Caribbean & Central America - May 2020

Measures to stop the spread of the coronavirus (Covid-19) have badly impacted travel and tourism in Central America, a sector which is a key contributor to GDP across the sub-region.

The significance of the sector to the Central American economy is evident in the latest (2020) figures from the United Kingdom-based World Travel and Tourism Council (WTTC). Panama tops the region in terms of the percentage of GDP accounted for by tourism (13.6% in 2019), according to WTTC figures, which also show that travel and tourism contributed 14.7% of total employment and US$5.7bn in revenue, or 21.7% of total exports. In Costa Rica, travel and tourism accounted for 12% of GDP in 2019, contributing 11.7% of total employment and revenue of US$4.1bn, equivalent to 19.5% of the country’s total exports. The numbers are also significant in El Salvador (11% GDP and 11.6% total employment), Guatemala (6.2% GDP and 6.5% total employment), Honduras (11.7% GDP and 12.2% total employment) and Nicaragua (10.1% GDP; 10.4% total employment).

Restrictions on movement due to Covid-19 have brought the travel and tourism industry to a halt throughout the sub-region. On 25 March, Costa Rica’s tourism board (ICT) said the country would suffer a complete loss of income from tourism. Warning it would take “many months and years” for the industry to recover, Tourism Minister María Amalia Revelo predicted in a “best case scenario” some ₡24bn (US$41.5m) of tourism revenue would be lost. El Salvador had expected revenue from tourism to rise by 15%-20% in 2020, but the industry is now expected to contract by 25%, according to Tourism Minister Morena Valdez. In Guatemala, many firms in the sector will go bankrupt without state support, said Luis Rey, president of the tourism chamber (Canatur) noting tourism supports 177,000 direct jobs and 500,000 indirect jobs in the country.

Given the importance of tourism in the sub-region, unsurprisingly governments have implemented measures to support the sector. Authorities in Costa Rica are planning a massive advertising campaign and measures to reduce prices to encourage domestic tourism and kickstart the industry post-coronavirus. Panama is planning to develop internal and external tourism in small- and medium-sized cities using a US$100m loan from the Inter-American Development Bank (IDB), according to an 18 March announcement by Panama’s tourism authority (ATP). The ATP has also formed a working group with public and private sector tourism bodies which will focus initially on promoting domestic tourism and then welcoming international visitors back.

In Guatemala, President Alejandro Giammattei announced that his government is working to support the tourism sector and formed a working group with industry representatives. One of the first initiatives on offer is Q400m (US$51.9m) in loans, announced by Finance Minister Álvaro González Ricci at the end of April. In Honduras, the government has agreed to pay L6,000 (US$242) per month to workers in the tourism sector no longer receiving a salary, according to Labour Minister Carlos Madero. The Honduran government will cover 58% of the fund and tourism companies the remaining 42%, and the agreement provides for monthly payments for a maximum period of one quarter, a scheme which will assist 150,000 workers on estimates from Epaminondas Marinakys, president of the Honduran national tourism board (Canaturh).

While the plans outlined above are a move in the right direction, those working informally in the sector are likely to miss out on state aid. It is also unclear whether the region’s public finances will be able to sustain extended support for business.