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<p>Despite repeated fiscal reforms, multilateral support, and regional integration efforts, Central American countries continue to experience recurrent episodes of fiscal stress and institutional fragility. This article examines whether sovereign fiscal-institutional fragility in the countries of the Central American Integration System (SICA) can be represented as a multidimensional and nonlinear process shaped by ESG-related governance, social inequality, reserve-buffer capacity, and economic growth. Using annual data for eight SICA countries over 2008–2023, the study develops an exploratory empirical framework with three components. First, it constructs a sovereign ESG index using principal component analysis, identifying a governance-related component associated with rule of law, control of corruption, political stability, government effectiveness, regulatory quality, and voice and accountability. Second, it builds a Fiscal-Institutional Fragility State Index (FSI) that combines inequality, governance-related ESG performance, international reserves, and GDP growth. Third, it applies a quantum-inspired functional representation and an extended synthetic control strategy to examine country-specific fragility profiles and post-event deviations. The results suggest that fiscal-institutional fragility in the SICA region is heterogeneous and multidimensional. The FSI-based functional estimates identify country-specific local stability configurations, but they do not provide definitive evidence of multiple equilibria or metastable regimes across the full sample. The synthetic control results show suggestive post-event deviations in selected cases, particularly Guatemala, Nicaragua, and the Dominican Republic, although placebo evidence and pre-treatment fit diagnostics do not support strong causal claims. The findings highlight the importance of governance-related ESG performance and macroeconomic buffer capacity for understanding sovereign fragility in small open economies. The proposed framework contributes to the literature by offering an exploratory tool for comparing fiscal-institutional fragility under structural uncertainty, while explicitly recognizing the limitations imposed by small samples, annual data, and counterfactual identification.</p>

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Whose fragility? Institutional resilience, fiscal stress and ESG dynamics in Central America under structural uncertainty

  • 期刊论文

  • 发表日期：

    2026年7月28日

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  • Roberto Yoan Castillo Dieguez

摘要

Despite repeated fiscal reforms, multilateral support, and regional integration efforts, Central American countries continue to experience recurrent episodes of fiscal stress and institutional fragility. This article examines whether sovereign fiscal-institutional fragility in the countries of the Central American Integration System (SICA) can be represented as a multidimensional and nonlinear process shaped by ESG-related governance, social inequality, reserve-buffer capacity, and economic growth. Using annual data for eight SICA countries over 2008–2023, the study develops an exploratory empirical framework with three components. First, it constructs a sovereign ESG index using principal component analysis, identifying a governance-related component associated with rule of law, control of corruption, political stability, government effectiveness, regulatory quality, and voice and accountability. Second, it builds a Fiscal-Institutional Fragility State Index (FSI) that combines inequality, governance-related ESG performance, international reserves, and GDP growth. Third, it applies a quantum-inspired functional representation and an extended synthetic control strategy to examine country-specific fragility profiles and post-event deviations. The results suggest that fiscal-institutional fragility in the SICA region is heterogeneous and multidimensional. The FSI-based functional estimates identify country-specific local stability configurations, but they do not provide definitive evidence of multiple equilibria or metastable regimes across the full sample. The synthetic control results show suggestive post-event deviations in selected cases, particularly Guatemala, Nicaragua, and the Dominican Republic, although placebo evidence and pre-treatment fit diagnostics do not support strong causal claims. The findings highlight the importance of governance-related ESG performance and macroeconomic buffer capacity for understanding sovereign fragility in small open economies. The proposed framework contributes to the literature by offering an exploratory tool for comparing fiscal-institutional fragility under structural uncertainty, while explicitly recognizing the limitations imposed by small samples, annual data, and counterfactual identification.