Fitch Praises CAF’s Capitalization and Upgrades Rating to Positive
January 17, 2022
The commitment of its shareholder countries to expand equity, together with the solidity and financial stability of the multilateral organization highlighted by the risk rating agency, led to an upgrade of its outlook to positive. Fitch highlighted the institution’s support to Latin American countries to address the COVID-19 pandemic, the accession of Mexico, Costa Rica and the Dominican Republic as full members, in addition to the process initiated by El Salvador to join CAF.
The commitment reached by consensus among shareholder countries of CAF—development bank of Latin America—to strengthen the institution’s equity with a record-high capital increase of USD 7 billion, was highlighted by Fitch Rating by upgrading the credit rating outlook to positive, ratifying the long-term rating of A+ and the short-term rating of F1+.
“The Positive Outlook reflects our expectation of an improvement in CAF’s solvency as a result of the recently approved very large capital increase and favorable loan portfolio dynamics. Despite the recent downgrades in Latin America’s sovereign ratings, capital contributions from CAF shareholders will support the credit expansion and diversification of the bank’s portfolio in the coming years, while maintaining “excellent” capitalization indicators,” the rating agency said in its report.
CAF executive president Sergio Díaz-Granados applauded the good news for Latin America and the Caribbean: “Fitch’s recognition of CAF’s joint work to raise the institution’s capital will allow us to offer a stronger response to drive the well-being of Latin Americans and Caribbeans, promote social and economic recovery, become the green bank of the region, and lead the digital transformation that will make us more competitive.”
The process for Mexico, Costa Rica and the Dominican Republic to become full CAF members, as well as the accession of the Republic of El Salvador, was also highlighted by the risk rating agency. The high capitalization and liquidity indicators, as well as the bank’s excellent track record as a preferred creditor, and the pivotal role played as a source of financing for sovereign borrowers to address the effects of the COVID-19 pandemic, were other factors highlighted by Fitch.
CAF has been engaged in a diversification strategy for its financing sources for the past three decades, through an uninterrupted presence in global capital markets, which has given it a privileged position internationally. CAF promotes sustainable development and regional integration through efficient funds mobilization for the timely provision of high-value-added multiple financial services to clients in the public and private sectors of shareholder countries.