The Central America region is a smallmarket. The region contains around 43 million inhabitants(0.6 percent of total world population) who generate around0.25 percent of the world's Gross Domestic Product(GDP). While the region has successfully embarked on aregional integration agenda and has strong commercial linkswith the US, extra-regional trade-mainly with largefast-growing emerging economies-remains a challenge. Exportperformance is analyzed along three dimensions that,together, give a fairly comprehensive picture ofcompetitiveness: 1) the composition, orientation and growthof the export basket; 2) the degree of exportdiversification across products and markets; and 3) thelevel of sophistication and quality of their main exports.This analysis allows exports dynamics at the differentmargins of trade (intensive, extensive, and quality) to beevaluated and individual countries' to be benchmarkedwith peers in the Central American region. The results ofthis report allow policy makers to identify key areas toexplore in the overall discussion of export competitivenessin the Central American region. This paper relates to theliterature on challenges and opportunities that tradeliberalization can bring to the Central American region.Much of the recent literature focuses on the role of thefree trade agreement negotiated by Costa Rica, the DominicanRepublic, El Salvador, Guatemala, Honduras, and Nicaragua,with the US.
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