The Washington-based financial institution said a combination of poor infrastructure, differing regulations and other measures hampering trade has left regional trade far below its potential.
CMC News reported that cross-border projects could help lower those transaction costs, boost export capacity and lead to a better distribution of trade benefits.
The bank said it will work with governments in the region to identify priority projects, with an emphasis on Central America and the Caribbean.
The IDB, the largest source of development finance in the Americas, said a trust fund of 20 US dollars million in contributions and pledges from Canada, Mexico, Spain and the United States will support projects to expand trade in Latin America and the Caribbean.
Canada has contributed 10 million Canadian dollars – double its original pledge; the United States has added five million US dollars and Spain has paid another two million US dollars into the trust fund, the bank said.
Mexico has pledged three million US dollars, and that Colombia has expressed interest in contributing, marking the first time borrowing member-countries participated in an IDB-managed multi-donor trust fund, the IDB said.
“These resources will enable the IDB to provide Latin American and Caribbean countries incentives to invest in cross-border projects and leverage loans, lowering overall project costs,” the IDB said.