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The Central American crisis began in the late 1970s, when major civil wars and communist revolutions erupted in various countries in Central America, causing it to become the number one region among the US's foreign policy hot spots in the 1980s. In particular, the United States feared that victories by communist forces would cause the rest of South America to become isolated from the United States if the governments of the Central American countries were overthrown and pro-Soviet communist governments were installed in their place. Throughout the second half of the twentieth century, the United States often pursued its interests through puppet governments and the elite classes, whose members tended to ignore the demands of the peasant and working class.
In the aftermath of the Second World War and continuing into the 1960s and 1970s, Latin America's economic landscape drastically changed. The United Kingdom and the United States both held political and economic interests in Latin America, whose economy developed based on external dependence. Rather than solely relying on agricultural exportation, this new system promoted internal development and relied on regional common markets, banking capital, interest rates, taxes, and growing capital at the expense of labor and the peasant class. The Central American Crisis was, in part, a reaction by the lower classes of Latin American society to unjust land tenure, labor coercion, and unequal political representation. Landed property had taken hold of the economic and political landscape of the region, giving large corporations a lot of influence over the region and forcing formerly subsistent farmers and lower-class workers into very harsh living conditions.
The Sandinista National Liberation Front (FSLN) overthrew the 46-year-long Somoza dictatorship in 1979. However, the United States opposed the Nicaraguan revolution, and instead backed the Somoza dictatorship and later the Contras.
Fought between the military-led government of El Salvador and the Farabundo Martí National Liberation Front (FMLN), a coalition or umbrella organization of five left-wing militias. Over the course of the 1970s, significant tensions and violence had already existed, before the civil war's full outbreak.
The United States supported the Salvadoran military government and supplied them with 4 billion dollars, trained their military elites, and provided them with arms over the course of a decade. Israel also actively supported the government forces and was El Salvador's largest supplier of arms from 1970 to 1976. The conflict ended in the early 1990s. Between 75,000 and 90,000 people were killed during the war.[verification needed]
Following a CIA-backed coup ousting Jacobo Arbenz in 1954, civil war ensued in Guatemala between 1962 and 1996. In Guatemala, the Rebel Armed Forces (FAR) fighting against the government were based exclusively in rural areas, and were made up of a large peasant and indigenous population. They ran a multifaceted operation and led an armed mass struggle of national character. Guatemala saw an increase in violence in the late 1970s, marked by the 1978 Panzós massacre. In 1982 the resurgent guerrilla groups united in the Guatemalan National Revolutionary Unity. The presidency of Efraín Ríos Montt (1982–1983), during which he implemented a strategy he called "beans and bullets", is widely considered[by whom?] the war's turning point. The Guatemalan government and the severely weakened guerrillas signed a peace agreement in December 1996, ending the war. Over 200,000 people died over the course of the civil war, disproportionately indigenous people targeted by the Ríos Montt headed military. On 10 May 2013, Ríos Montt was convicted of genocide and sentenced to 80 years in prison.
Going into the Central American Crisis, Honduras's economy was framed by stagnating agricultural production, de-industrialization, deteriorating terms of trade, the continuing problems of the Central American common market, the decline of international financial reserves, salary decline, and increasing unemployment and underemployment. Honduras, like El Salvador, was increasingly dependent on economic assistance from the United States. In Honduras, efforts to establish guerrilla movements foundered on the generally conservative attitude of the population. Nevertheless, fears that the civil wars wracking its neighbors might spread to the country led to the killings and disappearances of leftists, spearheaded by the army's Battalion 316. Relatively stable Honduras became a key base for the Reagan administration's response to the crisis. US troops held large military exercises in Honduras during the 1980s, and trained thousands of Salvadorans in the country. The nation also hosted bases for the Nicaraguan Contras.
By the late 1980s, El Salvador, Guatemala, and Honduras all implemented reforms such as privatizing state companies, liberalizing trade, weakening labor laws, and increasing consumption taxes in attempts to stabilize their economies. As of 2015[update], violence still reigns over Central America. A common legacy of the Central American crisis was the displacement and destruction of indigenous communities, especially in Guatemala where they were considered potential supporters of both the government and guerilla forces.
Several Latin American nations formed the Contadora Group to work for a resolution to the region's wars. Later, Costa Rican President Óscar Arias succeeded in convincing the other Central American leaders to sign the Esquipulas Peace Agreement, which eventually provided the framework for ending the civil wars.