Resources to support projects to reduce transport and logistics costs in Latin America and the Caribbean

CALGARY, Canada – The Canadian, Mexican and U.S. governments will contribute $13 million to a regional infrastructure integration fund to be managed by the Inter-American Development Bank (IDB), supporting cross-border projects designed to reduce transport and logistics costs to expand trade.

In a recent study, the IDB estimated that Latin America and the Caribbean is at 50 percent of its intra-regional trade potential due to insufficient regional infrastructure and a still imperfect trade and regulatory architecture, suggesting that countries should prioritize integration projects to reduce trade costs, boost the region’s export capacity and promote a better distribution of the benefits of deeper integration.

The contributions were announced on the margins of a meeting of finance ministers of the Americas, which took place here during the annual meeting of the IDB’s Board of Governors. The fund is expected to reach $20 million, with additional contributions from other donors.

“Expanding economic engagement in the Americas and building resilient and sustainable economies through increased trade and investment makes us all stronger,” said Canadian Finance Minister Jim Flaherty, whose country is contributing $5 million to the fund, in a statement made on March 25.

“Canada recently made unprecedented investments in infrastructure in our own country, so we know full well the benefits regional infrastructure will bring,” added Flaherty, who chaired the ministerial meeting.

“Infrastructure investment is of utmost importance for the integration of Central America and the Caribbean,” said Mexican Finance Secretary Ernesto Cordero. “Also, a more integrated Latin America and Caribbean region will enhance the growth potential of the global economy” he added.

President Barack Obama coined the fund the “Crossroads Fund”, recognizing the strategic location of Central America and the Caribbean as a point of encounter of the Americas. He announced his government’s $5 million contribution to the fund last week during a visit to El Salvador, where he underscored the need to increase trade and economic growth across the region.

Under the framework of the existing Fund for Integration Infrastructure (FIRII), the IDB created a new multi-donor window to support its mandate on regional and global integration. This window will allow the Bank to leverage its traditional lending resources with innovative financing mechanisms to underpin high-impact cross-border infrastructure projects and efforts to harmonize regional trade-related regulatory frameworks.

Using resources from this fund, the IDB will be able to provide countries in Latin America and the Caribbean with an incentive to invest in cross-border projects by lowering overall project costs. The Bank will work with governments in the region to identify priority projects.

Under a capital increase agreement reached last year among its 48 member countries, the IDB aims to boost its grant and lending for regional integration-related projects, including a commitment to reach 15 percent of its annual lending by 2015.