Operations for over US$273 million approved by CAF Board

With the attendance of ministers, vice ministers and senior directors of financial and economic development organizations from the public and private sectors of CAF member countries, the 88th Board meeting was held today in Caracas, Venezuela.

CAF is a multilateral financial organization whose mission is to support the sustainable development of its member countries, and regional integration. Its principal shareholders are Bolivia, Colombia, Ecuador, Peru and Venezuela.

The shareholder base includes several extraregional countries: Brazil, Mexico, Chile and Trinidad and Tobago. In this respect, the meeting agreed to admit Jamaica, which will soon join these nations as a "C" series shareholder. The Board also approved a more favorable policy for operations with these nations, aimed at facilitating their effective participation in the institution’s governing bodies, and the real possibility of expanding existing areas of financing.

In addition to approval of three loan operations for the road, energy and financial sectors of member countries totaling US$273.2 million, the Board also approved the 1995 annual report, the financial statements audited by KPMG and distribution of annual income.

Colombian Minister of Economic Development Rodrigo Marín Bernal was elected to chair the Board and Shareholders meetings for a one year term, position which has previously been held by outstanding authorities from the region. The appointment rotates in alphabetical order among the five Andean countries.

CAF President & CEO Enrique García said the highlights for the institution during the 1995 period were a record level of income (US$55.4 million) and of operations approved (US$2.258 billion) -  the highest in the history of the Corporation - combined with attracting investment into member countries for an amount in excess of its own contributions.

García said CAF was continuing to strengthen its presence on international capital markets, becoming the first Latin American issuer to access them after the Mexican crisis, and placing new issues at the most competitive rates and terms for the region, as well as entering the new and demanding Yankee market. It was also significant that the agencies not only confirmed their risk ratings (investment grade) during the year, but Moody’s also upgraded its rating. CAF was also awarded the annual “Best Latin American Issuer" prize by Euromoney.

Other developments were the admission of Brazil into CAF share capital, of great importance because of its potential for regional integration, and creation of the Fund for Human Development (FONDESHU) to finance projects in favor of sustainable human development among low-income social sectors of the Andean countries.

During the year, the Corporation’s assets totaled US$2.969 billion, while liquid assets increased to US$556 million, net worth to US$933 million, and the loan and investment portfolio to US$2.363 billion.

Operations approved ECUADOR: strengthening financial and productive sectors The CAF Board approved credit facilities for US$200 million to reactivate the productive sector and develop the financial sector of Ecuador.

The financing will be granted to banks which are eligible for the program and are willing to assume the responsibility of improving the quality of their portfolio, liquidity and solvency, as part of a gradual program of institutional development between the bank, the Superintendency of Banks -- institution which will play a leading role in developing the project -- and Corporación Financiera Nacional (CFN), designated as executing body given its characteristics and experience as a wholesale bank.

The funds will strengthen the capital position of the national financial sector, improving its liquidity and NPI ratio. In the productive sector, the program will facilitate restructuring of liabilities to enable companies to access credit on significantly longer terms than at present, as well as meeting immediate needs for financial services resulting from the ongoing processes, such as development of foreign trade, and privatization of the electricity sector.

ECUADOR: Upgrading of Pan-American Highway A US$38.2 million loan was approved by the CAF Board in favor of the Republic of Ecuador for a rectification project for the international Pan-American Highway, which will provide a link with the North and South extremes of the city of Ambato, capital of Tungurahua province, relieving vehicle transport and easing movement of passengers and cargo.

Because of its high integrationist content, the loan is part of CAF’s priority policies. The project will facilitate international traffic with Colombia and Peru, and contribute to developing the physical infrastructure and productive and commercial activity of Ecuador. The Pan-American Highway crosses the country from north to south, linking various cities, towns and centers of production in the inter-Andean region and the coastal and eastern areas.

The project involves building a 25-km four-lane highway along the eastern part of the city of Ambato, a 285-meter span concrete bridge, along with three traffic interchanges and overpasses in strategic sites along the new route.

The executing body of this major roadwork is the Ministry of Public Works and Communications (MOP). In this project -- as in all those financed by CAF -- environmental aspects have been taken very much into account, and the project will in fact contribute to eliminating pollution in Ambato.

BOLIVIA: Expansion of hydroelectric system In view of the growing demand for electricity in the city of La Paz, the CAF Board approved a US$35 million loan to expand and upgrade the Valle de Zongo generating system – located 50 km from the city – which will expand current capacity by almost 60% (from 112 to 177 MW).

The executing agency for the program is Compañía Boliviana de Energía Eléctrica (COBEE), a private company which last year also received a US$8 million CAF loan with similar objectives. With this operation, CAF is contributing to provision of adequate physical infrastructure, especially in relation to the development, competitiveness and efficiency of the electricity service, with the aim of raising productive activity and the quality of life of the population.

The existing Zongo system consists of eight hydroelectric plants located on waterfalls along 50 kms of the valley. The current project will expand the capacity of four of these plants (Zongo, Botijlaca, Cuticucho, and Santa Rosa), and build two new plants: Tiquimani and Huaji, complying with all the requirements of the environmental laws in force in the country.