In a difficult year CAF approves over US$9.20 billion

( Special, December 17, 2009).- Announcing the results for 2009, CAF President & CEO Enrique García said it had been a difficult year in which the world economy went through the deepest economic crisis since the Great Depression. Despite this, CAF achieved record approvals of over US$9.20 billion, welcomed the entry of five new full members: Argentina, Brazil, Panama, Paraguay and Uruguay, and Portugal as shareholder, and approved a new capital increase of US$2.50 billion, in addition to the US$1.50 billion already in process of execution.

García said the global economy seemed to have touched bottom given that there are clear signs of recovery. "These signs can be seen in the financial markets which have begun to recover their level of activity, in a lower perception of risk on credit markets, in the recovery of raw material prices, and the apparent stabilization of home prices in the United States, among others."

The CAF president however said recovery in advanced countries would be slow and - in the medium term - would not repeat the dynamism of recent years. "China has been a decisive factor in helping to overcome this crisis," García said in reference to the rapid recovery of the emerging economies, mainly stimulated by that country's public policies.

How has the region responded to the crisis?

Although the crisis affected the Latin American region much more than expected, García said, "prospects are moderately positive thanks to the adoption of anti-cyclical policies, recovery of raw material prices, and resumption of capital flows into the region, all of which has led to a lower cost of external credit, recovery of stock markets, and stronger Latin American currencies."

However, so far recovery has been mainly limited to financial markets, while rates of reactivation are incipient in the productive sector. The CAF chief executive referred to the challenges facing the region in view of the "loss of importance at global level" in relation to the Asian continent and other regions. "We have to consider not only the macroeconomy but also the microeconomic dimension of development, which is what accelerates growth." In his opinion, Latin America needs a transformation to make its economies "more productive, create more quality employment and involve excluded sectors more actively, to counteract the effects of poverty and inequality."

A bridge between Latin America and the world

After Portugal's recent adhesion, CAF now has 18 shareholders. García emphasized the decision to increase the paid-in capital by US$2.50 billion, in addition to the ongoing capitalization process of US$1.50 billion, following the full membership of Argentina, Brazil, Panama, Paraguay and Uruguay. As a result the CAF capital will increase by over US$4.00 billion over the next few years.

CAF continued to play an important role as link between Latin America and other regions of the world; especially the range of activities and agreements with China, Russia, Italy and India among other countries, with the aim of complementarity between their economies and Latin America.

Approvals in 2009 increased 17%

According to García, "in a very difficult global economic environment, CAF provided decisive anti-cyclical and opportune support for member countries in the crisis, at the same time as obtaining highly satisfactory financial and operating results."

In 2009 approvals exceeded US$9.20 billion, growth of almost 17% in the year and 96% in the last five years, while lending grew 13% in 2009, doubling the rate of the previous year.

Of total approvals in 2009, 36% were destined for financing projects related to economic and integration infrastructure, and social development, with 15% of the total going to develop the region's energy capacity both public and private. "CAF is now the main source of multilateral financing for infrastructure in Latin America."

Also in 2009 CAF approved a record amount of over US$37 million in cooperation funds, mainly non-reimbursable, destined for institutional strengthening, promotion of sustainable development, social inclusion and cultural identity of the region, as well as programs related to competitiveness, research and public policies which stimulate quality and inclusive economic growth.

Opportune measures in the midst of a crisis

In relation to the anti-cyclical measures adopted by CAF in response to the crisis, the CAF CEO highlighted approvals of over US$2.00 million for freely usable and rapid disbursement operations. This support was channeled through contingent lines of credit, wide-approach sectoral programs, intensification of financing for financial systems and development banks, which also contributed to improving the financial conditions and debt profiles of partner countries. García also mentioned the strengthening of the Compensatory Financing Fund, through which CAF lowers interest rates applicable to operations for marginal sectors, integration projects and reducing asymmetries between countries.

The CAF president reported the issue of over US$1.30 billion in bonds in 2009, including a bond for US$1.00 billion in the United States, the largest in the Corporation's history. He referred to the net profit of over US$200 million which builds confidence on international capital markets, a key factor for consistent improvement in risk ratings which is necessary for continued competitive participation on international markets."

"These results - García concluded - are due to various factors, especially the backing from shareholder countries as reflected in the timely payment of capital subscriptions and debt service, reinvestment of profits to increase capital, the confidence placed in the CAF administration, and recognition of the institution's catalytic role and valuable contribution to sustainable development and regional integration."