BLP’s summary of the most important regional news and opportunities offers an overview of the economic, social, and political landscape of Central America at just a click away.

San José selected as one of the 10 happiest cities in the world. A new study reveals that San José, Costa Rica is among the happiest cities in the world for travelers. The Costa Rican capital has been ranked number 8 out of 40 worldwide, standing out for the friendliness of its inhabitants and for being a destination with excellent value for money. San José offers a mix of traditional Central American city and cosmopolitan urban center, with an incredible variety of attractions and activities: parks, museums, historic buildings, theaters, and the most incredible beaches, wildlife, and nature. Guarded by green hills and impressive volcanoes, San José is an idyllic part of the world. Click here for more information.

A 1.24% increase was approved for minimum salaries in the private sector, effective July 1. The National Wage Council approved an extraordinary rise of 1.24% for minimum wages in the private sector as of July 1 of this year. The increase, the same that the Government of Rodrigo Chaves proposed on June 30, equals ¢1,240 more per month for each ¢100,000 now received. The Wage Council includes workers, employers, and the Executive Branch, whose members agreed that “it is the first time it has been done.” The current methodology for wage-setting enables this council to call for a wage revision if the accumulated inflation rate as of May is equal to or higher than the annual inflation target set by the Central Bank of Costa Rica (BCCR) for the year. Click here for more information.

Eurobonds would be a lifeline for the exchange rate, according to experts. The placement of $1.5 billion per year in Eurobonds should move forward as soon as possible to reduce the pressure on the exchange rate, which reached ¢700 last week, and the rise in interest rates. Rodrigo Chaves’ proposal would help finance the State between this year and 2027, at the same time, it would help the country mitigate the economic storm that is affecting us due to the increase in inflation, the price of hydrocarbons, and the low growth. Click here for more information.

Public works construction in Costa Rica has decreased since December 2017. In Costa Rica, the construction of highways, roads, bridges, electric generation works, aqueducts, sewers, and other public works buildings has decreased. By the beginning of 2022, the Central Bank of Costa Rica (BCCR) reported that the construction sector grew by 6.2%, which represented 9.4 percentage points more than at the beginning of 2021. This recovery of the sector is solely due to the growth of private construction, mainly middle and upper-class housing, as well as commercial and industrial buildings. However, public works construction contrasts with the private sector, as the variation for January 2022 decreased by 23.9% compared to the previous year. This is one of the most drastic year-on-year variations that the sector has suffered in the last decade. Not even in a pandemic was such a reduction recorded. Click here for more information.

Reduced bond sales put the Treasury in trouble with payments in the coming months. The Ministry of Finance concludes the first semester far from the objective of selling the bonds necessary to face the closing of 2022 and the beginning of 2023 that will be loaded with heavy obligations such as the payment of salaries, Christmas bonuses, school bonuses, and maturities of internal and external debt. The National Treasury raised, between January and this Monday, June 20, a total of ¢1.048.157 million in domestic debt securities, an amount that represented 52.4% of the target for the first six months of 2022, and only 26.8% of the total expected for the entire year. Click here for more information.

A $200 million photovoltaic plant will be built. New investment in El Salvador will be the construction of a photovoltaic plant thanks to a Swiss consortium that will invest $200 million. The plant will inject energy to the national grid, but will also serve to mine bitcoin, announced El Salvador’s ambassador to the United States, Milena Mayorga. Click here for more information.

El Salvador could pay debt with IMF funds. El Salvador received some $400 million in Special Drawing Rights (SDR) last year. The total amount distributed by the IMF to its members is worth approximately $650 billion, and each member is allocated according to its contribution to the Fund. These funds have a variable value, according to a basket of currencies, and are reflected in the international reserves of the country’s Central Reserve Bank (BCR). Since there has been discussion of the financial problems that El Salvador faces with internal debt and especially of the $800 in Eurobonds coming due next January, the SDRs have been mentioned as an option. Click here for more information.

The reinforcement of $25 million for innovation will reduce the digital gap in the country. The Legislative Assembly maintains its commitment to modernize the services provided by public institutions using new technologies. For this reason, in the plenary session, they modified the Budget Law 2022 and incorporated $25.145 million into the budget of the Presidency of the Republic. With this, the Secretariat of Social Innovation will have funds to promote different initiatives aimed at reducing the digital gap in the country. It will also serve to finance connectivity projects in schools and other government infrastructure to bring digital services to the entire population. Click here for more information.

The number of companies that have managed to export is increasing. Salvadoran products are finding more and more markets, to the point of marking historic achievements for the country. The number of companies that have placed their products in international markets has increased, compared to last year, according to the Central Reserve Bank (BCR). Economic units exporting up to 10 thousand dollars reached 613 up to the fifth month of 2022, that is, 5.5% more than in the same period last year. This group includes small and medium-sized companies that managed to meet the requirements to make the leap to internationalization. There are other foreign trade indicators that suggest that there will be continuity in the projects and that there will be greater productivity, for example, the import of capital goods. Click here for more information.

Government modernizes the CNR platform to manage the Intellectual Property Registry online. The Government of President Nayib Bukele seeks to simplify services, join with the user in the processes and provide a better experience in response times in each of its institutions as part of the digital transformation to which it is committed during the five-year term. In this context, the National Registration Center (CNR), through the Intellectual Property Registry, presented the updates of the ”Intellectual Property Agents Base” platform. The entire process will be managed online and followed up with post-registration services, trademark renewal, transfer of rights, and multi-services. This update will optimize and increase productivity through short and automatic response times and the calculation of fees to avoid errors. Click here for more information.

Extensions, loans, and other financial maneuvers were approved by Congress, at the government’s request. The Legislative has approved at least six legal reforms that imply the reallocation of resources so that the government will have Q6 billion more in 2022 and 2023. In six months, the Congress of the Republic has approved a series of modifications to the General Budget of Revenues and Expenditures of the nation for this year, with which the availability of resources for the government has increased by Q6 billion (5.6%). In addition, the congressmen approved a loan of $500 million with the International Bank for Reconstruction and Development (IBRD), as well as empowering the Departmental Development Councils to execute it in 2023. Click here for more information.

Socialization of the new audit model. The Superintendence of Tax Administration (SAT) presented the new intelligent auditing model at the eleventh meeting of the Public-Private Dialogue Table on Internal Taxation, attended by 26 institutions. According to the head of the SAT, Marco Livio Díaz, the focus is on the growth of the tax base, through the referred model, based on the economic sector and the use of data analysis, which will give a qualitative change to the entity in charge. “We are working together with the economic organizations, to solve the problems and make the processes more agile,” he explained. Click here for more information.

In July, a business conference will be held. A business roundtable is scheduled for July 11, to promote trade between the Republic of China (Taiwan) and Guatemala. Among the participating sectors are caps, cosmetics, electric buses, charging stations, solar inverters, hearing aids, telecommunications, intelligent solutions, packaged beverages, and recycled plastic, among others. According to information from the Embassy of Taiwan in our country, Guatemala’s exports to the Asian nation, between January and April 2022, grew 63.6 percent, compared to the same period in 2021. Click here for more information.

New record in remittance inflows. The trend of historical records continues to increase for foreign currency income from family remittances, according to the latest economic bulletin of the Foundation for Development (Fundesa) for May of this year. According to the information, the amount was $1.592 billion, $355.8 million more than in May 2021, which represents an increase of 28.8 since an accumulated income of $7,045.2 million was registered in the first five months of 2022. For Fernando Spross, Fundesa researcher, the increase is significant because the May results add more than the amount registered in the first semester of 2021 and, by the end of the year, $17.5 billion in remittances is expected, which would be almost 17 percent of the gross domestic product (GDP). Click here for more information.

Private banking earned more than 3.5 billion lempiras from January to May of this year. Private banking in Honduras recorded a record increase in profits of 71%. According to preliminary data from the National Banking and Insurance Commission (CNBS), more than 3,534 million lempiras were earned. The profits are supported by the recovery of the loan portfolio, which increased by more than 61,000 million lempiras to 452,526 million lempiras. Deposits also grew by more than 46,000 million lempiras and now exceed 494,750 million lempiras. Click here for more information.

$1 billion of BCH international reserves are for social programs. The declaration of a financial emergency decreed by the government to access funds from international reserves will not be used to cover payment of foreign debt or any emergency, but for “social spending,’ said the Minister of Finance, Rixi Moncada. The official, who admitted that the government of Hernández (Juan Orlando) diverted 168,000 million lempiras in 12 years, responded to the criticism of economists on the real need to use the international reserves of the Central Bank of Honduras (BCH). Click here for more information.

Nicaraguan Parliament approves CABEI loan. The National Assembly (unicameral parliament) of Nicaragua approved the loan signed between the Central American Bank for Economic Integration (CABEI) and the Sandinista government to finance the improvement of highways. The amount of the loan is $382,580,372 for a project with a total cost of $401,504,000, the remainder of which will be contributed by the State of Nicaragua, according to the Legislative body. The information released also said national resources will contribute to financing the “X Road Expansion and Improvement Program,” which includes six departments, among them the capital of the country. Click here for more information.

Nicaragua signs a cooperation agreement with Iran on pharmaceutical products. Nicaragua signed a cooperation agreement with Iran’s Barekat Pharmaceutical Group, which will enable the Central American country to obtain quality medicines, medical supplies, and Iranian raw materials to produce medicines, the Government of Managua said this Sunday. The agreement will allow Nicaragua to advance cooperation in health issues through the distribution of Iranian medicine and medical supplies. Ortega Murillo expressed “that Iran and Nicaragua share ideals” and stressed that both countries work together in strategic areas such as health. Click here for more information.

CAF to allocate $1.25 billion to protect oceans in Latin America and the Caribbean. The Development Bank of Latin America (CAF) will invest $1.25 billion over the next five years to finance projects that contribute to preserving, energizing, and promoting marine and coastal ecosystems in Latin America and the Caribbean. The multilateral entity’s resources will be used to design and implement projects that promote the blue economy, with an emphasis on the restoration of marine and coastal environments, blue carbon, marine energy, and the development and implementation of new technologies. Click here for more information.

Nicaragua is the primary regional importer of communication radios. In 2021, purchases of communication radios reached $69 million in Central America, with Nicaragua being the highest importer at $15 million, and China the largest supplier whose $25 million in sales represented 37% of the total. In percentages, Central American countries increased their imports of communication radios with Nicaragua at 53%, El Salvador at 40%, Guatemala, 38%, Costa Rica, 35%, and Panama at 1%. Only Honduras represented an imperceptible negative percentage variation of 0.21%. Click here for more information.

ECONOMIC INDEX

Country Exchange rate (x USD) Basic passive rate in local currency Current monetary policy rate S&P sovereign debt indicator Moodys Sovereign Debt Indicator Fitch indicator
Costa Rica 693,69 3,86% 5,50% B B2 B
El Salvador 8,75 6,50% Not available CCC Caa3 CCC
Guatemala 7,75 1,75% 2,25% BB- Ba1 BB-
Honduras 24,41 6,37% 3% BB- B1 No rating
Nicaragua 35,87 0,88% 5,00% No rating B3 B-

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