Central America

This region stretches from the southern Mexican border to Columbia’s northern border, south of the Panama canal. This is an area characterized by political instability and generally low economic development. Most countries are Spanish-speaking and the second poorest country in the northern hemisphere is here – Nicaragua.

Country focus

Belize: This country suffers from high unemployment and much of it is long-term. There is a severe shortage of skilled labour and wage rates are low. 42% of the population live below the poverty line. Underlying this is the high cost of finance and inadequate financial institutions. Employment is also highly seasonal – largely concentrated in April/May.

In spite of a weak labour market immigration exceeds emigration and most immigrants come from Guatemala, El Salvador and Honduras. No legal protection exists in respect to discrimination on the grounds of disability or sexual orientation and/or gender identity. Generally, the Ministry of labour does not adequately police compliance with employment, wage or health and safety laws.

Costa Rica: This is the third largest country in the region and the most politically stable. Most of the population speak English and the government spends about 7% of its budget on education. The country has several free trade zones to which it has been able to attract many foreign companies.  One interesting characteristic of the country is that it abolished its army in 1949. The country operates a civil law system based on Spanish law. The legislature appoints members to the Supreme court who then make appointments to lower courts.

The Labour Code dates back to 1943, but other laws govern rights such as freedom from discrimination and equal opportunities for disabled workers. All employees are entitled to a 13th month bonus at Christmas and are entitled to two weeks annual vacation (plus public holidays) after 50 weeks of service. Severance pay for dismissal without legitimate cause ranges from between seven and 22 days per year of service – although there is only an entitlement in respect to any service during the last eight years.

El Salvador: There is a high level of crime and violence throughout the country and many public facing jobs carry a significance risk. A heavy fall in the number of professional, executive and management jobs has taken place in the country because of a collapse in exports, the departure of some key corporations and increased imports from China. There is no national minimum wage, although rates are set by sector and a 13th month payment is necessary at Christmas. The normal workweek is 44 hours and double time is set for work on national holidays. The maximum penalty for contravention of health and safety rules is 28 times the minimum monthly wage – a sum insufficient to deter gross violations of rules across the workplace.

Guatemala: this country has the largest economy in Latin America, but still suffers from the aftermath of a long civil war that ended more than two decades ago. The legal system is heavily corrupted and only about 4% of the workforce are unionised. The proportion of the national workforce in agriculture is low by regional standards, but the “informal economy” remains very high.

The main employment law is the Código del Trabajo and enforcing it is a relatively small and ineffective labour inspectorate. The country is generally unsafe for foreigners and has the highest homicide rate for trade union activists in the world. The incidence of forced overtime is high and there are frequent reports of child labour. Many smaller local employers also make social security deductions from wages, but fail to pay them to the authorities – thus leaving their employees without health and state welfare cover.

Honduras: This country has many characteristics of a failed state. The informal economy is very large, most institutions have been heavily corrupted and it is not generally a safe environment for businesses to operate.

A third of the active adult population and half of those aged 15-24 are economically inactive and not undertaking education or training. Trades union membership is relatively high – at 15% – but many unions have fragmented memberships are, in turn, corrupted. The Labour Code allows workers to be hired on a temporary basis and sets a limit of 40% of employees on such contracts. These workers are generally paid by the hour and many are effectively zero-hours contracts. Strike action is generally regulated by requiring high thresholds for obtaining union membership agreements and complex procedures when subject to mediation and conciliation. Calling a strike can also be very dangerous for union leaders as 31 leaders were murdered between 2009 and 2016.
Overtime and health/safety limits exist, but are not enforced and many labour inspectors do not have the transportation necessary to visit companies they plan to inspect.

Nicaragua: Around 20-25% of citizens live abroad (many in Costa Rica) and the economy relies heavily on overseas remittances. 77% of the working population operate in the informal economy and only 3% of the population are covered by collective agreements.

The dominant sector is services (51%), although this is declining in importance. The minimum wage is different in ten economic sectors and is generally set below the subsistence level. The ‘Code on Processes of Labour and Social Security’ came into force in 2013 and was an attempt to set up specialised Labour Courts and mediation processes to resolve disputes. Generally, laws governing overtime, minimum pay and health / safety are not well enforced and no-existent in the informal sector.

Panama: The employment market appears to be very buoyant, especially in the services sector. With demand rising in 2017/18 by over 10%. There is a modest, but adequate minimum wage and the vast majority of workers earn incomes above the poverty line. The standard workweek is 48 hours and there is no upper limit to the number of overtime hours that can be worked.

40% of the workforce operate in the informal economy and are beyond the reach of labour laws. However, even in the formal sector an employee would not be able to object to or remove themselves from unsafe working conditions without putting their employment a risk.

Greatest advantages: Proximity to the USA, large supply of mainly unskilled labour.

Greatest disadvantages: Huge informal economies, widespread corruption, low general regard for the law.

Proportion of global land area: 0.34%
Proportion of global population: 0.6%
Annual rate of population increase: 1.5%
Life expectancy: Men 77.2 years Costa Rica Women 82.2 years Costa Rica
Working population in the informal economy: 42.4 – 80.3%
GSI Modern slavery (Forced Labour) 0.4 % to 0.8%
Unemployment rate: 2.6 % Guatemala to 1.4% Belize
GDP/capita PPP (current) $16,642 Costa Rica, $4,746 Honduras
Female labour participation rate: 40.3% Guatemala
Male labour participation rate: 83.9% Guatemala

World Bank rating (doing business): 61 / 190 (Costa Rica) – 131/190 Nicaragua
FedEE overall employment potential rating: 6/10
FedEE regulatory rating: 5/10

Minimum wage rates (selected states)
– Costa Rica: Unskilled 10,060.75 CRC a day (1.1.2018)

– El Salvador: Industry $10 a day (1.1.2017)
– Guatemala: 90.16 GTQ (82.46 GTQ a day in export zones) (1.1.2018)
– Panama: $457.60 a month for restaurant workers (1.1.2018)