OP-ED The large flow of Central American children to the US southern border has reignited the immigration debate. While controversy rages over border enforcement issues, both Democrats and Republicans are not considering the conditions in Honduras, Guatemala and El Salvador that have triggered this unfortunate exodus.
The mass migration is associated with high crime and limited economic opportunities in these Central American nations. According to UN data, Honduras has the world’s highest homicide rate at over 90 murders per 100,000 people, while both El Salvador and Guatemala also rank among the top five with murder rates of about 40 per 100,000 each. By comparison, the homicide rate in the US is less than 5 per 100,000.
With respect to economic performance, all three of these nations are classified as “lower middle income” by the World Bank – so they are not among the world’s poorest countries. But all three are seeing less per capita income growth than other lower middle income countries and their Latin America peers, as show in the accompanying table.
|Country/Group||2004 GNI Per Capital||2013 GNI Per Capita||Annual Growth Rate|
|Latin America & Caribbean||$4017||$9634||10.21%|
|Lower Middle Income Countries Globally||$779||$2068||11.46%|
|Source: World Bank Development Indicators|
If these three countries could become safer and could provide greater economic opportunities, their residents would have less reason to risk unlawfully immigrating to the U.S. Policy changes both in these countries and in the US could improve the quality of life in these nations and thereby stem the immigration crisis.
One obvious possibility is providing more foreign aid to the three nations. This approach would undoubtedly spark a lot of opposition. If authorized, much of the money will likely be siphoned away by local elites or spent ineffectively. Fortunately, more indirect alternatives to outright government to government transfers are available.
Much of the crime in Central America is gang related, and gangs obtain the lion’s share of their income from drug trafficking. Successful interdiction efforts elsewhere have led to a greater proportion of U.S.-bound narcotics going through Central America. Drug enforcement efforts don’t eliminate the demand for drugs. Instead, they drive up prices and thereby increase profits for the smugglers who are still operating. As a result, gangs have become quite powerful in Honduras and elsewhere in Central America.
By taking the profit out of drug smuggling, we can shrink violent gang activity in Latin America just as the U.S. saw a dramatic drop in violent crime after the end of Prohibition. Decriminalization of cocaine and heroin in the US would dry up gang profits, but is a political non-starter. A more politically palatable alternative would be a treatment program under which registered addicts receive their narcotics for free at drug treatment centers. Because the program would be limited to known users and because they would be required to consume the drugs at the treatment center, this initiative would not create new addicts. As The Economist reported in February, this approach has been successfully implemented in both Switzerland and the Netherlands.
Eliminating profits from narcotics smuggling would initially reduce incomes in Central America, but opportunities to legally generate income would increase as security improves – especially if the chaos is replaced by an efficient and effective legal system. Countries in which the rule of law is widely accepted and that have effective market-oriented legal systems often enjoy very rapid growth. This has been the case in East Asian societies like Hong Kong, Singapore, Taiwan and South Korea.
More recently, the benefits of market-based growth have spread to poorer Latin American countries. A prime example is Peru – which after decades of instability has witnessed very rapid improvements in living standards since 2001. Rapid economic growth followed the vanquishing of the Shining Path guerilla movement and market-oriented reforms implemented under the last four presidents.
The relationship between the rule of law, markets and growth has not been lost on Honduras’ leaders. In 2011, the government amended the Honduran constitution to allow the creation of charter cities that could operate under different – and presumably more liberal – legal systems. The inspiration for creating these autonomous zones appears to have come from economist Paul Romer, who advocated the concept of charter cities in a widely-viewed 2009 TED talk.
Implementation of the charter city concept in Honduras has been slowed by political opposition and court challenges. Progressives in the US and elsewhere have ridiculed the idea as an abrogation of national sovereignty and a sellout to the foreign corporate interests who would develop the zones. These critics might benefit from reading Karl Marx, who understood capitalism’s unique ability to produce rapid economic development.
Last month, the Honduran Supreme Court dismissed the remaining constitutional challenges against the country’s charter cities legislation. The government is now free to select initial zones for development and work with prospective developers. It is promoting charter cities – now known as Zonas de Empleo y Desarrollo Económico (ZEDE) – via the web and other means.
The U.S. should encourage Honduras and its Central American neighbors to move forward with market-oriented reforms either in special zones or at the national level. Further, we should find a way to lift the burden of our illegal drug trade from these nation’s shoulders. These measures will hasten the day when parents in Honduras, Guatemala and El Salvador no longer see the need to send their children on a dangerous and illegal trip to our border.
Marc Joffe is the Principal Consultant at Public Sector Credit Solutions. He was previously a senior director at Moody’s Analytics.
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