LatinFinance - September/October 2015 - 43

you look at Central America, we have four
countries that are low and middle income
economies: Guatemala, El Salvador, Honduras and Nicaragua. Then you have Costa
Rica and Panama that are high middle
income. Costa Rica has tried to get into the
OECD, in order to do that, you need to be a
high income country.
I've heard that Costa Rica will be accepted in July of next year as an OECD country.
Costa Rica is trying to get into that exclusive
club. If that really happens, it means that
this is feasible to try and come out of poverty and become a high-income country.
LF: What has enabled Costa Rica to
make that leap?
NR: Well for Panama, that's been the
Panama Canal, Panama has a financial
center, the ports there. The main message

Source: www.bcie.org

America is much lower around 40%.
The other thing that's important are the
inroads that Central America has made
with regards to infrastructure. The bank is
instrumental in that process. There's a lot
more that has to be done. Countries should
be spending 6% of GDP in infrastructure
and most economies, especially in Latin
America, spend not even 2% in a lot of
cases. We share that feature with Latin
America. Most countries spend too little on
infrastructure. Other economies such as
China, spend upward of 8% to 10%. I think
India spends around 6% to 8%. That's what
you have to do in order to try to transform
Central America and compete with the rest
of the world. You definitely need better
infrastructure, which means roads, ports
and airports. About 30% of our lending
goes to that area.

OPENING UP: Boosting intra-regional
trade is critical for Central America

LF: What other areas does Cabei focus
on and devote resources to?
NR: The other area that's important for
transforming Central America is energy.
Something like 60% of our lending is infrastructure and energy. The demands of
the region are much larger than that. Even
though our role has been important, the
region needs a lot more investment in those
two areas to try and transform themselves
into higher income economies.
Transforming Central America is not
something that can be done overnight. Becoming a high income country is a large feat
and a daunting task. I think it can be done. If

NICK RISCHBIETH, CABEI

"WITHOUT ECONOMIES
OF SCALE, IT'S VERY
HARD TO CREATE
THE CONDITIONS FOR
SUSTAINED GROWTH
OVER A LONG PERIOD
OF TIME"

is that Costa Rica, for 30 years has been
either number one or number two in terms
of investment in education as a percentage
of GDP. We're talking about over the past
few decades.
That's something that the rest of Central America should be doing, if they really want to improve. Someone asked me
what's the first thing you need to do in
order to be a high income country? Education is number one, education is number
two and education is number three. Costa
Rica has done this and the rest of Central
America hasn't done this.
Also, Costa Rica doesn't have a military.
They abolished it in the 20s or 30s. If you
don't have a military you can spend the
money on education. Whatever you're
spending on the military and spending it on
education, if you do that for 30 years, I'm
sure you'll have small tigers, like in Asia.
LF: Why is integration so important?
NR: Integration is important, because these
small countries with populations of 5 million or 8 million or 10 million, they're much
too small to make a difference by themselves. It has to be a region. By themselves,
Costa Rica and Panama are the exceptions,
I don't think they're capable of transforming these economies without acting as a
region.
Combined, together, they are a lot more
important. Instead of a population of 5
million to 10 million, we're talking about
40 million. We're talking about a GDP of
around $157 billion, about commercial
trade of about $86 billion. Without the
economies of scale, I think it's very hard to
actually try to create the conditions for sustained growth over a long period of time.
LF: What are the keys to growth going
forward?
NR: You have to expand and consolidate the process of integration. You have
to continue to amplify and modify your
infrastructure. You have to continue to
spend your money on education. You have
to up your human resources and invest
strategically in education and health. Those
are the things that Central America has to
do to move forward. There's a number of
other things that need to happen. These
countries have been singled out as countries where there's high-level corruption.
You need to take measures in those areas.
You lose 1% of GDP in terms of growth every
year if you have high levels of corruption
and you need to attack that as well. LF

September/October 2015 - L ATINFINA NCE.COM 43

http://www.bcie.org http://www.LATINFINANCE.COM

Table of Contents for the Digital Edition of LatinFinance - September/October 2015