The Andean Development Corporation (CAF) will deploy its
$2.5 billion capital boost to raise the volume of private
sector loans and credit lines to up to 30% of total lending,
Enrique Garcia, its president, has said.
The institution will prioritize trade and project finance,
Garcia told Emerging Markets.
It will return to concentrating on small and
medium-sized companies, by providing credit lines for trade
finance via commercial banks, and ramp up long-term
project financing to private companies directly in
addition to co-financing infrastructure projects with the
As the economic slump hit Andean economies last year,
CAFs ambitions to become a private sector financier were
undermined. The public sector accounted for 81% of its loans as
of September 2009. Now, CAF aims to increase private sector
loan exposures while preserving its AA-/A+ credit rating.
Franklin Santarelli, credit analyst at Fitch, said: A
10% hike in private sector lending would be a big increase, so
[CAF] would have to cherry-pick the best borrowers, [or] else
risk undermining their creditworthiness.
In August 2009, CAFs shareholders agreed on a $2.5
billion paid-in capital boost by 2017, which would bring its
total paid-in capitalization to more than $6 billion, three
times that of 2007. Panama became a full member of CAF earlier
this month, following Brazil and Uruguay last year.
Garcia hopes that a capital boost and diversified country
lending could provide a buffer to absorb any losses triggered
by private sector loan defaults or impairments.
Santarelli said that CAF could lend to more highly-rated
firms and banks in Brazil and Panama than the Andean region
but that loan demands from the Brazilian public sector,
and chronic balance-of-payment dramas in the Andes, may derail
CAFs private-sector focus. Total loan approvals were $9.2
billion in 2009 and Garcia is eyeing $10 billion this year and
a 10% year-on-year increase in lending over the next five
Garcia said Argentina would complete its bid to become a
full member in the coming months. CAF is also in talks with El
Salvador and Guatemala to join CAF as category C
(i.e. non-shareholding) members.
Garcia said Italy will this year join CAF as the third
shareholder outside Latin America, after Spain and Portugal,
after Congress approved a $75 million paid-in capital
Garcia is mandated to restrict shareholding by non Latin
American countries and hence, capital from international
donors to 15%, in order to preserve CAFs regional