Assessing Central America's performance on the illici trade index

Why Central America matters for illicit trade:

Central America occupies a strategic position between South American production zones, North American consumer markets, and global trade routes. Its ports, land corridors, free trade zones, and logistics hubs support legitimate commerce across the Americas, but they also create opportunities for illicit trade networks to move, conceal, repackage, and redistribute illegal goods.

Central America faces illicit trade across many sectors, from counterfeit goods and smuggled excisable products to illicit pharmaceuticals, environmental crime, narcotics, arms trafficking, and migrant smuggling. These activities often rely on the same enabling conditions: porous borders, uneven customs enforcement, informal markets, corruption, weak free trade zone oversight, and gaps in supply chain monitoring. They also increasingly overlap with trade-based money laundering. Criminal networks use legitimate trade systems not only to move illicit goods, but also to conceal and integrate the proceeds.

About the report:

This report builds on TRACIT’s 2025 Illicit Trade Index, which evaluated 158 countries across six categories and 37 indicators measuring their capacity to defend their economies against illicit trade. For this regional report, TRACIT adapted the Index methodology to focus specifically on seven Central American countries: Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and Panama. This narrower lens enables deeper country-level analysis, comparison across neighbouring markets, and more targeted policy recommendations.

The report provides a structured assessment of illicit trade risks, enforcement capacity, and policy gaps across Central American countries, namely: Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and Panama.

Each country is assessed across the same six categories used in the global Index:

Taxation and Economic Environment
Regulatory Framework and Enforcement
Criminal Enablers of Illicit Trade
Trade, Customs and Borders
Supply Chain Intermediaries
Sectoral Indicators of Illicit Trade

For each country, the report presents:

Overview: A situational assessment of the country’s exposure to illicit trade, including geography, trade infrastructure, criminal activity, regulatory gaps, enforcement capacity, and key enabling factors.
Performance on the Illicit Trade Index: A breakdown of the country’s global ranking, regional ranking, overall score, strongest category, weakest category, and performance across the six Index categories
Vulnerabilities or sectoral assessment: A closer look at the sectors where illicit trade is most prominent, including tobacco, alcohol, pharmaceuticals, counterfeit goods, environmental crime, and other country-specific risks.
Policy recommendations: Targeted reforms designed to address the country’s main vulnerabilities and improve its capacity to prevent, detect, and disrupt illicit trade.

The report also includes a regional analysis comparing Central America’s performance against other geographic and economic groupings, identifying emerging trends, shared vulnerabilities, and areas where regional cooperation can deliver stronger results.

Key findings

Central America’s geography makes it both a trade bridge and an illicit trade corridor.
Illicit trade in the region spans counterfeits, excisable goods, pharmaceuticals, environmental crime, narcotics, arms, and migrant smuggling.
Free trade zones, informal markets, weak supply chain monitoring, corruption, and uneven enforcement are recurring vulnerabilities.
Costa Rica and Panama perform strongest in the region, but even the top performers face major gaps compared with global leaders.
Regional cooperation is essential because illicit trade networks operate across borders, sectors, and supply chains.

TRACIT's regional recommendations

Illicit trade in Central America is not only a customs or border control problem. It is also a financial and institutional problem. Criminal networks exploit weak enforcement, corruption, informal markets, free trade zone vulnerabilities, and gaps in supply chain monitoring to move illicit goods and disguise the proceeds.

TRACIT recommends a coordinated Central American strategy against illicit trade, built around the following priorities:

Strengthen cross-border cooperation between customs, tax authorities, police, prosecutors, financial intelligence units, and regulators.
Improve public-private information sharing so that governments can use industry intelligence to identify high-risk routes, products, operators, and supply chain vulnerabilities.
Tighten oversight of free trade zones, especially high-risk hubs, by requiring stronger customs supervision, operator transparency, and real-time visibility over goods moving through the zones.
Extend customs authority over in-transit goods, bonded warehouses, free trade zones, and other special economic regimes to reduce the misuse of “in transit” declarations.
Introduce stronger KYC and due diligence requirements for free zone operators, logistics providers, freight forwarders, brokers, postal operators, and other supply chain intermediaries.
Improve risk profiling and targeting through better use of advance electronic data, cargo information, container profiling, and intelligence-led inspections.
Empower customs authorities to act ex officio against counterfeit and illicit goods, including goods in transit, without relying solely on rights-holder requests.
Link illicit trade enforcement with anti-money laundering investigations to target trade-based money laundering, shell companies, false invoicing, opaque ownership structures, and legitimate businesses used to conceal criminal proceeds.
Strengthen penalties for serious illicit trade offenses so that sanctions reflect the scale, profitability, and organized nature of the crime.
Tackle corruption in customs, ports, law enforcement, and judicial institutions through integrity checks, internal oversight, whistleblower protection, and accountability mechanisms.
Review tax policies and exemptions that create excessive price differentials or opportunities for diversion, especially for excisable goods such as tobacco and alcohol.
Raise public awareness of illicit trade as an economic, security, public health, and governance threat, not merely a consumer or IP issue.

Assessing Central America’s Performance on the Illicit Trade Index

Download the report

MEDIA CENTER

TRACIT Media Release