Most of the Central American markets will continue recovering in 2021, dictated by strong US recovery, which we expect to lift exports and remittances. Although the tourism sector will likely continue to struggle throughout the rest of the year, we see a potential upside to a faster recovery toward the end of the year, contingent upon Western tourists’ willingness to travel and a faster vaccine rollout across the subregion. What about your most critical market?

Central America’s outlook will remain stable in the short-term, mainly driven by a strong US economic recovery. However, the subregion will not regain pre-pandemic levels until 2023
  • Nicaragua is facing a governance crisis, crippling US sanctions, and negative sequels of the COVID-19 fallout, making it the one exception to Central America’s general recovery.
  • Costa Rica will continue to struggle with its dire public debt and anemic labor market amid the IMF agreement reached in Q1.
  • Panama’s recovery is contingent upon higher investment into the key construction sector, which represents 16% of GDP, and the Laurentino Cortizo government’s ability to speed up the vaccine rollout within the country that has the highest rate of COVID-19 cases in the subregion.
  • Guatemala will recover pre-pandemic GDP levels faster than Costa Rica and Panama, as remittance inflows continue to outperform and exports to the US improve.
  • Honduras and El Salvador will also recover quickly because of their high dependence on remittance flows from the US.
  • Belize’s recovery will be the weakest in Central America given the country’s dependence on the embattled tourism industry.

To win in Central America in 2022, make sure to revamp your government engagement playbook to get ahead of policy disruption stemming from tax reforms, and pressure-test your market prioritization strategies, considering different levels of exposure to external drivers across countries. Check out our Latin America Outlook for a deeper dive into the rest of your critical markets across Latin America.

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