An agreement made last week between the OPEC Fund for International Development and the ACS, with Venezuela’s Development Bank (BANDES) as intermediary could mean a significant new source of development financing for the countries of the Greater Caribbean.

The agreement, which was signed at the recently held 3^rd ACS Summit, commits the three organizations to coordinate their financial assistance in support of development programs and projects in ACS countries in identified priority sectors. The current ACS priorities are trade, transport, sustainable tourism and natural disaster prevention and mitigation.

The OPEC Fund plans to lend $1 billion over the three-year period 2002-2004 to non-OPEC low and middle-income developing countries. The share of Latin America and the Caribbean (LAC) in this total will be $165 million. $25 million is targeted for low-income LAC countries, all five of which—Cuba, Guyana, Haiti, Honduras and Nicaragua—are ACS members.

The remaining $140 million targeted for the LAC region will go to middle income countries, 12 out of the 15 of which are also ACS members. These are Belize, Colombia, Costa Rica, Dominica, the Dominican Republic, El Salvador, Grenada, Guatemala, Jamaica and St Vincent and the Grenadines.

OPEC loans normally have a maturity of 20 years and a grace period of 5 years. Low-income countries pay between 1 and 2.75 percent depending on their per capita income. For middle-income countries the interest rate is pegged to the London InterBank Offering Rate.

Most lending is for specific projects: the bulk of this so far has gone to energy, transportation, agriculture/agro-industry and education. Other sectors are eligible and have received assistance. Modest amounts have been provided for balance of payments and programme financing and there is a grant programme to support technical assistance and emergency aid. And the Fund also engages in co-financing with bilateral institutions of OPEC members such as the Arab Fund, the Saudi Fund and the Kuwaiti Fund as well as with multilateral agencies such as UNDP and UNICEF.

Moreover, the Fund’s Private Sector Facility provides financing to private firms either directly or through the intermediation of national and regional development banks or investment funds. Involvement is in the form of equity participation or debt instruments but this may be widened in the future. This facility is of particular interest to the middle-income countries of the region since it is not subject to per capital income criteria. The main requirements are that beneficiary firms must be established within the laws of the host country and must be privately owned (this can be either local or foreign) and commercially managed, be technically and financially viable, have significant economic merit and be both ethically and environmentally sound.

The Fund’s Director General was a special guest at the ACS Summit and addressed the assembled leaders, expressing satisfaction with his meeting with the ACS Secretariat and BANDES. The plan is to organize a working meeting in the first half of 2002 to which   leading regional and national financial organizations will be invited, to work out ways of taking full advantage of the agreement in order to “fast-track” the flow of Fund resources to the region.

Professor Norman Girvan is Secretary General of the Association of Caribbean States. The views expressed are not necessarily the official views of the ACS. Feedback can be sent to mail@acs-aec.org.

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December 20, 2001