Calderon Gives Life to Plan Puebla-Panama

(International Relations and Security Network, 20/04/2007)


When former Mexican president Vicente Fox announced Plan Puebla-Panama (PPP) in 2001, many believed his vision of integration between Mexico and Central America could improve trade, transportation, energy supplies and security. It was billed as a massive infrastructure project at a cost of US$50 billion.


Such an ambitious package saw little more than US$4.5 billion spent mostly on customs posts between Mexico and Guatemala and an upgraded power grid between the two countries until current Mexican President Felipe Calderon decided to revive the plan on 9 April with a one-day conference in Campeche, Mexico. In attendance were the presidents of all Central American countries, apart from Belize and Nicaragua, who sent their prime minister and vice president, respectively.


Weeks later, there is little evidence to suggest Calderon's one-day meeting will achieve much more than Fox's original announcement, but three significant differences are worth a closer look.


First, Calderon has proven he is a man of action. His drive toward a coherent national security plan in Mexico has culminated in the widespread use of the Mexican military to secure areas of the country thought lost to organized crime. The results of this bold move are yet to be seen, but his willingness to act on his promises is clear.


Calderon is also pragmatic. The original and current form of the PPP includes a US$6 billion oil refinery to be built in an as yet undefined Central American country. Fox originally promised 230,000 barrels of oil a day to help supply the refinery. But Calderon, knowing his country's limited oil output, has reduced that promise to 80,000. The country's main oil supply, tapped from the Cantarell oil field, is reportedly on the decline. Yet important support from Colombia has been secured.


Second, when Fox first proposed the plan, Colombia was neither present nor had a great interest in integration. Under Uribe, the remote region between Choco, Colombia and the Darien in Panama is not much more secure. But, he attended the Campeche meeting. His willingness to add political capital to the plan gives the region, and the US, his signal of approval. Both are important for funding, and Uribe has pledged that Colombia will work to supply the Central American refinery with additional oil.


Connecting Colombia with Central America and Mexico beyond, has clear security challenges and some daunting possibilities for how a road from Cali to Panama City could facilitate drug smuggling. But in an ideally secure Colombia, such a land route would greatly benefit regional trade, as would modernizing and paving the 4,000 kilometers of highway between Panama City and Puebla, currently a significant cause of high transportation costs and thus reduced trade revenue due to poor road conditions.


Third, apart from Calderon's pragmatism and Colombia's involvement, Venezuela's looming presence was not an issue in 2001. When he made unilateral promises of cheap oil and other refined petroleum products to Central American nations and parts of the Caribbean, President Hugo Chavez broke a decade's-old agreement, known as the San Jose Pact, made between Venezuela and Mexico to work together to ensure oil supply and other resources to Central America and the Caribbean. According to the pact, the two countries would work together to encourage economic development and integration.


Chavez's unilateral promises to install a refinery in Nicaragua further breech this agreement, again alienating Mexico. Under Calderon's version of PPP, both Mexico and Colombia are now in a position to work against Chavez's attempts to envelop Central America in the snare of his petro-dollar diplomacy.


Chavez's de facto presence in Latin American geopolitics adds an extra element of attention from Washington, which was not as acute in 2001. Part of the reason why Fox was unable to raise more than US$4.5 billion for his version of the PPP was due to international lenders. Both the World Bank and the Inter-American Development Bank had trouble lending billions to a regional project. With some diplomatic pressure from Washington, it is likely these two lending institutions will view Calderon's version with favor.


These three differences have altered the PPP in a way that paints a brighter future, yet there are considerable security concerns.


Guatemala is struggling with not only the widespread presence of members of the Mara Salvatrucha street gang but an element of indigenous organized crime that has found a niche in making the connection between Colombian cocaine suppliers and Mexican buyers. Both El Salvador and Honduras have problems with the Mara Salvatrucha as well as a considerable problem with elements involved in the region's drug trade – not to mention Mexico's own security challenges. And if a paved road is eventually opened between Panama City and Colombia, the implications for increased land-based smuggling are a concern, but do they outweigh the benefit realized from increased land-based trade?


The pros of at least one oil refinery, supported by Colombia and Mexico, a modernized road and customs system, and the thousands of jobs created through breathing life into Plan Puebla-Panama clearly outweigh the costs. The questions that remain are centralized on funding. The political will appears to be in place. And with a little help from Washington, Fox's dream could very well become Calderon's reality.