CAF strengthens its capital by US$4 billion

(Caracas, August 19, 2009).- CAF’s Board of Directors, headed by the Venezuelan Minister of Economy and Finance, Alí Rodríguez Araque, and formed by the ministers of Economy, Finance, Planning and other economic authorities of member countries, approved a US$2.5 billion increase in the paid-in capital of the institution. The increase, which had been proposed by several member countries at the previous Board meeting last March, responds to the need to strengthen the organization's capital in order to cover the substantial demand for loans it has been receiving in the wake of the global economic crisis, and to strengthen the Corporation's ability to further support the long-term development of the region.

The approved capital strengthening of US$2.5 billion is in addition to current capitalization agreements totaling US$1.5 billion following the conversion process of five Series C shareholder countries (Argentina, Brazil, Panama, Paraguay, and Uruguay) to full-membership. In total, the multilateral development bank will receive additional funds of over US$4.0 billion.

This increase in capital, to be paid between 2010 and 2017 will make it possible for the Corporation to respond to the expected growth in financing operations, while preserving the institution's financial strength. "The financial strengthening resulting from this capital increase will practically triple CAF’s paid-in capital to US$12 billion over the next eight years, allowing a level of approvals that could reach over US$100 billion in the same period and a portfolio of around US$30 billion by 2017," CAF President & CEO, Enrique García, said. As a result, the organization will continue to be one of the most important sources of financing for the region.

Within the present international context, the multilateral bank has intensified its important anti-cyclical role in response to the significant increase in the demand for financing, as observed in the mounting level of approvals that has reached US$5.5 billion so far this year and that is projected to exceed US$10.0 billion by the end of 2009.

Integrated development agenda

"The capital increase is not only in response to the crisis, but will also be used to expand support for member countries based on a development agenda that balances stability, growth and social equity, while respecting cultural diversity and the environment." In fact - García said - this capitalization process will strengthen CAF's capacity to contribute to the development of a better quality and more sustained growth model, which is economically efficient, creates productive employment, is inclusive, socially equitable and respectful of the environment."

Expressing the general feeling of the Board, Alexandre Meira da Rosa, Director for Brazil, said the unanimous decision reflected "a political expression of support for CAF’s uniqueness, its democratic decision-making, its capacity for rapid and effective response to the crisis, and the fact that it has become a truly Latin American institution, key to the region’s integration." At the end of the meeting, Oscar Iván Zuluaga, minister of Finance and Public Credit and director for Colombia, said "this Board meeting was historic because of the transcendence of the decision to increase the capital, which will strengthen the Latin American region, while conveying a message of confidence to the markets."

Financial strength generates confidence

García stated, "this backing from CAF members reflects their confidence in the institution's capacity, based on its financial strength and increasing activity, which is possible thanks to the important capital contributions made by shareholders, reinvestment of profits, and permanent presence in the international financial markets. The latter is made possible thanks to the high credit ratings granted by the leading international agencies."

One of CAF's most important characteristics is its ability to intermediate funds from international financial markets towards the countries of the region. This faculty has allowed the Corporation to play a key role in difficult situations, such as the one which the region currently faces.