Trade Finance in Central America and Mexico

By Mayora IP

The World Trade Organization (WTO) and the International Finance Corporation (IFC) have jointly launched a new report titled Trade Finance in Central America and Mexico, which delves into the dynamics of trade and supply chain finance (TSCF) in Guatemala, Honduras, and Mexico. Referred to collectively as the CAM-3, these economies are linked through the Central America-Mexico trade agreement and share increasing relevance in regional and global commerce.

The study provides a detailed examination of how trade finance supports commerce in these countries, analyzing its current penetration, associated costs, and the economic potential of easing existing barriers. It reveals that only 12% of Guatemala’s goods trade is currently backed by TSCF, signaling both the nascent stage of financial intermediation and the significant room for expansion. According to model-based estimates, doubling the coverage of TSCF and aligning its costs with those of advanced economies could boost Guatemala’s trade flows—exports and imports combined—by up to 7.8%.

Despite their smaller economies, both Guatemala and Honduras have seen growth in import volumes, broader export footprints, and increased trade diversification, especially within Latin America. Specific sectors, such as light manufacturing in Guatemala and food production in Honduras, have exhibited strong momentum. This sectoral expansion may translate into higher demand for trade-related financial services, including supply chain finance mechanisms that facilitate smoother transactions between buyers and suppliers.

However, the report notes that both countries face persistent structural barriers, including high trade costs and limited integration into global value chains when compared to Mexico and other regional peers. These constraints weigh on the scale of trade finance demand and must be tackled in tandem with the deployment of financial solutions to unlock the countries’ full potential.

As these economies continue to grow and integrate further into global markets, the risks associated with trade will likely increase. In turn, this will drive demand for bank-intermediated trade finance, particularly supply chain finance solutions aimed at bridging payment gaps with new or riskier suppliers. The entrance of new exporters, expansion into new markets, and greater trade route diversification will further pressure the region’s trade finance infrastructure to innovate and expand.

The report emphasizes the need for coordinated efforts among businesses, financial institutions, national governments, and regional and multilateral development banks to strengthen the reach and impact of trade and supply chain finance in the CAM-3. Such collaboration is key to making TSCF a lever for increased competitiveness and economic resilience across Central America and Mexico.