New UK trade partnership in Central America

New Initiative to Boost UK Trade & Investment with Central America

The UK’s export credit agency, UK Export Finance, has just concluded a memorandum of understanding with the Central American Bank for Economic Integration, CABEI.

UKEF offers credit guarantees for British exporters wherever the export destination – indeed it used to be known as the Export Credit Guarantee Department, still its official name – and acts as an independent agency within the Department for International Trade. As well as supporting exports in the obvious sense, UKEF also offers insurance – and sometimes its own direct lending – for infrastructure projects overseas that have significant elements of UK procurement or management.

CABEI is the Honduras-based, 60 year-old multilateral development bank for Central America, which in our definition also includes the Dominican Republic and indeed Cuba. Like the Washington institutions such as the World Bank or the Interamerican Development Bank, CABEI is capitalised by its member countries and raises significant funds for on-lending and the financing of projects through the international bond markets. In fact, CABEI is the highest rated bond-issuer in Latin America and has an impeccable reputation among global banks and their fixed-income investor client base.

Although there is significant trade between the UK and Central America – in, for example, agricultural produce such as coffee and fruit coming to Britain, and British exports from pharmaceuticals to whisky going there – the region has not been at the forefront of UK commercial relations. The new MoU aims to change that.

One of the ideas behind CABEI-UKEF collaboration is to start to shape a ready made route-to-market to help British contractors to win project tenders in Central America. The region – like most of Latin America – suffers from an infrastructure deficit. And although many might be surprised to learn how far several of the region’s countries have come for example in terms of renewable power generation, obvious challenges remain.

A couple of those come inevitably from geography. On the one hand, transport of goods in the isthmus is obviously a north-to-south story and the reverse. Much transport currently is by road – whereas the region is a clear candidate for a rail network linking its major cities. CABEI has a medium-term strategy to build just such a system – and an electric one at that. Several components of that are already under development. Much of the Central America’s trade is intraregional, so equally a littoral maritime transport system is part of the bank’s longer-term strategy. British industry has a big role to play, if it can be encouraged to do so.

At the same time, the geography of Central America also gives rise to the well-known problem of illegal immigration to the US, plus a greater susceptibility to extreme weather events, such as last year’s hurricanes Eta and Iota. UK investment can help mitigate the first through enabling better health and education outcomes while generating employment; the second through scientific and engineering know-how and the UK’s nett-zero commitment.

Trains, ports, power and a whole range of social and environmental projects – such as improving educational, medical and sanitation infrastructure – together offer openings for British companies to get involved. CABEI and UKEF have launched their partnership precisely because of British expertise and experience in the design, procurement and management of sustainable infrastructure projects. The UK is of course the home of Public-Private Partnerships too. Central America is keen to benefit from the transfer of that financial ‘technology’.

The UK had Central America as one its early counterparties to a continuation free trade agreement after leaving the EU. Clearly there are great prospects now in the region for Global Britain. What’s more, in terms of economic growth, Central America has outperformed wider Latin America over several cycles. From the UK’s perspective, the new relationship between its government agencies and the most important financial and developmental actor in Central America brings terrific opportunity.

Christopher Garnett

Principal Permanent Adviser to Executive President

United Kingdom

Central American Bank for Economic Integration

[email protected]

To see the official news on the CABEI-UKEF MoU – and an article by CABEI's president and by UKEF’s CEO – please see:

https://ijglobal.com/articles/157371/uk-enters-new-era-for-trade-with-central-america

For more information about each partner, please see:

https://www.bcie.org/en/

and:

https://www.gov.uk/government/organisations/uk-export-finance