The UK’s export credit agency, UK Export Finance (UKEF), has signed a partnership with CABEI, Central America’s leading development bank, to encourage joint financing of major clean energy, infrastructure and construction projects.
This cooperation agreement guarantees a closer relationship between the UKEF and the highest rated borrower in Latin America.
Trade between the UK and Central America was worth over £1.7 billion in 2020.
Supporting UK business
Both institutions will help finance major projects in Central America that involve UK exports, supporting businesses and jobs in the UK.
Governments and businesses in Central America looking to raise funds to develop larger projects can benefit from working with CABEI, while also accessing UKEF’s support that is aimed at reducing and spreading the cost of financing for buyers of UK exports.
Countries that can benefit from the joint financing agreement include the Dominican Republic, Panama, Guatemala, Honduras, El Salvador, Nicaragua and Costa Rica.
Greater presence
Last year, UKEF increased its funding limits for a number of countries in Central America as it looked to establish a greater presence in the region.
At least £2.5bn is now available for new business in each of Guatemala, Honduras and Panama and £1.5bn for Costa Rica, El Salvador and Nicaragua.
Boost
This UKEF-CABEI MoU aims to boost trade links and builds on the UK-Central America trade association agreement signed in August 2019.
According to law firm Scornik Gerstein, the agreement was secured to ensure that the UK and the six Central American countries covered would benefit from continued trade after the UK left the European Union.
The deal came into effect at the end of the UK’s transition period of leaving the EU on 31 December 2020.
Trade commitments
The 2019 comprehensive agreement established a political and economic association between the UK and Central America.
It covers both trade in goods, including provisions on rules of origin, preferential tariffs and quotas, and trade in services.
It also contains commitments in areas such as intellectual property, notably geographical indications, and government procurement.
Central America
Central America is home to some of the world’s fastest growing economies, including Mexico, which the government predicts will be a top 10 world economy within a generation.
The UK signed a continuity trade deal with Mexico in December and started talks on a £5bn trade deal in March that promised an ‘Aztec-Brexit bounce’, the Express reports.
However, as reported in IOE&IT Daily Update, the deal was rendered obsolete after the EU signed a more generous and comprehensive deal between its 27 members states and Mexico.
According to a report from the House of Lords’ International Agreements Committee, the UK could now have to wait another three years to catch-up with the EU in trade with Mexico.