Cabei details CentAm support measures

Central American development bank Cabei has presented economic relief measures, one of which is a 0.10% interest rate rebate from March 1, potentially amounting to US$10mn per country.

The move is part of Cabei’s commitment to help countries’ coronavirus response as US$100mn are being reserved to finance vaccines, health equipment, and support logistics.

Demand for a recently launched US$500mn social bond was so “spectacular” that it enabled the rebate, executive president Dante Mossi (pictured) said at a webinar on Friday.

Guatemala will receive a rebate on US$1.6bn in loans, Costa Rica on US$1.4bn and El Salvador on US$1.1bn. In the last five years, the interest rate has been reduced by 1.35%.

Mossi also said that “last year was a record year, obviously a lot of support [went] to the public sector because that’s where the biggest needs are.” But he added that small and medium businesses also received support and confirmed the approval of a US$2.5bn reconstruction program.

The program will also finance disaster prevention and climate change adaptability projects, and help create opportunities in affected communities. Cabei’s reconstruction efforts related to damage hurricanes Eta and Iota caused last November amount to almost US$4bn, and will focus on Nicaragua, Honduras and Guatemala.

“We will discuss emergent operations for the region including building dams to mitigate floods particularly in Honduras. Almost US$7mn in projects that we’re preparing. Including dams to mitigate floods in the Sula valley, Choluteca zone, the Atlántida and Colón departments,” Mossi said.

An US$80mn vaccine loan for Costa Rica still needs to pass the country’s national assembly. Mossi praised the country for moving the fastest in the region to secure vaccines and for obtaining a US$300mn loan to help small and medium businesses recover from the pandemic. The loan is also pending national assembly approval.

According to Mossi, Costa Rica's large-scale infrastructure projects could impact the region.

“The project of the train in Costa Rica is a lesson for Central America because they’re very long, complicated projects. Once it’s approved, we begin a series of steps that will take years,” he said.

Guatemala is also studying an electric freight train project with Cabei, which Mossi described as “transformational.” And the Dominican Republic, El Salvador and Honduras are considering similar projects.

Cabei plans to help El Salvador with US$800mn, as the country exemplifies the economic problems the pandemic has created.

“The debt level, public debt has increased for a simple reason, because tax income has plummeted. Economic activity has decreased not only in El Salvador but all over the world. So countries have to ask for outside financing,” Mossi said. 

“In El Salvador there’s a high level of debt but what we take into account more than the level of debt is the service of the debt of the country in terms of interest rate payment and if there are capabilities in the country to repay that.”