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IDB approves $1 billion program to finance trade credit in Latin America and the Caribbean

The Inter-American Development Bank today announced it will deploy a new financial instrument – a $1 billion International Trade Finance Reactivation Program – to add to a menu of activities designed to help Latin America and the Caribbean reactivate their economies.

The program, approved recently by the Bank’s Board of Governors, is for a two-year term and is expected to help correct the scarcity of export-import financing in the region that has taken place in some countries following economic crises.

"With this instrument the Bank will be helping countries cut the Gordian Knot of tight or nonexistent credit that is a real obstacle to resuming growth," commented IDB President Enrique V. Iglesias. "If a country following a shock loses access to trade credit, it does not have the flexibility to adjust production and seek out new markets and areas of competitive advantage that correspond to the new economic reality. This program offers a chance to help those nations that fell behind regain momentum for both trade expansion and integration."

Loans and guarantees under the International Trade Finance Reactivation Program will be oriented primarily toward assisting the private sector, utilizing the IDB’s own resources to mobilize additional funding from private sources, such as syndicated loans and capital markets. Financing under the program will be channeled to the private sector through private and public financial intermediaries.

The new International Trade Finance Reactivation Program will mobilize the full range of existing IDB financial products to provide fresh resources and to mitigate trade-related risks for institutions that finance imports and exports. Existing trade credit lines will have an opportunity to expand with added protection, and credit lines that have been closed will have an incentive to reopen under risk sharing arrangements.

Financing will be available for pre-export as well as import activities. The IDB may also offer its financial guarantees for structured trade finance transactions backed by future flows of trade and trade-related receivables.

In countries where the government has a role in providing export credit or where private banks fail to supply financing, the program will provide new trade-related loans and the reformulation of existing loans for the provision of short-term trade credit to finance imports and exports. Resources channeled through the public sector are not subject to the total program limit of $1 billion.

Financing will also be available for institutional strengthening and technical assistance in the international trade sector in borrowing member countries.

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