The Inter-American Development Bank (IADB) has announced the approval of a US$400mn Regional Trade Finance Facilitation Program that will provide partial credit guarantees to support short-term credit transactions for exporters and importers in Latin America and the Caribbean.
The programme will establish credit lines for bank coverage for participating banks in IADB borrowing member countries (issuing banks) on their individual trade-related transactions with international banks (confirming banks), with tenors of up to one year.
This IADB project, which will be put in place for an initial period of five years, is the third by the bank’s private sector department under the IADB’s International Trade Finance Reactivation Program approved by the board of governors in 2003.
Under the new facility, the IADB will issue guarantees in favour of confirming banks to support a portion of their exposure to issuing banks on individual eligible transactions.
The programme is designed to assist the economic reactiviation and growth of Latin America and the Caribbean by counteracting the effects of volatile international capital flows through maintaining and even increasing the availability of short-term funding for international trade. The programme is also expected to contribute to an increase in intraregional and extra-regional trade.
By adopting a programme that is similar to those adopted by other regional multilateral development banks, such as the European Bank for Reconstruction and Development (EBRD) and the Asian Development Bank (ADB), the IADB is contributing to the strengthening of the globally integrated network of correspondent banking relationships, thus leveling the playing field for international trade.