Central America Economy

By | June 13, 2021

The transition area between the mainland masses of the American double continent is occupied by a Mediterranean Sea, which is bounded in the west by a land bridge and in the east by arches of islands. Mexico and seven small states are located on the Indian and colonial Spanish land bridge. This part not only mediates north-south traffic over the Carretera Interamericana, but also acts as a bridge between the Atlantic and Pacific Oceans (including the Panama Canal, which went into operation in 1914, and rail, road and pipeline connections). Central America is located in the tropics, only the extreme north of Mexico near the border with the USA can be assigned to the subtropics.

The eastern boundary of Central America is formed by the island groups of the Bahamas and the Greater and Lesser Antilles. There are a large number of differently structured small and micro-states that only gained their independence after the Second World War and some of them do not yet have full sovereignty. The ethnic and political diversity of this region results from the colonial times. The Guiana countries in the southeast (partly outside the map section) are also assigned to the Caribbean area for socio-cultural and economic reasons.

According to Countryaah, the larger countries (Venezuela, Colombia and especially Mexico) are striving for the position of Latin American central powers. The entire area has been politically and economically dominated since the 19th century by the great power USA, which regards Central America as its “backyard” and Mexico, as a member of NAFTA, has already firmly attached to itself.

At the same time, the natural favors of Central America are threatened to a high degree by natural disasters. In addition to the tropical cyclones, which occur particularly in the Caribbean, volcanic eruptions and earthquakes occur and destroy human life and property at irregular intervals. The Pacific part of the land bridge is particularly hard hit.


The Central American economic area is today largely determined by agriculture. In most countries, one or two agricultural export products dominate, which results in a strong dependency on the world market revenues of these foreign exchange earners. In many cases, state-subsidized export production in large farms has displaced small-scale agriculture, which is geared towards self-sufficiency and local and regional markets.

A spatial structural feature is the plantation economy of foreign corporations in large agro-industrial enterprises. This means not only a certain form of agricultural production, but also a social and political system, the roots of which go back to the colonial era and which reached its peak around 1900. The most important products are sugar cane, bananas and palm oil, and cotton, cocoa, citrus fruits and pineapples and, to a lesser extent, coffee and tobacco are grown in plantations. Coffee is mainly produced on farms, not in plantations. In many places coffee producers form cooperatives in order to jointly process and market the coffee they produce.

Central America is rich in energy resources. Above all, crude oil and natural gas are produced on a large scale, partly in the offshore sector, and in Colombia and Venezuela there is also hard coal mining. The energy resources mentioned form a basis for electricity generation in Central America, plus hydropower plants as well as nuclear power plants in Mexico and especially in the USA.

In addition, non-ferrous metal ores (Mexico), steel refiners (Cuba), precious metals (Mexico, Colombia, Honduras, Nicaragua) and iron ore (Venezuela) are mined on a large scale. On the one hand, the ores are exported, on the other hand they also form the basis for smelting sites.

In the secondary economic sector, the map shows the focal points in the south of the USA, in eastern and central Mexico and in northern South America. Oriented towards the oil and gas deposits as well as pipeline locations, large refineries and the chemical industry are concentrated in a few sub-areas, especially on the coasts of the Gulf of Mexico and the Caribbean Sea.

Modern growth industries can be found primarily in the USA and in northern Mexico near the border with the USA. Electronics, electrical engineering and aviation industries are located in Tijuana, Ciudad Juárez, Chihuahua, Monterrey and Nuevo Laredo, for example. There the maquiladora industry plays a quantitatively outstanding role. The largest single location of the electronics industry in Mexico is Guadalajara with tens of thousands of employees. Global companies such as Intel, Hewlett-Packard and Flextronics (one of the largest contract manufacturers of electronic products worldwide, including for Microsoft, Sony and Apple) produce there.

Mexico is also a focus of automotive engineering and its suppliers, for example the Volkswagen Group is strongly represented there.

With a few exceptions (such as Mexico City), light industry predominates in the rest of Latin America (textiles, food and beverages as well as wood processing).

The capitals, in which political-administrative functions and educational institutions are concentrated, stand out as service locations. Tourism has achieved great importance for the smaller Caribbean islands and locations in the Pacific coastal area. Costa Rica, the Yucatan Peninsula in Mexico, the Bahamas, Cuba and the Dominican Republic are the main destinations in the region. Beach tourism and cruise tourism dominate.

Special services in the international financial business led to the emergence of larger banking centers in the Bahamas, the Cayman Islands and Panama, among others, which can be classified as tax havens and play an important but often critically valued role in the globalized economy.

Central America Economy