CAF ends year with US$3.50 billion in approvals and confirms its support for the real recovery of the region

The Andean Development Corporation (CAF) ends 2004 with the record figure of US$3.50 billion approved for operations in favor of its 16 shareholder countries, the executive president of this multilateral financial institution, Enrique García, announced today in Caracas.

These results have been achieved in the favorable conditions of the Latin American economy, characterized by a general recovery of growth. Regional GDP grew an estimated 5.5% in 2004, stimulated by the strong increase in exports and the favorable trend in the terms of trade. The region’s new expansion is taking place in a context of macroeconomic stability, favorable conditions in the world economy, the increased momentum of regional integration processes, and important progress in political stability and spaces for governance in the countries of the region.

The favorable economic conditions during this year and the positive outlook for the medium-term offer a window of opportunity for the countries of the region to strengthen quality economic growth, which will help them solve problems of unemployment, poverty, social dissatisfaction and democratic governance.

In this context, the CAF continues its conceptual and financial support for a renewed development agenda for the region, by stimulating initiatives that promote stability, efficiency, and social equity.

CAF’s activities in 2004

García said that 54% of all the funds approved in the year were destined for projects related to physical infrastructure, social development and environment; 22% were for structural reforms; and 24% were channeled into productive sectors and investment projects for micro-, small- and medium-sized enterprises.

Supplementing the credit activity, the CAF approved US$30 million in non-reimbursable funds for regional integration, competitiveness, small and medium-sized enterprises, cultural and community development, environmental sustainability and governance and institutional strengthening in the region.

Other important activity in 2004 included continuing support for the regional integration efforts which included the signing of the Andean Community-MERCOSUR agreement; progress by Colombia, Ecuador and Peru in their FTT negotiations with the United States; and the creation of the South American Community of Nations.

In this integrationist context, the Corporation also gave assistance directly, or through the financial systems, to the region’s productive sectors with funds of US$830 million to finance investment processes, working capital and foreign trade operations. The Andean Competitiveness Program, PAC, continued its work to strengthen the region's competitiveness agenda with projects related to science and technology, entrepreneurial capacity, cluster development, and knowledge management.

In infrastructure, integrated support was maintained for the South American Regional Infrastructure Integration Initiative (IIRSA) and the Puebla-Panama Plan Initiative. During the year, five operations for US$397 million were approved, bringing the total number of South American physical integration projects that the CAF has financed in the last four years to 40. The total investment in these projects is over US$7.00 billion, of which the CAF has directly contributed US$2.00 billion. Support for the development of the economic infrastructure of member countries continued with mass transport, electricity generation, and road infrastructure projects, totaling US$1.30 billion. Another important action was the implementation of innovative financing mechanisms for regional infrastructure through joint public-private schemes.

Social development infrastructure was also backed with approvals of US$300 million for projects to satisfy needs for potable water, basic sanitation, protection of social expenditure, and microfinance entities. The finance in this area is supplemented by cultural and community development programs through productive community management of public services, music and sports instruction, and cultural public policies; along with the Integrated Support Programs for SMEs which facilitate access to financing; and the Governance and Institutional Strengthening Programs which provide training for leadership, consensus building and development of local institutions.

The record level of financing achieved in 2004 was possible thanks to the institution’s financial strength and confirmation of its risk ratings by the leading international rating agencies, which made possible a continuing active presence on international financial markets. The activity on the capital markets was recognized this year by three awards from prestigious financial magazines: Euromoney (best issuing agency of the year), Emerging Markets (best bond issue to finance development) and Latin Finance (best multilateral).

Lastly, Enrique García emphasized the institution's commitment to a sustainable development model with social inclusion, which reinforces the regional integration of Latin America, a task of primary importance in the strengthening of democratic governance in the region. He also underscored the support that the CAF has received from its shareholder countries through capital increases and the forthcoming entry of the Dominican Republic as a partner country, which increases the number of shareholder countries to 17.