CAF Rating
Upgraded to +VE

The Japanese risk rating agency, Japan Credit Rating (JCR) has upgraded the rating outlook for the Andean Development Corporation (CAF) from stable to positive, which implies a possible improvement in the rating in the medium term, which is currently at “AA-“.
In a recent announcement, JCR said that the decision to change the outlook to positive was due to an improvement in asset quality and the strengthening of the Corporation's capital with the potential participation of Brazil, Argentina and Uruguay as full members of CAF in the next few years.
CAF President & CEO Enrique García said that this decision, announced in Tokyo, “recognizes the constant strengthening of CAF's financial structure and reflects its new Latin American dimension.”
CAF currently has four credit ratings granted by the most prestigious international agencies: Fitch Ratings (A+), Japan Credit Rating Agency (AA-), Moody's Investors Service (A1), and Standard & Poor's (A+).
The Corporation's financial strategy is based on diversification and expansion of sources of funds and reduction of costs on international financial markets, having made 56 bond issues to date under very competitive conditions. The purpose of raising these funds is to finance important projects in line with the multilateral financial organization's mission to promote the sustainable development and regional integration of its member countries, in both public and private sectors.
The Andean Development Corporation (CAF) is a multilateral financial institution whose mission is to promote the sustainable development of its shareholder countries and regional integration. Its current members are 17 countries in Latin America, the Caribbean, and Europe, namely: Argentina, Bolivia, Brazil, Costa Rica, Colombia, Chile, Dominican Republic, Ecuador, Jamaica, Mexico, Panama, Paraguay, Peru, Spain, Trinidad & Tobago, Uruguay and Venezuela, along with 15 private banks from the Andean region. With headquarters in Caracas, Venezuela, the CAF has representative offices in La Paz, Brasilia, Bogota, Quito and Lima.

$11-mn Loan for
Brazilian Civic Body
As part of the Support Program for Municipal Governments in Brazil (PRAM), which has an initial quota of US$200 million, the Andean Development Corporation (CAF) approved a US$11.7 million loan for the Brazilian municipality of Feira de Santana. The municipality itself will be the executing agency, and the loan is guaranteed by the Brazilian Federative Republic.
CAF President & CEO Enrique García said that "it is a new operation under the PRAM, a program structured so that CAF can act directly at the first level of sub-national governments, granting the option of obtaining finance in dollars or local currency, in support of one of the priority objectives of the Brazilian government: development of local infrastructure and administrative decentralization."
García added that the loan granted to Feira de Santana municipality, located 108 kilometers from Salvador, capital of Bahia state, is destined to improve the quality of life of the population of 535,000 through construction of federal road infrastructure, reducing risks of accidents and facilitating travel between the city center and peripheral barrios.
The strategic location of Feira de Santana at the largest road trunk connection in the Brazilian northeast, connecting federal roads BR-101, BR-116, and BR-324, led to the municipal government's decision to use the funds for construction of five viaducts on the city ring road. The total cost of the project is estimated at US$23.5 million, 50% to be financed by the CAF loan and the rest by the municipality.

Meet On Promoting
Business Networks
To promote the exchange of ideas and experiences between entrepreneurs and representatives of public, private and academic organizations on clusters and their importance in business development, the Andean Development Corporation (CAF) has recently held the International meeting for competitiveness and development of commercial networks (CAF-Networks for Competitiveness) in Lima.
The event is part of the CAF Competitiveness Support Program (PAC). The main participants were CAF President & CEO Enrique García and prominent international experts who analyzed the current situation, advantages and projections for clusters in the region, helping CAF define its future actions in Latin American countries.
The presentations covered four sessions which offered contributions and experiences on the theme, generating values for promotion of competitiveness and business development.
In the first session, Christian H.M. Ketels, representing the Harvard Business School Institute for Strategy and Competitiveness, gave the keynote paper on Clusters and competitive advantages in the world economy, introducing the subject with a conceptual approach to cluster development.
The role of the public sector and international alliances for promotion of business networks was the title of the second paper, which identified the characteristics of successful public (or mixed) intervention in promotion of productive networks. The papers were presented by Claudio Maggi, development manager of Foundation Chile; Carlos Alberto Dos Santos, director of administration and finance of the Brazilian Support Service for Micro and Small Enterprises (SEBRAE), among others.
The third session was on Opportunities for generation of value throughout productive chains. During the presentations, experts on the area, including Beatriz Tubino, general manager of the Peruvian Asparagus and Vegetable Institute (IPEH), explained how initiatives of entrepreneurs have developed clusters with achievements in innovation, quality, diversification and market penetration.
The presentations in the last session on Importance of development of supplementary services for clusters covered experiences and ways in which suppliers have generated value in cluster development. The papers were given by prominent experts such as Remigio Álvarez, director of international productive chains, Nacional Financiera (NAFIN) of Mexico; Michael Penfold, professor at the Institute of Higher Administrative Studies (IESA), Venezuela, among others.
PAC's main line of action is to promote projects on cluster promotion, productive chains and development of suppliers as mechanisms for stimulating business development and competitiveness in the region. For CAF, this event is an important opportunity to make these concepts better known and exchange experiences and best practices from successful cases.
The International meeting for competitiveness and development of business networks took place in the presence of Foreign Trade and Tourism Minister Mercedes Araoz, currently vice president of the National Competitiveness Council; and Premier Jorge del Castillo, who gave the closing address.

CAF-Chile Sign Pact on
Forging Regional Ties

Chilean President Michelle Bachelet made an official visit to the headquarters of the Andean Development Corporation (CAF) in Caracas in April 2007 to move forward with the consolidation and strengthening of the regional cooperation and integration process.
During the visit a memorandum of understanding was signed by Chilean Foreign Minister Alejandro Foxley and CAF President & CEO Enrique García. The memorandum aims to forge closer links and expand existing relations between Chile and the Corporation, as well as strengthening economic links between the countries of Latin America and the Caribbean with the Asia-Pacific region.
During the signing, García said, "this visit confirms the willingness and disposition of both parties to promote and strengthen regional integration and sustainable social development in an effort to improve the quality of life of the people of the continent." After the meeting he said that he assigned great importance to strengthening CAF's relations with Chile "as a country that has historically played a key role in achieving the objective of balanced and harmonious development in the countries of the region in pursuit of economic growth with equity, which is in line with the Corporation's mission."
President Bachelet, who was witness of honor at the signing, was accompanied - in addition to Foreign Minister Alejandro Foxley - by Housing and Urban Planning Minister Patricia Pobrete; Minister of the National Women's Service Laura Albornoz, and parliamentarians and business leaders.
The Chilean delegation and the CAF work team explored aspects related to increased participation by Chile in the programs and projects promoted by the institution, as well as topics of mutual interest for strengthening economic relations between Latin American countries and the Asia-Pacific region, through various schemes including cooperation funds which will be jointly administered by Chile and the Corporation.

$28-mn CAF Loan for
Uruguayan Thermal Plant

CAF has also approved a US$28-million loan in favor of Administración Nacional de Usinas y Trasmisiones Eléctricas (UTE), which, jointly with a parallel loan operation for US$14 million from Citigroup, will partially finance execution of the third phase of the Punta del Tigre Thermal Plant Project in San José department in Uruguay.
CAF president & CEO Enrique García explained that the approval was part of the Corporation's efforts to improve the quality of life of the population of Latin America.
The objective of the project is to contribute to the stability, security and reliability of the Uruguayan national electricity system, and reduce the probability of electricity supply failures by incorporating thermal backup equipment into existing generating capacity, with construction of the Punta del Tigre thermal plant of 300 MW of firm installed capacity.
The project is being built in three phases. In the first stage, which consisted of Phases I and II already executed, the first four generating units were completed with a total of 200 MW of firm installed capacity, and the transmission line, oil pipeline and two gasoil storage tanks were built. In Phase III, currently in execution, instrumented by an extension of the agreement with the supplier, a further 100 MW will be added to the plant. The total cost of the plant and accessory works is US$165.4 million, of which the CAF loan represents 17%. Citigroup is financing 55%, and the remaining 28% comes from UTE's own funds.

$600 Million CAF Loan for
Venezuelan Power Plant

The Andean Development Corporation (CAF) has approved an 18-year US$600 million loan for Venezuela to partially finance the Manuel Piar (Tocoma) Hydroeléctrica Plant Project, which is executed by CVG Electrificación de Caroní CA (CVG Edelca) with the objective of increasing the efficiency and reliability of the Venezuelan National Electricity System.
As Enrique García, president & CEO, explained "the loan is an example of the institution's support for the development of Venezuela because it contributes to improving the electricity supply in this member country and promoting the development of regional energy infrastructure." He emphasized the positive impact of the project on the expansion of productive sectors, adding that "a modern logistics platform is indispensable for building sustained and quality economic growth."
García said that the loan was the second granted by CAF for the project. The Corporation provided US$300 million in 2004 for the project, whose objective is to increase electricity generation by 15 percent to cover demand and improve the efficiency and reliability of the National Electricity System. The plant is part of a strategic plan to exploit the hydroelectric potential of the Caroní River in the south of Venezuela. The new plant will supplement the generating capacity of the Guri, Macagua and Caruachi plants, which are currently supplying 75 percent of the power consumed in the country.
The Manuel Piar (Tocoma) Hydroelectric Plant has a total cost of US$3.06 billion, of which CAF financing covers 30 percent, while the remaining 70 percent is financed from own resources and other multilateral sources.
The hydroelectric plant is the last power generating project of the Lower Caroní development. The project, which will have a nominal capacity of 2,160 MW, is expected to generate an average of 12,100 GWh/year, 14 percent of the total generated by the Lower Caroní hydroelectric development. The construction period, which has already begun, is planned to conclude in 2014. The operation of the plant will bring total nominal capacity of the entire complex to 16,130 MW, making it one of the world's largest hydroelectric generating systems.
Since 1992, CAF has approved 10 loans totaling US$1.82 billion for projects executed by Edelca to increase power production and transmission in Venezuela. In Brazil it has financed construction of the transmission line to supply Venezuelan electricity to the border area.

CAF Pact on Carbon Emissions

An important sales agreement for carbon credits was signed by the Andean Development Corporation (CAF) with the company Ingenio Providencia S. A. on behalf of the Dutch government.
The project will permit Ingenio Providencia S.A. to reduce carbon dioxide emissions thanks to a reduction in the coal consumed in its processes by developing activities that result in greater energy efficiency.
The project will result in reductions of about 170,000 tons of carbon dioxide annually starting in the second quarter of 2007. The four stages of the project are aimed at improving energy efficiency by installing new equipment such as evaporators, motors and boilers, as well as making improvements in the interior of the process.
In the first stage, due to begin in March, normal coal consumption is expected to fall by 23,259 tons, while in the second stage the reduction will be an additional 1,105 tons per year. The third stage covers replacement of steam engines by electric motors. In the last stage a more efficient boiler will be installed along with a turbo-generator which will result in a further reduction of 30,000 tons of coal, leaving around 120 MWH per year available for export to the national network.
Ingenio Providencia S.A. currently processes about 2,700,000 tons of sugarcane a year which generate about 791,000 tons of bagasse annually, for production of around 6.5 million liters a month of sugar and alcohol carburant.
Through its Latin American Carbon Program (PLAC), CAF promotes projects to reduce greenhouse gas emissions and contribute to sustainable development, with activities ranging from identification of opportunities to marketing of emission reductions, all in accordance with the terms of the Kyoto protocol.