Investing in the infrastructure of Central America to overcome the challenges of Covid-19

By - World Healthcare Journal

The latest edition of the World Economic Series, Rebooting the World Economy, focused on Central America, an area of great cohesion and diversity.

Chair Rt Hon Stephen Dorrell was joined by His Excellency Mr Iván Acosta, Finance Minister of Nicaragua, Dr Dante Mossi, President of the Central American Bank for Economic Integration, and Ambassadors from the eight SICA/CAIS nations and from London’s diplomatic community in conjunction with Diplomat magazine.

SICA, or the Central American Integration System, of which the UK is an Extra-Regional Observer state, has a combined population of 60m and forms the fourth-largest economy in Latin America. It includes Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Panama, and the Dominican Republic in the Caribbean.

Iván Acosta gave a comprehensive introduction to Nicaragua and the region, which has a population of 59.9m over 523,000 square kilometres. With 29 airports and 47 seaports, it has a GDP of $349,214.4m and $30bn in exports. Although Spanish is the official language in seven countries, there are also 45 indigenous languages spoken, making it a hugely diverse region.

The integration is arranged in five areas that are key to the development of the region. Democratic security, climate change and integrated risk management, social integration, economic integration and strengthening of the region and institutional framework are the main areas of cooperation. Covering 2 per cent of the world’s surface and encompassing 12 per cent of its biodiversity, Central America also has 39 per cent of its forests, making it a valuable ecotourism destination that has to be protected. It also has the geographical advantages of both the Pacific Ocean and the Caribbean Sea, giving access to Asia and Europe as well as North America.

The impact of Covid-19 

So far the region has seen 425,020 Covid-19 cases with 266,766 recoveries, equating to 28 per cent of Latin American cases. The hardest hit country has been the Dominican Republic, and the pandemic has exposed the divisions within the region in terms of economic impact. The coronavirus pandemic is expected to lead to a further increase in poverty as a result of increased job losses and decrease in income, with the sharpest predicted drop in GDP estimated to come in El Salvador.

“This economic impact is generating pressure on debt levels, increasing the public deficit and also threatening the food security and sovereignty of the population,” Mr Acosta said. “This will deepen inequality in the region, which will have negative effects on social cohesion. In consideration of the United Nations Development Programme for Latin America as a whole, this could mean a setback of more than a decade of progress in reducing multidimensional poverty.

“Although Covid 19 is the most recent global crisis for Central America, with climate variability, climate change and other risks for the medium term, we are already one of the most vulnerable regions in the world. ” 

Trading partners 

The US is the main trading partner for Central America, closely followed by Central America itself and then by the UK and Europe. The recovery plan post-Covid includes increased spending on infrastructure to improve communications, with more roads and increased rail construction to come, for example in Costa Rica, which is building an electric railway to transport cargo to its Caribbean coast from the interior. Additionally there is more public investment in energy and communication infrastructure.

Dr Dante Mossi, President of the Central American Bank for Economic Integration (CABEI), picked up on this theme as he outlined the investment opportunities for UK companies and investors in the region. The CABEI is a distinguished development institution serving Central America and Cuba, and is rated AA by Standard & Poor’s.  

The UK has signed a free trade agreement with the region and is considered an important trading partner. The region has begun to use public-private partnership models more and, as a result, is engaged in larger projects, bringing many opportunities not just in road and rail but also in energy, logistics and healthcare.

“All of a sudden, everyone wants trains because they have discovered that the modes of transportation are not enough and because the cargo volumes are actually very high. We also need cheaper electricity,” Dr Mossi said. “So at CABEI we are introducing natural gas to the economy. We finance a very modest part of our billion-dollar project in Panama so the project developer was very happy to have CABEI involved. We have also developed gas projects in the Dominican Republic and we are seeking to bring another gas project to Honduras in the coming year. ” 

In the middle of the Covid crisis CABEI went through a capitalisation process from five to seven billion dollars. “We still have two hundred million dollars of capital available. And I would love the UK to have a little slice of CABEI,” he added. “It will give enormous access to the region. We also have our own revolving fund to prepare projects and we have seen some engineering companies from the UK compete successfully for these contracts. It’s a fantastic opportunity for SMEs, and we advertise everything in English and Spanish. ”  

He finished by mentioning the direct British Airways flights between London and Costa Rica, opening up a market of nearly 60m people to British businesses.

David Lelliott OBE, the British Ambassador to El Salvador, echoed Dante Mossi’s comments and expanded on the support that can be given to UK companies looking to do business in Central America. The government of El Salvador is very keen to deliver infrastructure projects and the UK is ideally placed to help with sector knowledge and experience. A strong diplomatic presence with embassies and high commissions in six of the eight countries is a big advantage and the Ambassador stressed the active engagement undertaken by them.

Active debate 

Discussions following the presentation focused on the level of internet connection locally, which is large and growing, and the reality of opening up the region while Covid-19 is still ongoing. The event concluded with the understanding that, while the pandemic has opened up sharp economic divisions among the populations of some countries, the answer to rebooting the economy lies in concrete infrastructure investment to overcome the current challenges.

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