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How Cabei is pushing the electromobility agenda for Central America

Bnamericas Published: Tuesday, November 15, 2022
How Cabei is pushing the electromobility agenda for Central America

Central America wants more and more electromobility projects, which benefit the user and the environment. According to the president of the Central American Bank for Economic Integration (Cabei), Dante Mossi, the funds available to its member countries could reach US$1bn. However, problems such as the lack of electric buses and the paperwork for rail projects have slowed down development. 

Mossi spoke to BNamericas about these obstacles and what the development bank is doing to overcome them.

BNamericas: What are the most important mobility projects for Central America?

Mossi: Electromobility has several dimensions, perhaps the most ambitious and with the highest ticket is electric mobility through trains, such as the San José train [in Costa Rica], the San Salvador train, the train in Guatemala, and in the Dominican Republic, they are making great progress. These are projects that unfortunately progress slowly since they are very complex, but they’re moving ahead. In fact, in the Dominican Republic we have already approved the loan for an extension of metro line 2C, and recently we are also in talks to finance the other expansion of Santo Domingo towards its airport, so the issue of electric mobility is an issue that we’ve been supporting a lot since I joined [the bank] four years ago, so initiatives are large and slow, as feasibility studies take time.

I recognize that the first government that put the issue of electric mobility on our agenda was Costa Rica, because it’s a country that has 99.9% renewable energy generation and they told us: to complete our mission of being a sustainable country we need to decarbonize the transport sector. Our agenda is to listen to the demands of the countries, and not have noise from other places that comes with global ideas, but with local ideas.

BNamericas: What other rail electromobility projects do you have in the region?

Mossi: We have two projects in Costa Rica, the San José electric train, and there is the TELCA, which is the Limón electric freight train on Costa Rica’s Caribbean that connects Limón with the producing areas in the north of the country and extends far into the middle of Costa Rica. There is the El Salvador train, which is about 60km long, linking San Salvador with the port of Acajutla, which has just finished its feasibility study. In Guatemala we’re working on the interoceanic train project that runs from coast to coast passing through Guatemala City. In the Dominican Republic we’re doing a feasibility study for the train between Santo Domingo and Santiago de los Caballeros, which is the second largest city. We also already have the legal authorization for the loan for the extension of the metro to the east of the city of Santo Domingo. Those are the projects already underway that together I estimate are US$5bn.

BNamericas: What have been the main obstacles to developing these projects?

Mossi: Every time a government changes, it rethinks projects, so the design and preparation of technical documents for a railway take a lot of time. For example, in Costa Rica it took the entire past administration to prepare documents to bid for the electric train. When the new government arrived it was decided to prioritize one of the three lines that the previous government wanted to do simultaneously, and that's fine, but obviously this introduces a delay. A change of administration is a change of priorities, and it’s natural. Even Belize has a rail initiative to connect with the Maya train in northern Belize near the [Mexican] state of Yucatán.

BNamericas: If the projects are progressing slowly, why has it become such an important issue in the region?

Mossi: One of the issues that has concerned us in Central America is the impact of fuel on the economy. Unfortunately, in Central America we don’t produce oil and every time the price of fuel varies, the price of fuels and derivatives rises. At that time, private consumption drops and obviously generates less economic activity throughout the region. This applies to all Cabei member countries, such as Belize, Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, Panama and the Dominican Republic. So [electromobility] is one of the ways to get out of this dependence on fuel prices. 

It’s also good for the environment. There is some disbelief regarding the idea that electric mobility is convenient for our pockets. Costa Rica created a caravan of Central American electric cars, which departed from Costa Rica and went up to Guatemala to show that it’s possible to save money, that it’s possible to help the environment. Climate change affects us a lot in Central America, and I think the world has heard from the financiers, but now they need to sell us the cars. We are responding to this demand from civil society. It has also become a necessity for companies that are green and want to be totally green and sustainable.

BNamericas: Is there a specific area of electromobility that you are focusing on?

Mossi: Our main focus was on buses as a good form of electric public transport. Many countries are already very advanced: El Salvador, Costa Rica and Panama, and we have supported these countries to the extent possible to change their legal frameworks and allow the entry of electric mobility. There are barriers that are sometimes absurd but that are the law. In both Guatemala and Honduras, installing a plug to connect the car by law would be selling electricity because I’m selling electricity to a third party, so it’s necessary to modify the law to clarify that this is a private service. These are issues that Panama, Costa Rica and El Salvador have already resolved, Nicaragua is also quite advanced on that issue.

BNamericas: What is the status of the projects to introduce electric buses in these countries?

Mossi: We have financing, we have legal frameworks that are taking shape, but what we don't have are the vehicles. That has been the Achilles heel that we have to attack now: how do we get the big car companies to sell them to us. The only supplier that has allowed the purchase of a certain number of buses has been China with the BYD brand, and there are no more... The problem, as they explain to us, is that the large transport companies require not only the sale of the vehicle, but also the maintenance, that is, having a dealer to turn to in case I have to maintain my transport unit.

We have also spoken with Mexico because they assemble vehicles there to see how we approach these markets, since we have a free trade agreement with Mexico and the United States, but there are no vehicles.

That is the idea of the forum that we’re organizing [on November 21], we’re working with the United States government to demystify that Central America is so backward, so underdeveloped, that we’re not capable of buying an electric vehicle.

In Honduras there are 500 buses that want to migrate to electric, in Guatemala there is a tender for 1,000 electric buses and they have complained that only one Chinese company, BYD, has arrived, so you cannot bid with only one, those are the challenges that the region has. The Nicaraguan government told us: If there is a supply, I am willing to pass a decree that all the cars I buy from now on are electric, and I have financing for them. What we don't have is the supply. So we're doing this forum in Washington  as a way of knocking on Uncle Sam's door to tell them: here we are, we want to do business.

BNamericas: What other countries have you approached?

Mossi: We went to Taiwan and Korea. In Korea we saw the factory and they didn't want to sell me vehicles because they were going to send them to the United States. We're even in talks with a company called Blink on the charger issue. We have a Korean trust fund, but how do we convince them to start putting more of those electric chargers because Blink's experience tells us that if they don't put the chargers people won’t buy. The beautiful thing about Central America is that there are already very advanced countries, one goes to El Salvador and there are already electric chargers everywhere, in Costa Rica there are already, in Panama they say there are, the Dominican Republic already has them, so it’s a matter of bringing supply and demand closer.

In Taiwan they told us that they needed a partner to assemble the vehicles in the destination country. The business of assembling is not complicated. We went to the assembly factory in Taiwan and I was astonished how easy it is: it's like putting together a big Lego, and the profile of the people who do it is not electrical mechanical engineers with a master's degree in vehicle assembly; we’re talking about technicians and they teach them how to do it. They say that the real business of the electric vehicle is a business of optimal battery management, done remotely from Taiwan. They do it with all the countries with whom they have commercial relations: India, Indonesia, Vietnam and the Philippines. It sounds very attractive. 

The only thing that has slowed us down a bit with Taiwan is that only recently they began to lift travel restrictions, but it’s the only one that has told us they don’t have problems with the supply chain. In Korea, in essence, they told us about the limitations of the supply chain, so all the vehicles are being sold to the United States and Europe because they are already on order, there were already advanced orders. It's like the vaccine story: who's first in line and with the biggest wallet. That's the signal we want to give manufacturers: tell them we're ready to buy the vehicles, obviously not at a retail level.

BNamericas: Do you have an estimate for when the replacement of vehicles could begin?

Mossi: We signed an agreement with the International Energy Agency [IEA] and they talk about replacing one million vehicles. It’s a little less than that, but only in Honduras the goal we have is to replace 50,000 taxis, 500 medium-range buses, and motorcycles. The market is attractive.

BNamericas: But have you still not estimated when the vehicles might start to arrive?

Mossi: My ambition is to start next year because the financing is already there. The funds are already available and they are charging me for having the funds without doing anything. In the forum that we’re organizing we are inviting the largest dealers in the region.

BNamericas: If we could talk about a fund for mobility in Central America at Cabei, how much would this fund be?

Mossi: They are not exclusive for electromobility, but today [Nov. 10] we signed a 250mn-euro agreement with KFW, which is for resilient green growth, which includes electric mobility and renewable energy. We have US$270mn with the green climate fund, which are credits that we’re giving to the consumer at 3.5%, five years and two years of grace. I would say that in essence we have about US$650mn available for electric mobility, and if we include the trains it reaches a billion dollars. The bag is really very large, they are funds that we have obtained from friendly entities, but Cabei also has its own funds.

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