How you can unlock cheap UK finance for projects in Panama

Founded in 1919 to kickstart the British economy following World War I, UK Export Finance (UKEF) is nothing new. But most UK companies are unaware of how it can help them expand to exotic new markets like Panama.

UKEF’s founding principle is that no viable British export should fail through a lack of finance. So, it works with partner banks to provide capital or guarantees for UK companies exporting goods or services.

UKEF in Panama

In 2015, UKEF first began offering export finance to Panama – then Brexit happened. Exporters might have worried that the vote to leave the EU, would reduce UK appetite for international expansion. In fact, the opposite happened. In 2019 the UK-Central America Continuity Agreement was signed. The Agreement ensured that the benefits of the existing EU deal with the region continued, but it also left the door open for improvements in the trade and investment relationship between the UK and Central America.

Then in 2021, UKEF’s presence in Panama was boosted by a historic partnership between UKEF and the leading development bank in the region, CABEI (Central American Bank for Economic Integration). The deal was significant because partnering with BCEI allows UKEF to deploy its finance more rapidly. BCEI is involved in a plethora of projects throughout Central America and, as long as they contain a UK good or service, they can now receive lower-cost financing via UKEF. It means that a Panamanian project that is going to use UK equipment or expertise can borrow the money for the purchase locally – in Panamanian balboas – from CABIE. The Panamanian balboa, which is effectively the US dollar – is one of the more than 60 international currencies in which UKEF credit is available.

in October 2023, UKEF signed a Letter of Interest, with view to a partnership with CAF, a leading Latin American development bank

The UKEF-CABEI agreement focuses on supporting infrastructure and clean energy projects. That is particularly relevant for Panama which is one of the largest construction and renewable energy markets in the region and also has the joint highest UKEF facility in Central America. That ties in with UKEF’s decision in 2021 to halt the financing of overseas fossil-fuel projects. Given that Panama doesn’t produce oil, gas or coal, it is now a perfect market for UKEF funding.

Then in October 2023, UKEF signed a Letter of Interest, with view to a partnership with CAF, a leading Latin American development bank. Judging from early signs the cooperation will have an emphasis in sustainable projects, while CAF is already very active in Panama. UKEF will provide capital to co-finance alongside CAF loans to overseas buyers of UK goods and services. It will also offer guarantees that cover financing provided by CAF.

How UKEF can help you

At present UKEF has a total ‘market risk appetite’ of over £4 billion to support transactions involving Panamanian projects with at least 20% UK content. UKEF can offer attractive financing options for buyers in Panama – both public sector and private sector – including extended repayment terms. These start from 15 years for normal projects but can be extended to as long as 22 years for renewable energy and clean growth projects.

In Panama UKEF can help you:

Win export contracts by providing attractive financing terms to buyers in Panama
Fulfil contracts by supporting working capital and trade finance
Obtain export insurance

UKEF doesn’t just provide the finance for the deal to happen. It can also offer insurance, of up to 95% of the value of a contract, to cover potential losses that could accrue from political instability or buyer insolvency.

In the financial year 2022-2023 UKEF issued $6.5billion of export finance, which is one of the highest amounts in the last 30 years. In addition to helping projects in Panama it also provides a big boost for the UK economy. The vast majority of companies that receive UKEF support small and medium-sized enterprises, that need loans, insurance policies or bank guarantees for export activities. That is particularly important in emerging markets, which are sometimes deemed too risky by the private sector. UK Export Finance underwrites private sector loans and takes on the risk which means private lenders are prepared to sign those contracts.

UKEF can help with the financial support, but investors that want in-depth expertise and advice about potential investment projects in Panama should reach out to the country’s export and investment promotion authority, PROPANAMA. In addition to designing and implementing Panama’s trade and investment strategies, PROPANAMA also helps incoming international investors understand the best opportunities. Panama has a range of investor regimes that offer incentives depending on the type of business. Some of the most famous include: Colon Free Zone, Panama Pacific, City of Knowledge, Special Free Zones, Multinational Headquarters, EMMA, Public Private Association, Resident as Investor, Agroparks.