US$20 million line of credit granted for export finance

(Caracas, December 17, 1991).- A US$20 million line of credit was granted by CAF to the Export Finance Fund (FINEXPO), organization attached to the Central Bank of Venezuela.

The agreement was signed today (Tuesday, December 17) by CAF President & CEO Enrique García and the Vice President of Export Finance of the Central Bank, Policarpo Rodríguez.

With this operation, CAF is continuing to strengthen the export sector of its five member countries - Bolivia, Colombia, Ecuador, Peru and Venezuela – which are all committed to a dynamic process of modernization of their international trade and face the challenge of the approaching implementation of a free trade area with a view to establishing the Andean common market in 1995.

The innumerable business possibilities which are opening among the companies of the area require versatile and responsive technical, economic and financial assistance. Aware of this, CAF is responding to the new situation created by Andean integration by facilitating for exporters and importers access to finance, and modernization of machinery and equipment, in order to expand their possibilities of participating in world markets.

This line of credit will be used to provide short-, medium- and long-term finance for exports of Venezuelan goods and services to the Andean market and third countries. The line can be increased as the funds are placed.

Venezuelan exports

In the area of international trade, Venezuela is adopting a modern flexible policy with a simple and attractive tax regime. It is attempting to diversify its exportable offer to the maximum - especially non-traditional goods - by an appropriate financing policy, apart from other components designed to assist exporters.

Following application of technological-administrative innovations and industrial reconversion, the country now has a modern industrial base in areas as diverse as metal-mechanical, automotive, petrochemical, agro-industry, textiles, steel and, of course, oil, as well as civil engineering and construction services.

Export activity in Venezuela is financed basically from two sources: FINEXPO and commercial banks.

Created in 1973 as a Vice Presidency of the Central Bank, FINEXPORT is the body responsible for promotional credit for Venezuelan non-traditional exports, which it does by granting credit directly or through lines of credit with local and international intermediaries.

To access FINEXPORT funds, goods must be produced in the country with a value added of not less than 30%, issued by the Foreign Trade Institute.

CAF support

The CAF support mechanism which promotes intra-subregional trade and develops non-traditional exports to member countries or external markets is the Andean Foreign Trade Finance System (SAFICO) which operates as a supplementary mechanism to national export finance systems through the central bank, the commercial financial sector and the private sector in each member country.

SAFICO funds are used to finance transactions of goods and services originating in the subregion, on financial terms and conditions fixed at the time of the operation in line with market conditions, the nature of the goods and services, and the amount of the credit.

As of November 1991, CAF had approved SAFICO operations totaling US$2,043,000.

Support operations for the foreign trade of its member countries have increased notably in recent years following the setting up of a financial intermediation network with the active participation of Andean commercial banks and private business groups or companies, which have received lines of credit for exports and imports.

Venezuela, through both SAFICO and MECOFIN (Letter of Credit Confirmation and Finance Mechanism for Imports from Third Countries), has signed 43 agreements with CAF for a total of US$240 million.