ABSTRACT
The growth path ofmost LatinAmerican economies in the postwar era experienced drastic shifts. In the case of some Central American countries, important turning points in their economic growth trajectories have been associated with political and social instability and with radical changes in macroeconomic policy. The civil strife and, most important, the armed conflicts in Guatemala (1963-96), El Salvador (1979-92), and Nicaragua (1974-79, 1981-90) had severe negative effects on their economies and, to a certain extent, on those of Honduras and Costa Rica. The Central American peace process, whose origins can be traced back to the formation of the Contadora Group (1983) and that is currently undergoing its final phase, has undoubtedly improved the economic prospects and performance of the region.1 Despite the effects of these social and political events on the fluctuations of output, it has been argued that, from a long-term perspective, the evolution of exports and the terms of trade can be seen as fundamental determinants of Central America’s economic growth (Oman and Wignaraja, 1991; ECLAC, 1993, 1995; Taylor, 1993).
