The Contadora negotiating process was initiated in January 1983 at a meeting of the foreign ministers of Mexico, Venezuela, Colombia, and Panama on Contadora Island in the Gulf of Panama. The idea of a purely Latin American diplomatic effort to stabilize the Central American situation and prevent either military confrontation between neighboring states or direct military intervention by the United States was attributed to then-president of Colombia Belisario Betancur Cuartas. These "Core Four" countries served as mediators in subsequent negotiating sessions among the five Central American states.

By September 1983, the negotiations had arrived at a consensus on twenty-one points or objectives. These included democratization and internal reconciliation, an end to external support for paramilitary forces, reductions in weaponry and foreign military advisers, prohibition of foreign military bases, and reactivation of regional economic mechanisms such as the Central American Common Market. The twenty-one points were incorporated into a draft treaty, or acta, one year later.

In September 1984, the Nicaraguan government took the other four government delegations by surprise with its call for the immediate signing of the acta as a final treaty. The governments of El Salvador, Honduras, Guatemala, and Costa Rica had been suspicious of Nicaraguan intentions throughout the negotiating process. This precipitous rush to finalize the process forced the four to reassess their positions and to examine more closely a document that they previously might have viewed as little more than a diplomatic exercise. The United States government, which had been advising the Salvadorans informally with regard to the negotiations, strongly recommended against signing the acta, citing its lack of adequate verification and enforcement provisions, its deferral of the issues of reductions in arms and foreign advisers, the freezing of United States military aid to El Salvador and Honduras, and the vagueness of the sections on democratization and internal reconciliation. Although Nicaragua's action had the effect of embarrassing the governments of the other four states and portraying Nicaragua before world public opinion as the only serious negotiator in the Contadora process, it ultimately succeeded in drawing the remaining four Central American states into closer consultation. This collaboration led to the October 1984 Act of Tegucigalpa in which the governments of El Salvador, Honduras, and Costa Rica emphasized their commitment to the establishment of pluralistic democratic systems and their belief that simultaneous and verifiable arms reductions were a necessary component of this process. The Guatemalan government was represented in the discussions in the Honduran capital but declined to sign the resultant document.

Although improved verification procedures were negotiated, the talks bogged down by mid-1985. The Nicaraguan delegates rejected discussion of democratization and internal reconciliation as an unwarranted intervention in their country's internal affairs.c13 s. The other four states maintained that these provisions were necessary to ensure a lasting settlement. Another major sticking point was the cessation of aid to insurgent groups, particularly United States aid to the contras. Although the United States government was not a party to the Contadora negotiations, it was understood that the United States would sign a separate protocol agreeing to the terms of a final treaty in such areas as aid to insurgents, military aid and assistance to Central American governments, and joint military exercises in the region. The Nicaraguans demanded that any Contadora treaty call for an immediate end to contra aid, whereas the core four countries and the remaining Central American states, with the exception of Mexico, downplayed the importance of such a provision. In addition, the Nicaraguan government raised objections to specific cuts in its military force levels, citing the imperatives of the counterinsurgency campaign and defense against a potential United States invasion. In an effort to break this impasse, the governments of Argentina, Brazil, Peru, and Uruguay announced in July 1985 that they were joining the Contadora process as a "support group" in an effort to resolve the remaining points of contention and achieve a comprehensive agreement.

Despite the combined efforts of the core four and the "support group," the Contadora process unofficially came to a halt in June 1986, when the Central American countries still could not resolve their differences sufficiently to permit the signing of a final treaty draft. Later that month, the United States Congress approved US$100 million in aid to the contras in spite of numerous requests from the Contadora group to refrain from such unilateral action. Although the core four and support group countries vowed to continue their diplomatic efforts and did convene negotiating sessions subsequent to the unsuccessful June 6 meeting in Panama City, the Contadora process was clearly moribund. The Central American states, with the exception of Nicaragua, resolved to continue the negotiating process on their own without the benefit of outside mediation.

Data as of November 1988