Central America: Oasis of Opportunities  

On June 1, following LATIN COUNSEL´s invitation, I had the opportunity to participate, along with other colleagues, in a breakfast in Madrid on business opportunities in the Central American region.

Since it was held in Madrid, the presentations were oriented towards the European market in general and the Spanish market in particular.  However, many of the opportunities and conclusions of the event can be extrapolated, in general, to other jurisdictions. 

Central America is a small and vibrant region that offers a plethora of business and investment opportunities.

In this article, we will delve into some of the key sectors and business prospects that make Central America an attractive region for growth and expansion.

By way of context, Central America’s population is just over 46 million, slightly less than the population of Spain.  Its GDP is US$263 billion, slightly less than that of Colombia and similar to that of Peru.

The opportunities are particularly good because, as we shall see, the region is not starting from scratch.  Much has already been built and what is needed is more knowledge, technology, connections, alliances, investment and access to capital. 

For a company that intends to start an internationalization process, Central America can be a very good pilot project, since the risk is small.

It is also a region of the world completely open to investment and trade, with a special cultural, gastronomic, social and religious affinity with Spain.  It is also very open to the world, with free trade and investment agreements with more than 90% of the world’s GDP. 

Some of the clearest opportunities are the following:

Tourism and Hospitality:

Central America has breathtaking landscapes, pristine beaches, ancient ruins and diverse ecosystems, making it a magnet for tourists. The tourism and hospitality sector presents significant commercial potential, ranging from ecotourism initiatives, luxury resorts, adventure tourism and cultural experiences. Investing in hotels, restaurants, tour operators and travel agencies can generate lucrative returns, especially in popular destinations such as Costa Rica.

Before the pandemic, the region was visited by just under 10 million tourists, certainly a far cry from the 84 million that visit Spain or the nearly 80 million in the U.S. Experience and knowledge are key to raising not only the number of tourists, but the spending profile per person.
           
Renewable energy:

Central America has abundant renewable energy resources, including geothermal, solar, wind and hydroelectric. There are abundant rivers, wind, sun and water.

The region’s commitment to sustainable development and the growing demand for clean energy creates a favorable environment for investment in renewable energy projects. The development of solar farms, wind power plants, and hydroelectric projects can contribute to both environmental preservation and financial returns, as well as meet ESG objectives.

Agribusiness and food:

With fertile soils and favorable climate, Central America is an agricultural paradise. It could very well be the supermarket of the world, much like Almeria in southern Spain.

The region offers excellent agribusiness opportunities, including the cultivation and export of the finest pineapple, coffee, bananas, sugar cane, cocoa and exotic fruits. In addition, organic agriculture, sustainable practices, and value-added food processing are emerging trends that present attractive investment prospects for those interested in the agricultural sector.  Access to agritech best practices is needed. 

International trade and logistics:

Central America’s strategic location, coupled with its preferential trade agreements, offers significant advantages for manufacturing and export-oriented companies.

The region provides access within hours to major markets in North and South America, making it an ideal hub for production, assembly, and distribution activities, especially considering the trend toward near shoring and friend shoring.  Textiles, electronics, light manufacturing, life sciences, automotive parts and processed foods are among Central America’s thriving manufacturing sectors.  In addition, there are very important tax incentives, such as free trade zones and inward processing regimes.

Technology and Innovation:

Central America is undergoing a digital transformation, embracing technology and innovation in several sectors. Investing in technology startups, software development, e-commerce platforms, fintech and telecommunications infrastructure can take advantage of the region’s growing digital economy. With growing internet penetration and tech-savvy population, Central America presents promising prospects for those in the tech sector.

Private partnerships:

Central America is a land of entrepreneurs and successful companies, some of them, even outside the region.

However, there is a large majority that still need support, financial support, international alliances, knowledge and contacts in order to continue to be successful beyond the Central American region. There is a great opportunity in the consolidation of certain industries and financing or investment in certain companies.  This can be done through private equity or venture capital funds.

Mobility and transportation:

During the 2016-2020 period, the average speed of road traffic in Central America was 19.4 km/hour. By 2020, the calculated average speed was 17.4 km/hour.  
On average, a trip between the capital city and places located 80 km away is made at 55 km/h, on average, when in Chile one travels at 92 km/h; in Mexico, at 90 km/h and in Panama at 72 km/h.

Evidently, there is a great opportunity for investment in the construction of roads, trains and subways. The topographical difficulty of the region makes this particularly challenging, but also particularly important.

In conclusion, Central America represents a realm of untapped commercial potential, offering diverse opportunities in multiple sectors. Entrepreneurs and investors can find avenues for growth and success.

Market research, understanding local regulations and establishing strong partnerships are crucial to navigating the Central American business landscape. With the right strategies and a proactive approach, Central America can become a rewarding destination for those seeking new business.

David Gutiérrez, BLP





From left to right: Raquel Flórez (Freshfields), David Gutiérrez (BLP Costa Rica/ Madrid), Adriana Castro (BLP Costa Rica), Manfred Peters (Latin Counsel), Mónica Fuertes Britez (Latin Counsel), Pamela López (BLP Guatemala), Zygmunt Brett (BLP El Salvador), Jorge Arenales (BLP Guatemala/ Europe), Rodolfo Salazar (BLP Guatemala)