Our Shared Interests
Before I begin, I’d like to thank Arturo Aguilar and Eric Olson for organizing this Central America Donors Forum. Thank you as well to Colleen Hoey and Fernando Cossich for your hospitality and for the outstanding leadership you bring to your respective roles as leader of the U.S. Embassy and USAID Mission, respectively. It is an honor for me to join you all in taking this opportunity to strengthen our friendships with our Central American partners.
Our friendships are strong because they are rooted in shared values, supported by shared interests, and driven by a shared destiny. By virtue of geography and history, events in the Western Hemisphere—and particularly in Central America—have an outsized impact on the economic and national security landscape in the United States. When our Central American neighbors enjoy security and prosperity, the United States also sees benefits. But when our neighbors struggle with crises of governance, natural disasters, and transnational criminal networks, we in the United States suffer as well.
That’s why, in his address to the United Nations last month, President Trump emphasized that: “Here in the Western Hemisphere, we are joining with our partners to ensure stability and opportunity all across the region.”
U.S. Vision for Central America
Author David McAllister-Wilson once said, “Vision isn’t everything, but it’s the beginning of everything” so let me begin with our vision. In our vision, Central America is a prosperous, safe, and democratic region with which the United States can partner to advance our shared interests regionally and globally.
Our commitment to that vision is manifest in our significant engagement in the region, not just through ongoing daily diplomatic interaction but through high-level visits and meetings between principals. In just the past few months:
- President Trump met with the President of El Salvador Nayib Bukele at the UN and joined President of Honduras Juan Orlando Hernández in New York to witness the signing of bilateral migration agreements;
- Since arriving at State, Secretary Pompeo has traveled to the Western Hemisphere six times;
- In Washington, the State Department hosted President-elect of Guatemala Alejandro Giammattei, President Hernandez, President Bukele, Honduran Foreign Minister Lisandro Rosales, Salvadoran Foreign Minister Alexandra Hill, and Mexican Foreign Secretary Marcelo Ebrard;
- Acting Assistant Secretary for Western Hemisphere Affairs Ambassador Michael Kozak traveled to Panama just last week in his first trip to the region in his new role; and
- I myself have visited El Salvador, Guatemala, and Honduras on numerous occasions to work with our partners on our shared challenges and our positive agenda for the region.
This intensive diplomatic engagement is producing results. The governments of El Salvador, Guatemala, Honduras, and Mexico have taken historic action to reduce the overwhelming number of irregular migrants coming to the U.S. border, and last week President Trump announced his intention to resume targeted U.S. foreign assistance funding for El Salvador, Guatemala, and Honduras. This funding will support programs that are advancing our joint efforts to improve security in the region and mitigate illegal immigration from and through El Salvador, Guatemala, and Honduras.
Yet we recognize that progress toward our vision for the region does not hinge on diplomacy and foreign assistance alone. We must harness the resources of the private sector, in combination with the talent and initiative of the citizens of Central America. Let me offer some examples of how we are doing this:
First, through the América Crece program, we seek to catalyze private sector energy and infrastructure investments in Latin America and the Caribbean. We will formally launch the expanded América Crece initiative on the margins of the November, 2019 APEC Leaders’ Week in Chile. América Crece encompasses a broad range of infrastructure projects, including energy, airports, roads, ports, and telecommunications.
América Crece seeks to promote the kind of investments we support in Panama. For example, just last week our Acting Assistant Secretary Ambassador Kozak gave keynote remarks to celebrate the inauguration of Applied Energy Solution’s new LNG power plant in Panama. The new LNG plant has already generated a thousand jobs for Panamanians and will eventually employ 200 people. The plant represents over a billion dollars of U.S. investment, and positions Panama as a regional energy hub.
Second, through the 100,000 Strong in the Americas Innovation Fund, we seek to advance education across the region because when education lags, economies cannot prosper. That’s why the State Department launched the Innovation Fund – an $11 million fund backed by governments, companies, foundations, NGOs, and higher education institutions. Serving as a trusted bridge between the public and the private sector, the Fund enables us to work together to promote education, good governance, democracy, and human rights. The Fund has awarded 232 grants to universities and training institutions in 25 countries and 46 U.S. states. I’m excited to say that next week we’ll announce new Innovation Fund partnerships between universities in the United States, El Salvador, Guatemala, and Honduras made possible by Cementos Progreso – our first Central American partner.
Third, the Overseas Private Investment Corporation – as it transitions to become the new International Development Finance Corporation – will increase its investments worldwide and employ new tools. We’ve already seen OPIC actively engaged in the region, most recently through a $350 million loan for the development, construction, and operation of a liquefied natural gas facility in El Salvador that will supply more than 20 percent of the country’s energy needs when it is completed. This initiative demonstrates the strategic value of public-private partnerships to foster economic growth in the region.
And fourth, USAID has worked in close partnership with the people of Central America to improve their livelihoods, strengthen democratic institutions, and advance security. Their work has included programs to address the root causes of illegal immigration to the United States by improving citizen security, growing prosperity, and addressing corruption – all of which helps attract private sector investment.
The Need for Political Will: Creating Cultures of Compliance
While the United States can and will support countries that work for a better future, we must also recognize the significant challenges facing this region. Corruption remains endemic and undermines faith in governing institutions. And by scaring away foreign investment, corruption stifles economic growth. As our Acting Assistant Secretary recently noted in front of the U.S. Congress, elected officials in Central America must show the political will to take on these problems boldly, directly, and effectively. If they do, much is possible. The U.S. government will encourage the U.S. private sector to spur job growth where we see our partners take concrete action to curb corruption and strengthen rule of law – these are the environments that are good for business, and that attract sound and sustainable investment.
As we know, investments go where they generate the greatest return given the lowest possible risk. Historically, investors have largely avoided Central America because risk and uncertainty have outweighed opportunity. It is up to the countries in this region to turn that dynamic around by creating a fertile ground for international and domestic investment. To this end, governments must work with civil society partners and private sector groups – such as chambers of commerce – to reduce impunity, combat corruption, and improve budget and procurement transparency. Doing so will improve the business environment, create jobs, raise wages, increase tax revenues, and ultimately make countries in the region not just great places to visit – but great places to live and raise families.
And let me just take a moment, if I might. I think everybody in the room is sensitive to the efforts we are undertaking, not just the U.S., but the governments in the region, to combat corruption. And one such effort is the MACCIH initiative. There are others in the region. And I’d like to encourage you to support these initiatives, to make your positions known, because if we cannot confront and eliminate corruption, it’s going to take much longer to make the progress these countries need and deserve.
Helping Countries Solve Their Own Development Challenges: The Journey to Self-Reliance
As we meet with foreign governments and partners around the region, we consistently hear the same thing: “we want trade, not aid.” That’s why the U.S. government is reorienting our approach to achieve greater development outcomes and work toward sustainable progress when foreign assistance is no longer necessary. We call it the Journey to Self-Reliance. As partners on this journey, we are empowering Central American governments and our partners to achieve locally sustained results.
An Opportune Moment for Action
So let me be clear: the U.S. government believes the private sector – working alongside civil society – will drive the future of international development.
This is an opportune moment for action: today many private sector players and development actors recognize that they have shared interests. Donor agencies alone cannot achieve their goals for sustainable development. Central American governments are expanding efforts to diversify their economies and attract capital for investment. However, development financing should never result in unsustainable debt. Some countries outside the region use debt diplomacy to create dependencies, which may seem negligible today but will eventually constitute real leverage over governments and societies and could pose a challenge to state sovereignty. We support efforts by our Central American partners to look after their long-term economic interests by relying on open and transparent processes to select investment partners.
There is also a growing recognition within the private sector regarding the benefits of investing in the developing world. After all, that is where the greatest growth potential is! Our companies are ready to engage, but they need a level playing field. When a U.S. company invests overseas, governments know that the Foreign Corrupt Practices Act requires certain obligations and responsibilities. This is a good thing for them, for you, and for all of us.
This is why we continue to press for market access for U.S. companies, and for fair and reciprocal trade. This is why we will continue to demand that all economic actors operating here in the Americas adhere to the highest standards for transparency, anti-corruption, debt sustainability, labor rights, environmental protection, and concern for local communities.
The Case for Private Sector Engagement
When we talk about private sector engagement in international development, we are not just talking about investing. What we mean by “private sector engagement” is that governments and other public sector actors collaborate to improve the security, governance, and economic environment that enables investment, job creation, and widespread prosperity.
Why should we encourage private sector engagement? I’ll give you our top five reasons.
- Number one: Businesses provide pathways to lift people out of poverty. The private sector creates nine out of ten jobs in the developing world, which makes it a powerful force for raising living standards.
- Number two: Expanding economic opportunities improves security and stability by creating the conditions for communities to thrive.
- In Honduras, USAID partnered with social impact investor Raiz Capital to renovate historic sites in Tegucigalpa and turn them into centers for business incubation and cultural appreciation. These investments transform neighborhoods, give youth somewhere to gather, give businesses a place to grow, and provide the impetus for urban renewal and economic growth.
- Number three: The private sector provides the building blocks every country needs for economic growth.
- In Guatemala, USAID initiated the “Creating Economic Opportunities” project. Launched just last year, this initiative has already forged partnerships with more than 200 businesses that will create 50,000 jobs in areas of high outward migration. These partnerships have: opened up air travel to the city of Huehuetenango; connected women owned businesses to Walmart’s retail supply chain; and mobilized credit for the expansion of a factory started by two returnees.
- Number four: Governments, donor agencies, and private sector actors are increasingly finding their interests aligned. Donor agencies find they can’t achieve their development goals alone; governments seek to expand efforts to diversify their economies and attract capital for investment; and the private sector sees the need for and the benefits of investing in the developing world.
- In mid-2018, the U.S. government launched an initiative called “Deal Team 2.0”− a whole-of-government approach to getting U.S. companies more involved in overseas tenders. As part of that effort, our Global Markets Trade Americas Team at the U.S. Embassy in El Salvador recently convened a webinar during which 41 companies from a range of industries heard about the opportunities related to Millennium Challenge Corporation/Fomilenio II public-private partnerships.
- Number five: Private-sector engagement leverages a wide variety of relationships. Yesterday, our team organized a panel on impact investing − investments made into companies, organizations, and funds with the intention to generate a social impact alongside a financial return.
- For example, here in Honduras, USAID partnered with the Ministry of Education and the private sector to leverage up to $25 million in corporate social responsibility investments in areas of interest to all three partners. These investments are expanding the number of teachers trained, as well as student access to educational materials. Today’s private sector recognizes the benefits of strengthening community services for customers and employees.
Here’s the bottom line: When the U.S. and Central American governments, local communities, and private sector actors collaborate together we can lift people out of poverty, strengthen communities, and accelerate countries toward self-reliance. It isn’t just about making money; it is about making a difference.
Conclusion: The Change We Seek
In conclusion, I want to issue a call to action – a call for our partners to embrace market-based approaches as a more sustainable way to support Central American communities to achieve development outcomes at scale.
The domestic and international private sectors are engines of economic growth, and key enablers of development progress. Businesses and investors create jobs; develop and fund technologies and innovation; provide critical goods and services demanded by households, communities, other private-sector entities, and the government; and develop a reliable tax base. For the U.S. government and our partner countries, this means that domestic and international businesses and investors are indispensable partners.
So, what is the change we seek? Development professionals always have a “Theory of Change.” Here is ours:
If the United States and Central American governments engage with private-sector actors – along with local communities, civil society, and academia – then we will increase each country’s prosperity, as well as its capacity for self-reliance because public-private partnerships offer a sustainable path to achieve a prosperous, safe, and democratic Central America.