Using the Private Sector to Spark Investment for Change in Latin America


Authors: Antonio Garrastazu, Rima Kawas and Valerie Dowling*

The Northern Triangle countries of El Salvador, Guatemala, and Honduras and their neighbor Mexico are some of the most dangerous countries in the world. In 2020, El Salvador and Honduras were listed among the top ten countries with the highest global crime rates. Aside from a focus on crime, much has been written regarding the root causes of the mass exodus of people from these four countries, but more than any other factor we can trace the roots of violence and flight to governmental failures, especially in three key areas– corruption, poor governance, and lack of human rights.

The private sector serves as vital partners in addressing these failures. The Northern Triangle is one of the top foreign policy priorities of the Biden administration—Vice President Kamala Harris’s first foreign trip was to Guatemala and Mexico; the United States Agency for International Development (USAID) Administrator, Samantha Power, recently visited the region, as have numerous U.S. officials, and the U.S. has named a Special Envoy, Ricardo Zúñiga, to the region. The administration’s FY 22 budget requests over $800 million for the Northern Triangle, with a push for $4 billion in assistance within four years. In addition, the recent call to action by the White House encouraging businesses to invest in economic development across the Northern Triangle and Mexico is more important than ever, especially in light of the economic fallout from COVID-19. For these investments in time and money to succeed, partnership with the private sector is critical.

With over a million deaths from COVID-19, Latin America  continues to be a hotspot. To help the region recover, the international development community should build on the momentum of private sector partnerships begun during the pandemic. This work goes beyond vaccine development and distribution. For example, during the shortage of hand sanitizers, breweries across the U.S. made hand sanitizers and donated it to first responders. Other companies are helping produce ventilators and PPE. These are examples of the ways in which government and civil society in Latin America need to leverage the private sector to help address key economic development challenges that countries are experiencing because of the COVID-19 pandemic and on the road to recovery.

Insecurity and lack of basic governance in certain communities in each of these countries has created a mass exodus of people seeking safe shelter and a better future for their families. Rising crime and corruption lead to instability, abandoned houses and farms, and a rise in food insecurity. The corruption that comes hand in hand with such instability stifles innovation and limits economic opportunities, creating push factors for economic-driven migration.  The economy and crime rates are interrelated. A small business owner, someone who owns a convenience store, for example, will see fewer customers if the crime rate in their neighborhood increases. A report by the United Nations Office on Drugs and Crime  highlighted this link during the 2008 economic global recession. And a working paper (research in progress) currently underway by the International Monetary Fund in Honduras shows the crime rate there is reducing GDP by 3 percent. The report states that when crime falls by “5 percent…it leads to about a one percent increase in output per capita.”

Private sector investment is a necessary tool for addressing the root causes of migration through a collaborative, whole of government approach. Whole of government refers to a coordinated agenda put in place by several ministries and public agencies to offer solutions to a problem. The pillars of this strategy—combating corruption, reinforcing democratic institutions, strengthening the rule of law, improving human rights and security, and providing opportunities for economic growth, are fundamental to the sustainability and viability of democratic governance and democracy in the region.

The international development community should leverage President Biden’s Northern Triangle plan by engaging more directly with both U.S. and international companies to invest in the region through public private partnerships. Microsoft, Mastercard and Nespresso, for example, have committed to making investments that range from expanding internet access, enhancing financial and banking services to targeted populations, and partnering with coffee growers in El Salvador and Honduras.

To further strengthen American investment in the region, the U.S. International Development Finance Corporation should complement private sector financing and continue to help small and medium sized enterprises strengthen private incentives in development. This whole of government approach is fundamental to long term sustainability in the region. Successful partnerships will require a stable and predictable political and security climate. Rule of law must prevail because a secure environment is fundamental for private sector investments.

To move these important goals forward, the International Republican Institute (IRI) is helping local governments and leaders build Local Economic Development Engines, or LEDEs. LEDEs bring the private sector, municipal leaders and citizens together to design local solutions to local challenges. This collaboration ensures citizens have buy-in and the support they need for sustainability.  IRI has worked with the private sector, academe and civil society organizations in Mexico that serve as anti-corruption watchdogs and who are pushing for anti-corruption legislation. A whole of society approach, with governance at its core, is the only viable solution to stem the root causes of migration.

Three vital steps will encourage the private sector to engage as a partner and power innovative investment in the region. First, it is important to create partnerships early, right from the first spark of an idea, so as to engage the private sector from inception. Second, the international development community should think of the private sector as a long-term partner, a partner that can provide expertise to solve problems ranging from corruption to inefficient service delivery. Finally, the international development community should listen to the private sector in the local communities to understand the governance challenges they are facing and to ensure that their solutions will help local businesses thrive and expand.

The root causes of migration can only be addressed with the help of the private sector working as a true partner and investor in regional development.

Antonio Garrastazu is Regional Director for Latin America and the Caribbean at the International Republican Institute where he focuses on citizen-centered governance, legislative strengthening, political inclusion, and election integrity, among others. Antonio has over 20 years of experience working in inter-American relations in the realms of business, government, and academics.

Rima Kawas is a Senior Advisor at the International Republican Institute where she focuses on providing technical advice on private sector engagement and governance. Rima leverages her extensive experience working in government, most notably as a Senior Policy Advisor to a former Governor and her work at a Fortune 50 company to provide technical advice to address key democratic challenges.

Valerie Dowling is Director of Women’s Democracy Network at the International Republican Institute where she focuses on women’s political and civic participation, leadership, and representation globally and also works on private sector engagement.  Valerie has worked in the political process from grassroots campaigns to the White House.

Antonio Garrastazu
Antonio Garrastazu
Antonio Garrastazu is Regional Director for Latin America and the Caribbean at the International Republican Institute where he focuses on citizen-centered governance, legislative strengthening, political inclusion, and election integrity, among others. Antonio has over 20 years of experience working in inter-American relations in the realms of business, government, and academics.


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