The Inter-American Development Bank (IDB) says it expects eight new Latin American issuing banks to sign up to its largely letter of credit (L/C)-based trade finance facilitation programme (TFFP).

This would bring the total of banks participating in the scheme that aims to boost trade and improve trade finance provision in emerging Latin American markets to 20 by the end of this year.

Geographical spread

Latin American business news daily BNamericas reports IDB's private sector department investment officer Juan Jose Garcia as saying that the bank has made contact with and received feedback from 39 potential bank participants in the programme.

As a result, IDB expects to sign up two more banks in each of Argentina, Colombia and Brazil as well as one bank in each of Costa Rica, Peru, Honduras and Bolivia.

Participant banks in the programme so far include two banks in each of Argentina, Brazil, the Dominican Republic and Ecuador and one bank in each of Colombia, Nicaragua and Panama.

Successful model

The TFFP is based on the model first launched by the European Bank for Reconstruction and Development (EBRD), which has used it successfully to foster international trade with Central and Eastern Europe as well as the countries of the former Soviet Union.

The IDB's TFFP is also similar in most respects to the Asian Development Bank's TFFP and the largest of all such schemes, the International Finance Corporation's US$500 million Global Trade Finance Programme (DC World News, 24 November 2004), which covers worldwide trading rather than focusing on a specific region.

In all of these schemes, the development bank essentially guarantees L/Cs issued by smaller banks in emerging markets with the aim of boosting trade flows and improving bank capabilities and trade finance provision in emerging markets.

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