ABSTRACT
The five Central American countries (Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua) have traditionally been rather cautious and conservative as far as foreign borrowing is concerned. This is probably a result of the long-lasting unfavorable experiences arising from the failure to service external debts arranged. The Central American countries in 1961 established their own regional development bank with the specific purpose of mobilizing long-term, low-interest foreign borrowing to finance both public and private priority projects. In fact it is only that the external debt burden and refinancing have become important in Central America's economic policy. The external dependence of the Central American economy is more a problem of international markets for primary goods than a problem of foreign financing for capital formation. It was estimated that by the end of 1983 the overall external debt of the five Central American countries would amount to some US$10 billion, only about 3 percent of the Latin American total.
