CAF sets record in 2001 approving operations for over US$3,100 million

In 2001 the Andean Development Corporation (CAF) approved operations for over US$3,100 million, the highest figure in the Corporation’s history, in a year characterized by a severe crisis in the world economy. This figure consolidated the multilateral lender’s anti-cyclical role and position as principal source of financing for Andean countries, providing about 61% of total financial resources granted by all multilateral organizations to the region, and as an important facilitator in the Latin American integration process. In this respect, during the year negotiations were concluded for the admission of Argentina, Costa Rica, Uruguay and Spain bringing the number the Corporation’s shareholders to 16.

The CAF received an upgraded risk rating and consolidated its position as the best Latin American issuer with a solid A rating assigned by the three leading agencies: Standard & Poor's, Moody's and Fitch. This ranking gave the Corporation unrestricted access to international capital markets, and an important catalytic role in favor of the member countries.

These highlights of the Corporation’s activities during the year were outlined by the CAF executive president, Enrique García, at the end-of-year press conference in the Caracas headquarters. "With this year’s results, the CAF confirms its Latin American vision and leadership role in the area thanks to the decisive support of its shareholder countries, its versatility, flexibility and responsiveness in the provision of services, financial strength and competitive access to capital markets," the CAF chief said.

According to García, this activity took place in exceptionally complex international conditions. Economic growth in Latin America will be under 1%, in a year in which the world’s major economies are experiencing a synchronized slowdown with negative consequences for the region’s exports, capital flows and investments. In a regional scenario of low growth, public finances will come under pressure, financing requirements will increase, and become more difficult to cover given the situation on international markets in the wake of the Argentine crisis and the events of September 11."

The CAF executive president, who was re-elected by the shareholder countries last March for a third term in recognition of his successful management, said a variety of development models have been adopted in Latin America, but the region has not achieved the results required to make the leap to the sustained economic growth that generates broad and equitable benefits for the majority of the population. The CAF is committed to the generation of fresh ideas that contribute to the making of a new agenda, with a vision of a region integrated into the irreversible reality of globalization, García added.

With this in mind, during the year work was intensified on the Andean Competitiveness Program (PAC) which is being developed jointly with Harvard University, and on the definition of policies aimed at strengthening governability and democratic institutions, especially in the area of municipal development and assistance for small and micro-enterprises.

As part of its mission to promote sustainable development and regional integration, the Corporation promoted, jointly with the IDB and Fonplata, the start of the South American Regional Integration Initiative (IIRSA). Following the mandate of the South American presidents meeting in Brasilia in 2001, the CAF has identified 12 hubs each with specific projects in line with the concept of developing sustainable infrastructure.

For García, the most important challenges the Corporation will face in its next five-year period "center on promoting effective Latin American integration to support the quest for high, sustained and more equitable economic growth, which creates the conditions of social and environmental sustainability that the region requires, and brings more equitable participation in the global context." To achieve this, the crucial step will be to make the transition from economies based on natural resources to economies based on knowledge, technology and job creation, which emphasize participation and coordination between government, private sector and civil society. In this, the building of social capital ¾ based on better education, participation, transparency and confidence ¾ is especially important, as is encouraging the sustainable use of environmental and cultural wealth.

he Corporation in figures

During 2001 the CAF approved operations in favor of its shareholder countries for over US$3,100 million ¾ the highest figure in its history ¾ of which 68% was used to finance sustainable economic and social infrastructure projects in both public and private sectors. Disbursements totaled US$2,200 million and the portfolio US$6,300 million, including the third-party portfolio managed and administered by the Corporation. The expansion was made possible by increases in the capital of shareholder countries and the continuing inflow of new funds raised on competitive conditions on international capital markets. The funds granted to individual shareholder countries were as follows:

Bolivia

Bolivia received approvals for US$450 million, the largest amount for this country in the history of its relations with the Corporation. Total disbursements to the country were US$218 million with a total portfolio of US$537 million, including the third-party portfolio managed and administered by the CAF.

The principal operations were geared to financing the economic reactivation programs and injecting fresh funds into the economy in a bid to stimulate aggregate demand and moderate the social effects of the economic crisis.

In the area of infrastructure, approvals totaled US$116 million destined to finance major projects, including the Highway Rehabilitation and Maintenance Program (US$42 million) designed to upgrade five sections of the Basic Road Network; in addition a CAF-Banco do Brasil cofinancing for US$74 million was approved for upgrading and paving the Tarija-Bermejo (Tarija) Highway, which connects with other integration corridors and links Bolivia to several neighboring countries.

The CAF also approved US$100 million as partial financing for the Economic Reactivation Special Fund (FERE) set up by the Bolivian government to reschedule the portfolio of the national financial system to help the productive sector meet its financial obligations; in addition US$25 million was approved for the National Emergency Employment Plan, along with US$150 million to change the profile of the domestic public debt contracted to finance the Pension Reform.

In the private sector, the CAF continued its assistance to corporate clients through loans for working capital and trade for a total of US$24 million. In the financial sector, the existing lines with local banks and micro-financial entities were renewed. Additionally, about US$2 million were destined for non-reimbursable technical cooperation and contributions for the execution of projects aimed at modernizing the country and assisting the least favored social sectors.

Colombia

This country continued to be the Corporation’s principal beneficiary in 2001. A total of US$819 million was approved for major operations for the economy and national development. Disbursements were US$334 million with a total portfolio of US$1,818 million, including the third-party portfolio managed and administered by the CAF.

For the public sector, US$200 million was allocated for the second stage of the Roads for Peace Program, in addition to the US$162 million approved for the first phase last year. This program forms part of the social component of Plan Colombia.

A loan of US$100 million was approved for the Bogotá City Government to finance the Transmilenio transport system and education programs.

In the private sector, a syndicated A/B loan was granted to the Bavaria company for US$250 million to finance investment programs in the company and its subsidiaries, and a partial loan guarantee for US$50 million was issued to Chivor to enable the company to obtain funds up to US$200 million through bond issues on the local domestic market. This is the first guarantee of this type granted by a multilateral to a private client and the second granted by the CAF in Colombia.

Funds for non-reimbursable technical cooperation were approved for several clients totaling US$2 million to finance feasibility studies for development projects.

Ecuador

This shareholder received US$275 million in approvals. Disbursements totaled US$347 million with a total portfolio of US$1,124 million, including the third-party portfolio managed and administered by the CAF.

The most important operations approved included a US$50-million loan for the Manabí Transfer project which will supply water to that province, and a loan for US$57 million to the Guayaquil City Government to develop the III Road Program.

The CAF also approved a US$25 million loan for the Ecuadorian financial system, US$25 million for the Daule Peripa-La Esperanza Transfer Rehabilitation Program and a US$13-million loan for the clean-up of Estero Salado.

Approvals for the private sector totaled US$67 million; the principal loans being made to Andinatel (US$25 million), Pronaca (US$10 million), Fadesa (US$7 million) and other clients (US$25 million).

Funds for non-reimbursable technical cooperation totaled US$1.1 million destined for development studies and programs, along with support for micro-financing.

Peru

The CAF approved a total of US$625 million for Peru. Disbursements were US$544 million with a total portfolio of US$1 billion, including the third-party portfolio managed and administered by the CAF.

The approvals included US$500 million to finance the Public Investment Multisectoral Program, in two phases: in March this year, US$300 million for the 2001 program as a contribution to the country’s financial requirements through a set of projects in various economic sectors; later, in November a US$200 million loan was approved for the 2001-2002 Program.

The Corporation also granted a loan for US$20 million for the Southwest Rehabilitation Program for the area affected by the earthquake. In the private sector, several corporate clients received US$103 million for working capital and foreign trade.

Peru was also favored with non-reimbursable technical cooperation funds of US$818,000 for studies and seminars, and general matters of development, culture, integration and national development planning, among others.

Venezuela

Approvals for Venezuela totaled US$625 million. Disbursements were US$584 million with a total portfolio of US$1,286 million, including the third-party portfolio managed and administered by the CAF.

Approvals included US$62 million for the Yacambú-Quibor Water System, a project that will supply water to the city of Barquisimeto and surrounding areas. The CAF also approved a loan for US$100 million for Metro de Los Teques, a mass transport system that will connect the city of Los Teques with Caracas.

Other approvals for public sector works included US$20 million for treatment works for Lake Valencia; US$10 million for supplementary studies for the Western Corridor Development Program; and US$17 million for the Losada-Ocumarito System Investment Plan in the central region of the country.

In addition, two cofinancing operations were approved for the private sector through an A/B loan modality. The first was for US$150 million for the Electricidad de Caracas utility, of which the CAF share was US$37.5 million. In the second A/B operation, Primor Inversiones, a member of the Polar Group, received US$200 million. In this case, the Corporation financed the A tranche for US$50 million.

Funds totaling US$432,000 were approved for non-reimbursable technical cooperation to support studies, seminars and programs, and general matters of development, culture and integration.

Other shareholder countries

The CAF approved over US$130 million for the other 11 shareholder countries. The most important operations included the finance granted to Brazil through loan approvals of US$74 million for several clients. Other approvals were US$25 million for Nacional Financiera (NAFIN) of Mexico, and loans of US$1.7 million for several corporate clients in Paraguay to finance working capital and foreign trade. The Corporation also approved a maximum equity investment of US$8 million in the Multinational Industrial Fund, a trust whose objective is to promote the development of small and medium-sized enterprises in Mexico.

Funds

During 2001 the CAF approved an equity investment of US$15 million as capital contribution to the Business Investment and Development Fund (FIDE) for small and medium-sized enterprises in the Andean Community and other shareholder countries, which have the potential to become competitive on domestic and international markets.