in 2020 and that it would be the largest engineering work in history. Thousands of jobs would be created, both for the implementation of the project and for the operation of the canal, which would boost the country's economy. However, the Chinese investor behind the project turned out to be a fraud and work never began.
In May 2024, finally, the Nicaraguan Assembly withdrew the permits it had granted and put an end to the initiative. There is another important element that balances the regional balance a little and that has to do with remittances. That is, the money that expatriates send to their countries of origin.
Large sums of money enter Honduras, El Salvador, Nicaragua and Guatemala every year, ranging between 19 and 27% of everything produced by each of those countries. On the other hand, in Panama and Costa Rica it does not reach 1% of the product. Another way of looking at the same phenomenon is to observe that the two southern countries attract population, while the most backward countries expel them.
For some time now, El Salvador, Guatemala, Nicaragua and Honduras have registered more emigrants than immigrants, unlike Panama and Costa Rica. In between, Belize remains relatively stable. However, there is one aspect in which Panama and Costa Rica are not at the forefront; they are among the most unequal in the region.
If we take the Gini coefficient, El Salvador is the state that has the greatest equality among its inhabitants, while Panama is at the other extreme: it is ranked 145 among 159 states surveyed. Obviously it is not easy to reduce poverty and close the gap with the most developed countries. However, there is an aspect of Costa Rica that can be highlighted in any part of the globe, beyond the natural resources or the potential that a certain country has.
In the last survey carried out by Latinobarómetro throughout Latin America, one of the questions asked of the population was whether they would mind if a non-democratic government came to power as long as it solved the problems. While Honduras, Guatemala and El Salvador had responses well above the average, Costa Rica was at the other extreme: it is the country in the region that would least tolerate an authoritarian regime. In short, it seems that it has been effective for Panama and Costa Rica to have greater social spending on education and health and a more diversified economy.
Furthermore, they have managed their resources better and have valued their democratic institutions more. Finally, we would like to know your opinion. In what way do you think the countries of northern Central America could progress?
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Until next time.
