New operating schemes approved to offer the most complete financial services

(Caracas, January 29, 1993). -- Two new operating policies related to capital participation and issue of guarantees was approved by the CAF Board during its 76th meeting on January 25 in Caraballeda, Venezuela.

These developments position CAF in the vanguard of institutions of its type, given the wide range of financial instruments and operating modalities it will offer its clients.

Guarantees One of the policies approved relates to making the issue of bonds and guarantees more flexible by expanding their operations and coverage.

Companies and financial institutions will be able to apply for a CAF guarantee for issue of paper, such as bonds to back third-party loans.

This policy will expand the range of clients and beneficiaries, help develop the capital markets of the Andean countries, and permit the institution to release funds which, in the absence of this policy, would have been used to finance project execution and global credit programs.

The Board also decided the use to be given to the funds obtained with CAF backing. These funds must be used for fields of action in which CAF is involved and be governed by the same criteria used for financing an investment project.

The Corporation will perform an important function in developing the capital markets of Bolivia, Colombia, Ecuador, Peru and Venezuela by granting guarantees for bonds or other similar instruments issued by productive or financial companies. This scheme will generate confidence among savers and therefore increase investment levels and the efficiency of allocation of resources.

Equity participation A second policy approved establishes that participation by the Corporation in equity or with subordinated debt must be in sound projects in association with the private sector, which will contribute funds, technology and markets.

The proposed policy is expected to reduce the financial cost of projects; improve return on investment and reduce the risk for the Corporation; increase CAF’s catalyzing function which facilitates obtaining other financial funds; support development of capital markets; and democratize capital by the subsequent sale of the shares.

The trade liberalization of the countries of the subregion, globalization of the world economy, the need to develop financial markets, the opening to foreign direct investment, and the privatization and reconversion processes being put through by companies and public services mean that CAF has to play a more effective role in attracting capital and technology for the economic development of the subregion, and maintain a more active presence on capital markets through risk investments with the characteristics approved by the Board.