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Mesoamerica renews push towards integration

The presidents of Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Panama, Mexico, Colombia and the Dominican Republic will meet tomorrow, Oct. 26, in Cartagena, Colombia at the XII Summit of the Tuxtla Mechanism for Dialogue and Coordination. The heads of state will be informed of the progress made by the Mesoamerica Project in terms of regional integration and will decide further courses of action.

Luis Alberto Moreno, president of the Inter-American Development Bank, will attend the summit along with representatives of other multilateral organizations that have been part of the Mesoamerican integration process. This process goes beyond trade and includes issues such as energy, transport, vulnerability to natural disasters, climate change, investment planning and regional harmonization of rules and regulations.

Key sectors

Integration in some sectors, such as energy, already shows significant progress. The Electrical Interconnection System for Central America (SIEPAC), a 1,800 km power line that links six countries, is 93 percent completed. A Regional Electrical Market has been put in place. This infrastructure is complemented by the existing electrical interconnection between Guatemala and Mexico, and a project to interconnect Panama and Colombia.

The IDB has invested around $280 millions in SIEPAC, a project that has generated 1,000 jobs. SIEPAC will improve power supply, increase investment and reduce power generation costs up to 20 percent in participating countries.

Transportation is another key sector. At last year’s Tuxtla Summit, which took place in Costa Rica, participating countries agreed to accelerate the rehabilitation of the Pacific Corridor, a 3,200 km road that offers the shortest route between Panama and Mexico. The road is the region’s main logistical corridor, with 95 percent of cargo using it.

The plan includes road optimization and maintenance, traffic safety, weight and size standardization and border checkpoints outfitting. The corridor will improve regional competitiveness as it reduces transportation costs and times and facilitates access to markets and the integration of productive chains. Transportation times should decrease from 190 hours (8 days) to 54 hours (2.25 days) in the next 5 years.

Responding to cargo bottlenecks generated by checkpoints, border authorities have implemented an automated procedure called International Merchandise Transit (TIM) that unifies information in a single document, valid for every regional border authority.

TIM simplifies and optimizes paperwork at border checkpoints. It is currently used in six checkpoints in four countries in the region: Mexico, Guatemala, El Salvador and Honduras. TIM is expected to extend to Nicaragua, Costa Rica and Panama in the first quarter of 2011. Eventually, TIM is expected to be adopted in all of Central American border checkpoints – on land, ports and airports.

These improvements would have only a short term impact  if the region’s vulnerability to natural disasters is not taken into account. The Mesoamerican Territorial Information System (SMIT) was created to develop a protocol that will allow countries to share territorial information. In that sense, it’s linked to the CAPRA Initiative, a regional platform to identify disaster risks in each country and design financial and hedging instruments, such as contingent loans, reserve funds and local insurance markets.

Before the Cartagena Summit, Mesoamerican Finance and Economy Ministers met in Washington with President Moreno and top IDB officials to discuss investment needs and improve coordination. President Moreno stressed that the recent increase in the Bank’s capital renews the IDB’s historic commitment to integration, which is now one of its five institutional priorities.

Boiler Plate

Mesoamerica Project is a dialogue, coordination and cooperation mechanism supported by the IADB to articulate integration efforts and improve management and execution of projects designed to improve the region’s quality of life.