WTO, IFC launch joint publication on trade finance in Central America and Mexico

The report finds that trade and supply chain finance (TSCF) supports 8 per cent of Mexico’s goods trade, 12 per cent of Guatemala’s, and 10 per cent of Honduras's. In the case of Mexico, only about a quarter of merchandise importers and exporters have any access to financing. These are among the lowest access rates across surveyed economies, despite supply chain finance having made some inroads in Mexico's economy and, to a lesser extent, in Guatemala and Honduras.

The report underscores that there is significant potential to grow and diversify the currently concentrated market for TSCF. Model-based projections show that doubling TSCF coverage and aligning costs with advanced economy standards could raise exports and imports by up to 8.9 per cent in Honduras, 7.8 per cent in Guatemala and 7.4 per cent in Mexico - adding more than USD 90 billion in combined trade volume.

In her opening remarks at the launch, DDG Hill underlined the importance of the WTO-IFC collaboration on trade finance given its key role in enabling trade. Citing the Asian Development Bank (ADB) estimation of a USD 2.5 trillion global trade finance gap in 2023, mainly in developing economies, she noted that "inadequate access to trade finance functions in effect as a prohibitive trade cost, holding back trade and closing off economic opportunities for firms and people."

This is particularly relevant in the case of micro, small and medium-sized enterprises and women-owned businesses that "find it particularly hard to access trade finance," she added.

This is the third and last edition of a short series of reports on trade finance in developing economies aimed at improving understanding of the trade finance ecosystem, the constraints to trade finance and gaps in provisions. The first report focused on West Africa (Côte d'Ivoire, Ghana, Nigeria, Senegal) in 2022 and the second on the Mekong region (Cambodia, Lao PDR and Viet Nam) in 2023-24.

The joint WTO-IFC work on trade finance springs from a 2021 joint statement by the WTO Director-General Ngozi Okonjo-Iweala and IFC Managing Director Makhtar Diop, pledging to enhance cooperation to improve the analytics, identification, and detection of trade finance gaps in order to better direct capacity building and other resources to where unmet demand is greatest.

DDG Hill stressed that in the countries and regions studied so far, only a limited share of trade is supported by trade and supply chain finance, whereas in advanced economies this share is at least 60 per cent. "In each of the regions we examined, trade finance was heavily concentrated. Too few banks directing too little finance towards a small group of well-established and large traders," she said.

Doubling the trade finance coverage of trade would increase trade flows by a significant amount and help diversify trade geographically. "More trade finance means not only more trade integration, but also more socioeconomic inclusion through trade," she added.

Looking ahead, DDG Hill emphasized that the WTO will continue its work - whether in the trade finance field, through its investment facilitation efforts or through the implementation of its Trade Facilitation Agreement - to reduce international trade costs. In many emerging economies, reducing the cost of shipping, financing and border clearance is key to being competitive internationally. "The adoption of digital technologies is paramount in this regard,” she noted.

“We remain at our members’ disposal for promoting trade finance solutions and engaging in expert discussions, such as today’s, with support from multilateral development banks and development financial institutions," DDG Hill said. She noted that "these efforts help address persistent gaps in trade finance access, especially for small and medium enterprises, and support broader goals of trade inclusion, economic diversification, and digital transformation.” Her full remarks (in Spanish) are here.

Policy recommendations included in the report point at strengthening supply chain markets through regulatory harmonization, digital innovation, improved risk assessments and better access for small and women-owned firms. International organizations and development banks can also play a key role through capacity building, liquidity support and risk-sharing facilities.

The launch was followed by a presentation of the report and a panel discussion bringing together representatives of the WTO, IFC, the International Chamber of Commerce (ICC), the Mexican government and the Instituto Tecnológico Autónomo de México (ITAM).

The publication can be found here.