Central America is a land bridge that connects North America to South America. Today, this area of the world is under major reconstruction. Its recent history is filled with civil wars, military dictatorships, and native uprisings. Though the recent economy has turned toward the better, the history of the economy in Central America has not been a fortunate. Poverty, disease, and discontent were common among the people living in this region. Many of the problems faced by these nations date back to the Spanish Colonization of the area.
Before the Spanish arrived, this region contained a civilization with a rich written history, sophisticated agricultural systems, and amazing cities. Civilized society in Central America can be traced back thousands of years to around 2,000 B. C. It is believed that around this time the native people began to plant crops instead of hunting animals. Pottery, which was discovered in the Parita Bay region of Panama, is believed to made around 2,130 B. C. and it reflects some South American cultural influences. After 1,000B. C. organized, sedentary farming communities began to sprout, and communication and commerce developed among them.
After 500 B. C. an advanced civilization, the Mayas, emerged in the present-day lands of Guatemala and El Salvador. Kaminaljuy was on of the earlier Mayan cities, and was located in the highlands near present-day Guatemala City. Other Mayan cities arose southeastward, towards Nicaragua (a map of Mayan cities is located at the back of the paper). It is clear that the early Mayan people inhabited the higher terrain in Central America because of the suitable climate, but as the civilization grew, the lowland cities became centers for a higher civilization.
In the Mayan cities they developed an advanced system of writing, and with their hieroglyphs on stone monuments, they were able to record their history. Many achievements by the Mayan people exceeded those of the same era Europeans. Among the Mayan’s brilliant achievements were sculptures, ceramics, paintings, and weaving. They made discoveries in astronomy and mathematics that rivaled the ancient Egyptians, and they also developed complex agricultural and water management systems . A major flaw in the Mayan system included their lack of technology.
The Mayan people did not have any tools that would aid them in their daily work, like farming. All work was done by hand, which may have slowed the development of their civilization because they were not able to produce large amounts of food. Map of Major Mayan sites1. Chichn Itza2. Palenque3. Yaxchiln4. Bonampak5. Lagartero6. Iazapa7. Kaminaljuy8. Piedras Negras9. Tikal10. Uaxactun11. Copan12. Cuello13. Tulm 14. Coba;15. Dzibilchaltun 16. Uxmal Mayan civilization reached its peek between 600 and 900 A. D. reaching a population over 4 million people located mainly in the sites stated above.
It was during this period that most of their scientific discoveries took place. It was after 900 A. D. that the stresses of the social structure that the Mayans developed began to ware down. The Mayan agricultural practices caused the depletion of its fertile land. Many Mayan cities were established on soil that appeared to be fertile. However, there were actually large deposits of limestone only a few feet under the topsoil.
At many locations in the Maya area, observations can be made in Valle de Naco, where erosion and sedimentation of soils are associated with Maya decline and abandonment. In some cases, it appears that cities were just abandoned, which is probable if fertile land was discovered elsewhere. Wars with neighboring natives, droughts, and diseases are also reasons thought to cause the decline of the Mayas. The Aztec Empire, a trio of Native American tribes consisting of the Tenochtitlan, Texcoco, and the Tacuba , has been attributed to the decline of the Mayas.
The Aztecs were a war-like civilization, though highly civilized, who were mainly located in present-day Mexico. Some believe that the Aztecs waged war on the Mayas, who were predominately a peaceful culture, and that may have caused their decline. The Aztecs, however, along with the Maya and Inca of Peru, all met their end when the Spanish Empire came to Middle America. The Spanish Empire brought with it many diseases that the Native Americans had not been in contact with, so a large portion of the Native Americans died of diseases like the mumps, small pox and influenza .
Despite this drastic decline, many parts of the Mayan civilization survived the Spanish Colonization, often by retreating to the lowlands that were less desirable to the Spaniards. The Mayan civilization is still seen in many parts of modern Middle America today. Many of the Mayan people fled to undesirable lowlands of Belize and Guatemala when the Spaniards arrived, and many of the same ceramics, tools, and weapons were discovered that were made after 1638 in Belize. In many of these areas were the Mayan people fled, there is a definite Spanish influence predominately in religion.
It was not uncommon at the time to see an entire town of Native Americans to contain one or two Catholic churches with both Mayan and Spanish priests . Today there are between 5 and 6 million Mayan Indians living in Guatemala today, which is half of its total population . The Spanish colonizers came to America with weapons that the natives had never seen before. Having previously waged battles with spears, clubs, and arrows, the Spaniards’ guns, trained dogs, horses, and cannons intimidated the natives. The Spanish colonials also made attempts to ally themselves with some native tribes in attempts to increase their numbers.
This proved effective in their battles against the Aztecs, where only a few hundred Spanish warriors would fight, but they would also have a few thousand native allies. The Spanish invaders set up colonies all over Central America, though early on rivalries among the conquistadors made it difficult to have a unified Central America. In 1530 Guatemala, Nicaragua, Honduras, Chiapas, and Panama all functioned under separate orders . By 1543, however, Spain unified the all of Central America. Most of the natives that were left after this transition period that took place either died of disease brought by the Spaniards, were killed, or enslaved.
A commercial system was set up in Central America by the Spanish, which put the native slaves to work growing crops, which were specialized by region, and mining for precious metals. Magistrates appointed by Spanish royalty ran this system, and because the salary for such a position was so low, corruption was often very high . The Spanish government paid the new rulers over the land very little, because they had to fund the many wars they were fighting. In turn the magistrates acted more like entrepreneurs, in that the made profits off of ever product produced by the natives and sold to them as well.
In the 16th century, the main export for Central America to Spain was Cacao, while in the 17th century Indigo took its place. The new society that the natives lived in comprised of two small upper classes, the previously mentioned Spanish administrative authority and the Creole landholding elite. Under these middle classes lived the natives, many of whom lived on large haciendas, living off of subsistence farming. At the beginning of the 18th century, the Spanish empire was in a costly war, which would seriously alter the history of Central America.
Bourbon Philip V’s policy after 1750 was directly responsible for much of the change. It increased a centralized authority, and reasserted royal control that had diminished in the previous years. It made a strong emphasis on agricultural exports, especially indigo, cacao, and tobacco, and took power away from the clergy and Creole elite . This new policy also heightened the strong regionalism on the isthmus, as the provinces resisted the growing power of the Guatemalan establishment, which became a major center for European trade.
As the century closed, a growing preference for the appointment of Spaniards to rule in Central America contributed to the Creole resentment. In 1808, France invaded Spain. This caused increased difficulties in Central America due to unwelcome new and higher taxes and demands for “patriotic donations” to support Spain against the French. Some reforms were also made, like the Cdiz Constitution of 1812 that provided colonial representation in the Spanish parliament and elections for provincial offices .
This increased the importance of politics in Central America, and laid the foundations for Creole democracy. Increased Native American uprisings occurred in this time, but unlike the situation in South America, they were unsuccessful. After the defeat of Napoleon in 1814, Ferdinand VII annulled the 1812 constitution, which caused Creole to oppose Spanish rule in Central America. The reinstatement of the constitution by the Spanish in 1820 created political factions that are the basis of the Liberal and Conservative parties that dominated Central America for the following century.
A council in Guatemala City accepted an independence plan made by a Mexican Creole named Agustn Iturbide on September 15, 1821, but there were differences among the provinces that had to be dealt with. Civil war erupted in Granada and San Salvador, who refused to accept the decision, and after a long siege Iturbide’s plan was scrapped. On July 1, 1823 a Liberal dominated assembly from all of the provinces gathered in Guatemala and declared its independence from Spain under the name United Provinces of Central America.
In 1824 it adopted the Constitution of the Federal Republic of Central America, a document similar to the Spanish Constitution of 1812, providing for a federation of Guatemala, El Salvador, Honduras, Nicaragua, and Costa Rica. Chiapas decided to stay with Mexico, and Panama had become part of the Republic of Columbia in 1821. In 1824 the constitution provided a single-house legislature and reserved considerable autonomy to the states, yet it offered an adequate framework for a union. Different provincial ideologies began to show themselves at this time, and the first presidential election led to disaster.
A Liberal, Manual Jose Arce, won the election although it appeared that his opponent had more popular votes. This electoral process angered not only conservatives who were displeased with the electoral process, but also extreme liberals who feel that their candidate had sold out to conservatives to gain votes after electing a conservative to replace a liberal Guatemalan state governor. The Salvadoran state government rebelled, touching off a civil war from 1826 to 1829. The Liberals won the bloody struggle in 1829, under the command of Francisco Morazan .
Under his presidency he exiled Conservatives, including the archbishop and other clergy, and instituted economic, social, educational, and judicial reforms. Morazan presidency is also contained a lot of internal conflict. In 1833 Morazan was forced to quell Native American interests that resurfaced in a rebellion in El Salvador. In 1837 peasants revolted in Guatemala due to the Liberal policies of the governor and the panic due to a cholera epidemic. They not only expelled the governor, but also divided up the liberals so that the conservatives had a chance to take control.
An attempt, under liberal leadership, was successful in attempting to form a 6th state from parts of Western Guatemala, but it was quickly retaken. The federation was in disarray at this point, and by 1938 Nicaragua, Honduras, and Costa Rica all withdrew from the union . In 1847 Guatemala declared itself a sovereign republic, and Costa Rica soon followed in 1848. In 1855 in Nicaragua, William Walker made himself president with the aid of the alliance of Nicaraguan Liberals, only to find a united army from all five states ready to defeat.
By 1872 the Liberals had returned to power in every state except Nicaragua, and they continued to dominate politics through the middle of the 20th century. They placed strong importance on agricultural exports as the key to national modernization. A transportation and communication infrastructure was also developed by the Liberals, which aided them in bringing Central America into the North Atlantic Trade economy. In 1903 the United States began its construction on the Panama Canal, which would greatly impact the economy of this tiny nation in the years to come.
This time period from about 1870 up until the 1940’s was characterized by military dictatorships, who aided the farmers by protecting there interests. By the middle of the 20th century, the powerful political and economic elites associated with the export-led economies promoted by the Liberal parties faced strong representation from the middle- and working-class people. The Communist nation is believed to have had a significant influence on the working people of Central America. What happened from this point in time differs from country to country.
In Guatemala, armed conflict started in 1963 and lasted for 33 years. Its origins are traced back to the overthrow of democratically elected president Jacobo Arbenz in 1954. El Salvador suffered a civil war that began in 1979 and ended in 1992 with a peace agreement. Nicaragua experienced civil war from 1974 to 1979, which ended in the overthrow of self-imposed dictator Anastasio Somoza Debayle. Costa Rica and Honduras were successful in establishing a democratic state, though due to the difficulties in the other countries foreign trade was greatly impacted in these countries .
In 1987 a Central American Peace Plan was established that was instigated by President Oscar Arias Sanchez of Costa Rica. It would later include unification plans, similar to that of the European Union. In the 1980’s the countries in Central America experienced an economic slump, where they saw large external imbalances, high inflation, output stagnation, and a deterioration of social conditions. Contributing factors were the armed outbursts in El Salvador, Guatemala, and Nicaragua (which had adverse effects on the economies of Costa Rica and Honduras). Structural policies and Latin American debt crisis worsened this regions foreign trade.
In the early 1990’s, however, most of the countries implemented macroeconomic and structural reforms, which were often supported by financial and technical assistance from IMF, the World Bank, and the Inter-American Development Bank. In the mid 90’s privatization, financial sector reform, and trade liberalization become areas of focus. As a result economic performance improved considerably: growth increased: inflation declined: external position strengthened: poverty decreased: the average GDP growth rose to almost 4 percent: and per capita output increased to an average of 1. 2 percent.
Costa Rica, El Salvador, and Guatemala grew at twice the rate of Honduras and Nicaragua because they had more advanced economies. Nicaragua began to recover in 1994, after suffering a period of hyperinflation by implementing reforms that transformed its regulated economy into a market-based economy. Excluding Nicaragua, the countries of Central America have reduced the rate of inflation from 27 percent to 6 percent. In spite of these economic turnarounds 20 percent of the advanced economic countries and as much as 50 percent of the less developed countries still live below the poverty line.
The countries of Central America have clearly begun to turn their economies around. El Salvador has pegged its currency to the U. S. dollar since 1993, while all the other countries have exchange systems that allow for some degree of exchange flexibility. The education and health sectors in all of these countries have seen a dramatic turnaround partly due to the increased availability in external funds for social problems provided by postwar reconstruction in El Salvador, Guatemala, and Nicaragua. While Costa Rica continued to place these two items high on their social services lists .
A major set back hit most of Central America in the fall of 1998. For four days Hurricane Mitch devastated Nicaragua, El Salvador, Honduras, and Guatemala with four feet of rain . It created waves 40 to 50 feet high off of the coast of Honduras. This caused massive mudslides, swept away bridges, roads, and villages. This storm left over 10,000 people dead and millions left homeless. This disaster is going to hit these countries hard economically too. In Nicaragua, an estimated 67 percent of the Gross Domestic Product was lost do to crop damage from the storm .
After this hurricane most of the nations of Central America were at a standstill. Hundreds of millions of dollars, however, have begun to poor out of other nations pockets to aid the hurt countries. Millions more are also coming from private organizations, mostly religiously affiliated. This could prove to be a good turnaround for the people of these countries, because there will be jobs needed to be filled in construction, and many people there to fill them. These pictures show the size of Hurricane Mitch. This picture has been altered to show the size of the storm-compared toe the size of each country.
Looking ahead, these nation face difficult challenges in recovering from the recent disaster hurricane Mitch, strengthening their social policies, improving external competitiveness, and reducing poverty levels. More needs to be done in Nicaragua and Honduras to ease them off of the foreign aid they are currently receiving. In El Salvador and Guatemala’s tax efforts remain insufficient to meet countries’ social investments. Financial freedoms among businesses have advanced rapidly over the past decade, whereas the laws to keep the businesses in check have not.
It is important for the countries of Central America to keep track of all the businesses and their activities. Large amounts of foreign debt are also a serious problem for many of these countries. Taxes in these nations should be simplified and exemptions should be decreased in order to be able to pay for these debts. The countries must also begin to attract investments from corporations in other nations. The people in these countries do not need a high salary to survive, and companies like Intel, who has set up a factory in Central America, are taking advantage of this.
If countries like Nicaragua and Honduras can attract foreign investments of these kinds it will ease the tension from the damaged crops sector. Central America has a promising future. Debt relief is in sight under the Initiative for Highly Indebted Poor Countries (HIPC Initiative), which will help them achieve a sustainable external position and significantly increase their capacity to meet their social needs. With the foreign debt aid and the money that is being invested in the countries for disaster relief, the countries should be able to lower their poverty rates, and increase employment levels.