The Inter-American Development Bank today welcomed Costa Rica’s entry to an agreement to establish a free trade area among Central American countries and the United States, offering its support to help Costa Ricans maximize the benefits of the new accord and mitigate the costs of the transition.
El Salvador, Guatemala, Honduras and Nicaragua last month completed their negotiations with the United States to establish the Central American Free Trade Area (CAFTA). Costa Rica took part in the same rounds but prolonged their discussions until Sunday.
The Central American countries now face the challenge of implementing policies that will allow them to benefit fully from the advantages of free trade, as well as to distribute its fruits equitably and protect groups affected by changing economic conditions.
The IDB, as part of its original mandate, offers its borrowing member countries support on trade and integration issues. Last year it approved nearly $320 million in financing to help Central American nations raise productivity levels in economic sectors that will be gradually exposed to greater foreign competition.
The IDB’s new Lending Program for Trade, Integration and Competitiveness, designed to address countries’ various needs during the transition to free trade, combines loans to support policy reforms and finance investment programs with technical cooperation.
Borrowing countries can use these resources to carry out fiscal and customs reforms, promote exports and investment, upgrade their infrastructure, improve the climate for business, provide relief to small and medium-size enterprises and farmers, and offer training to displaced workers.
The IDB also supports regional integration and infrastructure programs such as Plan Puebla Panama.
Together with other international institutions and bilateral aid agencies, the IDB has assisted the Central American countries from the start of the CAFTA negotiations, helping them identify trade-related capacity-building needs and providing financial and technical resources to strengthen their trade policy management and agreement implementation.