Back on track: from Panama to Puebla and beyond, Central America heads toward the North American free trade bloc. (Central America).

Felipe Bosch Gutierrez couldn't be happier that Mexican and Central American governments are focusing on roads, rail lines and electricity grids. "That's one of the best ideas of the Puebla-Panama Plan," says Bosch Gutierrez, a legal representative for Guatemalan fast-food chicken franchise Polo Campero. "If we can reach Villahermosa faster, then I think that the whole south of Mexico is going to be closer. If you can do that, then you are one step away from the biggest market in the world, which is Mexico-U.S.-Canada."

Bosch Gutierrez isn't the only one connecting the dots in North America these days. Mexican President Vicente Fox and the region's presidents have lined up multilateral support for the US$4 billion plan. U.S. Trade Representative Robert Zoellick told the U.S. Congress that free trade negotiations with Costa Rica, El Salvador, Nicaragua, Honduras, and Guatemala will begin in 2003. And if the Free Trade Area of the Americas stalls, Zoellick has said the United States "will go forward with those who are interested."

Integration is suddenly being thrust on Central America. Most of the money--$3.4 billion--will be spent to repair thousands of miles of highways between southern Mexico and Panama. The idea is to link the major cities and to make connections from the Atlantic to the Pacific oceans. The first phase, scheduled to be completed by 2006, would rebuild three-quarters of 3,159 kilometers of roads along the Pacific corridor at a cost of $955 million, according to Puebla-Panama Plan projections.

Centripetal force. The remaining $600 minion is slated for the other seven objectives of the plan--sustainable development, human development and education, prevention and mitigation of disasters, tourism, facilitation of commercial exchange, connecting the energy grids and integrating the telecommunications systems. To date, only a fraction of the total price tag has been committed.

"I like what I'm hearing," says Anthony Zorn, chief operating officer of NewCom Communications, a Salvadoran telecommunications company, attending a presidential summit on the plan in Merida, Mexico. "All the people involved in the Puebla-Panama Plan really have a realistic view of the benefits and the challenges to pull together the region."

A proposed free trade pact between the United States and five of the Central American countries promises to pull the region together even more. Total U.S.-Central American trade has more than doubled to more than $20 billion in the past decade. "We are on track to get these negotiations done in 2003," says Thomas G. Travis, a trade consultant and principal with Sandier, Travis & Rosenberg.

Agricultural products will likely be the toughest area to negotiate in the deal. The liberalization of products such as milk, sugar, rice, corn, bean, beef, poultry and pork, as well as vegetables including potato and onion, will prove a considerable challenge. Both the Puebla-Panama Plan and the proposed free trade agreement also face a budding protest movement that seeks to put teeth in labor rights and environmental provisions.

U.S. congressional approval of the trade promotion authority, which allows Congress only to vote up or down any agreement, will speed talks along, says Jonathan Gold, international trade policy director for the International Mass Retail Association in Arlington, Virginia. "It's a big boost for the region," says Gold. "In the past couple of years, Latin American countries were spinning their wheels because they did not want to negotiate a deal and have the [U.S.] Congress rewrite the terms."

Brewing battle. While the debate is only now getting under way, businesses are rushing in to capture the uptick of integration. In the last 12 months, for example, beer in Central America has been turned on its head. Grupo Empresarial Bavaria bought the No. 1 brewer in Panama, but the Colombian company lost out in its bid to acquire beer makers in Honduras and El Salvador to South African Breweries. For its part, Heineken has taken over companies in Costa Rica and Nicaragua, while Brazil's AmBevformed an alliance with Guatemala-based oft drink bottler Mariposa to acquire beer interests in Guatemala, Honduras and El Salvador.

The beer brawl is only a taste of colliding business interests. In telecommunications, Telefonos de Mexico (Telmex) and other international companies are snapping up companies in the region. Enrique Castellanos, public relations director for Telgua, a Guatemalan telecommunications company recently bought by Telmex, insists that there are no specific plans for integrating two phone companies. But, he adds, "we are just beginning with this." Indeed, Telmex's sister company, America Movil, recently acquired a license to provide cellular service in Nicaragua.

Not all of the companies seeking to profit from integrating Central America internationally are finding the going easy. Close-out sale signs went up in the windows of Mexican retailer Elektra's 13 stores in El Salvador during August. According to company officials, the operations were not generating returns as high as hoped when the group entered El Salvador in 1997.

Pollo Campero, the largest fast-food chicken franchise in Central America, has delayed plans to expand into southern Mexico until the needed infrastructure is in place. Small villages there are as much as two hours apart, making servicing them difficult, says Bosch Gutierrez, the company's legal representative.

"After we saw that, we decided to wait and not to get into a plan for the south of Mexico," says Bosch Gutierrez. "We got a little scared because the towns are so far apart from each other that attracting enough customers would be almost impossible." He says that a highway from Tikal, Guatemala, through Villahermosa, capital of Mexico's Tabasco state, would be ideal for all companies.

And that road, many people here hope, is just the beginning.

--with reporting by LATIN TRADE staff in Miami