Toward integrated development: Extraregional countries participate in CAF share capital

In recent years, CAF has become a versatile and effective communication bridge between the Andean Group and other regional integration schemes, given the expansion of these processes.

As a result, the institution is achieving one of the objectives of its mission which is to support sustainable growth and regional integration efforts. To do this, it generates and channels foreign investments into Latin America and promotes the region on international financial markets where it enjoys a prestigious position.

During 1993, the Corporation had the capacity to successfully compete on these markets, placing three public bond issues on the euromarket and in Japan – on very advantageous conditions – for approximately US$300 million. In this respect, the assignment of three investment-grade ratings by the most important risk rating firms of Europe and the United States (IBCA, Moody's and Standard & Poor's) was decisive for facilitating placement of the bonds and promoting CAF on international markets.

International interest In the area of investments, Latin America’s relations with the countries of the industrialized world are today qualitatively different.

In recent years these nations have expressed interest in establishing relations on a different basis from the traditional ones, because they are clearly aware that underdevelopment not only affects the country which suffers from it directly but also the balance of international relations. For this reason, they are granting financial assistance for a range of projects which contribute to regional development.

In this respect, CAF offers its support by managing and supervising loans and grants which governments and organizations in these countries allocate to less favored areas and populations, such as campesino farmers and indigenous communities.

In addition, the business sector of the developed world sees many attractive investment possibilities in the region, given the rapid expansion and opening of markets and economies. There is confidence and general recognition that the integration process is moving in the right direction, particularly in relation to trade and investment.

At the same time, the private sectors of the region want to become competitive partners and take maximum advantage of the new circumstances; so they are diversifying their productive and commercial structure, and introducing higher quality into their products.

CAF is deeply committed to development of the private sector and has become its largest provider of medium- and long-term financial services, targeting the majority of its operations to this sector.

Integrated Development In this context, CAF is contributing pragmatically to strengthening economic, financial and commercial relations in Latin America and the Caribbean, which now have special importance because all countries are committed to making efforts in favor of reciprocal free trade, by harmonizing their economic policies and moving toward opening their financial markets.

In this context, it is very important to develop closer institutional ties to improve identification of business and investment opportunities.

Aware of this, CAF has signed cooperation agreements with the Caribbean Development Bank (CDB), Central American Bank for Economic Integration (BCIE), Financial Fund for Development of the River Plate (FONPLATA), Latin American Economic System (SELA), and the Latin American Integration Association (ALADI).

To develop closer relations with other nations, CAF provides a class of shares known as series "C". These are reserved for extra-subregional countries which wish to strengthen their links with the Andean area by stimulating trade relations, promoting foreign investments, technology transfer, business operations, setting up joint ventures, and joint participation on the international market by the business sectors of the partner countries.

Mexico, Chile and Trinidad & Tobago have signed this type of share subscription agreement, and Jamaica and Brazil are expected to do so in the near future.

With the Caribbean area, CAF has established productive institutional and commercial contacts, which have led to joint operations between Andean-Caribbean private businesses.

The Corporation has also made a series of lines of credit available to financial institutions in Mexico, Chile, Trinidad and Tobago, St Lucia, Antigua and Barbuda, St Vincent and the Grenadines, Jamaica and Barbados to finance foreign trade operations between these countries and the Andean nations.

Characteristics of these shares The CAF series "C" shares can be subscribed by governments of extra-subregional countries; international organizations; public, semi-public or private institutions; as well as natural persons from these countries.

In the case of Mexico, the institution authorized to subscribe was Nacional Financiera, and in Chile Corporación de Fomento de la Producción (CORFO). When the membership of Trinidad and Tobago is formalized, the counterpart will be the Ministry of Finance of that country.

CAF is authorized to engage in operations with the government or government dependencies of countries which have subscribed to series "C" shares, for financing of projects whose objective is integration with one or more countries of the Andean Group, or technical cooperation operations to finance preparation of integration projects.

The Corporation can also offer financial assistance to public or private companies in member countries, associated with Andean companies, and grant lines of credit to banks in these countries.