Progress in Central America

Dramatic political and economic change has taken place in Central America over the past half a dozen years. Consider the following:

*In 1990, El Salvador, Guatemala, and Nicaragua were engaged in civil wars. Most expect that within the next several months the Guatemalan government and guerrilla forces will sign a peace settlement, bringing an end to the region's most prolonged and only remaining armed conflict.

*Former guerrilla leaders hold nearly one-quarter of the seats in El Salvador's parliament. Some of them - grouped in the Party for Democracy - are trying to build a political alliance with the centrist Christian Democrats that would allow for an effective challenge to the ruling Arena Party in next year's congressional elections and in presidential elections in 1999. El Salvador has enjoyed a solid record of growth over the past four years and is now the region's strongest economic performer.

*In October, Nicaragua will hold its second-straight competitive presidential election. This will be the first time in Nicaragua's history that one freely elected president will replace another. Although still in dire economic straits, Nicaragua seems to have stabilized its economy.

*After years of military dominance, Honduras's civilian authorities are exercising increasing political control over the country's armed forces.

*With its vibrant, long-standing democratic institutions, its relatively high per-capita income, and its record of social advance, Costa Rica has stood apart from its neighbors. It's working to make its economy internationally competitive and better able to sustain the country's political and social gains.

Central America's progress is real and substantial, but the region faces a difficult future. Economic growth is still too slow to make any dent in the poverty that pervades much of Central America. Guatemala's mostly indigenous rural population obtains almost no health or education services from the central government, and tax revenues remain insufficient to even begin to provide such services. Social conditions are not much better in most other countries of the region. Criminal violence, often linked to drug trafficking, is on the upsurge throughout Central America. Human-rights abuses by national security forces are frequent, militaries are prominent in politics, and democratic institutions and practices are weakly protected. Nowhere - except Costa Rica - are the region's political openings consolidated.

Throughout the 1980s, the US was intensely involved in Central America, in some years providing the region with more than $1 billion in military and development assistance. Today Washington gives limited and sporadic attention to the region - although this is not all bad. That US policy is not an issue in the upcoming Nicaraguan elections is a healthy development, for example, as is the limited role of the US in Guatemala's peace negotiations. Yet, US actions will exert strong influence on the future of every Central American nation. The US is the largest market for the region's exports and the main source of its foreign investment. For reasons of proximity, inclination, and habit, the US will remain engaged on a variety of issues - drugs, immigration, human rights, and trade disputes. That engagement can be made more productive.

The challenge for the US and Central American countries is to develop a constructive, long-term relationship. The mainstay should be the recognition that the nations of Central America (and the Caribbean) are an integral part of North America. In this light, NAFTA is incomplete because it excludes a significant segment of the continent. It is time to formulate a strategy to bring the economies of Central America and the Caribbean into NAFTA. In the meantime, the US should continue to fulfill its long-standing pledge to adopt interim measures to prevent NAFTA from damaging these economies by diverting investment toward Mexico.

*Peter Hakim is president of Inter-American Dialogue in Washington.