The Inter-American Development Bank (IDB) has announced that the Banco de Crédito Centroamericano (Bancentro) has become the first Nicaraguan issuing bank in its Trade Finance Facilitation Programme (TFFP).

In this programme, the IDB extends guarantees to cover letters of credit (L/Cs), documentary collections, promissory notes and other instruments used to finance international trade transactions.

Economic benefits

Bancentro's participation in the TFFP will be instrumental to the Nicaraguan economy, according to the IDB.

It says it will support potential business opportunities resulting from the creation of the Central America-Dominican Republic-United States Free Trade Agreement (CAFTA-DR) and other free trade agreements.

American signatories

The CAFTA-DR includes seven signatories: the US, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua.

The US Congress approved the CAFTA-DR in July 2005 and was ratified a month later, thus forming the US' second largest free trade zone in Latin America after Mexico.

The programme

Launched in 2005, the TFFP network comprises over 60 confirming banks belonging to 26 different international banking groups in 20 countries and 11 issuing banks in seven Latin American and Caribbean countries with over US$270 million in approved credit lines.

By April 2006, the IDB had issued guarantees for over US$30 million in support of approximately 50 individual international trade transactions totalling over US$66 million.

Similar programmes

The IDB's TFFP is similar in most respects to the Asian Development Bank's TFFP which aims to boost liquidity and stability of the trade finance system in the Asia and Pacific region (DC World News, 14 January 2004).

In November 2004 the International Finance Corporation (IFC), approved its largely L/C based US$500 million Global Trade Finance Programme (DC World News, 24 November 2004), which covers worldwide trading rather than focusing on trades with or within a specific region.

All of these models are based on the European Bank for Reconstruction and Development's very successful Trade Facilitation Programme, which fosters international trade with central and eastern Europe and the countries of the former Soviet Union (DC World, 11 May 2004).

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.