Perspectives on the Agro-Export Economy in Central America

Since colonial times — and possibly before — Central America has been geared to the primary-export economy. Primary commodity exports still represent one half of material production and two-thirds of foreign exchange earnings, and are thus the single most important growth factor in the region. Although this sector embraces mining, forestry and fishing it is dominated by agricultural exports organised mainly in large enterprises which obtain labour and food from the mass of small peasant farmers who surround them. Despite the large profits to be made and high production growth rates in the three postwar decades, sustained economic development has not been attained in Central America. On the one hand, the cyclical transformations of demand patterns in metropolitan markets have led to the familiar cycles of ‘boom and bust’ over the centuries. Industrialisation — other than export processing — has been a recent phenomenon in Central America, with serious shortcomings in terms of efficiency and market size. On the other hand, the emergence of a social structure made up of repressive regimes, footloose foreign investors and an impoverished semi-proletarian peasantry, has led to a weak civil society subject to both US intervention in support of its oligarchies and mass movements against exogenously induced modernisation.

Any recovery plan for the Central American economies must take into account the huge dependency on exports of green coffee, raw cotton and bananas. This analysis will outline the conditions of the world market for these exports, particularly in the European Economic Community (EEC). If Central American countries come out of the political crisis within a framework of peace, rapid economic recuperation will be needed, which will rely on traditional exports. In this chapter the main characteristics of the world markets and their long-run tendencies will be discussed, as well as trends in the 1980s. The evolution of prices for the three products will be a particularly important topic. The perspectives of the EEC markets will also be dealt with, with consideration of their generally oligopolistic nature. In the final part, some conclusions will be drawn and a comparative table is presented with the general outlook for the three principal traditional Central American export commodities.

This study focuses on two issues of special relevance to Central American coffee exports to the EEC. The first concerns the West German market, which is the most important market in Europe. Attention will mostly be drawn to the process of concentration in the processing industry and to the distribution of surplus profits of the coffee trade, a result of the very different positions of the competitors in this market. The second issue concerns European tariff preferences and their possible consequences, one of which is the shift of the regional origin of European coffee imports and the other is the disadvantages arising from a higher degree of processing of the commodity.

Since the boom in cotton farming, this sector has played a vital role in the economies of Central America. Over the past decades, cotton-growing both in Nicaragua and El Salvador has brought economic development in terms of the generation of income, employment, economic infrastructure in the countryside, as well as the provision of foreign exchange. The effects of accelerating capitalist development in the countryside have been the expulsion of peasants from the cotton regions, their proletarianisation and marginalisation. In addition, the production of basic grains has diminished through the expansion of this agro-export sector, while cotton production has created less employment than it destroyed, and has been accompanied by bad working conditions and low wages.

The crisis of the 1980s appears to be questioning the basic viability of the agro-export development model in Central America. The effects of slackening world market demand, unstable international prices, worsening terms of trade and negative net external capital flows have combined with those of social unrest, repression and in most countries even civil war, resulting in serious external and internal imbalances of the overall economic system. Some studies speak of the end of an era, the consequences of which might be comparable to those of the disappearance of the international indigo markets in the nineteenth century. Then, the inability to make profits on the world market resulted in a drastic change in the production structure of Central America.¹

In the discussion about alternatives for economic recovery in Central America, it seems unwise for the small open economies of the region to leave aside the most dynamic and important income, employment and surplus-generating sectors which have shaped their principal socioeconomic structures. In considering the elements of a possible strategy let us review the most important arguments of the preceding chapters of this book.