US$4.60 billion approved in 2005

Enrique García, CAF president & CEO, reported on the activities of the multilateral organization at a press conference.

Significant increase for private sector and strong stimulus in areas of economic infrastructure and social development.

Key amendment to CAF Establishing Agreement.

A report on activities in 2005 was offered at a press conference in Caracas by CAF President & CEO Enrique García, who announced that this year the Corporation had achieved a record US$4.60 billion in approvals, up over 30% from last year’s figure.

García emphasized the increased participation of the private sector in the approvals, and a strong stimulus for infrastructure and regional integration projects, underscoring innovative programs and projects in the social and cultural areas, as well as a deepening of the Corporation’s catalytic and innovative role. In the context of a renewed dynamic of regional integration processes, the amendment to the CAF Establishing Agreement merits special mention. This change will expand the number of Latin American and the Caribbean countries that become full members.

Economic recovery strengthens in Latin America

The CAF president said that Latin America had strengthened its economic recovery in 2005 with 4.3% growth, mainly due to a favorable trend in exports and the recovery of investments in most countries of the region. In a favorable external environment characterized by the increase in terms of trade, a gradual recovery of capital flows into the region, and the compression of country risk, García said that the region had maintained a stable macroeconomic environment with 6.2% inflation, a surplus current account, and lower levels of external debt.

However, García warned that the countries of the region should not be complacent about the current situation because they still suffer from a set of structural problems, such as the widening gap with other emerging economies (especially in Asia), volatile economic growth, unequal income distribution and slow progress on poverty reduction. These problems responded largely to the high concentration of exports on a few products, a factor that makes Latin American economies more vulnerable; low levels of competitiveness; insufficient levels of domestic savings and investment; and the institutional weaknesses prevalent in most countries of the region.

In this context, CAF was is promoting a renewed development agenda aimed at improving the living conditions of Latin Americans through sustained quality growth, which means inclusive growth that generates employment. García added that the agenda should be viewed integrally taking as fundamental pillars the improvement of efficiency, maintenance of stability, environmental equilibrium, and equity and solidarity so that the benefits of economic growth reach all segments of the population.

CAF Activity in 2005

In line with these principles, CAF accompanied the regional development efforts with approvals of loans and other financial operations which benefited a large number of countries and sectors. Although the nucleus of the Corporation's operations was centered on the Andean region, which received 75% of total approvals in 2005, the chief executive emphasized the Corporation’s continuing support for regional integration efforts, evidenced by the 250% increase in approvals for Series C (non-Andean) shareholders. This year, a total of US$1.23 billion was approved for Argentina, Brazil, Costa Rica, Mexico, Panama, Paraguay and Uruguay; as a result, CAF financed 13 Latin American countries in 2005.

By sector, 43.5% of the total amount approved in 2005 was destined for economic infrastructure and social development, including a record 20% for integration infrastructure. In this area, the president underscored approvals for over US$1.00 billion for integration projects in the transport and energy sectors, especially in South America with the use of innovative schemes for public-private participation. In addition, 21% was granted to the corporate and competitiveness sector, 19% to financial systems and capital markets, and 16% for programmatic operations.

García explained that these results were possible thanks to the financial strength that characterized CAF, and the confirmation of its risk ratings by the leading international risk rating agencies, facilitating an active presence on international financial markets as a frequent issuer with the best risk rating in Latin America. The US agency Moody's investor Services in 2005 renewed its recognition of CAF’s financial strength and stability by upgrading its rating from A2 to A1, while the Japan Credit Rating Agency (JCR) assigned an AA- rating.