Corporacion Andina de Fomento (CAF), the Andean development bank, expects total loan approvals to reach $11 billion in 2011, up from $8.5 billion last year.
CAF president Enrique Garcia told Emerging Markets that the increase in lending reflects CAF’s growing stature as a regional development bank.
“We were a relatively small sub-regional bank but today we are a regional bank,” he said. Last year’s loan approval levels “put us at similar levels to the World Bank and the IDB”.
Garcia highlighted a “substantial” shift in the concentration of the bank’s lending since its $2.5 billion capital boost, approved in July 2009. “Twenty years ago CAF lent $400 million a year, with assets of about $700 million. Today we lend more than $10 billion in 18 countries, with assets close to $19 billion,” he said.
In 2010, private sector operations comprised 30% of total lending – a level which Garcia expected to remain level this year.
Garcia said that the bank’s recent surge in lending would not impair the institution’s creditworthiness.
“We have to continue to be very careful in terms of risk management,” he said, pointing out that this was critical since the capital hike was made up entirely of paid-in capital. The bank, headquartered in Venezuela, is rated A1 by Moody’s and A+ by Standard & Poor’s and Fitch.
Garcia said that the bank’s unique shareholding structure acted as a boost for the institution as it stepped up its activities across the region. “The members of CAF have a sense of ownership,” he said.“We are the only relevant regional multilateral development bank which is owned by the region.”
“With the new full members, the footprint of CAF is increasing considerably,” he added. In 2010, the bank approved $1.9 billion of loans and investments in Brazil and $1.6 billion in Argentina.
CAF also plans to step up its local currency funding programme this year. The institution is looking to issue local currency bonds in Chile, Panama and Brazil this year Garcia said.
“We would like to increase our participation in the local markets of Latin America through capital raising and by helping the development of capital markets in the region,” he said.
“We are working [on issuing bonds] in Chila and Panama and we are trying to see if we can do it in Brazil.”
In August 2009, CAF’s 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. Argentina, Brazil, Panama, Paraguay and Uruguay have joined as members since 2009.