The International Finance Corporation (IFC), a member of the World Bank Group, has committed over USD 1.25 billion to support the private sector in Central America during the fiscal year 2024. This unprecedented investment has played a pivotal role in increasing access to credit for small and medium-sized enterprises (SMEs), promoting climate-related businesses, and boosting infrastructure development across the region. These investments in Central America are vital to fostering long-term economic growth, tackling climate challenges, and improving the overall business environment in the region.
Expanding Access to Credit for SMEs
A significant portion of the committed funds, more than USD 780 million, was allocated to the Global Trade Finance Program (GTFP). This facility supports the flow of goods and services to and from developing countries, focusing on assisting SMEs and the agricultural sector. By providing guarantees to banks and financial institutions, the GTFP aims to strengthen trade finance in regions with limited access to credit, particularly benefiting businesses in Central America, where SMEs are crucial to the local economies. These investments are essential for improving access to financing and helping small businesses thrive, which, in turn, supports job creation and poverty reduction in the region.
In addition to the GTFP, the IFC implemented ten advisory projects and ten market development and upstream initiatives throughout the year. These projects are designed to create new opportunities for regional businesses, improve market efficiency, and foster sustainable growth. Through these efforts, the IFC has significantly contributed to the region’s economic development, providing solutions to address some of the most urgent challenges local businesses face, such as inequality, climate change, and low competitiveness. The investments in Central America are aimed at making these businesses more resilient, innovative, and capable of competing in a globalized economy.
Promoting Climate-Related Investments
During the past year, IFC’s efforts also focused on promoting investments that support environmental sustainability and combat climate change. One of the highlights in this area was a USD 220 million loan granted to Banco Industrial in Guatemala. This funding aims to boost climate finance and expand the bank’s SME portfolio, allowing small businesses access financing for environmentally sustainable projects. The loan is part of a broader initiative by IFC to enhance the role of the private sector in addressing climate change across Central America, where such initiatives are critical for ensuring long-term environmental resilience.
In addition to its work with financial institutions, the IFC has also focused on promoting climate resilience in the region’s infrastructure projects. For example, IFC has committed USD 175 million to ENERGUATE, Guatemala’s leading electricity distribution company. This funding will allow the company to increase its investments in expanding the country’s energy infrastructure. Notably, this financing package includes USD 100 million from IFC, structured as a sustainability-linked loan—the first of its kind in Guatemala—and USD 75 million mobilized from the Japan International Cooperation Agency (JICA). These investments in Central America’s energy infrastructure are instrumental in ensuring a cleaner, more sustainable energy supply for the region’s growing population.
Infrastructure Development in Central America
Infrastructure is a critical area in which IFC’s investments in Central America have been significantly impacted. One of the most vital projects in this regard was structuring the first public-private partnership (PPP) in Panama, aimed at rehabilitating the eastern section of the Pan-American Highway. This critical infrastructure project will improve logistics and transportation connectivity in the eastern part of the country, facilitating economic development and regional integration. These investments in Central America enhance local infrastructure, foster greater regional cooperation, and open new trade routes for the region’s industries.
Beyond transportation, the IFC is also working with the Panama Canal Authority on an ambitious climate strategy. This strategy focuses on decarbonization, resilience, and transitioning to a more sustainable and environmentally friendly operation of the Panama Canal, one of the world’s most vital waterways. Through this collaboration, the IFC is helping to integrate climate action into the core of Panama’s infrastructure development while positioning the country as a leader in sustainable development within the region. These strategic investments in Central America’s infrastructure are designed to support both economic and environmental goals, creating a foundation for more sustainable growth in the long term.
Support for Sustainable Business Models
One of the most innovative initiatives the IFC supported last year was an investment of USD 2 million in ProNuvo, a company based in Costa Rica. ProNuvo specializes in the sustainable production of animal feed made from insect protein, a solution that contributes to the growing field of the circular economy. By promoting such sustainable business models, the IFC is helping to foster innovation in agriculture and food production across Central America, paving the way for more environmentally responsible business practices that can drive long-term economic growth. These investments in Central America help to position the region as a hub for innovative, sustainable business models that address global environmental challenges.
This investment in ProNuvo also reflects the IFC’s commitment to the region’s sustainable development. The circular economy model, which focuses on minimizing waste and maximizing resource efficiency, is gaining traction as businesses and governments in Central America seek new ways to address environmental challenges and create more sustainable economic systems. By supporting companies like ProNuvo, the IFC encourages adopting innovative and eco-friendly practices that can significantly reduce the environmental impact of traditional industries. Such investments in Central America are crucial for promoting environmentally responsible business practices that have the potential to scale globally.
High-Impact Investments in Honduras and Nicaragua
Throughout the year, IFC’s Global Trade Finance Program (GTFP) also substantially impacted Honduras and Nicaragua, two countries that are members of the International Development Association (IDA) and eligible for concessional financing. With a total of USD 267 million in financing, the GTFP recorded its highest volume of transactions in these two countries in the past five years. These funds are vital for boosting trade, supporting small businesses, and enhancing the overall economic stability of these nations, which have faced significant challenges due to political instability and natural disasters. These high-impact investments in Central America are essential for promoting trade and strengthening the resilience of economies often vulnerable to external shocks.
The investments in Central America also contribute to the region’s broader economic and social development agenda. By providing critical financing to SMEs and other key sectors, the IFC is helping to improve livelihoods, create jobs, and reduce poverty. Furthermore, these investments are designed to promote sustainable development by supporting projects that address pressing issues such as climate change, social inequality, and environmental degradation. The IFC’s investments in Central America are helping to create a more inclusive and sustainable economic framework for the region’s future.
A Strategic Commitment to the Region
Sanaa Abouzaid, IFC’s regional manager for Central America, emphasized the institution’s long-term commitment to the region, even in the face of complex challenges. She stated, “In a challenging context, IFC is reinforcing its commitment to the private sector in Central America. Through innovative financing, capital mobilization, and impactful solutions, we support Central American companies in tackling the region’s most pressing development challenges, including inequality, climate change, and lack of competitiveness.”
Abouzaid’s statement underscores the IFC’s strategic role in driving economic growth and development across Central America. By focusing on the private sector, the IFC is helping to create the conditions necessary for long-term prosperity. Whether through supporting SMEs, advancing climate finance, or enhancing infrastructure, the IFC’s investments in Central America are crucial to shaping the future of the region’s economy.
Looking Ahead
As the IFC continues to expand its efforts in Central America, the institution remains focused on addressing the critical issues facing the region’s businesses and communities. With a strong emphasis on sustainability, climate resilience, and inclusive economic growth, the IFC’s investments are setting the stage for a more prosperous and equitable future for Central America. As the region grapples with the challenges of the 21st century, the IFC’s role as a partner for development will be increasingly important in fostering resilience and long-term prosperity. These investments in Central America will play a critical role in building the foundation for a more sustainable and inclusive future.