The countries in Central America and the Caribbean may be at different stages of economic development however they all have one top priority in common: building physical infrastructure including roads, bridges, airports and seaports as well as technological infrastructure such as broadband communications. If infrastructure falls behind with productive capacity bottlenecks will invariably occur thereby hindering overall progress in the region.
Some infrastructure projects are so large that they require financing that is beyond the financing capacity of the domestic banks. Traditionally, the large multinational banks have provided the capital for these projects, however these entities have become increasingly risk averse, and in some instances are now experiencing balance sheet constraints given their obligations under Basel III and other regulations. Others are actually retreating from Central America by selling subsidiaries.
“There needs to be a deepening of the capital markets of the region to allow for the mobilization of capital so that domestic banks and investors can take on the risk of transforming these economies,” says Lyndon Guiseppi, CEO and Director at BCB Holdings Ltd. “We also need support from public-private partnerships (PPP) and private finance initiatives (PFI) as well as regional developmental agencies such as the Central American Bank for Economic Integration and Inter-American Development Bank.”
PPP/PFI is a form of procurement where the public sector procures services over a long period of time. However, the risk of ownership and the efficient operation of the project is left in the hand of a private sector supplier.
Two other urgent priorities need to be addressed. One is economic diversification away from agriculture and commodities, which have fallen in price recently. The other is income inequality. In most of the jurisdictions the middle class is not robust, and without their purchasing power, the region’s economies will continue to lag their more developed counterparts. Multilateral institutions including the Inter-American Development Bank have programs and policies in place, however these are insufficient to address these needs. Government agencies also need to directly intervene to create educational opportunities at all levels so that individuals who are outside the formal economy can develop marketable skills and participate directly in these transformational initatives.
“There’s a huge unbanked sector that is outside of the formal economy,” says Guiseppi. “Not enough is being done to mobilize those consumers, and I believe domestic banks have a role to play in this area which is commonly called bancarisation.”
Against this backdrop, BBIL is both committed to the region and helping its customers build their businesses as they transition to a more viable economic model.
Even though BBIL is based in Belize most of its customers are non-Belizeans. BBIL provides basic banking products and services as well as attractive financial packages for projects in Belize and throughout Central America and the Caribbean. Given that the information customers need to make intelligent decisions about investing in the region is not usually readily available in the public domain BBIL is strategically positioned to share with them the wealth of market intelligence which we have gathered over many years of doing business across the region.
“There are project sponsors who are looking for capital, and we have daily contact with investors who have the capital to invest,” says Guiseppi. “So to the extent that interests may collide, we are in a position to put these parties together.”
BBIL will continue to monitor economic trends so that it can respond to customer needs in a timely manner. Moreover, BBIL stands ready to support multilateral and government initiatives to tackle priorities that will move Central America and the Caribbean to the next level of development.
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