Brazil increases equity investment in the CAF

Brazil today increased its equity investment in the Andean Development Corporation (CAF), after subscribing to the by-laws of the multilateral financial organization.

In a ceremony at the Corporation’s headquarters, the minister of Planning, Budget and Administration, Guilherme Gomes Dias, and the CAF executive president, Enrique García, signed the subscription document. The CAF president said this decision shows the confidence that Brazil - the largest country in Latin America - has in the institution as a secure and timely source of financing and in its catalytic role in the South American integration process.

The CAF-Brazil relationship has strengthened in recent years, especially after the summit meeting of South American presidents in Brasilia held on the initiative of President Fernando Henrique Cardoso in September 2000. This summit created the initiative for the integration of South American regional infrastructure (IIRSA), with a mandate to move ahead with investment, programs and projects aimed at achieving the connectivity of all the region through physical integration, García said.

In line with this mandate, the CAF has been giving financial backing to projects with a major integrationist potential, including the Ilo-Santos corridor, which is a key element in uniting the two integration blocks: the Andean Community and MERCOSUR. The corridor connects the ports of Ilo and Matarani in Peru, Iquique and Arica in Chile, and Santos and Sepetiba on the Brazilian side. The CAF is also funding the highway rehabilitation and surfacing program, as well as bridge building, in Rondonia state, as a contribution to the physical integration of Brazil with Bolivia and Peru.

The development bank has also financed the BR-174 Highway, which connects the Brazilian city of Manaus with the Venezuelan border town of Santa Elena de Uairén; the Brazil-Venezuela power line from the Guri Dam in Venezuela to Roraima state; and the gas pipeline that supplies Bolivian gas to Brazil. The start-up of these integration projects has had a major economic impact on the countries involved consistent with expectations.

After joining the CAF as a Series "C" shareholder in June 1996, Brazil increased its equity investment in March 1999 and is now repeating the operation. During the 1996-2002 period the Corporation approved loans in favor of Brazil, under various modalities, for a total of US$1.22 billion and has made disbursements of US$1.20 billion.

The Corporation’s portfolio in Brazil at June 30, 2002 totaled US$488 million, including US$120 million derived from the multilateral institution’s catalytic action to attract capital from international banks into that country. Long-term infrastructure operations account for 65% of the portfolio, mainly related to integration.