Description

Important links run in both directions between telecommunications and economic development.
This paper examines the telecommunications sector in Central America in the context of national
and regional growth and sustainable development. Its analysis of the telecommunications sector
in Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua shows that the sector developed
substantially in the last several years even while under tight regulation or monopoly and that
current telephone penetration is relatively high in relation to per capita income. Still, unmet
demand for telephone service is substantial and geographic distribution of service is uneven.
Moreover, revenues rely heavily on international calling, and Central America has the highest
traffic imbalance in the world. This paper discusses prospects for expansion of the sector and
revenues in each country under a variety of frameworks: continued monopolies; planned or ongoing
privatization programs; new regulatory frameworks; and/or deregulation. Technology and
regulation are moving the telecommunications sector in all countries toward competition, but the
approach to reform varies in each country. These different approaches will transform regional
cooperation, possibly making certain agreements more difficult but also increasing the potential
benefit from regional regulation