CABEI chief outlines strategy to boost Central American farm exports

Strengthening infrastructure is a key piece of the Central American Bank for Economic Integration’s strategy to increase access to the U.S. market for regional farmers. Connecting farmers to a larger market for their goods can help lift them out of poverty during a time when Central America is still reeling financially from the COVID-19 pandemic and climate change is posing challenges for their productivity, according to CABEI Executive President Dante Mossi. But getting their goods to those markets also requires access to electricity and roads, as well as water and sanitation. “If you don’t have one of those, you will never get out of poverty. At CABEI, we actually recognize that we are mostly an infrastructure bank. So we have been financing ports, airports, highways, customs offices everywhere, because the access is critical,” Mossi told Devex. “The logistics are very important.” CABEI was created in 1960, around the same time as the Inter-American Development Bank. Its founders felt that IDB would be dominated by larger economies, so they sought to build a smaller regional grouping that would be advantageous to the countries of Central America. The bank’s smaller size —CABEI approved $3.6 billion in 2020, compared with IDB’s $21.6 billion — allows it to approve projects more swiftly than larger development banks can, Mossi said. CABEI’s current institutional strategy, which lasts until 2024, focuses on helping Central America compete in global markets. This includes increasing the productivity and sustainability of the agriculture industry. Farmers in the region need assistance with infrastructure on multiple levels, Mossi said. The first is access to irrigation and roads in their communities, which allow them to farm successfully and then get crops out of their fields. Rainfall has become increasingly unpredictable as farmers struggle with the impacts of climate change, so the bank has focused on financing dams to facilitate irrigation. Modeled after a successful project in the Dominican Republic, CABEI’s dams initiative is helping build a handful of earth dams in Honduras. Dams that don’t use concrete are more environmentally friendly, Mossi said. “The purpose is twofold. One, and the most important, is for human and irrigation purposes — particularly during the dry season, because it really gets dry,” Mossi said. “No. 2 is to avoid floods.” He said that although countries in Central America were realizing the damage that climate change had been doing to their agriculture industries over the past few years, many governments were not in a financial position to spend on mitigation efforts. Financing from the bank allows them to consider projects that can help safeguard their water supply without having to shoulder the burden on their own. The bank approved a capital increase from $5 billion to $7 billion during the pandemic. Countries still paid what they owed, despite the financial stress that governments were experiencing during the health crisis — demonstrating the bank’s value for Central America, Mossi said. The increase also significantly boosted the bank's ability to provide loans, he said. “Now is the time for the regional bank to make a difference, because the voices in Washington are somehow a bit far from where the action is.” --— Dante Mossi, executive president, CABEI CABEI is an accredited institution with the Green Climate Fund, meaning it works with countries to develop projects that are then approved by GCF. The bank has about $585 million in approved GCF funds that it has spent on projects including reforestation initiatives and an electric train in Costa Rica, Mossi said. In addition, GCF has approved a $174.3 million loan that CABEI will match with an equal amount of its own money to support livelihood projects in the so-called Dry Corridor of Central America. “People leave because of weather-related challenges, and they migrate,” Mossi said. “Most of the migrants from Central America are coming from the Dry Corridor.” Farmers must consider what crops will best allow them to take advantage of the U.S. export market so they can make a living, he said. “Once we got the irrigation in place, then the second thing is, what do they need to grow? Of course, a farmer in central Honduras will not compete with a farmer in Iowa in producing corn or wheat. … But we can compete in terms of providing, for example, a nice mango during the winter months,” Mossi said. “They were cut one week, and the second week they are [on] the shelf in the supermarket. So it’s really fresh produce from Central America being offered to these markets.” The final step is ensuring access to ports, Mossi said. To take advantage of the region’s proximity to the U.S., CABEI helped finance the construction of a “dry canal” in Honduras — a highway that facilitates access to a northern port city for agricultural products and other goods. The port has a U.S. customs office, so goods are sent as domestic cargo and can reach the U.S. quickly. Fresh seafood, including tilapia and shrimp, is also shipped from the port daily. This gives the region an advantage over Asia, Mossi said, because the longer shipping distance requires seafood from across the Pacific to be frozen before transit. “We are very focused on doing these right types of investments, and we haven’t done it alone. We have lots of help from our member countries and friendly countries,” Mossi said. “Now is the time for the regional bank to make a difference, because the voices in Washington are somehow a bit far from where the action is. That’s the advantage we have over big boys.”