Dante Mossi

Dr Dante Mossi, executive president of the Central American Bank for Economic Integration (Cabei), talks to Joy Macknight about how it is helping the region’s farmers and small producers reactivate and transform their businesses to ensure a sustainable future.

Q: What are the major challenges to Central America’s post-Covid-19 pandemic recovery?

A: While economies from Guatemala to Panama were closed to international trade during the pandemic, intraregional trade did not stop; therefore, turning the regional economy back on was not too difficult. Remittances rebounded quickly because the region is closely linked to the US through our migrant population; the US Covid-19 support programmes also helped migrant workers.

Another challenge has been to convince tourists to return. Southern Central America — Costa Rica, Panama and the Dominican Republic — is reliant on tourism. As such, those countries focused on increasing vaccination rates to convince the world that it is safe to visit.

The challenge now is how to grow our economies in a sustainable way. For example, we need to move away from fossil fuels because the economy suffers a shock every time the oil price jumps. Energy independence is needed for our survival.

Q: How is Cabei supporting the region’s recovery?

A: We believe that we can be better prepared for the next pandemic. We are building a ‘bio park’ to produce vaccines in the region. We want to nurture industries that are essential for the region.

Cabei is also providing loans for small producers — with grace periods that are normally reserved for countries — to reactivate their business and increase employment to pre-pandemic levels. They can also access a guarantee fund that can help them adapt and transform their business, for example purchasing an electric delivery van or installing solar panels to be more resilient to the electricity price.

We have built strong partnerships with member and non-member countries, including the UK, Germany, France, Spain, Korea, Taiwan and the US, which have provided lines of credit to Cabei for distribution across the region.

Q: How is Cabei supporting the move to more environmentally sustainable economies?

A: As a 60-year-old institution, Cabei was providing financing for solar energy, wind energy and hydroelectric dams in the 1960s. Today, we are taking the challenge to the next level. For example, Cabei is providing a grant to a utility in Costa Rica for a floating solar farm, the first one in Central America. We are looking at hydro and solar energy back-to-back generation plants, so they can provide clean energy 24/7 and sustainable power throughout the day.

In another example, we work with the Green Climate Fund to deliver finance to the private sector. Cabei agreed to provide credit to entrepreneurs and small famers to help them be resilient and sustainable. We want to lift them out of poverty.

Being sustainable is essential for our survival. This region suffers climate change head on — in 2020, we had two Category 5 hurricanes [Eta and Iota] hit within two weeks of each other

Being sustainable is essential for our survival. This region suffers climate change head on — in 2020, we had two Category 5 hurricanes [Eta and Iota] hit within two weeks of each other. We also have droughts and migrants are leaving the region because of these extreme weather cycles.

Q: Cabei has promoted the idea of a regional debt market — how is that progressing?

A: We got the central banks, ministries of finance and stock exchanges in the region to agree on dealing with securities in a cross-border fashion, without additional paperwork. This means, for example, a pension fund in Costa Rica can buy debt from Guatemala, etc. The market potential is estimated at $120bn.

There is a pending decision where the market will be. The three contenders are El Salvador, Panama and the Dominican Republic. When we announced the short list of countries, the Korea Stock Exchange offered us its payment settlement software as a way of collaborating and, once the system is running, they want to link the two exchanges. Mexico also came with a similar offer.

Q: Why is it taking shape now?

A: Many believe that Cabei has made the difference. Cabei is the highest rated [by Standard & Poor’s] Latin American institution, so we’re bringing credibility to the table. We have offered the financing needed to support the chosen stock exchange’s requirements to ensure that it can transact easily in primary and secondary markets.

Q: What lessons have been learned from El Salvador’s bitcoin experiment?

A: Cabei is not a part of financing El Salvador’s bitcoin programme, but we are providing technical assistance. It is a financial inclusion experiment, with people using their mobile phone to receive remittances and pay for services. It is an experiment to make cryptocurrency part of the formal economy.

So far, the impact has been modest — less than 1% of remittances are handled by this new system. But the promise of the model is that it can reduce the cost of sending money from the US to El Salvador to almost zero.

El Salvador took a lead in making a cryptocurrency legal tender and the jury’s still out on whether it was a good decision. But even if the experiment fails, the experiment itself was worthwhile.

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