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October 25, 2013

Competitiveness of CABEI in the sectors of energy infrastructure, productive infrastructure, and social infrastructure

By The Project Formulation Department

Amayo, Nicaragua.
Amayo, Nicaragua.
Since it was founded in 1960, the Central American Bank for Economic Integration (CABEI) has become one of the main sources of financial resources and technical assistance for the creation of national and regional initiatives in the areas of competitiveness, integration, and sustainable development in the Central American Isthmus, positioning itself as the main source of multilateral funding for the Region. In this context, CABEI has been implementing its Institutional Strategy 2010-2014: "Competitiveness with Integration and Social Development," within which it seeks to increase impact on development, support fulfillment of millennium goals, and contribute to the economic reactivation of the Central American region. The strategy is framed within three fundamental axes: Social Development, Competitiveness, and Regional Integration; they are linked by the cross-cutting axis of Environmental Sustainability, with the goal of guaranteeing that outputs from the main axes have long-term environmental sustainability.

CABEI's Mission, as expressed in its Constitutive Agreement, establishes that the Bank will have for an objective "to promote the economic integration and the balanced economic and social development of the founding countries." Additionally, the vision of CABEI is: "To be a strategic partner for improving the quality of life of Central Americans through the sustainable development of the land and its resources."

The Institutional Strategy 2010-2014 establishes six focus areas so that CABEI resources granted through credit approvals, programs, and technical cooperation will have a direct impact on the objectives embodied in the strategic axes. The of Energy Infrastructure, Productive Infrastructure, and Social Infrastructure sectors correspond to three of the principal focus areas found within the strategy, which represent jointly 87% of total approvals by CABEI in 2012, which grew to USD$1.5201 billion.

Highway to Puerto Cortés, Honduras.
Highway to Puerto Cortés, Honduras.
It is important to highlight that the initiatives framed within the sectors of productive, energy, and social infrastructure have a direct impact on the competitiveness, integration, and social development of the Central American region. In its more than 50 years, CABEI has approved more than USD$4.967 billion for the focus area of Productive Infrastructure, a figure that represents 27% of total approvals in the Bank's history. Among the initiatives of greatest impact in the productive infrastructure sector at the regional level in which CABEI is participating are: The Rehabilitation and Expansion of 240 Kilometers of Route CA-2, West and East in Guatemala, that is part of the pacific corridor in the International Network of Highways (RICAM) and that along its course will benefit more than 2.4 million of the country's residents; the Construction of the Logistics Corridor Villa de San Antonio - Goascorán, Sections I, II and III in the Republic of Honduras, which is part of an inter-oceanic corridor in the RICAM to join the ports of La Unión in El Salvador with Puerto Cortés in Honduras, benefitting more than 500,000 residents in its zone of influence; the IV and V Project of Highway Rehabilitation and Maintenance of the Republic of Nicaragua, using intensive labor, according to the method of the World Bank's "Concrete Block Road Program" (MCA), creating more than 1,762 jobs at the local level and regionally benefitting more than 340,000 residents in more than 36 marginal communities; among others.

With the goal of continuing to drive investment to productive infrastructure, CABEI has a sector support strategy with two strategic guidelines: i) To design, develop, and implement financial solutions that incentivize the development of the Region's infrastructure; and ii) To incentivize, in coordination with other stakeholders, the development of a favorable investment climate to invest in the development of infrastructure in the Region. Every one of the guidelines has a group of programs that include financial solutions for the public sector as well as the private sector, promoting a favorable business climate to attract investment from both sectors. Regarding the energy sector, since its founding, CABEI has approved more than USD$3.560 billion in energy infrastructure investment projects, a figure that represents 20% of total approvals by the Bank. Of the total financial resources directed toward the focus area of energy, around 81% has been destined to electricity generation projects, and the remaining 19% of resources were oriented toward the financing of rural electrification projects, transmission lines, electrical substations and distribution networks that have contributed to the integration and sustainable development of Central American countries. It is important to highlight that of funds awarded for energy generation projects, 79% has been destined toward the development of generation projects with renewable resources, contributing to the creation of more than 8,000 jobs, generating savings in the importation of about 20 million oil barrels, and contributing to the reduction of more than 30 million tons of CO2 in the region.

Geothermal Plant “Las Pailas” in Costa Rica
Geothermal Plant “Las Pailas” in Costa Rica
Recently, CABEI approved the Strategy for supporting the Central American energy sector, created with the general objective of "Providing financial solutions to promote energy efficiency, driving the development of renewable energy sources and reducing dependency on nonrenewable energy sources in Central America." In this context, CABEI has participated in the funding of the energy infrastructure projects of greatest reach in the region, among which stand out the Central American Electrical Interconnection System (SIEPAC); the Hydroelectric project "Reventazón" and the Geothermal Plant "Las Pailas" in Costa Rica; the Wind Farms of "Cerro de Hula" and "Amayo" in Honduras and Nicaragua, respectively; the Hydroelectric project "Xacbal" in Guatemala; the expansion of the Hydroelectric Plant "5 de Noviembre" in El Salvador; among others.

On the other hand, as part of the infrastructure sector, the Bank's focus are in the human development and social infrastructure sector. In this sense, CABEI has continued to support this area through the implementation of projects in healthcare, education, public housing, water and sanitation, and citizen security. According to approvals projections for the year 2013, 34% - that is, more than USD$675 million - will be destined to these areas. Strong support is expected this year for the strengthening of the healthcare networks of Guatemala, Nicaragua, Costa Rica, and Panama, approving about USD$470 million to improve, expand, and build hospitals and healthcare centers. In the education sector, the Government of Honduras will receive support with a school infrastructure improvement program, an investment of USD$30 million, to benefit more than 400 educational centers with preschool, elementary, and secondary education. In the water and sanitation sector, approvals of up to USD$168 million are intended in 2013 for projects seeking to improve water quality, increase coverage, and improve energy efficiency in countries like El Salvador and Costa Rica. Finally, CABEI has faced strong challenges in providing access to funding for public housing and urbanism; nevertheless, since the end of the previous decade until now more than USD$180 million has been geared towards the improvement, expansion, and construction of public housing, benefitting more than 21,300 families throughout the Central American region.

* This essay was published in the Second "Signs of Competitiveness in the Americas" Report - 2013. Click here to access the Report.

- Click here to read about other CABEI's Approved Operations



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