Central America Country Risk Report

Published 23 June 2015 | Quarterly

  • 62 pages
  • Instant access to your report online and PDF format through your account library
  • Includes 3 free updated quarterly reports
 
$1,195.00
Central America Country Risk Report

External Tailwinds Supporting Regional Underperformers

Core View

Central American outperformers Costa Rica and Panama are facing a more challenging road ahead in the coming years. As real GDP growth slows in Panama on the back of the end of canal construction, establishing fiscal discipline will be crucial. Should the country fail to rein in spending in an environment of lower growth, this would likely cool investor enthusiasm toward the country. Similarly, Costa Rica is also facing a challenging fiscal outlook - a situation which is only exacerbated by the fragmented political environment.

In contrast, our outlook for most of Central America's underperformers is brightening. Guatemala, Honduras and El Salvador will benefit from stronger US demand for their manufactured goods, rising remittance inflows and lower oil prices in the quarters ahead. That said, significant security risks will temper foreign direct investment into these countries over the next five years. Nicaragua's macroeconomic position is also especially vulnerable given its strong ties to Venezuela. Our core view is for a moderate slowdown in growth in the coming years due to an end to the Tariff Preference Level programme and our view that Venezuela will modestly reduce assistance to Nicaragua. However, if Venezuela were to suddenly cut off aid under the ALBA-TCP programme, this would see a sharp downturn in Nicaraguan growth and rising pressure on the country's macroeconomic buffers.

Major Forecast Changes

  • We have revised down our growth forecast for Costa Rica. While low oil privates will offer tailwinds to private consumption, the confluence of Intel winding down operations in the country and a poor harvest will weigh more significantly on growth than we originally anticipated. As such, after originally forecasting an expansion of 4.0% in 2015, we now expect growth of 2.8%, implying a noticeably slowdown from the 3.5% expansion in real GDP.

  • We have revised down Guatemala's Short-Term...

Table of Contents

Executive Summary
15
Core Views
15
Major Forecast Changes
15
Key Risk To Outlook
15
Political Outlook - Regional
17
SWOT Analysis
17
Domestic Politics
18
Long-Term Political Outlook
19
Central America Facing Continued Challenges To Political Stability
19
Economic Outlook - Regional
23
SWOT Analysis
23
Chapter 1
25
Domestic Politics
25
Fragmented Policymaking Environment To Undermine Sol-s- Agenda
25
Chapter 1
27
Exchange Rate Policy
27
CRC: Depreciation To Moderate
27
TABLE: BMI CURRENCY FORECAST
27
TABLE: Exchange Rate
27
Chapter 2
29
Domestic Politics
29
Gang Truce No Silver Bullet For Security Environment
29
Chapter 2
31
Balance Of Payments
31
External Tailwinds To Bolster Balance Of Payments Position
31
TABLE: Current Account
31
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Contents
Contents
Chapter 3
33
Domestic Politics
33
Challenging Security Environment Will Persist
33
Chapter 3
35
Fiscal Policy
35
Fiscal Deficits To Persist
35
TABLE: Fiscal Policy
36
Chapter 4
37
Domestic Politics
37
Security Environment Will Not Improve Rapidly
37
Chapter 4
39
Economic Activity
39
IMF Stand-By Arrangement Offering Tailwinds To Macroeconomic Outlook
39
TABLE: Macroeconomic Forecasts
40
Chapter 5
41
Domestic Politics
41
Canal Construction To Generate Strong Opposition
41
Chapter 5
43
Fiscal Policy
43
TABLE: Fiscal Policy
43
Chapter 6
45
Domestic Politics
45
Corruption Fight To Boost Reform Mandate
45
Chapter 6
47
Economic Activity
47
End Of Canal Expansion To Weigh On Growth
47
TABLE: Macroeconomic Forecasts
47
Chapter 7: BMI Global Macro Outlook
49
Global Outlook
49
Deflationary Pressure
49
Table : Global Assumptions
49
Table : Developed States , Real GDP Growt H, %
50
Table : BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
50
Table : Emerging Mar kets , Real GDP Growth , %
51

The Central America Country Risk Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Panama, Guatemala, Nicaragua, El Salvador, Costa Rica, Honduras. It is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.

An influential new analysis of Panama, Guatemala, Nicaragua, El Salvador, Costa Rica, Honduras's economic, political and financial prospects through end-2019, just published by award-winning forecasters, BMI Research.

Key Uses

  • Forecast the pace and stability of Panama, Guatemala, Nicaragua, El Salvador, Costa Rica, Honduras's economic and industry growth through end-2019.
  • Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
  • Assess the critical shortcomings of the operating environment that pose hidden barriers and costs to corporate profitability.
  • Contextualise Panama, Guatemala, Nicaragua, El Salvador, Costa Rica, Honduras's country risks against regional peers using BMI's country comparative Risk Index system.
  • Evaluate external threats to doing business in Panama, Guatemala, Nicaragua, El Salvador, Costa Rica, Honduras, including currency volatility, the commodity price boom and protectionist policies.

The Central America Country Risk Report by BMI Research includes two major sections: Economic Outlook and Political Outlook.

Economic Outlook:

How will the Panama, Guatemala, Nicaragua, El Salvador, Costa Rica, Honduras' economic policy-making and performance impact on corporate profitability over 2015-2019?

BMI provides our fully independent 5-year forecasts for Panama, Guatemala, Nicaragua, El Salvador, Costa Rica, Honduras through end-2019 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.

Economic Outlook Contents

The Central America Country Risk Report features BMI's forecasts with supporting analysis for 2015 through to end-2019, set against government views and BMI's evaluation of global and regional prospects.

Key Areas Covered:

Data:

  • Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
  • BMI's comprehensive Risk Index system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.

Written Analysis:

  • Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
  • Balance of Payments - trade and investment, current and capital account.
  • Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
  • Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
  • Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
  • Foreign Direct Investment - approvals, inflows and climate.
  • External Debt - debt profile (short and long-term plus public and private sector obligations).
  • Global Assumptions - forecasts for each year to end-2019 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.

Key Benefits

  • Rely upon BMI's 100% independent forecast scenarios for Panama, Guatemala, Nicaragua, El Salvador, Costa Rica, Honduras and underlying assumptions - we take no advertising and are privately-owned.
  • Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on Panama, Guatemala, Nicaragua, El Salvador, Costa Rica, Honduras, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
  • Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.

Political Outlook:

What are the political risks to doing business in Panama, Guatemala, Nicaragua, El Salvador, Costa Rica, Honduras over the next 5-years?

BMI's Panama, Guatemala, Nicaragua, El Salvador, Costa Rica, Honduras country Risk Index evaluates the short- and medium-term threats to political stability.

Political Outlook Contents

  • SWOT Analysis for the Panama, Guatemala, Nicaragua, El Salvador, Costa Rica, Honduras Market - Political Strengths, Weaknesses, Opportunities and Threats facing Panama, Guatemala, Nicaragua, El Salvador, Costa Rica, Honduras.
  • Political Stability and Risk Assessment - BMI's Risk Index assesses explicit short- and long-term risks to political stability; latest positioning and trends for Panama, Guatemala, Nicaragua, El Salvador, Costa Rica, Honduras's risk are compared with regional and global averages.
  • Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.
  • Long-Term Political Outlook BMI examines the structural risks to the stability of Panama, Guatemala, Nicaragua, El Salvador, Costa Rica, Honduras’s political system and the dominant public policy issues likely to affect decision-makers, and outlines scenarios for how the state could evolve in the medium to long term.

Key Benefits

  • Benchmark Panama, Guatemala, Nicaragua, El Salvador, Costa Rica, Honduras's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
  • Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
  • Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.

*Not all Country Reports contain the Key Sector Outlook chapter. Please enquire above for more information.

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Testimonials

The sections that I find most interesting and useful are the macroeconomic data and forecasts for the country, top export destinations and economic activity. The indicators/analysis of these areas helps us orient our thinking, our assumptions and, consequently, our decisions in the commercial area.

Country Manager, DHL Express