The transformation of the economies of Central America before 1979 rested on three pillars. The first was rapid growth and diversification of agricultural exports to the rest of the world. The second, based on the first, was stable exchange rates and very low rates of inflation. The third, based on the first and second, was exports of manufactured goods within the Central American Common Market (CACM). Since the Central American crisis began in 1979, all three pillars have crumbled and the task of economic reconstruction has become one of the most pressing facing the region. The work of reconstruction is complicated, however, by the knowledge that the three traditional pillars were in some respects deficient; they could not prevent a descent into civil war in three countries of the region (El Salvador, Guatemala and Nicaragua) nor interstate conflict between two (El Salvador and Honduras in 1969). Thus, reconstruction will have to address the failings of the old order, while adding new elements of dynamism to permit the countries of the region to regain and surpass the pre-1979 levels of income per head.
KeywordsGross Domestic Product Land Reform European Economic Community Real Gross Domestic Product International Response
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