Paraguay joins CAF

The entry of Paraguay into CAF share capital was today formalized with the signing of an agreement  under which this country subscribes to 1,000 C series shares of ordinary CAF capital, with a nominal value of US$9,700 each, and a total cost of US$9.7 million.

The signing took place in Asuncion in the offices of Ministry of Finance, which is the body authorized by the Paraguay government to subscribe to the shares.  The agreement was signed by CAF President & CEO Enrique García – reelected as head of the international financial institution a few months ago for a second term ending 2001 – and by Paraguayan Minister of Finance Carlos Facetti.

Additionally, a second agreement was signed under which the Paraguayan government authorizes the Corporation to undertake in the country all the operations in accord with its objectives – whether through government dependencies, public or private corporations, or financial institutions – at the same time as granting a series of facilities to expedite its operations in the country.

With the entry of Paraguay, ten countries of the region are now CAF members. Five of them are members of the Andean Community, while the rest – Brazil, Chile, Mexico, Trinidad and Tobago and now Paraguay – belong to other regional integration schemes such as Mercosur, Caricom, TLC FTA and G-3, which reinforces one of CAF’s objectives which is to act as a bridge between them.

Since its members are only Latin American and the Caribbean countries, CAF can act with absolute independence in favor of the interests of the region. The Corporation has also achieved a privileged position on international capital markets, which facilitates generation of competitive funds in the industrialized countries which are then channeled into the productive sectors of the shareholder countries. With its issues of bonds and commercial paper, CAF has so far generated over US$1.40 billion on the leading world markets: euromarket, Samurai market in Japan, Yankee of the United States and Dragon of southeast Asia.

The institution has a current authorized capital of US$2.50 billion; in 1996 the loan and investment portfolio totaled US$2.72 7 billion, while total assets were US$3.354 billion.

The institution serves both public and private sectors, providing financial products and services to a wide range of clients formed by governments, private companies and financial institutions. Its operations always aim for a balance between economic, environmental and social variables, indispensable for long-term sustainable development.

The operations financed include short-, medium- and long-term loans, cofinancing operations which substantially increase the investments which CAF makes, lines of credit to back foreign trade, and channeling funds into productive sectors through financial institutions which act as wholesale banks.

Support for infrastructure CAF’s work in favor of regional integration and generation of competitiveness includes financing the provision of infrastructure in its shareholder countries, especially roads and transport, energy and telecommunications.

CAF has considerable experience in this area having financed in the last four years 50 physical infrastructure and border integration projects for US$1.80 billion, of which 15 (US$700 million) relate to the private area.

CAF is currently evaluating financial participation in the construction of the Bolivia/Brazil gas pipeline, paving of part of the Transchaco highway between Paraguay and Bolivia, and the laying of the electricity transmission line from the Macagua II hydroelectric plant in Venezuela to the border area with Brazil.

The Corporation has also provided financial support for projects involving generation, capture and distribution of electricity; passenger and cargo road transport; supplementary transport works, including docks; telecommunications; development of cellular telephony; collection, distribution and purification of water; and agricultural and livestock services, including irrigation systems.

Additionally, the present and future tendency of CAF is to introduce innovative financial instruments which facilitate private participation in the development of physical infrastructure and increase investment, as is the case of the projects financed under the limited recourse lending facility, in which the Corporation has been participating since 1991.

Another very important example of CAF support for infrastructure is participation in the formation of the capital of regional investment funds, together with other high-level investors. The objective of these funds is to promote development of infrastructure or private productive activities. Outstanding in this respect are the Scudder Fund for Electricity in Latin America and the Caribbean, Infrastructure Fund for Latin America, Business Fund for Latin America, and Profund International Investment Fund.

Other areas of cooperation CAF participates in many activities in favor of integration. To facilitate trade flows – preferably at private sector level – substantial annual amounts are granted in lines of credit and commercial loans, through an extensive network of financial institutions in the shareholder countries.

The institution also cooperates with strengthening domestic capital markets and their regional integration, with a view to adapting to the new climate of competitiveness and globalization, dominant on international markets, and attracting foreign investment.

CAF also organizes business meetings to promote strategic alliances in sectors related to production and regional trade as backing for the private sector in its process of participating in the new dynamic of globalization of productive processes.