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Central America pins hopes on free trade

Central America's republics share the problem of heavy fiscal deficits, which incoming administrations hope to cure. Much is also expected of the implementation of a free trade agreement with the US.

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IN SPITE OF their geographical propinquity, Central Americans have never like being lumped together, championing their diversity rather than what they have in common. But new governments take office this year in Guatemala, Panama and El Salvador that face similar economic challenges. They are ones that investors hope can be dealt with successfully, enabling these small republics to build on their nascent reputation as alternative safe havens for bondholders in volatile Latin America.

Highest on the agenda is a cap on rising fiscal deficits. A close second is the urgency of tax and expenditure reform, which is likely to be a battle given the divisions in each nation's legislature. The good news is that voters this year opted for business-savvy newcomers with a pro-US agenda, not the rebel leftists of the war-torn past.

Guatemala's Oscar Berger has been the first to face up to the challenges. A former mayor who leads a centre-right coalition and is backed by the country's most influential business chambers, Berger took office in January for a four-year period. His rise to the presidency put a welcome end to the dominance of the governing party of former dictator Efraín Ríos Montt.

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