Central American Economic Integration: An Introduction to the Study of Customs Union and Relations with the European Union

Abstract

This Working Paper focuses on the characteristics and challenges of the process of economic integration in Central America and it analyses the situation and alternatives of the existing customs union in the region. It also refers to the external relations of Central America, in particular with the European Union (EU), the USA (CAFTA) and Mexico (Plan Puebla Panama). In order to extend the analytical scope, Central American relations with the EU have been considered in the general context of the relations between Latin America and the EU (Group of Rio Dialogue). The Paper emphasizes the importance of strengthening economic integration and improving external relations of Central American countries. For this reasons, I suggest to establish a common budget in the region, with a revenue system based on national contributions and on the customs union incomes and an expenditure mechanism able to carry out structural projects. A common budget will reinforce the existing process of integration, will contribute to the improvement of the international insertion of Central American countries and will boost economic social development in the region.