“The US’s latest investments aim to address economic hardship in the region in three ways: By bringing more workers into the formal economy, by setting higher wage and labor standards, and by using corporate influence to fight corruption.
That won’t happen overnight. But there is reason to hope that US companies could meaningfully improve living conditions over time and give people a reason to stay.”
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“The region needs sustained investment before its residents will see any meaningful improvement in quality of life that might dissuade them from making the choice to migrate. In the past, US government aid has proved an unreliable source of that kind of investment. Former President Donald Trump decided to slash US aid to the region by a third, turning the clock back on the Obama administration’s efforts. Honduras saw homicides surge thereafter, and funding for social welfare programs ranging from job training for at-risk youths to grants for women entrepreneurs was cut.
The Biden administration hopes that because private companies are behind these latest investments, profit might motivate them to continue investing in the region, regardless of how US policy evolves, creating a more reliable stream of funding for Northern Triangle residents. The danger of this approach, of course, is that these companies could also suddenly pull their investments if they’re found to hurt the bottom line.”
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“At the moment, governments in the region have so far been unable to provide a significant social safety net because they haven’t had the money to do so. In part, that’s because countries in the Northern Triangle have among the lowest effective tax rates in the world. Workers with informal jobs don’t typically pay taxes and local corporations often try to evade them.
Guatemala’s 2019 tax revenue, for instance, was just 13.1 percent of its GDP — the lowest among Latin America and Caribbean countries, which brought in nearly 23 percent of their GDP on average. For comparison, taxation brings in an average of about a third of GDP across high-income countries that are members of the Organisation for Economic Co-operation and Development (OECD).
In Honduras, that has resulted in a sparse welfare system. There are no government-provided unemployment benefits. Though it has a social security program, only formal workers can pay into it and benefit from it. Public health care services are for the most part only available in large cities, leaving people in rural areas without access to physicians. That lack of support, coupled with pervasive violence and corruption, has left many migrants with no choice but to seek safety and opportunity elsewhere.”