The CAF in Colombia: a dynamic and innovative presence

The figures on the expansion of CAF’s presence in recent years in Colombia speak for themselves. Between 1998 and 2003, the Corporation's portfolio in this country rose from US$624 to US$1.9 9 billion. Currently, Colombia is the largest beneficiary of loans from the multilateral, with an average of 26% of the total financing approved in the last five years.

The funds were used to promote and finance sustainable infrastructure projects; contribute to macroeconomic stability, structural reforms and competitiveness; strengthen the business and financial sectors, and support economic and commercial integration processes.

The Corporation has also successfully directed its efforts into attracting funds into the country from other international capital sources through the application of innovative financial solutions. One quarter of the current CAF portfolio in Colombia - around US$445 million - relates to funds from other financial sources that have participated, under the Corporation’s umbrella, in operations such as syndicated loans and partial credit guarantees.

In developing its strategic programs, the CAF has stimulated and participated in many new initiatives in areas such as strengthening governance, promotion of culture, development of science and technology, support for SMEs, formation of productive chains, sustainable trade in biodiversity, economic integration, and development of the carbon market.

Permanent commitment

In 1998 and 1999, CAF approved two loans totaling US$200 million which helped solve the difficult situation of the Colombian financial system at that time.

The CAF has also cooperated with the country's efforts to recover peaceful coexistence and has been the main financier of the economic and social recovery component of the Plan Colombia, thanks to two loans totaling US$362 million granted to the "Roads for Peace" program, supplemented with a US$75-million loan to complete a new road corridor to connect Quito-Bogota-Caracas, which will cut travel time between the three capitals.

With a US$100-million loan, the Corporation is supporting the Bogota Capital District Road Plan and Education Program. For the transport component, the loan finances the expansion of the Transmilenio system; and for education, the Bogota District Public Library Network and the building and equipping of education centers in marginal areas.

CAF’s backing for the country was reaffirmed in October 2002, with the definition of the financial commitment for the 2003-2006 period, totaling US$3.50 billion. To July 2004 three loans were approved for the national government: US$300 million for the Support Program for Reform of the State, Competitiveness and Social Investment; US$250 million for the government’s economic program, and US$150 million for infrastructure projects. The infrastructure operations include US$65 million for the Urban Development Program, and US$85 million to partially finance the nation's participation in the building of the Transmilenio.

Innovative financing

In two operations with the Republic, the CAF put into practice an innovative financial instrument: the partial loan guarantee. In 2000, a syndicated US$250-million loan over five years was granted by various international banks, backed by a partial loan guarantee for US$100 million from the CAF, which helped the operation receive an investment grade rating. In view of the success of this instrument, in 2002 the CAF granted Colombia another guarantee for US$83.3 million to facilitate access to a new syndicated loan for US$250 million.

In cofinancing, the CAF has carried out various A/B loan operations in favor of major Colombian companies. The most important being the US$250-million loan to Bavaria, one of the largest cofinancings approved in recent years, in which Japanese investors participated for the first time. The operation was co-led by JP Morgan. In 2003 a new cofinancing for US$150 million was approved for this company to continue backing its strategy of internalization, and to finance equipment and working capital.

Another important A/B loan was US$95 million for Empresas Publícas de Medellín to optimize the La Sierra gas-fuelled thermoelectric plant. In the private infrastructure sector, A/B loans were granted to Gases de Boyacá y Santander for the building of a gas pipeline network (US$40 million), and to Orbitel telecommunications company (US$75 million), among others.

CAF’s actions were also aimed at the productive sector through lines of credit with domestic banks. In addition to the lines already approved for the Colombian Foreign Trade Bank (Bancoex) to finance export of goods and services, in 2003 a new credit was granted in pesos for the equivalent of US$50 million destined specifically for SMEs. The funds for this operation were obtained through the CAF’s first issue in local currency in the region.

Strategic support

In the field of sustainable development, the CAF signed agreements with the Bogota District Government and Empresas Públicas de Medellín to study the marketing of the carbon gas emission reductions obtained by the Transmilenio and La Sierra gas optimization projects, respectively.

For development of SMEs, among other actions, the CAF set up, with the consulting firm Vision of the University of La Sabana, the first risk-rating agency for this sector in an effort to strengthen its deficient access to sources of financing.

Also in 2003, an alliance was formed with the risk capital management firm Mercurius Ventures to invest in Colombian SMEs up to US$1 million of funds from the FIDE.

To promote competitiveness, the pilot phase of the Andean Program of Technology and Technology Service Exports: Exporte is under way. The objective is to promote the potential for exportable technology in the Andean countries. The program is backed by the CAF, Colciencias, Proexport and the Ministry of Commerce, Industry and Tourism. The program is managed by the Antioquia Technology-Based Business Incubator. Also, through the PAC, the Corporation is participating in the strengthening of productive chains such as electric and electronics, and fruit and vegetables in the Valle del Cauca region.

Colombia was the first country where the CAF launched, in June 2002, its Governance Program, which is currently operating in 142 municipalities. The program covers four major areas: ethics and transparency for development; strengthening institutions; decentralization and citizen participation; and leadership for the transformation.

To give continuity to this program, at the end of 2003 a technical cooperation agreement was signed with the Vice Presidency of the Republic, under which the CAF contributed US$290,000 to finance agreements on transparency, an anti-corruption mission, and training of leaders committed to a new concept of public management.

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