Key Takeaways:
The ThinkHUGE Business and Investment Council met in October 2024, promising $10 billion in nearshoring investments in manufacturing, infrastructure, technology, and agribusiness across the Northern Triangle.
Northern Triangle nations are navigating between U.S. and Chinese investments. While the U.S. remains the dominant trade partner, especially in textiles and manufacturing, China’s growing infrastructure investments pose potential competition for influence in the region.
Private sector investment is expected to stay stable regardless of the 2024 U.S. election outcome; Democrats would focus on economic-driven migration reduction, while a Trump presidency would likely maintain private sector support.
Organised crime and corruption remain barriers, posing risks to growth and investor confidence in the region.
The HUGE Business and Investment Council
Think HUGE is a public-private network focused on economic growth and sustainable development in the Northern Triangle. The network’s primary aim is to reduce immigration by creating jobs in Central America as well as encouraging companies operating in China to reshore in Central America.
The aims of ThinkHUGE align with those of the U.S. government’s ‘Root Causes Strategy’, whose purpose is to address underdevelopment as a root cause of migration. Though not formally affiliated with the U.S. government, the platform receives significant bi-partisan engagement.
On 16th October 2024, Think HUGE Business held its third annual meeting in Washington D.C. KSG conducted a thorough assessment and performed consultations with individuals close to the matter.
Attendees included high-level private sector executives, senior officials from the Biden Administration and the Northern Triangle governments, and representatives of international organizations.
Discussions focused on strategic partnerships and opportunities in HUGE's four priority sectors: manufacturing, infrastructure, knowledge & technology, and agribusiness, with a particular focus on nearshoring opportunities. $10 billion in investments were projected by 2025, with key projects including:
“Solar Panels for the People” which aims to install solar panels on the roofs of homes and businesses in Honduras and Guatemala.
Synergy Industrial Park, owned by U.S.-Central American Pantaleon Group, which involves an $80million USD investment and will create 50,000 jobs in Guatemala.
The XOCHI Bypass Road connecting Mexico with Central Guatemala.
NUMA Industrial Park, developed by Latin American business CBC La Mariposa, which aims to attract nearshoring and over $1billion USD of investments to Guatemala.
DataTrust, developed by Aristos Imobiliaria, a $30million USD investment in El Salvador’s first commercial data centre. Inaugurated in July 2024, it is expected to generate over 4,000 direct and indirect jobs.
The meeting also discussed the prospects of the ‘Americas Act’ bill—currently in the Senate— with advice given to private sector representatives on lobbying strategies. ‘America First’ defines re-shoring and near-shoring from China as being in the national security interest, and enables incentives like loans, credit, and renegotiated duty rates, to be directed to Western Hemisphere countries.
China in the Northern Triangle
China’s main foreign policy initiative in Central America has been through attempts to secure diplomatic recognition of the One China policy. Two out of three of the Northern Triangle nations have cut diplomatic relations with Taiwan, with El Salvador severing ties in 2018, and Honduras following suit in March 2023.
Beyond foreign policy, China, as part of its Belt and Road Initiative (BRI), has been increasing its involvement in Northern Triangle public-private partnerships and strategic investments, with a focus on sectors such as infrastructure development and energy projects.
However, despite Chinese investment, the region remains economically dependent on U.S. trade and remittances, particularly through initiatives like the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR), which gives industries such as textiles, manufacturing, and agribusiness tariff-free access to U.S. markets, thus maintaining U.S. supply chains as central to the region's economies.
Forward Look
Central American Commercial Alignment
Despite initiatives like ThinkHUGE, Northern Triangle countries are expected to maintain diplomatic ambiguity, balancing U.S. and Chinese influences. Explicit U.S. alignment is unlikely, but steady U.S. private-public partnerships could gradually tilt them toward favouring U.S. commercial interests without formal commitments. Think HUGE, while not decisive alone, supports a broader U.S. commercial strategy.
Growing Chinese investments, loans, and trade agreements could gradually weaken U.S. influence in Central America. Without strong U.S. private investment options, Northern Triangle countries may increasingly turn to China for infrastructure projects like Honduras's "Tren Interocéanico." This shift could strain U.S. relations and potentially result in tariffs on Central American goods, impacting nearshoring opportunities. To counterbalance, the U.S. would likely respond by reinforcing security partnerships and targeted financial aid.
KSG underlines that despite U.S. and Chinese influence becoming more nuanced as Northern Triangle countries seek investment from both nations, the region’s deep economic ties with the U.S. limit the scope of China’s influence. This is most notable in sectors like textiles and manufacturing where U.S. firms are dominant.
KSG assesses that Central American openness to U.S. investments may prompt China to take on more risk in counterbalancing U.S. influence. This may involve offering more favourable terms for technology infrastructure, renewable energy projects, and mining concessions.
Despite this, it is more likely that China will engage in a more restrained approach, offering economic aid and flexible trade terms, particularly in sectors not targeted by U.S. partnerships.
Security
The ongoing threat of organised crime in the Northern Triangle presents significant challenges for private investments. Although violence is decreasing in El Salvador and Honduras, rising levels of violence, extortion, and corruption may still jeopardise investments and economic growth, worsening conditions that drive irregular migration.
Impact of U.S. Election Results
KSG assesses that a Democratic presidency under Kamala Harris would likely resume the U.S. foreign policy strategy of addressing the ‘Root Causes’ of migration, leading to increased engagement with initiatives like ThinkHUGE and promoting private investment and nearshoring in the Northern Triangle. If the U.S. continues to support these investments, the Central American market is expected to become increasingly stable and favourable for companies seeking nearshoring opportunities.
If Donald Trump returns to the presidency, KSG expects a more transactional approach to economic and migration policies, focusing on economic protectionism that may lead to tariffs on Central American goods and stricter immigration measures. Trump's use of tariffs as a negotiation tactic could disrupt trade and investor relations, particularly affecting textiles, manufacturing, and agribusiness, which rely on tariff-free access to the U.S. market. This could undermine the Northern Triangle’s advantage as a nearshoring destination.
Increased Chinese investments may prompt Trump to target Central America as China's 'backdoor' to the U.S. market. KSG assesses that a Trump administration will likely regulate and penalise Chinese investments in the Northern Triangle, leading these countries to comply with U.S. demands to avoid tariffs. While significant damage to commercial relations is unlikely in the short term, a Trump victory poses higher risks to private foreign direct investment efforts.
Although U.S. election results could lead to distinct foreign policy approaches toward Central America, the private sector is likely to retain lobbying leeway in partnership platforms, ensuring that commercial entry and investments in the region remain stable. KSG assesses that neither a Harris nor Trump administration are likely to discourage private investment in the region. Consequently, the investment environment is likely to remain stable throughout 2025, regardless of which party wins the election.