Infrastructural vs Political Integration: The Central American Case

Exam Candidate Number: Y1506728

Department of Politics

BA Politics with International Relations

Supervisor: Alejandro Peña

Word Count: 9880

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Abstract

Throughout the 1960s and 70s the world saw a plethora of regional integration

projects emerge in locations across the globe. The Central American isthmus was no

exception. However, regionalism in Central America undoubtedly failed during the

crises of the 1980s. The re-emergence of regionalism in the early 1990s therefore

raised significant questions as to whether or not this was a new form of regionalism

and if so what characteristics or features distinguished it from the old. Furthermore,

can these new features lead to more successful economic and political integration in

the region, securing its future development? Through applying a theoretical

framework of regionalism and neofunctionalism this paper will answer these

questions. Firstly, the history and context of regionalism in Central America will be

understood in order to extrapolate the shortfalls of the ‘old’ regionalism and the

potential for development of the ‘new’. Furthermore, through an empirical study of

the region’s hard infrastructural projects this paper will argue that infrastructural

integration has ensured a future for political cooperation through functional spillovers.

This has initiated favourable regional institutions, structures, and a regulatory

framework that promotes collaboration across the region.

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Table of Contents

Introduction 4

Methodology8

Literature Review & Theoretical Debate10Introduction 10(New) Regionalism 11Integration Theory & Neofunctionalism 13Infrastructural Development 18

Regionalism in Central America 21First Wave of Regional Integration 21New Wave Regionalism in Central America

24Conclusion 27

Infrastructure as a Mechanism for Integration29

Introduction 29Building Political Consensus 30Puebla-Panama Plan 33Neofunctionalism as an Explanation 35

Conclusion 39

Bibliography 43

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1.Introduction

Central America, as a region has been subject to over 5 decades of regional

integration. This has spanned the trade booms of both the 60s and 70s as well as the

‘Lost Decade’ of the 1980s. The isthmus, with its multiple, isolated economies, has a

complicated and challenging economic and political geography. It has become

apparent following the political turmoil of the 1980s that regional integration is the

only viable solution to inhibiting further regional regression and further its

participation in the global economy. The turning point of the early 1990s saw a ‘new’

wave of enthusiasm for increased regional integration and the recognition of a need to

develop common policy and collaborate both politically and economically. Hence, the

region’s progressive vision for the future and privileged location renders the countries

of Central America a large potential to diversify and grow their economies.

However, since the 1990s, the region has undergone an extraordinary transformation,

from its economies being characterized by rural populations and agriculture to a

diversifying market where the majority of people live in cities and urban areas.

Politically, Central America has moved from civil wars and autocratic, dictatorial

regimes to societies with peaceful transitions between democratically elected

governments. All this has led to a rejection of the formerly volatile, resource

dependent economies that previously characterized the region into stable global

exporters. As a result, during the 1990s, the countries of Central America made strong

headway towards integrating their economies with each other and the rest of the

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world. As Rodriguez and McGaughey (2005: 41) set out ‘Central American economic

integration has been a source of political stability in a region that in recent decades

was plagued by civil wars’. The Central American Common Market was created in

1990 with the long-term goal of establishing a customs Union. This revival of interest

in regionalism can be seen in two different perspectives. Firstly, the fact that

regionalism and regionalist schemes have seen to emerge in all corners of the globe,

hence scholars posit that international forces are a causal factor. Secondly, in

opposition to the global outlook, domestic forces and inter-regional dynamics remain

key to understanding the re-emergence of regionalism.

The rejection of regionalism in the 1980s and its re-emergence (in a new form) in the

90s makes the Central American case particularly interesting. Integration in the region

has clearly been problematic. Hence, this paper’s research will focus on the question

of why has there been an increase in political integration in Central America post-

1990. Moreover, infrastructural integration as a sub-case of economic integration will

be explored to illustrate this development in the region. This will include

distinguishing the Central American model from the European Union and

investigating the deferring extent to which external and internal factors played a role.

The unique nature of the regions historical and political context will be understood in

order to explore how the regions development and supra-national political landscape

has been shaped. This paper’s hypothesis claims it is Central America’s regional

infrastructural development and integration post-1990 that has led to increased

political diplomacy and unification through functional ‘spillovers’, extending the

work of Haas and Neofunctionalist theory. The unique nature of the regions history

will explain why the conditions for integration were not robust enough during the

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‘first wave’ (Joseph Nye, 1988) of regional integration in the 60s but will explain

why, post 1990, liberalisation led to a willingness and openness that consequently

allowed infrastructural projects to go ahead and further the whole region’s

development.

The chapter outline is as follows. Chapter two will outline the methodology of this

paper and how this approach will help to explain the background and context to the

research and study. In Chapter three the theoretical debates surrounding Central

America’s regional development will be evaluated, especially those that go some way

in explaining the causes for the surge in regional integration since 1990. In order to

understand the Central American experience of regional integration, this paper must

first assess what the preconditions for regional integration are through assessing the

global experience of ‘new’ regionalism. As a result we will later be able to draw

conclusions over what specific characteristics, exclusive factors and preconditions

were present and necessary for the development in Central American Integration post-

1990. This chapter will consequently be heavily concerned with examining Neo-

functionalist theory alongside a regions infrastructural, economic and political

development – concluding that regional infrastructural development goes a long way

in starting a political cascade of improved correspondence between different states in

a given region.

Chapter 4 will then analyse the first wave of regionalism in Central America. This

will include both its successes and failures. The chapter will subsequently review the

‘new’ regionalism post-1990. It firstly, will seek to understand why the new attempts

(since 1990) to integrate the region both economically and politically are likely to

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lead to a more positive outcome than previous attempts. The chapter will then aim to

extrapolate what the significant internal conditions and external relations were that led

to greater economic and infrastructural integration and why political integration

subsequently followed. Chapter 5 extends this work through striving to answer the

question put forward by Haas (1964: 705), ‘Does the economic integration of a group

of nations automatically trigger political unity?’ Furthermore, investigating the extent

of infrastructural and economic integration when compared to political integration in

the region. Neofunctionalism will be tested as a theory that could explain the

successes behind new regionalism in the Isthmus. The paper will come to the

conclusion that multilateral cooperation as a result of regional infrastructural

development has been a key factor in the integration process and in arranging external

economic cooperation. Finally, the potential for further political integration within

the region will be understood – drawing attention to the institutional weakness of

supranational bodies and the nature of governments to concentrate primarily on their

domestic political agendas.

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2.Methodology

This paper’s methodology finds its roots in ‘research design’ in planning the structure

and strategy of the investigation (Burnham, 2008: 39). In identifying the puzzle of

Central American Regionalism it is of paramount importance to highlight the key

focus of this study and consequently how this paper plans to answer the key questions

surrounding the topic. This includes distinctly setting out the parameters of the study,

which becomes easier using a case study, in this paper, a single region. This paper

will be primarily concerned with secondary source literature. As previously

mentioned this will be both theoretical in nature but also based on empirical evidence.

However, when investigating the extent of infrastructural integration I plan to use

papers from the Inter-American Development Bank and reviews of various summits

surrounding projects such as the Puebla-Panama Plan (PPP). The majority of

theoretical study will be applied when exploring the history and, successes and

failures of regional integration in Central America. The use of more primary source

research could perhaps have provided slightly more discernment however; due to the

recent and contemporary nature of the study, secondary texts are fairly dependable

and give a detailed account and breakdown of Central America over the time frame.

When assessing the theoretical framework of the paper, especially in understanding

the secondary literature on new regionalism and neofunctionalism, it is essential to

apply qualitative analysis. The qualitative method is used in this case as it, ‘enables

the focus to be shifted from the individual to the group(s) and to learn (following the

theories of Goffman and others) how meanings are negotiated between members and

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the group dynamics involved’ (Pierce, 2008: 45). This ensures the ability of the paper

to not only focus on the Central American region as a whole but also allow for the

independent yet multifarious nature of the different facets that make up functionalist

theory. This approach will however, develop into more empirical research and study

as we delve deeper into the infrastructural development of the region. This method

will be employed in order to test the theory behind economic and infrastructural

development and integration in the region in order to explain the principle factors for

increased regionalism in Central America. The qualitative method offers the best

means of identifying and comparing the distribution between places and time of

phenomena and changing attitudes (Pierce, 2008: 43).

Halperin & Heath (2012: 205) claim that, ‘good case studies are nearly always

situated in a comparative context.’ This paper will apply the theories of regionalism

integration and neofunctionalism to the Central American case to see if they ‘work’.

The focus, therefore, on Central America gives us a quantifiable geopolitical region

for which this paper can test theories that have been qualitatively assessed. This paper

cannot always show definitively how certain variables are internally related even

though it is proved that they are associated ‘in the manner of a syndrome’ (Haas &

Schmitter, 1964: 709). What can be said, is that analysis can be gathered from

observing the infrastructural projects and economic union that led-or was supposed to

lead- to political union. The inherent nature of the region as a close set of similar

sized states makes the isthmus a perfect case study for applying neofunctionalist

theory, which has been said to have been a key explanation for the success of regional

projects elsewhere in the world. Hence, the region, as a case study to test these

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theories, can significantly contribute to the literature surrounding neofunctionalism

alongside development and regionalism.

3.Review of the Literature and Theoretical Debate

Introduction

In this section, the debate surrounding Central American integration will be

understood. Contemporary academic discussion and debate surrounding regionalism

has tended to concentrate on one regionalist arrangement (Fawcett and Hurrell, 1995;

Hettne et al, 1999) such as the EU, NAFTA, or ASEAN. There have however, been

many different perspectives regarding the rise of ‘new regionalism’ (Söderbaum &

Shaw, 2003). There is broad scope at the institutional level with many scholars and

academics consciously avoiding these regional groupings due to their bureaucratic

and traditional nature. It has therefore, been widely accepted that with the rise in

regionalism during the 1990s, regionalist projects must be seen within a global

perspective (Fawcett and Hurrell, 1995: 3). This view has risen as a result of the many

regionalist projects that have appeared across the planet, leading academics to

comprehend those international forces and factors are likely to prove a salient factor

in a region’s development.

The primary point of focus in reviewing the literature, therefore, can be found in two

main perspectives on the rise of regionalism through a historical perspective. Firstly,

determining the boundaries between the ‘domestic’ and ‘international’, which have

become increasingly blurred with the transnational flow of ideas and social

mobilization (Fawcett and Hurrell, 1995: 3). Secondly, the ‘dividing line between

economic and political regionalism’ (Fawcett and Hurrell, 1995: 4, Bulmer-Thomas,

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1987) has become ever harder to draw. It is often easier to see the economic, outward

form of regionalism in the case of economic deals and agreements such as the EC or

NAFTA. However, it is the underlying political factors that are what holds these

regional pacts together.

Consequently, the literature surrounding the history of Central American regionalism

will be explored with particular reference to the pre-conditions necessary for

successful integration. Following this, Neofunctionalism and the work of Ernst B.

Haas will be evaluated. Finally, the importance of sources regarding the regions

infrastructural development will show how it has given the region, as a whole, a

future for growth and development.

(New) Regionalism

Most authors on regionalism have not made claims that there is some unstoppable

momentum towards regionalism in international politics. However according to

Fawcett and Hurrell (1995: 5),

‘all are agreed that regionalism is a political phenomenon that needs to be subjected

to comprehensive and critical scrutiny and there have been concrete developments

that need to be explained.’

As we have previously mentioned, regionalism is based on two main premises. The

first one being that regionalism is a response to globalism and a reaction to varying

global forces and practices. The second premise is founded upon the recognition ‘that

regionalism emerges from the internal dynamics of the region, and the motivations

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and strategies of regional actors’ (Hettne et al, 2005: 2). The literature makes no

distinction of either of these premises having a larger impact than the other with no

dominant paradigm for which all regions subscribe (Hettne et al, 2005; Fawcett &

Hurrell, 1995). The majority of academic work on regionalism has therefore tended to

focus purely on one individual region at a time. This has been most evident in the

literature surrounding Europe, Africa and Asia where regionalisation has perhaps, in

the past, been most perceptible or transparent. There has been a wealth of work on

European regionalism and the EU is widely regarded as the benchmark for regional

integration. In many ways, this has the potential to limit this investigation. The

European case is obviously significantly different to the Central American one, due to

mainly to its early successes and relatively stable political environment. However, the

EU case offers a key explanation for the benefits of, and the international rise in

regional projects. The plethora of academic literature on these regions also highlights

one of the most important features of ‘new regionalism’, which is the worldwide

reach, extension, and linkages to multiple regions of the world (Mittelman, 2000:

113). Hence, the literature is very much relevant to the Central American case with

new regionalism ‘both global and pluralistic, compared to the old regionalism, which

was Eurocentric and narrow’ (Söderbaum & Shaw, 2003). Hence, there should be no

issues in applying New Regionalist Theory (NRT) to Central America especially with

many scholars positing that it is increasingly problematic to view Europe as a model

or benchmark for which other regions to strive for (Fawcett and Hurrell, 1995; Hettne

& Söderbaum, 2000).

The perennial issue of regionalism is the disparity in practice across the world and the

mixed success with which different countries have experienced it. This has begged the

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question of why some countries fail to engage in successful cooperation and why

some cases of regionalism make little progress beyond the initial stage of signing

treaties? (Hettne et al, 2005: 2-3). It is these questions that this paper will initially try

to answer with respect to Central America’s experience of regionalism over the last

half century. According to Hettne (2000) there have been two ‘waves’ of regionalism.

The first emerged in Europe in the late 1940s after WW2. However, it eventually died

out in the late 1960s, early 70s. The ‘new’ wave began to emerge in the mid-to-late

1980s with the white paper and Single European Act (Hettne, 2000; Söderbaum &

Shaw, 2003; Mansfield & Milner, 1999). As a result of the distinction between these

two different types of regionalism it allows commentators to distinguish between

different regional projects. The ‘new’ regionalism can therefore be viewed more in

the ‘empirical rather than temporal sense’ (Söderbaum & Shaw 2003: 4). This

literature will be especially practical, as the paper comprehends why there was a

turning point in the early 1990s and a subsequent re-emergence of regionalism in

Central America. The literature also enables the cross examination of old and new

patterns of regionalisation, again essential for anticipating the prospect of growth in

the region.

Integration Theory & Neofunctionalism

Regional integration is defined by Haas (2004:16), in his seminal work The Uniting of

Europe, as:

The process whereby political actors in several distinct national settings are

persuaded to shift their loyalties, expectations and political activites toward a new

centre, whose institutions possess or demand jurisdiction over the pre-existing

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national states. The end result of a process of political integration is a new political

community, superimposed over the pre-existing ones.’

The study of regional integration as seen above would appear to have significant

affinity and accord with the theory of functionalism. However, as we see from the

literature, this is not always the case. ‘Those who concern themselves with the

building of empirical theories of international political integration tend to see the

functionalists as belonging to a distant pre-scientific age’ (Groom & Taylor, 1975: 9).

Integration theorists have tended to busy themselves with understanding empirical

measures and quantitative analysis of development models. However, the

functionalist critique of integration theory is founded upon the idea that integration

theorists are preoccupied with bureaucratised super-states, leading them away from

the central issues of world order (Groom & Taylor, 1975; Tooze, 1977).

Neofunctionalism arose as a direct product of this academic debate and through the

work of Haas can be seen to be a ‘comparative exercise in regional integration

theory,’ (Rosamond, 2005: 234) bridging the gap between regional integration theory

and functionalism. As Rosamond (2005: 243) writes, ‘The explicit purpose of the

neofunctionalists was to utilize the pioneering European experience of integration to

generate hypotheses for testing in other contexts’. Effectively, neofunctionalism

offers up a theoretical framework, which can be applied to various other regional

integration projects around the world (Haas & Schmitter, 1964, Groom & Taylor,

1975). This makes the theory, immediately stand out from other theories of regional

integration, which tend to focus almost solely of the regional experience of the EU.

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Neofunctionalism as a theory of regional integration is well contested due to its

ambition and the large amount of criticism it has attracted (Nieman and Schmitter,

2009: 45). However, in the case of Central America, the theory (although originally

meant to explain economic developments in Europe) is perfect for explaining

integration in the region, as this chapter will explain. Other theories such as Liberal

Intergovernmentalism are difficult to apply to this case, as it is a ‘Grand Theory’ that

aims to explain the evolution of a region’s integrationist development. The theory also

neglects the idea of spillover and does not seem to adequately address where and why

these supranational institutions are created, drawing on a wide range of political,

economic and social explanations. After analysis of the theory’s conditions, it seems

more Eurocentric than other integration theories with EU policy creation and

development as its main concern. Neofunctionalism, however, by its very nature is an

evolving theory and can offer an explanation for a wide range of unique regional

experiences of integration.

The primary early commentators on Neofunctionalism were Haas and Lindberg

through their assessment and theorizing of European integration in the post-WW2

period. Their early writing became more refined through the works of not only Haas

and Lindberg themselves but also academics such as Peter Schmitter. Before

analysing the debates surrounding neofunctionalism, it must be defined. Schmitter

(2004: 46) defines Neofunctionalism as,

‘A theory of regional integration that places major emphasis on the role of non-state

actors – especially, the ‘secretariat’ of the regional organization involved and those

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interest associations and social movements that form at the level of the region – in

providing the dynamic for further integration.’

Hence, although member states can be considered important in the integration

process, primarily the signing of initial agreements and pacts, they do not exclusively

control the direction and subsequent change (Schmitter, 2004: 46). Neofunctionalism

emerged as an explanation to European Coal and Steel community embarking on a

plan to place the whole sector and multiple different coal and steel producing

countries under a common supranational authority (Groom & Taylor, 1975; Haas,

2004). Lindberg and Haas, the ‘fathers’ of neofunctionalism effectively combined

functional mechanisms with federalist goals. Lindberg and Haas focused Mitrany’s

(1975) functionalism on single geographical regions, stressing the importance of

supranational institutions and organisations.

Following on from defining neofunctionalism, one of its key features comes from the

work of Jean Monnet (Wiener & Diez, 2009; Haas, 2005; Lindberg, 1963). This was

the idea of functional ‘spillover’. Monnet, who is considered one of the founders of

European Integration and the EU, along with Robert Schuman (French Foreign

Minister) posited that the best course of action to promote peace and regional

economic growth was the integration of a key industrial sector. Their work

culminated in ‘The Schuman Declaration’ in 1950, which advocated the integration of

Europe’s Coal and Steel sector. Both men believed that through economic integration,

the knock on effects would lead to political integration (Brinkley & Hackett, 1991).

This process is referred to as ‘spillover’. Spillover is of paramount importance to this

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paper’s research as it is the mechanism by which, infrastructural integration is likely

to lead to or at least encourage political integration.

Spillover can be defined as an explanation of the effect of integrating one sector and

the domino effect that leads to technical pressures forcing states to integrate other

sectors (Niemann & Schmitter, 2009: 49). Haas (2004: 297) claimed that the

integration of one sector ‘begets its own impetus toward extension of the entire

economy’. Effectively, Haas was claiming that integrating one sector without

integrating further sectors of the economy would lend the initial integration

redundant. Furthermore, Haas (2004) argued, governments and non-governmental

elites would quickly realise this and move towards a regional centre where regulatory

frameworks and regional issues could be discussed and further integration promoted.

Again, Haas’s work on spillover is largely Eurocentric. However, neofunctional

spillover can provide a key explanation of how integration of certain sectors of the

economy in Central America have spilled-over to others and brought about significant

regional political collaboration.

Neofunctionalism, as a whole, has probably been the most critiqued integration theory

since its popularity of the 60s (Wiener & Diez, 2009; Haas, 2004; Rosamond, 2005).

This came from many intergovernmentalists, who stressed the importance of treaties

and intergovernmental cooperation, but it also came from neofunctionalists

themselves. Haas even pronounced the theory obsolete (Groom & Taylor, 1975;

Wiener & Diez, 2009). Many of these criticisms that arose during the 1980s were

based around neofunctionalist assumption of grand theory. It is argued that

neofunctionalism cannot provide a universal, general theory of regional integration in

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all cases. However, these criticisms hold little weight against this paper, as it is an

investigation as to whether neofunctionalism can explain increased political

cooperation in the case of Central America.

Infrastructural Development

It must be said at this point ‘that the emphasis on theory by no means implies a

neglect of the empirical worlds of regionalism’ (Söderbaum & Shaw, 2003: 2).

Halperin and Heath (2012: 206) would agree, stating that although it is a common

assumption that case studies represent a type of qualitative research, often

quantitative/empirical research is what is required to adequately test and prove that

theory in its application. Hence, a wealth of sources and papers from the World Bank,

the Inter-American Development Bank and various other international bodies and

government agencies will be assessed in understanding the extent to which

infrastructural developments acted as a mechanism to drive regionalism and therefore,

political integration. These sources are primarily investigations concerned with

projects such as the Puebla Panama Plan (a key Central American regional integration

plan) and the subsequent initiatives, objectives and respective infrastructural projects

that arose as a result. In doing so, this paper will draw heavily on the work of Foster

and Briceño-Garmendia (2010) who applied much of the above theory to the

development of infrastructure in Africa. Despite this work being set in a totally

different geo-political and economic arena, the framework still proves useful in

analysing the role of infrastructural integration as a catalyst for regionalism. The

advantage of analysing sources on both the meetings surrounding the Puebla Panama

Plan and the extent to which infrastructural integration was achieved as a result,

enables this paper to draw conclusions on the extent of political cooperation as a

direct result of infrastructural initiatives.

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‘Integrating physical infrastructure is both a precursor to and an enabler for deeper

economic integration, thereby allowing countries to gain scale economies and

harness regional public goods’ (Foster & Briceño-Garmendia, 2010: 143).

Immediately, ‘physical infrastructure’ must be defined before moving forward.

Physical or ‘hard’ infrastructure both refer to the physical, usually large, engineered

projects and networks that are absolutely necessary for the functioning of a modern

industrial nation (odi.org, 2015: iv). The key merits and advantages of regional

integration are clearly evident through these hard infrastructural networks and

projects. More importantly however, to this paper, is the fact that investment and the

promotion of regional infrastructure through cooperative political mechanisms is key

to regional development through functional spillover. The mobilization of private and

state investment in hard infrastructure is likely to ‘facilitate a regulatory environment,

in transport, ports, energy, and communications’ (Rodriguez & McGaughey, 2004:

45). There is a wealth of economic and political benefits to investing in regional

infrastructural integration, namely; Information and Technology Communications

(ICT) and Energy ensure a dramatic decrease in the cost of production; pooling and

sharing of energy resources could reduce electricity costs by billions a year; transport

and water collaboration is essential for cross border trade and management and

development of cross-border public goods (Foster & Briceño-Garmendia, 2010: 143).

The literature surrounding the benefits of regional infrastructural integration generally

focuses around the benefits to intra-regional trade and political cooperation. ‘Regional

infrastructure and regional integration can raise growth and productivity through

increased trade and investment, and hence can increase competition as well as

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channels for productivity spillovers’ (odi.org, 2015). Therefore, infrastructure as a

sector or mechanism of integration is paramount in understanding neofunctionalism

and spillover in a region, and the subsequent degree of political cooperation that arises

as a result of continued investment in regional integration.

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4.Regionalism in a Central American Context

‘First wave’ of Regional Integration

Central American countries all share a similar colonial past, and with the close

proximity of each nation’s capital, the development of the region has been defined by

the wavering interrelationships between Costa Rica, El Salvador, Guatemala,

Nicaragua, and Honduras all of whom were former provinces belonging to the same

Spanish Captaincy General (Rodriguez & McGaughey, 2005: 40). These shared

relationships include: population movements; shared natural resources, vulnerability

to natural disasters and economic integration. The latter led to the formation of the

Central American Common Market (CACM) in 1960, which ensured not only trade

integration but furthered other forms of regional cooperation including investment

flows and interregional debt balances. The countries of Central America have also

experienced a more recent trend of military conflicts that emerged across the region

during the mid-1980s. This period of severe border conflicts and ideological divisions

caused huge turmoil in the region but is said to have eventually given rise to a

collective effort to ensure future peace and democracy across the isthmus (Jaramillo

& Lederman, 2007). It is this collection of shared traits and interrelationships that

have allowed academics to speak of a true region and highlight the need for collective

policy making to address the positive and negative cross-border impacts (Rodriguez

& McGaughey, 2005: 40).

During the 1960s there was a huge surge of industrialization in Central America with

the primary aim of providing manufactured goods to the newly created regional

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market. Deeper economic integration was the logical next stage, especially after the

UN’s Economic Commission for Latin America (ECLA) had suggested it in the

1950s. As Grugel (1995: 177) writes, ‘[economic integration] was seen as the way to

overcome the limitations in size of the national markets which had proved one of the

biggest obstacles to industrial development in the past.’ This was the catalyst for

CACM that was later established in 1960 by El Salvador, Nicaragua, Honduras,

Guatemala and Costa Rica1. The United States of America was a fervent, early

supporter of CACM. This was in part a result of security concerns in the neighbouring

Caribbean. Yet more importantly, Central America was perceived to be an untapped

source for many American manufacturing companies. Consequently, the US played

an increasing role in Central American integration, encouraging a far more liberal

approach to trade and investment than ECLA’s original, dated model of integration.

The growing external trade saw major economic growth, however this growth tended

to cover up and obscure more serious political and economic flaws (Rodriguez &

McGaughey, 2005: 41; Grugel, 1995: 178). Shortly after the initial growth and

industrialization, it was realized that integration could not protect any of the members

of CACM from the decline in prices of traditional exports in the 70s. During the mid-

1980s and one of the most serious economic recessions of the 20th century it appeared

that regionalism in Central America had become a ‘mechanism for transmitting

recession’ (Grugel, 1995: 179) and in no way offered a solution to solving economic

downturn. The subsequent collapse of the CACM and economic crisis was a direct

result of a heavy reliance on external trade and funding, primarily from the United

States. The crisis of the 80s was also worsened by the internal conflict in El Salvador,

Nicaragua and Guatemala, which was leading the region into extreme poverty,

1 Panama at this point was not a member, as it still had a service economy that was tied to the US.

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unemployment, de-legitimisation of the state and a consequent breakdown in

intraregional communication (Bulmer-Thomas, 1991).

Hence, the 1980s saw a substantial restructuring of the Central American economies

after the exhaustive process of industrialisation. The focus on regional development

led to a strong emphasis on the external sector and exports, leaving the region

vulnerable to not only the cycles of the international economy but also a heavy

reliance on the US market. Grugel (1995: 194) puts this down to an over-extended

state and excessive protectionism that has led to political inefficiency and

maladministration. Furthermore, the perpetual aim of political elites in the region to

obsess over foreign trade agreements have stagnated intraregional projects (Bull,

1999: 967). These political and economic drawbacks are exactly what the regional

projects of the 1990s look to combat through increased intraregional infrastructural

projects.

This examination of Central America’s regional history and its first wave of

regionalism provides key insight as to why the ‘new wave’ of regionalism that came

post-1990 had far more potential, with increased infrastructural integration than it

previously had. It also goes someway in supporting this paper’s hypothesis that

furthered infrastructural integration is likely to forward political integration. The ‘first

wave’ of regionalism clearly focused heavily on its economic relationship with the

United States and integration into the international economy, which ultimately led to

failure of economic integration during the 1980s. At the end of the 1980s the region

was in a poor economic and political state, ‘Institutional Issues such as inefficient

customs procedures and nontariff barriers, along with poor transport infrastructure for

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integration, have largely been to blame for this situation’ (Rodriguez & McGaughey,

2005: 42). What can also be deduced from this initial wave of regionalism is that

neofunctionalism cannot be applicable. One of the key criticisms of neofunctionalism

is the fact that it cannot provide explanations for or be applied to all regional projects

as it ‘presumes that member countries are relatively developed and diversified in their

productive systems and that they have democratic polities’ (Wiener & Diez, 2009:

51). This was not the case pre-1990 with substantial civil wars and conflict in El

Salvador, Honduras, Guatemala and Nicaragua.

‘New Wave’ Regionalism in Central America

Hettne (2000: 458), as seen previously, characterised ‘new regionalism’ as a theory

that emerged in the 1980s in the context of the comprehensive structural

transformation of the global system. Following the trend set by the ‘old regionalism’,

the new wave of regionalism must be understood within its own historical context.

This is the re-structuring of the World Order through (i) the move from bipolarity to

multipolarity and the relative decline of US hegemony; (ii) the growth of

interdependence and globalisation; (iii) the changing attitudes of developing states

towards increasingly neo-liberal economic and political systems (Hettne &

Söderbaum, 2000: 460). All of these factors seem to appear in the regionalism that

appeared in Central America during the 1990s. It can therefore immediately be

deduced that New Regionalism Theory (NRT) should apply to the isthmus during this

period and is likely to go someway in explaining the characteristics of the ‘new wave’

of regionalism seen in Central America post-1990.

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The ‘New Regionalism’ in Central America that was said to emerge shortly after the

political and economic crises of the 1980s was inspired by deepening structural

market reforms, the return to shared peace and democratic principles and the common

aim to increase economic growth and reduce the poverty that had become rife over the

previous decade. This section will aim to explain what characterized the ‘new

regionalism’ in Central America and why the new integration attempts (post-1990)

are more likely to prove successful. The early 1990s saw a rise in both intra- and

extraregional exports and direct foreign investment. Coupled with modernised

political institutions and the creation of the North American Free Trade Agreement

(NAFTA) gave Central America the drive to progress with trade agreements across

the planet to guarantee access to international markets.

Benedicte Bull (1999: 960) describes the revival of regional integration in Central

America through several major diplomatic events. The first he claims was the summit

of Central American presidents in Guatemala in 1990. This was where a 10-point list

of economic policies were agreed upon, including a new judicial framework for

economic integration, a programme for infrastructure and trade and a general focus on

the development of policy regarding domestic economies. Rodriguez and McGaughey

(2005: 42) stress the importance of these presidential meetings exclaiming that, ‘the

personal commitment of the Presidents of the Central American countries, and the

addition of Panama and Belize to the agreements, has meant that the region was able

to begin to take very important regional integration decisions’. Central American

Presidents’ have been the most widely used tool or political mechanism in the signing

of numerous economic agreements. These presidential meeting and summits

continued throughout the early 1990s with the Protocol of Tegucigalpa and the

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Protocol of Guatemala, which outlined the judicial basis of the functioning of the

Central American Integration System (SICA) and reduction of the Common External

Tariff (CET) to 20% respectively (Rodriguez & McGaughey, 2005: 53, iabd, 2000:

47).

When considering the ‘new regionalism’ Gamble and Payne note that (2003: 51) ‘One

of the most striking characteristics common to all the regionalist projects is their

commitment to a form of open regionalism’. This was also a key feature of the new

wave of regionalism in Central America. There was an increased realization of the

shift in the International Political system from the bipolarity of the Cold War to a

more complex system. With the established rhetoric of the United States’ New World

Order the US administrations had previously favoured multilateralism and tended to

discount regionalism or any region as a global trading partner (Hettne, 2000;

Mansfield & Milner, 1999). However, the post-1990 surge in regionalist projects went

some way in completely reshaping the global order. Furthermore, the progression of

the European Union and its influence on the developing world (including Central

America) toward regional integration has been of paramount importance. Mistry

(2003: 119) claims that regionalism is not just a response to globalisation and the

breakdown of bipolarity but it is a mechanism to cope with the hegemony (or lack

there of) of the United States. In essence there has been an overwhelming reliance on

the US in the past (Grugel, 1995; Bull, 1999) and the only way for the developing

world to have any say in the emerging world order is to form regional blocs. The

alternative would be to remain as single sovereign territories, which realistically can

hold little to no economic or political weight in the global political arena. There has,

as a consequence, been a concerted effort by the region to engage in bilateral trade

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agreements with other regional bodies such as the European Union. The EU and

Central America have always held strong ties, ever since the peace process at the end

of the 1980s (europa.eu, 2016). The EU’s central trade policy objective is to increase

bilateral trade and use it to strengthen the ongoing process of economic and political

integration in the isthmus. This is evident in the EU’s Association Agreement with the

countries of Central America that relies on three key pillars: political dialogue,

cooperation, and trade, all of which, reinforce each other and regional integration

(europa.eu, 2016). ‘These are the right tools to support economic growth, democracy

and political stability in Central America’ (European Commission, 2016). The New

Association Agreement that was signed in 2012 by Honduras, Nicaragua, Panama,

Costa Rica, El Salvador and Guatemala. It aimed at fostering sustainable development

but also deepening the process of integration, specifically political integration in order

to help local businesses expand into the regional market and eventually the

international market.

Conclusion

To conclude this section, the overriding question that must be answered is, have the

political drawbacks of the early regionalist projects in the region continued or what

has changed? It is clear that the region’s experience of regionalism has been largely

associated with United States foreign economic policy and the importance of external

trade agreements with economic powers across the world. Benedicte Bull (1999: 967)

as one of the primary scholars on new regionalism in Central America comments that

‘although regional leaders took the initiative in the integration process, it has

increasingly been modelled to please external actors.’ This was a key shortfall of the

old regionalism where the constant focus on integration into the international markets

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and the limited focus on intraregional trade left the region incredibly vulnerable to

global recessions as seen during the 1980’s economic crisis. The majority of old

regionalism was a result of a fervent concentration on economic integration above any

other form of regional integration. This was a direct product of the New World Order

and external pressures primarily from the US. This has continued in some way into

the new regionalism. Trade links with other economic powerhouses has still been a

focal point for Central American Development. However, there has been increased

salience on agreements with other regional bodies such as the EU and less

determination to purely meet the needs of the United States. These agreements have

also tended to incorporate and place value on far more than just economic integration.

Central America has, through its trade agreements with the EU, consistently added

emphasis to the importance of political and infrastructural integration. Consequently,

the 1990’s integration projects can also be distinguished from their predecessors

through the new targets of sustained development. Governments and elites have

increased cross-border interaction and intraregional trade alongside integration into

the international political economy. In analysing this change, it is evident that the

economic integration process is clearly necessary or at least a stepping-stone into the

global economy for the countries of Central America however; it cannot be seen as

sufficient. There has to be stronger political ties, which the next section will argue are

created through regional infrastructural integration.

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5.Infrastructure as a Mechanism of Integration

Introduction

Central America is a region made up of small economies all of whom (as this paper

has explained) have realised that economic integration is the only way to compete or

have any say in the International Political Economy. This section posits that the

integration of physical infrastructure (as a sub-case of economic integration) is a key

form of regional integration that is likely to ensure increased political integration

through functional spillovers. As we have seen from the literature in chapter 3, there

are clear benefits to be had in developing regional infrastructure. However, as Foster

& Briceño-Garmendia (2010: 154) write, ‘reaping those benefits poses political,

institutional, economic, and financial challenges that are far from trivial.’ This chapter

will examine infrastructure as a mechanism to drive regionalism and political

cooperation. This in part will extend much of the work in chapter 4 through

understanding the differences in the regional and liberal nature of Central America’s

integration projects both pre- and post-1990. Firstly, it will be understood how the

investment and focus on regional infrastructure projects is likely to build political

consensus. Furthermore, the establishment of effective regional institutions to manage

these projects and infrastructural networks will be looked at in respect to furthering

political cooperation. Finally, in analysing the recent regional projects in the isthmus,

the extent to which neofunctionalism can offer an explanation to how infrastructural

integration has given the region a future and a significant development prospect will

be understood.

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Building Political Consensus

The starting point for any regionalist project or perhaps more pertinent in this case,

any ‘new’ regionalist project is aiming to build some sort of political consensus

among the neighbouring states in a given geo-political region. This is especially

potent where states may have differing national agendas or recent histories of conflict,

as in the case of Central and Latin America during the 1980s (Foster & Briceño-

Garmendia, 2010: 154; Fay & Morrison, 2005: ii). It is clear that the building of

regional infrastructure is but one aspect of a much broader process of regional

integration in Central America where the focus has primarily been on international

trade integration as seen in chapter 4. Yet, this focus on economic integration above

all other sectors, as previously discussed, might well have been Central America’s

downfall pre-1990. Regional infrastructure is an easier form of integration where the

benefits are clearly visible and requires very little of participating states in terms of

resigning sovereignty (odi.org, 2015). It is therefore instrumental in achieving broader

political and economic integration. As the literature points out, often some countries

have more to gain from regional infrastructure networks than others, especially those

that are landlocked, however, this is less relevant in the case of Central America

where all states have at least one coastline, the majority having two.

The Inter-American Development Bank (IDB) has had an active role in Central

America’s regional integration since responding to requests from the President’s

Antigua summit held at the end of 1990 (Rodriguez and McGaughey, 2005: 49). The

Inter-American Development Bank has been pivotal in fostering regional consultative

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groups to promote economic and infrastructural integration. This was one of the key

failures of the economic integration of the 1980s. The region had insufficient

leadership to develop regional policy (Beteta, 2012: 20). The IDB has consequently

acquired a mandate to work with the presidents of all the Mesoamerican countries that

make up Central America to coordinate the regional integration program. The IDB

approved its own Regional Integration Strategy Document in 2003. In this document

the IDB establishes four main categories it pledges to support. These include: the

consolidation of regional markets through further liberalisation of trade as well as a

multilateral forum of Doha Round of the World Trade Organisation (WTO);

Institutional strengthening at the country and regional level; regional cooperation in

environment, health and education (IDB, 2009). However, the most important

category of program support, for this paper, was the bank’s aim to promote, ‘regional

infrastructure through cooperative mechanisms such as the Puebla-Panama Plan

(PPP), mobilization of private investment, and facilitating a regulatory environment,

in transport, ports, energy, and communications’ (Rodriguez and McGaughey, 2005:

45).

The IDB has also implemented and organised a variety of different mechanisms and

consultative meetings both national and regional where progress and policy in these

areas can be discussed and debated as well as offering technical advice to ensure

integration development targets are met. Examples of such meetings are the Meeting

for Reconstruction and Transformation of Central America in Stockholm, 1999 and

the Regional Programming Paper in Madrid, 2001 (Large, 2005: 47). The Regional

Consultative Group for Central America (RCG-CA) was also created and chaired by

the IDB in 1990. This was to be a programming mechanism for defining the region’s

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priorities when it came to infrastructural development. It had become apparent that

prior to RCG-CA the bank had provided the region with over US$21 million to

strengthen intraregional economic institutions and expand operations in the electric

power sector among other projects (IDB, 1995: 3). The effectiveness of these projects,

and the use of IDB investment, was significantly hindered through a lack of

centralized regional institutions. This consequently meant the funding had a limited

impact on advancing regional infrastructure. Hence, the RCG-CA made it possible to

promote political cooperation in the region in order to effectively manage future

infrastructural projects. The first RCG-CA meeting was chaired by the IDB in

Brussels in March 1993. The Multilateral Steering Committee (MSC), which was

made up of Central American Economy Ministers, officials of the IDB, International

Monetary Fund (IMF), the World Bank and the United Nations Development

Programme (UNDP) had previously run these meetings with a focus on modernizing

the regions productive sector (Rodriguez and McGaughey, 2005: 50). Although

multiple sectors were discussed at Brussels, the electric power sector received the

most support securing grants totalling US$4.2 million (IDB, 1995: 3). This paved the

way for the Central American Electric Interconnection System (SIEPAC).

There were obvious advantages for creating an integrated electric power production

and distribution system in the region, not least to take advantage of surplus electricity

in some countries and foster competition and diversify ownership in others. The

initiation of SIEPAC was agreed by the Presidents of Central America in 1995 and

was ratified by the Central American Electricity Market Framework Treaty in 1996.

Further political cooperation and collaboration by all the countries involved is evident

in the establishment of the Electric Interconnection Commission (CRIE), which, as

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Rodriguez and McGaughey (2005: 67) write, acted ‘as regulator of the electricity

market and the Regional Operator (EOR) that is responsible for the technical

operation and administration of the commercial aspects of the regional market.’ Here

is yet more evidence of political cooperation as a direct result of needing to build

political consensus in order to start a regional infrastructural project but also to

maintain and regulate the sectors operations and customs.

Thus, by the 2001 RCG-CA meeting in Madrid the countries of Central America

arrived with a series of infrastructural projects that had been developed unanimously.

The aim of the meeting was to have all the ‘Heads of State to collectively back the

integration process and define priorities for external cooperation before the

international community’ (Rodriguez and McGaughey, 2005: 51). The document

presented in Madrid was entitled, ‘Regional Proposal for the Transformation and

Modernisation of Central America in the 21st Century’. In effect the meeting

objectives was to foster an international network where officials and elites could

debate and set priorities for the planned infrastructural projects and initiatives.

Puebla-Panama Plan

The Puebla-Panama Plan was launched in 2001 as a modern, flexible, political

mechanism with which countries of the Central American region and Southern

Mexico could promote regional integration. Its aim was to strengthen the political

cooperation of Mesoamerican Countries, Southern Mexico and the international

community. The plan incorporates all seven Central American countries (including

Panama and Belize) as well as nine states in South-South-East Mexico due to shared

economic and social indicators (Stenzel, 2006: 555). The Plan started through

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identifying the commonalities between the Regional Proposal for the Transformation

and Modernization of Central America in the 21st Century and Mexico’s aims for the

plan. This process went through many organisations, namely the IDB, the World

Bank, SICA and the UN. It is immediately apparent the global nature of integration in

the plan and continues to reflect traits of new regionalism. The end result of these

political compromises was eight initiatives all of which promote and facilitate intra-

and extraregional trade. Three of these were purely concerned with hard infrastructure

projects: The Mesoamerican Transport Initiative, the Mesoamerican Initiative for

Energy interconnection, and the Mesoamerican Initiative for Integrating

Telecommunications Services (Rodriguez and McGaughey, 2005: 65; Pires, 2008: 4).

Despite the PPP being an umbrella for a broad range of different interventions it was

these initiatives that gained the most financing (87% of US$8076 million) and largest

loans (74% of 39 loans). The transport initiative received the largest share of

investment with (76%) followed by energy, which was granted (11.5%) (iadb, 2008).2

The Mesoamerican transport initiative’s objective, as set out by the Inter-American

Development Bank (2009: 12) as part of the PPP, was to significantly expand and

improve the Mesoamerican region’s internal and external transport networks through

upgrading international road links and matching transport legislation and regulation to

reduce costs and encourage competitiveness. Members and advocates of the PPP

hoped the International Network of Mesoamerican Highways (RICAM) would help to

overcome the current infrastructural limitations of the region and consequently

2 All figures from: https://publications.iadb.org/bitstream/handle/11319/5982/Evaluation_of_IDB%C3%A2%E2%82%AC%C2%BFs_support_to_the_Plan_Puebla_Panama_Initiative.pdf?sequence=2 IADB (2008)

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improve cross-border trade and market access. The projects included in the Transport

Initiative are: the Pacific Corridor (Puebla to Panama), the Atlantic Corridor,

Complementary Roads and Regional Connections, Modernization of Customs and

Border Crossings (Trade Facilitation Initiative), and the Harmonization of Technical

Regulations and Standards. Governments and multilateral institutions have financed

47% of the projects that are currently being worked on and executed. In order to

finance the remaining 53% and a total of approximately US$1.9 billion these

governments and multilateral organisations will have to secure funding from the

private sector as well as continuing to contribute themselves (Rodriguez &

McGaughey, 2005: 70). To ensure continuity of the projects a regional

subcommission on Road Concessions has been set-up to find solutions to the common

problems facing highway development in the region. Furthermore, Central American

governments will continue to seek funding from various development banks across

the globe including the IDB, World Bank as well as bilateral financial institutions of

the USA, UK and Japan. Rodriguez and McGaughey (2005: 66) sum this up by

exclaiming,

‘The PPP has become a guiding mechanism for cooperation among the countries and

for coordinating the search for international assistance for priority regional

integration investments. It is also adding to the climate for private investment in

sectors such as energy that until the 1990s were under the sole purview of the public

sector in Central America.’

Neofunctionalism as an explanation

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Infrastructural integration in Central America immediately meets the broad definition

of neofunctionalism in that there is major emphasis placed on the role of non-state

actors and the ‘secretariat’ of regional organisation (Schmitter, 2004: 46). Moreover,

it adheres to Haas’ (1964: 709) conditions that non-governmental elites would

promote further integration as well as private organisations. In reviewing the literature

it is clear that there is wide scope for which neofunctionalist dynamics can occur.

However, there are certain conditions for functionalist ‘spillover’ that can be broadly

met in the Central American case. Primarily this paper’s research into the

infrastructural integration of the region and the consequent spillovers and political

cooperation clearly meet the conditions of the theory. Schmitter and Niemann (2009:

57) state that for functional spillover, ‘the situation/process in which the original

integrative goal can be assured only by taking further integrative action, which in turn

creates circumstances that require further action – perhaps the most important

condition is that functional pressures have to be perceived as compelling.’ In essence,

the original integrative goal of a regionalist project must lead to integration in other

sectors (Haas, 2004: 297). On this broad point it is clear infrastructural projects in

Central America have led to wider forms of integration both economic and, as this

paper is most concerned, political. Niemann (2006) explains in his book ‘Explaining

Decisions in the European Union’, that the original issue for which the integration is

concerned must be considered salient in its own right but where interdependence and

reliance from other sectors is also of upmost concern. The infrastructural projects

concerning electricity and transport were of high concern and indeed salient to the

region and the governments of Central America’s states. Infrastructure was seen as

such an important sector as the free movement of people across the region has a direct

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effect on both the economy and intraregional trade but also on the communities of

Central America.

It is evident that the functional interdependence between infrastructural integration

and other policy areas is also strong. The most pronounced functional connection was

the impact on trade and the fact that the regional economy was likely to benefit from

the improved hard infrastructure through smoother border controls and efficient

energy production and distribution. As discussed above with this integration spillover,

the state requires more effective regional institutions and regulatory bodies and

frameworks. The state is unlikely to allow increased infrastructural developments

without ensuring economic advantages to its own industries, hence the functional

spillovers and integration of other sectors of the regional economy. Additionally,

national and supranational elites also heavily bought into the new regionalism and the

importance of regional infrastructural projects, yet again a key feature of

neofunctionalism.

Schmitter and Niemann (2009: 58) set out further conditions bound to the concept of

functional spillover, namely the idea that the initial integration of one sector should

not create or lead to problems in other sectors. Or when spillovers are pre-determined

or at least anticipated, the advantages of the initial integration are likely to far

outweigh the potential concerns of the subsequent effects. The second condition is far

more common that the first. This is due to the pressure governments and the

concerned organisations are often put under to develop certain areas of the economy.

Central America primarily fits the second condition with its wide range of issues

leading to a diverse set of projects. It was clear from the salience placed on the

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Puebla-Panama Plan and the fact that over a third of the proposed initiatives were

based on hard infrastructure, that infrastructural integration was a priority for the

regions presidents. This led to Rodriguez and McGaughey (2005: 66) proclaiming

that, ‘While the Puebla-Panama Plan is showing visible progress in strategic projects,

perhaps its greatest success is of a political nature and the consolidation of a decision-

making framework’. The outcome of which, has enabled all the countries of the

region to ‘promote regional projects that in the past seemed impossible to convert into

reality’.

When considering political spillover, there are clear integrative pressures from

national and supranational elites who quickly realize that certain issues cannot be

adequately solved at a national level. The empirical evidence for this is blatantly

obvious with the role of the IDB and the various regulatory bodies that have been

built around the development of Central America’s regional infrastructure.

Furthermore, the need for private funding alongside these projects has opened

opportunities for constant dialogue between the private sphere, non-governmental

elites and national governments. This has been most evident in bodies such as the

Regional Consultative Group for Central America. In this one group, politicians,

academics and the business elite from all over the region and the world worked

together to set the priorities for regional infrastructure, facilitate project preparation,

organise cross-border financing and finally develop regional regulatory frameworks.

Thus, political spillover has been substantial during the 1990s from the initial focus

on infrastructural integration.

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6. Conclusion

Regionalism since the 1960s has seen peaks and troughs in term of popularity across

the world. The resurgence of regionalism in global politics towards the end of the

1980s and throughout the 1990s saw features of the old regionalism bought back

while new organisations and institutions were formed. This paper has, however,

recognised that Central America’s experience of regionalism has been unique. The

failure of the first regionalist wave led many scholars to be sceptical of the prospect of

future regional integration, mainly due to recurrent fears of tying themselves to

fluctuating international markets and multilateral trading. However, the new

regionalism that emerged in the early 1990s occurred alongside new domestic and

international political commitments to the regions growth and development. As a

result, this paper set out to explore the origins of this new regionalism and understand

its key features and how, through functional spillover, they might lead to increased

political cooperation and integration.

Firstly, the idiosyncratic nature of Central American regional integration has been

determined through an in depth examination of the region’s recent experience of

regionalism. Chapter 4 investigated the shortfalls of the first wave of regionalism,

deducing that the old regionalism was not robust enough to survive economic crises,

as the political conditions were not present. The region experienced a large wave of

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cross-border conflict during the 1980s as well as civil wars. Accompanied by the

regions over reliance on bilateral trade agreements with US ensured a vulnerability to

fluctuating International markets, poor regional economic structures and institutions

and wide reaching economic instability. The turning point of the 1990s ushered in a

new regionalism. The new regional projects held similarities to their predecessors in

their persistent focus on economic integration and development. However, increased

political cooperation through a new set of collaborative economic institutions and

structures, directed by a presidential elite led to a range of new initiatives designed to

develop the region while protecting it from future crises. This included multilateral

trade agreements with the EU and later Mexico rather then an obsessive focus on the

United States.

In recognising these differences and the increased political cooperation of the new

regionalism, this paper set out to understand why there was new enthusiasm for

integration and where had it come from. Chapter 5, uses empirical evidence to

elucidate how the integration of one sector, in this case infrastructure, can lead to

increased political cooperation and integration. Firstly, the building of political

consensus around infrastructure was illustrated by exploring the role of regional

institutions such as the Inter-American Development Bank. The bank has been

effective in establishing other effective regional institutions, such as the Regional

Consultative Group for Central America. The RCG-CA as explained has been

monumental in setting priorities for regional investments and facilitating cross-border

financing, all forms of advanced political collaboration. Furthermore, both groups

helped developed regulatory frameworks for which these projects could be maintained

and adequately financed, safeguarding the economic future of the projects. Again,

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nowhere has this been more evident then in the Puebla-Panama Plan. The PPP has

been instrumental as a mechanism for political cooperation, ensuring investment from

all the governments of Mesoamerica, including Mexico, as well as private and

international loans. The PPP has embodied the potential of the new regionalist wave

in Central America through its intense focus on economic development in the region

while securing multilateral agreements and association.

The countries of Central America have clearly shown a political will to cooperate at a

regional level and restructure their regional institutions to transform the old

regionalism into a modern, contemporary framework, foster intraregional trade and

combine to agree the best international trade links. The literature is often sceptical of

the future of regionalist projects due to the perceived institutional fragility of

supranational organisations. Political cooperation must continue in Central America to

maintain a strengthening of regional institutions, further infrastructural projects and

undertake new trade agreements. It is therefore essential, that the Puebla-Panama Plan

and similar projects succeed. The PPP and other regional projects have been of

paramount importance in facilitating a strong regional, political dialogue and ensured

foreign investment and support through functional spillovers. Again, this must carry

on if the region is to continue to work towards a Customs Union.

This paper has proven that the integration of infrastructure in Central America has,

through functional spillovers, fostered political integration and subsequent trade

growth and development. The implications of this study for future research is that

regional integration has given the Central American isthmus a future as a regional

trading bloc, can this model be maintained? Can it work in other developing regions

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of the world? Hence, further scholarship examining other or new regionalist projects

must acknowledge how infrastructure, as a sector or the economy, contributes to

political cooperation and therefore development. At the time of writing it also seems

that the EU, as a political region, may be on the cusp of collapsing. What will the

implications for regional infrastructural projects if it does?

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