UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

(Mark One)

¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF

THE SECURITIES EXCHANGE ACT OF 1934

OR

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 20182020

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

OR

¨ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report……………………………report

For the transition period from ______ to _______

Commission File Number 1-11414

BANCO LATINOAMERICANO DE COMERCIO EXTERIOR, S.A.

(Exact name of Registrant as specified in its charter)

Torre V, Business Park

Avenida La Rotonda, Urb. Costa del Este

P.O. Box 0819-08730

Panama City, Republic of Panama

(Address of principal executive offices)

Ana Graciela de Méndez

Chief Financial Officer

+507 210-8500

Email address: amendez@bladex.com

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.                     ¨

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.                                                            x

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

BANCO LATINOAMERICANO DE COMERCIO EXTERIOR, S.A.

TABLE OF CONTENTS

Page

In this Annual Report on Form 20-F, or this Annual Report, references to the “Bank” or “Bladex” are to Banco Latinoamericano de Comercio Exterior, S.A., a specialized multinational bank incorporated under the laws of the Republic of Panama (“Panama”), and its consolidated subsidiaries described in Item 4.A “Information on the Company – History and Development of the Company.” References to Bladex’s consolidated financial statements (the “Consolidated Financial Statements”) are to the financial statements of Banco Lationoamericano de Comercio Exterior, S.A., and its subsidiaries, with all intercompany balances and transactions having been eliminated for consolidating purposes. References to “Bladex Head Office” are to Banco Latinoamericano de Comercio Exterior, S.A. in its individual capacity. References to Bladex’s loan portfolio (the “Loan Portfolio”) are to the Bank’s loans at amortized cost, gross of interest receivable, allowance for loan losses, unearned interest and deferred fees. References to Bladex’s commercial portfolio (the “Commercial Portfolio”) are to the Bank’s Loan Portfolio plus customers’ liabilities under acceptances, and loan commitments and financial guarantee contracts, such as confirmed and stand-by letters of credit, and guarantees covering commercial risk. References to Bladex’s credit portfolio (the “Credit Portfolio”) are to the Bank’s Commercial Portfolio plus Bladex’s investment portfolio (the “Investment Portfolio”) consisting of securities at fair value through other comprehensive income (“FVOCI”) and securities at amortized cost, gross of interest receivable and the allowance for expected credit losses. References to “U.S. dollars” or “$” are to United States (“U.S.”) dollars. References to the “Region” are to Latin America and the Caribbean. The Bank accepts deposits and raises funds principally in U.S. dollars, grants loans mostly in U.S. dollars and publishes its Consolidated Financial Statements in U.S. dollars. The numbers and percentages set forth in this Annual Report have been rounded and, accordingly, may not total exactly.

Upon written or oral request, the Bank will provide without charge to each person to whom this Annual Report is delivered, a copy of any or all of the documents listed as exhibits to this Annual Report (other than exhibits to those documents, unless the exhibits are specifically incorporated by reference in the documents). Written requests for copies should be directed to the attention of Mrs. Ana Graciela de Méndez, Chief Financial Officer, Bladex, as follows: (1) if by regular mail, to P.O. Box 0819-08730, Panama City, Republic of Panama, and (2) if by courier, to Torre V, Business Park, Avenida La Rotonda, Urb. Costa del Este, Panama City, Republic of Panama. Telephone requests may be directed to Mrs. de Méndez at +507 210-8563. Written requests may also be sent via e-mail to Mrs. de Méndez atamendez@bladex.comor ir@bladex.com.

Forward-Looking Statements

In addition to historical information, this Annual Report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements may appear throughout this Annual Report. The Bank uses words such as “believe,” “intend,” “expect,” “anticipate,” “plan,” “may,” “will,” “should,” “estimate,” “potential,” “project” and similar expressions to identify forward-looking statements. Such statements include, among others, those concerning the Bank’s expected financial performance and strategic and operational plans, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. Forward-looking statements involve risks and uncertainties, and actual results may differ materially from those discussed in any such statement. Factors that could cause actual results to differ materially from these forward-looking statements include the risks described in the section titled “Risk Factors.” Factors or events that could cause the Bank’s actual results to differ may emerge from time to time, and it is not possible for the Bank to predict all such factors or results. The Bank undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by applicable law or regulation. Forward-looking statements include statements regarding:

In addition, the statements included under the headings “Item 4.B. Business Overview—Strategies for 20192021 and Subsequent Years” and “Item 5.D. Trend Information” are forward-looking statements. Given the risks and uncertainties surrounding forward-looking statements, undue reliance should not be placed on these statements. Many of these factors are beyond the Bank’s ability to control or predict. The Bank’s forward-looking statements speak only as of the date of this Annual Report. Other than as required by law, the Bank undertakes no obligation to update or revise forward-looking statements, whether as a result of new information, future events, or otherwise.

PART I

Not required in this Annual Report.

Not required in this Annual Report.

A.        Selected Financial Data

The following table presents selected consolidated financial data for the Bank. The Consolidated Financial Statements were prepared and presented in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The following selected financial data as of December 31, 20182020 and 2017,2019, and for the years ended December 31, 2018,2020, December 31, 20172019 and December 31, 20162018 has been derived from the Consolidated Financial Statements, and are included in this Annual Report beginning on page F-1, together with the reports of the independent registered public accounting firms KPMG LLP (“KPMG”). The following selected financial data as of December 31, 2018, 2017 and Deloitte, Inc. (“Deloitte”).2016, and for the years ended December 31, 2017 and 2016, are derived from the Forms 20-F for the years 2018 and 2017 already filed with the SEC. The Consolidated Financial Statements as of, and for the yearyears ended December 31, 2020, 2019 and 2018 were audited by the independent registered public accounting firm KPMG, and the Consolidated Financial Statements as of, and for the years ended, December 31, 2017 2016, 2015, and 20142016 were audited by the independent registered public accounting firm Deloitte.Deloitte, Inc. The information below is qualified in its entirety by reference to the detailed information included elsewhere herein and should be read in conjunction with Item 4, “Information on the Company,” Item 5, “Operating and Financial Review and Prospects,” and the Consolidated Financial Statements and notes thereto included in this Annual Report.

Consolidated Selected Financial Information

B.        Capitalization and Indebtedness

Not required in this Annual Report.

C.        Reasons for the Offer and Use of Proceeds

Not required in this Annual Report.

D.        Risk Factors

The Bank’s business, results of operations, financial conditions and cash flows are subject to, and could be materially adversely affected by, various risks and uncertainties, including, without limitation, those set forth below, any one of which could cause the Bank’s actual results to vary materially from recent results or anticipated future results. Investors should consider, among other things, all of the information set out in this Annual Report and particularly the risk factors with respect to Bladex and the Region. In general, investing in financial instruments of issuers in emerging market countries such as Panama involves a higher degree of risk than investing in financial instruments of U.S. and European issuers. Additional risks and uncertainties not presently known to the Bank or that its management currently deems immaterial may also impair the Bank’s business operations.

Risks Relating to the Bank’s Business

The effects of the COVID-19 pandemic have adversely affected, and are expected to continue to adversely affect, the Bank’s businesses and results of operations, and its duration and future impacts on the economy in the Region and on its businesses, results of operations and financial condition remain uncertain.

The negative economic conditions arising from the pandemic negatively impacted the Bank’s financial results during 2020 in various respects, including requiring it to implement policies focused substantially on maintaining liquidity and therefore not allowing the Bank to grow its Credit Portfolio in line with growth in recent years. While management believes these policies have been prudent in the circumstances and have allowed the Bank to perform well during a challenging year, these policies resulted in a reduction in the Bank’s net interest income during 2020 compared to 2019. The Bank also saw a reduction in 2020 in its income from fees and commissions related to a decline in mandated structured loan transactions, as a result of the negative economic effects caused by the COVID-19 pandemic throughout the Region.

Overall, 2020 proved to be a very challenging year for the markets in the Region where Bladex operates, as Latin American economic growth was severely impacted by high uncertainty and volatility caused by the negative effects of the COVID-19 pandemic. The borrowers to which the Bank lends operate a wide range of businesses and are active in numerous economic sectors, many of which have faced, and will continue to face, significant challenges and negative impacts as a result of the COVID-19 outbreak. These impacts may include, among others, reduced business volumes, temporary closures of the Bank’s borrowers’ facilities, insufficient liquidity, delayed or defaulted payments from the Bank’s borrowers’ own customers, increased levels of indebtedness or the unavailability of sufficient financing for the Bank’s borrowers, and other factors which are beyond the Bank’s control. To the extent the COVID-19 pandemic adversely affects the business and financial results of the borrowers to whom the Bank lends, it could lead to loan restructurings on terms which may not be as favorable to the Bank, bankruptcies and insolvencies of the Bank’s borrowers, and may increase the level of impaired loans in the Bank’s Commercial Portfolio and its level of allowances for expected credit losses, which could in turn materially and adversely affect the Bank’s business, results of operations and financial condition.

The ongoing effects of COVID-19 outbreak may also cause material and adverse impacts on the Bank’s assets, as well as impacts on income due to lower lending and transaction volumes, which may impact the Bank’s assets and capital position. Further expected credit losses could arise, impacted by the disruption to global supply chains, and through the impact that COVID-19 is still having more broadly on economic growth globally. In addition, the COVID-19 pandemic may cause the Bank to continue to institute from time to time office closures and remote working arrangements for its employees and staff, which could have a material adverse effect on productivity.

The COVID-19 pandemic has also caused, and is likely to continue to cause, severe economic, market and other disruptions worldwide and in the Region. The Bank cannot assure you that conditions in the bank lending, capital and other financial markets will not continue to deteriorate as a result of the pandemic, or that the Bank’s access to capital and other sources of funding will not become constrained, which could adversely affect the Bank’s Commercial Portfolio volumes and the terms of future loans in the Commercial Portfolio, renewals or refinancings.

The extent of the COVID-19 pandemic’s effect on the Bank’s operational and financial performance will depend on future developments, including the speed and success of the rollout of COVID-19 vaccines both globally and in the Region, and the duration of the eficacy of the vaccines. As of the date hereof, the rollout of vaccines in the Region has proceeded significantly more slowly than in the U.S., Great Britain, the European Union and other countries, and the timing widespread vaccine availability remains uncertain.

The Bank’s management continues to closely monitor the pandemic and related risks as they evolve globally and in the Region. The magnitude and duration of the pandemic and its future direct and indirect effects on the global and Regional economies and the Bank’s business, results of operations and financial condition are highly uncertain and depend on future developments that cannot be predicted, including the likelihood of further surges of COVID-19 cases and the spread of more easily communicable variants of COVID-19, the timing and availability of effective medical treatments and vaccines, future actions taken by governmental authorities, including any stimulus legislation in the Region, and/or other third parties in response to the pandemic. The pandemic may cause prolonged global or Regional negative economic conditions or longer lasting effects on economic conditions than currently exist, which could have a material adverse effect on the Bank’s business, results of operations and financial condition. In addition, the foregoing factors and conditions could result in potential downgrades to the Bank’s credit ratings, negative impacts to regulatory capital and liquidity and further restrictions on dividends and/or common stock repurchases.

Bladex faces liquidity risk, and its failure to adequately manage this risk could result in a liquidity shortage, which could adversely affect its financial condition, results of operations and cash flows.

Bladex, like all financial institutions, faces liquidity risk. Liquidity risk is the risk that the Bank will be unable to maintain adequate cash flow to repay its deposits and borrowings and fund its Credit Portfolio on a timely basis. The Bank’s capacity and cost of funding may be impacted by a number of factors, such as changes in market conditions (e.g., in interest rates), credit supply, changes in credit ratings, regulatory changes, systemic shocks and volatility in the banking sector,and financial sectors, and changes in the market’s perception of the Bank, among others. Failure to adequately manage its liquidity risk could produce a shortage of available funds, which may cause the Bank to be unable to repay its obligations as they become due.

Short-term borrowings and debt from international private banks that compete with the Bank in its lending activity, represent one of the main sources of funding at 25% of the Bank’s total funding as of December 31, 2018. If these international banks cease to provide funding to the Bank or cease to provide funding to the Bank at historically applicable interest rates, the Bank would have to seek funding from other sources, which may not be available, or if available, may be at a higher cost.

Turmoil in the international financial markets, including but not limited to conditions surrounding the ongoing COVID-19 pandemic, could negatively impact liquidity in such financial markets, reducing the Bank’s access to credit or increasing its cost of funding, which could lead to tighter lending standards. The occurrence of such unfavorable market conditions could have a material adverse effect on the Bank’s liquidity, results of operations and financial condition.

As of December 31, 2018, 71%2020, 50% of the Bank’s total deposits represented deposits from central banks or their designees (i.e., the Bank’s Class A shareholders), 13%25% of the Bank’s deposits represented deposits from private sector commercial banks and financial institutions, 15% of the Bank’s deposits represented deposits from state-owned and private, corporations and international organizations, 8% of the Bank’s deposits represented deposits from private sector commercial banks and financial institutions, and 8%10% of the Bank’s deposits represented deposits from state-owned banks. The Bank does not accept retail deposits from individuals. Any disruption or material decrease in current or historic deposit levels, in particular levels of deposits made by central banks and their designees (i.e., the Bank’s Class A shareholders) due, among other factors, to any change in their U.S. dollar liquidity strategies which currently include making deposits with the Bank, could have a material adverse affecteffect on the Bank’s liquidity, results of operations and financial condition. In addition, if some private or state-owned international banks cease to provide deposits to the Bank or cease to provide funding to the Bank at historically applicable interest rates, the Bank would have to seek funding from other sources, which may not be available, or if available, may be at a higher cost.

Lastly, Panama is a U.S. dollar-based economy. Panama does not have a central bank, and there is no lender of last resort to local financial institutions in the Panamanian banking sector in the event of financial difficulties or system-wide liquidity disruptions, which could adversely affect the banking system in the country.

Any of the above factors, either individually or in the aggregate, could adversely affect the Bank’s liquidity, financial condition, results of operations and cash flows.

The Bank’s allowance for losses on financial instruments could be inadequate to cover credit losses mostly related to its loans, loan commitments and financial guarantee contracts.

The Bank determines the appropriate level of allowances for losses based on a forward-looking process that estimates the probable loss inherent in its Credit Portfolio, which is the result of a statistical analysis supported by the Bank’s historical portfolio performance, external sources, and the judgment of the Bank’s management. The latterBank’s level of allowances reflects assumptions and estimates made in the context of changing political and economic conditions in the Region. The Bank’s commercial portfolio (the “Commercial Portfolio”) includes: (i) gross loans excluding interest receivable, allowance for loan losses, unearned interest and deferred fees (the “Loan Portfolio”), (ii) customers’ liabilities under acceptances, and (iii) loan commitments and financial guarantee contracts, such as confirmed and stand-by lettersRegion, including, but not limited to, the impact of credit, and guarantees covering commercial risk.ongoing turmoil related to the COVID-19 pandemic. The Bank’s allowances for losses could be inadequate to cover losses in its CommercialCredit Portfolio due to, among other factors, concentration of exposure or deterioration in certain sectors or countries, including but not limited to the impact of ongoing turmoil related to the COVID-19 pandemic and other factors, which in turn could have a material adverse effect on the Bank’s financial condition, results of operations and cash flows.

The Bank’s businesses are subject to market risk inherent in the Bank’s financial instruments, as fluctuations in different metrics may have adverse effects on its financial position.

Market risk generally represents the risk that the values of assets and liabilities or revenues will be adversely affected by changes in market conditions. Market risk is inherent in the financial instruments associated with many of the Bank’s operations and activities, including loans and securities at amortized cost, deposits, financial instruments at fair value through profit or loss (“FVTPL”) and securities at fair value through other comprehensive income (“FVOCI”),FVOCI, short-term and long-term borrowings and debt, derivatives and trading positions. This risk may result from fluctuations in different metrics: interest rates, currency exchange rates and changes in the implied volatility of interest rates and changes in securities prices, due to changes in either market perception or actual credit quality of either the relevant issuer or its country of origin. This risk may also result from turmoil in the international financial markets, including but not limited to the ongoing effects of the COVID-19 pandemic, volatility in commodity prices, and other factors. Accordingly, depending on the instruments or activities impacted, market risks can have wide ranging, complex adverse effects on the Bank’s financial condition, results of operations, cash flows and business.

Furthermore, the Bank cannot predict the amount of realized or unrealized gains or losses on its financial instruments for any future period. Gains or losses on the Bank’s investment portfolioInvestment Portfolio may not contribute to its net revenue in the future or may cease to contribute to its net revenue at levels consistent with more recent periods. The Bank may not successfully realize the appreciation or depreciation now existing in its consolidated investment portfolioInvestment Portfolio or in any assets of such portfolio.

The Bank faces interest rate risk that may be caused by the mismatch in maturities of interest-earning assets and interest-bearing liabilities.  If not properly managed, this mismatch can reduce net interest income as interest rates fluctuate.

As a bank, Bladex faces interest rate risk because interest-bearing liabilities generally reprice at a different pace than interest-earning assets. Bladex’s exposure to financial instruments whose values vary with the level or volatility of interest rates contributes to its interest rate risk. Failure to adequately manage eventual mismatches may reduce the Bank’s net interest income during periods of fluctuating interest rates.

The Bank’s Commercial Portfolio may decrease or may not grow as expected. Additionally, growth in the Bank’s Commercial Portfolio or other factors, including those beyond the Bank’s control, may expose the Bank to increases in its allowance for expected credit losses.

The Bank’s Commercial Portfolio, including its Loan Portfolio, may not grow at anticipated levels or may decrease in future periods.periods due, among other possible factors, to reduced demand for new credits and/or unscheduled voluntary prepayments by clients. For example, the Bank’s Commercial Portfolio decreased by 15% as of December 31, 2020 to $5,551 million, from $6,502 million as of December 31, 2019, as a result of the implementation by management of measures favoring liquidity, emphasizing sectors which management considers defensive in the current economic context (such as oil & gas (downstream), electric power and food and beverage) and stricter credit underwriting standards, in each case in order to confront market conditions related to the ongoing COVID-19 pandemic. A reversal or slowdown in the growth rate of the Region’s economy and trade volumes could adversely affect the Bank’s Commercial Portfolio, and as a result adversely affect the Bank’s results of operations. OnThe negative effects of the other hand,COVID-19 virus throughout the world, and in particular the Region, as well as the implementation of restrictive governmental measures to prevent its spread, impacted the Bank’s Commercial Portfolio in a number of ways, including a reduction in Commercial Portfolio balances. In particular, as loans in the Commercial Portfolio were substantially repaid or prepaid in accordance with their terms, the Bank has been lending on a more selective basis, having established stricter credit underwriting criteria with a focus on client segments and industries that the Bank believes are better suited to weather the effects of the COVID-19 pandemic. See Item 3.D., “Key Information--Risk Factors—Risks Relating to the Bank’s Business--The effects of the COVID-19 pandemic have adversely affected, and are expected to continue to adversely affect, the Bank’s businesses and results of operations, and its duration and future impacts on the economy in the Region and on its businesses, results of operations and financial condition remain uncertain,” and Item 5.D., “Operating and Financial Review and Prospects—Trend Information.”

Furthermore, any future expansion of Bladex’sthe Bank’s Commercial Portfolio may expose the Bank to higher levels of potential or actual losses and require an increase in the allowance for expected credit losses, which could negatively impact the Bank’s operating results and financial position. Furthermore, the Bank’s historical loan loss experience may not be indicative of its future loan losses. Credit-impaired or low credit quality loans can also increase the Bank’s allowance for expected credit losses and thereby negatively impact the Bank’s results of operations. The Bank may not be able to effectively control the level of the impaired loans in its total Loan Portfolio. In particular, the amount of its reported credit-impaired loans may increase in the future as a result of growth in its Loan Portfolio, including loans that the Bank may acquire in the future, changes in its business profile or factors beyond the Bank’s control, such as the impact of economic trends and political events affecting the Region, certain industries or financial markets and global economies, or particular clients’ businesses. For example, forbusinesses, all of which could be negatively impacted by the year ended December 31, 2018,effects of the Bank increased its allowances for expected credit losses on credit-impaired loans in large part as a result of a significant deterioration in sugar industry fundamentals throughout the Region, including the deterioration of one specific credit in the Brazilian sugar industry.COVID-19 pandemic. These factors, among others, could have a material adverse effect on the Bank’s financial condition, results of operations and cash flows.

Increased competition and banking industry consolidation could limit the Bank’s ability to grow and may adversely affect its results of operations.

Most of the competition the Bank faces in the trade finance business comes from domestic and international banks, and in particular European, North American and Asian institutions. Many of these banks have substantially greater resources than the Bank, may have better credit ratings, and may have access to less expensive funding than the Bank does. It is difficult to predict how increased competition will affect the Bank’s growth prospects and results of operations.

Over time, there has been substantial consolidation among companies in the financial services industry. Merger activity in the financial services industry has produced companies that are capable of offering a wide array of financial products and services at competitive prices. In addition, whenever economic conditions and risk perception improve in the Region, competition from commercial banks, the securities markets and other new market entrants generally increases.

Globalization of the capital markets and financial services industries exposes the Bank to further competition.  To the extent the Bank expands into new business areas and new markets, the Bank may face competitors with more experience and more established relationships with clients, regulators and industry participants in the relevant market, which could adversely affect the Bank’s ability to compete. The Bank’s ability to grow its business and therefore, its earnings, may be affected by these competitive pressures.

The Bank also faces competition from local financial institutions which increasingly have access to as good or better resources than the Bank. Local financial institutions are also clients of the Bank and there is complexity in managing the balance when a local financial institution is both a client and competitor. Additionally, many local financial institutions are able to gain direct access to the capital markets and low cost funding sources, threatening the Bank’s historical role as a provider of U.S. dollar funding.

As a result of the foregoing, increased competition and banking industry consolidation could limit the Bank’s ability to grow and may adversely affect its results of operations.

The Bank’s businesses rely heavily on data collection, management and processing, and information systems, several of which are provided by third parties. Operational failures or security breaches with respect to any of the foregoing could adversely affect the Bank, including the effectiveness of its risk management and internal control systems. Additionally, the Bank may experience cyberattacks or system defects and failures (including failures to update systems), viruses, worms, and other malicious software from computer “hackers” or other sources, which could unexpectedly interfere with the operation of the Bank’s systems.

All of the Bank’s principal businesses are highly dependent on the ability to timely collect and process a large amount of financial and other information across numerous and diverse markets, at a time when transaction processes have become increasingly complex with increasing volume. The proper functioning of financial control, accounting or other data collection and processing and information systems is critical to the Bank’s businesses and to its ability to compete effectively. A partial or complete failure of any of these primary systems could materially and adversely affect the Bank’s decision-making process, risk management and internal control systems, as well as the Bank’s ability to respond on a timely basis to changing market conditions. If the Bank cannot maintain effective data collection, management and processing and information systems, it may be materially and adversely affected.

The Bank also relies on third party technology suppliers for many of its core operating systems that are crucial to its business activities. Any issues associated with those suppliers may have a significant impact on the Bank’s capacity to process transactions and conduct its business. Additionally, these suppliers have access to the Bank’s core systems and databases, exposing the Bank to vulnerability from its technology providers. Any security problems and security vulnerabilities of such third parties may have a material adverse effect on the Bank.

The Bank is also dependent on information systems to operate its website, process transactions, respond to customer inquiries on a timely basis and maintain cost-efficient operations. While the Bank has implemented policies and procedures designed to manage information security, the Bank may experience cyberattacks or operational problems with its information systems as a result of system defects and failures (including failures to update systems), viruses, worms, and other malicious software from computer “hackers” or other sources, which could unexpectedly interfere with the operation of the Bank’s systems.

Furthermore, the Bank manages and stores certain proprietary information and sensitive or confidential data relating to its clients and to its operations. The Bank may be subject to breaches of the information technology systems it uses for these purposes. Additionally, the Bank operates in many geographic locations and is exposed to events outside its control.control, including the potential proliferation of regulatory requirements regarding local storage of data, use of local services or technology, or sharing of intellectual property. Despite the contingency plans the Bank has in place, its ability to conduct business in any of its locations may be adversely impacted by a disruption to the infrastructure that supports its business.

In addition, as a result of the COVID-19 pandemic, the Bank has implemented office closures and remote working policies in order to protect the health of its employees and staff. These arrangements have necessitated new and increased reliance on information technology, such as videoconferencing and other infrastructure. Any failure or hacking of these and other systems could materially and adversely affect the Bank’s business and operations.

The Bank’s ability to remain competitive depends in part on its ability to upgrade its information technology on a timely and cost-effective basis. The Bank continually makes investments and improvements in its information technology infrastructure in order to remain competitive. The Bank may not be able to maintain the level of capital expenditures necessary to support the improvement or upgrading of its information technology infrastructure. Any failure to effectively improve or upgrade its information technology infrastructure and management information systems in a timely manner could have a material adverse effect on the Bank. The Bank’s reputation could also suffer if the Bank is unable to protect its customers’ information from being used by third parties for illegal or improper purposes.

Operational problems or errors can have a material adverse impact on the Bank’s business, financial condition, reputation, results of operations and cash flows.

Operating failures, including those that result from human error or fraud, not only may increase the Bank’s costs and cause losses, but may also give rise to conflicts with its clients, lawsuits, regulatory fines, sanctions, interventions, reimbursements and other indemnity costs, all of which may have a material adverse impact on the Bank’s business, financial condition, reputation, results of operations and cash flows. Ethical misconduct or breaches of applicable laws by the Bank’s businesses or its employees could also be damaging to the Bank’s reputation, and could result in litigation, regulatory action or penalties. Operational risk also includes: (i) legal risk associated with inadequacy or deficiency in contracts signed by the Bank; (ii) penalties due to noncompliance with laws, such as anti-money laundering (“AML”) and embargo regulations; and (iii) punitive damages to third parties arising from the activities undertaken by the Bank. Also, the Bank has additional services for the proper functioning of its business and technology infrastructure, such as networks, internet and systems, among others, provided by external or outsourced companies. Impacts on the provision of these services, caused by these companies due to the lack of supply or the poor quality of the contracted services, can affect the conduct of the Bank’s business as well as its clients. Operational problems or errors such as these may have a material adverse impact on the Bank’s business, financial condition, reputation, results of operations and cash flows.

Any delays or failure to implement business initiatives that the Bank may undertake could prevent the Bank from realizing the anticipated revenues and benefits of these initiatives.

Part of the Bank’s strategy is to diversify income sources through certain business initiatives, including targeting new clients and developing new products and services. These initiatives may not be fully implemented within the time frame the Bank expects, or at all. In addition, even if such initiatives are fully implemented, they may not generate revenues as expected, which could adversely affect the Bank’s business, results of operations and growth prospects. Any delays in implementing these business initiatives could prevent the Bank from realizing the anticipated benefits of the initiatives, which could adversely affect the Bank’s business, results of operations and growth prospects.

The Banks hedging strategy may not be able to prevent losses.

The Bank uses diverse instruments and strategies to hedge its exposures to a number of risks associated with its business, but the Bank may incur losses if such hedges are not effective. The Bank may not be able to hedge its positions, or do so only partially, or its hedges may not have the desired effectiveness to mitigate the Bank’s exposure to the diverse risks and market in which it is involved.

Any failure to remain in compliance with applicable banking laws or other applicable regulations in the jurisdictions in which the Bank operates could harm its reputation and/or cause it to become subject to fines, sanctions or legal enforcement, which could have a material adverse effect on the Bank’s business, financial condition and results of operations.

Bladex has adopted various policies and procedures to ensurepromote compliance with applicable laws, including internal controls and “know-your-customer” procedures aimed at preventing money laundering and terrorism financing; however,financing. However, the participation of multiple parties in any given transaction can increase complexity and require additional time for due diligence. Also, because trade finance can be more reliant on document-based information than other banking activities, it is susceptible to documentary fraud, which can be linked to money laundering, terrorism financing, illicit activities and/or the circumvention of sanctions or other restrictions (such as export prohibitions, licensing requirements or other trade controls). While the Bank remains alert to potentially high-risk transactions, it is also aware that efforts, such as forgery, double invoicing, partial shipments of goods and use of fictitious goods, may be used to evade applicable laws and regulations. If the Bank’s policies and procedures are ineffective in preventing third parties from using it as a conduit for money laundering or terrorism financing without its knowledge, the Bank’s reputation could suffer and/or it could become subject to fines, sanctions or legal action (including being added to any “blacklists” that would prohibit certain parties from engaging in transactions with the Bank), which could have an adverse effect on the Bank’s business, financial condition and results of operations. In addition, amendments to applicable laws and regulations in Panama and other countries in which the Bank operates (including the U.S.) could impose additional compliance burdens on the Bank.

The Bank may not be able to detect or prevent money laundering and other financial crimes fully or on a timely basis, which could expose the Bank to additional liability and could have a material adverse effect on the Bank.

The Bank is required to comply with applicable AML, anti-terrorism, anti-bribery and corruption sanctions, laws and regulations. The Bank has developed policies and procedures aimed at detecting and preventing the use of its banking network for money laundering and other financial crime related activities. Financial crime is continually evolving and is subject to increasingly stringent regulatory oversight and focus. This requires proactive and adaptive responses from the Bank so that it is able to deter threats and criminality effectively. If the Bank is unable to fully comply with applicable laws, regulations and expectations, regulators and relevant law enforcement agencies may impose significant fines and other penalties on the Bank, including a complete review of its business systems, day-to-day supervision by external consultants and ultimately the revocation of the Bank’s banking license.

In addition, while the Bank reviews its counterparties’ internal policies and procedures with respect to such matters, the Bank, to a large degree, relies upon its counterparties to maintain and properly apply their own appropriate compliance procedures and internal policies. Such measures, procedures and internal policies may not be completely effective in preventing third parties from using the Bank’s (and its counterparties’) services as a conduit for illicit purposes (including illegal cash operations) without the Bank’s (and its counterparties’) knowledge. If the Bank is associated with, or even accused of having breached AML, anti-terrorism or sanctions requirements, the Bank’s reputation could suffer and/or the Bank could become subject to fines, sanctions and/or legal enforcement (including being added to any blacklists that would prohibit certain parties from engaging in transactions with the Bank). Any of the above consequences could have a material adverse effect on the Bank’s operating results, financial condition and prospects.

Expansion and/or enforcement of U.S. economic or financial sanctions, requirements or trade embargoes could have a material adverse effect on the Bank.

The Bank requires all subsidiaries, branches, agencies and offices to comply in all material respects with applicable Sanctions (as defined below). The Bank continues to monitor activities relating to those jurisdictions which are subject to Sanctions and periodically updates its global Sanctions policy to promote compliance with the various requirements resulting from these changes in Sanctions.

During 2018 and in recent years, theThe U.S. has issued new legislation expanding Sanctions on Nicaragua, North Korea, Russia and Venezuela, and issued an executive order modifying Sanctions with respect to Sudan. Furthermore, in recent years, OFAC has designated some notable groups or financial institutions on the Specially Designated Nationals (“SDN”) List in the regions or jurisdictions where the Bank, is eitherits counterparties, or its customers are located, have operations, or in which it doesdo business.

For example, since 2015 and through 2019,2021, the U.S. has continued to expand Sanctions in respect of the Government of Venezuela and certain Venezuelan nationals, including certain Venezuelan government officials.officials effectively blocking all property and interests in property of the Government of Venezuela pursuant to Executive Order 13884 of August 5, 2019. With regard to any Sanctions targeting persons who have been added to OFAC’s SDN List or other persons considered blocked persons under OFAC sanctions, U.S. persons may not make to such listed persons, or receive from such listed persons, any contribution or provision of funds, goods, or services. These Sanctions also prohibit, with certain limited exceptions, (a) transactions by a U.S. person or within the United States relating to new debt with a maturity greater than 30 days or new equity, of the Government of Venezuela, bonds issued by the Government of Venezuela prior to August 25, 2017, and dividend payments or other distributions of profits to the Government of Venezuela from its controlled entities, and (b) direct or indirect purchases by a U.S. person or within the United States of securities from the Government of Venezuela (other than new debt with a maturity of 30 days or less). These recent Sanctions relating to Venezuela have also resulted in the designation of certain state-owned financial institutions, as SDNs, including Banco De Desarrollo Económico y Social de Venezuela (“BANDES”), Banco Bandes Uruguay S.A., Banco Bicentenario del Pueblo, de la Clase Obrera, Mujer y Comunas, Banco Universal C.A., Banco de Venezuela, S.A. Banco Universal and Banco Prodem S.A.

Beginning in 2018, the U.S. also expanded Sanctions in respect of the Government of Nicaragua and certain Nicaraguan nationals. Like the Venezuela-related Sanctions, these recent Sanctions have also resulted in the designation of certain financial institutions, as SDNs, including Banco Corporativo S.A., a subsidiary to the Venezuelan government-funded Alba de Nicaragua, S.A.

While the Bank does not consider that its business activities with counterparties with whom transactions are restricted or prohibited under U.S. Sanctions are material to its business, these aforementioned recent developments and any future expansion of Sanctions could have a material adverse impact on the Bank due to, among other things, the following:

Changes in applicable law and regulation may have a material adverse effect on the Bank.

The Bank is subject to extensive laws and regulations regarding the Bank’s organization, operations, lending and funding activities, capitalization and other matters. The Bank has no control over applicable law and government regulations, which govern all aspects of its operations, including but not limited to regulations that impose:

The regulatory structure governing financial institutions, such as the Bank, is continuously evolving. Disruptions and volatility in the global financial markets resulting in liquidity problems at major international financial institutions could lead the governments in jurisdictions in which the Bank operates to change laws and regulations applicable to financial institutions based on such international developments.

In response to the global financial crisis, which began in late 2007, national and intergovernmental regulatory entities, such as the Basel Committee on Banking Regulations and Supervisory Practices (the “Basel Committee”) proposed reforms to prevent the recurrence of a similar crisis, including the Basel III framework, which creates new higher minimum regulatory capital requirements. On December 16, 2010 and January 13, 2011, the Basel Committee issued its original guidance (which was updated in 2013) on a number of regulatory reforms to the regulatory capital framework in order to strengthen minimum capital requirements, including the phasing out of innovative Tier 1 and 2 Capital instruments with incentive-based redemption clauses and implementing a leverage ratio on institutions in addition to current risk-based regulatory requirements. The Superintendency of Banks of Panama (“Superintendencia de Bancos de Panamá” or the “Superintendency”) is authorized to increase the minimum capital requirement percentage in Panama in the event that generally accepted international capitalization standards (the standards set by the Basel Committee on Banking Supervision) become more stringent. Non-compliance with this legal lending limit could result in the assessment of administrative sanctions by the Superintendency for such violations, taking into consideration the magnitude of the offense and any prior occurrences, and the magnitude of damages and prejudice caused to third parties. The Bank follows Basel III criteria to determine capitalization levels, and has determined the Bank’s Tier 1 Basel III capital ratio (Basel III – IRB) to be 18.1%26.0% as of December 31, 2018.2020. In addition, as of December 31, 2018,2020, the Bank’s total capital to risk-weighted asset ratio,Capital Adequacy Ratio, calculated according to the guidelines of the Banking Law (as defined below), was 17.1%20.21%.

Based on the Bank’s current regulatory capital ratios, as well as conservative assumptions on expected returns and asset growth, the Bank does not anticipate that additional regulatory capital will be required to support its operations in the near future. However, depending on the effects of the rules that complete the implementation of the Basel III framework on Panamanian banks and particularly on other Bank operations, the Bank may need to reassess its ongoing funding strategy for regulatory capital.

The Bank also has operations in countries outside of Panama, including the United States. Changes in the laws or regulations applicable to the Bank business in the countries in which it operates or adoption of new laws, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) in the United States, and the related rulemaking, may have a material adverse effect on the Bank’s business, financial condition, and results of operations. The Dodd-Frank Act was signed into law on July 21, 2010 and was intended to overhaul the financial regulatory framework in the United States following the global financial crisis and has substantially impacted all financial institutions that are subject to its requirements. The Dodd-Frank Act, among other things, imposes higher prudential standards, including more stringent risk-based capital, leverage, liquidity and risk-management requirements, established a Bureau of Consumer Financial Protection, established a systemic risk regulator, consolidated certain federal bank regulators, imposes additional requirements related to corporate governance and executive compensation and requires various U.S. federal agencies to adopt a broad range of new implementing rules and regulations, for which they are given broad discretion.

In 2014, the U.S. Federal Reserve Board issued a final rule strengthening supervision and regulation of large U.S. bank holding companies and foreign banking organizations (such as the Bank). The final rule establishes a number of enhanced prudential standards for large U.S. bank holding companies and foreign banking organizations to help increase the resiliency of their operations. These standards include liquidity, risk management, and capital. The final rule was required by Section 165 of the Dodd-Frank Act. Under the final rule, foreign banking organizations with combined U.S. assets of $50 billion or more will be required to establish a U.S. risk committee and employ a U.S. chief risk officer to help ensure that the foreign bank understands and manages the risks of its combined U.S. operations. In addition, these foreign banking organizations will be required to meet enhanced liquidity risk-management standards, conduct liquidity stress tests, and hold a buffer of highly liquid assets based on projected funding needs during a 30-day stress test event. Foreign banking organizations with total consolidated assets of $50 billion or more, but combined U.S. assets of less than $50 billion, are subject to enhanced prudential standards. However, the capital, liquidity, risk-management, and stress testing requirements applicable to these foreign banking organizations are substantially less than those applicable to foreign banking organizations with a larger U.S. presence. In addition, the final rule implements stress testing requirements for foreign banking organizations with total consolidated assets of more than $10 billion and risk committee requirements for foreign banking organizations that meet the asset threshold and are publicly traded. While the majority of these enhanced prudential standards are not currently applicable to the Bank, they could ultimately become applicable as the Bank grows, its U.S. presence or assets increase or if the Dodd-Frank Act is later amended, modified or supplemented with new legislation.

On December 10, 2013, pursuant to the Dodd-Frank Act, federal banking and securities regulators issued final rules to implement Section 619 of the Dodd-Frank Act (the “Volcker Rule”). Generally, subject to certain exceptions, the Volcker Rule restricts banks from: (i) short-term proprietary trading as principal in securities and other financial instruments, and (ii) sponsoring or acquiring or retaining an ownership interest in private equity and hedge funds. The Volcker Rule prohibitions and restrictions generally apply to banking entities, including the Bank, unless an exception applies.Based on analysis of applicable regulations and the Bank’s investment activities, the Bank has determined that its currentinvestmentactivities are not subject to the Volcker Rule restrictions.

The Dodd-Frank Act also will have an impact on the Bank’s derivatives activities if it enters into swaps or security-based swaps with U.S. persons. In particular, Bladex may be subject to mandatory trade execution, mandatory clearing and mandatory posting of margin in connection with its swaps and security-based swaps with U.S. persons.

On March 18, 2010, the Hiring Incentives to Restore Employment Act of 2010, Pub. L. 111-147 (H.R. 2847), added Sections 1471 through 1474 (collectively, “FATCA”) to Subtitle A of the Internal Revenue Code of 1986, as amended (the “Code”). FATCA requires withholding agents, including foreign financial institutions (“FFIs”), to withhold thirty percent (30%) of certain payments to a FFI unless the FFI has entered into an agreement with the U.S. Internal Revenue Service (“IRS”) to, among other things, report certain information with respect to U.S. accounts. FATCA also imposes on withholding agents certain withholding, documentation, and reporting requirements with respect to certain payments made to certain non-financial foreign entities.

On June 30, 2014, Panama signed a Model 1 intergovernmental agreement (“Panama IGA”) with the U.S. for purposes of FATCA. Under the Panama IGA, most Panamanian financial institutions are required to register with the IRS and comply with the requirements of the Panama IGA, including with respect to due diligence, reporting, and withholding.

To this end, the Bank registered with the IRS on April 23, 2014 as a Registered Deemed-Compliant Financial Institution (including a Reporting Financial Institution under a Model 1 IGA) and is required under the Panama IGA to identify U.S. persons and report certain information required by the IRS, through the tax authorities in Panama.

Any changes in applicable laws and regulations, as well as the volume and complexity of the laws and regulations applicable to the Bank, may have a material adverse effect on the Bank.

Any failure by the Bank to maintain effective internal control over financial reporting may adversely affect investor confidence and, as a result, the value of investments in our securities.

The Bank is required under the Sarbanes-Oxley Act of 2002 to furnish a report by the Bank’s management on the effectiveness of its internal control over financial reporting and to include a report by its independent auditors attesting to such effectiveness. Any failure by the Bank to maintain effective internal control over financial reporting could adversely affect its ability to report accurately its financial condition or results of operations. If the Bank is unable to conclude that its internal control over financial reporting is effective, or if its independent auditors determine that Bladex has a material weakness or significant deficiency in its internal control over financial reporting, the Bank could lose investor confidence in the accuracy and completeness of its financial reports, the market prices of its shares could decline, and could be subject to sanctions or investigations by the Securities and Exchange Commission (“SEC”) or other regulatory authorities. Failure to remedy any material weakness in its internal control over financial reporting, or to implement or maintain other effective control systems required of public companies subject to SEC regulation, also could restrict the Bank’s future access to the capital markets.

The Bank makes estimates and assumptions in connection with the preparation of its consolidated financial statements, and any changes to those estimates and assumptions could have a material adverse effect on its operating results.

In connection with the preparation of its consolidated financial statements, the Bank uses certain estimates and assumptions based on historical experience and other factors. While the Bank’s management believes that these estimates and assumptions are reasonable under the current circumstances, they are subject to significant uncertainties, some of which are beyond its control. Should any of these estimates and assumptions change or prove to have been incorrect, its reported operating results could be materially adversely affected.

RegulationReforms to and reformreplacement of LIBOR, EURIBORinterbank offered rates (“IBORs”) and certain other rates or other benchmarks couldindices may adversely affect the Bank’s business, financial instruments linked to such benchmarks.condition and results of operations.

LIBOR, EURIBOR and other rates and indices deemed to be benchmarks are the subject of recent national, international and other regulatory guidance and proposals for reform. Some of these reforms are already effective, while others have yet to be implemented. These reforms may cause such benchmarks to perform differently than in the past, to disappear entirely, or have other consequences which cannot be predicted. Any such consequence could have a material adverse effect on any financial instrument linked to such a benchmark, including, among others, loans and other financial instruments in the Bank’s portfolio.

Regulation (EU) 2016/1011 (the “Benchmark Regulation”) was published in the Official Journal of the European Union on June 29, 2016 and went into effect on from January 1, 2018 (with the exception of provisions specified in Article 59 (mainly on critical benchmarks) that have applied since June 30, 2016). The Benchmark Regulation could have a material impact on any financial instrument linked to LIBOR, EURIBOR or another benchmark rate or index, in particular, if the methodology or other terms of the benchmark are changed in order to comply with the terms of the Benchmark Regulation, and such changes could, among other things, have the effect of reducing or increasing the rate or level, or affecting the volatility of the published rate or level, of the benchmark. In addition, the Benchmark Regulation stipulates that each administrator of a benchmark regulated thereunder must be licensed by the competent authority of the Member State where such administrator is located. There is a risk that administrators of certain benchmarks will fail to obtain a necessary license, preventing them from continuing to provide such benchmarks. Other administrators may cease to administer certain benchmarks because of the additional costs of compliance with the Benchmark Regulation and other applicable regulations, and the risks associated therewith. There is also a risk that certain benchmarks may continue to be administered but may, in time, become obsolete.

As an example of such reforms, onOn July 27, 2017, the U.K. Financial Conduct Authority announced that it will no longer persuadecompel or compelpersuade banks to submitcontribute to LIBOR rate setting after 2021. Fundamental reform of significant interest rate benchmarks is being undertaken globally, including the replacement of interbank offered rates ("IBORs") with certain alternative reference rates (“ARRs”). Due to the nature of its business, the Bank’s portfolio is mainly constituted of short-term fixed rate assets and liabilities. However, the Bank has exposures to IBORs (USD LIBOR only) on its financial instruments that will be replaced or reformed as part of these market-wide initiatives. There is uncertainty over the timing and the methods of transition. The Bank anticipates that IBOR reform will impact its risk management and hedge accounting.

Although LIBOR was planned to be discontinued by the end of 2021, consultations have finished and regulatory changes have been announced. Therefore, this means that certain LIBOR tenors will continue until June 30, 2023. It remains unclear what benchmark rate or rates may develop as accepted alternatives to LIBOR, or what the effect of any such changes may have on the markets for LIBOR-based financial instruments. Although certain ARRs have been proposed to replace LIBOR and other IBORs, market and client adoption of alternatives may vary across or within categories of contracts, products and services, resulting in market fragmentation, decreased trading volumes and liquidity, increased complexity and modeling and operational risks. ARRs have compositions and characteristics that differ significantly from the benchmarks they may replace, in some cases have limited history, and may demonstrate less predictable performance over time than the benchmarks they replace. Additionally, most ARRs are calculated on a compounded or weighted-average basis, involve complex billing and reconciliation and, unlike IBORs, do not reflect bank credit risk and therefore may require a spread adjustment. The market transition from IBORs to ARRs is complex and there are important differences between the fallbacks, triggers and calculation methodologies being implemented in cash and derivatives markets (including within cash markets). Any mismatch between the adoption of ARRs in loans, securities and derivatives markets may impact hedging or other financial arrangements the Bank has implemented, and as a result the Bank may experience unanticipated market exposures. There can be no assurance that ARRs will be comparable or adequate alternatives to IBORs or perform in the same way, that existing assets and liabilities based on or linked to IBORs will transition successfully to ARRs, of the timing of adoption and degree of integration and acceptance of ARRs in the financial markets, or of the future availability or representativeness of such ARRs.

Furthermore, the discontinuation of IBORs, including LIBOR, benchmark after 2021 (the “FCA Announcement”).requires the Bank to transition a significant number of IBOR-based products and contracts, including related hedging arrangements. The FCA Announcement indicatestransitioning of certain contracts, products and clients will be more complex. Additionally, some outstanding IBOR products may be particularly challenging to modify due to requirements that all impacted parties consent to such modification. There is no guarantee that the continuationBank and other market participants will be able to successfully modify all outstanding IBOR-based products or be adequately prepared for a discontinuation of LIBOR onan IBOR at the current basis (or at all) cannot andtime such IBOR may cease to be published or otherwise discontinued. Also, there can be no assurance that existing or new provisions for successor rates in the Bank’s IBOR-based products will not be guaranteed after 2021. The potential eliminationinclude adequate methodologies for adjustments or that the characteristics of the LIBOR benchmarksuccessor rates will be similar to or anyproduce the economic equivalent of the benchmarks they seek to replace. These changes may adversely affect the yield on loans or securities held by the Bank, amounts paid on securities the Bank has issued, amounts received and paid on derivatives the Bank has entered into, the value of such loans, securities or derivative instruments, the trading market for such products and contracts, and the Bank’s ability to effectively use hedging instruments to manage risk. Furthermore, there is no guarantee that liquidity in ARR-based products will develop, and it is possible that ARR-based products will perform differently to IBOR-based products during times of economic stress, adverse or volatile market conditions and across the credit and economic cycle, which may impact the value, return on and profitability of the Bank’s ARR-based assets. Certain impacted clients, counterparties and other benchmark,market participants may refuse, delay, or changeslack operational readiness to transition to ARRs, resulting in the mannerrisk that some contracts and products may not transition to an ARR before discontinuation of administration of any benchmark, could require the relevant IBOR, exposing the Bank to financial, operational, supervisory, conduct and legal risks.

The Bank’s products and contracts that reference IBORs, in particular LIBOR, may contain language that determines when a successor rate including the ARR and/or result in anthe applicable spread adjustment to the interestdesignated rate (including IBORs) would be selected or determined. If a trigger is satisfied, the Bank’s products and contracts may give the calculation agent (which may be Bladex) discretion over the successor rate to be selected. The Bank may face a risk of litigation, disputes or other actions from clients, counterparties, customers, investors or others regarding the interpretation or enforcement of IBOR-based contract provisions or if the Bank fails to appropriately communicate the effect that the transition to ARRs will have on existing and future products.

Failure to meet industry-wide IBOR transition milestones and to cease issuance of loansIBOR Products by relevant cessation dates may, subject to certain regulatory exceptions, result in supervisory enforcement by applicable regulators, increase our cost of, and access to, capital and other financial instruments, or result inconsequences. In addition, IBOR Products held by the Bank’s may become less liquid as the transition process develops, and other unforeseen consequences in respect of any financial instrument linked tomay arise if such benchmark, including, but not limited to, financial instruments whose interest ratesproducts are linked to LIBOR or any other such benchmark which is subject to reform. Furthermore, even prior to the implementation of any changes, uncertaintyheld beyond relevant cessation dates.

Uncertainty as to the nature of alternative reference rates and as to potential changes, to such benchmarkARRs or other reforms may adversely affect such benchmark duringmarket liquidity, the termpricing of the financial instruments, the return on the financialLIBOR-based instruments and the trading market for securities based on such benchmark.

Any such consequences could have a material adverse effect on the valueavailability and cost of associated hedging instruments and return on any such financial instrument, including, but not limited to, financial instruments inborrowings. Payments under contracts referencing new reference rates may differ from those referencing LIBOR. The transition may change the Bank’s Commercial Portfolio. Moreover, anyrisk profile and require changes to its risk and pricing models, valuation tools, product design and hedging strategies. Although the Bank is unable to quantify the ultimate impact of the above matters or any other significant changetransition from LIBOR given the uncertain nature of the potential changes, it continues to monitor the developments related to the settingfuture of LIBOR in line with any regulatory or existence ofquasi-regulatory guidance. Moreover, the failure to manage any relevantpotential transition from LIBOR to a different reference rate, couldor rates, may adversely affect the ability of the Bank to meet its obligations under financial instruments issued on a floating rate basis or could have a material adverse effect on the market price and/or liquidity of,Bank’s reputation, business and the amount payable under, any such financial instruments. Such consequences would have a material adverse effect on the Bank’s business, financial condition, and results of operations and share price.operations.

The loss of senior management, or the Bank’s ability to attract and maintain key personnel, could have a material adverse effect on it.

The Bank’s ability to maintain its competitive position and implement its strategy depends on its senior management. The loss of some of the members of the Bank’s senior management, or the Bank’s inability to maintain and attract additional personnel, could have a material adverse effect on its operations and ability to implement its strategy. The Bank’s performance and success are largely dependent on the talents and efforts of highly skilled individuals. Talent attraction and retention is one of the key pillars for supporting the results of Bladex, which is focused on client satisfaction and sustainable performance. The Bank’s ability to attract, develop, motivate and retain the right number of appropriately qualified people is critical to its performance and ability to thrive throughout the Region. Concurrently, the Bank faces the challenge of providing a new experience to employees, so that the Bank is able to attract and retain highly-qualified professionals who value environments offering equal opportunities and who wish to build their careers in dynamic, cooperative workplaces, which encourage diversity and meritocracy and are up to date with new work models.

The Bank’s performance could be adversely affected if it were unable to attract, retain and motivate key talent. As the Bank is highly dependent on the technical skills of its personnel, including successors to crucial leadership positions, as well as their relationships with clients, the loss of key components of the Bank’s workforce could make it difficult to compete, grow and manage the business. A loss of such expertise could have a material adverse effect on the Bank’s financial performance, future prospects and competitive position.

Risks Relating to the Region

The Bank’s mission is focused on supporting trade and regional integration across the Region. As a result, any increases in tariffs or other restrictions on foreign trade, or resulting uncertainty that reduces international trade flows, either throughout the Region or globally, could adversely affect the Bank’s business, results of operations or share price.

The Bank’s mission is focused on supporting trade and regional integration across the Region, and a significant portion of the Bank’s operations is derived from financing trade related transactions. As a result, increases in tariffs, changes in political, regulatory and economic conditions in the U.S. or in the Region, or in policies governing infrastructure, trade and foreign investment in the U.S., or other restrictions on foreign trade throughout the Region or globally could adversely affect the Bank’s business and results of operations. For example, the Trump administration in the U.S. has increasingly threatened to impose tariffs on a variety of imports from countries throughout the world, including the Region, and has recently imposed certain tariffs on steel and aluminum. China has recently announced retaliatory tariffs against certain American products. Furthermore, the Trump administration has expressed significant doubts regarding existing trade agreements, including the North American Free Trade Agreement (“NAFTA”), and issued an executive order announcing the United States’ withdrawal from the Trans-Pacific Partnership (“TPP”). The Trump administration has undertaken to replace NAFTA with the United States – Mexico – Canada Agreement (“USMCA”), which was signed by each country on November 30, 2018, and if approved by the legislatures in each country, will replace NAFTA. There can be no assurance that the U.S. or China, or other countries, including those in the Region, will not move to implement further tariffs or restrictions on trade, or what the scope and effects of any such restrictions might be. Any such tariffs or restrictions, or uncertainty surrounding any future restrictions, could materially adversely affect international trade flows, which is a core sector underlying the Bank’s business model. Any such disruptions in international trade flows could materially and adversely affect the demand and pricing of the Bank’s trade related lending activities, and therefore have a material adverse effect on the Bank’s business, financial condition, results of operations and share price.

Global markets and currencies were also adversely impacted after the U.K.’s referendum on the exit from the European Union (the “E.U.”), commonly referred to as “Brexit”, was passed into law, and on June 19, 2017 negotiations commenced to determine the future terms of the U.K.’s relationship with the E.U. After several months of negotiations, a framework agreement was reached by the U.K. and E.U. governments which would, if passed, govern the implementation of Brexit. However, the U.K. Parliament rejected this framework in three separate votes, and as a result there continues to be substantial uncertainty regarding the terms on which Brexit will be implemented, or whether Brexit will occur without an agreement. Additionally, European leaders recently approved an extension until October 31, 2019 on the U.K.’s scheduled withdrawal. Once withdrawal actually occurs, it is expected to be followed by a transition period during which businesses and others prepare for the new post-Brexit rules to take effect on January 1, 2021. The ongoing lack of certainty surrounding the terms on which Brexit will be implemented, as well as the extended delay in agreeing any such terms, has led to substantial uncertainty in international markets. As a result, global markets and currencies have been adversely impacted, including sharp fluctuations in the value of the British pound as compared to the U.S. dollar. Any market disruptions, including, among others, disruptions in financial markets or international trade, as a result of Brexit or otherwise, could have an adverse effect on the Bank’s business, financial conditions and results of operations.

The Bank’s credit activities are concentrated in the Region. The Bank also faces borrower concentration. Adverse economic developments in the Region or in the condition of the Bank’s largest borrowers could adversely affect the Bank’s growth, asset quality, prospects, profitability, financial condition and financial results.

As a reflection of the Bank’s mission and strategy, the Bank’s credit and other activities are concentrated in the Region, and are therefore highly susceptible to macroeconomic factors throughout the Region, as well as in individual countries. Economies in the Region have historically experienced significant volatility evidenced, in some cases, by political uncertainty, including with respect to upcoming elections, slow economic growth or recessions, increases in unemployment and the resulting reduction in consumer purchasing power, declining investments, fluctuations in interest rates and the capital markets, government and private sector debt defaults and restructurings, and significant inflation and/or currency devaluation.  Furthermore, since the outbreak of COVID-19 in December 2019, economies in the Region have faced, and continue to face, significant economic difficulties and uncertainties as a result of the spread of the virus and the effects of restrictive governmental measures to prevent its spread. See Item 3.D., “Key Information--Risk Factors—Risks Relating to the Bank’s Business--The effects of the COVID-19 pandemic have adversely affected, and are expected to continue to adversely affect, the Bank’s businesses and results of operations, and its duration and future impacts on the economy in the Region and on its businesses, results of operations and financial condition remain uncertain,” and Item 5.D., “Operating and Financial Review and Prospects—Trend Information.”

Global economic changes, including fluctuationsthe effects of the ongoing COVID-19 pandemic, volatility in commodity prices, oil and energy prices, U.S. dollar interest rates and U.S. dollar exchange rates, and slower economic growth in industrialized countries, could have adverse effects on the economic condition of countries in the Region including Panama, and other countries in which the Bank operates. In addition, country risk associated with certain of the most vulnerable countries in the Region, as well as risk associated with the Region as a whole, may deteriorate as a result of potentially disorderly sovereign debt restructurings in certain countries, including Argentina, Costa Rica and El Salvador. Adverse changes affecting the economies in the Region could have a significant adverse impact on the quality of the Bank’s credit exposures, including increased allowance for losses, debt restructurings and loan losses. In turn, these effects could also have an adverse impact on the Bank’s asset growth, asset quality, prospects, profitability and financial condition.

Banks, including Bladex, that operate in countries considered to be emerging markets may be particularly susceptible to disruptions and reductions in the availability of credit or increases in financing costs, which may have a material adverse impact on their operations. In particular, the availability of credit to financial institutions operating in emerging markets is significantly influenced by an aversion to global risk. In addition, any factor impacting investors’ confidence, such as a downgrade in credit ratings of a particular country or an intervention by a government or monetary authority in any such markets, may affect the price or availability of resources for financial institutions in any of these markets, which may affect the Bank.

The Bank also faces borrower concentration, with its credit activities being in a number of countries. The Bank’s credit portfolio (the “Credit Portfolio”) consists of the Commercial Portfolio and the “Investment Portfolio.” The “Investment Portfolio” consists of securities at FVOCI and investment securities at amortized cost. Adverse changes affecting one or more of these economies could have a material adverse impact on the Bank’s Credit Portfolio and, as a result, its financial condition, growth, prospects, results of operations and financial condition. As of December 31, 2018, 63%2020, 56% of the Bank’s Credit Portfolio was outstanding to borrowers in the following five countries: Brazil ($1,2111,063 million, or 19%18%), Colombia ($795 million, or 13%), Mexico ($917 million, or 14%), Colombia ($706656 million, or 11%), ArgentinaChile ($611583 million, or 10%), and PanamaPeru ($555347 million, or 9%6%).

In addition, as of December 31, 2018,2020, of the Bank’s total Credit Portfolio balances, 10%12% were to five borrowers in Brazil, 8% were to five borrowers in Mexico,Colombia, 6% were to five borrowers in Argentina,Chile, 5% were to five borrowers in Peru, and 4% were to five borrowers in each of Colombia and Panama.Mexico. A significant deterioration of the financial or economic condition of any of these countries or borrowers could have a material adverse impact on the Bank’s Credit Portfolio, potentially requiring the Bank to create additional allowances for expected credit losses, or suffer credit losses with the effect accentuated because of this concentration.

The Bank’s mission is focused on supporting trade and regional integration across the Region. As a result, any increases in tariffs or other restrictions on foreign trade, or resulting uncertainty that reduces international trade flows, either throughout the Region or globally, could adversely affect the Bank’s business, results of operations or share price.

The Bank’s mission is focused on supporting trade and regional integration across the Region, and a significant portion of the Bank’s operations is derived from financing trade related transactions. As a result, increases in tariffs, changes in political, regulatory and economic conditions in the U.S. or in the Region, or in policies governing infrastructure, trade and foreign investment in the U.S., or other restrictions on foreign trade throughout the Region or globally could adversely affect the Bank’s business and results of operations. For example, the former Trump administration in the U.S. had increasingly threatened to impose tariffs on a variety of imports from countries throughout the world, including the Region, and did impose certain tariffs on steel and aluminum. China has also imposed tariffs against certain American products. The U.S. and China agreed upon phase one of a trade agreement reducing protectionist measures by both countries. China may not have met certain commitments it made in phase one, which could negatively impact negotiations for a second phase of the agreement.

Furthermore, on November 3, 2020, the United States held a presidential election in which Joseph R. Biden, Jr. was elected president of the United States. Mr. Biden was inaugurated on January 20, 2021. The full extent of Mr. Biden’s legislative agenda, the relationship between the executive and legislative powers and future U.S. policies with respect to matters of importance to the Region and its economy, particularly trade and migration, remain uncertain and will start to be developed in the coming months. There can be no assurance that the U.S. or China, or other countries, including those in the Region, will not move to implement further tariffs or restrictions on trade, or what the scope and effects of any such restrictions might be. Any such tariffs or restrictions, or uncertainty surrounding any future restrictions, could materially adversely affect international trade flows, which is a core sector underlying the Bank’s business model. Any such disruptions in international trade flows could materially and adversely affect the demand and pricing of the Bank’s trade related lending activities, and therefore have a material adverse effect on the Bank’s business, financial condition, results of operations and share price.

The United Kingdom (the “UK”) left the European Union (the “E.U.”) on January 31, 2020, which was a process commonly referred to as “Brexit”, and entered a transition period until December 31, 2020. During the transition period the UK continued to be bound by E.U. laws and regulations. The UK and the E.U. agreed to the Trade and Cooperation Agreement (the “TCA”) in December 2020, which covers topics such as tariffs and other barriers to trade, among other topics, but does not cover financial services regulation. There is uncertainty on what the future of financial services regulation (and certain other topics not adequately covered by the TCA) between the UK and the E.U. will be. This ongoing lack of certainty has led to uncertainty in international markets. As a result, global markets and currencies may be adversely impacted, including fluctuations in the value of the British pound as compared to the U.S. dollar. Any market disruptions, including, among others, disruptions in financial markets or international trade, as a result of Brexit or otherwise, could have an adverse effect on the Bank’s business, financial conditions and results of operations.

Local country foreign exchange controls or currency devaluation, monetary tightening, higher interest rates and rising inflation, may harm the Bank’s borrowers’ ability to pay U.S. dollar-denominated obligations.

The Bank makes mostly U.S. dollar-denominated loans and investments.  As a result, the Bank faces the risk that local foreign exchange controls may restrict the ability of the Bank’s borrowers to acquire dollars to repay loans on a timely basis, even if they are exporters, and/or that significant currency devaluation might occur, which could increase the cost, in local currency terms, to the Bank’s borrowers of acquiring dollars to repay loans. Additionally, several Latin American currencies have devalued sharply against the U.S. dollar, on concerns about the U.S. trade policy agenda, coupled with a trend of rate increases by the U.S. Federal Reserve Board. Asset risks may rise for banks that lend to exporters or high value-added manufacturers, particularly in the automotive supplier and technology sectors in the Region. U.S. monetary tightening and rising inflation could prompt central banks to tighten monetary policy in Latin American countries, with higher rates potentially leading to weaker asset quality. Rising rates may reduce borrower repayment capacity, leading to an increase in credit-impaired loan ratios as loan growth decelerates. Any of these factors could harm the Bank’s borrowers’ ability to pay U.S. dollar-denominated obligations, which could adversely affect the Bank’s business and results of operations.

A significant portion of the Bank’s Loan Portfolio consists of loans made to borrowers in the oil and gas and agribusiness sectorsectors in the Region. Lending in the agribusiness sectorthese sectors presents unique risks, including among others climactic risks and risks related to commodities pricing.

As of December 31, 2018, 7.7%2020, $586 million, or 12% of the Bank’s Loan Portfolio was comprised of oil and gas related loans, and $337 million, or 7% of the Bank’s Loan Portfolio was comprised of agribusiness loans. As of December 31, 2018, the Bank had $447 million in agribusiness loans. Repayment of agribusinessthese loans depends substantially, in mostsome cases, on the productionproducing, exploring and exporting of sugar and also marketing the harvested ofoil and gas or other commodities. CollateralMost of these loans are unsecured and collateral securing some of these loans may be illiquid. In addition, the limited purpose of some agricultural-related collateral affects credit risk because such collateral may have limited or no other uses to support values when loan repayment problems emerge. Many external factors can impact the Bank’s agricultural borrowers’ ability to repay their loans, including commodity price volatility (i.e., oil and sugar prices), diseases such as COVID-19, war, adverse weather conditions, water issues, commodity price volatility (i.e. sugar prices), diseases, land values, production costs, changing government regulations and subsidy programs, changing tax treatment, technological changes, labor market shortages/increased wages, and changes in consumers’ preferences, over which the Bank’s borrowers may have no control. For example, for the year ended December 31, 2018, the Bank increased its allowances for expected credit losses on credit-impaired loans in large part as a result of a significant deterioration in sugar industry fundamentals, particularly the deterioration of one specific credit in the Brazilian sugar industry. These factors, as well as recent volatility in certain commodity prices, including sugar prices,the price of oil, could adversely impact the ability of those to whom the Bank has made agribusiness loans to perform under the terms of their borrowing arrangements with the Bank, which in turn could result in credit losses and adversely affect the Bank’s business, financial condition and results of operations.

A downgrade in the Bank’s credit ratings may adversely affect its funding costs, access to capital, access to loan and debt capital markets, liquidity and, as a result, its business and results of operations. Increased risk perception in countries in the Region where the Bank has large credit exposures could have an adverse impact on the Bank’s credit ratings.

Credit ratings represent the opinions of independent rating agencies regarding the Bank’s ability to repay its indebtedness, and affect the cost and other terms upon which it is able to obtain funding. Each of the rating agencies reviews its ratings and rating methodologies on a periodic basis and may decide on a grade change at any time, based on factors that affect the Bank’s financial strength, such as liquidity, capitalization, asset quality and profitability. Credit ratings are essential to the Bank’s capability to raise capital and funding through the issuance of debt, loan transactions, as well as to the cost of such financing.

Among other factors, increased risk perception in any country where the Bank has large exposures could trigger downgrades to the Bank’s credit ratings.  Such perception of increased risk could result from events which are beyond the Bank’s control, such as economic or political crises or the macroeconomic deterioration of certain key economic sectors due to the spread of COVID-19 or otherwise, among other factors. A credit rating downgrade would likely increase the Bank’s funding costs, and may create liquidity risk, reduce its deposit base and access to the lending and debt capital markets, trigger additional collateral or funding requirements or decrease the number of investors and counterparties willing or permitted, contractually or otherwise, to do business with or lend to the Bank.  As a result, the Bank’s ability to obtain the necessary funding to carry on its financing activities in the Region at meaningful levels could be affected adversely, which could have a negative effect on its business and results of operations.

A.       History and Development of the Company

The Bank, a corporation(sociedad anónima) organized under the laws of Panama and headquartered in Panama City, Panama, is a specialized multinational bank originally established by central banks of Latin American and Caribbean countries to promote foreign trade and economic integration in the Region. The legal name of the Bank is Banco Latinoamericano de Comercio Exterior, S.A. Translated into English, the Bank is also known as Foreign Trade Bank of Latin America, Inc. The commercial name of the Bank is Bladex.  

The Bank was established pursuant to a May 1975 proposal presented to the Assembly of Governors of Central Banks in the Region, which recommended the creation of a multinational organization to increase foreign trade financing capacity of the Region. The Bank was organized in 1977, incorporated in 1978 as a corporation pursuant to the laws of the Republic of Panama, and officially began operations on January 2, 1979. Panama was selected as the location of the Bank’s headquarters because of the country’s importance as a banking center in the Region, the benefits of a fully U.S. dollar-based economy, the absence of foreign exchange controls, its geographic location, and the quality of its communications facilities.  Under a contract-law signed in 1978 between the Republic of Panama and Bladex, Bladexthe Bank was granted certain privileges by the Republic of Panama, including an exemption from payment of income taxes in Panama.

The Bank offers its services through its head office in Panama City, its agency in New York (the “New York Agency”), its subsidiaries in Brazil and Mexico, and its representative offices in Buenos Aires, Argentina; Mexico City, Mexico; Sao Paulo, Brazil; Lima, Peru; and Bogotá, Colombia, as well as through a worldwide network of correspondent banks.and its representative license in Peru.

Bladex’s head office is located at Torre V, Business Park, Avenida La Rotonda, Urb. Costa del Este, Panama City, Republic of Panama, and its telephone number is +507 210-8500.

The New York Agency, which began operations on March 27, 1989, is located at 10 Bank Street, Suite 1220, White Plains, NY 10606, and its telephone number is +1 (914) 328-6640. The New York Agency is principally engaged in financing transactions related to international trade, mainly the confirmation and financing of letters of credit for customers in the Region. The New York Agency mayis also authorized to book transactions through an International Banking Facility (“IBF”).

Bladex’s shares of Class E common stock are listed on the New York Stock Exchange (“NYSE”) under the symbol “BLX.”

The following is a description of the Bank’s subsidiaries:

The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. Information is also available on the Bank’s website at: http://www.bladex.com

B.       Business Overview

Overview

The Bank’s mission is to provide financial solutions of excellence to financial institutions, companies and investors doing business in Latin America, supporting trade and regional integration across the Region.

As a multinational bank operating in 23 countries with a strong and historic commitment to Latin America, the Bank possesses extensive knowledge of business practices, risk and regulatory environments, accumulated over forty years of doing business throughout the entire Region. Bladex provides foreign trade solutions to a select client base of premier Latin-American financial institutions and corporations, and has developed an extensive network of correspondent banking institutions with access to the international capital markets. Bladex enjoys a preferred creditor status in many jurisdictions, being recognized by its strong capitalization, prudent risk management and sound corporate governance standards. Bladex fosters long-term relationships with clients, and it has developed over the years a reputation for excellence when responding to its clients’ needs, in addition to having a solid financial track record, which has reinforced its brand recognition and its franchise value in the Region, and contributes to the Bank achieving its vision of being recognized as a leading institution in supporting trade and regional integration across Latin America.

The Bank’s lending and investing activities are funded by interbank deposits, primarily from central banks and financial institutions in the Region, by borrowings from international commercial banks, and by sales of the Bank’s debt securities to financial institutions and investors in Asia, Europe, North America and the Region. The Bank does not provide retail banking services to the general public, such as retail savings accounts or checking accounts, and does not take retail deposits.

Bladex participates in the financial and capital markets throughout the Region, through two business segments.

The Commercial Business Segment encompasses the Bank’s core business of financial intermediation and fee generationgenerating activities developed to cater to corporations, financial institutions and investors in Latin America. The array of products and services include the origination of bilateral short- and medium-term loans, structured and syndicated credits, loan commitments letter of credit contingenciesand financial guarantee contracts such as issued and confirmed letters of credit, stand-by letters of credit, guarantees covering commercial risk, and other assets consisting of customers’ liabilities under acceptances. The majority of the Bank’s short-term loans are extended in connection with specifically identified foreign trade transactions. Through its revenue diversification strategy, the Bank’s Commercial Business Segment has introduced a broader range of products, services and solutions associated with foreign trade, including co-financing arrangements, underwriting of syndicated credit facilities, structured trade financing (in the form of factoring and vendor financing) and financial leasing.

The Treasury Business Segment focuses on managing the Bank’s investment portfolio,Investment Portfolio, and the overall structure of its assets and liabilities to achieve more efficient funding and liquidity positions for the Bank, mitigating the traditional financial risks associated with the balance sheet, such as interest rate, liquidity, price and currency risks. Interest-earning assets managed by the Treasury Business Segment include liquidity positions in cash and cash equivalents, as well as highly liquid corporate debt securities rated above ‘A-’, and financial instruments related to the Bank’s investment management activities, consisting of securities at FVOCI and securities at amortized cost. The Treasury Business Segment also manages the Bank’s interest-bearing liabilities, which constitute its funding sources and which consist mainly of deposits, short- and long-term borrowings and debt.

Historically, trade finance has been afforded favorable treatment in the context of debt restructurings of Latin American borrowers. This has been, in part, due to the perceived importance that governments and other borrowers in the Region have attributed to maintaining access to trade finance. The Bank believes that, in the past, the combination of its focus on trade finance and the composition of its Class A shareholders has been instrumental in obtaining certain exceptions regarding U.S. dollar convertibility and transfer limitations imposed on the servicing of external obligations, or preferred creditor status. Although the Bank maintains both its focus on trade finance and its Class A shareholders’ participations, it cannot guarantee that such exceptions will be granted in future debt restructurings.

As of December 31, 2018,2020, the Bank had 5152 employees, or 31%29% of its total employees, across its offices responsible for marketing the Bank’s financial products and services to existing and potential new customers.

Recent Developments during 2020

During 20182020, Latin American economies faced significant shocks and an environment of great uncertainty. This was primarily due to the effects generated by the COVID-19 pandemic and measures implemented to contain its spread throughout the several countries in the Region. Faced with an adverse and volatile environment, economic activity, inflation and financial conditions in the Region were significantly affected.

The global economic impact of COVID-19 was very difficult to predict, as its shockwaves simultaneously impacted both supply (affecting production processes) and demand (suspension of investment and consumption decisions, and a further deterioration of confidence), in each case in a Latin American Region that had already been exhibiting weak economic performance.

Early lockdowns affected economies in historic proportions. The greatest economic impact resulted from the closure of borders, containment measures, breakdown of the global supply chain, cancellation of investments and a slowdown in consumption.

Similarly, the crisis triggered a considerable contraction in international trade, strong fluctuations in the prices of primary goods, and high volatility in financial markets.

In addition, the lockdown measures adopted in the vast majority of countries around the world to contain the spread of the pandemic have gravely hurt tourism and tourism-related activities, such as commercial aviation and hospitality services (restaurants and hotels).

The world economy continuesentered a strong recession in 2020, registering a 3.3% decrease in world output, according to grow in an uncertain environment, characterized by increasing volatility. The International Monetary Fund (“IMF”) estimates, which was the largest contraction in its April 2019 report calculated world GDPproduction since 1946. This significant decrease was due to a general decline in economic activity in both developed and emerging economies.

Regarding the main trade partners of Latin America, the U.S. entered into a recession in 2020, with negative growth of 3.5%; China, on the other hand, recorded growth of 2.3%, in each case according to IMF estimates. As a result of the COVID-19 pandemic, of the main global economies, China is expected to be 3.6%the only one that grew at a positive rate in 2020. However, while China did avoid a recession, its rate of growth in 2020 represented the largest growth slowdown in 40 years.

In order to confront the effects of the pandemic, both developed and emerging economies implemented unprecedented fiscal and monetary policies, including almost $13 trillion dollars in fiscal actions and approximately $8.5 trillion dollars in announcements of monetary measures, as described in the IMF’s 2020 annual report. These efforts have helped alleviate the situation, softening the impacts of the drop in economic activity, but also producing high levels of liquidity which have underpinned a rise in global debt, as well as a significant decrease in financial volatility, while also contributing to lower profitability and an increase in risk appetite in financial markets. This situation exacerbated a greater disconnect between financial dynamics and the real economy.

For Latin America, the IMF has estimated a GDP contraction of -7.0% in 2020, well below the growth of 1.8% estimated at the beginning of 2020 and representing Latin America’s worst regional performance since the great depression of the 1930s. In this sense, the main economies of the Region fell into recession: Brazil (-4.1%), Mexico (-8.2%), Argentina (-10.0%), Chile (-5.8%), Peru (-11.1 %) and Colombia (-6.8%). These contractions are explained both by the significant decrease in domestic demand in each of its components and by the lower external demand.

It is worth highlighting that the COVID-19 pandemic has manifested itself in a non-uniform way. Factors such as each country’s ability to react to the health emergency in the short term and to adopt policies to provide aid to the most impacted sectors have largely accounted for the year 2018. Thisdynamics of economic activity over the year. The severity of the economic shutdown and the economic performance of each country prior to the pandemic have also differed across countries.

Structural factors, such as the degree of integration into international trade and global growth was sustained, mainly, byvalue chains, the growthproductive structure, demographic factors and the sophistication of labor markets, have also been crucial in assessing the extent to which economies have been affected in the U.S. and stability in both the European and Chinese economies, although growth in both Europe and China has slowed when compared to previous years. As a general matter, while the global economy has continued to grow, growth has been more moderate and focused on certain key economies than has been the case in recent years. Growthcurrent crisis.

Likewise, foreign trade in the Region stalled at 1.0%registered a reduction of 12.0% in 2018, which2020 according to The Economist Inteligence Unit. This substantial reduction was substantially weaker than previously projected. The disappointing growth outcome reflected softening global trade growththe result of decreases in commodity prices, lower export volumes due to diminished external demand, and tighter external financing conditions.

2018 was characterized by increased conflict in international trade and increases in tariffs by several countries on a range of products. For example, the Trump administration in the U.S. has increased tariffs on a varietycontraction of imports from countries throughout the world, including the Region,caused by quarantines and continues to threaten additional new,similar measures and increases in existing, tariffs. For example, in 2018 the U.S. imposed certain increased tariffs on steel and aluminum. China has also announced retaliatory tariffs against certain U.S. products. Furthermore, the Trump administration has undertaken to replace NAFTA with the USMCA.slow internal economic activity.

Notwithstanding increasing levels of protectionism, world trade of goods and services showed a positive performance in 2018, growing by 3.8%, accordingWith respect to economic policies, fiscal policy became the IMF. Latin American trade flows increased by 9.3% in 2018, primarily due to higher pricesmost important tool for commodities, such as metals and oil, and a higher volume of exports resulting from dynamic external demand. Although commodity prices have recovered, they are still below the peak price levels reached during 2011 and 2012. These price increases have bolstered the recovery for certain exporters of key commodities products in the Region, with sugar, which continues to trade at minimal prices in the international market, remaining a notable exception.

The Federal Reserve Bank continued to make progress in normalizing monetary policy which tightened monetary conditions, adding pressure on emerging economies in 2018, especially in Latin America. Nearly all economies in the Region with floating exchange rates have experienced nominal depreciation against the U.S. dollar, particularly Argentina, Brazil, Chile, Mexico, and Uruguay. In most of these economies, especially Argentina, depreciation is contributing to a rise in inflation. Central banks in several countries have intervened in foreign exchange markets using derivative instruments to reduce currency volatility (e.g., Brazil and Uruguay) or to build reserves (e.g., Colombia). In addition, monetary policy experienced tightening in some economies to contain inflationary pressures stemming partly from currency depreciation, which further dampened growth (e.g. Argentina).

The Region is comprised of diverse economies, each of which exhibited its own trends in 2018. Developments in Argentina, Brazil, and Venezuela hindered regional growth, despite better performance in several mid-size economies (e.g., Chile, Colombia and Peru). For example, the volatility in the international markets significantly affected Argentina, mainly due to its external vulnerability related to a loan agreement with the IMF which included certain restrictions on the country’s fiscal measures and economic policies. In Brazil, while pressure on Brazilian markets lifted to a significant extent in 2018, uncertainty continues, as the markets continue to await key fiscal adjustments and pension fund reforms. On the other hand, the markets in Mexico did respond positively to the new proposed USMCA. Growth moderated in Central America, reflecting a variety of factors, affected by weak confidence in Costa Rica and Panama, political uncertainty in Guatemala, and social unrest in Nicaragua.

In addition, the year 2018 was important in the political calendar of the Region, with presidential elections takingseveral countries putting in place in Brazil, Mexico, Colombiaimportant packages of fiscal measures to mitigate the social and Costa Rica, which compriseeconomic effects of the pandemic crisis. Central banks of the Region have also implemented measures to support aggregate demand and preserve financial stability, leading to a significant portionexpansion of Regional GDP (67% of GDPliquidity, as well as an increase in financing directed at specific sectors of the Region). Although these elections are an important parteconomies.

Faced with the complex global situation driven by the health crisis and the persistence of the democratic processnegative product gaps in the Region, they were alsogovernments had to find a balance in their economic policies between promoting growth and restoring their ability to continue to make tactical economic policy adjustments. Fiscal policy was mainly aimed at cushioning the causenegative effects of economic and political uncertainty. In this context, rising populism posed risks for the implementation of much-needed reformspandemic as a priority in severalall countries in the Region, most notablyRegion. Monetary policy continued to support growth, as inflation expectations remained stable and well anchored. However, structural reforms that seek to promote greater openness to trade and investment, stimulate competitiveness, and address overly strict regulations in Brazil, Mexicothe labor market, continue to remainkey tasks on the Latin American and Costa Rica.Caribbean agenda.

Potential growth continues to be impaired by lingering structural problems, including high public debt, weaker financial systems, high unemployment rates, and vulnerability to commodity and climate-related shocks. Some countries have begun to strengthen their fiscal positions, but further tightening is warranted in others to ensure debt sustainability.

Within this economic context, the Bank’s annual profit was $11.1 million in 2018, compared to $82.0 million in 2017, mainly as a result of (i) a $57.5 million impairment loss on financial instruments related to the significant deterioration of credit-impaired loans; (ii) a $10.0 million impairment loss on non-financial assets, due to an assessment of these items, which concluded that they had2020 proved to be written off;a very challenging year for markets in which Bladex operates. Nevertheless, Bladex’s unique business model – characterized by its short-term trade nature and (iii)high-quality borrower base – proved to be a $10.7 million decrease in annual revenues, mainly resulting from an 8% reduction in net interest income, as net interest margin decreased 14 basis pointsfundamental and net interest spread decreased 27 basis points from 2017 levels to 1.71% and 1.21%, respectively. The decrease in financial margins relates to narrower net lending spreads as a result ofdifferentiating advantage throughout the origination of higher quality loans in 2018, as the Bank increased its lending share to financial institutions, sovereign and state-owned entities, and top quality corporations – most of which are exporters with U.S. dollar generation capacity. Lower lending spreads were partly offset by the net positive effect of an increasing interest rate environment on the repricing of the Bank’s assets and liabilities.

The Bank’s 2018 results represent a return on average equity (“ROAE”) of 1.1% and a return on average assets (“ROAA”) of 0.2%, which were significantly below 2017 levels of 8.0% and 1.3%, respectively. However, in management’s opinion, the credit impairment losses recorded by the Bank in 2018 allowedCOVID-19 pandemic, allowing the Bank to reflect in its resultsstrengthen sound asset quality, capitalization and liquidity levels.

As soon as the impacteffects of the negativeCOVID-19 pandemic started to unfold, Bladex was able to significantly increase its cash position, continuously maintaining levels well above regulatory liquidity requirements based on Basel III standards, supported by broad access to debt capital markets evidenced by its third bond issued in the Rule 144A/Regulation S market and the continued support of deposits from our Class A shareholders. The Bank assumed a defensive approach which prioritized liquidity management, underwriting credit cyclesoundness – working closely with and attenting to the needs of its client base under tighter credit underwriting standards – and risk/reward targets for each transaction, over portfolio growth that has affected the Region over the past few years, and left the Bank with a strengthened balance sheet and solid levels of solvency and liquidity, positioning the Bank to grow its businessresulted in a profitable and reliable manner. Reflecting this position, the Bank ended 2018 with a strong 18% Tier I Basel III capital ratio and a liquidity position of 22% of total assets.year-over-year decrease but well-diversified, high quality Credit Portfolio.

Strategies for 20192021 and Subsequent Years

Resume business growth under improved economic environment

The Bank plans to continue to recuperate its pre-COVID-19 portfolio balances, focusing on lending to its top-tier client base of banks and corporations throughout the Latin American Region, favoring defensive sectors and taking advantage of business opportunities emerging from economic recovery, the positive commodity cycle and an increasing trend in trade flows expected for 2021. Prudent liquidity management will continue to be a priority, although the Bank expects to return to historical levels as market volatility has subdued, supported by its ample and diversified funding sources.

Since the World Health Organization declared a global pandemic on March 11, 2020, Bladex activated its Business Continuity Plan, which remains in place as of the date of this annual report, including work-from-home policies for employees. The Bank has remotely operated and processed transactions uninterruptedly, without compromising its standards and quality of service. It has also reinforced and implemented cybersecurity measures and controls, which are continuosly monitored both by its information security and technology personnel and by an outsourced security operation center (SOC). The Bank plans to gradually return to its normal operating environment, in all cases prioritizing the health and safety of its employees, as the rollout of vaccines accelerates in the countries where the Bank maintains offices.

Streamline the Bank’s operating model for greater efficiency

The Bank aims to improvecontinue improving efficiency and productivity throughout its organization, with investments having already been made in technology and more efficient processes. The Bank is focusing on a number of specific areas, including implementing a more centralized management model in which the head office provides risk management and administrative support to the Bank’s representative offices, and with representative offices concentrating primarily on origination and client relationship management. The Bank expects that this plan will reduce costs, contribute to its goal of operational excellence and provide greater flexibility to respond to the demands of its clients.

Further grow the Bank’s business in politically and economically stable, high-growth markets

The Bank’s expertise in risk and capital management and extensive knowledge of the Region allows it to identify and strategically focus on stable and growth-oriented markets, including investment-grade countries in the Region. Bladex maintains strategically located representative offices in order to provide focused products and services in markets that the Bank considers key to its continued growth.

Targeted growth in expanding and diversifying the Bank’s country and industry exposure

The Bank’s strategy is to participate in activities associated with trade and the trade supply chain, as well as integration across Latin American, targeting clients that offer the potential for longstanding relationships and a wider presence in the Region, such as financial institutions, corporations, sovereigns and state-owned entities. The Bank seeks to achieve this through participation in bilateral and co-financed transactions and by strengthening the short- and medium-term trade servicesand non-trade financing that it provides. The Bank intends to continue enhancing existing client relationships and establish new client-relationships through its Region-wide expertise, product knowledge, quality of service, agile decision-making process and client approach, and by strategically targeting industries and participants in the value chain of international trade by country within the Region.

The Bank targetsplans to continue targeting clients that operateacross a diversified range of industry sectors, and will seek to limit the concentration of any single corporate industry sector to a maximum of 10% of its total Loan Portfolio. The Bank plans to continue to focus on strategic sectors in most of the main exporting sectors related to commodities (agribusiness, oil & gas, metals, and petrochemicals, among others) and services (transportation and utilities, among others).international trade.

The Bank plans to focus its future efforts on growing its business with a larger number of corporate clients along the trade value chain, which management believes will reinforce the Bank’s business model, enhance origination capacity and all the Bank to deploy capital most effectively. The Bank also intends to diversifycontinue diversifying its credit risk profile, in order to continue to mitigate the impact of potential losses, should they occur.

Increase the range of products and services offered to clients

As a result of the Bank’s relationships throughout the Region, management believes it is well positioned to strategically identify key products and services to offer to clients. The Bank’s Articles of Incorporation permit a broad scope of potential activities, encompassing all types of banking, investment, and financial and other businesses that support foreign trade flows and the development of trade and integration in the Region. This supports the Bank’s ongoing strategy to develop and expand products and services such as vendor finance, letters of credit, leasing, debt intermediation in primary and secondary markets, and syndications, including export insurance programs, that complement the Bank’s expertise in foreign trade finance and risk management.management, such as: i) financing acquisitions from the Bank’s structuring and syndication business desk, as well as liability management transactions, ii) letters of credit client base diversification, and iii) vendor finance with a focus on supply chain finance through electronic platforms.

Lending Policies

The Bank extends credit directly to financial institutions and corporations within the Region. The Bank finances import and export transactions for all types of goods and products, with the exception of certain restricted items such as weapons, ammunition, military equipment and hallucinogenic drugs or narcotics not utilized for medical purposes. Imports and exports financed by the Bank are destined for buyers and sellers in countries both inside and outside the Region. The Bank analyzes credit requests from eligible borrowers by applying its credit risk criteria, including economic and market conditions. The Bank maintains a consistent lending policy and applies the same credit criteria to all types of potential borrowers in evaluating creditworthiness.

Due to the nature of trade finance, the Bank’s loans are generally unsecured. However, in certain instances, based upon the Bank’s credit review of the borrower and the economic and political situation and trends in the borrower’s home country, the Bank may determine that the level of risk involved requires that a loan be secured by collateral.

Country Credit Limits

The Bank maintains a continual review of each country's risk profile evolution, supporting its analysis with various factors, both quantitative and qualitative, the main driving factors of which include: the evolution of macroeconomic policies (fiscal, monetary, and exchange rate policy), fiscal and external performance, price stability, level of liquidity in foreign currency, changes of legal and institutional framework, as well as material social and political events, among others, including industry analysis relevant to Bladex business activities.  

Bladex has a methodology for capital allocation by country and its risk weights for assets. The Risk Policy and Assessment Committee (the “CPER”), for its acronym in Spanish) of the Bank’s Board of Directors (the “Board”) approves a level of “allocated capital” for each country, in addition to nominal exposure limits. These country capital limits are reviewed at least once a year by the CPER, and more often if necessary. The methodology helps to establish the capital equivalent of each transaction, based on the internal numeric rating assigned to each country, which is reviewed and approved by the CPER.

The amount of capital allocated to a transaction is based on customer type (sovereign, state-owned or private corporations, or financial institutions), the type of transaction (trade or non-trade), and the average remaining term of the transaction (from one to 180 days, 181 days to a year, between one and three years, or longer than three years). Capital utilizations by the business units cannot exceed the Bank’s reported total equity.

Borrower Lending Limits

The Bank generally establishes lines of credit for each borrower according to the results of its risk analysis and potential business prospects; however, the Bank is not obligated to lend under these lines of credit. Once a line of credit has been established, credit generally is extended after receipt of an application from the borrower for financing. Loan pricing is determined in accordance with prevailing market conditions and the borrower’s creditworthiness.

For existing borrowers,

Depending on the proposed amount, lines of credit are approved by different credit committees. The Bank’s management credit committee has authority to approve credit lines up to $30 million, under the legal lending limit prescribedallowed terms and conditions approved for each country by Panamanian law, providedthe Board credit committees. Credit lines exceeding that amount and/or conditions, must be approved by other credit committees, which are composed of certain members of the Board. All credit lines must fully comply fully with the country credit limits and conditions for the borrower’s country of domicile setLegal Lending Limit established by the Board. Approved borrower lending limits are reported to the CPER quarterly.Panamanian Regulator. Panamanian Law sets forth certain concentration limits, which are applicable and strictly adhered to by the Bank, including a 30% limit as a percentage of capital and reserves for any one borrower and borrower group, in the case of certain financial institutions, and a 25% limit as a percentage of capital and reserves for any borrower and borrower group, in the case of corporate and sovereign entities. As of December 31, 2018,2020, the Bank’s legal lending limit prescribed by Panamanian law for corporations and sovereign borrowers amounted to $248$262 million, and for financial institutions and financial groups amounted to $298$314 million. Panamanian law also sets lending limits for related party transactions, which are described in more detail in the section “Supervision and Regulation–Panamanian Law.” Non-compliance with this legal lending limit could result in the assessment of administrative sanctions by the Superintendency for such violations, taking into consideration the magnitude of the offense and any prior occurrences, and the magnitude of damages and prejudice caused to third parties. As of December 31, 2018,2020, the Bank was in compliance with regulatory legal lending limits.

Credit Portfolio

The Bank’s Credit Portfolio consists of the Commercial Portfolio and the Investment Portfolio. The Bank’s Commercial Portfolio includes: (i) gross loans at amortized cost excluding interest receivable, allowance for loan losses, unearned interest and deferred fees (the “Loan Portfolio”), (ii) customers’ liabilities under acceptances, and (iii) loan commitments and financial guarantee contracts, such as confirmed and stand-by letters of credit, and guarantees covering commercial risk. The Bank’s Investment Portfolio consists of securities at FVOCI and investment securities at amortized cost.cost, gross of interest receivable and the allowance for expected credit losses.

As of December 31, 2018,2020, the Credit Portfolio amounted to $6,397$5,946 million, compared to $6,085$6,582 million as of December 31, 20172019 and $6,552$6,397 million as of December 31, 2016.2018. The $312$636 million, or 5%, increase10% decrease during 20182020 compared to 2019 was largely attributable to the Bank’s Commercial Portfolio, which increased by $291 million, or 5%, duedefensive approach to improved conditions for credit demand in the Region and an increase in the Bank’s client basefavor liquidity over loan growth during most of financial institutions. Compared to December 31, 2016, the Bank’s Credit Portfolio2020 as of December 31, 2018, represented a $155 million, or 2%, decrease that reflected the implementationpart of the Bank’s efforts to improve its portfolio credit risk profile.prudential measures implemented by management since the onset of the COVID-19 pandemic.

Commercial Portfolio

The Bank’s Commercial Portfolio amounted to $5,551 million as of December 31, 2020, compared to $6,502 million as of December 31, 2019, and $6,290 million as of December 31, 2018, compared to $5,999 million as of December 31, 2017, and $6,444 million as of December 31, 2016.2018. The $291$951 million, or 5%, increase15% decrease during 20182020 reflects prudential measures implemented by the aforementioned improved conditions to longer tenor transactions and an increaseBank’s management since the onset of the COVID-19 pandemic, favoring liquidity, emphasizing sectors which management considers defensive in the Bank’s client base of financial institutions, compared to the negativecurrent economic context (such as oil & gas (downstream), electric power and food and beverage) and stricter credit cycle experienced in the Region in previous periods, as evidenced by the $154 million, or 2%, balance reduction in the Commercial Portfolio from December 31, 2016 to December 31, 2018.underwriting standards.

As of December 31, 2018, 74%2020, 75% of the Bank’s Commercial Portfolio remaining-term profile was scheduled to mature within one year, compared to 81%73% as of December 31, 20172019 and 77%74% as of December 31, 2016,2018, which reflects higher mid-termshort term lending origination throughout 2018.2020. As of those same dates, trade-related finance transactions represented 45%43%, 60%40% and 66%45%, respectively, of the Bank’s Commercial Portfolio, while trade-related finance transactions represented 59%57%, 74%53% and 85%59%, respectively, of the Bank’s short-term Commercial Portfolio, asorigination, both of which reflect the Bank increased itsBank’s increasing focus on, and exposure to, financial institutions.institutions in recent years.

As of December 31, 2018,2020, the Commercial Portfolio’s exposure remained diversified across regions and industry sectors, with 52%54% of the total Commercial Portfolio representing the Bank’s traditional client base of financial institutions and 48%46% of the total Commercial Portfolio represented by corporations, of which 37%34% and 54% of such percentages were trade-related financing, respectively. AsIn addition, the Commercial Portfolio continued to be well diversified across corporate sectors, with industry concentration levels of December 31, 2018, 19%5% of the total Commercial Portfolio was placedor lower as of December 31, 2020, except for certain sectors that the Bank considers to be defensive in the current economic context, such as oil & gas (downstream) at 7%, and electric power and food and beverage, each at 6% of the Commercial Portfolio as of December 31, 2020. Geographically, 59% of the portfolio remained geographically distributed in investment grade countries as of December 31, 2020, up 5 percent points from December 31, 2019, as the Bank weighted during the year its portfolio towards lower-risk countries, taking advantage of good risk/return opportunities. On a country-risk basis, Brazil represented the largest country-risk exposure at 18% of the total Commercial Portfolio, of which 91% were with financial institutions. Other relevant country-risk exposures were to investment grade countries such as Colombia at 14%, Mexico at 11%, Chile at 10%, and top-rated countries outside of Latin America (which relates to transactions carried out in Latin America) at 9% of the total portfolio. The Bank also continued adjusting its exposure towards lower-risk countries, evidenced by a 103% increase year-over-year in Peru, now representing 6% of total Commercial Portfolio, while continuing to decrease exposure in Argentina, down 42% year-over-year, now representing 2% of the Bank’s largest country exposure, which management believes is commensurate with the size and prospects of Brazil’s economy and its relevance in international trade flows.total Commercial Portfolio.

The following table sets forth the distribution of the Bank’s Commercial Portfolio, by product category, as of December 31 of each year:

Loan Portfolio

As of December 31, 2018,2020, the Bank’s Loan Portfolio totaled to $5,778$4,911 million, compared to $5,506$5,893 million as of December 31, 20172019 and $6,021$5,778 million as of December 31, 2016.2018. The $272$982 million, or 5%,17% Loan Portfolio increasedecrease during 20182020 was mainly attributable to higher mid-termlower lending origination throughout 2018 asduring the Bank was able to deploy longer tenor transactions with our traditional client base of top quality financial institutions, exporting corporations and “multilatinas”, and continued to perform well on its short-term origination capacity. The $243 million, or 4%, decrease compared to December 31, 2016, was primarily related toyear, reflecting the Bank’s decisiondefensive approach to favor liquidity over loan growth during most of the year, as part of prudential measures implemented at the onset of the COVID-19 pandemic, coupled with a continued emphasis on sectors which management considers defensive in previous years to improve its Loan Portfolio risk profile by reducing unwanted exposures to certain countries, industriesthe current economic context (such as oil & gas (downstream), electric power and clients.food and beverage) and stricter credit underwriting standards. As of December 31, 2018,2020, the Loan Portfolio had an average remaining maturity term of 323348 days, and 73%63% of the Bank’s Loan Portfolio was scheduled to mature within one year, compared to an average remaining maturity of 282380 days, or 80%71% maturing within one year as of December 31, 2017,2019, and 279323 days, or 76%73% maturing within one year as of December 31, 2016.2018.

As of December 31, 2018,2020, the Bank’s credit-impaired loans totaled $11 million (or 0.22% of the Loan Portfolio), compared to $62 million (or 1.05% of the Loan Portfolio) as of December 31, 2019 and $65 million (or 1.12% of the Loan Portfolio), compared to $59 million (or 1.07% of the Loan Portfolio) as of December 31, 2017 and $65 million (or 1.09% of the Loan Portfolio) as of December 31, 2016.2018. Credit-impaired loans increaseddecreased in 20182020 mainly due to the net effectsale of (i) the classification of loans totaling $65 million as credit-impaired, $62$11.6 million of which corresponded to a loan in the Brazilian sugar sector that significantly deteriorated during 2018 due to worsening international sugar industry fundamentals which led to a substantial decrease in sugar prices to levels well below the worldwide marginal cost of production, combined with the risk involved in the borrower’s complex restructuring process; and (ii) finalized credit restructuring agreements and the sale of loansan outstanding credit-impaired exposure classified as credit-impaired,Stage 3 (under accounting standard IFRS 9), which led to loan derecognitions totaling $21resulted in a $52.1 million and principal balance write-offs totaling $38 million. Including principal and accrued interest, total loan write-offswrite-off against its individually allocatedassigned allowance for credit allowances amounted to $42 million in 2018.losses. As of December 31, 2018, the $622020, $11 million in credit-impaired loanloans were related to a single transaction in the Brazilian sugarretail trade sector, discussed above accountedaccounting for 96%100% of the Bank’s total impaired loans classified as Stage 3 (under accounting standard IFRS 9), with individually assigned allowance for credit losses. The remainderlosses of the Loan Portfolio performed well during 2018, evidenced by the 10% increase in loans$4.2 million, representing coverage of 40%.

Loans classified as Stage 1 under IFRS 9, with credit conditions unchanged since origination. Moreover,origination, decreased by 18% during 2020, reflecting the prudential measures implemented since the onset of the COVID-19 pandemic in 2020, while loans classified as Stage 2 under IFRS 9, which represent loans with exposures whose credit conditions have deteriorated since origination, decreasedincreased by 39% in 2018.25%, mainly as a result of the Bank’s internal country ratings’ downward revisions.

Loan Portfolio by Country

The following table sets forth the distribution of the Bank’s Loan Portfolio by country risk at the dates indicated: