The infrastructure impact of Central America's migration crisis

Migration from Central America to the United States is a decades-long problem, and was mostly due to the brutal civil wars some countries in the region experienced. 

More recently, thousands of people are trying to flee the region to escape from rampant poverty and growing gang-related violence to find better opportunities up north. 

Although the issue is mainly a political and economic one, its consequences have the potential to create important impacts regarding infrastructure, not only of the Central American countries but also Mexico. 

The responses from both the US and the Mexican governments to the roughly 5,000 Central American migrants currently moving their way through Mexico with the intention of reaching the US could have significant effects on the sector. 

As most governments see infrastructure development as a tool for poverty alleviation, news on the Central American migrant caravans has inevitably brought infrastructure-related concerns into the picture.

IMPACT ON CENTRAL AMERICA

The unprecedentedly large migrant caravan comes just two weeks before the US midterm elections. In what many see as a rallying call for his Republican base, Donald Trump has threatened to cut financial aid to Guatemala, Honduras and El Salvador for not being "able to do the job of stopping people from leaving their country and coming illegally to the US."

The particular measures Trump plans to implement are not immediately clear, nor is the extent to which he can act without congressional approval, so it is important to note that at this time, most analysis is based on speculation.

Although the majority of aid being directly provided by the US to Central America serves to fund humanitarian-geared programs such as security building, nutrition, and agricultural development, some programs, like the ones managed by US agency the Millennium Challenge Corporation (MCC), have played a significant role in the development of infrastructure projects in the three countries, which together are also known as Central America's northern triangle.

In Honduras, for example, the United States has historically been the largest bilateral donor. In 2005, the country became the first one in the hemisphere to sign an MCC compact. Under the plan, the agency invested US$205mn over five years in, among other things, improving the country's road infrastructure. MCC's US$15.6mn threshold program, launched in 2013, is aimed at supporting the implementation of effective and transparent public-private partnerships in Honduras.

Through the five-year Fomilenio II plan, Salvadoran authorities and are following an action plan supported by an investment of over US$365mn aimed at strengthening El Salvador's regulatory framework, logistical infrastructure and the development of human capital. Some US$277mn of that sum is being provided by the US government. 

The logistics branch of that plan is expected to receive over US$100mn to fund highway expansion and border crossing infrastructure. 

Thanks to the program, El Salvador is expected to carry out its first ever public-private partnership, which involves upgrading the cargo terminal of the country's Monseñor Arnulfo Romero international airport.

Other initiatives under the plan include upgrading a 5.73km highway section connecting to the El Amatillo border crossing and building a cargo transport center at El Amatillo, as well as completing a highway widening project.

As for Guatemala, MCC's US$28mn threshold program has as one of its goals to attract private investment to support infrastructure development.

Even though it is not yet known if the initiatives could be impacted by an eventual decision on the part of Trump to cut off aid to the region, it would most likely affect the launch of any future projects.

In addition, not only the aid provided by the US could be impacted, but potentially also that disbursed via multilateral organizations. One such organization could be the Inter-American Development Bank (IDB), to which the US has historically been the largest contributor.

Last year, the IDB and the northern triangle governments announced an initiative to unleash unprecedented infrastructure investment. Under the agreement, the bank is set to provide up to US$750mn to leverage additional investment of up to US$1.75bn in private and public funds over the next five years. In any case, the importance of foreign aid related to the US is more than evident.

Central American authorities are well aware of the importance foreign funds play in infrastructure. Earlier this month, in the context of the second Conference for Prosperity and Security in Central America meeting in Washington DC, a few days before the caravan took off for Mexico, Guatemalan President Jimmy Morales asked the US government for help to secure US$15bn in soft financing for infrastructure and development projects in his country.

Morales said that the funds would serve to create job opportunities, thus avoiding undocumented immigration to the US, and suggested they could come from the IDB or the World Bank.

IMPACT ON MEXICO

As a transit country for Central American migrants, the effects in Mexico of the growing number of people entering the country undocumented or seeking refugee status on some decisions related to infrastructure are starting to become manifest.

Over the last few decades, Mexican authorities also recognized infrastructure development as a way to reduce Central American migration. Through the Infrastructure Fund for Mesoamerica and the Caribbean, also known as the Yucatán fund, which is managed by its agency for international development cooperation, AMEXCID, Mexico has provided financing for different infrastructure projects in the region. 

According to official information, the administration of President Enrique Peña Nieto invested some US$53mn in the development of infrastructure projects in the northern triangle countries. The projects carried out in Honduras include the construction of the Villa San Antonio-Goascorán highway, and the La Paz and Anguiatú bridges, and the construction of a road to La Libertad port in El Salvador.

The implementation of some projects in Guatemala is currently under consideration, Mexico's foreign minister Luis Videgaray said at the recent Conference for Prosperity.

Trump's threat to completely close the southern border of his country if Mexico is "unable to stop" the caravan raised concerns among the Mexican public and, of course, the government. 

Given that the effects of the recent migrant caravan will have to be addressed by the incoming government of president-elect Andrés Manuel López Obrador (AMLO), who takes office December 1, the veteran politician has been forced to discuss potential solutions to the growing social crisis. 

In addition to continuing to invest in promoting economic development in the northern triangle, AMLO has also pledged to implement a work visa program for Central Americans.

The incoming president's plan is based on his expectation that some of the main infrastructure projects he is promoting, such as the construction of the Maya passenger rail line in the country's southern region, the development of a trade corridor in the Tehuantepec isthmus region, and the construction of a new oil refinery in Tabasco, along with other infrastructure and economic initiatives in his portfolio, will boost job creation in Mexico.

According to AMLO, his government will create enough jobs and economic opportunities to favor not only Mexicans but also those migrants seeking to build a life in the country. In this respect, if AMLO's prediction comes true, Central American workers could be beneficial for Mexico, with migrants having an incentive to enter the country as documented workers. 

However, the real impact of this large migration wave on the infrastructure sector of both Central America and Mexico will most likely not be seen in the near future.