Central America Offers its Own Set of Challenges and Opportunities for MNCs

As Latin America’s largest markets have struggled in recent years, multinationals are taking a closer look at the opportunities that the smaller markets of Central America can offer, particularly they seek to diversify their regional portfolios. However, the opportunity must be kept in perspective, as Central America only represents around 3.5% of the Latin America’s GDP, making the region the eighth-largest market in Latin America, just behind Peru.

Graph 1 LATAM Blog Post

That said, Central America is expected to experience growth on par with some of the fastest growing markets in Latin America over the next few years. However, individual markets within Central America will experience widely divergent growth prospects, making prioritizing investments within the region absolutely essential.

  • Panama will remain one of the fastest-growing economies in the region, with multinationals increasingly considering the country as a viable hub for operations in Latin America
  • Costa Rica offers a solid business climate, but chronic budget deficits and legislative gridlock cloud its medium-term outlook
  • Guatemala, Honduras, and El Salvador continue to be plagued by weak government finances and drug-related violence, limiting the potential for higher economic growth that might alleviate these countries’ extreme poverty
  • Nicaragua is projected to experience solid growth over the next several years, in part because of its financial position, but the market also remains at risk of severe political and economic instability
  • Belize is suffering from high debt loads and limited opportunities for growth over the medium term

Graph 2 LATAM Blog post

FSG recently published a report that provides multinationals with an extensive overview of the region’s macroeconomic outlook, forward-looking market and industry sentiment, and deep-dives on each of these markets.

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