The nations of Central America are developing plans for an interconnected grid to supply the 31 million inhabitants of the region with electricity. The governments hope that access to the grid will persuade investors to build large capacity power plants selling cheap power, Reuters reports.

The grid would stretch from Panama to Guatemala. The estimated cost of the project, known as the Central American Electric Interconnection, is $350 million. The project was created in 1996 when Central American leaders signed a supporting agreement.

Representatives of the utilities of Panama, Costa Rica, Nicaragua, Honduras, El Salvador and Guatemala are getting closer to making the international grid a reality within the next six years.

The manager of Guatemala’s rural power authority said that the companies want to start construction in 2002, with completion in 2004.

Guatemala and El Salvador are already interconnected. A separate network links Hon- duras, Nicaragua, Costa Rica and Panama. However, current circuits are prone to failure.

Earlier this year, the Interamerican Development Bank (IDB) signed a $10 million loan agreement with Guatemala and Costa Rica to fund technical studies for the project. The IDB has promised to fund the scheme with a major loan once the technical plan is approved.

Only 51 per cent of Central Americans have access to electricity. Demand in the region is growing at an annual rate of six per cent.

Studies indicate that over the next ten years the region will need to invest $7.44 billion to meet the predicted demand. The new grid is expected to help keep costs down by optimizing efficiency.

The six countries intend to set up a regional regulatory agency to oversee the operation of an international power market based on the grid. Competition is likely to force some national governments to privatize their publicly owned power companies in order to enable them to compete with privately generated power.