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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-267056
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED OCTOBER 31, 2022
USD 800,000,000
CORPORACIÓN ANDINA DE FOMENTO
5.250% Notes due 2025
Corporación Andina de Fomento (“CAF”) is issuing the 5.250% Notes due 2025 (the “notes”). The notes will bear interest at a rate per annum equal to 5.250%, payable semi-annually in arrears on May 21 and November 21 of each year. The first short interest payment will be made on May 21, 2023. CAF may not redeem the notes prior to their maturity on November 21, 2025, other than in limited circumstances for tax reasons. There is no sinking fund for the notes. See “Description of Notes” in this prospectus supplement.
Neither this prospectus supplement nor the accompanying prospectus comprises a prospectus for the purposes of Part VI of the Financial Services and Markets Act 2000 (as amended, the “FSMA”), Article 6 of Regulation (EU) 2017/1129 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018 (“EUWA”) (the “UK Prospectus Regulation”) or Article 6 of Regulation (EU) 2017/1129 (as amended, the “EU Prospectus Regulation”) or listing particulars given in compliance with the listing rules (the “Listing Rules”) made under Part VI of the FSMA by the United Kingdom Financial Conduct Authority in its capacity as competent authority under the FSMA (the “FCA”).
CAF will apply to the FCA to admit the notes to the official list of the FCA (the “Official List”) and to the London Stock Exchange plc (the “London Stock Exchange”) to admit the notes to trading on the London Stock Exchange’s Main Market (the “Market”). No assurance can be given by CAF that such applications will be approved. The Market is a UK regulated market for the purposes of Regulation (EU) No. 600/2014 on markets in financial instruments as it forms part of domestic law by virtue of the EUWA (“UK MiFIR”). The notes will not be subject to the prospectus requirements of the UK Prospectus Regulation as a result of CAF’s status as an exempt issuer pursuant to the UK Prospectus Regulation, by virtue of being a public international body of which any state is a member, but will be issued in compliance with the Listing Rules.
Price to Public(1) | Underwriting Discount | Proceeds to Corporación Andina de Fomento(1) | ||||||||||
Per Note | 99.830 | % | 0.27 | % | 99.73 | % | ||||||
Total | USD 798,640,000 | USD 2,160,000 | USD 797,840,000 |
(1) | Plus accrued interest, if any, from, November 22, 2022. |
Neither the U.S. Securities and Exchange Commission (the “SEC”) nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus supplement or the accompanying prospectus. Any representation to the contrary is a criminal offense.
Delivery of the notes in book-entry form only through The Depository Trust Company (“DTC”) will be made on or about, November 22, 2022.
Joint Book-Running Managers
Barclays | Citigroup | Daiwa | J.P. Morgan |
The date of this prospectus supplement is November 15, 2022.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | S-15 | |||
UNAUDITED CONDENSED INTERIM FINANCIAL INFORMATION AND NOTES THERETO | S-21 | |||
SUPPLEMENTARY INFORMATION (UNAUDITED) AS OF SEPTEMBER 30, 2022 | S-49 | |||
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IMPORTANT INFORMATION
You should rely only on the information contained in this document or to which CAF has referred you. CAF has not, and the underwriters have not, authorized anyone to provide you with information that is different. This document may only be used where it is legal to sell these securities. The information in this document may only be accurate on the date of this document.
This document is only being distributed to and is only directed at (i) persons who are outside the United Kingdom or (ii) persons who have professional experience in matters related to investments and who are investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended, of the United Kingdom (the “Financial Promotion Order”); (iii) persons who fall within Articles 49(2)(a) to (d) (“high net worth companies, unincorporated associations etc.”) of the Financial Promotion Order; and (iv) any other persons to whom this document may otherwise lawfully be communicated (all such persons together being referred to as “relevant persons”). This document must not be acted on or relied on by other persons in the United Kingdom. Any investment or investment activity to which this document relates is available only to relevant persons and will be engaged in only with relevant persons. This document must not be acted on or relied on by persons who are not relevant persons.
In connection with the issue of the notes, Citigroup Global Markets Limited, as the Stabilization Manager (or persons acting on behalf of any Stabilization Manager) may over-allot notes or effect transactions with a view to supporting the market price of the notes at a level higher than that which might otherwise prevail. However, stabilization may not necessarily occur. Any stabilization action may begin on or after the date on which adequate public disclosure of the terms of the offer of the notes is made and, if begun, may cease at any time, but it must end no later than the earlier of 30 days after the issue date of the notes and 60 days after the date of the allotment of the notes. Any stabilization action or over-allotment must be conducted by the relevant Stabilization Manager (or person(s) acting on behalf of any Stabilization Manager) in accordance with all applicable laws and rules.
UK MIFIR PRODUCT GOVERNANCE / PROFESSIONAL INVESTORS AND ECPS ONLY TARGET MARKET
Solely for the purposes of each manufacturer’s product approval process, the target market assessment in respect of the notes has led to the conclusion that: (i) the target market for the notes is only eligible counterparties, as defined in the FCA Handbook Conduct of Business Sourcebook, and professional clients, as defined in Regulation (EU) No 600/2014 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018 (“UK MiFIR”); and (ii) all channels for distribution of the notes to eligible counterparties and professional clients are appropriate. Any distributor should take into consideration the manufacturers’ target market assessment; however, a distributor subject to the FCA Handbook Product Intervention and Product Governance Sourcebook is responsible for undertaking its own target market assessment in respect of the notes (by either adopting or refining the manufacturers’ target market assessment) and determining appropriate distribution channels.
NOTIFICATION UNDER SECTION 309B(1) OF THE SINGAPORE SFA
The notes are prescribed capital markets products (as defined in the Securities and Futures (Capital Markets Products) Regulations 2018) and Excluded Investment Products (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).
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ABOUT THIS PROSPECTUS SUPPLEMENT
The notes described in this prospectus supplement are debt securities of CAF that are being offered under a registration statement filed with the SEC under the U.S. Securities Act of 1933, as amended (the “Securities Act”).
This prospectus supplement supplements the accompanying prospectus, dated October 31, 2022. The accompanying prospectus provides you with a general description of the debt securities that CAF may issue, and this prospectus supplement contains specific information about the terms of this offering and the notes. This prospectus supplement also may add, update or change information provided in the accompanying prospectus. To the extent that certain information in this prospectus supplement is inconsistent with information in the accompanying prospectus, the information in this prospectus supplement replaces the information in the accompanying prospectus and you should rely on the information in this prospectus supplement. Consequently, before you invest, you should read this prospectus supplement together with the accompanying prospectus.
The registration statement, any post-effective amendments to the registration statement and their various exhibits contain additional information about CAF, the notes and other matters. All of these documents are available on the internet website of the SEC at www.sec.gov. Certain terms that are used, but not defined in this prospectus supplement, have the meanings given to them in the accompanying prospectus.
Except as otherwise specified, all amounts in this prospectus supplement are expressed in U.S. Dollars (“dollars,” “$,” “U.S.$”, “USD”, “US Dollars” or “U.S. dollars”).
Laws in certain jurisdictions may restrict the distribution of this prospectus supplement and the accompanying prospectus and the offering of the notes. You should inform yourself about and observe these restrictions. See “Underwriting” in this prospectus supplement.
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This prospectus supplement and the accompanying prospectus contain forward-looking statements. Statements that are not historical facts, including statements about CAF’s beliefs and expectations, are forward-looking statements. These statements are identified by words such as “believe,” “expect,” “anticipate,” “should” and words of similar meaning.
Forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual financial and other results may differ materially from the results discussed in the forward-looking statements. Therefore, you should not place undue reliance on them. Factors that might cause such a difference include, but are not limited to, those discussed in this prospectus supplement and the accompanying prospectus, such as the effects of economic or political turmoil in one or more of CAF’s shareholder countries. CAF undertakes no obligations to update any forward-looking statement, which speak only as of the date of this prospectus supplement.
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You should read the following summary information in conjunction with the more detailed information appearing elsewhere in this prospectus supplement and the accompanying prospectus.
Issuer | Corporación Andina de Fomento |
Securities Offered | 5.250% Notes due 2025. |
Maturity Date | November 21, 2025. |
Interest Payment Dates | May 21 and November 21 of each year, with a first short interest payment commencing May 21, 2023. |
Interest Rate | 5.250% per annum. |
Not Redeemable | The notes are not redeemable prior to their maturity on November 21, 2025, other than in limited circumstances for tax reasons. See “Description of the Debt Securities — Redemption for Tax Reasons” in the accompanying prospectus. |
Form and Denominations | The notes will be issued in the form of a global note held by the depositary or the depositary’s custodian. You will hold your interest in the global note through a financial institution that has an account with the depositary. Generally, you will not be entitled to have notes registered in your name, you will not be entitled to certificates representing your notes and you will not be considered a holder of a note under the fiscal agency agreement. You may hold your interest in the global note in denominations of USD 1,000 and integral multiples of USD 1,000 in excess thereof. See “Description of the Notes — Form and Denominations.” |
Payment of Principal and Interest | Interest and the principal amount of your notes will be paid in U.S. dollars. As long as the notes are in the form of the global note, interest and principal will be paid through the facilities of the depositary. See “Description of the Notes — Payments on the Notes.” |
No Sinking Fund | There is no sinking fund for the notes. |
Additional Amounts | Payments will be made without withholding or deducting taxes, duties, assessments or other similar governmental charges imposed by the full member shareholder countries or any of their political subdivisions or agencies having the power to tax, unless the withholding or deduction of those taxes, duties, assessments or charges is required by law. In that event, with certain exceptions, such additional amounts as may be necessary will be paid so that the net amount you receive after such withholding or deduction will equal the amount that you would have received without a withholding or deduction. (See “Description of the Debt Securities — Additional Payments by CAF” in the accompanying prospectus.) Under the terms of the Constitutive Agreement, CAF is exempt from all taxes and |
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tariffs on income, properties or assets, and from any liability involving payment, withholding or collection of any taxes in the full member shareholder countries. See “Legal Status of CAF” in the accompanying prospectus. |
Status | The notes are not secured by any of CAF’s property or assets. Accordingly, your ownership of the notes means you are one of CAF’s unsecured creditors. The notes rank equally with all of CAF’s other unsecured indebtedness, as described in the accompanying prospectus. See “Description of the Debt Securities — General” in the accompanying prospectus. |
Negative Pledge | The notes will contain a restriction on CAF’s ability to pledge or mortgage its assets. See “Description of the Debt Securities — Negative Pledge” in the accompanying prospectus. |
Default | You will have certain rights if an event of default occurs and is not cured by CAF, including the right to declare your notes to be immediately due and payable, as described in the accompanying prospectus. See “Description of the Debt Securities — Default; Acceleration of Maturity” in the accompanying prospectus. |
Further Issuances | CAF may from time to time, without the consent of existing holders of the notes, create and issue additional notes having the same terms and conditions as the notes offered hereby, except for the issue date, the offering price and, if applicable, the date of first payment of interest on the additional notes. Any such additional notes will form a single series with the notes offered hereby, provided, however, that if such additional notes are not fungible with the notes offered hereby for U.S. federal income tax purposes, the additional notes will be issued under a separate CUSIP number. |
Fiscal Agent | The notes will be issued under a fiscal agency agreement between CAF and The Bank of New York Mellon (as successor-in-interest to JPMorgan Chase Bank, N.A.), which serves as fiscal agent, paying agent, transfer agent and registrar. |
Taxation | For a discussion of the full member shareholder countries and U.S. tax consequences of the notes, see “Taxation — Full Member Shareholder Country Taxation” and “— United States Taxation” in the accompanying prospectus. You should consult your own tax advisors to determine the foreign and U.S. federal, state, local and any other tax consequences to you in connection with your purchase, ownership and disposition of the notes. |
Listing | CAF will apply to the FCA for the notes to be listed on its Official List and to the London Stock Exchange for the notes to be admitted to trading on the Market. No assurance can be given by CAF that such applications will be approved. |
Governing Law | The notes will be governed by the laws of the State of New York. |
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CAF will use the net proceeds of the sale of the securities to repay outstanding indebtedness that will mature in the fourth quarter of 2022 and the first quarter of 2023. Until then, CAF will invest the net proceeds in high quality short-term debt instruments in accordance with its liquidity policy.
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CAPITALIZATION AND INDEBTEDNESS
The following table sets forth CAF’s capitalization and indebtedness as of September 30, 2022 and does not give effect to any transaction since that date.
As of September 30, 2022 | ||||
(in USD millions) | ||||
Total Liabilities(1)(3) | 35,240.7 | |||
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Stockholder’s equity | ||||
Capital | ||||
Subscribed and paid-in capital (authorized capital USD 25.0 billion)(2) | 5,511.8 | |||
Additional paid-in capital | 4,227.8 | |||
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Total capital | 9,739.6 | |||
Reserves | ||||
Mandatory reserve pursuant to Article 42 of the Constitutive Agreement | 582.7 | |||
General reserve | 3,189.3 | |||
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Total reserves | 3,772.0 | |||
Retained earnings | 74.1 | |||
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Total stockholder’s equity | 13,585.7 | |||
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Total liabilities and stockholder’s equity | 48,826.4 |
(1) | Total liabilities includes commercial paper, deposits, bonds and borrowings from other financial institutions, accrued interest payable, accrued expenses and other liabilities and derivative financial instruments. |
(2) | As of September 30, 2022, authorized capital includes USD 7.0 billion of callable capital authorized by CAF’s board of directors (the “Board of Directors”), USD 1.6 billion of which has been subscribed for by shareholder countries. As of September 30, 2022, subscribed capital does not include (i) USD 1.6 billion of callable capital that has been subscribed for by shareholder countries and (ii) USD 1.0 billion of capital subscriptions receivable that remain unpaid. |
(3) | Total liabilities excludes issuances of bonds and other debt securities after September 30, 2022. For more information relating to bond issuances completed by CAF after September 30, 2022, see “Supplementary Information (Unaudited) as of September 30, 2022.” |
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General
As of September 30, 2022, CAF’s total authorized capital was USD 25.0 billion, of which USD 18.0 billion was ordinary capital shares and USD 7.0 billion was callable capital shares. On March 8, 2022, the Shareholders’ Assembly approved a general paid-in capital increase for a total amount of USD 7.0 billion. Bilateral subscription agreements with each shareholder country in connection with this capital increase are currently being negotiated and expected to be signed throughout 2022 and 2023.
Paid-in Capital and Unpaid Capital
As of September 30, 2022, CAF’s subscribed paid-in and unpaid capital (excluding callable capital) was USD 6.5 billion, of which USD 5.5 billion was paid-in capital and USD 1.0 billion was unpaid capital. The unpaid capital is receivable in installments according to the agreements subscribed with the shareholder countries. Over the years, CAF has had several increases of subscribed capital.
Since 1990, capital contributions made to CAF (valor patrimonial) comprise a premium paid on each Series “B” and Series “C” share purchased and the nominal USD 5,000 per share value established by CAF’s by-laws. The premium component of such capital contributions is determined at the beginning of each subscription and applies to all payments under that subscription.
Information regarding recent capital subscriptions and annual capital contributions made by shareholder countries as of September 30, 2022 is as follows:
Argentina
In March 2016, Argentina subscribed for an additional USD 572.0 million in Series “B” shares to be paid in seven installments, of which it paid USD 41.7 million in 2017, USD 88.4 million in 2018, USD 88.4 million in 2019, USD 88.4 million in 2020, USD 88.4 million in 2021 and USD 88.4 million in 2022.
Bolivia
In 2009, Bolivia subscribed for an additional USD 105.0 million in Series “B” shares, to be paid in eight installments. The final installment was paid in 2017.
In March 2016, Bolivia subscribed for an additional USD 190.0 million in Series “B” shares, to be paid in six installments. The final installment was paid in 2022.
In July 2022, Bolivia subscribed for an additional USD 269.2 million in Series “B” shares, to be paid in 11 installments.
Brazil
In 2009, Brazil subscribed for an additional USD 190.0 million in Series “C” shares to be paid in seven installments. The final installment was paid in 2017.
In July 2017, Brazil subscribed for an additional USD 572.0 million in Series “B” shares, to be paid in eight installments, of which it paid USD 20.1 million in 2018, USD 45.0 million in 2020, USD 26.2 million in 2021 and USD 24.7 million in 2022 As of September 30, 2022, USD 100.1 million to be paid under the agreement are past due.
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Colombia
In June 2012, Colombia subscribed for an additional USD 210.0 million in Series “B” shares to be paid in three installments. The final installment was paid in 2018.
In August 2012, Colombia subscribed for an additional USD 228.6 million in Series “B” shares. The final installment was paid in 2017.
In July 2016, Colombia subscribed for an additional USD 572.0 million in Series “B” shares, to be paid in eight installments, of which it paid USD 5.0 million in 2017, USD 5.0 million in 2018, USD 93.7 million in 2019, USD 93.7 million in 2020, USD 93.7 million in 2021 and USD 46.8 million in 2022.
Costa Rica
In September 2019, Costa Rica subscribed for USD 110.0 million in Series “C” shares, which it paid in full in 2019.
Dominican Republic
In 2009, the Dominican Republic subscribed for an additional USD 17.0 million in Series “C” shares. The final installment was paid in 2017.
In February 2016, the Dominican Republic subscribed for an additional USD 50.0 million in Series “C” shares, to be paid in four installments. The final installment was paid in 2020.
In 2021, the Dominican Republic subscribed for an additional USD 310.1 million in Series “C” shares, to be paid in six installments, of which it paid USD 46.0 million in 2022.
Ecuador
In 2009, Ecuador subscribed for an additional USD 105.0 million in Series “B” shares to be paid in eight installments. The final installment was paid in 2017.
In June 2016, Ecuador subscribed for an additional USD 190.0 million in Series “B” shares, to be paid in six installments. The final installment was paid in 2020.
In July 2022, Ecuador subscribed for an additional USD 269.2 million in Series “B” shares, to be paid in 11 installments, of which it paid USD 53.8 million in 2022.
El Salvador
In December 2021, El Salvador began its process to become a full member shareholder country and subscribed for USD 460.0 million in Series “B” shares to be paid in seven installments, of which it paid USD 65.7 million in 2022.
In December 2021, El Salvador subscribed for USD 36.0 million in callable capital.
Mexico
In February 2017, Mexico subscribed for an additional USD 51.3 million in Series “C” shares, which it paid in full in 2017.
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Panama
In 2009, Panama subscribed for an additional USD 55.0 million in Series “C” shares to be paid in seven installments. The final installment was paid in 2017.
In February 2012, Panama subscribed for an additional USD 91.5 million in Series “B” shares, to be paid in five installments. The final installment was paid in 2017. In February 2016, Panama subscribed for an additional USD 190.0 million in Series “B” shares, to be paid in six installments beginning in 2017. The final installment was paid in 2022.
Paraguay
In 2009, Paraguay subscribed for an additional USD 55.0 million in Series “C” shares to be paid in seven installments. The final installment was paid in 2017.
In May 2012, Paraguay subscribed for an additional USD 91.5 million in Series “B” shares, to be paid in five installments. The final installment was paid in 2017.
In March 2016, Paraguay subscribed for an additional USD 190.0 million in Series “B” shares, to be paid in six installments. The final installment was paid in 2022.
Peru
In March 2016, Peru subscribed for an additional USD 572.0 million in Series “B” shares, to be paid in eight installments. The final installment was paid in 2022.
Portugal
In 2017, Portugal subscribed for USD 6.4 million in Series “C” shares to be paid in three equal installments. The final installment was paid in 2019.
Spain
In 2017, Spain subscribed for an additional USD 173.2 million of paid-in capital to be paid in five installments. The final installment was paid in 2021.
Trinidad and Tobago
In December 2018, Trinidad and Tobago subscribed for an additional USD 190.0 million of paid-in capital to be paid in eight installments, of which it paid USD 20.0 million in 2019, USD 20.0 million in 2020 and USD 25.0 million in 2021.
Uruguay
In 2009, Uruguay subscribed for an additional USD 55.0 million in Series “C” shares to be paid in seven annual installments. The final installment was paid in 2017.
In March 2016, Uruguay subscribed for an additional USD 190.0 million in Series “B” shares, to be paid in six installments. The final installment was paid in 2022.
Venezuela
In 2009, Venezuela subscribed for an additional USD 380.0 million in Series “B” shares to be paid in eight installments. In December 2016, the agreement was amended to provide for payment in nine installments.
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Venezuela has paid a total of USD 268.2 million as of September 30, 2017. In March 2018, the agreement was amended to provide for payment in three installments, with the final installment scheduled to be paid in 2020. As of the date of this prospectus supplement, USD 111.8 million to be paid under the subscription agreement, as amended in March 2018, are past due.
In March 2016 and May 2016, Venezuela subscribed for an additional USD 572.0 million in Series “B” shares. In March 2018, the agreement was amended to provide for payment in eight installments, with the final installment scheduled to be paid in 2025. As of the date of this prospectus supplement, USD 240.8 million to be paid under the agreement, as amended in March 2018, are past due.
As of September 30, 2022, CAF has repurchased a total of 95,956 Series “B” shares totaling USD 1.4 billion from Venezuela. The proceeds were used to repay due and overdue amounts of principal and interest and deducting the amount of paid-in capital and additional paid-in capital to USD 479.8 million and USD 882.8 million, respectively. As a result of the Program, Venezuela is currently meeting its obligations in relation to its loan agreements with CAF. See “Liquidity Management in Exceptional Situations Program” for more information.
The following table sets out the nominal value of CAF’s subscribed paid-in capital and unpaid capital as of September 30, 2022:
Shareholders | Paid-in Capital | Unpaid Capital | ||||||
(in USD thousands) | ||||||||
Series “A” Shares: | ||||||||
Argentina | 1,200 | — | ||||||
Bolivia | 1,200 | — | ||||||
Brazil | 1,200 | — | ||||||
Colombia | 1,200 | — | ||||||
Ecuador | 1,200 | — | ||||||
El Salvador | 1,200 | — | ||||||
Panama | 1,200 | — | ||||||
Paraguay | 1,200 | — | ||||||
Peru | 1,200 | — | ||||||
Trinidad y Tobago | 1,200 | — | ||||||
Uruguay | 1,200 | — | ||||||
Venezuela | 1,200 | — | ||||||
Series “B” Shares: | ||||||||
Argentina | 595,395 | 62,225 | ||||||
Bolivia | 323,970 | 94,805 | ||||||
Brazil | 480,125 | 160,590 | ||||||
Colombia | 1,016,045 | 65,960 | ||||||
Ecuador | 344,535 | 75,845 | ||||||
El Salvador | 24,140 | 138,845 | ||||||
Panama | 201,135 | — | ||||||
Paraguay | 198,735 | — | ||||||
Peru | 1,084,175 | — | ||||||
Trinidad and Tobago | 140,185 | 44,005 | ||||||
Uruguay | 207,300 | — | ||||||
Venezuela | 363,610 | 240,780 | ||||||
Commercial Banks | 2,485 | — |
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Shareholders | Paid-in Capital | Unpaid Capital | ||||||
(in USD thousands) | ||||||||
Series “C” Shares: | ||||||||
Barbados | 17,610 | — | ||||||
Chile | 27,705 | — | ||||||
Costa Rica | 55,190 | — | ||||||
Dominican Republic | 68,980 | 93,005 | ||||||
Jamaica | 910 | — | ||||||
Mexico | 76,835 | — | ||||||
Portugal | 9,600 | — | ||||||
Spain | 259,695 | — | ||||||
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Total | 5,511,760 | 976,190 |
Reserves
Article 42 of the Constitutive Agreement requires that at least 10% of CAF’s net income in each year be allocated to a mandatory reserve until that reserve amounts to 50% of subscribed capital. The mandatory reserve can be used only to offset losses. The mandatory reserve is an accounting reserve. CAF also maintains a general reserve to cover contingent events and as a source of funding of last resort in the event of temporary illiquidity or when funding in the international markets is unavailable or impractical.
As of September 30, 2022, CAF’s reserves totaled USD 3.8 billion. At such date, the mandatory reserve pursuant to Article 42 of the Constitutive Agreement amounted to USD 0.6 billion, or 7.2%, of subscribed paid-in capital and the general reserve amounted to USD 3.2 billion.
Callable Capital
In addition to CAF’s subscribed paid-in and un-paid capital, shareholder countries have subscribed for USD 1.6 billion of callable capital of the USD 7.0 billion callable capital authorized by the Board of Directors, as of September 30, 2022. CAF’s callable capital may be called by the Board of Directors to meet the obligations of CAF only to the extent that CAF is unable to meet such obligations with its own resources. See Note 16 to CAF’s audited financial statements, included elsewhere in this prospectus supplement.
The Constitutive Agreement provides that the obligation of CAF’s shareholder countries to pay for the shares of callable capital, upon demand by the Board of Directors, continues until such callable capital is paid in full. Thus, CAF considers the obligations of shareholder countries to pay for their respective callable capital subscriptions to be binding obligations backed by the full faith and credit of the respective governments. If the callable capital were to be called, the Constitutive Agreement requires that the call be prorated among CAF’s shareholder countries in proportion to their shareholdings.
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SELECTED FINANCIAL INFORMATION
The following selected financial information as of and for the years ended December 31, 2021, 2020, and 2019 has been derived from the audited financial statements of CAF for those periods, which are included elsewhere in this prospectus. The financial statements of CAF have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”). The following selected financial information as of and for the nine-month periods ended September 30, 2022 and 2021 (balance sheet as of September 30, 2021 not included therein) has been derived CAF’s unaudited condensed interim financial information and includes all adjustments, consisting of normal recurring adjustments, that CAF considers necessary for a fair presentation of its financial position at such dates and its results of operations for such periods. The results of the nine-month period ended September 30, 2022, are not necessarily indicative of results to be expected for the full year. The selected financial information should be read in conjunction with CAF’s audited financial statements and notes thereto, its unaudited condensed interim financial information and the notes thereto and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included elsewhere in this prospectus supplement.
Year Ended December 31, | Nine Months Ended September 30, | |||||||||||||||||||
2021 | 2020 | 2019 | 2022 | 2021 | ||||||||||||||||
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Statements of Comprehensive Income | ||||||||||||||||||||
Interest income | 671,991 | 1,081,165 | 1,611,791 | 726,083 | 512,265 | |||||||||||||||
Interest expense | 371,275 | 595,157 | 951,077 | 481,398 | 282,200 | |||||||||||||||
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Net interest income | 300,716 | 486,008 | 660,714 | 244,688 | 230,065 | |||||||||||||||
Provision (credit) for loan losses | 29,869 | 2,923 | 52,395 | (5,499 | ) | 8,014 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net interest income after provision (credit) for loan losses | 270,847 | 483,085 | 608,319 | 250,187 | 222,051 | |||||||||||||||
Non-interest income | 38,957 | 17,717 | 14,492 | 17,535 | 34,394 | |||||||||||||||
Non-interest expenses | 171,401 | 186,876 | 162,730 | 146,350 | 124,715 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Income before unrealized changes in fair value related to financial instruments and contributions to Stockholders’ Special Funds | 138,403 | 313,926 | 460,081 | 121,372 | 131,730 | |||||||||||||||
Unrealized changes in fair value related to other financial instruments | (3,388 | ) | (2,089 | ) | (5,273 | ) | (2,484 | ) | 3,105 | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Income before Contributions to Stockholders’ Special Funds, net | 135,015 | 311,837 | 454,808 | 118,888 | 134,835 | |||||||||||||||
Contributions to Shareholders’ Special Funds | 30,000 | 72,015 | 129,226 | 44,756 | 17,195 | |||||||||||||||
Net income and total comprehensive income | 105,015 | 239,822 | 325,582 | 74,132 | 117,640 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Summarized Balance Sheet Data (end of period) | ||||||||||||||||||||
Total assets | 47,592,350 | 46,845,903 | 42,293,634 | 48,826,404 | 46,258,144 | |||||||||||||||
Total liabilities | 34,292,711 | 33,851,002 | 29,496,906 | 35,240,747 | 33,087,099 | |||||||||||||||
Total stockholders’ equity | 13,299,639 | 12,994,901 | 12,796,728 | 13,585,657 | 13,171,045 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total liabilities and stockholders’ equity | 47,592,350 | 46,845,903 | 42,293,634 | 48,826,404 | 46,258,144 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Loan Portfolio and Equity Investments | ||||||||||||||||||||
Loans before allowance for loan losses and loan commissions, net of origination cost | 29,595,386 | 28,117,867 | 26,520,618 | 29,735,066 | 27,450,876 | |||||||||||||||
Allowance for loan losses | 76,650 | 95,015 | 91,642 | 67,105 | 79,794 | |||||||||||||||
Equity investments | 433,350 | 432,600 | 463,825 | 403,878 | 447,353 |
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Year Ended December 31, | Nine Months Ended September 30, | |||||||||||||||||||
2021 | 2020 | 2019 | 2022 | 2021 | ||||||||||||||||
(in USD thousands, except ratios) | ||||||||||||||||||||
Selected Financial Ratios | ||||||||||||||||||||
Return on average total stockholders’ equity(1) | 1.0 | % | 2.4 | % | 3.7 | % | 1.2 | % | 1.4 | % | ||||||||||
Return on average paid-in capital(2) | 2.6 | % | 5.8 | % | 8.7 | % | 3.0 | % | 3.3 | % | ||||||||||
Return on average assets(3) | 0.3 | % | 0.7 | % | 1.1 | % | 0.3 | % | 0.4 | % | ||||||||||
Administrative expenses divided by average total assets | 0.3 | % | 0.3 | % | 0.4 | % | 0.3 | % | 0.3 | % | ||||||||||
Overdue loan principal as a percentage of loan portfolio (excluding non-accrual loans) | 0.0 | % | 0.0 | % | 0.5 | % | 0.0 | % | 0.0 | % | ||||||||||
Non-accrual loans as a percentage of loan portfolio | 0.4 | % | 0.2 | % | 0.3 | % | 0.4 | % | 0.5 | % | ||||||||||
Allowance for loan losses as a percentage of loan portfolio | 0.3 | % | 0.3 | % | 0.3 | % | 0.2 | % | 0.3 | % |
(1) | Income before unrealized changes in fair value related to financial instruments and Contributions to Stockholders’ Special Funds divided by annual average total stockholders’ equity. Annual average total stockholders’ equity is computed as the arithmetic average of total stockholders’ equity as of the beginning and the end of each period. Data for interim periods has been annualized. |
(2) | Income before unrealized changes in fair value related to financial instruments and Contributions to Stockholders’ Special Funds divided by annual average subscribed and paid-in capital. Annual average subscribed and paid-in capital is computed as the arithmetic average of subscribed and paid-in capital as of the beginning and the end of each period. Data for interim periods has been annualized. |
(3) | Income before unrealized changes in fair value related to financial instruments and Contributions to Stockholders’ Special Funds divided by annual average total assets. Annual average total assets is computed as the arithmetic average of total assets as of the beginning and the end of each period. Data for interim periods has been annualized. |
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with CAF’s audited financial statements and notes thereto, included elsewhere in this prospectus.
Market Overview and Portfolio Trends
Since 2020, important global developments have occurred, including:
• | the COVID-19 pandemic; |
• | low growth in Latin America; |
• | volatility in the price of certain commodities; and |
• | more recently, high levels of inflation and an increase in global interest rates. |
In addition, CAF is transitioning out of the use of the London Interbank Offered Rate (“LIBOR”) both in its loan portfolio and hedging of its financial liabilities.
The COVID-19 pandemic and the volatility in commodity prices have not adversely affected CAF’s results of operations. However, they have resulted in a downward adjustment of the external risk rating of some of its sovereign borrowers specifically during 2020 and to a lesser extent 2021, which led to a corresponding increase in its allowance for loan losses, according to the methodology described in “— Income Statement — Provision (Credit) for Loan Losses” below.
The rise in global interest rates due to rising inflation has had an impact on the valuation of the marketable securities of CAF’s liquidity portfolio, however this has been offset by the increase in interest rates charged to clients from CAF’s loan portfolio given that the majority of its loans are made in USD floating rate.
CAF’s loan portfolio has grown from USD 26.5 billion, as of December 31, 2019, to USD 29.7 billion, as of September 30, 2022, as a result of its strategy to expand its shareholder base without affecting its capitalization ratios, principally through additional paid-in capital contributions by several shareholder countries, as well as the issuance of shares to new shareholder countries. These two main drivers also led CAF’s loan portfolio to grow by 5.3% in 2021, 6.0% in 2020 and 5.3% in 2019.
As of September 30, 2022, CAF’s loan portfolio was distributed by country as follows:
Ecuador | 14.2 | % | ||
Argentina | 12.9 | % | ||
Colombia | 12.7 | % | ||
Bolivia | 10.1 | % | ||
Panama | 9.2 | % | ||
Venezuela | 8.8 | % | ||
Brazil | 7.7 | % | ||
Paraguay | 6.5 | % | ||
Peru | 4.6 | % | ||
Trinidad and Tobago | 3.9 | % | ||
Uruguay | 3.3 | % | ||
Mexico | 2.1 | % | ||
Costa Rica | 1.8 | % | ||
Dominican Republic | 1.4 | % | ||
Barbados | 0.6 | % | ||
Chile | 0.5 | % |
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Notwithstanding the presence of other state-sponsored development banks in the regions in which CAF operates, CAF does not expect that the growth of its loan portfolio will be materially affected by the activities of other development banks in these regions, since the financing needs of its shareholder countries exceed the current supply of lending resources. CAF believes that activities of other development banks in the regions in which it operates are complementary to its lending operations.
LIBOR Replacement
The replacement of LIBOR with a new reference rate or rates is an industry risk due to the implications it has on the assets as well as the liabilities of financial institutions. In that regard, CAF has been closely following the recent developments and announcements from groups and organizations that are most closely involved with the phasing out of LIBOR that affect the loan and derivatives markets, including the International Swaps and Derivatives Association (“ISDA”) and its recent publication of the ISDA 2020 IBOR Fallbacks Protocol, to which CAF adhered in January 2021. In addition, CAF has established an interdepartmental task force in charge of preparing the institution for the change in reference rates, including measures such as the incorporation of fallback provisions on loans to mitigate any possible impact LIBOR replacement may have. As of January 1, 2022, all loans originated will be linked to the reference rate Term Secured Overnight Funding Rate (“SOFR”). New financial liabilities will also be hedged to SOFR. Legacy loans that are referenced to LIBOR rate will be converted after June 2023 when LIBOR rate ceases to be representative. It is for this reason that CAF expected the LIBOR transition to occur smoothly. If SOFR or another rate does not achieve wide acceptance as the alternative to LIBOR, there likely will be disruption in financial markets. In the event that SOFR or another reference rate is widely accepted, risks will remain related to outstanding loans, borrowings, derivatives and other instruments using LIBOR related to transitioning those instruments to a new reference rate and the corresponding value transfer that may occur in connection with that transition, as the new reference rate will not exactly mimic LIBOR.
On the funding side, CAF has ceased issuance of Floating Rate Notes (“FRN”) linked to LIBOR, and all outstanding LIBOR FRNs (totaling USD 100 million) will reset before the first half of 2023. On June 15, 2021, CAF issued its first FRN bond that is linked to the SOFR rate for USD 400 million, an important step in the LIBOR transition process.
Statements of Comprehensive Income
Interest Income
Nine Months Ended September 30, 2022 and 2021. For the nine-month period ended September 30, 2022, CAF’s interest income was USD 726.1 million, representing an increase of USD 213.8 million, or 41.7%, compared to interest income of USD 512.3 million for the corresponding period in 2021. This increase resulted primarily from the growth of CAF’s loan portfolio and higher interest rates charged on loans that accrue interest based on six-month LIBOR and a spread differential. Average market interest rates were higher in the first nine months of 2022, when six-month LIBOR averaged 2.17%, a significantly higher rate than that which existed during the first nine months of 2021, when six-month LIBOR averaged 0.18%.
Interest Expense
Nine Months Ended September 30, 2022 and 2021. For the nine-month period ended September 30, 2022, CAF’s interest expense was USD 481.4 million, representing an increase of USD 199.2 million, or 70.6%, compared to interest expense of USD 282.2 million for the corresponding period in 2021. This increase resulted from higher interest rates, specifically the six-month LIBOR. Average market interest rates were higher in the first nine months of 2022, when six-month LIBOR averaged 2.17%, than in the first nine months of 2021, when six-month LIBOR averaged 0.18%.
Net Interest Income
Nine Months Ended Sept 30, 2022 and 2021. For the nine-month period ended September 30, 2022, CAF’s net interest income was USD 244.7 million, representing an increase of USD 14.6 million, or 6.4%, compared to
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net interest income of USD 230.1 million for the corresponding period in 2021. This increase resulted from higher average market rates as CAF holds more interest-earning assets than interest-payable liabilities. The net interest income margin was 0.79% for the nine-month period ended September 30, 2022, as compared to 0.68% for the corresponding period in 2021.
Provision (Credit) for Loan Losses
CAF has adopted the requirements of ASU 2016-13 Financial Instruments — Credit Losses, along with several other subsequent codification updates related to accounting for credit losses, on January 1, 2020 following the modified- retrospective approach. As of March 31, 2020, the applicable Current Expected Credit Losses (“CECL”) was applied to assets such as loans measured at amortized cost basis, as well as off-balance-sheet undisbursed loan commitments and financial guarantees. As a result of the adoption, there was no cumulative-effect adjustment to the 2020 opening retained earnings. The allowance for credit losses is maintained at a level CAF believes to be appropriate to absorb expected lifetime credit losses over the contractual life of the loan portfolio and consider available information relevant to assessing the collectability of cash flows including a combination of internal and external information relating to past events, current conditions, and reasonable and supportable forecasts. A loan is considered in non-accrual status when, based on currently available information and events, it is probable that CAF will not recover the total amount of principal and interest as agreed in the terms of the original loan contract. The allowance for loan losses is determined on a loan-by-loan basis based on the present value of expected future cash flows, discounted at the original loan’s effective interest rate. CAF’s management individually evaluates the compliance of the new terms of the restructured loan for a reasonable period to calculate specific allowances for loan losses and if the remaining balance of the restructured loan is considered collectible, the restructured loan could return to accrual status. See Notes 2 and 6 to CAF’s audited financial statements included elsewhere in this prospectus.
Nine Months Ended September 30, 2022 and 2021. For the nine-month period ended September 30, 2022, CAF recorded a credit for loan losses of USD 5.5 million, compared with a provision for loan losses of USD 8.0 million for the corresponding period in 2021. The credit for loan losses was due to a decrease in the outstanding amount of private sector loans in CAF’s loan portfolio during the nine-month period in 2022.
Non-Interest Income
CAF’s non-interest income consists principally of other commissions, dividends arising from equity investments not accounted for using the equity method, its corresponding share of earnings or losses on equity investments, which are accounted for using the equity method, and other income.
Nine Months Ended September 30, 2022 and 2021. For the nine-month period ended September 30, 2022, CAF’s non-interest income was USD 17.5 million, representing a decrease of USD 16.9 million, or 49.0%, compared to non-interest income of USD 34.4 million for the corresponding period in 2021. This decrease was mainly due to a decrease in other income.
Non-Interest Expenses
CAF’s non-interest expenses consist principally of administrative expenses, representing 85.1% and 90.7% of total non-interest expenses for the nine-month periods ended September 30, 2022 and September 30, 2021, respectively
Nine Months Ended September 30, 2022 and 2021. For the nine-month period ended September 30, 2022, CAF’s non-interest expenses were USD 146.4 million, representing an increase of USD 21.6 million, or 17.3%, compared to total non-interest expenses of USD 124.7 million for the corresponding period in 2021. This increase resulted principally from an increase in administrative expenses and impairment charges for equity investments, which increased by 10.1% and 839.5%, respectively.
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For the nine-month period ended September 30, 2022, administrative expenses were USD 124.6 million, representing an increase of USD 11.4 million over administrative expenses of USD 113.2 million for the corresponding period in 2021. This increase resulted principally from several corporate actions, such as the decentralization process of employees and new hires.
Income before unrealized changes in fair value related to financial instruments and contributions to Stockholders’ Special Funds
Nine Months Ended September 30, 2022, and 2021. For the nine-month period ended September 30, 2022, CAF’s income before unrealized changes in fair value related to financial instruments and contributions to Stockholders’ Special Funds was USD 121.4 million, representing a decrease of USD 10.4 million, or 7.9%, compared to an income before unrealized changes in fair value related to financial instruments and contributions to Stockholders’ Special Funds of USD 131.7 million for the corresponding period in 2021. This decrease resulted primarily from higher total non-interest expenses and lower total non-interest income during the nine-month period in 2022, in comparison to the corresponding period in 2021.
Net Income
Nine Months Ended September 30, 2022 and 2021. For the nine-month period ended September 30, 2022, CAF’s net income was USD 74.1 million, representing a decrease of USD 43.5 million, or 37.0%, compared to net income of USD 117.6 million for the corresponding period in 2021. This decrease resulted primarily from higher total non-interest expenses, higher contribution to Stockholders’ Special Funds and lower total non-interest income during the nine-month period in 2022, in comparison to the corresponding period in 2021.
Balance Sheet
Assets
September 30, 2022. As of September 30, 2022, CAF’s total assets were USD 48.8 billion, representing an increase of USD 1.2 billion, or 2.6%, over total assets of USD 47.6 billion as of December 31, 2021. The increase in assets resulted primarily from an increase in deposits with banks and other assets, which increased by 60.7% and 445.4%, respectively, compared to December 31, 2021. Other assets are composed primarily from collateral of derivative financial instruments.
Liabilities
September 30, 2022. As of September 30, 2022, CAF´s total liabilities were USD 35.2 billion, representing an increase of USD 0.9 billion or 2.8%, over total liabilities of USD 34.3 billion as of December 31, 2021. The increase in liabilities resulted primarily from an increase in the outstanding amount of deposits, commercial papers and derivative financial instruments, which increased by 23.5%, 50.1% and 394.1%, respectively, compared to December 31, 2021.
Stockholders’ Equity
September 30, 2022. As of September 30, 2022, CAF’s total stockholders’ equity was USD 13.6 billion, representing an increase of USD 286.0 million, or 2.2%, over total stockholders’ equity of USD 13.3 billion as of December 31, 2021. The increase in total stockholders’ equity resulted principally from an increase in reserves and paid-in capital in comparison to December 31, 2021.
Asset Quality
Overdue Loans
September 30, 2022. As of September 30, 2022, there were no overdue loans (not including non-accrual loans in overdue status), this was also the case for the years ended December 31, 2021 and 2020.
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Non-Accrual Loans
September 30, 2022. As of September 30, 2022, the total principal amount of CAF’s non-accrual loans was USD 102.9 million, or 0.4% of the total loan portfolio, representing a decrease of USD 9.2 million over non-accrual loans of USD 112.1 million as of December 31, 2021. This decrease was primarily due to a loan that was written-off during the nine-month period ended September 30, 2022. Loans in non-accrual status are from the private sector borrowers located in Peru, Brazil, Mexico and Colombia.
Restructured Loans
September 30, 2022. As of September 30, 2022, the total principal amount of outstanding restructured loans was USD 25.1 million, or 0.1% of the total loan portfolio. There was no restructuring during the nine-month period ended September 30, 2022.
Loan Write-offs and Recoveries
September 30, 2022. There were USD 5.0 million loans written-off during the nine-month period ended September 30, 2022. CAF booked no recoveries during the nine-month period ended September 30, 2022. For the nine-month period ended September 30, 2021, a total amount of USD 23.2 million loans were written-off and CAF booked no recoveries.
Liquidity
CAF’s liquidity policy requires it to maintain sufficient liquid assets to cover at least 12 months of net cash requirements.
Net cash requirements under the policy are calculated as follows:
(+) | Scheduled loan collections |
(+) | Committed paid-in capital payments |
(-) | Scheduled debt service |
(-) | Committed disbursements |
CAF’s investment policy requires that at least 90% of its liquid assets be held in the form of investment grade instruments rated A-/A3/A- or better by a U.S. nationally-recognized statistical rating organization. The remaining portion of its liquid assets may be invested in non-investment grade instruments rated B-/Ba3/B or better by a U.S. nationally-recognized statistical rating organization. CAF’s investment policy emphasizes security and liquidity over yield.
September 30, 2022. As of September 30, 2022, CAF’s liquid assets consisted of USD 14.0 billion of cash, deposits with banks, marketable securities and other investments, of which 91.4% were invested in investment grade instruments rated A-/A3/A- or better by a U.S. nationally-recognized statistical rating organization; 36.8% of CAF’s liquid assets were invested in time deposits in financial institutions, 14.8% in commercial paper, 9.1% in corporate and financial institution bonds, 18.0% in certificates of deposit, 14.3% in U.S. Treasury Notes and 7.0% in other instruments, including deposits in cash. As of September 30, 2021, CAF’s liquid assets consisted of USD 16.9 billion of cash, deposits with banks, marketable securities and other investments, of which 88.1% were invested in investment grade instruments rated A-/A3/A- or better by a U.S. nationally-recognized statistical rating organization; 15.9% of CAF’s liquid assets were invested in time deposits in financial institutions, 27.2% in commercial paper, 11.8% in corporate and financial institution bonds, 23.1% in certificates of deposit, 12.4% in U.S. Treasury Notes and 9.6% in other instruments, including deposits in cash. As of September 30, 2021, the percentage of liquid assets invested in investment grade instruments rated A-/A3/A- or better by a U.S. nationally-recognized statistical rating organization was below CAF’s investment policy’s requirement of 90%. However, such percentage of liquid assets was 90.5% 10 business days later.
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As of September 30, 2022, CAF’s liquid assets were distributed by country as follows:
United States | 32.4 | % | ||
Japan | 9.1 | % | ||
France | 5.4 | % | ||
Chile | 7.9 | % | ||
Switzerland | 6.7 | % | ||
United Arab Emirates | 6.0 | % | ||
Canada | 5.9 | % | ||
China | 4.0 | % | ||
Qatar | 3.6 | % | ||
South Korea | 3.4 | % | ||
Kuwait | 3.1 | % | ||
Germany | 2.6 | % | ||
Supranational | 1.7 | % | ||
Australia | 1.6 | % | ||
United Kingdom | 1.4 | % | ||
Spain | 1.3 | % | ||
Ireland | 1.0 | % | ||
others | 2.9 | % |
Commitments and Contingencies
CAF enters into commitments and contingencies in the normal course of business to facilitate its business and objectives. Commitments and contingencies include:
• | credit agreements subscribed and pending disbursements, |
• | lines and letters of credit for foreign trade, |
• | equity investment agreements subscribed and |
• | partial credit guarantees. |
For further discussion of these arrangements, see Note 16 to CAF’s unaudited condensed interim financial information included elsewhere in this prospectus supplement and Note 21 to CAF’s audited financial statements included elsewhere in the accompanying prospectus.
Strategy and Capital Resources
CAF’s business strategy is to provide financing for projects, trade and investment in the shareholder countries. CAF’s management expects CAF’s assets to grow in the future, which will increase its need for additional funding. Likewise, maturing debt obligations will need to be replaced. In addition to scheduled capital increases, CAF’s management anticipates a need to increase funds raised in the international capital markets and to maintain funding through borrowings from multilateral and other financial institutions. While the substantial majority of CAF’s equity will continue to be held by full member shareholder countries, CAF intends to continue offering equity participation to associated shareholder countries through the issuances of Series “C” shares to such countries. See “Capital Structure.”
CAF intends to continue its programs to foster sustainable growth within the shareholder countries, and to increase its support for the private sector within their markets, either directly or through financial intermediaries. See “Operations of CAF.”
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CORPORACIÓN ANDINA DE FOMENTO (CAF)
Unaudited Condensed Interim
Financial Information
As of September 30, 2022 and December 31, 2021
and for the nine-month periods ended
September 30, 2022 and 2021
Contents
INDEX TO FINANCIAL STATEMENTS
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CORPORACIÓN ANDINA DE FOMENTO (CAF)
Unaudited Condensed Interim Balance Sheets
As of September 30, 2022 and December 31, 2021
(In thousands of U.S. dollars)
NOTES | September 30, 2022 | December 31, 2021 | ||||||||
ASSETS | ||||||||||
Cash and due from banks | 91,371 | 112,047 | ||||||||
Deposits with banks | 5,158,199 | 3,210,216 | ||||||||
|
|
|
| |||||||
Cash and due from banks and deposits with banks | 5,249,570 | 3,322,263 | ||||||||
|
|
|
| |||||||
Marketable securities: | ||||||||||
Trading | 3 and 14 | 8,662,900 | 12,503,067 | |||||||
Other investments | 105,487 | 292,392 | ||||||||
Loans (US$ 2,137,716 and US$ 2,389,651 at fair value as of September 30, 2022 and December 31, 2021, respectively) | 4 and 14 | 29,735,066 | 29,595,386 | |||||||
Less loan commissions, net of origination costs | 160,727 | 153,955 | ||||||||
Less allowance for loan losses | 4 | 67,105 | 76,650 | |||||||
|
|
|
| |||||||
Loans, net | 29,507,234 | 29,364,781 | ||||||||
|
|
|
| |||||||
Accrued interest and commissions receivable | 546,835 | 357,836 | ||||||||
Equity investments | 403,878 | 433,350 | ||||||||
Derivative financial instruments | 13 and 14 | 429,872 | 512,383 | |||||||
Property and equipment, net | 100,952 | 105,987 | ||||||||
Other assets | 5 | 3,819,676 | 700,291 | |||||||
|
|
|
| |||||||
TOTAL | 48,826,404 | 47,592,350 | ||||||||
|
|
|
| |||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
LIABILITIES: | ||||||||||
Deposits (US$ 104,480 and US$ 106,119 at fair value as of September 30, 2022 and December 31, 2021, respectively), net | 6 and 14 | 4,943,475 | 4,002,626 | |||||||
Commercial paper | 7 | 4,224,132 | 2,813,646 | |||||||
Borrowings from other financial institutions (US$ 629,242 and US$ 740,028 at fair value as of September 30, 2022 and December 31, 2021, respectively), net | 8 and 14 | 1,677,426 | 1,772,171 | |||||||
Bonds (US$ 19,330,130 and US$ 24,074,774 at fair value as of September 30, 2022 and December 31, 2021, respectively), net | 9 and 14 | 19,526,582 | 24,260,537 | |||||||
Accrued interest payable | 373,748 | 288,233 | ||||||||
Derivative financial instruments | 13 and 14 | 4,165,039 | 842,958 | |||||||
Accrued expenses and other liabilities | 10 | 330,345 | 312,540 | |||||||
|
|
|
| |||||||
Total liabilities | 35,240,747 | 34,292,711 | ||||||||
|
|
|
| |||||||
STOCKHOLDERS’ EQUITY: | ||||||||||
Subscribed capital | 8,113,610 | 7,716,975 | ||||||||
Less callable capital portion | 1,625,660 | 1,589,660 | ||||||||
Less capital subscriptions receivable | 976,190 | 690,940 | ||||||||
|
|
|
| |||||||
Paid-in capital | 5,511,760 | 5,436,375 | ||||||||
|
|
|
| |||||||
Additional paid-in capital | 4,227,799 | 4,091,298 | ||||||||
Reserves | 3,771,966 | 3,666,951 | ||||||||
Retained earnings | 74,132 | 105,015 | ||||||||
|
|
|
| |||||||
Total stockholders’ equity | 13,585,657 | 13,299,639 | ||||||||
|
|
|
| |||||||
TOTAL | 48,826,404 | 47,592,350 | ||||||||
|
|
|
|
See accompanying notes to Unaudited Condensed Interim Financial Information
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CORPORACIÓN ANDINA DE FOMENTO (CAF)
Unaudited Condensed Interim Statements of Comprehensive Income
For the nine-month periods ended September 30, 2022 and 2021
(In thousands of U.S. dollars)
NOTES | 2022 | 2021 | ||||||||||
Interest income: | ||||||||||||
Loans | 676,121 | 452,968 | ||||||||||
Investments and deposits with banks | 3 | 12,444 | 27,168 | |||||||||
Loan commissions | 37,521 | 32,129 | ||||||||||
|
|
|
| |||||||||
Total interest income | 726,086 | 512,265 | ||||||||||
|
|
|
| |||||||||
Interest expense: | ||||||||||||
Bonds | 386,552 | 249,684 | ||||||||||
Borrowings from other financial institutions | 32,837 | 16,934 | ||||||||||
Commercial paper | 27,524 | 3,960 | ||||||||||
Deposits | 26,848 | 3,256 | ||||||||||
Commissions | 7,637 | 8,366 | ||||||||||
|
|
|
| |||||||||
Total interest expense | 481,398 | 282,200 | ||||||||||
|
|
|
| |||||||||
Net interest income | 244,688 | 230,065 | ||||||||||
(Credit) provision for loan losses | 4 | (5,499 | ) | 8,014 | ||||||||
|
|
|
| |||||||||
Net interest income, after (credit) provision for loan losses | 250,187 | 222,051 | ||||||||||
|
|
|
| |||||||||
Non-interest income: | ||||||||||||
Other commissions | 2,467 | 1,797 | ||||||||||
Dividends and equity in earnings of investees | 8,799 | 2,725 | ||||||||||
Other income | 6,269 | 29,872 | ||||||||||
|
|
|
| |||||||||
Total non-interest income | 17,535 | 34,394 | ||||||||||
|
|
|
| |||||||||
Non-interest expenses: | ||||||||||||
Administrative expenses | 124,571 | 113,161 | ||||||||||
Other expenses | 4 | 21,779 | 11,554 | |||||||||
|
|
|
| |||||||||
Total non-interest expenses | 146,350 | 124,715 | ||||||||||
|
|
|
| |||||||||
Income before unrealized changes in fair value related to other financial instruments and contributions to Stockholders’ Special Funds | 121,372 | 131,730 | ||||||||||
Unrealized changes in fair value related to other financial instruments | 15 | (2,484 | ) | 3,105 | ||||||||
|
|
|
| |||||||||
Income before contributions to Stockholders’ Special Funds, net | 118,888 | 134,835 | ||||||||||
Contributions to Stockholders’ Special Funds | 11 | 44,756 | 17,195 | |||||||||
|
|
|
| |||||||||
Net income and total comprehensive income | 74,132 | 117,640 | ||||||||||
|
|
|
|
See accompanying notes to Unaudited Condensed Interim Financial Information
S-23
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Unaudited Condensed Interim Statements of Stockholders’ Equity
For the nine-month periods ended September 30, 2022 and 2021
(In thousands of U.S. dollars)
Reserves | ||||||||||||||||||||||||||||||||
NOTE | Paid-in capital | Additional paid-in capital | General reserve | Article N° 42 of the Constitutive Agreement | Total reserves | Retained earnings | Total stockholders’ equity | |||||||||||||||||||||||||
BALANCES AS OF��DECEMBER 31, 2020 | 5,366,050 | 3,961,900 | 2,878,929 | 548,200 | 3,427,129 | 239,822 | 12,994,901 | |||||||||||||||||||||||||
Capital increase | 114,975 | 211,554 | — | — | — | — | 326,529 | |||||||||||||||||||||||||
Capital decrease due to shares’ repurchase | 4 | (94,375 | ) | (173,650 | ) | — | — | — | — | (268,025 | ) | |||||||||||||||||||||
Net income and total comprehensive income | — | — | — | — | — | 117,640 | 117,640 | |||||||||||||||||||||||||
Appropriated for general reserve | — | — | 215,839 | — | 215,839 | (215,839 | ) | — | ||||||||||||||||||||||||
Appropriated for reserve pursuant to Article N° 42 of the Constitutive Agreement | — | — | — | 23,983 | 23,983 | (23,983 | ) | — | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
BALANCES AS OF SEPTEMBER 30, 2021 | 5,386,650 | 3,999,804 | 3,094,768 | 572,183 | 3,666,951 | 117,640 | 13,171,045 | |||||||||||||||||||||||||
|
|
|
|
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|
|
|
|
|
|
|
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| |||||||||||||||||||
BALANCES AS OF DECEMBER 31, 2021 | 5,436,375 | 4,091,298 | 3,094,768 | 572,183 | 3,666,951 | 105,015 | 13,299,639 | |||||||||||||||||||||||||
Capital increase | 176,880 | 323,252 | — | — | — | — | 500,132 | |||||||||||||||||||||||||
Capital decrease due to shares’ repurchase | 4 | (101,495 | ) | (186,751 | ) | — | — | — | — | (288,246 | ) | |||||||||||||||||||||
Net income and total comprehensive income | — | — | — | — | — | 74,132 | 74,132 | |||||||||||||||||||||||||
Appropriated for general reserve | — | — | 94,505 | — | 94,505 | (94,505 | ) | — | ||||||||||||||||||||||||
Appropriated for reserve pursuant to Article N° 42 of the Constitutive Agreement | — | — | — | 10,510 | 10,510 | (10,510 | ) | — | ||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
BALANCES AS OF SEPTEMBER 30, 2022 | 5,511,760 | 4,227,799 | 3,189,273 | 582,693 | 3,771,966 | 74,132 | 13,585,657 | |||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to Unaudited Condensed Interim Financial Information
S-24
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Unaudited Condensed Interim Statements of Cash Flows
For the nine-month periods ended September 30, 2022 and 2021
(In thousands of U.S. dollars)
NOTES | 2022 | 2021 | ||||||||||
OPERATING ACTIVITIES: | ||||||||||||
Net income and total comprehensive income | 74,132 | 117,640 | ||||||||||
Adjustments to reconcile net income to net cash provide by (used in) operating activities: | ||||||||||||
Unrealized loss on trading securities | 86,733 | 47,845 | ||||||||||
Loan commissions, net of amortization of origination costs | (15,188 | ) | (13,221 | ) | ||||||||
(Credit) Provision for loan losses | 4 | (5,499 | ) | 8,014 | ||||||||
Impairment charge for equity investments | 836 | 89 | ||||||||||
Unrealized changes in fair value related to equity investment | 10,258 | (27,345 | ) | |||||||||
Equity in earnings of investees | (4,567 | ) | (57 | ) | ||||||||
Amortization of deferred charges | 3,819 | 3,751 | ||||||||||
Depreciation of property and equipment | 6,756 | 6,646 | ||||||||||
Provision for employees’ severance benefits | 11,066 | 9,892 | ||||||||||
Provision for employees’ savings plan | 565 | 621 | ||||||||||
Unrealized changes in fair value related to other financial instruments | 15 | 2,484 | (3,105 | ) | ||||||||
Net changes in operating assets and liabilities: | ||||||||||||
Trading securities, net | 3,897,531 | (2,587,156 | ) | |||||||||
Accrued interest and commissions receivable | (188,999 | ) | 28,751 | |||||||||
Other assets | (8,922 | ) | (11,258 | ) | ||||||||
Accrued interest payable | 85,515 | (38,607 | ) | |||||||||
Severance benefits paid or advanced | (10,502 | ) | (7,624 | ) | ||||||||
Employees’ savings plan paid or advanced | (2,420 | ) | (581 | ) | ||||||||
Accrued expenses and other liabilities | 2,772 | (50,229 | ) | |||||||||
|
|
|
| |||||||||
Total adjustments and net changes in operating assets and liabilities | 3,872,238 | (2,633,574 | ) | |||||||||
|
|
|
| |||||||||
Net cash provided by (used in) operating activities | 3,946,370 | (2,515,934 | ) | |||||||||
|
|
|
| |||||||||
INVESTING ACTIVITIES: | ||||||||||||
Purchases of other investments | (367,135 | ) | (1,804,200 | ) | ||||||||
Maturities of other investments | 554,040 | 2,121,246 | ||||||||||
Loan origination and principal collections, net | 4 | (747,340 | ) | 231,103 | ||||||||
Equity investments, net | 22,945 | 12,560 | ||||||||||
Property and equipment, net | (1,721 | ) | (961 | ) | ||||||||
|
|
|
| |||||||||
Net cash (used in) provided by investing activities | (539,211 | ) | 559,748 | |||||||||
|
|
|
| |||||||||
FINANCING ACTIVITIES: | ||||||||||||
Net increase in deposits | 6 | 937,489 | 449,119 | |||||||||
Proceeds from commercial paper | 7 | 38,472,258 | 19,418,921 | |||||||||
Repayment of commercial paper | 7 | (37,061,774 | ) | (19,020,775 | ) | |||||||
Net decrease in derivative-related collateral | (3,247,549 | ) | (120,310 | ) | ||||||||
Proceeds from issuance of bonds | 9 | 2,731,088 | 3,476,626 | |||||||||
Repayment of bonds | 9 | (3,837,931 | ) | (2,819,846 | ) | |||||||
Proceeds from borrowings from other financial institutions | 8 | 162,885 | 191,649 | |||||||||
Repayment of borrowings from other financial institutions | 8 | (136,450 | ) | (102,860 | ) | |||||||
Proceeds from issuance of shares | 500,132 | 326,529 | ||||||||||
|
|
|
| |||||||||
Net cash (used in) provided by financing activities | (1,479,852 | ) | 1,799,053 | |||||||||
|
|
|
| |||||||||
NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKS AND DEPOSITS WITH BANKS | 1,927,307 | (157,133 | ) | |||||||||
CASH AND DUE FROM BANKS AND DEPOSITS WITH BANKS AT BEGINNING OF THE PERIOD | 3,322,263 | 2,948,290 | ||||||||||
|
|
|
| |||||||||
CASH AND DUE FROM BANKS AND DEPOSITS WITH BANKS AT END OF THE PERIOD | 5,249,570 | 2,791,157 | ||||||||||
|
|
|
| |||||||||
SUPPLEMENTAL DISCLOSURE: | ||||||||||||
Interest paid during the period | 413,115 | 308,144 | ||||||||||
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| |||||||||
NONCASH FINANCING ACTIVITIES: | ||||||||||||
Principal collections — Loans | 4 | 288,246 | 268,025 | |||||||||
|
|
|
| |||||||||
Capital decrease | 4 | (288,246 | ) | (268,025 | ) | |||||||
|
|
|
| |||||||||
Change in derivative instruments assets | 82,511 | 1,045,805 | ||||||||||
|
|
|
| |||||||||
Change in derivative instruments liabilities | 3,322,081 | 257,317 | ||||||||||
|
|
|
|
See accompanying notes to Unaudited Condensed Interim Financial Information
S-25
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of September 30, 2022, and December 31, 2021
and for the nine-month periods ended September 30, 2022, and 2021
(In thousands of U.S. dollars)
1. | ORIGIN |
Business description – Corporación Andina de Fomento (CAF) began its operations on June 8, 1970; and was established under public international law which abides by the provisions set forth in its Constitutive Agreement. Series “A” and “B” stockholder countries are: Argentina, Bolivia, Brazil, Colombia, Ecuador, El Salvador, Panama, Paraguay, Peru, Trinidad and Tobago, Uruguay, and Venezuela. Series “C” stockholder countries are: Barbados, Chile, Costa Rica, Dominican Republic, Jamaica, Mexico, Portugal, and Spain. In addition, there are 13 banks which are Series “B” stockholders.
CAF is headquartered in Caracas, Venezuela and has offices in Asuncion, Paraguay; Bogota, Colombia; Brasilia, Brazil; Buenos Aires, Argentina; Mexico City, Mexico; Panama City, Panama; La Paz, Bolivia; Lima, Peru; Madrid, Spain; Montevideo, Uruguay; Port of Spain, Trinidad and Tobago and Quito, Ecuador.
CAF promotes a sustainable development model through credit, non-refundable resources, and support in the technical and financial structuring of projects in the public and private sectors of Latin America.
CAF offers financial and related services to the governments of its stockholder countries, as well as their public and private institutions, corporations, and joint ventures. CAF’s principal activity is to provide short, medium, and long-term loans to finance projects, working capital, trade activities and to undertake feasibility studies for investment opportunities in stockholder countries. Furthermore, CAF manages and supervises third-party cooperation funds owned and sponsored by other countries and organizations, destined to finance programs agreed upon with donor countries and organizations which are in line with CAF’s policies and strategies.
CAF raises funds to finance its operations from sources both within and outside its stockholder countries.
COVID-19
In March 2020, the World Health Organization declared the novel coronavirus (COVID-19) a global pandemic, which has generated high volatility in global capital markets with an impact on equity investments and the mark-to-market value of marketable securities.
To date, CAF has maintained the continuity of its operations, and the demand for loans from its stockholder countries has increased; notwithstanding, decreases or increases have been observed in external risk ratings for most of our borrowers. COVID-19 has had not material effects on the financial position of CAF as of September 30, 2022 and on the results of operations and cash flows for the nine-month period then ended.
2. | BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES |
Financial statement presentation – The condensed interim financial information as of September 30, 2022, and December 31, 2021, and for the nine-month periods ended September 30, 2022 and 2021 is unaudited and has been prepared, in accordance with accounting principles generally accepted in the United States of America. In the opinion of management, such condensed interim financial information includes all adjustments, consisting of normal recurring adjustments, necessary for the fair presentation of the results of
S-26
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of September 30, 2022, and December 31, 2021
and for the nine-month periods ended September 30, 2022, and 2021
(In thousands of U.S. dollars)
the interim periods. The results of operations for the nine-month period ended September 30, 2022 are not necessarily an indication of the results to be expected for the full year 2022.
This condensed interim financial information should be read in conjunction with CAF’s audited financial statements as of and for the years ended December 31, 2021, 2020 and 2019 and the notes thereto (“audited financial statements”).
For a detailed discussion about CAF´s significant accounting policies, refer to Note 2 of the audited financial statements.
Recent accounting pronouncements applicable
ASU 2020-04, Reference Rate Reform
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). The ASU provides optional expedients and exceptions, for contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments in this ASU do not apply to contract modifications made or other transactions entered after December 31, 2022. In January 2021, the FASB issued amendments in ASU 2021-01 to the expedients and exceptions in Topic 848 to capture the incremental consequences of the scope clarification and tailor the existing guidance to derivative instruments affected by the discounting transition. Currently, CAF is evaluating the impact of both ASUs and estimates that there will be no material effects in the financial statements since the rates will be offset between financial assets and liabilities.
Libor Replacement
The replacement of the LIBOR rates with a new reference rate or rates is an industry risk due to the implications it has on the assets as well as the liabilities of financial institutions. In that regard, CAF has been closely following the recent developments and announcements from groups and organizations that are most closely involved with the phasing out of the LIBOR rate that affect the loan and derivatives markets, including the International Swaps and Derivatives Association (ISDA) and its recent publication of the ISDA 2020 IBOR Fallbacks Protocol, to which CAF has adhered in January 2021. In addition, CAF has established an interdepartmental task force in charge of preparing the institution for the change in reference rates, including measures such as the incorporation of fallback provisions on loans to mitigate any possible impact LIBOR may have. This task force in coordination with management recommended and approved that starting January 1, 2022, all loans originated will be made in the reference rate Term SOFR. New financial liabilities will also be hedged to SOFR. Legacy loans that are referenced to LIBOR rate will be converted after June 2023 when LIBOR rate ceases to be representative. It is for this reason that we expected the LIBOR transition to occur smoothly.
If SOFR or another rate does not achieve wide acceptance as the alternative to LIBOR, there likely will be disruption in financial markets. In the event that SOFR or another reference rate is widely accepted, risks will remain related to outstanding loans, borrowings, derivatives and other instruments using LIBOR related to transitioning those instruments to a new reference rate and the corresponding value transfer that may occur in connection with that transition, as the new reference rate will not exactly mimic LIBOR.
S-27
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of September 30, 2022, and December 31, 2021
and for the nine-month periods ended September 30, 2022, and 2021
(In thousands of U.S. dollars)
3. | MARKETABLE SECURITIES |
Trading
A summary of trading securities follows:
September 30, 2022 | December 31, 2021 | |||||||||||||||
Amount | Average maturity (years) | Amount | Average maturity (years) | |||||||||||||
U.S. Treasury Notes | 2,005,561 | 1.75 | 2,219,711 | 1.60 | ||||||||||||
|
|
|
| |||||||||||||
Non-U.S. governments and government entities bonds | 358,836 | 1.06 | 556,230 | 0.80 | ||||||||||||
|
|
|
| |||||||||||||
Financial institutions and corporate securities: | ||||||||||||||||
Commercial paper | 2,073,233 | 0.24 | 3,861,129 | 0.14 | ||||||||||||
Certificates of deposits(1) | 2,517,251 | 0.53 | 3,284,428 | 0.24 | ||||||||||||
Bonds | 1,282,083 | 1.72 | 1,941,602 | 1.93 | ||||||||||||
Collateralized mortgage obligation | 253,240 | 5.31 | 290,805 | 5.95 | ||||||||||||
Liquidity funds(2) | 172,696 | 1.00 | 349,162 | 1.00 | ||||||||||||
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|
|
| |||||||||||||
6,298,503 | 0.88 | 9,727,126 | 0.73 | |||||||||||||
|
|
|
| |||||||||||||
Trading | 8,662,900 | 1.09 | 12,503,067 | 0.89 | ||||||||||||
|
|
|
|
(1) | Each certificate of deposit bears a maturity date and specified fixed interest rate. It also is held through The Depository Trust Company (DTC) and has a CUSIP number, which is a code that identifies a financial security and facilitates trading. |
(2) | The liquidity funds are comprised of short-term (less than one year) securities representing high-quality liquid debt and monetary instruments. |
The fair value of trading securities includes net unrealized loss of US$ 102,334 and US$ 15,600, as of September 30, 2022 and December 31, 2021, respectively.
For the nine-month period ended September 30, 2022 and 2021, Interest income—Investments and deposits with banks includes interest income for US$ 115,306 and US$ 49,334, respectively, and loss on the mark-to-market valuations for US$ 102,862 and US$ 22,166, respectively. The fluctuation in Interest income—Investments and deposits with banks is mainly due to the increase of the benchmark interest rates since the start of 2022 due to high inflation expectations and the increase of the short-term interest rates by the U.S. Federal Reserve which affected the mark-to-market valuations of CAF´s trading securities during the nine-month period ended September 30, 2022, and during the same corresponding period in 2021, the fluctuation was related to reductions of benchmark interest rates and high volatility in global capital markets and asset valuation as a result of the COVID-19 pandemic.
CAF places its short-term investments mainly in high grade financial institutions and corporate securities. CAF has conservative investment guidelines that limit the amount of credit risk exposure, considering among other factors, limits as to credit ratings, limits as to duration exposure, specific allocations by type of investment instruments and limits across sector and currency allocation. As of September 30, 2022 and
S-28
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of September 30, 2022, and December 31, 2021
and for the nine-month periods ended September 30, 2022, and 2021
(In thousands of U.S. dollars)
December 31, 2021, CAF does not have any significant concentrations of credit risk according to its investment guidelines. Non-US dollar-denominated securities included in marketable securities amounted to the equivalent of US$ 37,297 and US$ 307,437 as of September 30, 2022 and December 31, 2021, respectively.
Maturity of marketable securities are as follows:
September 30, 2022 | December 31, 2021 | |||||||
Remaining maturities: | ||||||||
Less than one year | 5,715,239 | 8,891,515 | ||||||
Between one and two years | 2,116,802 | 2,351,677 | ||||||
Between two and three years | 488,324 | 500,274 | ||||||
Between three and four years | 179,938 | 407,059 | ||||||
Between four and five years | 75,115 | 235,344 | ||||||
Over five years | 87,482 | 117,198 | ||||||
|
|
|
| |||||
8,662,900 | 12,503,067 | |||||||
|
|
|
|
4. | LOANS |
Loans include short, medium, and long-term loans to finance projects, working capital and trade activities. The majority of the loans are to Series “A” and “B” stockholder countries, or to private institutions or companies domiciled in those countries. Loans by country are summarized as follows:
September 30, 2022 | December 31, 2021 | |||||||
Stockholder country: | ||||||||
Argentina | 3,874,056 | 3,842,317 | ||||||
Barbados | 165,510 | 172,683 | ||||||
Bolivia | 3,031,588 | 2,752,463 | ||||||
Brazil | 2,302,919 | 2,698,038 | ||||||
Chile | 143,364 | 304,187 | ||||||
Colombia | 3,811,933 | 3,403,385 | ||||||
Costa Rica | 538,104 | 547,145 | ||||||
Dominican Republic | 406,018 | 110,789 | ||||||
Ecuador | 4,283,824 | 4,201,415 | ||||||
Mexico | 620,000 | 825,000 | ||||||
Panama | 2,766,937 | 2,562,057 | ||||||
Paraguay | 1,945,539 | 1,511,665 | ||||||
Peru | 1,380,043 | 1,743,908 | ||||||
Trinidad & Tobago | 1,165,083 | 1,163,978 | ||||||
Uruguay | 987,235 | 903,243 | ||||||
Venezuela | 2,652,660 | 2,871,509 | ||||||
|
|
|
| |||||
Total | 30,074,813 | 29,613,782 | ||||||
Fair value adjustments | (339,747 | ) | (18,396 | ) | ||||
|
|
|
| |||||
Loans | 29,735,066 | 29,595,386 | ||||||
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S-29
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of September 30, 2022, and December 31, 2021
and for the nine-month periods ended September 30, 2022, and 2021
(In thousands of U.S. dollars)
Fair value adjustments of loans represent mainly adjustments to the amount of loans for which the fair value option is elected.
As of September 30, 2022 and December 31, 2021, loans denominated in currencies other than U.S. dollar were granted for an equivalent of US$ 323,706 and US$ 170,401, respectively, mainly in Colombian pesos, Brazilian reales, and Uruguayan pesos. All these loans are hedged with Borrowings from other financial institution and Bonds issued in the same currency. As of September 30, 2022 and December 31, 2021, fixed interest rate loans amounted to US$ 2,238,440 and US$ 2,321,999, respectively.
There has been an increase in demand for loans from our stockholder countries as a result of COVID-19 pandemic. In that regard, as of September 30, 2022 and December 31, 2021, CAF has approved emergency credit lines aggregating up to US$ 9.7 billion, available to CAF stockholder countries, of which disbursement for US$ 4.3 billion have been made as of September 30, 2022 and US$ 3.8 billion as of December 31, 2021. The emergency credit lines are aimed at enhancing a prompt and appropriate response in stockholder countries and mitigating the adverse consequences from the pandemic.
Loans classified by sector borrowers and the weighted average yield of the loan portfolio is shown below:
September 30, 2022 | December 31, 2021 | |||||||||||||||
Amount | Weighted average yield (%) | Amount | Weighted average yield (%) | |||||||||||||
Public sector | 29,069,793 | 4.63 | 27,723,931 | 2.25 | ||||||||||||
Private sector | 1,005,020 | 5.28 | 1,889,851 | 1.98 | ||||||||||||
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| |||||||||
30,074,813 | 4.66 | 29,613,782 | 2.23 | |||||||||||||
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Loans by industry segments are as follows:
September 30, 2022 | December 31, 2021 | |||||||||||||||
Amount | % | Amount | % | |||||||||||||
Social and other infrastructure programs | 14,646,287 | 49 | 12,496,820 | 42 | ||||||||||||
Transport, warehousing and communications | 8,296,656 | 28 | 8,326,436 | 28 | ||||||||||||
Electricity, gas and water supply | 5,670,427 | 19 | 6,025,830 | 20 | ||||||||||||
Financial services - Commercial banks | 749,230 | 2 | 1,230,670 | 4 | ||||||||||||
Financial services - Development banks | 567,465 | 1 | 1,367,969 | 5 | ||||||||||||
Agriculture, hunting and forestry | 53,109 | — | 62,104 | — | ||||||||||||
Manufacturing industry | 27,240 | — | 32,291 | — | ||||||||||||
Others | 64,399 | 1 | 71,662 | 1 | ||||||||||||
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| |||||||||
30,074,813 | 100 | 29,613,782 | 100 | |||||||||||||
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S-30
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of September 30, 2022, and December 31, 2021
and for the nine-month periods ended September 30, 2022, and 2021
(In thousands of U.S. dollars)
Loans mature as follows:
September 30, 2022 | December 31, 2021 | |||||||
Remaining maturities: | ||||||||
Less than one year | 3,583,431 | 5,176,788 | ||||||
Between one and two years | 2,941,242 | 2,721,602 | ||||||
Between two and three years | 2,937,235 | 2,818,766 | ||||||
Between three and four years | 2,712,604 | 2,811,208 | ||||||
Between four and five years | 2,825,696 | 2,575,262 | ||||||
Over five years | 15,074,605 | 13,510,156 | ||||||
|
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| |||||
30,074,813 | 29,613,782 | |||||||
|
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|
|
CAF maintains an internal risk rating system to evaluate the quality of the non-sovereign loans, which identifies, through a standardized rating and review parameters, those risks related to credit transactions in order to determine an internal risk rating classification designed by CAF. For purpose of determining the allowance for loan losses of sovereign loans as of September 30, 2022 and December 31, 2021 rating assigned by external agencies are used.
The credit quality of the sovereign loans of estimating the allowance for credit losses is based on the individual long-term foreign currency debt rating applicable to the borrower countries, which is determined using the average rating of three recognized international credit rating agencies. The credit quality by year of origination and taking the Moody’s rating as a reference as of September 30, 2022 is as follows:
Credit Rating | Year of origination | |||||||||||||||||||||||||||||||
Country | 2022 | 2021 | 2020 | 2019 | 2018 | Prior | Total | |||||||||||||||||||||||||
Argentina | Ca | 301,919 | 531,065 | 530,475 | 9,396 | 502,119 | 1,947,394 | 3,822,368 | ||||||||||||||||||||||||
Barbados | Caa1 | — | 12,000 | 100,000 | 195 | — | 53,315 | 165,510 | ||||||||||||||||||||||||
Bolivia | B2 | 530,000 | 350,000 | 23,810 | 221,852 | 77,370 | 1,811,306 | 3,014,338 | ||||||||||||||||||||||||
Brazil | Ba2 | 9,753 | — | 382,972 | 309,456 | 304,103 | 1,039,790 | 2,046,074 | ||||||||||||||||||||||||
Colombia | Baa2 | 600,000 | 500,000 | 350,000 | 500,502 | 300,000 | 902,519 | 3,153,021 | ||||||||||||||||||||||||
Costa Rica | B2 | — | — | 500,000 | — | — | 22,986 | 522,986 | ||||||||||||||||||||||||
Dominican Republic | Ba3 | 300,000 | 10,947 | — | — | — | 95,071 | 406,018 | ||||||||||||||||||||||||
Ecuador | Caa3 | 135,000 | 600,305 | 721,789 | 547,634 | 483,591 | 1,680,837 | 4,169,156 | ||||||||||||||||||||||||
Mexico | Baa2 | 300,000 | — | 300,000 | — | — | — | 600,000 | ||||||||||||||||||||||||
Panama | Baa2 | 320,000 | 354,000 | 385,714 | 344,704 | 4,017 | 1,006,545 | 2,414,980 | ||||||||||||||||||||||||
Paraguay | Ba1 | 205,121 | 250,000 | 394,470 | 111,966 | 694,447 | 264,220 | 1,920,224 | ||||||||||||||||||||||||
Peru | Baa1 | — | 391,875 | — | 250,000 | — | 542,220 | 1,184,095 | ||||||||||||||||||||||||
Trinidad & Tobago | Ba2 | — | 175,000 | 323,416 | 200,000 | 244,444 | 222,222 | 1,165,082 | ||||||||||||||||||||||||
Uruguay | Baa2 | 100,000 | 300,000 | 47,619 | — | 17,648 | 392,302 | 857,569 | ||||||||||||||||||||||||
Venezuela | C | — | — | — | 500,000 | — | 2,152,661 | 2,652,661 | ||||||||||||||||||||||||
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2,801,793 | 3,475,192 | 4,060,265 | 2,995,705 | 2,627,739 | 12,133,388 | 28,094,082 | ||||||||||||||||||||||||||
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S-31
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of September 30, 2022, and December 31, 2021
and for the nine-month periods ended September 30, 2022, and 2021
(In thousands of U.S. dollars)
The credit quality of the non-sovereign loan portfolio by year of origination, as represented by the internal credit risk classification as of September 30, 2022 is as follows:
Year of origination | ||||||||||||||||||||||||||||
Credit Rating | 2022 | 2021 | 2020 | 2019 | 2018 | Prior | Total | |||||||||||||||||||||
Satisfactory - outstanding | 100,000 | — | — | — | — | 116,739 | 216,739 | |||||||||||||||||||||
Satisfactory - very good | 522,562 | 30,000 | — | — | — | 40,002 | 592,564 | |||||||||||||||||||||
Satisfactory - adequate | 102,074 | 93,456 | 53,091 | 52,267 | 33,661 | 196,623 | 531,172 | |||||||||||||||||||||
Watch | 115,250 | 11,808 | 100,000 | 83,352 | 12,000 | 65,182 | 387,592 | |||||||||||||||||||||
Special mention | 30,000 | — | — | — | 60,418 | — | 90,418 | |||||||||||||||||||||
Doubtful | — | — | — | — | — | 82,925 | 82,925 | |||||||||||||||||||||
Sub-standard | — | — | — | — | 20,000 | 46,254 | 66,254 | |||||||||||||||||||||
Loss | — | — | — | — | — | 13,067 | 13,067 | |||||||||||||||||||||
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869,886 | 135,264 | 153,091 | 135,619 | 126,079 | 560,792 | 1,980,731 | ||||||||||||||||||||||
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The internal and external ratings have been updated as of September 30, 2022.
Loan portfolio quality
The loan portfolio quality indicators and the related amounts are presented below:
September 30, 2022 | September 30, 2021 | |||||||
During the period CAF recorded the following transactions: | ||||||||
Loans written-off | 5,000 | 23,235 | ||||||
Purchases of loan portfolio | — | — | ||||||
Sales of loan portfolio | 37,500 | — | ||||||
September 30, 2022 | December 31, 2021 | |||||||
CAF presented the following amounts and quality indicators as of the end of the period / year: | ||||||||
Non-accrual loans | 102,925 | 112,059 | ||||||
Troubled debt restructured | 25,073 | 29,206 | ||||||
Overdue accrual loans | — | — | ||||||
Allowance for loan losses as a percentage of loan portfolio | 0.23 | % | 0.26 | % | ||||
Non-accrual loans as a percentage of loan portfolio | 0.35 | % | 0.38 | % | ||||
Overdue loan principal as a percentage of loan portfolio | 0.00 | % | 0.00 | % |
For the nine-month period ended September 30, 2022 and for the year ended December 31, 2021, there was not restructured loans.
As of September 30, 2022 and December 31, 2021, the total principal amount of non-accrual loans are related to private sector borrowers (non-sovereign loans) which present 2,292 days and 2,019 days overdue, respectively. During the nine-month periods ended September 30, 2022 and 2021, there were no interest income recognized for non-accrual loans. The allowance of loan losses for loans in non-accrual status amount to US$ 18,603 as of September 30, 2022 and December 31, 2021.
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CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of September 30, 2022, and December 31, 2021
and for the nine-month periods ended September 30, 2022, and 2021
(In thousands of U.S. dollars)
On March 31, 2020, CAF implemented the Support Program for the Liquidity Management in Exceptional Situations (the “Program”) approved by CAF’s Shareholders Assembly on March 3, 2020. The Program allows CAF to repurchase the shares of a stockholder country that fulfills the requirements of the Program and apply the proceeds to that country’s outstanding loans and interest. Pursuant to the Program, CAF notified Venezuela that it fulfills the requirements. Since inception of the Program to September 30, 2022, CAF repurchased a total of 95,956 shares totaling US$ 1,362,575 and applied that amount to repay due and overdue amounts of principal and interest and deducting the amount of paid-in capital and additional paid-in capital for US$ 479,780 and US$ 882,795, respectively. For the nine-month period ended September 30, 2022, CAF repurchased an additional 20,299 shares totaling US$ 288,246 and applied that amount to repay due and overdue amounts of principal and interest and deducting the amount of paid-in capital and additional paid-in capital for US$ 101,495 and US$ 186,751, respectively. Since the inception of the Program to December 31, 2021, CAF repurchased 75,657 shares totaling US$ 1,074,329 deducting the amount of paid-in capital and additional paid-in capital for US$ 378,285 and US$ 696,044, respectively. As a result of the repurchases, as of November 11, 2022, Venezuela is current with its loans with CAF.
A/B Loans
CAF only assumes the credit risk for the portion of its participations of the loan. As of September 30, 2022 and December 31, 2021, CAF had loans of this nature amounting to US$ 376,348 and US$ 103,675, respectively, whereas other financial institutions provided funds for US$ 297,707 and US$ 46,215, respectively.
Allowance for Loan Losses
The allowance for credit losses is maintained at a level CAF believes to be adequate to absorb expected lifetime losses over the contractual life of the loan portfolio and consider available information relevant to assessing the collectability of cash flows including a combination of internal and external information relating to past events, current conditions, and reasonable and supportable forecasts.
Changes in the allowance and the balance for loan losses over the outstanding amounts, individually and collectively evaluated, are presented below:
For the nine-months period ended September 30, | ||||||||||||||||||||||||
2022 | 2021 | |||||||||||||||||||||||
Credit risk | Credit risk | |||||||||||||||||||||||
Sovereign | Non- sovereign | Total | Sovereign | Non- sovereign | Total | |||||||||||||||||||
Balances at beginning of period | — | 76,650 | 76,650 | — | 95,015 | 95,015 | ||||||||||||||||||
(Credit) Provision for loan losses | — | (5,499 | ) | (5,499 | ) | — | 8,014 | 8,014 | ||||||||||||||||
Loan written-off | — | (5,000 | ) | (5,000 | ) | — | (23,235 | ) | (23,235 | ) | ||||||||||||||
Recoveries | — | 954 | 954 | — | — | — | ||||||||||||||||||
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Balances at end of period | — | 67,105 | 67,105 | — | 79,794 | 79,794 | ||||||||||||||||||
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S-33
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of September 30, 2022, and December 31, 2021
and for the nine-month periods ended September 30, 2022, and 2021
(In thousands of U.S. dollars)
Changes in the provision for contingencies and the off-balance-sheet undisbursed loan commitments and financial guarantees, individually and collectively evaluated, are presented below:
For the nine-months period ended September 30, | ||||||||||||||||||||||||
2022 | 2021 | |||||||||||||||||||||||
Credit risk | Credit risk | |||||||||||||||||||||||
Sovereign | Non- sovereign | Total | Sovereign | Non- sovereign | Total | |||||||||||||||||||
Balances at beginning of period | — | 15,202 | 15,202 | — | 14,833 | 14,833 | ||||||||||||||||||
Provision for contingencies | — | 202 | 202 | — | 486 | 486 | ||||||||||||||||||
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Balances at end of period | — | 15,404 | 15,404 | — | 15,319 | 15,319 | ||||||||||||||||||
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Provision for contingencies and the off-balance-sheet undisbursed loan commitments and financial guarantees are included in the statements of comprehensive income as part of other expenses.
5. | OTHER ASSETS |
A summary of other assets follows:
September 30, 2022 | December 31, 2021 | |||||||
Derivative related collateral | 3,750,959 | 645,632 | ||||||
Intangible assets, net of accumulated amortization of US$ 9,074 and US$ 8,381, respectively | 28,127 | 25,386 | ||||||
Receivable from investment securities sold | 12,973 | 4,017 | ||||||
Other | 27,617 | 25,256 | ||||||
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3,819,676 | 700,291 | |||||||
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6. | DEPOSITS |
A summary of deposits follows:
September 30, 2022 | December 31, 2021 | |||||||
Demand deposits | 78,135 | 83,157 | ||||||
Time deposits: | ||||||||
Less than one year | 4,864,949 | 3,919,679 | ||||||
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4,943,084 | 4,002,836 | |||||||
Fair value adjustments | 391 | (210 | ) | |||||
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Carrying value of deposits | 4,943,475 | 4,002,626 | ||||||
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As of September 30, 2022 and December 31, 2021, the weighted average interest rate was 1.02% and 0.11%, respectively. Deposits are issued for amounts equal to or more than US$ 100. Total deposits
S-34
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of September 30, 2022, and December 31, 2021
and for the nine-month periods ended September 30, 2022, and 2021
(In thousands of U.S. dollars)
denominated in currencies other than the U.S. dollar to an equivalent of US$ 508,368 and US$ 259,991 as of September 30, 2022 and December 31, 2021, respectively.
7. | COMMERCIAL PAPER |
As of September 30, 2022 and December 31, 2021, the outstanding amount of commercial paper issued by CAF, amounts to US$ 4,224,132 and US$ 2,813,646, respectively, of which matures in 2023 and 2022. As of September 30, 2022 and December 31, 2021, the weighted average interest rate was 1.34% and 0.23%, respectively.
8. | BORROWINGS FROM OTHER FINANCIAL INSTITUTIONS |
A summary of borrowings from other financial institutions by currency follows:
September 30, 2022 | December 31, 2021 | |||||||
U.S. dollars | 1,174,429 | 1,179,623 | ||||||
Euros | 623,952 | 590,809 | ||||||
Colombian Pesos | 29,005 | 30,764 | ||||||
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1,827,386 | 1,801,196 | |||||||
Fair value adjustments | (149,508 | ) | (28,328 | ) | ||||
Less debt issuance costs | 452 | 697 | ||||||
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Carrying value of borrowings from other financial institutions | 1,677,426 | 1,772,171 | ||||||
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As of September 30, 2022 and December 31, 2021, the fixed interest-bearing borrowings amounted to US$ 434,073 and US$ 410,531, respectively. As of September 30, 2022 and December 31, 2021, the weighted average interest rate after considering the impact of interest rate swaps was 2.62% and 1.52%, respectively.
Borrowings from other financial institutions, by remaining maturities, are summarized below:
September 30, 2022 | December 31, 2021 | |||||||
Less than one year | 398,248 | 178,039 | ||||||
Between one and two years | 196,932 | 388,211 | ||||||
Between two and three years | 219,433 | 248,616 | ||||||
Between three and four years | 175,159 | 191,271 | ||||||
Between four and five years | 174,063 | 169,039 | ||||||
Over five years | 663,551 | 626,020 | ||||||
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1,827,386 | 1,801,196 | |||||||
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The agreements on some borrowing from other financial institutions agreements contains covenants requiring the use of the proceeds for specific purposes or projects.
S-35
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of September 30, 2022, and December 31, 2021
and for the nine-month periods ended September 30, 2022, and 2021
(In thousands of U.S. dollars)
As of September 30, 2022 and December 31, 2021, there were unused term credit facilities amounting to US$ 2,042,094 and US$ 1,899,056, respectively.
9. | BONDS |
A summary of outstanding bonds follows:
September 30, 2022 | December 31, 2021 | |||||||||||||||||||||||
At original exchange rate | At spot exchange rate | Weighted average cost, after swaps (%) (period end) | At original exchange rate | At spot exchange rate | Weighted average cost, after swaps (%) (year-end) | |||||||||||||||||||
U.S. dollars | 6,535,045 | 6,535,045 | 2.92 | 8,428,409 | 8,428,409 | 1.35 | ||||||||||||||||||
Euro | 8,403,601 | 6,976,674 | 3.83 | 8,637,076 | 8,274,796 | 1.25 | ||||||||||||||||||
Swiss francs | 2,669,965 | 2,560,852 | 4.26 | 2,203,076 | 2,297,342 | 1.42 | ||||||||||||||||||
Japanese yen | 1,467,415 | 1,081,025 | 4.31 | 1,404,689 | 1,297,358 | 1.28 | ||||||||||||||||||
Mexican pesos | 1,078,762 | 1,088,494 | 4.05 | 574,643 | 569,250 | 1.41 | ||||||||||||||||||
Australian dollars | 1,072,849 | 876,471 | 3.97 | 1,026,690 | 945,521 | 1.58 | ||||||||||||||||||
Norwegian kroner | 694,695 | 441,055 | 3.83 | 694,695 | 544,687 | 1.24 | ||||||||||||||||||
Hong Kong dollars | 584,332 | 577,714 | 4.77 | 635,865 | 632,757 | 1.73 | ||||||||||||||||||
Colombian pesos | 334,458 | 218,957 | 3.03 | 334,464 | 248,243 | 1.53 | ||||||||||||||||||
Uruguayan pesos | 286,609 | 273,447 | 4.18 | 280,304 | 250,040 | 1.27 | ||||||||||||||||||
Brazilian Real | 201,662 | 197,732 | 3.25 | 201,662 | 191,590 | 0.70 | ||||||||||||||||||
Indonesian Rupee | 75,000 | 67,912 | 4.28 | 75,000 | 72,467 | 0.46 | ||||||||||||||||||
Canadian dollars | 30,395 | 28,954 | 4.63 | 30,395 | 31,385 | 2.50 | ||||||||||||||||||
New Zealand Dollar | 28,758 | 24,154 | 3.13 | 13,651 | 14,554 | 1.66 | ||||||||||||||||||
Kazakhstan Tenge | 15,082 | 13,035 | 3.24 | 15,082 | 14,295 | 1.21 | ||||||||||||||||||
Indian Rupee | — | — | — | 31,891 | 28,729 | 2.71 | ||||||||||||||||||
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23,478,628 | 20,961,521 | 24,587,592 | 23,841,423 | |||||||||||||||||||||
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Fair value adjustments | (1,430,962 | ) | 425,217 | |||||||||||||||||||||
Less debt issuance costs | 3,977 | 6,103 | ||||||||||||||||||||||
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Carrying value of bonds | 19,526,582 | 24,260,537 | ||||||||||||||||||||||
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A summary of the bonds issued, by remaining maturities at original exchange rate, follows:
September 30, 2022 | December 31, 2021 | |||||||
Remaining maturities: | ||||||||
Less than one year | 3,630,400 | 3,944,492 | ||||||
Between one and two years | 3,528,599 | 4,557,150 | ||||||
Between two and three years | 4,854,336 | 3,245,067 | ||||||
Between three and four years | 2,825,644 | 4,256,759 | ||||||
Between four and five years | 3,509,309 | 3,787,884 | ||||||
Over five years | 5,130,340 | 4,796,240 | ||||||
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23,478,628 | 24,587,592 | |||||||
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S-36
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of September 30, 2022, and December 31, 2021
and for the nine-month periods ended September 30, 2022, and 2021
(In thousands of U.S. dollars)
As of September 30, 2022 and December 31, 2021, fixed interest rate bonds amounted to US$ 22,999,195 and US$ 24,108,665, respectively, of which US$ 16,956,700 and US$ 16,173,655, respectively, are denominated in currencies other than U.S. dollar.
The company has not issued floating rate notes linked to LIBOR since 2015 . All outstanding FRN linked to LIBOR (totaling US$ 100 million) will reset before the first half of 2023. On June 15, 2021, CAF issued its first FRN that is linked to the SOFR for US$ 400 million, an important step in the LIBOR transition process.
For the nine-months ended September 30, 2022 and 2021, there were no bonds repurchased.
10. | ACCRUED EXPENSES AND OTHER LIABILITIES |
A summary of accrued expenses and other liabilities follows:
September 30, 2022 | December 31, 2021 | |||||||
Payable for investment securities purchased | 175,982 | 17,437 | ||||||
Employees’ severance benefits and savings plan | 105,821 | 104,083 | ||||||
Contributions to Stockholders´ Special Funds (Note 11) | 22,212 | 12,467 | ||||||
Provision for contingencies | 15,404 | 15,202 | ||||||
Derivative-related collateral | 6,550 | 148,773 | ||||||
Other | 4,376 | 14,578 | ||||||
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330,345 | 312,540 | |||||||
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11. | CONTRIBUTIONS TO STOCKHOLDERS’ SPECIAL FUNDS |
In March 2022, the Stockholders’ Assembly of CAF approved the contribution up to a maximum amount of US$ 89,000 to some stockholders’ special funds for 2022. Subsequently, during the nine-month period ended September 30, 2022, based on the analysis of the new commitments contracted or the resources required by the stockholders´ special funds, authorized the contributions of US$ 70,000, US$ 15,000, and US$ 4,000 to Compensatory Financial Found (FFC), Technical Cooperation Fund (FCT), and Human Development Fund (FONDESHU), respectively. For the nine-month period ended September 30, 2022, CAF has recognized US$ 44,756 as an expense and, as of September 30, 2022 recognized an unconditional obligation (accounts payable) for US$ 22,212 which was paid in October 2022.
In March 2021, the Stockholders’ Assembly of CAF approved the contribution up to a maximum amount of US$ 30,000 to FCT for 2021. Subsequently, during the nine-month period ended September 30, 2021, based on the analysis of the new commitments contracted or the resources required by the stockholders´ special funds, CAF recognized US$ 17,195 as an expense and, as of September 30, 2021, recognized an unconditional obligation (accounts payable) for US$ 6,206 which was paid in October 2021.
12. | TAX EXEMPTIONS |
Pursuant to its Constitutive Agreement, CAF is exempt, in all of its Member Countries, from all taxes and tariffs on income, properties or assets, and from any liability involving payment, withholding or collection of any taxes.
S-37
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of September 30, 2022, and December 31, 2021
and for the nine-month periods ended September 30, 2022, and 2021
(In thousands of U.S. dollars)
In addition, CAF has entered into agreements with each of the associated shareholder countries. Pursuant to these agreements, each country that is a shareholder but do not qualify as a Member Country has agreed to extend to CAF, with respect to its activities in and concerning that country, immunities and privileges similar to those than have been granted to CAF in the Member Countries.
13. | DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES |
CAF utilizes derivative financial instruments to reduce exposure to interest rate risk and foreign currency risk. CAF does not hold or issue derivative financial instruments for trading or speculative purposes.
The market risk associated with interest rate and foreign currency is managed by swapping marketable securities - trading, loans, borrowings from other financial institutions and bonds, subject to fixed interest rates and denominated in currency other than the U.S. dollar into floating interest rate instruments denominated in U.S. dollars. CAF enters into derivative financial instruments to offset the economic changes in value of specifically identified marketable securities – trading, loans, borrowings from other financial institutions and bonds.
Derivative financial instruments held by CAF consist of interest rate swaps designated as fair value hedges of specifically identified loans, bonds or borrowings from other financial institutions with fixed interest rates and denominated in U.S. dollars. Also, CAF enters into cross-currency and interest rate swaps as an economic hedge (derivative that is entered into to manage a risk but is not accounted as a hedge) for interest rate and foreign exchange risks related with deposits, bonds, borrowings or loans denominated in currencies other than the U.S. dollar where CAF’s management elected to measure those liabilities and assets at fair value under the fair value option guidance.
When the fair value of a derivative financial instrument is positive, the counterparty owes CAF, creating credit risk for CAF. When the fair value of a derivative financial instrument is negative, CAF owes the counterparty and, therefore, it does not have credit risk. CAF minimizes the credit risk in derivative financial instruments by entering into transactions with high-quality counterparties whose credit rating is “A” or higher.
In order to reduce the credit risk in derivative financial instruments, CAF enters into credit support agreements with its major swap counterparties. This provides risk mitigation, as the swap contracts are regularly marked-to-market, and the party being the net obligor is required to post collateral when net mark to-market exposure exceeds certain predetermined thresholds. This collateral is in the form of cash.
CAF does not offset for each counterparty, the fair value amount recognized for derivative financial instruments with the fair value amount recognized for the collateral, whether posted or received, under master netting arrangements executed with the same counterparty. CAF reports separately the cumulative gross amounts for the receivable from and payable to for derivative financial instruments.
CAF also utilizes futures derivatives instruments to reduce exposure to price risk. These are contracts for delayed delivery of securities or money market instruments in which the seller agrees to make delivery at a specified future date of a specified instrument at a specified price or yield. Initial margin requirements are
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Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of September 30, 2022, and December 31, 2021
and for the nine-month periods ended September 30, 2022, and 2021
(In thousands of U.S. dollars)
met with cash or securities. CAF generally closes out open positions prior to maturity. Therefore, cash receipts or payments are limited to the change in fair value of the future contracts. Additionally, CAF utilizes forward contracts to reduce exposure to foreign currency risk.
The balance sheet details related to CAF’s derivative financial instruments are as follows:
Derivative assets | Derivative liabilities | |||||||||||||||
September 30, 2022 | December 31, 2021 | September 30, 2022 | December 31, 2021 | |||||||||||||
Cross-currency swap | 53,838 | 350,991 | 3,807,328 | 779,146 | ||||||||||||
Interest rate swap | 358,514 | 153,236 | 356,448 | 62,865 | ||||||||||||
U.S Treasury futures | 17,066 | 1,763 | 1,084 | 628 | ||||||||||||
Cross-currency forward contracts | 454 | 6,393 | 179 | 319 | ||||||||||||
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429,872 | 512,383 | 4,165,039 | 842,958 | |||||||||||||
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The following table presents the notional amount and fair values of interest rate swaps and cross-currency swaps and the underlying hedged items:
Notional amount | Fair value | |||||||||||||||
Interest rate swap | Cross- currency swap | Derivative assets | Derivative liabilities | |||||||||||||
As of September 30, 2022: | ||||||||||||||||
Loans | 2,218,597 | — | 358,514 | — | ||||||||||||
Loans | — | 277,830 | 21,324 | 5,248 | ||||||||||||
Deposits | — | 105,000 | 1,381 | 2,223 | ||||||||||||
Borrowings from other financial institutions | — | 623,952 | — | 136,396 | ||||||||||||
Borrowings from other financial institutions | 154,798 | — | — | 6,803 | ||||||||||||
Bonds | — | 16,920,083 | 31,133 | 3,663,461 | ||||||||||||
Bonds | 6,357,495 | — | — | 349,645 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
8,730,890 | 17,926,865 | 412,352 | 4,163,776 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Notional amount | Fair value | |||||||||||||||
Interest rate swap | Cross- currency swap | Derivative assets | Derivative Liabilities | |||||||||||||
As of December 31, 2021: | ||||||||||||||||
Loans | 2,296,334 | — | 38,643 | 18,377 | ||||||||||||
Loans | — | 112,936 | 2,083 | 1,692 | ||||||||||||
Deposits | — | 110,000 | 1,498 | 5,639 | ||||||||||||
Borrowings from other financial institutions | — | 590,809 | — | 26,298 | ||||||||||||
Borrowings from other financial institutions | 177,547 | — | 5,191 | — | ||||||||||||
Bonds | — | 16,143,345 | 347,410 | 745,517 | ||||||||||||
Bonds | 8,250,000 | — | 109,402 | 44,488 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
10,723,881 | 16,957,090 | 504,227 | 842,011 | |||||||||||||
|
|
|
|
|
|
|
|
S-39
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of September 30, 2022, and December 31, 2021
and for the nine-month periods ended September 30, 2022, and 2021
(In thousands of U.S. dollars)
The following table presents the notional amount and fair values of U.S. treasury futures and cross-currency forward contracts:
As of September 30, 2022 | ||||||||||||||
Fair value | ||||||||||||||
Start date | Termination date | Contract Currency | Notional amount | Derivative assets | ||||||||||
Forward contracts | Various | Various | Various | 69,980 | 454 | |||||||||
|
|
|
| |||||||||||
Futures short | Various | Until December 2022 | Various | 979,731 | 17,066 | |||||||||
|
|
|
| |||||||||||
Fair value | ||||||||||||||
Start date | Termination date | Contract Currency | Notional amount | Derivative liabilities | ||||||||||
Futures long | Various | Until December 2022 | US$ | 73,300 | (1,066 | ) | ||||||||
|
|
|
| |||||||||||
Futures short | September 2022 | Until December 2022 | US$ | 2,400 | (18 | ) | ||||||||
|
|
|
| |||||||||||
Forward contracts | Various | Various | Various | 11,474 | (179 | ) | ||||||||
|
|
|
| |||||||||||
As of December 31, 2021 | ||||||||||||||
Fair value | ||||||||||||||
Start date | Termination date | Contract Currency | Notional amount | Derivative assets | ||||||||||
Forward contracts | Various | Until January 2022 | Various | 292,582 | 6,393 | |||||||||
|
|
|
| |||||||||||
Futures short | Various | Until March 2022 | Various | 1,301,223 | 1,763 | |||||||||
|
|
|
| |||||||||||
Fair value | ||||||||||||||
Start date | Termination date | Contract Currency | Notional amount | Derivative liabilities | ||||||||||
Futures long | Various | Until March 2022 | Various | 144,264 | (226 | ) | ||||||||
|
|
|
| |||||||||||
Futures short | Various | Until March 2022 | US$ | 47,000 | (402 | ) | ||||||||
|
|
|
| |||||||||||
Forward contracts | Various | Until March 2022 | Various | 33,684 | (319 | ) | ||||||||
|
|
|
|
The amounts of collateral posted related to U.S. treasury futures as of September 30, 2022 and December 31, 2021, was US$ 972 and US$ 8,977, respectively. As of September 30, 2022 and December 31, 2021, the amount of collateral received related to U.S. treasury futures was US$ 6,550 and US$ 17, respectively.
CAF enters into International Swaps and Derivatives Association, Inc. (ISDA) master netting arrangements with substantially all of its derivative counterparties. These legally enforceable master netting arrangements give CAF the right to take cash or liquidate securities held as collateral and to offset receivables and payables with the same counterparty, in the event of default by the counterparty. The following tables
S-40
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of September 30, 2022, and December 31, 2021
and for the nine-month periods ended September 30, 2022, and 2021
(In thousands of U.S. dollars)
present information about the effect of offsetting of derivative financial instruments, although CAF has elected not to offset any derivative financial instruments by counterparty in the balance sheet:
As of September 30, 2022 | ||||||||||||||||
Derivative assets | Gross amounts not offset in the balance sheet | |||||||||||||||
Description | Gross amounts of recognized assets | Financial instruments | Cash and securities collateral received | Net amount | ||||||||||||
Swaps | 412,352 | (379,221 | ) | — | 33,131 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Derivative liabilities | Gross amounts not offset in the balance sheet | |||||||||||||||
Description | Gross amounts of recognized liabilities | Financial instruments | Cash and securities collateral pledged | Net amount | ||||||||||||
Swaps | (4,163,776 | ) | 379,221 | 3,749,987 | (34,568 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
As of December 31, 2021 | ||||||||||||||||
Derivative assets | Gross amounts not offset in the balance sheet | |||||||||||||||
Description | Gross amounts of recognized assets | Financial instruments | Cash and securities collateral received | Net amount | ||||||||||||
Swaps | 504,227 | (329,443 | ) | (148,756 | ) | 26,028 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Derivative liabilities | Gross amounts not offset in the balance sheet | |||||||||||||||
Description | Gross amounts of recognized liabilities | Financial instruments | Cash and securities collateral pledged | Net amount | ||||||||||||
Swaps | (842,011 | ) | 329,443 | 636,655 | 124,087 | |||||||||||
|
|
|
|
|
|
|
|
14. | FAIR VALUE MEASUREMENTS |
The following section describes the valuation methodologies used by CAF to measure various financial instruments at fair value, including an indication of the level in the fair value hierarchy in which each financial instrument is classified. Where appropriate, the description includes details of the valuation methodologies and the key inputs to those methodologies.
When available, CAF generally uses quoted prices in active markets to determine fair value.
If quoted market prices in active markets are not available, fair value is based upon internally developed valuation methodologies that use, where possible, current market-based or independently sourced market inputs, such as interest rates, currency rates, etc.
Where available, CAF may also make use of quoted prices in active markets for recent trading activity in positions with the same or similar characteristics to the financial instrument being valued. The frequency
S-41
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of September 30, 2022, and December 31, 2021
and for the nine-month periods ended September 30, 2022, and 2021
(In thousands of U.S. dollars)
and size of trading activity and the amount of the bid-ask spread are among the factors considered in determining the liquidity of markets and the relevance of observed quoted prices from those markets.
The following valuation methodologies are used to estimate the fair value and determine the classification in the fair value hierarchy of CAF’s financial instruments:
- | Marketable securities: CAF uses quoted prices in active markets to determine the fair value of trading securities. These securities are classified in Level 1 of the fair value hierarchy. |
- | Loans: The fair value of fixed rate loans, is determined using a discounted cash flow technique using the current variable interest rate for similar loans. These loans are classified in Level 2 of the fair value hierarchy. |
- | Derivative assets and liabilities: Derivative financial instruments transactions contracted and designated by CAF as hedges of risks related to interest rates, currency rates or both, for transactions recorded as financial assets or liabilities are also presented at fair value. In those cases the fair value is calculated using market prices provided by an independent financial information services company, which are determined using discounted cash flow valuation technique using observable inputs. Derivative assets and liabilities are classified in Level 2 of the fair value hierarchy. |
- | Bonds, borrowings from other financial institutions and deposits: For CAF’s bonds issued and medium and long term borrowings from other financial institutions and deposits, fair value is determined by using a discounted cash flow technique, taking into consideration benchmark interest yield curves at the end of the reporting period to discount the expected cash flows for the applicable maturity, thus reflecting market fluctuations of key variables such as interest and exchange rates. These yield curves are adjusted to incorporate CAF credit risk spread. Bonds, borrowings from other financial institutions and deposits are generally classified in Level 2 of the fair value hierarchy based on the observability of significant inputs to the discounted cash flow technique. |
S-42
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of September 30, 2022, and December 31, 2021
and for the nine-month periods ended September 30, 2022, and 2021
(In thousands of U.S. dollars)
Items Measured at Fair Value on a Recurring Basis
The following tables present for each of the fair value hierarchy levels CAF’s financial assets and liabilities that are measured at fair value on a recurring basis:
As of September 30, 2022 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Marketable Securities: | ||||||||||||||||
U.S. Treasury Notes | 2,005,561 | — | — | 2,005,561 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Non-U.S. governments and government entities bonds | 91,999 | 266,837 | — | 358,836 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Financial institutions and corporate securities: | ||||||||||||||||
Commercial paper | — | 2,073,233 | — | 2,073,233 | ||||||||||||
Certificate of deposits | 2,517,251 | — | — | 2,517,251 | ||||||||||||
Bonds | 1,282,083 | — | — | 1,282,083 | ||||||||||||
Collateralized mortgage obligation | 247,130 | 6,110 | — | 253,240 | ||||||||||||
Liquidity funds | 172,696 | — | — | 172,696 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
4,219,160 | 2,079,343 | — | 6,298,503 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Sub-total financial assets at fair value | 6,316,720 | 2,346,180 | — | 8,662,900 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Loans | — | 2,137,716 | — | 2,137,716 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Derivative instruments: | ||||||||||||||||
Cross-currency swap | — | 53,838 | — | 53,838 | ||||||||||||
Interest rate swap | — | 358,514 | — | 358,514 | ||||||||||||
U.S Treasury futures | — | 17,066 | — | 17,066 | ||||||||||||
Cross-currency forward contracts | — | 454 | — | 454 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
— | 429,872 | — | 429,872 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total financial assets at fair value | 6,316,720 | 4,913,768 | — | 11,230,488 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities: | ||||||||||||||||
Deposits | — | 104,480 | — | 104,480 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Borrowings from other financial institutions | — | 629,242 | — | 629,242 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Bonds | — | 19,330,130 | — | 19,330,130 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Derivative instruments: | ||||||||||||||||
Cross-currency swap | — | 3,807,328 | — | 3,807,328 | ||||||||||||
Interest rate swap | — | 356,448 | — | 356,448 | ||||||||||||
U.S Treasury futures | — | 1,084 | — | 1,084 | ||||||||||||
Cross-currency forward contracts | — | 179 | — | 179 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
— | 4,165,039 | — | 4,165,039 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total financial liabilities at fair value | — | 24,228,891 | — | 24,228,891 | ||||||||||||
|
|
|
|
|
|
|
|
S-43
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of September 30, 2022, and December 31, 2021
and for the nine-month periods ended September 30, 2022, and 2021
(In thousands of U.S. dollars)
As of December 31, 2021 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Marketable Securities: | ||||||||||||||||
U.S. Treasury Notes | 2,219,711 | — | — | 2,219,711 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Non-U.S. governments and government entities bonds | 418,413 | 137,817 | — | 556,230 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Financial institutions and corporate securities: | ||||||||||||||||
Commercial paper | — | 3,861,129 | — | 3,861,129 | ||||||||||||
Certificate of deposits | 3,284,428 | — | — | 3,284,428 | ||||||||||||
Bonds | 1,941,602 | — | — | 1,941,602 | ||||||||||||
Collateralized mortgage obligation | 288,583 | 2,222 | — | 290,805 | ||||||||||||
Liquidity funds | 349,162 | — | — | 349,162 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
5,863,775 | 3,863,351 | — | 9,727,126 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Sub-total financial assets at fair value | 8,501,899 | 4,001,168 | — | 12,503,067 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Loans | — | 2,389,651 | — | 2,389,651 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Derivative instruments: | ||||||||||||||||
Cross-currency swap | — | 350,991 | — | 350,991 | ||||||||||||
Interest rate swap | — | 153,236 | — | 153,236 | ||||||||||||
U.S Treasury futures | — | 1,763 | — | 1,763 | ||||||||||||
Cross-currency forward contracts | — | 6,393 | — | 6,393 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
— | 512,383 | — | 512,383 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total financial assets at fair value | 8,501,899 | 6,903,202 | — | 15,405,101 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities: | ||||||||||||||||
Deposits | — | 106,119 | — | 106,119 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Borrowings from other financial institutions | — | 740,028 | — | 740,028 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Bonds | — | 24,074,774 | — | 24,074,774 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Derivative instruments: | ||||||||||||||||
Cross-currency swap | — | 779,146 | — | 779,146 | ||||||||||||
Interest rate swap | — | 62,865 | — | 62,865 | ||||||||||||
U.S Treasury futures | — | 628 | — | 628 | ||||||||||||
Cross-currency forward contracts | — | 319 | — | 319 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
— | 842,958 | — | 842,958 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total financial liabilities at fair value | — | 25,763,879 | — | 25,763,879 | ||||||||||||
|
|
|
|
|
|
|
|
S-44
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of September 30, 2022, and December 31, 2021
and for the nine-month periods ended September 30, 2022, and 2021
(In thousands of U.S. dollars)
Items that are not measured at fair value
The carrying amount and estimated fair values of CAF’s financial instruments that are not recognized in the balance sheets at fair value are as follows:
| September 30, 2022 | December 31, 2021 | ||||||||||||||||||
Hierarchy Levels | Carrying amount | Estimated fair value | Carrying amount | Estimated fair value | ||||||||||||||||
Financial assets: | ||||||||||||||||||||
Cash and due from banks | 1 | 91,371 | 91,371 | 112,047 | 112,047 | |||||||||||||||
Deposits with banks | 1 | 5,158,199 | 5,158,199 | 3,210,216 | 3,210,216 | |||||||||||||||
Other investments | 1 | 105,487 | 105,487 | 292,392 | 292,392 | |||||||||||||||
Loans, net | 2 | 27,369,518 | 27,357,381 | 26,976,260 | 26,949,431 | |||||||||||||||
Accrued interest and commissions receivable | 2 | 546,835 | 546,835 | 357,836 | 357,836 | |||||||||||||||
Derivative related collateral | 1 | 3,750,959 | 3,750,959 | 645,632 | 645,632 | |||||||||||||||
Receivable from investment securities sold | 1 | 12,973 | 12,973 | 4,017 | 4,017 | |||||||||||||||
Financial liabilities: | ||||||||||||||||||||
Deposits | 2 | 4,838,995 | 4,838,995 | 3,896,507 | 3,896,507 | |||||||||||||||
Commercial paper | 2 | 4,224,132 | 4,224,132 | 2,813,646 | 2,813,646 | |||||||||||||||
Borrowings from other financial institutions, net | 2 | 1,048,184 | 1,042,998 | 1,032,143 | 1,014,964 | |||||||||||||||
Bonds, net | 2 | 196,452 | 194,199 | 185,763 | 176,035 | |||||||||||||||
Accrued interest payable | 2 | 373,748 | 373,748 | 288,233 | 288,233 | |||||||||||||||
Derivative related collateral | 1 | 6,550 | 6,550 | 148,773 | 148,773 | |||||||||||||||
Payable for investment securities purchased | 1 | 175,982 | 175,982 | 17,437 | 17,437 |
The following methods and assumptions were used to estimate the fair value of those financial instruments not accounted for at fair value:
- | Cash and due from banks, deposits with banks, other investments, accrued interest and commissions receivable, deposits, commercial paper, accrued interest payable, derivative-related collateral, receivable from investment securities sold and payable for investment securities purchased: The carrying amounts approximate fair value because of the short maturity of these instruments. |
- | Loans: CAF is one of the few institutions that grant loans for development projects in the stockholder countries. A secondary market does not exist for the type of loans granted by CAF. As rates on variable rate loans are reset on a semiannual basis, the carrying value, adjusted for credit risk, was determined to be the best estimate of fair value. The fair value of fixed rate loans is determined by using the current variable interest rate for similar loans. The fair value of non-accrual status loans is estimated using the discounted cash flow technique. |
- | Equity investments: The direct investments in equity securities of companies without a readily determinable fair value are measured at cost, less impairment plus or minus observable price changes of an identical or similar instrument of the same issuer. As of September 30, 2022 and December 31, 2021, the carrying amount of those investments amounted to US$ 118,186 and US$ 113,036, |
S-45
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of September 30, 2022, and December 31, 2021
and for the nine-month periods ended September 30, 2022, and 2021
(In thousands of U.S. dollars)
respectively. In addition, as of September 30, 2022 and December 31, 2021, investments in funds without a readily determinable fair value, with carrying amount of US$ 242,655 and US$ 267,131, respectively, and the net effects of impairment and the changes in fair value related to equity investment for the nine-month period ended as of September 30, 2022 and 2021 amounted to US$ (11,094) and US$ 27,256, respectively, are accounted for at fair value applying the practical expedient, using the net asset value per share. These financial instruments are generally classified in level 3 of the fair value hierarchy based on the observability of significant inputs to the valuation methodology (these instruments are not disclosed in the table above). |
- | Bonds and borrowings from other financial institutions: For CAF’s bonds issued and medium and long term borrowings, fair value is determined using a discounted cash flow technique, taking into consideration yield curves to discount the expected cash flows for the applicable maturity, thus reflecting the fluctuation of variables such as interest and exchange rates. These yield curves are adjusted to incorporate CAF credit risk spread. Those financial instrument are generally classified in Level 2 of the fair value hierarchy based on the observability of significant inputs to the valuation methodology. |
15. | NET (LOSS) GAINS ON CHANGES IN FAIR VALUE RELATED TO FINANCIAL INSTRUMENTS |
The gains on changes in fair value of marketable securities - trading, cross-currency swaps and financial liabilities carried at fair value under the fair value option are as follows:
For the nine-month perod ended September 30, 2022 | ||||||||||||
Gain (loss) on derivatives | Gain (loss) on hedged item | Net Gain (loss) | ||||||||||
Cross-currency swaps: | ||||||||||||
Deposits | 3,299 | (3,361 | ) | (62 | ) | |||||||
Bonds | (3,234,221 | ) | 3,214,317 | (19,904 | ) | |||||||
Loans | 15,685 | (844 | ) | 14,841 | ||||||||
Borrowings from other financial institutions | (110,098 | ) | 109,186 | (912 | ) | |||||||
|
|
|
|
|
| |||||||
(3,325,335 | ) | 3,319,298 | (6,037 | ) | ||||||||
|
|
|
|
|
| |||||||
For the nine-month perod ended September 30, 2021 | ||||||||||||
Gain (loss) on derivatives | Gain (loss) on hedged item | Net Gain (loss) | ||||||||||
Cross-currency swaps: | ||||||||||||
Deposits | (7,738 | ) | 7,267 | (471 | ) | |||||||
Bonds | (1,280,430 | ) | 1,271,713 | (8,717 | ) | |||||||
Loans | (367 | ) | (7,526 | ) | (7,893 | ) | ||||||
Borrowings from other financial institutions | (38,210 | ) | 55,510 | 17,300 | ||||||||
|
|
|
|
|
| |||||||
(1,326,745 | ) | 1,326,964 | 219 | |||||||||
|
|
|
|
|
|
S-46
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of September 30, 2022, and December 31, 2021
and for the nine-month periods ended September 30, 2022, and 2021
(In thousands of U.S. dollars)
In addition, during the nine-month periods ended September 30, 2022 and 2021, CAF recorded net gains of US$ 3,553 and US$ 2,886, respectively, related to changes in fair value of U.S. treasury futures and cross-currency forwards and changes in fair value of the U.S. Treasury Notes.
16. | COMMITMENTS AND CONTINGENCIES |
Commitments and contingencies include the following:
September 30, 2022 | December 31, 2021 | |||||||
Loan commitments subscribed – eligible | 6,598,850 | 6,477,638 | ||||||
Lines of credit | 4,827,932 | 3,328,384 | ||||||
Loan commitments subscribed – non eligible | 2,353,335 | 1,561,726 | ||||||
Guarantees | 134,299 | 129,804 | ||||||
Equity investments agreements subscribed | 76,004 | 79,769 |
These commitments and contingencies arose from the normal course of CAF’s business and are related principally to loans that have been approved or committed for disbursement.
In the ordinary course of business, CAF has entered into commitments to extend loans; such loan commitments are reported in the above table upon signing the corresponding loan agreement and are reported as loans in the balance sheets when disbursements are made. Loan commitments that have fulfilled the necessary requirements for disbursement are classified as eligible.
The commitments to extend loans have fixed expiration dates and in some cases expire without a loan being disbursed. Therefore, the amounts of total commitment to extend loans do not necessarily represent future cash requirements. Also, based on experience, portions of the loan commitments are disbursed on average two years after the signing of the loan agreement.
The lines of credit are extended to financial and corporate institutions as a facility to grant short term loans basically to finance working capital and international trade activities.
Guarantees mature as follows:
September 30, 2022 | September 30, 2021 | |||||||
Less than one year | 41,095 | 6,338 | ||||||
Between one and five years | 28,000 | 62,649 | ||||||
Over five years | 65,204 | 60,817 | ||||||
|
|
|
| |||||
134,299 | 129,804 | |||||||
|
|
|
|
To the best knowledge of CAF’s management, CAF is not involved in any litigation that is material to CAF’s business or that is likely to have any impact on its business, financial condition, or results of operations.
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CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of September 30, 2022, and December 31, 2021
and for the nine-month periods ended September 30, 2022, and 2021
(In thousands of U.S. dollars)
17. | SEGMENT REPORTING |
Management has determined that CAF has only one operating and reportable segment since it does not manage its operations by allocating resources based on a determination of the contributions to net income of individual operations. CAF does not differentiate on the basis of the nature of the products or services provided the preparation process, or the method for providing services among individual countries.
For the nine-month periods ended September 30, 2022 and 2021, loans made to or guaranteed by three countries individually generated in excess, of 10% of interest income on loans, as follows:
September 30, 2022 | September 30, 2021 | |||||||
Ecuador | 96,369 | 65,110 | ||||||
Argentina | 90,943 | 63,778 | ||||||
Colombia | 90,356 | 61,411 | ||||||
|
|
|
| |||||
277,668 | 190,299 | |||||||
|
|
|
|
18. | SUBSEQUENT EVENTS |
Management has evaluated subsequent events through November 11, 2022, the date these financial statements were available to be issued. As a result of this evaluation, management has determined that there are no subsequent events that require a disclosure in these financial statements except for:
- | On October 19, 2022, CAF issued bonds for AUD 35 million, equivalent to US$ 21.9 million, 5.90% due 2037, under its Medium-Term Note Programme. |
- | On October 21, 2022, CAF issued bonds for TRY 850 million, equivalent to US$ 45.7 million, 37,00% due 2027, under its Medium-Term Note Programme. |
- | On October 28, 2022, CAF issued bonds for UYU 2.7 million, equivalent to US$ 0.07 million, 3.61% due 2039, under its Uruguay Local Debt Programme. |
- | On October 31, 2022, CAF issued bonds for UYU 33.5 million, equivalent to US$ 0.8 million, 3.20% due 2037, under its Uruguay Local Debt Programme. |
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CORPORACIÓN ANDINA DE FOMENTO (CAF)
SUPPLEMENTARY INFORMATION (UNAUDITED)
As of September 30, 2022
BONDS
Title | Interest Rate | Coupon | Date of Agreement of Issue | Year of Final Maturity | Currency | Principal Amount Outstanding as of September 30, 2022 (in millions) | ||||||||||||
7.875% Yankee Bonds | Fixed | 7.88% | 2002 | 2022 | USD | 85 | ||||||||||||
4.25% Euro Bond (Schuldschein) | Fixed | 4.25% | 2012 | 2027 | EUR(1) | 82 | ||||||||||||
4.375% Euro Bond (Schuldschein) | Fixed | 4.38% | 2012 | 2032 | EUR | 60 | ||||||||||||
5.0% Euro Dollar Bond | Fixed | 5.00% | 2012 | 2042 | USD | 50 | ||||||||||||
4.0% Euro Hong Kong Dollar Bonds | Fixed | 4.00% | 2012 | 2024 | HKD(2) | 398 | ||||||||||||
1.85% Euro Yen Bonds | Fixed | 1.85% | 2012 | 2023 | JPY(3) | 6,000 | ||||||||||||
3.25% Euro Bonds | Fixed | 3.25% | 2013 | 2033 | EUR | 100 | ||||||||||||
3.25% Euro Bonds | Fixed | 3.25% | 2013 | 2033 | EUR | 100 | ||||||||||||
4.27% Euro Hong Kong Dollar Bonds | Fixed | 4.27% | 2013 | 2028 | HKD | 940 | ||||||||||||
Euro Dollar Bonds | Floating | L3M + 97 bps | 2013 | 2023 | USD | 100 | ||||||||||||
1.85% Euro Yen Bonds | Fixed | 1.85% | 2013 | 2023 | JPY | 4,600 | ||||||||||||
3.66% Euro Bond | Fixed | 3.66% | 2013 | 2033 | EUR | 51 | ||||||||||||
3.625% Euro Bond (Schuldschein) | Fixed | 3.63% | 2013 | 2033 | EUR | 200 | ||||||||||||
6.25% Kangaroo Bonds | Fixed | 6.25% | 2013 | 2023 | AUD(4) | 225 | ||||||||||||
3.31% Euro Bonds | Fixed | 3.31% | 2013 | 2028 | EUR | 226 | ||||||||||||
3.31% Euro Bonds | Fixed | 3.31% | 2013 | 2028 | EUR | 25 | ||||||||||||
2.0% Euro Bonds | Fixed | 2.00% | 2014 | 2024 | CHF(5) | 300 | ||||||||||||
3.51% Euro Bonds | Fixed | 3.51% | 2014 | 2034 | EUR | 65 | ||||||||||||
3.500% Euro Bonds | Fixed | 3.50% | 2014 | 2039 | EUR | 200 | ||||||||||||
4.29% Euro Bonds | Fixed | 4.29% | 2014 | 2026 | NOK(6) | 1,500 | ||||||||||||
4.070% Euro Bonds | Fixed | 4.07% | 2014 | 2024 | NOK | 900 | ||||||||||||
3.925% Euro Bonds | Fixed | 3.93% | 2014 | 2029 | HKD | 1,257 | ||||||||||||
3.05% Euro Bonds | Fixed | 3.05% | 2014 | 2030 | EUR | 50 | ||||||||||||
1.50% Swiss Franc Bonds | Fixed | 1.50% | 2014 | 2028 | CHF | 225 | ||||||||||||
0.51% Swiss Franc Bonds | Fixed | 0.51% | 2015 | 2026 | CHF | 200 | ||||||||||||
0.68% Euro Yen Bonds | Fixed | 0.68% | 2015 | 2025 | JPY | 8,900 | ||||||||||||
0.51% Swiss Franc Bonds | Fixed | 0.51% | 2015 | 2026 | CHF | 150 | ||||||||||||
3.05% Euro Bonds | Fixed | 3.05% | 2015 | 2035 | NOK | 1,000 | ||||||||||||
4.50% Kangaroo Bonds | Fixed | 4.50% | 2015 | 2025 | AUD | 225 | ||||||||||||
4.50% Kangaroo Bonds | Fixed | 4.50% | 2015 | 2025 | AUD | 50 | ||||||||||||
0.46% Swiss Franc Bonds | Fixed | 0.46% | 2015 | 2023 | CHF | 200 | ||||||||||||
4.50% Kangaroo Bonds | Fixed | 4.50% | 2015 | 2025 | AUD | 50 | ||||||||||||
3.05% Euro Bonds | Fixed | 3.05% | 2015 | 2030 | NOK | 800 | ||||||||||||
0.45% Samurai Market | Fixed | 0.45% | 2016 | 2026 | JPY | 4,500 | ||||||||||||
0.304% Swiss Market Bond | Fixed | 0.30% | 2016 | 2024 | CHF | 125 | ||||||||||||
0.51% Swiss Market Bond | Fixed | 0.51% | 2016 | 2026 | CHF | 125 | ||||||||||||
2.89% Euro Bonds | Fixed | 2.89% | 2016 | 2026 | HKD | 320 |
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Title | Interest Rate | Coupon | Date of Agreement of Issue | Year of Final Maturity | Currency | Principal Amount Outstanding as of September 30, 2022 (in millions) | ||||||||||||
4.50% Kangaroo Market Bond | Fixed | 4.50% | 2016 | 2026 | AUD | 110 | ||||||||||||
1.70% Euro Bonds | Fixed | 1.70% | 2016 | 2031 | EUR | 70 | ||||||||||||
1.803% Euro Bonds | Fixed | 1.80% | 2016 | 2031 | EUR | 100 | ||||||||||||
4.50% Kangaroo Market Bond | Fixed | 4.50% | 2016 | 2026 | AUD | 80 | ||||||||||||
1.796% Euro Bonds | Fixed | 1.80% | 2016 | 2031 | EUR | 50 | ||||||||||||
3.50% Euro Bonds | Fixed | 3.50% | 2017 | 2037 | CAD(7) | 40 | ||||||||||||
4.50% Kangaroo Market Bond | Fixed | 4.50% | 2017 | 2027 | AUD | 175 | ||||||||||||
3.265% Euro Bonds | Fixed | 3.27% | 2017 | 2027 | HKD | 1,620 | ||||||||||||
0.30% Swiss Market Bond | Fixed | 0.30% | 2017 | 2025 | CHF | 160 | ||||||||||||
2.75% Yankee Bond | Fixed | 2.75% | 2017 | 2023 | USD | 1,000 | ||||||||||||
4.50% Kangaroo Market Bond | Fixed | 4.50% | 2017 | 2027 | AUD | 75 | ||||||||||||
4.50% Kangaroo Market Bond | Fixed | 4.50% | 2018 | 2027 | AUD | 75 | ||||||||||||
1.125% Euro Bond | Fixed | 1.13% | 2018 | 2025 | EUR | 1,000 | ||||||||||||
8.50% Mexican Pesos Bonds | Fixed | 8.50% | 2018 | 2028 | MXN(9) | 3,000 | ||||||||||||
6.50% Indonesian Rupiah Bond | Fixed | 6.50% | 2018 | 2023 | IDR(10) | 1,034,100 | ||||||||||||
0.30% Swiss Market Bond | Fixed | 0.30% | 2018 | 2025 | CHF | 115 | ||||||||||||
6.77% Euro Bond | Fixed | 6.77% | 2018 | 2028 | COP(11) | 510,000 | ||||||||||||
6.75% Euro Bond | Fixed | 6.75% | 2018 | 2028 | COP | 150,000 | ||||||||||||
0.75% Euro Bond | Fixed | 0.75% | 2018 | 2023 | EUR | 500 | ||||||||||||
3.385% Euro Dollar Bond | Fixed | 3.39% | 2018 | 2023 | USD | 30 | ||||||||||||
3.4% Kangaroo Market Bond | Fixed | 3.40% | 2018 | 2023 | AUD | 100 | ||||||||||||
3.73% Euro Dollar Bond | Fixed | 3.73% | 2018 | 2023 | USD | 50 | ||||||||||||
3.75% Yankee Bond | Fixed | 3.75% | 2018 | 2023 | USD | 750 | ||||||||||||
0.63% Euro Bond | Fixed | 0.63% | 2019 | 2024 | EUR | 750 | ||||||||||||
3.90% Uruguayan bond | Fixed | 3.90% | 2019 | 2040 | UIU(12) | 39 | ||||||||||||
6.77% Colombian Pesos Bond | Fixed | 6.77% | 2019 | 2028 | COP | 99,500 | ||||||||||||
1.68% Kangaroo Bond | Fixed | 1.68% | 2019 | 2023 | AUD | 12 | ||||||||||||
9.60% Mexican Pesos | Fixed | 9.60% | 2019 | 2039 | MXN | 965 | ||||||||||||
0.17% Euro Bond | Fixed | 0.17% | 2019 | 2023 | EUR | 40 | ||||||||||||
3.90% Uruguayan bond | Fixed | 3.90% | 2019 | 2040 | UIU | 7 | ||||||||||||
2.97% Euro Dollar Bond | Fixed | 2.97% | 2019 | 2029 | USD | 140 | ||||||||||||
10.4% Uruguayan Peso Bond | Fixed | 10.40% | 2019 | 2024 | UIU | 1,752 | ||||||||||||
0.18% Euro Bond | Fixed | 0.18% | 2019 | 2027 | EUR | 50 | ||||||||||||
10.4% Uruguayan Peso Bond | Fixed | 10.40% | 2019 | 2024 | UYU(13) | 1,814 | ||||||||||||
3.76% Uruguayan bond | Fixed | 3.76% | 2019 | 2039 | UIU | 3 | ||||||||||||
0.625% Euro Bond | Fixed | 0.63% | 2019 | 2026 | EUR | 750 | ||||||||||||
3.90% Uruguayan bond | Fixed | 3.90% | 2019 | 2040 | UIU | 8 | ||||||||||||
2.0% Dollar Bond | Fixed | 2.00% | 2020 | 2023 | USD | 120 | ||||||||||||
3.76% Uruguayan bond | Fixed | 3.76% | 2020 | 2039 | UIU | 5 | ||||||||||||
3.78% Uruguayan bond | Fixed | 3.78% | 2020 | 2038 | UIU | 2 | ||||||||||||
3.30% Uruguayan bond | Fixed | 3.20% | 2020 | 2037 | UIU | 7 | ||||||||||||
4.2581% Uruguayan bond | Fixed | 4.26% | 2020 | 2039 | UIU | 1 | ||||||||||||
3.76% Uruguayan bond | Fixed | 3.76% | 2020 | 2039 | UIU | 6 | ||||||||||||
3.78% Uruguayan bond | Fixed | 3.78% | 2020 | 2038 | UIU | 6 | ||||||||||||
2.3750% Dollar Bond | Fixed | 2.38% | 2020 | 2023 | USD | 800 | ||||||||||||
1.025% Japanese Bond | Fixed | 1.03% | 2020 | 2040 | JPY | 3,000 | ||||||||||||
6.78% Mexican Bond | Fixed | 6.78% | 2020 | 2027 | MXN | 1,200 | ||||||||||||
3.30% Uruguayan bond | Fixed | 3.20% | 2020 | 2037 | UIU | 15 |
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Title | Interest Rate | Coupon | Date of Agreement of Issue | Year of Final Maturity | Currency | Principal Amount Outstanding as of September 30, 2022 (in millions) | ||||||||||||
1.625% Euro Bond | Fixed | 1.63% | 2020 | 2025 | EUR | 700 | ||||||||||||
3.78% Uruguayan bond | Fixed | 3.78% | 2020 | 2038 | UIU | 9 | ||||||||||||
10.4% Kazakhstan Bond | Fixed | 10.40% | 2020 | 2023 | KZT(14) | 6,210 | ||||||||||||
7.5% Mexican Bond | Fixed | 7.50% | 2020 | 2030 | MXN | 1,525 | ||||||||||||
1.80% New Zealand Bond | Fixed | 1.80% | 2020 | 2025 | NZD(15) | 21 | ||||||||||||
1.83% Australian Bond | Fixed | 1.83% | 2020 | 2025 | AUD | 31 | ||||||||||||
0.70% Japanese Bond | Fixed | 0.70% | 2020 | 2023 | JPY | 3,800 | ||||||||||||
0.65% Japanese Bond | Fixed | 0.65% | 2020 | 2025 | JPY | 3,500 | ||||||||||||
3.76% Uruguayan bond | Fixed | 3.76% | 2020 | 2039 | UIU | 7 | ||||||||||||
3.45% Uruguayan bond | Fixed | 3.45% | 2020 | 2023 | UYU | 6,335 | ||||||||||||
0.77% Japanese Bond | Fixed | 0.77% | 2020 | 2025 | JPY | 17,200 | ||||||||||||
0.70% Swiss Market Bond | Fixed | 0.70% | 2020 | 2025 | CHF | 350 | ||||||||||||
0.50% Japanese Bond | Fixed | 0.50% | 2020 | 2023 | JPY | 5,000 | ||||||||||||
1.60% Euro Bond | Fixed | 1.60% | 2020 | 2025 | USD | 40 | ||||||||||||
0.727% Japanese Bond | Fixed | 0.73% | 2020 | 2025 | JPY | 20,000 | ||||||||||||
6.75% Colombian Bond | Fixed | 6.75% | 2020 | 2028 | COP | 104,200 | ||||||||||||
3.30% Uruguayan bond | Fixed | 3.20% | 2020 | 2037 | UIU | 11 | ||||||||||||
4.26% Uruguayan bond | Fixed | 4.26% | 2020 | 2029 | UIU | 5 | ||||||||||||
1.625% Euro Bond | Fixed | 1.63% | 2020 | 2025 | USD | 750 | ||||||||||||
3.76% Uruguayan bond | Fixed | 3.76% | 2020 | 2039 | UIU | 9 | ||||||||||||
0.098% Euro Bond | Fixed | 0.10% | 2020 | 2023 | EUR | 90 | ||||||||||||
3.78% Uruguayan bond | Fixed | 3.78% | 2020 | 2038 | UIU | 11 | ||||||||||||
6.77% Colombian Bond | Fixed | 6.77% | 2020 | 2028 | COP | 145,000 | ||||||||||||
3.78% Uruguayan Bond | Fixed | 3.78% | 2020 | 2037 | UIU | 5 | ||||||||||||
1.332% Euro Bond | Fixed | 1.33% | 2020 | 2025 | USD | 30 | ||||||||||||
4.2581% Uruguayan bond | Fixed | 4.26% | 2020 | 2039 | UIU | 6 | ||||||||||||
0.84% Euro Bond | Fixed | 0.84% | 2020 | 2023 | USD | 30 | ||||||||||||
1.327% Euro Bond | Fixed | 1.33% | 2020 | 2025 | USD | 30 | ||||||||||||
3.76% Uruguayan Bond | Fixed | 3.76% | 2021 | 2039 | UIU | 6 | ||||||||||||
0.8% Euro Bond | Fixed | 0.80% | 2021 | 2024 | USD | 30 | ||||||||||||
0.25% Euro Bond | Fixed | 0.25% | 2021 | 2026 | EUR | 1,250 | ||||||||||||
3.78% Uruguayan Bond | Fixed | 3.78% | 2021 | 2038 | UIU | 12 | ||||||||||||
0.85% Euro Bond | Fixed | 0.85% | 2021 | 2024 | USD | 100 | ||||||||||||
0.85% Euro Bond | Fixed | 0.85% | 2021 | 2024 | USD | 50 | ||||||||||||
0.35% Samurai Bond | Fixed | 0.35% | 2021 | 2026 | JPY | 13,300 | ||||||||||||
0.45% Samurai Bond | Fixed | 0.45% | 2021 | 2028 | JPY | 1,400 | ||||||||||||
0.35% Samurai Bond | Fixed | 0.35% | 2021 | 2026 | JPY | 16,600 | ||||||||||||
6.8% Mexican Bond | Fixed | 6.82% | 2021 | 2031 | MXN | 3,535 | ||||||||||||
1.58% Euro Bond | Fixed | 1.58% | 2021 | 2026 | USD | 50 | ||||||||||||
0.25% Samurai Bond | Fixed | 0.25% | 2021 | 2024 | JPY | 5,000 | ||||||||||||
3.78% Uruguayan Bond | Fixed | 3.78% | 2021 | 2037 | UIU | 9 | ||||||||||||
4.26% Uruguayan Bond | Fixed | 4.26% | 2021 | 2039 | UIU | 9 | ||||||||||||
3.76% Uruguayan Bond | Fixed | 3.76% | 2021 | 2039 | UIU | 5 | ||||||||||||
1.00% Samurai Bond | Fixed | 1.00% | 2021 | 2026 | AUD | 30 | ||||||||||||
2.5% Euro Bonds | Fixed | 2.50% | 2021 | 2031 | NOK | 600 | ||||||||||||
3.78% Uruguayan Bond | Fixed | 3.78% | 2021 | 2038 | UIU | 9 | ||||||||||||
Brazilian Real Bond | Index-linked | N.A. | 2021 | 2033 | BRL(16) | 215 | ||||||||||||
Brazilian Real Bond | Index-linked | N.A. | 2021 | 2026 | BRL | 70 |
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Title | Interest Rate | Coupon | Date of Agreement of Issue | Year of Final Maturity | Currency | Principal Amount Outstanding as of September 30, 2022 (in millions) | ||||||||||||
0.30% Euro Yen Bonds | Fixed | 0.30% | 2021 | 2031 | JPY | 3,000 | ||||||||||||
Brazilian Real Bond | Index-linked | N.A. | 2021 | 2033 | BRL | 239 | ||||||||||||
Brazilian Real Bond | Index-linked | N.A. | 2021 | 2026 | BRL | 80 | ||||||||||||
3.54% Mexican Bond | Fixed | 3.54% | 2021 | 2031 | MXN UDI(17) | 211 | ||||||||||||
Euro Bond | Floating | SOFR + 0.62% | 2021 | 2024 | USD | 400 | ||||||||||||
0.45% Japanese Bond | Fixed | 0.45% | 2021 | 2028 | JPY | 20,000 | ||||||||||||
0.32% Japanese Bond | Fixed | 0.32% | 2021 | 2027 | JPY | 5,500 | ||||||||||||
0.09% Japanese Bond | Fixed | 0.09% | 2021 | 2024 | JPY | 3,000 | ||||||||||||
0.22% Japanese Bond | Fixed | 0.22% | 2021 | 2026 | JPY | 5,000 | ||||||||||||
3.20% Uruguayan Bond | Fixed | 3.20% | 2021 | 2037 | UIU | 7 | ||||||||||||
3.61% Uruguayan Bond | Fixed | 3.61% | 2021 | 2039 | UIU | 1 | ||||||||||||
4.26% Uruguayan Bond | Fixed | 4.26% | 2021 | 2039 | UIU | 6 | ||||||||||||
3.78% Uruguayan Bond | Fixed | 3.78% | 2021 | 2038 | UIU | 12 | ||||||||||||
Brazilian Real Bond | Index-linked | N.A. | 2021 | 2026 | BRL | 261 | ||||||||||||
Brazilian Real Bond | Index-linked | N.A. | 2021 | 2026 | BRL | 40 | ||||||||||||
Brazilian Real Bond | Index-linked | N.A. | 2021 | 2033 | BRL | 163 | ||||||||||||
2.16% Australian Bond | Fixed | 2.16% | 2021 | 2031 | AUD | 65 | ||||||||||||
1.92% Euro Bond | Fixed | 1.92% | 2021 | 2031 | USD | 50 | ||||||||||||
3.90% Uruguayan Bond | Fixed | 3.90% | 2021 | 2040 | UIU | 8 | ||||||||||||
3.76% Uruguayan Bond | Fixed | 3.76% | 2021 | 2039 | UIU | 4 | ||||||||||||
3.78% Uruguayan Bond | Fixed | 3.78% | 2021 | 2038 | UIU | 7 | ||||||||||||
4.26% Uruguayan Bond | Fixed | 4.26% | 2021 | 2039 | UIU | 2 | ||||||||||||
3.61% Uruguayan Bond | Fixed | 3.61% | 2021 | 2039 | UIU | 2 | ||||||||||||
1.25% Yankee Bond | Fixed | 1.25% | 2021 | 2024 | USD | 1,000 | ||||||||||||
3.20% Uruguayan Bond | Fixed | 3.20% | 2021 | 2037 | UIU | 7 | ||||||||||||
0.45% Swiss Franc Bonds | Fixed | 0.45% | 2022 | 2027 | CHF | 350 | ||||||||||||
2.25% Yankee Bond | Fixed | 2.25% | 2022 | 2027 | USD | 650 | ||||||||||||
0.60% Samurai Bond | Fixed | 0.60% | 2022 | 2032 | JPY | 7,200 | ||||||||||||
3.64% Uruguayan Bond | Fixed | 3.64% | 2022 | 2039 | UIU | 2 | ||||||||||||
6.8% Mexican Bond | Fixed | 6.82% | 2022 | 2031 | MXN | 7,500 | ||||||||||||
9.0% Mexican Bond | Fixed | 9.00% | 2022 | 2027 | MXN | 2,000 | ||||||||||||
3.64% Uruguayan Bond | Fixed | 3.64% | 2022 | 2039 | UIU | 4 | ||||||||||||
4.04% Uridashi Bond | Fixed | 4.04% | 2022 | 2027 | NZD | 22 | ||||||||||||
3.40% Uridashi Bond | Fixed | 3.40% | 2022 | 2027 | AUD | 12 | ||||||||||||
2.81% Uridashi Bond | Fixed | 2.81% | 2022 | 2027 | USD | 7 | ||||||||||||
3.61% Uruguayan Bond | Fixed | 3.61% | 2022 | 2039 | UIU | 1 | ||||||||||||
4.26% Uruguayan Bond | Fixed | 4.26% | 2022 | 2039 | UIU | 4 | ||||||||||||
2.88% Uruguayan Bond | Fixed | 2.88% | 2022 | 2039 | UIU | 15 | ||||||||||||
2.38% Euro Bond | Fixed | 2.38% | 2022 | 2027 | EUR | 500 | ||||||||||||
5.00% Australian Bond | Fixed | 5.00% | 2022 | 2029 | AUD | 55 | ||||||||||||
3.61% Uruguayan Bond | Fixed | 3.61% | 2022 | 2039 | UIU | 1 | ||||||||||||
3.20% Uruguayan Bond | Fixed | 3.20% | 2022 | 2037 | UIU | 8 | ||||||||||||
4.26% Uruguayan Bond | Fixed | 4.26% | 2022 | 2039 | UIU | 3 | ||||||||||||
2.09% Swiss Franc Bond | Fixed | 2.09% | 2022 | 2028 | CHF | 225 | ||||||||||||
2.72% Euro Bond (Schuldschein) | Fixed | 2.72% | 2022 | 2046 | EUR | 110 | ||||||||||||
3.5% Panama Bond | Fixed (Step-up) | 3.5% | 2022 | 2042 | USD | 200 | ||||||||||||
4.84 Mexican Bond | Fixed | 4.83% | 2022 | 2037 | MXN UDI | 750 | ||||||||||||
4.26% Uruguayan Bond | Fixed | 2.88% | 2022 | 2039 | UIU | 13 |
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(1) | Euros |
(2) | Hong Kong Dollars |
(3) | Japanese Yen |
(4) | Australian Dollars |
(5) | Swiss Francs |
(6) | Norwegian Kroner |
(7) | Canadian Dollar |
(8) | Mexican Pesos |
(9) | Indonesian Rupiah |
(10) | Colombian Pesos |
(11) | Uruguayan Indexed Units |
(12) | Uruguayan Pesos |
(13) | Kazakhstan tenge |
(14) | New ZealandDollar |
(15) | Brazilian Real |
(16) | Mexican Indexed Units |
Subsequent Events related to supplementary information: Management has evaluated subsequent events through September 30, 2022, the date these financial statements were available to be issued. As a result of this evaluation, management has determined that there are no subsequent events that require a disclosure in these financial statements except for:
• | On October 19, 2022, CAF issued bonds for AUD 35 million, 5.90% due 2037, equivalent to US$21.9 million under its Medium-Term Note Programme. |
• | On October 21, 2022, CAF issued bonds for TRY 850 million, equivalent to US$ 45.7 million, 37.0% due 2027, under its Medium-Term Note Programme. |
• | On October 28, 2022, CAF issued bonds for UYU 0.5 million, equivalent to US$ 67.7 thousand, 3.61% due 2039, under its Uruguay Local Debt Programme. |
• | On October 31, 2022, CAF issued bonds for UYU 6.0 million, equivalent to US$ 823.8 thousand, 3.20% due 2037, under its Uruguay Local Debt Programme. |
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Table of Contents
LOANS FROM COMMERCIAL BANKS, ADVANCES, DEPOSITS, COMMERCIAL PAPER AND REPURCHASE AGREEMENTS
Title | Interest Rate | Date of Agreement of Issue | Year of Final Maturity | Currency | Principal Amount Outstanding as of September 30, 2022 | |||||||||||||||
(in USD millions) | ||||||||||||||||||||
Borrowings from other financial institutions | Various | Various | Various | Various | 1,677.4 | |||||||||||||||
Deposits | Floating | Various | Various | Various | 4,943.5 | |||||||||||||||
Commercial Paper | Floating | Various | Various | Various | 4,224.1 |
LOANS FROM MULTILATERALS AND BILATERALS, EXIMS AND EXPORT CREDIT
AGENCIES
Title | Interest Rate | Date of Agreement of Issue | Year of Final Maturity | Currency | Principal Amount Outstanding as of September 30, 2022 | |||||||
(in USD millions) | ||||||||||||
Agencia Francesa de Desarrollo — AfD | Various | Various | Various | Various | 405.2 | |||||||
Instituto de Crédito Oficial — ICO | Floating | Various | Various | USD | 245.5 | |||||||
Banco Bilbao Viscaya IBF | Floating | 07/30/2020 | 08/08/2023 | USD | 200.0 | |||||||
JBIC, Japan | Floating | Various | Various | USD | 141.0 | |||||||
KfW (Germany) | Various | Various | Various | USD | 532.8 | |||||||
Nordic Investment Bank | Floating | Various | Various | USD | 15.8 | |||||||
Financiera de Desarollo Nacional | Fixed | Various | 5/15/2035 | COP | 29.0 | |||||||
Cassa Depositi e Prestiti S.P.P.A | Floating | Various | Various | EUR | 171.5 | |||||||
Interamerican Development Bank — IBD | Fixed | 05/24/1997 | 05/24/2023 | USD | 0.3 |
GUARANTEED DEBT
Borrower | Date of Issue | Year of Final Maturity | Principal Amount Outstanding as of September 30, 2022 | |||||||||
(in USD millions) | ||||||||||||
Republic of Peru | 02/13/2006 | 02/13/2025 | 28.0 | |||||||||
Promotora de Infraestructura Registral, S.A de C.V SOFOM | 08/23/2010 | 08/23/2030 | 12.0 | |||||||||
Isolux Corsan Argentina S.A. | 09/15/2011 | 09/15/2023 | 34.6 | |||||||||
H2Olmos S.A. | 10/24/2012 | 10/25/2032 | 25.6 | |||||||||
Planta de Reserva Fría de Generación de Eten S.A | 12/05/2013 | 12/05/2033 | 21.2 | |||||||||
ATN 3 S.A. | 06/21/2013 | 06/21/2023 | 5.0 | |||||||||
Concessionária Linha Universidade Participações S.A | 07/28/2022 | 10/29/2027 | 6.4 |
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This prospectus supplement describes the terms of the notes in greater detail than the accompanying prospectus and may provide information that differs from the accompanying prospectus. If the information in this prospectus supplement differs from the accompanying prospectus, you should rely on the information in this prospectus supplement.
General
The price, interest and payment terms of the notes are described on the cover and in the summary of this prospectus supplement.
CAF will issue the notes under a fiscal agency agreement, dated as of March 17, 1998, between CAF and The Bank of New York Mellon (as successor-in-interest to JPMorgan Chase Bank, N.A.), as fiscal agent.
This description of the notes includes summaries of CAF’s understanding of certain customary rules and operating procedures of DTC that affect transfers of interests in the global note. DTC may amend its customary rules and operating procedures after the date of this prospectus supplement.
The notes are not secured by any of CAF’s property or assets. Accordingly, your ownership of notes means you are one of CAF’s unsecured creditors. The notes are not subordinated in right of payment to any of CAF’s other unsecured debt obligations and therefore they rank equally with all CAF’s other unsecured and unsubordinated indebtedness. “Indebtedness” means all indebtedness of CAF in respect of monies borrowed by CAF and guarantees given by CAF for monies borrowed by others.
The notes will not be entitled to the benefit of any sinking fund.
Interest on any note will be paid to the person in whose name such note was registered at the close of business on the preceding May 6 and November 6, whether or not a business day (as defined below). For purposes of this prospectus supplement, “business day” is a day other than a Saturday, a Sunday or any other day on which banking institutions in New York, New York are authorized or required by law or executive order to remain closed.
If an interest payment date (other than the interest payment date that is also the date of maturity) would fall on a day that is not a business day, the payment of interest in respect of that interest payment date will be postponed to the following day that is a business day, except that if such next business day is in a different month, then the payment of interest in respect of that interest payment date will be on the day immediately preceding that interest payment date that is a business day. The amount of interest payable in respect of an interest payment date will remain the same notwithstanding that the actual day of payment thereof is changed in accordance with the preceding sentence. If the date of maturity is not a business day, the payment of principal of and interest on the notes will be made on the following day that is a business day, and no interest will accrue for the period from and after such date of maturity.
The issuance by CAF from time to time of its debt securities has been authorized by the resolutions of the Executive President of CAF dated July 7, 2021, and a further resolution dated, November 15, 2022, pursuant to powers delegated to the Executive President by Resolution No. 2410/2021 of the Board of Directors of CAF dated December 7, 2021.
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Form and Denominations
The Global Note
CAF will issue the notes in the form of one or more global debt securities (collectively, the “global note”) registered in the name of Cede & Co., as nominee of DTC. The global note will be issued:
• | only in fully registered form, and |
• | without interest coupons. |
You may hold beneficial interests in the global note directly through DTC if you have an account at DTC, or indirectly through organizations that clear through or maintain a custodial relationship with a DTC account holder, either directly or indirectly. Euroclear Bank SA/NV, as operator of the Euroclear System (“Euroclear”), and Clearstream Banking, S.A. (“Clearstream, Luxembourg”), are indirect participants in DTC, and therefore participants in Euroclear and Clearstream, Luxembourg will hold beneficial interests in the global notes indirectly at DTC.
Special Investor Considerations for Global Securities. Because you, as an investor, will not be a registered legal holder of the global note, your rights relating to the global note will be governed by the account rules of your bank or broker and of the depositary, DTC, as well as general laws relating to securities transfers. While the notes are held as global notes, CAF will not recognize a typical investor as a legal owner of the notes and instead will deal only with the fiscal agent and DTC or its nominee, the registered legal holder of the global note.
You should be aware that as long as the notes are issued only in the form of a global security:
• | You cannot get the notes registered in your own name. |
• | You cannot receive physical certificates for your interests in the notes. |
• | You will not be a registered legal holder of the notes and must look to your own bank or broker for payments on the notes and protection of your legal rights relating to the notes. |
• | You may not be able to sell interests in the notes to some insurance companies and other institutions that are required by law to own their securities in the form of physical certificates. |
• | As an owner of beneficial interests in the global note, you may not be able to pledge your interests to anyone who does not have an account with DTC, or to otherwise take actions in respect of your interests, because you cannot get physical certificates representing those interests. |
• | DTC’s policies will govern payments of principal and interest, transfers, exchanges and other matters relating to your interest in the global note. CAF and the fiscal agent have no responsibility for any aspect of DTC’s actions or for its records of ownership interests in the global note. Also, CAF and the fiscal agent do not supervise DTC in any way. |
• | DTC will require that interests in the global note be purchased or sold within its system using same-day funds. |
Description of DTC. CAF understands that:
DTC is a limited purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the Uniform Commercial Code and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
DTC was created to hold securities for financial institutions that have accounts with it, and to facilitate the clearance and settlement of securities transactions between the account holders through electronic book-entry changes in their accounts, thereby eliminating the need for physical movement of certificates. DTC account
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holders include securities brokers and dealers, banks, trust companies and clearing corporations. Indirect access to the DTC system is also available to banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a DTC account holder, either directly or indirectly.
DTC’s rules are on file with the SEC.
DTC’s records reflect only the identity of the account holders to whose accounts beneficial interests in the global note are credited. These account holders may or may not be the owners of the beneficial interests so recorded. The account holders will be responsible for keeping account of their holdings on behalf of the beneficial owners.
Definitive Notes
In a few special situations described in the next paragraph, the global note will terminate and your interests in it will be exchanged for physical certificates representing the notes (the “definitive notes”). After that exchange, the choice of whether to hold the definitive notes directly or in “street name” (in computerized book-entry form) will be up to you. You must consult your own bank or broker to find out how to have your interests in the definitive notes transferred to your own name, if you wish to be a direct legal holder of the definitive notes.
CAF will cause definitive notes to be issued in exchange for the global note if it decides in its sole discretion not to have any of the notes represented by the global note or if DTC or its nominee notifies CAF that:
• | it is unwilling, unable or no longer qualified to continue acting as the depositary for the global note and CAF does not appoint a successor depositary within 90 days; |
• | it has ceased to be a clearing agency registered under the Exchange Act at a time when it is required to be so registered and CAF does not appoint a successor depositary within 90 days; or |
• | an event of default with respect to the notes represented by the global note has occurred and is continuing as described under “Description of the Debt Securities — Default; Acceleration of Maturity” in the accompanying prospectus. |
CAF would issue definitive notes:
• | in fully registered form; |
• | without interest coupons; and |
• | in denominations of multiples of USD 1,000. |
Any definitive notes issued in this way would be registered in the names and denominations requested by DTC.
Payments on the Notes
The Global Notes. The fiscal agent will make payments of principal of, and interest on, the global notes to Cede & Co., the nominee for DTC, as the registered owner. The principal of, and interest on, the notes will be payable in immediately available funds in U.S. dollars.
CAF understands that it is DTC’s current practice, upon DTC’s receipt of any payment of principal of, or interest on, global securities such as the global note, to credit the accounts of DTC account holders with payment in amounts proportionate to their respective beneficial interests in the principal amount of the global note as shown on the records of DTC. Payments by DTC account holders to owners of beneficial interests in the global note held through these account holders will be the responsibility of the account holders, as is now the case with securities held for the accounts of customers registered in “street name.”
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Neither CAF nor the fiscal agent will have any responsibility or liability for any aspect of DTC’s or its account holders’ records relating to, or payments made on account of, beneficial ownership interests in the global note or for maintaining, supervising or reviewing any records relating to these beneficial ownership interests.
“Street name” and other owners of beneficial interests in the global note should consult their banks or brokers for information on how they will receive payments.
Definitive Notes. Payment of the principal of definitive notes, if any exist, may be made at the office of the fiscal agent. Payment of the interest on definitive notes will be paid by check mailed to you if you are a registered holder of definitive notes. At the request of a registered holder of more than USD 1,000,000 principal amount of definitive notes, payments of principal or interest may be made to that holder by wire transfer.
Unclaimed Payments on the Notes. Any monies CAF pays to the fiscal agent or any paying agent for the payment of the principal of or interest on any notes that remain unclaimed at the end of two years after such principal or interest has become due and payable will be repaid to CAF by such agent. Upon such repayment, all liability of the fiscal agent or any paying agent with respect to such monies shall thereupon cease, without, however, limiting in any way CAF’s unconditional obligation to pay principal of or any interest on the notes when due.
Transfer and Exchange of the Notes
The Global Note. Except as described below, the global note may be transferred, in whole and not in part, only to DTC, to one or more nominees of DTC or to a successor of DTC or its nominee.
Beneficial Interests in the Global Note. Beneficial interests in the global note will be represented, and transfers of such beneficial interests will be made, through accounts of financial institutions acting on behalf of beneficial owners either directly as account holders, or indirectly through account holders, at DTC. Beneficial interests will be in multiples of USD 1,000.
Definitive Notes. You may present definitive notes, if any exist, for registration of transfer or exchange at the corporate trust office of the fiscal agent in The City of New York, which CAF has appointed as the security registrar and transfer agent for the notes.
Notices
Notices will be sent by mail to the registered holders of the notes. If the notes are represented by a global note, any such notices will be delivered to DTC.
Certain Other Provisions
You should refer to the accompanying prospectus under the heading “Description of the Debt Securities” for a description of certain other provisions of the notes and the fiscal agency agreement.
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GLOBAL CLEARANCE AND SETTLEMENT PROCEDURES
Initial settlement for interests in the notes will be made in same-day U.S. dollar funds.
With regard to secondary market trading of interests in the notes, CAF understands the following:
Secondary market sales of interests in the notes between DTC participants will occur in the ordinary way in accordance with DTC rules. Secondary market sales of interests in the notes held through Euroclear or Clearstream, Luxembourg to purchasers of interests in the notes through Euroclear or Clearstream, Luxembourg will be conducted in accordance with the applicable rules and operating procedures of Euroclear and Clearstream, Luxembourg and will be settled using the procedures applicable to conventional eurobonds.
Cross-market transfers between persons holding interests in the notes directly or indirectly through DTC participants, on the one hand, and directly or indirectly through Euroclear or Clearstream, Luxembourg participants, on the other, will be effected in DTC in accordance with DTC rules on behalf of the relevant international clearing system by its U.S. depositary; however, such cross-market transactions will require delivery of instructions to the relevant international clearing system by the counterparty in such system in accordance with its rules and procedures and within its established deadlines (European time). The relevant international clearing system will, if a transaction meets its settlement requirements, deliver instructions to its U.S. depositary to take action to effect final settlement on its behalf by delivering or receiving interests in the notes in DTC, and making or receiving payment in accordance with normal procedures for settlement in DTC. Euroclear participants and Clearstream, Luxembourg participants may not deliver instructions directly to the respective U.S. depositary.
Because of time-zone differences, credits of interests in the notes received in Euroclear or Clearstream, Luxembourg as a result of a transaction with a DTC participant will be made during subsequent securities settlement processing and will be dated the business day following the DTC settlement date. Such credits or any transactions in such interests in the notes settled during such processing will be reported to the relevant Euroclear or Clearstream, Luxembourg participants on such business day. Cash received in Euroclear or Clearstream, Luxembourg as a result of sales of interests in the notes by or through a Euroclear participant or a Clearstream, Luxembourg participant to a DTC participant will be received with value on the DTC settlement date but will be available in the relevant Euroclear or Clearstream, Luxembourg cash account only as of the business day following settlement in DTC.
Although CAF expects that DTC, Euroclear and Clearstream, Luxembourg will follow the foregoing procedures in order to facilitate transfers of interests in notes among participants of DTC, Euroclear and Clearstream, Luxembourg, they are under no obligation to perform or continue to perform such procedures, and such procedures may be changed or discontinued at any time. None of CAF, the fiscal agent or any other agent will have any responsibility for the performance by any clearing system, or their respective direct or indirect participants or accountholders, of their respective obligations under the rules and procedures governing their operations.
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Under the terms and subject to the conditions contained in an underwriting agreement dated August 9, 2019 and a related pricing agreement dated November 15, 2022, CAF has agreed to sell to the underwriters named below and, subject to certain conditions, each underwriter has severally agreed to purchase the following respective principal amounts of notes:
Underwriter | Principal Amount | |||
Barclays Bank PLC | USD 200,000,000 | |||
Citigroup Global Markets Limited | USD 200,000,000 | |||
Daiwa Capital Markets Europe Limited | USD 200,000,000 | |||
J.P. Morgan Securities plc | USD 200,000,000 | |||
|
| |||
Total | USD 800,000,000 | |||
|
|
The underwriting agreement and related pricing agreement provide that the underwriters are obligated to purchase all of the notes if any are purchased.
CAF has agreed to indemnify the several underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make in respect of those liabilities.
The underwriters are offering the notes, subject to prior sale, when, as and if issued to and accepted by them, subject to certain conditions contained in the underwriting agreement and the related pricing agreement, such as the receipt by the underwriters of officer’s certificates and legal opinions. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.
CAF estimates that its out-of-pocket expenses for this offering will be approximately USD 300,000.
Commissions and Discounts
The underwriters propose to offer the notes initially at the public offering price on the cover page of this prospectus supplement. After the initial public offering the underwriters may change the public offering price and may allow concessions and discounts to broker/dealers.
Trading of the Notes
One or more of the underwriters intends to make a secondary market for the notes. However, the underwriters are not obligated to do so and may discontinue making a secondary market for the notes at any time without notice. These transactions may be effected on the London Stock Exchange, in the over-the-counter market or otherwise. No assurance can be given as to how liquid the trading market for the notes will be.
Price Stabilization and Short Positions
In connection with the offering the underwriters may engage in stabilizing transactions, syndicate covering transactions and penalty bids.
• | Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum. |
• | Syndicate-covering transactions involve purchases of the notes in the open market after the distribution has been completed in order to cover syndicate short positions. A short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the notes in the open market after pricing that could adversely affect investors who purchase in the offering. |
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• | Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the notes originally sold by the syndicate member are purchased in a stabilizing transaction or a syndicate covering transaction to cover syndicate short positions. |
These stabilizing transactions, syndicate-covering transactions and penalty bids may have the effect of raising or maintaining the market price of the notes or preventing or retarding a decline in the market price of the notes. As a result, the price of the notes may be higher than the price that might otherwise exist in the open market. These transactions, if commenced, may be discontinued at any time.
In connection with the issue of the notes, Citigroup Global Markets Limited, as the Stabilization Manager (or persons acting on behalf of any Stabilization Manager) may over-allot notes or effect transactions with a view to supporting the market price of the notes at a level higher than that which might otherwise prevail. However, stabilization may not necessarily occur. Any stabilization action may begin on or after the date on which adequate public disclosure of the terms of the offer of the notes is made and, if begun, may cease at any time, but it must end no later than the earlier of 30 days after the issue date of the notes and 60 days after the date of the allotment of the notes. Any stabilization action or over-allotment must be conducted by the relevant Stabilization Manager (or person(s) acting on behalf of any Stabilization Manager) in accordance with all applicable laws and rules.
Settlement and Sales of Notes
CAF expects the delivery of the notes will be made against payment therefor on or about the closing date specified on the cover page of this prospectus supplement, which is the fifth business day following the date hereof (this settlement cycle being referred to as “T+5”). Under Rule 15c6-1 of the SEC under the Exchange Act, trades in the secondary market generally are required to settle in two business days, unless the parties to that trade expressly agree otherwise. Accordingly, purchasers who wish to trade notes on the date hereof or the next four succeeding business days will be required, by virtue of the fact that the notes initially will settle in T+5, to specify an alternate settlement cycle at the time for any such trade to prevent a failed settlement and should consult their own advisor.
Selling Restrictions
The underwriters have represented and agreed that they have not and will not offer, sell or deliver any of the notes directly or indirectly, or distribute this prospectus supplement or the accompanying prospectus or any other offering material relating to the notes, in or from any jurisdiction except under circumstances that will result in compliance with the applicable laws and regulations thereof and in a manner that will not impose any obligations on CAF except as set forth in the underwriting agreement and related pricing agreement.
Brazil. The notes have not been and will not be registered with the “Comissão de Valores Mobiliários” — the Brazilian Securities Commission — and accordingly, the notes may not and will not be sold, promised to be sold, offered, solicited, advertised and/or marketed within the Federative Republic of Brazil, except in circumstances that cannot be construed as a public offering or unauthorized distribution of securities under Brazilian laws and regulations. Documents relating to an offering of the notes, as well as the information contained therein, may not be supplied or distributed to the public in Brazil nor be used in connection with any offer for subscription or sale of the notes to the public in Brazil.
Canada. No prospectus has been filed with any securities commission or similar regulatory authority in Canada in connection with the offer and sale of the notes, the notes have not been, and will not be, qualified for sale under the securities laws of Canada or any province or territory thereof and no securities commission or similar regulatory authority in Canada has reviewed or in any way passed upon this prospectus supplement or the merits of the notes and any representation to the contrary is an offence.
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The notes may not be offered, sold or distributed, directly or indirectly, in Canada or to or for the benefit of any resident of Canada, except in compliance with applicable securities laws and, without limiting the generality of the foregoing:
(a) any offer, sale or distribution of the notes in Canada has and will be made only to purchasers in that are “accredited investors” (as such term is defined in section 1.1 of National Instrument 45-106 Prospectus Exemptions (“NI 45-106”) or, in Ontario, as such term is defined in section 73.3(1) of the Securities Act (Ontario)), that are also a “permitted clients” (as such term is defined in section 1.1 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations), that are purchasing as principal, or are deemed to be purchasing as principal in accordance with applicable Canadian securities laws, and that is not a person created or used solely to purchase or hold the notes as an “accredited investor” as described in paragraph (m) of the definition of “accredited investor” in section 1.1 of NI 45-106;
(b) it is either (I) appropriately registered under applicable Canadian securities laws in each relevant province or territory to sell and deliver the notes, (II) such sale and delivery will be made through an affiliate of it that is so registered if the affiliate is registered in a category that permits such sale and has agreed to make such sale and delivery in compliance with the representations, warranties and agreements set out herein, or (III) it is relying on an exemption from the dealer registration requirements under applicable Canadian securities laws and has complied with the requirements of that exemption; and
(c) it has not and will not distribute or deliver this prospectus supplement, or any other offering material in connection with any offering of the notes, in or to a resident of Canada other than in compliance with applicable Canadian securities laws.
Hong Kong. The contents of this prospectus supplement have not been reviewed by any regulatory authority in Hong Kong. You are advised to exercise caution in relation to the offer of the notes. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice. This prospectus supplement does not constitute a “prospectus” (as defined in section 2(1) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32 of the Laws of Hong Kong) (the “Companies (Winding Up and Miscellaneous Provisions) Ordinance”)), nor is it an advertisement, invitation or document containing an advertisement or invitation falling within the meaning of section 103 of the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) (the “Securities and Futures Ordinance”). The notes may not be offered or sold in Hong Kong by means of any document other than (i) to “professional investors” as defined in the Securities and Futures Ordinance and any rules made thereunder, or (ii) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance or which do not constitute an offer to the public within the meaning of that Ordinance. No advertisement, invitation or document relating to the notes may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to notes which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the Securities and Futures Ordinance and any rules made thereunder. This prospectus supplement is strictly confidential to the person to whom it is addressed and must not be distributed, published, reproduced or disclosed (in whole or in part) by you to any other person in Hong Kong or used for any purpose in Hong Kong other than in connection with your consideration of the offer of the notes.
Indonesia. The notes under this prospectus supplement will be offered only to a strictly limited number of persons within the Republic of Indonesia so that such offering would not be considered to be a “public offering,” as defined in Article 1 section 15 of Law No. 8 of 1995 on Capital Markets, and no registration statement will need to be filed with the Financial Services Authority (Otoritas Jasa Keuangan).
You are advised to exercise caution in relation to the offering of the notes. If you are in any doubt about any of the contents of this prospectus supplement, you should obtain independent professional advice. This
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prospectus supplement is strictly confidential to the person to whom it is addressed and must not be distributed, published, reproduced or disclosed (in whole or in part) by you to any other person in the Republic of Indonesia or used for any purpose in the Republic of Indonesia other than in connection with your consideration of the offer of the notes.
Japan. The notes have not been and will not be registered under Article 4, Paragraph 1 of the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948, as amended) (the “FIEL”) since the offering in Japan constitutes the private placement to qualified institutional investors under Article 2, Paragraph 3, Item 2-A of the FIEL. Any transfer of the notes is prohibited except where it is transferred to qualified institutional investors, as defined in Article 10 of the Ordinance of Cabinet Office Concerning Definitions Provided in Article 2 of the Financial Instruments and Exchange Law of Japan.
People’s Republic of China. The notes may not be offered or sold directly or indirectly in the People’s Republic of China (for the purpose of this prospectus supplement, not including the Hong Kong Special Administrative Region, the Macao Special Administrative Region and Taiwan, “PRC”) and neither this prospectus supplement, which has not been submitted to China Securities Regulatory Commission or any other governmental authorities in the PRC, nor any offering material or information contained herein relating to the notes, may be circulated or distributed in the PRC or used in connection with any offer for the subscription or sale of shares in the PRC, except to the extent consistent with applicable laws and regulations of the PRC.
Republic of Korea. The notes offered under this prospectus supplement may not be offered, sold and delivered directly or indirectly, or offered or sold to any person for re-offering or resale, directly or indirectly, in Korea or to any resident of Korea except pursuant to the applicable laws and regulations of Korea, including the Financial Investment Services and Capital Markets Act and the Foreign Exchange Transaction Law and the decrees and regulations thereunder. For a period of one year from the issue date of the notes, no holder of the notes who is in Korea or a resident of Korea may transfer the notes in Korea or to any resident of Korea unless such transfer involves all of the notes held by it. The notes have not been registered with the Financial Services Commission of Korea for public offering in Korea. Furthermore, the notes may not be re-sold to Korean residents unless the purchaser of the notes complies with all applicable regulatory requirements (including but not limited to government approval requirements under the Foreign Exchange Transaction Law and its subordinate decrees and regulations) in connection with their purchase.
Singapore. This prospectus supplement has not been and will not be registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus supplement and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the notes may not be circulated or distributed, nor may the notes be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor (as defined in Section 4A of the SFA) pursuant to Section 274 of the SFA, (ii) to a relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA and (where applicable) Regulation 3 of the Securities and Futures (Classes of Investors) Regulations 2018, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where the notes are subscribed or purchased under Section 275 of the SFA by a relevant person which is: (a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, securities or securities-based derivatives contracts (each as defined in Section 2(1) of the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the notes pursuant to an offer made under Section 275 of the SFA, except: (1) to an institutional investor or to a relevant person or to any person arising from an offer referred to in
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Section 275(1A) or Section 276(4)(c)(ii) of the SFA; (2) where no consideration is or will be given for the transfer; (3) where the transfer is by operation of law; (4) as specified in Section 276(7) of the SFA; or (5) as specified in Regulation 37A of the Securities and Futures (Offers of Investments) (Securities and Securities-based Derivatives Contracts) Regulations 2018.
Any reference to the SFA is a reference to the Securities and Futures Act 2001 of Singapore and a reference to any term as defined in the SFA or any provision in the SFA is a reference to that term as modified or amended from time to time including by such of its subsidiary legislation as may be applicable at the relevant time.
Taiwan. The notes have not been and will not be registered or filed with, or approved by, the Financial Supervisory Commission of Taiwan and/or other regulatory authority or agency of Taiwan pursuant to relevant securities laws and regulations and may not be sold, issued or offered within Taiwan through a public offering or in circumstances which constitute an offer within the meaning of the Securities and Exchange Act of Taiwan or relevant laws and regulations that requires a registration, filing or approval of the Financial Supervisory Commission of Taiwan and/or other regulatory authority or agency of Taiwan. No person or entity in Taiwan has been authorized to offer or sell the notes in Taiwan.
United Kingdom. Each underwriter has represented and agreed that:
(a) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of any notes in circumstances in which Section 21(1) of the FSMA does not apply to CAF; and
(b) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to any notes in, from or otherwise involving the United Kingdom.
Underwriters and Affiliates
The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. Some of the underwriters and their affiliates have engaged in, and may in the future engage in, investment banking and other commercial dealings in the ordinary course of business with CAF. They have received, or may in the future receive, customary fees and commissions for these transactions.
In addition, in the ordinary course of their business activities, the underwriters and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve CAF’s securities and/or instruments. Certain of the underwriters or their affiliates that have a lending relationship with CAF routinely hedge their credit exposure to CAF consistent with their customary risk management policies. Typically, such underwriters and their affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in CAF’s securities, including potentially the notes offered hereby. Any such short positions could adversely affect future trading positions of the notes offered hereby. The underwriters and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.
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Latham & Watkins LLP will pass upon the validity of the notes on CAF’s behalf. Clifford Chance US LLP will pass upon the validity of the notes on behalf of the underwriters. Latham & Watkins LLP and Clifford Chance US LLP may rely as to certain matters on the opinion of Dr. Jorge Luis Silva Méndez, General Counsel of CAF.
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USD 3,000,000,000
CORPORACIÓN ANDINA DE FOMENTO
Debt Securities
Guarantees
Corporación Andina de Fomento (“CAF”) may from time to time offer up to USD 3,000,000,000 (or its equivalent in other currencies) aggregate principal amount of the securities described in this prospectus. The securities may be debentures, notes, guarantees or other unsecured evidences of indebtedness. In the case of debt securities sold at an original issue discount, CAF may issue a higher principal amount up to an initial public offering price of USD 3,000,000,000 (or its equivalent in other currencies).
The securities may be offered from time to time as separate issues. In connection with any offering, CAF will provide a prospectus supplement describing the amounts, prices, maturities, rates and other terms of the securities it is offering in each issue.
CAF may sell the securities directly to or through underwriters, and may also sell securities directly to other purchasers or through agents.
Neither the U.S. Securities and Exchange Commission (the “SEC”) nor any other regulatory body has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
Prospectus dated October 31, 2022
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Table of Contents
This prospectus is part of a registration statement that CAF filed with the SEC under the U.S. Securities Act of 1933, as amended (the “Securities Act”) using a “shelf” registration process. Under the shelf registration process, CAF may from time to time sell any combination of the securities described in this prospectus in one or more offerings up to a total dollar amount of USD 3,000,000,000 or the equivalent of this amount in foreign currencies or foreign currency units.
This prospectus provides you with a general description of CAF’s business and of the securities it may offer. Each time CAF sells securities, it will provide a prospectus supplement that will contain specific information about the terms of the securities in that offering. The prospectus supplement may also add, update or change information contained in this prospectus. You should read both this prospectus and any prospectus supplement before purchasing CAF’s securities. If the information in any prospectus supplement differs from the information in this prospectus or in the registration statement, you should rely on the information in the prospectus supplement.
The registration statement, any post-effective amendment to the registration statement and their various exhibits contain additional information about CAF, the securities it may issue and other matters. All of these documents may be inspected at the offices of the SEC.
You should rely only on the information in this prospectus or in other documents to which CAF has referred you in making your investment decision. CAF has not authorized anyone to provide you with information that is different. This prospectus may only be used where it is legal to sell these securities. The information in this prospectus may only be accurate on the date specified on the cover of this document.
Except as otherwise specified, all amounts in this prospectus are expressed in United States Dollars (“dollars,” “$,” “U.S.$”, “USD”, “US Dollars” or “U.S. dollars”).
All discrepancies between totals and the sums of the amounts appearing in this prospectus are due to rounding.
This prospectus may contain forward-looking statements. Statements that are not historical facts are statements about CAF’s beliefs and expectations and may include forward-looking statements. These statements are identified by words such as “believe,” “expect,” “anticipate,” “should” and words of similar meaning.
Forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual financial and other results may differ materially from the results discussed in the forward-looking statements. Therefore, you should not place undue reliance on them. Factors that might cause such a difference include, but are not limited to, those discussed in this prospectus, such as the effects of economic or political turmoil in one or more of CAF’s shareholder countries.
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CAF was established in 1968 pursuant to a Constitutive Agreement establishing the Corporación Andina de Fomento (the “Constitutive Agreement”), an international treaty, and seeks to foster and promote economic development within Latin America and the Caribbean. CAF is a multilateral financial institution, the principal shareholders of which are the current contracting parties to the Constitutive Agreement (each a “full member shareholder country” and collectively, the “full member shareholder countries”):
• | the Argentine Republic (“Argentina”); |
• | the Plurinational State of Bolivia (“Bolivia”); |
• | the Federative Republic of Brazil (“Brazil”); |
• | the Republic of Colombia (“Colombia”); |
• | the Republic of Ecuador (“Ecuador”); |
• | the Republic of El Salvador (“El Salvador”); |
• | the Republic of Panama (“Panama”); |
• | the Republic of Paraguay (“Paraguay”); |
• | the Republic of Peru (“Peru”); and |
• | the Republic of Trinidad and Tobago (“Trinidad and Tobago”); |
• | the Oriental Republic of Uruguay (“Uruguay”); and |
• | the Bolivarian Republic of Venezuela (“Venezuela”). |
The other shareholder countries of CAF are (each an “associated shareholder country” and collectively, the “associated shareholder countries”):
• | Barbados, |
• | the Republic of Chile (“Chile”); |
• | the Republic of Costa Rica (“Costa Rica”); |
• | the Dominican Republic (“Dominican Republic”); |
• | Jamaica; |
• | the United Mexican States (“Mexico”); |
• | the Portuguese Republic (“Portugal”); and |
• | the Kingdom of Spain (“Spain”). |
The full member shareholder countries and the associated shareholder countries are referred to collectively as “shareholder countries.”
All figures as of June 30, 2022, that refer to:
• | “full member shareholder countries” include all full member shareholder countries, except for El Salvador, which was in the process of becoming a full member shareholder country as of that date; |
• | “associated shareholder countries” include all associated shareholder countries; and |
• | “shareholder countries” include all shareholder countries. |
As of June 30, 2022, the full member shareholder countries collectively accounted for 90.03% of the nominal value of CAF’s paid-in capital. As of June 30, 2022, the associated shareholder countries collectively accounted for 9.92% of the nominal value of CAF’s paid-in capital. CAF’s shares are also held by 13 financial institutions based in the full member shareholder countries, which collectively accounted for 0.05% of the nominal value of the paid-in capital as of June 30, 2022.
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CAF commenced operations in 1970. CAF is headquartered in Caracas, Venezuela and has offices in Asunción, Paraguay; Bogotá, Colombia; Brasilia, Brazil; Buenos Aires, Argentina; Mexico City, Mexico; Panama City, Panama; La Paz, Bolivia; Lima, Peru; Madrid, Spain; Montevideo, Uruguay; Port of Spain, Trinidad and Tobago; and Quito, Ecuador.
CAF offers financial and related services to the governments of, and public and private institutions, corporations and joint ventures operating in, its shareholder countries. Primarily, CAF provides short-, medium- and long-term loans and guarantees. To a lesser extent, CAF also participates as a limited equity investor in corporations and investment funds, and provide technical and financial assistance, as well as administrative services for certain regional funds.
The Constitutive Agreement generally delegates to the Board of Directors of CAF (the “Board of Directors”) the power to establish and direct CAF’s financial, credit and economic policies. The Board of Directors has adopted a formal statement of CAF’s financial and operational policies. These operational policies provide CAF’s management with guidance as to significant financial and operational issues, and they may not be amended by the Board of Directors in any manner inconsistent with the Constitutive Agreement.
CAF promotes a sustainable development model through credit, non-refundable resources, and support in the technical and financial structuring of projects in the public and private sectors of Latin America.
CAF offers financial and related services to the governments of its stockholder countries, as well as their public and private institutions, corporations and joint ventures. CAF’s principal activity is to provide short, medium and long-term loans to finance projects, working capital, trade activities and to undertake feasibility studies for investment opportunities in shareholder countries. Furthermore, CAF manages and supervises third-party cooperation funds owned and sponsored by other countries and organizations, destined to finance programs agreed upon with donor countries and organizations which are in line with CAF’s policies and strategies.
CAF raises funds to finance its operations from sources both within and outside its shareholder countries.
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As an international treaty organization, CAF is a legal entity under public international law. CAF has international legal personality with full legal capacity, which permits it to enter into contracts, acquire and dispose of property and take legal action. The Constitutive Agreement has been ratified by the legislature in each of the full member shareholder countries. In addition, CAF has been granted the following immunities and privileges in each full member shareholder country:
• | immunity from expropriation, search, requisition, confiscation, seizure, sequestration, attachment, retention or any other form of forceful seizure by reason of executive or administrative action and immunity from enforcement of judicial proceedings by any party prior to final judgment; |
• | free convertibility and transferability of CAF’s assets; |
• | exemption from all taxes and tariffs on income, properties or assets, and from any liability involving payment, withholding or collection of any taxes; and |
• | exemption from any restrictions, regulations, controls or moratoria with respect to CAF’s property or assets. |
In addition, CAF has entered into agreements with each of its associated shareholder countries. Pursuant to these agreements, each country has agreed to extend immunities and privileges to CAF with respect to its activities in and concerning such country, these immunities and privileges are similar to those granted by the full member shareholder countries. CAF may also enjoy immunities and privileges under the laws of countries other than the full member shareholder countries and associated shareholder countries by virtue of its status as an international treaty organization or the identity of its shareholders.
The governments of some of CAF’s shareholder countries have historically taken actions, such as nationalizations and exchange controls that would be expected to adversely affect ordinary commercial lenders. In light of the immunities and privileges discussed above, CAF has not been adversely affected by these actions.
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Unless otherwise specified in the accompanying prospectus supplement, CAF will use the net proceeds of the sale of the securities for general corporate purposes.
On August 22, 2022, CAF’s Shareholders’ Assembly (the “Shareholders’ Assembly”) approved Honduras and Chile as full member shareholder countries effective after they fulfill all the necessary conditions. As of the date of this prospectus, Honduras and Chile must fulfill certain conditions in order to formalize their respective change of status to full member shareholder countries. Among other things, these conditions include, their direct or indirect subscription for ownership of a Series “A” share, the deposit of an instrument of adhesion with the Ministry of Foreign Affairs of Venezuela and, in the case of Chile, the exchange of all of Chile’s ordinary and callable Series “C” capital shares for Series “B” share equivalents.
On July 13, 2022, El Salvador became a full member shareholder country after fulfilling all the necessary conditions and approvals.
On March 8, 2022, the Shareholders’ Assembly approved Dominican Republic as a full member shareholder country effective after it fulfills all the necessary conditions. As of the date of this prospectus, Dominican Republic must fulfill certain conditions in order to formalize its change of status to full member shareholder country. Among other things, these conditions include, among others, its direct or indirect subscription for ownership of a Series “A” share, its exchange of all of its ordinary and callable Series “C” capital shares for Series “B” share equivalents and the deposit of an instrument of adhesion with the Ministry of Foreign Affairs of Venezuela.
See “Capital Structure—Process to Become a Full Member Shareholder Country” for more information regarding the conditions precedent for becoming a full member shareholder country.
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CAPITALIZATION AND INDEBTEDNESS
The following table sets forth CAF’s capitalization and indebtedness as of June 30, 2022 and does not give effect to any transaction since that date.
Capital | As of June 30, 2022(4) | |||
(in USD millions) | ||||
Total Liabilities(1)(3) | 33,354.8 | |||
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Shareholders’ equity | ||||
Capital | ||||
Subscribed and paid-in capital (authorized capital USD 25.0 billion)(2)(4) | 5,436.5 | |||
Additional paid-in capital | 4,091.5 | |||
Total capital | 9,528.0 | |||
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Reserves | ||||
Mandatory reserve pursuant to Article 42 of the Constitutive Agreement | 582.7 | |||
General reserve | 3,189.3 | |||
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Total reserves | 3,772.0 | |||
Retained loss | 14.4 | |||
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Total shareholders’ equity | 13,314.4 | |||
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Total liabilities and shareholders’ equity | 46,669.2 |
(1) | Commercial paper, deposits, bonds and borrowings from other financial institutions, accrued interest payable, accrued expenses and other liabilities and derivative financial instruments. |
(2) | Authorized capital also includes callable capital of USD 7.0 billion as of June 30, 2022. Subscribed capital USD 7.9 billion less callable capital portion USD 1.6 billion and less capital subscriptions receivable USD 0.9 billion. |
(3) | After June 30, 2022, there have been issuances of bonds, as described in “Supplementary Information (Unaudited) as of 30 June 2022.” |
(4) | See “Recent Developments” for more information on the most recent changes to capital since June 30, 2022. |
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General
As of June 30, 2022, CAF’s total authorized capital was USD 25.0 billion, of which USD 18.0 billion was ordinary capital shares and USD 7.0 billion was callable capital shares. On March 8, 2022, the Shareholders’ Assembly approved a general paid-in capital increase for a total amount of USD 7.0 billion. Bilateral subscription agreements with each shareholder country in connection with this capital increase are currently being negotiated and expected to be signed throughout 2022 and 2023.
CAF’s shares are divided into Series “A” shares, Series “B” shares and Series “C” shares.
Series “A” shares may be owned only by the full member shareholder countries. Each full member shareholder country owns one Series “A” share, which is held by its government, either directly or through a government-designated social or public purpose institution. Each of the full member shareholder countries owning a Series “A” share is entitled to elect one Director and one Alternate Director to the Board of Directors.
Series “B” shares are currently owned by the full member shareholder countries, and are held by their governments either directly or through designated governmental entities, except for certain Series “B” shares constituting approximately 0.05% of the outstanding shares of CAF as of June 30, 2022, which are owned by 13 private sector financial institutions of certain full member shareholder countries. CAF offered and sold Series “B” shares to private sector financial institutions in 1989 to obtain the benefit of their views in the deliberations of the Board of Directors. As owners of Series “B” shares, the full member shareholder countries collectively are entitled to elect five additional Directors and five additional Alternate Directors through cumulative voting, and the 13 private sector financial institutions collectively are entitled to elect one Director and one Alternate Director.
Series “C” shares are currently owned by eight associated shareholder countries. CAF makes Series “C” shares available for subscription by countries that are not full member shareholder countries to strengthen relationships between these countries and the full member shareholder countries. Ownership of Series “C” shares makes these countries eligible to receive loans from CAF. Holders of Series “C” shares collectively are entitled to elect two Directors and two Alternate Directors.
Under the Constitutive Agreement, Series “A” shares may be held by or transferred only to governments or government-designated social or public purpose institutions of full member shareholder countries. Series “B” shares also may be held by or transferred to such entities and, in addition, may be held by or transferred to private entities or individuals in the full member shareholder countries, except that no more than 49% of the Series “B” shares within any country may be held by private entities or individuals. Series “C” shares may be held by or transferred to public or private entities or individuals the member shareholder countries. Unless a CAF shareholder country withdraws, Series “A” and Series “B” shares may only be transferred within such country.
The Constitutive Agreement (i) allows, under certain circumstances, Latin American and Caribbean countries, including those that are currently associated shareholder countries, to become full member shareholder countries and to own Series “A” shares, and (ii) includes a formal purpose of supporting sustainable development and economic integration within all of Latin America and the Caribbean, as opposed to within only the Andean region.
Process to Become a Full Member Shareholder Country
To become a full member shareholder country, an applicant must fulfill the following conditions precedent:
• | subscribe, directly or indirectly, for ownership of a Series “A” share, |
• | exchange all or any of its ordinary and callable Series “C” capital shares for Series “B” share equivalents, |
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• | meet any additional conditions for accession to full member shareholder country status as determined by the Shareholders’ Assembly, in its sole discretion (such as the amount of guaranteed capital that the country must subscribe for or the date of the first capital payment), and |
• | deposit an instrument of adhesion with the Ministry of Foreign Affairs of Venezuela. |
After it has fulfilled the above conditions, an applicant is deemed to have become a full member shareholder country 30 days following a determination of such compliance and fulfillment of all conditionals for accession by the Shareholders’ Assembly.
Liquidity Management in Exceptional Situations Program
On March 31, 2020, CAF implemented the Support Program for the Liquidity Management in Exceptional Situations (the “Program”). The Program was formally approved by CAF’s shareholders in the Shareholders’ Assembly meeting held on March 3, 2020. The Program was created in order to provide shareholder countries with flexibility, resources and support in the repayment of outstanding debt obligations, particularly for shareholder countries whose economies were expected to be materially and adversely impacted by the COVID-19 pandemic. As such, the Program allows CAF to repurchase outstanding shares of shareholder countries and apply the proceeds to service such country’s debt. In order to qualify for the Program, shareholders countries are required to have met at least two of the following indicators during at least three consecutive years immediately prior to the Program approval:
• | A gross domestic product decline of more than 15% per year; |
• | Annual inflation rate above 100%; and |
• | Less than six months of total international reserves of imports of goods and services. |
In September 2020, new admissions to the Program were terminated as no shareholder country, other than Venezuela, met the requirements of the Program.
Paid-in Capital and Unpaid Capital
As of June 30, 2022, CAF’s subscribed paid-in and unpaid capital (excluding callable capital) was USD 6.3 billion, of which USD 5.4 billion was paid-in capital and USD 0.9 billion was unpaid capital. The unpaid capital is receivable in installments according to the agreements subscribed with the shareholder countries. Over the years, CAF has had several increases of subscribed capital.
Since 1990, capital contributions made to CAF (valor patrimonial) comprise a premium paid on each Series “B” and Series “C” share purchased and the nominal USD 5,000 per share value established by CAF’s by-laws. The premium component of such capital contributions is determined at the beginning of each subscription and applies to all payments under that subscription.
Information regarding recent capital subscriptions and annual capital contributions made by shareholder countries as of June 30, 2022 is as follows:
Argentina
In March 2016, Argentina subscribed for an additional USD 572.0 million in Series “B” shares to be paid in seven installments, of which it paid USD 41.7 million in 2017, USD 88.4 million in 2018, USD 88.4 million in 2019, USD 88.4 million in 2020 and USD 88.4 million in 2021.
Bolivia
In 2009, Bolivia subscribed for an additional USD 105.0 million in Series “B” shares, to be paid in eight installments. The final installment was paid in 2017.
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In March 2016, Bolivia subscribed for an additional USD 190.0 million in Series “B” shares, to be paid in six installments, of which it paid USD 17.2 million in 2017 and USD 34.6 million in 2018, USD 34.6 million in 2019, USD 34.6 million in 2020 and USD 34.6 million in 2021.
Brazil
In 2009, Brazil subscribed for an additional USD 190.0 million in Series “C” shares to be paid in seven installments. The final installment was paid in 2017.
In July 2017, Brazil subscribed for an additional USD 572.0 million in Series “B” shares, to be paid in eight installments, of which it paid USD 20.1 million in 2018, USD 45.0 million in 2020, USD 26.2 million in 2021 and USD 16.9 million in 2022.
Colombia
In June 2012, Colombia subscribed for an additional USD 210.0 million in Series “B” shares to be paid in three installments. The final installment was paid in 2018.
In August 2012, Colombia subscribed for an additional USD 228.6 million in Series “B” shares. The final installment was paid in 2017.
In July 2016, Colombia subscribed for an additional USD 572.0 million in Series “B” shares, to be paid in eight installments, of which it paid USD 5.0 million in 2017, USD 5.0 million in 2018, USD 93.7 million in 2019, USD 93.7 million in 2020, USD 93.7 million in 2021 and USD 46.8 million in 2022.
Costa Rica
In September 2019, Costa Rica subscribed for USD 110.0 million in Series “C” shares, which it paid in full in 2019.
Dominican Republic
In 2009, Dominican Republic subscribed for an additional USD 17.0 million in Series “C” shares. The final installment was paid in 2017.
In February 2016, Dominican Republic subscribed for an additional USD 50.0 million in Series “C” shares, to be paid in four installments. The final instalment was paid in 2020.
In 2021, Dominican Republic subscribed to an additional USD 310.1 million in Series “C” shares, to be paid in six instalments, of which it paid USD 46.0 million in 2022.
Ecuador
In 2009, Ecuador subscribed for an additional USD 105.0 million in Series “B” shares to be paid in eight installments. The final installment was paid in 2017.
In June 2016, Ecuador subscribed for an additional USD 190.0 million in Series “B” shares, to be paid in six installments. The final instalment was paid in 2020.
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El Salvador
In December 2021, El Salvador began its process to become a full member shareholder country and subscribed for USD 460.0 million in Series “B” shares to be paid in seven installments, of which it paid USD 65.7 million in 2022.
In December 2021, El Salvador subscribed for USD 36.0 million in callable capital.
Mexico
In February 2017, Mexico subscribed for an additional USD 51.3 million in Series “C” shares, which it paid in full in 2017.
Panama
In 2009, Panama subscribed for an additional USD 55.0 million in Series “C” shares to be paid in seven installments. The final installment was paid in 2017.
In February 2012, Panama subscribed for an additional USD 91.5 million in Series “B” shares, to be paid in five installments. The final installment was paid in 2017.
In February 2016, Panama subscribed for an additional USD 190.0 million in Series “B” shares, to be paid in six installments beginning in 2017, of which it paid USD 17.2 million in 2017 and USD 34.6 million in 2018, USD 34.6 million in 2019, USD 34.6 million in 2020 and USD 34.6 million in 2021.
Paraguay
In 2009, Paraguay subscribed for an additional USD 55.0 million in Series “C” shares to be paid in seven installments. The final installment was paid in 2017.
In May 2012, Paraguay subscribed for an additional USD 91.5 million in Series “B” shares, to be paid in five installments. The final installment was paid in 2017.
In March 2016, Paraguay subscribed for an additional USD 190.0 million in Series “B” shares, to be paid in six installments, of which it paid USD 17.2 million in 2017 and USD 34.6 million in 2018, USD 34.6 million in 2019, USD 34.6 million in 2020, USD 34.6 million in 2021.
Peru
In March 2016, Peru subscribed for an additional USD 572.0 million in Series “B” shares, to be paid in eight installments, of which it paid USD 35.0 million in 2017, USD 76.7 million in 2018, USD 76.7 million in 2019, USD 76.7 million in 2020 and USD 230.2 million in 2021.
Portugal
In 2017, Portugal subscribed for USD 6.4 million in Series “C” shares to be paid in three equal installments. The final installment was paid in 2019.
Spain
In 2017, Spain subscribed for an additional USD 173.2 million of paid-in capital to be paid in five installments. The final instalment was paid in 2021.
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Trinidad and Tobago
In December 2018, Trinidad and Tobago subscribed for an additional USD 190.0 million of paid-in capital to be paid in eight installments, of which it paid USD 20.0 million in 2019, USD 20.0 million in 2020 and USD 25.0 million in 2021.
Uruguay
In 2009, Uruguay subscribed for an additional USD 55.0 million in Series “C” shares to be paid in seven annual installments. The final installment was paid in 2017.
In March 2016, Uruguay subscribed for an additional USD 190.0 million in Series “B” shares, to be paid in six installments, of which it paid USD 17.2 million in 2017, USD 34.6 million in 2018. USD 34.6 million in 2019, USD 34.6 million in 2020 and USD 34.6 million in 2021.
Venezuela
In 2009, Venezuela subscribed for an additional USD 380.0 million in Series “B” shares to be paid in eight installments. In December 2016, the subscription agreement was amended to provide for payment in nine installments. Venezuela has paid a total of USD 268.2 million as of September 30, 2017. In March 2018, the subscription agreement was amended to provide for payment in three installments, with the final installment scheduled to be paid in 2020. As of the date of this prospectus, USD 111.8 million to be paid under the subscription agreement, as amended in March 2018, is past due.
In March 2016 and May 2016, Venezuela subscribed for an additional USD 572.0 million in Series “B” shares. In March 2018, the agreement was amended to provide for payment in eight installments, with the final installment scheduled to be paid in 2025. As of the date of this prospectus, USD 240.8 million to be paid under the agreement, as amended in March 2018, is past due.
As of June 30, 2022, CAF has repurchased a total of 91,289 Series “B” shares totaling USD 1.3 billion from Venezuela. The proceeds were used to repay due and overdue amounts of principal and interest and deducting the amount of paid-in capital and additional paid-in capital to USD 456.4 million and USD 839.9 million, respectively. As a result of the Program, Venezuela is currently meeting its obligations in relation to its loan agreements with CAF. See “Liquidity Management in Exceptional Situations Program” for more information.
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The following table sets out the nominal value of CAF’s subscribed paid-in capital and unpaid capital as of June 30, 2022:
Shareholders | Paid-in Capital | Unpaid Capital | ||||||
(in USD thousands) | ||||||||
Series “A” Shares: | ||||||||
Argentina | 1,200 | — | ||||||
Bolivia | 1,200 | — | ||||||
Brazil | 1,200 | — | ||||||
Colombia | 1,200 | — | ||||||
Ecuador | 1,200 | — | ||||||
Panama | 1,200 | — | ||||||
Paraguay | 1,200 | — | ||||||
Peru | 1,200 | — | ||||||
Trinidad y Tobago | 1,200 | — | ||||||
Uruguay | 1,200 | — | ||||||
Venezuela | 1,200 | — | ||||||
Series “B” Shares: | ||||||||
Argentina | 595,395 | 62,225 | ||||||
Bolivia | 311,800 | 12,170 | ||||||
Brazil | 477,385 | 163,330 | ||||||
Colombia | 1,016,045 | 65,960 | ||||||
Ecuador | 325,575 | — | ||||||
El Salvador | 23,140 | 138,845 | ||||||
Panama | 188,965 | 12,170 | ||||||
Paraguay | 186,565 | 12,170 | ||||||
Peru | 1,057,160 | 27,015 | ||||||
Trinidad and Tobago | 140,185 | 44,005 | ||||||
Uruguay | 195,130 | 12,170 | ||||||
Venezuela | 386,945 | 240,780 | ||||||
Commercial Banks | 2,485 | — | ||||||
Series “C” Shares: | ||||||||
Barbados | 17,610 | — | ||||||
Chile | 27,705 | — | ||||||
Costa Rica | 55,190 | — | ||||||
The Dominican Republic | 68,980 | 93,005 | ||||||
Jamaica | 910 | — | ||||||
Mexico | 76,835 | — | ||||||
Portugal | 9,600 | — | ||||||
Spain | 259,695 | — | ||||||
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Total | 5,436,500 | 883,845 |
Reserves
Article 42 of the Constitutive Agreement requires that at least 10% of CAF’s net income in each year be allocated to a mandatory reserve until that reserve amounts to 50% of subscribed capital. The mandatory reserve can be used only to offset losses. The mandatory reserve is an accounting reserve. CAF also maintains a general reserve to cover contingent events and as a source of funding of last resort in the event of temporary illiquidity or when funding in the international markets is unavailable or impractical.
As of June 30, 2022, CAF’s reserves totaled USD 3.8 billion. At such date, the mandatory reserve pursuant to Article 42 of the Constitutive Agreement amounted to USD 0.6 billion, or 7.0%, of subscribed paid-in and capital subscriptions receivable, and the general reserve amounted to USD 3.2 billion.
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Callable Capital
In addition to CAF’s subscribed paid-in and un-paid capital, CAF’s shareholder countries have subscribed for callable capital totaling USD 1.6 billion as of June 30, 2022. CAF’s callable capital may be called by the Board of Directors to meet the obligations of CAF only to the extent that CAF is unable to meet such obligations with its own resources. See Note 16 to CAF’s audited financial statements, included elsewhere in this prospectus.
Callable Capital
In addition to CAF’s subscribed paid-in and un-paid capital, CAF’s shareholder countries have subscribed for callable capital totaling USD 1.6 billion as of June 30, 2022. CAF’s callable capital may be called by the Board of Directors to meet the obligations of CAF only to the extent that CAF is unable to meet such obligations with its own resources. See Note 16 to CAF’s audited financial statements, included elsewhere in this prospectus.
The Constitutive Agreement provides that the obligation of CAF’s shareholder countries to pay for the shares of callable capital, upon demand by the Board of Directors, continues until such callable capital is paid in full. Thus, CAF considers the obligations of shareholder countries to pay for their respective callable capital subscriptions to be binding obligations backed by the full faith and credit of the respective governments. If the callable capital were to be called, the Constitutive Agreement requires that the call be prorated among CAF’s shareholder countries in proportion to their shareholdings.
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SELECTED FINANCIAL INFORMATION
The following selected financial information as of and for the years ended December 31, 2021, 2020, and 2019 has been derived from the audited financial statements of CAF for those periods, which are included elsewhere in this prospectus. The financial statements of CAF have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”). The following selected financial information as of and for the six-month periods ended June 30, 2022 and 2021 (balance sheet as of June 30, 2021 not included therein) has been derived CAF’s unaudited condensed interim financial information and includes all adjustments, consisting of normal recurring adjustments, that CAF considers necessary for a fair presentation of its financial position at such dates and its results of operations for such periods. The results of the six-month period ended June 30, 2022, are not necessarily indicative of results to be expected for the full year. The selected financial information should be read in conjunction with CAF’s audited financial statements and notes thereto, its unaudited condensed interim financial information and the notes thereto and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included elsewhere in this prospectus.
Year Ended December 31, | June 30, | |||||||||||||||||||
2021 | 2020 | 2019 | 2022 | 2021 | ||||||||||||||||
(in USD thousands, except ratios) | ||||||||||||||||||||
Statements of Comprehensive Income | ||||||||||||||||||||
Interest income | 671,991 | 1,081,165 | 1,611,791 | 358,209 | 347,331 | |||||||||||||||
Interest expense | 371,275 | 595,157 | 951,077 | 242,238 | 191,683 | |||||||||||||||
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Net interest income | 300,716 | 486,008 | 660,714 | 115,971 | 155,648 | |||||||||||||||
Provision (credit) for loan losses | 29,869 | 2,923 | 52,395 | (3,713 | ) | (7,472 | ) | |||||||||||||
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Net interest income after provision (credit) for loan losses | 270,847 | 483,085 | 608,319 | 119,684 | 163,120 | |||||||||||||||
Non-interest income | 38,957 | 17,717 | 14,492 | 14,575 | 22,463 | |||||||||||||||
Non-interest expenses | 171,401 | 186,876 | 162,730 | 99,100 | 86,618 | |||||||||||||||
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Income before unrealized changes in fair value related to financial instruments and contributions to Stockholders’ Special Funds | 138,403 | 313,926 | 460,081 | 35,159 | 98,965 | |||||||||||||||
Unrealized changes in fair value related to other financial instruments | (3,388 | ) | (2,089 | ) | (5,273 | ) | 1,828 | 5,664 | ||||||||||||
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Income before Contributions to Stockholders’ Special Funds, net | 135,015 | 311,837 | 454,808 | 36,987 | 104,629 | |||||||||||||||
Contributions to Stockholders’ Special Funds | 30,000 | 72,015 | 129,226 | 22,543 | 10,404 | |||||||||||||||
Net income and total comprehensive income | 105,015 | 239,822 | 325,582 | 14,444 | 94,225 | |||||||||||||||
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Summarized Balance Sheet Data (end of period) | ||||||||||||||||||||
Total assets | 47,592,350 | 46,845,903 | 42,293,634 | 46,669,212 | 47,299,692 | |||||||||||||||
Total liabilities | 34,292,711 | 33,851,002 | 29,496,906 | 33,542,774 | 34,249,224 | |||||||||||||||
Total stockholders’ equity | 13,299,639 | 12,994,901 | 12,796,728 | 13,314,438 | 12,980,468 | |||||||||||||||
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Total liabilities and stockholders’ equity | 47,592,350 | 46,845,903 | 42,293,634 | 46,699,212 | 47,299,692 | |||||||||||||||
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Year Ended December 31, | June 30, | |||||||||||||||||||
2021 | 2020 | 2019 | 2022 | 2021 | ||||||||||||||||
(in USD thousands, except ratios) | ||||||||||||||||||||
Loan Portfolio and Equity Investments | ||||||||||||||||||||
Loans before allowance for loan losses and loan commissions, net of origination cost | 29,595,386 | 28,117,867 | 26,520,618 | 28,364,544 | 26,655,847 | |||||||||||||||
Allowance for loan losses | 76,650 | 95,015 | 91,642 | 156,344 | 87,543 | |||||||||||||||
Equity investments | 433,350 | 432,600 | 463,825 | 410,335 | 444,222 | |||||||||||||||
Selected Financial Ratios | ||||||||||||||||||||
Return on average total stockholders’ equity(1) | 1.0 | % | 2.4 | % | 3.7 | % | 1.1 | % | 1.5 | % | ||||||||||
Return on average paid-in capital(2) | 2.6 | % | 5.8 | % | 8.7 | % | 1.3 | % | 3.7 | % | ||||||||||
Return on average assets(3) | 0.3 | % | 0.7 | % | 1.1 | % | 0.2 | % | 0.4 | % | ||||||||||
Administrative expenses divided by average total assets | 0.3 | % | 0.3 | % | 0.4 | % | 0.4 | % | 0.3 | % | ||||||||||
Overdue loan principal as a percentage of loan portfolio (excluding non-accrual loans) | 0.0 | % | 0.0 | % | 0.5 | % | 0.0 | % | 0.0 | % | ||||||||||
Non-accrual loans as a percentage of loan portfolio | 0.4 | % | 0.2 | % | 0.3 | % | 0.4 | % | 0.4 | % | ||||||||||
Allowance for loan losses as a percentage of loan portfolio | 0.3 | % | 0.3 | % | 0.3 | % | 0.2 | % | 0.3 | % |
(1) | Income before unrealized changes in fair value related to financial instruments and Contributions to Stockholders’ Special Funds divided by annual average total stockholders’ equity. Annual average total stockholders’ equity is computed as the arithmetic average of total stockholders’ equity as of the beginning and the end of each period. Data for interim periods has been annualized. |
(2) | Income before unrealized changes in fair value related to financial instruments and Contributions to Stockholders’ Special Funds divided by annual average subscribed and paid-in capital. Annual average subscribed and paid-in capital is computed as the arithmetic average of subscribed and paid-in capital as of the beginning and the end of each period. Data for interim periods has been annualized. |
(3) | Income before unrealized changes in fair value related to financial instruments and Contributions to Stockholders’ Special Funds divided by annual average total assets. Annual average total assets is computed as the arithmetic average of total assets as of the beginning and the end of each period. Data for interim periods has been annualized. |
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with CAF’s audited financial statements and notes thereto, included elsewhere in this prospectus.
Market Overview and Portfolio Trends
Since 2020, important global developments have occurred, including:
• | the COVID-19 pandemic; |
• | low growth in Latin America; |
• | volatility in the price of certain commodities; and |
• | more recently, high levels of inflation and an increase in global interest rates. |
In addition, CAF is transitioning out of the use of the London Interbank Offered Rate (“LIBOR”) both in its loan portfolio and hedging of its financial liabilities.
The COVID-19 pandemic and the volatility in commodity prices have not adversely affected CAF’s results of operations. However, they have resulted in a downward adjustment of the external risk rating of some of its sovereign borrowers specifically during 2020 and to a lesser extent 2021, which led to a corresponding increase in its allowance for loan losses, according to the methodology described in “— Income Statement — Provision (Credit) for Loan Losses” below.
The rise in global interest rates due to rising inflation has had an impact on the valuation of the marketable securities of CAF’s liquidity portfolio, however this has been offset by the increase in interest rates charged to clients from CAF’s loan portfolio given that the majority of its loans are made in USD floating rate.
CAF’s loan portfolio has grown from USD 26.5 billion, as of December 31, 2019, to USD 28.4 billion, as of June 30, 2022, as a result of its strategy to expand its shareholder base without affecting its capitalization ratios, principally through additional paid-in capital contributions by several shareholder countries, as well as the issuance of shares to new shareholder countries. These two main drivers also led CAF’s loan portfolio to grow by 5.3% in 2021, 6.0% in 2020 and 5.3% in 2019.
As of June 30, 2022, CAF’s loan portfolio was distributed by country as follows:
Ecuador | 14.7 | % | ||
Argentina | 13.0 | % | ||
Colombia | 12.2 | % | ||
Panama | 10.0 | % | ||
Venezuela | 9.4 | % | ||
Bolivia | 9.0 | % | ||
Brazil | 7.9 | % | ||
Paraguay | 5.8 | % | ||
Peru | 4.6 | % | ||
Trinidad and Tobago | 4.0 | % | ||
Uruguay | 3.2 | % | ||
Mexico | 2.2 | % | ||
Costa Rica | 1.9 | % | ||
Dominican Republic | 1.4 | % | ||
Barbados | 0.6 | % | ||
Chile | 0.2 | % |
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Notwithstanding the presence of other state-sponsored development banks in the regions in which CAF operates, CAF does not expect that the growth of its loan portfolio will be materially affected by the activities of other development banks in these regions, since the financing needs of its shareholder countries exceed the current supply of lending resources. CAF believes that activities of other development banks in the regions in which it operates are complementary to its lending operations.
LIBOR Replacement
The replacement of LIBOR with a new reference rate or rates is an industry risk due to the implications it has on the assets as well as the liabilities of financial institutions. In that regard, CAF has been closely following the recent developments and announcements from groups and organizations that are most closely involved with the phasing out of LIBOR that affect the loan and derivatives markets, including the International Swaps and Derivatives Association (“ISDA”) and its recent publication of the ISDA 2020 IBOR Fallbacks Protocol, to which CAF adhered in January 2021. In addition, CAF has established an interdepartmental task force in charge of preparing the institution for the change in reference rates, including measures such as the incorporation of fallback provisions on loans to mitigate any possible impact LIBOR replacement may have. As of January 1, 2022, all loans originated will be linked to the reference rate Term Secured Overnight Funding Rate (“SOFR”). New financial liabilities will also be hedged to SOFR. Legacy loans that are referenced to LIBOR rate will be converted after June 2023 when LIBOR rate ceases to be representative. It is for this reason that CAF expected the LIBOR transition to occur smoothly. If SOFR or another rate does not achieve wide acceptance as the alternative to LIBOR, there likely will be disruption in financial markets. In the event that SOFR or another reference rate is widely accepted, risks will remain related to outstanding loans, borrowings, derivatives and other instruments using LIBOR related to transitioning those instruments to a new reference rate and the corresponding value transfer that may occur in connection with that transition, as the new reference rate will not exactly mimic LIBOR.
On the funding side, CAF has ceased issuance of Floating Rate Notes (“FRN”) linked to LIBOR, and all outstanding LIBOR FRNs (totaling USD 100 million) will reset before the first half of 2023. On June 15, 2021, CAF issued its first FRN bond that is linked to the SOFR rate for USD 400 million, an important step in the LIBOR transition process.
Recent Developments Relating to Sanctions
The Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”) administers sanctions in respect of the Government of Venezuela and certain Venezuelan-related individuals and entities, including certain Venezuelan government officials. CAF is not a U.S. Person and has not been sanctioned; however, the following discussion of the current sanctions administered by OFAC is included because Venezuela is a member shareholder country and minority shareholder of CAF, with which CAF has had transactional activity, including loans to Venezuela.
With regard to any individual or entity who has been added to OFAC’s list of Specially Designated Nationals and Blocked Persons (“SDN List”) under Venezuela-related 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, or otherwise deal in property or interests in property of such persons. The OFAC-administered sanctions also prohibit, among other things and with certain limited exceptions:
• | 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 |
• | 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). |
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For purposes of these sanctions, certain amendments to outstanding debt of the Government of Venezuela, such as an extension of the maturity date, could be considered a “new debt” or other prohibited extension of credit. Unless otherwise specified in the relevant prospectus supplement, CAF will use the net proceeds of securities issued under this prospectus to fund its lending operations. CAF will not earmark the proceeds of particular issuances of securities to fund specific loan commitments or purchase specific investments. Accordingly, CAF believes that purchasers of securities will not acquire a direct or indirect interest in CAF’s loans to Venezuela, or any other specific assets of CAF, for purposes of the OFAC sanctions.
Although Venezuela is a member shareholder country and minority shareholder of CAF and two Venezuelan nationals designated by Venezuela serve as directors on the Board of Directors of CAF, neither the Government of Venezuela nor any member of the Board of Directors (whether or not a Venezuelan national) exercises control over CAF, has any operational or management role in CAF, or has any authority to negotiate on behalf of CAF or make binding commitments on behalf of CAF.
Although CAF generally is not required to comply with the OFAC sanctions outlined above because CAF is not a U.S. person and does not operate in or from the United States, CAF also transacts in the ordinary course with various commercial counterparties in the United States that are required to comply with OFAC sanctions. Some of these U.S. counterparties may serve as correspondent banks or as other intermediaries with involvement in funds flows in respect of CAF’s loan operations, including CAF’s loans to the Government of Venezuela. In addition, U.S. persons may purchase CAF’s debt securities. CAF has been monitoring and will continue to monitor OFAC sanctions and restrictions thereunder as applied to U.S. persons insofar as such sanctions and restrictions may have an effect on CAF’s business and operations.
The OFAC sanctions on Venezuela, and any additional sanctions that may be imposed in the future, could make it more difficult for Venezuela to service or renegotiate its outstanding debt, including its outstanding loans from CAF.
In light of the November 2017 downgrade in Venezuela’s long-term foreign ratings by Standard & Poor’s and Fitch, to selective default (“SD”) from CC and to restricted default (“RD”) from C, respectively, CAF increased its provisions for loan losses with respect to loans made to Venezuela to USD 28.3 million as of March 31, 2019 from the USD 19.8 million reported in September 2017. As a result of the change in the methodology described in “— Income Statement — Provision (Credit) for Loan Losses” below, the provision for loan losses for Venezuela was USD 0.0 as of December 31, 2021 and June 30, 2022. See Note 2 and Note 6 of the audited financial statements included elsewhere in this prospectus. On December 29, 2017, CAF granted to the Central Bank of Venezuela a credit facility in a total amount of USD 400 million. As of September 30, 2018, the credit facility was disbursed in full.
On December 14, 2018, CAF granted to the Central Bank of Venezuela a credit facility in a total amount of USD 500 million. As of December 31, 2019, the credit facility was disbursed in full.
On January 25, 2019, President Trump signed an Executive Order amending prior economic sanctions targeting the Maduro government, and on January 28, 2019, Petróleos de Venezuela S.A. (“PDVSA”) and certain of its affiliates were designated under Executive Order 13850 and added to the SDN List.
CAF does not have direct lending relationships with PDVSA or its subsidiaries. The sanctions on PDVSA and its affiliates, however, may adversely affect the ability of the Maduro government to receive payment for PDVSA’s production and sale of oil and related products and may therefore adversely affect macroeconomic conditions in Venezuela. As a result, Venezuela may find it more difficult to service its outstanding debt, including its outstanding loans from CAF.
On March 22, 2019, OFAC designated the Economic and Social Development Bank of Venezuela (“BANDES”) under Executive Order 13850 for operating in the financial sector of the Venezuelan economy and added it to the SDN List. As a result of that designation, all property and interests in property of BANDES,
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including any entity that is owned, directly or indirectly, 50% or more by BANDES, located in the United States or in the possession or control of U.S. persons, are blocked and must be reported to OFAC by persons subject to OFAC jurisdiction. BANDES is a “B” shareholder of CAF and holds approximately 8% of CAF’s equity. The designation of BANDES therefore does not extend to CAF. Moreover, CAF is not a U.S. person and, therefore, the current sanctions regulations do not prevent CAF from engaging in transactions or dealings with BANDES that occur outside of U.S. jurisdiction. CAF continues to maintain a control framework aimed at verifying its counterparties against OFAC’s SDN List and other applicable sanctions lists.
On April 17, 2019, OFAC designated the Central Bank of Venezuela under Executive Order 13850 for operating in the financial sector of the Venezuelan economy and added it to the SDN List. At the same time, OFAC issued General License 20 (“GL 20”), which authorizes certain transactions and activities that are for the official business of certain international organizations, including CAF. OFAC has amended the relevant general license twice since April 2019, most recently on January 21, 2020 with the issuance of GL 20B. GL 20B authorizes CAF to conduct transactions and activities involving the Central Bank of Venezuela to the extent they are subject to U.S. jurisdiction and are for CAF’s official business, to the same extent as was permitted prior to the designation of the Central Bank of Venezuela. Accordingly, the designation of the Central Bank of Venezuela has not had a material impact on CAF or its relationship with the Central Bank of Venezuela.
On August 5, 2019, President Donald Trump signed Executive Order 13884, which blocks all property and interests in property of the Government of Venezuela that are in or come within the United States or the possession or control of a U.S. person. For purposes of the Executive Order, the term “Government of Venezuela” is defined to include, among others, any person who has acted or purported to act directly or indirectly for or on behalf of the Government of Venezuela or of any political subdivision, agency or instrumentality thereof, including the Central Bank of Venezuela. The CAF directors appointed by Venezuela as a Series A shareholder and by BANDES as a Series B Shareholder may be considered to fall within the definition of “Government of Venezuela” in the Executive Order. On August 6, 2019, OFAC issued GL 20A (subsequently amended by GL 20B), authorizing official activities of certain international organizations, including CAF, involving the Government of Venezuela.
CAF consults with OFAC regarding its activities related to Venezuela and believes that CAF is in compliance with U.S. sanctions, to the extent CAF is subject to U.S. jurisdiction. CAF understands that any repurchase of securities of Venezuela under the Program should not be affected by sanctions or risk direct or indirect violations of sanctions. Should the repurchase of shares of Venezuela under the Program be considered subject to U.S. jurisdiction, CAF believes that GL 20B authorizes such activity. CAF has also implemented measures in order to segregate its U.S. Dollar treasury, including funds from the offering, from funds used for distributions to Venezuela, which are maintained in non-U.S. currencies. If OFAC took the position that CAF’s funds are fungible regardless of currency, it could expose purchasers of CAF’s securities to the risk of violating U.S. sanctions, in the event that GL 20B did not apply. Although GL 20A and GL 20B cover any Government of Venezuela person that is blocked solely pursuant to Executive Order 13884, they do not authorize transactions or dealings with any person other than the Central Bank of Venezuela whose property and interests in property are blocked under Executive Order 13850. CAF has not observed any material adverse effects on CAF following the issuance of Executive Order 13884, CAF does not anticipate that the blocking of the Government of Venezuela will have a material adverse effect on CAF in the future.
Other Recent Developments
In December 2021, El Salvador began its process to become a full shareholder member of CAF and subscribed to USD 460.0 million in Series “B” shares to be paid in seven installments. On July 13, 2022, El Salvador became a full member shareholder country after fulfilling all the necessary conditions and approvals.
Critical Accounting Policies
General
The financial statements of CAF are prepared in accordance with U.S. GAAP, which requires it in some cases to use estimates and assumptions that may affect its reported results and disclosures. CAF describes its significant
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accounting policies in Note 2 to its audited financial statements included elsewhere in this prospectus. Some of the more significant accounting policies CAF uses to present its financial results involve the use of accounting estimates that CAF considers to be critical because: (1) they require significant management judgment and assumptions about matters that are complex and inherently uncertain; and (2) the use of a different estimate or a change in estimate could have a material impact on CAF’s reported results of operations or financial condition.
Specifically, the estimates CAF uses to determine the allowance for loan losses are critical accounting estimates.
Additionally, other important estimates related to the preparation of CAF’s financial statements are those related to revenue recognition and the valuation and classification at fair values of financial instruments. The fair values for some financial assets and liabilities recorded in CAF’s financial statements are determined according to the procedures established by the accounting pronouncement ASC 820. As of the date of this prospectus, CAF has not changed or reclassified any asset or liability from one level to another pursuant to the hierarchy reflected in ASC 820, thereby maintaining consistency in the application of accounting principles in this matter.
Statements of Comprehensive Income
Interest Income
Six Months Ended June 30, 2022 and 2021. For the six-month period ended June 30, 2022, CAF´s interest income was USD 358.2 million, representing an increase of USD 10.9 million, or 3.1%, compared to interest income of USD 347.3 million for the corresponding period in 2021. This increase resulted from the growth of CAF’s loan portfolio and higher interest rates charged on loans that accrued interest based on six-month LIBOR and a spread differential. Average market interest rates were higher in the first six months of 2022, when six-month LIBOR averaged 1.44%, a significantly higher rate than that which existed during the first six months of 2021, when six-month LIBOR averaged 0.20%.
2021, 2020 and 2019. For the year ended December 31, 2021, CAF’s interest income was USD 672.0 million, representing a decrease of USD 409.2 million, or 37.8%, compared to interest income of USD 1,081.2 million for the year ended December 31, 2020. This decrease resulted primarily from lower interest rates charged on loans that accrue interest based on six-month LIBOR and a spread differential in 2020. Average market interest rates were lower during 2021, when six-month LIBOR averaged 0.20%, than in 2020, when six-month LIBOR averaged 0.69%. Interest income for the year ended December 31, 2020 was USD 1,081.2 million, representing a decrease of USD 530.6 million, or 32.9%, compared to interest income of USD 1,611.8 million for the year ended December 31, 2019. This decrease resulted primarily from lower interest rates in 2020. Average market interest rates were lower in 2020 than in 2019; in 2020, the six-month LIBOR averaged 1.50% compared with 2.40% in 2019.
Interest Expense
Six Months Ended June 30, 2022 and 2021. For the six-month period ended June 30, 2022, CAF’s interest expense was USD 242.2 million, representing an increase of USD 50.5 million, or 26.4%, compared to interest expense of USD 191.7 million for the corresponding period in 2021. This increase resulted from higher interest rates, specifically the six-month LIBOR. Average market interest rates were higher in the first six months of 2022, when six-month LIBOR averaged 1.44%, than in the first six months of 2021, when six-month LIBOR averaged 0.20%.
2021, 2020 and 2019. For the period ended December 31, 2021, CAF’s interest expense was USD 371.3 million, representing a decrease of USD 223.9 million, or 37.6%, compared to interest expense of USD 595.2 million for the corresponding period in 2020. This decrease resulted from lower overall funding costs due to the decrease in six-month LIBOR and the spread differential. Average market interest rates were lower in 2021, when six-month LIBOR averaged 0.20%, than in 2020, when six-month LIBOR averaged 0.69%. Interest expense for the year ended December 31, 2020 was USD 595.2 million, representing a decrease of
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USD 355.9 million, or 37.4%, from CAF’s interest expense of USD 951.1 million for the year ended December 31, 2019. This decrease resulted primarily from lower funding requirements related to a decrease in funding costs associated with a decrease in six-month LIBOR. The average amount of CAF’s liabilities increased by 14.8% for the year ended December 31, 2020, compared with the average for the year ended December 31, 2019. Average market interest rates were lower in 2020 than in 2019; in 2020, the six-month LIBOR averaged 1.50% compared with 2.40% in 2019.
Net Interest Income
Six Months Ended June 30, 2022 and 2021. For the six-month period ended June 30, 2022, CAF´s net interest income was USD 116.0 million, representing a decrease of USD 39.6 million, or 25.5%, compared to net interest income of USD 155.6 million for the corresponding period in 2021. This decrease resulted from primarily from higher interest rates that reduced the fair value of trading securities of CAF’s liquidity portfolio. The net interest income margin was 0.58% for the six-month period ended June 30, 2022, as compared to 0.70% for the corresponding period in 2021.
2021, 2020 and 2019. For the year ended December 31, 2021, CAF’s net interest income was USD 300.7 million, representing a decrease of USD 185.2 million, or 38.1%, over net interest income of USD 486.0 million for the year ended December 31, 2020. This decrease resulted from a decrease in interest rates explained in sections above. For the year ended December 31, 2020, CAF’s net interest income was USD 486.0 million, representing a decrease of USD 174.7 million, or 26.4%, over net interest income of USD 660.7 million for the year ended December 31, 2019. This decrease resulted from a decrease in interest rates explained in sections above. CAF’s net interest income margin was 0.67% in 2021, compared to 1.17% in 2020 and 1.69% in 2019.
Provision (Credit) for Loan Losses
CAF has adopted the requirements of ASU 2016-13 Financial Instruments — Credit Losses, along with several other subsequent codification updates related to accounting for credit losses, on January 1, 2020 following the modified- retrospective approach. As of March 31, 2020, the applicable Current Expected Credit Losses (“CECL”) was applied to assets such as loans measured at amortized cost basis, as well as off-balance-sheet undisbursed loan commitments and financial guarantees. As a result of the adoption, there was no cumulative-effect adjustment to the 2020 opening retained earnings. The allowance for credit losses is maintained at a level CAF believes to be appropriate to absorb expected lifetime credit losses over the contractual life of the loan portfolio and consider available information relevant to assessing the collectability of cash flows including a combination of internal and external information relating to past events, current conditions, and reasonable and supportable forecasts. A loan is considered in non-accrual status when, based on currently available information and events, it is probable that CAF will not recover the total amount of principal and interest as agreed in the terms of the original loan contract. The allowance for loan losses is determined on a loan-by-loan basis based on the present value of expected future cash flows, discounted at the original loan’s effective interest rate. CAF’s management individually evaluates the compliance of the new terms of the restructured loan for a reasonable period to calculate specific allowances for loan losses and if the remaining balance of the restructured loan is considered collectible, the restructured loan could return to accrual status. See Notes 2 and 6 to CAF’s audited financial statements included elsewhere in this prospectus.
Six Months Ended June 30, 2022 and 2021. For the six-month period ended June 30, 2022, CAF recorded a credit for loan losses of USD 3.7 million, compared with a credit for loan losses of USD 7.5 million for the corresponding period in 2021. The credit for loan losses was due to a decrease in the outstanding amount of private sector loans in the loan portfolio during the six-month period in 2022.
2021, 2020 and 2019. For the year ended December 31, 2021, CAF recorded a provision for loan losses of USD 29.9 million, representing an increase of USD 26.9 million, or 921.9%, compared with the provision for
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loan losses of USD 2.9 million for 2020. This increase was mainly due to the change on the calculation methodology for provisions (ASU 2016-13) related to the private sector credit risk and the sovereign credit risk. For the year ended December 31, 2020, CAF recorded a provision for loan losses of USD 2.9 million, representing a decrease of USD 49.5 million, or 94.4%, compared with the provision for loan losses of USD 52.4 million for 2019. This decrease was mainly due to the change on the calculation methodology for provisions (ASU 2016-13) and the reduction in loan loss provisions related to sovereign credit risk.
Non-Interest Income
CAF’s non-interest income consists principally of commissions, dividends arising from equity investments not accounted for using the equity method, its corresponding share of earnings or losses on equity investments, which are accounted for using the equity method, and other income.
Six Months Ended June 30, 2022 and 2021. For the six-month period ended June 30, 2022, CAF’s non-interest income was USD 14.6 million, representing a decrease of USD 7.9 million, or 35.1%, compared to non-interest income of USD 22.5 million for the corresponding period in 2021. This decrease was mainly due a decrease in other income.
2021, 2020 and 2019. For the period ended December 31, 2021, CAF’s non-interest income was USD 38.9 million, representing an increase of USD 21.2 million, or 119.9%, compared to non-interest income of USD 17.7 million for the corresponding period in 2020. This increase was mainly due to unrealized changes in fair value related to equity investments. For the year ended December 31, 2020, CAF’s total non-interest income was USD 17.7 million, representing an increase of USD 3.2 million, or 22.3%, from total non-interest income of USD 14.5 million for the previous year. This increase was mainly due to changes in the fair value and dividends related to equity investments.
Non-Interest Expenses
CAF’s non-interest expenses consist principally of administrative expenses, representing 85.3% and 89.5% of total non-interest expenses for the six-month periods ended June 30, 2022 and June 30, 2021, respectively.
Six Months Ended June 30, 2022 and 2021. For the six-month period ended June 30, 2022, CAF’s non-interest expense was USD 99.1 million, representing an increase of USD 12.5 million, or 14.4%, compared to non-interest expense of USD 86.6 million for the corresponding period in 2021. This increase was mainly due to an increase of USD 7.0 million or 9.1% in administrative expenses in comparison with the corresponding period in 2021.
CAF’s non-interest expenses consist principally of administrative expenses, representing 91.8% and 79.9% of total non-interest expenses for the years ended December 31, 2021 and December 31, 2020, respectively.
2021, 2020 and 2019. For the period ended December 31, 2021, CAF’s non-interest expenses were USD 171.4 million, representing a decrease of USD 15.5 million, or 8.3%, compared to total non-interest expenses of USD 186.9 million for the corresponding period in 2020. This decrease resulted principally from a decrease in provisions for contingent liabilities. For the year ended December 31, 2020, CAF’s total non-interest expenses were USD 186.9 million, representing an increase of USD 24.1 million, or 14.8%, over total non-interest expenses of USD 162.7 million for the year ended December 31, 2019.
Income before unrealized changes in fair value related to financial instruments and contributions to Stockholders’ Special Funds
Six Months Ended June 30, 2022 and 2021. For the six-month period ended June 30, 2022, CAF’s income before unrealized changes in fair value related to financial instruments and contributions to Stockholders’ Special
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Funds was USD 35.2 million, representing a decrease of USD 62.7 million, or 63.4%, compared to an income before unrealized changes in fair value related to financial instruments and contributions to Stockholders’ Special Funds of USD 99.0 million for the corresponding period in 2021. This decrease resulted primarily from higher interest rates that reduced the fair value of trading securities of the liquidity portfolio and the increase in funding costs due to higher interest rates.
2021, 2020 and 2019. For the period ended December 31, 2021, CAF’s income before unrealized changes in fair value related to financial instruments and contributions to Stockholders’ Special Funds was USD 138.4 million, representing a decrease of USD 175.5 million, or 55.9%, compared to income before unrealized changes in fair value related to financial instruments and contributions to Stockholders’ Special Funds of USD 313.9 million for year ended December 31, 2020. This decrease is primarily due to a reduction in non-interest income and a decrease in interest income. Net income before unrealized changes in fair value related to financial instruments and contributions to Stockholders’ Special Funds for the year ended December 31, 2020 was USD 313.9 million, representing a decrease of USD 146.2 million, or 31.8%, compared to income before unrealized changes in fair value related to financial instruments and contributions to Stockholders’ Special Funds of USD 460.1 million for 2019. This decrease is primarily due to a decrease in interest income and a decrease in loan loss provisions.
Net Income
Six months Ended June 30, 2022 and 2021. For the six-month period ended June 30, 2022, CAF’s net loss was USD 14.4 million, representing a decrease of USD 79.8 million, or -84.7%, compared to net income of USD 94.2 million for the corresponding period in 2021. This decrease resulted primarily from higher interest rates that reduced the fair value of trading securities of the liquidity portfolio and the increase in funding costs due to higher interest rate.
2021, 2020 and 2019. In March 2014, the Shareholders’ Assembly agreed, effective 2015, to approve a maximum amount to be contributed to Shareholders’ Special Funds during the fiscal year and to recognize these contributions as expenses. In 2021, CAF recognized USD 30.0 million as a contribution to Shareholders’ Special Funds, resulting in net income of USD 105.0 million, representing a decrease of USD 134.8 million, or 56.2%, compared to net income of USD 239.8 million for 2020. This decrease resulted primarily from a decrease in interest income as a result of lower average market rates that generated lower income in CAF’s loan portfolio and investment portfolio. In 2020, CAF recognized USD 72.0 million as a contribution to Shareholders’ Special Funds, resulting in net income of USD 239.8 million, representing a decrease of USD 85.8 million, or 26.3%, compared to net income of USD 325.6 million for 2019. This increase resulted primarily from an increase in CAF’s loan portfolio and an increase in the returns of its investment portfolio. See Note 22 to CAF’s audited financial statements included elsewhere in this prospectus.
Balance Sheet
Assets
June 30, 2022. As of June 30, 2022, CAF’s total assets were USD 46.7 billion, representing a decrease of USD 923.1 million, or 1.9%, over total assets of USD 47.6 billion as of December 31, 2021. The decrease in assets resulted primarily from a decrease in the outstanding amount of total loans that was reduced by 4.2% when compared with December 31, 2021 figures
2021 and 2020. As of December 31, 2021, CAF’s total assets were USD 47.6 billion, representing an increase of USD 746.4 million, or 1.6%, over total assets of USD 46.8 billion as of December 31, 2020. The increase in CAF’s total assets was principally due to the growth of its loan portfolio, which increased by USD 1.5 billion when compared to the year ended December 31, 2020.
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Liabilities
June 30, 2022. As of June 30, 2022, CAF’s total liabilities were USD 33.4 billion, representing a decrease of USD 937.9 million or 2.7%, over total liabilities of USD 34.2 billion as of December 31, 2021. The decrease in liabilities resulted primarily from a decrease in the outstanding amounts of Bonds, which decreased by 19.0% compared to December 31, 2021.
2021 and 2020. As of December 31, 2021, CAF’s total liabilities were USD 34.3 billion, representing an increase of USD 441.7 million, or 1.3%, over total liabilities of USD 33.9 billion as of December 31, 2020. The increase in CAF’s total liabilities resulted principally from an increase in outstanding amounts of Borrowings, Commercial Papers and Deposits, which increased by 6.0%, 76.0% and 19.9% respectively, when compared to the corresponding period on December 31, 2020.
Shareholders’ Equity
June 30, 2022. As of June 30, 2022, CAF’s total shareholders’ equity was USD 13.3 billion, representing an increase of USD 14.8 million, or 0.1%, over total shareholders’ equity of USD 13.3 billion as of December 31, 2021. The increase in CAF’s total shareholders’ equity resulted principally from an increase in earnings.
2021 and 2020. As of December 31, 2021, CAF’s total shareholders’ equity was USD 13.3 billion, representing an increase of USD 304.7 million, or 2.3%, over total shareholders’ equity of USD 13.0 billion as of December 31, 2020. The increase in CAF’s total shareholders’ equity resulted principally from an increase in paid-in capital.
Asset Quality
Overdue Loans
June 30, 2022. As of June 30, 2022, there were no overdue loans (not including non-accrual loans in overdue status), equal to the corresponding period in 2020. This was also the case as of December 31, 2020.
2021 and 2020. As of December 31, 2021, there were no overdue loans (not including non-accrual loans in overdue status) equal to the corresponding period in 2020. This was also the case as of December 31, 2020.
Non-accrual Loans
June 30, 2022. As of June 30, 2022, the total principal amount of CAF’s non-accrual was USD 104.6 million or 0.4% of the total loan portfolio, representing a decrease of USD 7.5 million over non-accrual loans of USD 112.1 million as of December 31, 2021. This decrease was primarily due to a loan that was written-off during the six-month period ended June 30, 2022. Loans in non-accrual status are from the private sector borrowers located in Peru, Brazil, Mexico and Colombia.
2021 and 2020. As of December 31, 2021, the total principal amount of CAF’s non-accrual loans was USD 112.1 million, or 0.4% of the total loan portfolio, and was related to private sector borrowers in Peru, Brazil, Mexico and Colombia. As of December 31, 2020, the total principal amount of CAF’s non-accrual loans was USD 69.1 million, or 0.3% of the total loan portfolio.
Restructured Loans
June 30, 2022. As of June 30, 2022, the total principal amount of outstanding restructured loans was USD 26.7 million, or 0.1% of the total loan portfolio. There were no restructured during the six-month period ended June 30, 2022.
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2021 and 2020. As of December 31, 2021, the total principal amount of outstanding restructured loans was USD 29.2 million, or 0.1% of the total loan portfolio. As of December 31, 2020, the total principal amount of outstanding restructured loans was USD 36.5 million, or 0.13% of the total loan portfolio.
Loan Write-offs and Recoveries
June 30, 2022. The total amounts of loans written-off during the six-month period ended June 30, 2022, was USD 5.0 million and no loans written-off during the six-month period offended June 30, 2021. CAF booked recoveries totaling USD 619.0 thousand during the six-month period ended June 30, 2022.
2021 and 2020. As of December 31, 2021, a total amount of USD 48.2 million loans were written off in comparison with the corresponding period in 2020, which had no loans written off. See “Operations of CAF — Asset Quality.” See “— Balance Sheet” above for details regarding the distribution of CAF’s loans by country and “Operations of CAF — Loan Portfolio” for details regarding the distribution of CAF’s loans by economic sector.
Liquidity
CAF’s liquidity policy requires it to maintain sufficient liquid assets to cover at least 12 months of net cash requirements.
Net cash requirements under this new policy are calculated as follows:
(+) | Scheduled loan collections |
(+) | Committed paid-in capital payments |
(-) | Scheduled debt service |
(-) | Committed disbursements |
CAF’s investment policy requires that at least 90% of CAF’s liquid assets be held in the form of investment grade instruments rated A-/A3/A- or better by a U.S. nationally-recognized statistical rating organization. The remaining portion of CAF’s liquid assets may be invested in non-investment grade instruments rated B-/Ba3/B or better by a U.S. nationally-recognized statistical rating organization. CAF’s investment policy emphasizes security and liquidity over yield.
As of June 30, 2022, CAF’s liquid assets consisted of USD 14.6 billion of cash, deposits with banks, marketable securities and other investments, of which 93.2% were invested in investment grade instruments rated A-/A3/A- or better by a U.S. nationally-recognized statistical rating organization; 28.4% of CAF’s liquid assets were invested in time deposits in financial institutions, 15.4% in commercial paper, 9.5% in corporate and financial institution bonds, 23.1% in certificates of deposit, 14.2% in U.S. Treasury Notes and 9.4% in other instruments, including deposits in cash.
As of December 31, 2021, CAF’s liquid assets consisted of USD 16.1 billion of cash, deposits with banks, marketable securities and other investments, of which 90.7% were invested in investment grade instruments rated A-/A3/A- or better by a U.S. nationally-recognized statistical rating organization; 21.7% of CAF’s liquid assets were invested in time deposits in financial institutions, 24.0% in commercial paper, 12.1% in corporate and financial institution bonds, 20.4% in certificates of deposit, 13.8% in U.S. Treasury Notes and 9.2% in other instruments, including deposits in cash.
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As of December 31, 2020, CAF’s liquid assets consisted of USD 14.7 billion of cash, deposits with banks, marketable securities and other investments, of which 91.8% were invested in investment grade instruments rated A-/A3/A- or better by a U.S. nationally-recognized statistical rating organization; 24.7% of CAF’s liquid assets were invested in time deposits in financial institutions, 19.7% in commercial paper, 15.2% in corporate and financial institution bonds, 19.8% in certificates of deposit, 13.8% in U.S. Treasury Notes and 6.8% in other instruments, including deposits in cash.
As of June 30, 2022, CAF’s liquid assets were distributed by country as follows:
United States | 32.1 | % | ||
Japan | 6.4 | % | ||
France | 4.2 | % | ||
China | 7.9 | % | ||
Australia | 1.2 | % | ||
Canada | 4.0 | % | ||
Switzerland | 4.2 | % | ||
South Korea | 3.7 | % | ||
Spain | 2.8 | % | ||
Chile | 7.9 | % | ||
Germany | 2.9 | % | ||
United Arab Emirates | 5.7 | % | ||
Qatar | 2.8 | % | ||
Supranationals | 5.8 | % | ||
Kuwait | 3.1 | % | ||
others | 3.8 | % |
As of December 31, 2021, CAF’s liquid assets were distributed by country as follows:
United States | 28.6 | % | ||
Japan | 13.8 | % | ||
France | 6.3 | % | ||
China | 8.8 | % | ||
Australia | 1.9 | % | ||
Canada | 2.9 | % | ||
Switzerland | 1.1 | % | ||
South Korea | 3.4 | % | ||
Spain | 3.8 | % | ||
Chile | 6.6 | % | ||
Germany | 5.2 | % | ||
Netherlands | 1.6 | % | ||
United Arab Emirates | 3.2 | % | ||
United Kingdom | 2.0 | % | ||
Qatar | 0.7 | % | ||
Ireland | 1.4 | % | ||
Supranationals | 2.0 | % | ||
Kuwait | 2.6 | % | ||
others | 2.3 | % |
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Commitments and Contingencies
CAF enters into commitments and contingencies in the normal course of business to facilitate its business and objectives. Commitments and contingencies include:
• | credit agreements subscribed and pending disbursements, |
• | lines and letters of credit for foreign trade, |
• | equity investment agreements subscribed and |
• | partial credit guarantees. |
See Note 21 to CAF’s audited financial statements included elsewhere in this prospectus.
Strategy and Capital Resources
CAF’s business strategy is to provide financing for projects, trade and investment in the shareholder countries. CAF’s management expects CAF’s assets to grow in the future, which will increase its need for additional funding. Likewise, maturing debt obligations will need to be replaced. In addition to scheduled capital increases, CAF’s management anticipates a need to increase funds raised in the international capital markets and to maintain funding through borrowings from multilateral and other financial institutions. While the substantial majority of CAF’s equity will continue to be held by full member shareholder countries, CAF intends to continue offering equity participation to associated shareholder countries through the issuances of Series “C” shares to such countries. See “Capital Structure.”
CAF intends to continue its programs to foster sustainable growth within the shareholder countries, and to increase its support for the private sector within their markets, either directly or through financial intermediaries. See “Operations of CAF.”
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The purpose of CAF is to foster and promote economic development, social development and integration within the shareholder countries through the efficient use of financial resources in conjunction with both private sector and public sector entities. To accomplish its objective, CAF primarily engages in short-, medium- and long-term loans and guarantees. To a lesser extent, CAF makes limited equity investments in funds and companies, and provides technical and financial assistance, as well as administrative services for certain regional funds.
CAF also provides lending for projects in associated shareholder countries, including but not limited to projects that promote trade or integration with full member shareholder countries.
Business Management of CAF
CAF’s business management is divided into two broad functions: client relationship management and financial management.
Client Relationship Management
CAF’s client relationship management function is conducted by a group of relationship managers and sector and product specialists who are responsible for the development, structuring, appraisal and implementation of its lending activities. Clients are identified through direct contact, referrals from CAF’s representative offices and referrals from third parties such as shareholders, multilateral institutions, international financial institutions and other clients.
CAF’s client relationship management function is currently fulfilled by the following two Vice-Presidencies:
• | The Corporate Vice Presidency of Strategic Programming which is responsible for the following departments: |
• | The Corporate Country Management, which is responsible for the relationships with governments, public sector corporations and financial institutions and for the development of a global approach to business activities in each of the shareholder countries; |
• | The Physical Infrastructure and Digital Transformation Management, which is responsible for the financing of public and private infrastructure projects and the analysis of public policies within the different development sectors; |
• | The Social and Human Development Management, which is responsible for financings and investments in social areas and in micro, small and medium size enterprises; |
• | The Urban Development and Creative Economies Department, which is responsible for financings and investments in water & sanitation projects as well as projects related to the urban agenda; |
• | The Gender, Inclusivity and Diversity Department, which is responsible for financings and investments in gender, inclusivity & diversity projects including projects involving ethnic and indigenous populations; and |
• | The Climate Action & Positive Biodiversity Department, which is responsible for financings and investments in mitigation, adaptation and biodiversity projects. |
• | A Private Sector Vice Presidency, which is responsible for the relationships with private sector corporations and financial institutions. |
The client relationship management group is also responsible for reviewing and developing lending policies and procedures and for monitoring the quality of the loan portfolio on an ongoing basis. In these duties, the client
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relationship management group is assisted by the Credit Administration Office and the Corporate Comptroller Office.
Financial Management
CAF’s financial management group is responsible for managing its funded debt, as well as its liquid assets. This group is responsible for developing, structuring, appraising and implementing CAF’s borrowing activities. It is also responsible for reviewing and developing policies and procedures for the monitoring of CAF’s financial well-being and for the proper management of liquidity. The financial management group is headed by the Vice President of Finance.
The asset distribution group is a part of the financial management group, and has two basic responsibilities:
• | structuring “A/B” loan transactions in which CAF lends a portion of the total amount and other financial institutions loan the remainder; and |
• | selling loans to international banks interested in increasing their exposure in the shareholder countries. |
The staff of the financial management group works in close coordination with the client relationship managers. The client relationship management group and financial management group are supported by the financial control and budget, human resources, information systems and legal departments.
Loan Portfolio
CAF extends medium-term and long-term loans to finance both public sector and private sector projects in the shareholder countries, either directly to a project or through a financial institution in a shareholder country that lends the funds to the appropriate project. To a lesser extent, CAF also provides loans to finance trade by and among the shareholder countries. Loans may be used for any component of a project, subject to exceptions relating to, among other things, the acquisition of land and the payment of taxes. CAF endeavors to concentrate CAF’s lending activities on national and multinational economic development projects, especially those involving electricity, gas and water supply, transport or communications in two or more shareholder countries and those that generate foreign exchange.
CAF provides credit lines to financial institutions in the shareholder countries. The purpose of these credit lines is to enable these institutions to finance projects that fall within CAF’s overall objectives, but that are not sufficiently large to justify CAF being directly involved in the project. The relevant financial institutions are thereby provided with funds that enable them to strengthen their financial resources within parameters previously agreed to with CAF. Under such multi-sectoral credit lines, CAF takes the credit risk of the financial intermediary and also has recourse to the underlying borrowers. The financial intermediaries are responsible for repayment of their loans from CAF regardless of whether the underlying borrower repays the financial intermediary.
CAF endeavors to strengthen trade by and among shareholder countries and to assist companies in the shareholder countries to access world markets. CAF’s trade-financing activities are complementary to those of the export credit agencies of shareholder countries because it finances qualifying import or export operations, whereas those agencies generally are limited to providing financing only for goods exported from the respective countries. Through trade-financing, CAF finances the movement of merchandise. CAF also provides credit support to trade activities through the confirmation of letters of credit in situations where the issuing local bank would not be perceived as sufficiently creditworthy by financial institutions in the beneficiary’s country.
In 1997, CAF began making a portion of its loans through an “A/B” loan program, where it acts as lender of record for the entire loan and sells non-recourse participations in the “B” portion of the loan to financial institutions. The “A” portion of the loan is made directly to the borrower by CAF. Under the “B” portion, other
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financial institutions provide the funding and assume the credit risk; CAF does not provide funding under the “B” portion and, therefore, does not assume any credit risk. Because CAF acts as the lender of record for the entire loan, thereby operating as the one official lender in the transaction, the borrower receives an interest rate that is generally lower than the rate available in the commercial markets. The lower interest rate is a result, among other factors, of the reduced inherent risk resulting from CAF’s status as a multilateral financial institution.
CAF’s loan pricing is typically based on its cost of funds plus a spread to cover operational costs and credit risks. All sovereign-risk loans are made at the same spread for comparable maturities. Generally, CAF’s loans are made on a floating interest rate basis. Under certain exceptional circumstances, loans may be made at fixed interest rates, provided that the corresponding funding is obtained at fixed interest rates. CAF generally charges a loan origination fee up to 0.85% of the total loan amount and a commitment fee equal to 0.35% per annum on undisbursed loan balances. Substantially all loans are denominated in U.S. dollars.
CAF’s policies generally require that loans to public sector entities have the benefit of sovereign guarantees. Exceptions have been made for a few highly-capitalized entities. Loans to private sector entities other than banks generally must have the benefit of bank or other guarantees, or other collateral acceptable to CAF.
As of December 31, 2021, CAF’s total assets were USD 47.6 billion, of which USD 29.6 billion, or 62.2%, were disbursed and outstanding loans. As of December 31, 2021, the “B” loan portion of CAF’s “A/B” loan transactions totaled USD 46.2 million. The tables on loan exposure that follow reflect only the “A” portion of the respective “A/B” loan transactions since CAF only assumes the credit risk of the “A” loan portion. CAF’s management expects further loan growth to be funded by additional borrowings and deposits, retained earnings and planned capital increases.
Loans to Public and Private Sector Borrowers
CAF’s total loan portfolio outstanding, classified by public sector and private sector borrowers, was as follows:
As of December 31, | ||||||||||||||||
2021 | 2020 | 2019 | ||||||||||||||
(in USD millions) | ||||||||||||||||
Public Sector | 93.6 | % | 27,723.9 | 25,619.4 | 22,594.9 | |||||||||||
Private Sector | 6.4 | % | 1,889.9 | 2,341.7 | 3,920.9 | |||||||||||
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100 | % | 29,613.8 | 27,961.2 | 26,515.8 | ||||||||||||
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Fair value adjustments | -18.4 | 156.7 | 4.8 | |||||||||||||
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29,595.4 | 28,117.9 | 26,520.6 | ||||||||||||||
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Geographic Distribution of Loans
CAF’s total loan portfolio outstanding, classified on a country-by-country basis, according to the location of the borrower, was as follows:
As of December 31, | ||||||||||||||||||||||||||||||||||||
2021 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||
Public | Private | Total | Public | Private | Total | Public | Private | Total | ||||||||||||||||||||||||||||
(in USD millions) | ||||||||||||||||||||||||||||||||||||
Argentina | 3,818.9 | 23.4 | 3,842.3 | 3,698.6 | 26.7 | 3,725.3 | 3,655.8 | 87.5 | 3,743.3 | |||||||||||||||||||||||||||
Barbados | 172.7 | — | 172.7 | 170.3 | — | 170.3 | 75.0 | — | 75.4 | |||||||||||||||||||||||||||
Bolivia | 2,725.8 | 26.7 | 2,752.5 | 2,505.7 | 40.6 | 2,546.3 | 2,599.3 | 116.5 | 2,715.8 | |||||||||||||||||||||||||||
Brazil | 2,268.8 | 429.2 | 2,698.0 | 1,948.0 | 673.5 | 2,621.5 | 1,509.0 | 719.6 | 2,228.6 | |||||||||||||||||||||||||||
Chile | — | 304.2 | 304.2 | 100.0 | 359.7 | 459.7 | 45.0 | 427.9 | 472.9 | |||||||||||||||||||||||||||
Colombia | 3,123.5 | 279.9 | 3,403.4 | 2,553.0 | 242.4 | 2,795.2 | 2,075.6 | 782.3 | 2,857.9 | |||||||||||||||||||||||||||
Costa Rica | 547.1 | — | 547.1 | 560.4 | 4.0 | 564.4 | 73.7 | 8.0 | 81.7 | |||||||||||||||||||||||||||
Dominican Republic | 110.8 | — | 110.8 | 128.4 | 16.6 | 145.0 | 154.4 | 20.3 | 174.7 | |||||||||||||||||||||||||||
Ecuador | 4,187.1 | 14.3 | 4,201.4 | 4,079.2 | 43.0 | 4,122.2 | 3,600.3 | 127.3 | 3,727.5 | |||||||||||||||||||||||||||
Mexico | 800.0 | 25.0 | 825.0 | 835.0 | 50.0 | 885.0 | 450.0 | 50.0 | 500.0 | |||||||||||||||||||||||||||
Panama | 2,379.0 | 183.1 | 2,562.1 | 1,806.5 | 269.7 | 2,076.2 | 1,511.9 | 519.7 | 2,031.6 | |||||||||||||||||||||||||||
Paraguay | 1,486.2 | 25.5 | 1,511.7 | 1,045.7 | 40.5 | 1,086.2 | 462.9 | 50.0 | 512.8 | |||||||||||||||||||||||||||
Peru | 1,288.2 | 455.7 | 1,743.9 | 1,065.5 | 459.0 | 1,524.5 | 1,070.9 | 916.8 | 1,987.7 | |||||||||||||||||||||||||||
Trinidad and Tobago | 1,164.0 | — | 1,164.0 | 1,048.9 | — | 1,048.9 | 788.9 | — | 788.9 | |||||||||||||||||||||||||||
Uruguay | 780.3 | 122.9 | 903.2 | 874.8 | 115.9 | 990.7 | 850.1 | 94.9 | 945.5 | |||||||||||||||||||||||||||
Venezuela | 2,871.5 | — | 2,871.5 | 3,199.7 | — | 3,199.7 | 3,671.8 | — | 3,671.8 | |||||||||||||||||||||||||||
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27,723.9 | 1,889.9 | 29,613.8 | 25,619.4 | 2,341.7 | 27,961.2 | 22,594.9 | 3,920.9 | 26,516.8 | ||||||||||||||||||||||||||||
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Fair value adjustments | -18.4 | 156.7 | 4.8 | |||||||||||||||||||||||||||||||||
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Total | 29,595.4 | 28,117.9 | 26,520.6 | |||||||||||||||||||||||||||||||||
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Loans Approved and Disbursed by Country
CAF’s loan approval process is described under “— Credit Policies.” After approval, disbursements of a loan proceed in accordance with the contractual conditions of the loan agreement.
Set forth below is a table of the amount of loans approved and loans disbursed, classified by country, for each of the years indicated:
Approved(1) | Disbursed(2) | |||||||||||||||||||||||
2021 | 2020 | 2019 | 2021 | 2020 | 2019 | |||||||||||||||||||
(in USD millions) | (in USD millions) | |||||||||||||||||||||||
Argentina | 1,377.8 | 963.6 | 625.5 | 699.4 | 536.4 | 574.3 | ||||||||||||||||||
Bolivia | 397.9 | 554.0 | 243.3 | 467.0 | 212.7 | 491.1 | ||||||||||||||||||
Brazil | 1,492.7 | 1,674.6 | 1,590.8 | 2,003.0 | 1,747.2 | 1,130.0 | ||||||||||||||||||
Colombia | 1,712.3 | 1,692.7 | 2,058.8 | 1,321.8 | 1,721.0 | 2,075.1 | ||||||||||||||||||
Ecuador | 1,159.1 | 1,135.2 | 969.3 | 534.4 | 991.9 | 748.0 | ||||||||||||||||||
Mexico | 1,100.8 | 503.0 | 950.4 | 603.0 | 1,322.5 | 771.9 | ||||||||||||||||||
Panama | 511.5 | 560.7 | 597.7 | 541.5 | 448.4 | 430.4 | ||||||||||||||||||
Paraguay | 880.8 | 946.9 | 710.3 | 494.5 | 629.1 | 117.9 | ||||||||||||||||||
Peru | 2,061.9 | 2,615.5 | 2,191.1 | 966.3 | 695.1 | 1,361.2 | ||||||||||||||||||
Trinidad and Tobago | 230.8 | 350.8 | 200.3 | 160.1 | 300.5 | 200.0 | ||||||||||||||||||
Uruguay | 1,100.7 | 1,351.5 | 965.4 | 290.9 | 96.5 | 94.8 | ||||||||||||||||||
Venezuela | 1.1 | 1.0 | 0.5 | 29.7 | 1.1 | 513.8 | ||||||||||||||||||
Others(2) | 1,164.7 | 1,797.2 | 1,906.9 | 777.5 | 1,680.6 | 1,534.4 | ||||||||||||||||||
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Total | 13,192.0 | 14,147.0 | 13,010.5 | 8,888.9 | 10,383.3 | 10,043.0 | ||||||||||||||||||
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(1) | Loans approved for disbursement in a given year may be disbursed, in whole or in part, in the current year or at a later date. The amount of loans disbursed and the timing of any individual disbursement, including the quantum of disbursement, are a function of the type of project and loan being financed. |
(2) | Includes short-term loans in the amounts of USD 5,176.8 million, USD 4,942.1 million and USD 6,222.3 million for the years ended December 31, 2021, 2020 and 2019, respectively. |
(3) | Loans outside the full member shareholder countries for the years ended December 31, 2021, 2021, 2020 and 2019. |
As of December 31, 2021, the increase (decrease) of CAF’s loan portfolio by country compared to the year ended December 31, 2020 was as follows: Argentina, 3.1%; Bolivia, 5.3%; Brazil, 2.9%; Colombia, 21.8%; Ecuador 1.9%; Panama 23.4%; Paraguay, 39.2%; Peru, 14.4%; Trinidad and Tobago, 11.0%; Uruguay, (2.2)%; and Venezuela, (10.3)%. The growth of the loan portfolio reflects loan approvals as a result of higher demand from shareholder countries and CAF’s increased share of infrastructure financings in the region. Loans to associated shareholder countries holding Series “C” shares (as described under “Capital Structure — General”) totaled USD 1,959.8 million in 2021, compared to loans to associated shareholder countries holding Series “C” shares totaling USD 2,224.4 million, and USD 1,304.6 million in 2020 and 2019, respectively.
CAF’s management anticipates that CAF’s loan portfolio will continue to grow as a result of its strategy to expand its shareholder base, both by issuing shares to new shareholder countries and by additional capital subscriptions by existing shareholder countries, which may result in increased loan demand for projects in such countries.
Distribution of Loans by Industry
As of December 31, 2021, CAF’s loan portfolio outstanding was distributed by country and industry as follows:
Argentina | Bolivia | Brazil | Colombia | Ecuador | Panama | Paraguay | Peru | Uruguay | Venezuela | Others(2) | Total by Sector | % of Total | ||||||||||||||||||||||||||||||||||||||||
(in USD millions) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Agriculture, hunting and forestry | 54.5 | 7.6 | — | — | — | — | — | — | — | — | — | 62.1 | 0.2 | % | ||||||||||||||||||||||||||||||||||||||
Manufacturing industry | — | — | 29.2 | — | 3.1 | — | — | — | — | — | — | 32.3 | 0.1 | % | ||||||||||||||||||||||||||||||||||||||
Supply of electricity, gas and water | 1,022.4 | 621.8 | 343.9 | 205.9 | 588.3 | 368.7 | 341.3 | 398.8 | 582.7 | 1,475.4 | 76.7 | 6,025.8 | 20.3 | % | ||||||||||||||||||||||||||||||||||||||
Transport, warehousing and communications | 1,052.0 | 1,384.3 | 1,138.9 | 298.0 | 1,199.3 | 1,271.6 | 510.2 | 380.5 | 262.7 | 209.1 | 619.9 | 8,326.4 | 28.1 | % | ||||||||||||||||||||||||||||||||||||||
Financial intermediaries(1) | — | 15.4 | 682.9 | 448.7 | 132.2 | 40.0 | 25.5 | 300.0 | — | — | 954.0 | 2,598.6 | 8.8 | % | ||||||||||||||||||||||||||||||||||||||
Social and other infrastructure programs | 1,709.0 | 657.2 | 447.5 | 2,450.8 | 2,269.2 | 738.6 | 634.7 | 664.6 | 57.8 | 1,187.1 | 1,680.3 | 12,496.8 | 42.2 | % | ||||||||||||||||||||||||||||||||||||||
Other activities | 4.4 | 2.2 | 55.7 | — | 9.3 | — | — | — | — | — | — | 71.7 | 0.2 | % | ||||||||||||||||||||||||||||||||||||||
Total | 3,842.3 | 2,688.5 | 2,698.0 | 3,403.4 | 4,201.4 | 2,419.0 | 1,511.7 | 1,743.9 | 903.2 | 2,871.5 | 3,330.8 | 29,613.8 | 100.0 | % | ||||||||||||||||||||||||||||||||||||||
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(1) | Multi-sectoral credit lines to public sector development banks, private banks and other institutions. |
(2) | This column includes loans outside the full member shareholder countries as of December 31, 2021. |
Maturity of Loans
As of December 31, 2021, CAF’s outstanding loans were scheduled to mature as follows:
2021 | 2022 | 2023 | 2024 | 2025 | 2026-2036 | |||||||||||||||||||
(in USD millions) | ||||||||||||||||||||||||
Principal amount | 5,176.8 | 2,721.6 | 2,818.8 | 2,811.2 | 2,575.3 | 13,510.2 |
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Ten Largest Borrowers
The following table sets forth the aggregate principal amount of loans to CAF’s ten largest borrowers, and the percentage such loans represented of the total loan portfolio, as of December 31, 2021:
Borrower | Amount | As a Percentage of Total Loan Portfolio | ||||||
(in USD millions) | ||||||||
Ecuador | 3,614.4 | 12.2 | ||||||
Argentina | 3,598.3 | 12.2 | ||||||
Bolivia | 2,661.8 | 9.0 | ||||||
Colombia | 2,644.5 | 8.9 | ||||||
Panama | 2,169.0 | 7.3 | ||||||
Venezuela | 1,995.0 | 6.7 | ||||||
Peru | 1,213.2 | 4.1 | ||||||
Trinidad and Tobago | 1,164.0 | 3.9 | ||||||
Paraguay | 1,144.9 | 3.9 | ||||||
Central Bank of Venezuela | 876.5 | 3.0 | ||||||
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21,081.5 | 71.2 | |||||||
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Selected Projects
Set out below are examples of projects approved by CAF during 2021 and the respective loan approval amounts. The selected projects represent a mix of CAF’s loan portfolio in the different sectors and activities in which it participates, including both public and private sector projects. They have been selected based on the relevance to each full member shareholder country and are representative of CAF’s lending activities in each such country.
Argentina
Basic Works Program of Drinking Water AySA — Phase IV. Amount: USD 245 million.
Bolivia
Program towards food sovereignty with irrigation technology sovereignty with irrigation technology. Amount: USD 35 million.
Brazil
São Paulo State Project — Expansion of Green Line 2 and Acquisition of Rolling Stock. Amount: USD 550 million.
Colombia
Support Program for the Digital Transformation of the State’s Digital Transformation for Reactivation. Amount: USD 500 million
Ecuador
Sector-Wide Approach Sector Loan for the Reduction of Chronic Child Under a Results-Based Budgeting Approach — Phase II. Budgeting for Results Approach — Phase II. Amount: USD 200 million
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Panama
Program to Support the Digital Transformation and Inclusion Strategy in Panama. Amount: USD 350 million.
Paraguay
Economic Reactivation Economic Reactivation and Strengthening of State Institutions State Institutions. Amount: USD 250 million.
Peru
Expansion and Improvement and Improvement of Water and Sewage Systems and Sewerage Systems — Nueva Rinconada. Amount: USD 52 million.
Trinidad and Tobago
Drainage and Flood Drainage and Flood Mitigation in Trinidad. Amount: USD 40 million.
Uruguay
Program for Strengthening of the Energy Sector Strengthening Program — Phase III. Amount: USD 300 million.
Other Activities
Treasury Operations
CAF’s investment policy requires that at least 90% of its liquid assets be held in the form of investment grade instruments rated A-/A3/A- or better by a U.S. nationally-recognized statistical rating organization. The remaining portion may be invested in unrated or non-investment grade instruments rated B-/Ba3/B- or better by a U.S. nationally-recognized statistical rating organization. As of December 31, 2021, CAF’s liquid assets consisted of USD 16.1 billion of cash, deposits with banks, marketable securities and other investments, of which 90.7% were invested in investment grade instruments rated A-/A3/A- or better by a U.S. nationally-recognized statistical rating organization; 21.7% of CAF’s liquid assets were invested in time deposits in financial institutions, 24.0% in commercial paper, 12.1% in corporate and financial institution bonds, 20.4% in certificates of deposit, 13.8% in U.S. Treasury Notes and 9.2% in other instruments, including deposits in cash.
Equity Shareholdings
CAF may acquire equity shareholdings in new or existing companies within the shareholder countries, either directly or through investment funds focused on Latin America. CAF’s equity participation in any one company is limited to 1% of its shareholders’ equity. CAF’s policies do not permit it to be a company’s largest individual shareholder. In addition, the aggregate amount of CAF’s equity investments cannot exceed 10% of its shareholders’ equity. As of December 31, 2021, the carrying value of CAF’s equity investments totaled USD 433.3 million, representing 3.3% of its shareholders’ equity. As of December 31, 2021, 61.6% of CAF’s equity portfolio was held through investment funds.
Credit Guarantees
CAF has developed its credit guarantee product as part of its role of attracting international financing for its shareholder countries. As such, CAF may offer guarantees of private credit agreements or it may offer public guarantees of obligations of the securities of third party issuers. CAF generally offers only partial credit guarantees with the intention that private lenders or holders of securities share the risk along with CAF.
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The emphasis of the credit guarantees is to aid in the financing of public sector projects, though CAF does not have any internal policies limiting its credit guarantees to public sector projects. Also, although CAF generally intends to guarantee approximately 25% of the financing for a given project, it may guarantee up to the full amount of the financing, subject to its other credit policies. CAF’s internal policies limit the aggregate outstanding amount of its credit guarantees to a maximum amount equivalent to 20% of our total equity. The amount of credit guarantees outstanding was USD 129.8 million as of December 31, 2021. Those credit guarantees represent 0.9% of CAF’s total equity and include guarantees issued for a public sector project in Peru and for several private sector companies that are operating in Argentina, Mexico and Peru.
Promotion of Regional Development
As part of CAF’s role in advancing regional integration, it evaluates on an ongoing basis new investment opportunities intended to benefit the shareholder countries. CAF also provides technical and financial assistance for the planning and implementation of binational and multinational projects, help obtain capital and technology for these projects, and assist companies in developing and implementing modernization, expansion and organizational development programs.
Fund Administration
In 2021, CAF acted as fund administrator for several funds funded by third parties and by its shareholders, the net assets of which totaled USD 442.3 million as of December 31, 2021. In 2020, CAF acted as fund administrator for several funds funded by third parties and by its shareholders, the net assets of which totaled USD 494.9 million as of December 31, 2020. CAF has no residual interest in the net assets of the special funds.
Each year, the Shareholders’ Assembly approves a maximum amount to be contributed to Shareholders’ Special Funds during the fiscal year, which contributions are recognized as expenses.
In March 2021, the Shareholders’ Assembly approved the contribution up to a maximum amount of USD 30.0 million to some shareholders’ special funds for 2021. Subsequently, for the year ended December 31, 2021, based on the analysis of the new commitments contracted or the resources required by the shareholders’ special funds, CAF recognized USD 30.0 million as an expense and, as of December 31, 2021 recognized an unconditional obligation (accounts payable) for USD 12.5 million which was paid in January 2022. In March 2020, the Shareholders’ Assembly approved the contribution up to a maximum amount of USD 135.0 million to some shareholders’ special funds for 2020. Subsequently, for the year ended December 31, 2020, the Executive President directly or by delegation, based on the analysis of the new commitments contracted or the resources required by the shareholders´ special funds, authorized the contributions of USD 100.0 million and USD 35.0 million to Compensatory Financial Fund (“FFC”) and Technical Cooperation Fund (“FCT”), respectively. For the year ended December 31, 2020, CAF recognized USD 72.0 million as an expense and, as of December 31, 2020 recognized an unconditional obligation (accounts payable) for USD 55.1 million which was paid in January 2021. As of December 31, 2021, the principal funds were the Compensatory Financing Fund, the Fund for the Development of Small and Medium Enterprise, the Technical Cooperation Fund and the Human Development Fund.
Technical Cooperation Fund
As of December 31, 2021, the Technical Cooperation Fund had a balance of USD 93.9 million. The purpose of this fund is to finance research and development studies that may lead to the identification of project investment opportunities and also, on occasion, to provide grants that are typically less than USD 100,000 each to facilitate the implementation of those projects.
Human Development Fund
As of December 31, 2021, the Human Development Fund had a balance of USD 4.4 million. This fund is devoted to assisting projects intended to promote sustainable development in socially excluded communities, as
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well as to support micro-enterprises through the financing of intermediary institutions that offer direct loans to rural and urban micro-entrepreneurs.
Compensatory Financing Fund
As of December 31, 2021, the Compensatory Financing Fund had a balance of USD 192.3 million. This fund was created to provide interest rate compensation of certain loans granted by CAF when a project providing social or developmental benefits is otherwise unable to sustain market interest rates. See Note 22 to CAF’s audited financial statements included elsewhere in this prospectus.
Fund for the Development of Small and Medium Enterprises
As of December 31, 2021, the Fund for the Development of Small and Medium Enterprises had a balance of USD 63.1 million. The purpose of this fund is to finance and, in general, support initiatives that aid the development of an entrepreneurial class in CAF’s shareholder countries.
Others nonrelated with shareholders’ special funds
As of December 31, 2021, others nonrelated with shareholders’ special funds had a total balance of USD 88.6 million.
Credit Policies
The Constitutive Agreement limits the total amount of disbursed and outstanding loans, guarantees and equity investments to 4.0 times shareholders’ equity. CAF’s actual ratio on December 31, 2021 was 2.3 times shareholders’ equity.
CAF applies commercial banking standards for credit approvals and maintains policies and procedures regarding risk assessment and credit policy. Relationship managers perform an initial screening of each potential client and transaction to ensure that the proposed extension of credit falls within CAF’s policies. Proposed project loans are evaluated in accordance with CAF’s Operational Policies, which set out detailed eligibility and evaluation guidelines. Loans to a private sector borrower are approved taking into consideration both the individual loan and the total exposure to the borrower.
The Loans and Investments Committee recommends approvals of loans and investments. The members of this Committee are the Executive Vice President, the Vice President of Private Sector, and the Corporate Vice President of Strategic Planning. The Secretary of the Committee is the Corporate Head of country Programs. New Operations are recommended for the approval of the Executive President. The Executive President, upon the recommendation of the Loans and Investments Committee, may approve (a) loans of up to USD 75.0 million for sovereign credits, (b) loans of up to USD 50.0 million for private credits, (c) investments of up to USD 25.0 million in the case of equity investments, (d) investments of up to 1% of total liquid assets of any issuer (unless the issuer is: (i) at least investment grade, in which case the investment may be up to 5% of the issuer’s total liquid assets, (ii) a government or governmental institution with an investment grade rating of at least AA+, in which case the investment may be up to 7% of the issuer’s total liquid assets, or (iii) the U.S. Treasury or the Bank for International Settlements, in which case CAF’s investment in notes, bills or bonds may be up to 50% of total liquid assets for each issuer), and (e) technical cooperation credits of up to USD 1.0 million. Amendments and waivers are approved by the committee and extensions and renewals are also approved by the committee.
Our policies also impose limitations on loan concentration by country and by type of risk. Loans to entities in any one full member shareholder country may not exceed either 25% of CAF’s loan portfolio or 100% of its shareholders’ equity. Aggregate loans to entities in any associated shareholder country currently may not exceed
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eight times the total of such country’s paid-in capital contribution to CAF plus any assets entrusted by the country to it under a fiduciary relationship. This limit does not apply to trade loan financing with full member shareholder countries. Additionally, no more than four times the country’s paid-in capital contribution to CAF plus any assets entrusted to it under a fiduciary relationship may be committed to operations essentially national in character. The same limitation applies to CAF’s total loan portfolio in relation to its shareholders’ equity. Loans to a public sector or mixed-capital entity not considered a sovereign risk are limited in the aggregate to 15% of CAF’s shareholders’ equity. Additionally, the exposure to any individual private sector entity or to an economic group is limited to 2.35% and 3.5%, respectively, of CAF’s total loan portfolio.
Operations in which CAF extends credit to entities in Series “C” shareholder countries must generally be related to activities of such entities in, or related to, the full member shareholder countries. Notwithstanding the above, the aggregate total of outstanding loans in all such countries may not exceed 15% of CAF’s total loan portfolio.
CAF’s policies permit it to provide up to 100% of the total project costs with respect to short-term loans. For medium- and long-term loans, CAF determines the appropriate level of financing on a case-by-case basis; however, limited-recourse financing in such loans may not exceed 50% of project costs. In practice, however, CAD typically limit its loans to a smaller percentage of total project costs and generally require a larger percentage of financial support by the borrower than required by its credit policies.
Asset Quality
CAF classifies a loan as overdue whenever payment is not made on its due date. CAF charges additional interest on the overdue payment from the due date and immediately suspend disbursements on all loans to the borrower and to any other borrowers of which the overdue borrower is a guarantor. The entire principal amount of a loan is placed in non-accrual status when collection or recovery is doubtful or when any payment, including principal, interest, fees or other charges in respect of the loan, is more than 90 days overdue in the case of a private sector loan or more than 180 days overdue in the case of a public sector loan. Interest and other charges on non-accruing loans are included in income only to the extent that payments have actually been received by CAF.
As of December 31, 2021, there were no loans overdue and USD 112.1 million of loans in non-accrual status. As of December 31, 2020, there were no loans overdue and USD 69.1 million of loans in non-accrual status. Loans in non-accrual status increased from USD 69.1 million in 2020 to USD 112.1 million in 2021, or by 62.2%, due to collection becoming increasingly doubtful on a number of loans made to private sector borrowers in Peru, Brazil, Mexico and Colombia.
For the year ended December 31, 2021, there were USD 48.2 million of loan write-offs. The loan write-offs in 2021 occurred because there was reasonable belief by CAF’s management that certain loan balances from the private sector would not be collectible. Given that CAF’s loan portfolio in 2021 was USD 29.6 billion, loans written off represented only 0.16% of CAF’s total loan portfolio. As such, CAF believes it has not suffered any individually significant losses on its loan portfolio. Although CAF’s loans do not enjoy any legal preference over those of other creditors, it does enjoy a de facto preferred creditor status arising from its status as a multilateral financial institution and from the interest of its borrowers in maintaining their credit standing with us. Although some of CAF’s shareholder countries have restructured their sovereign debt obligations, it has never had to declare an event of default with respect to such countries’ debt obligations to CAF.
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Quality of Loan Portfolio
The following table shows CAF’s overdue loan principal, loans in non-accrual status, and the total allowance for loan losses and their percentages of its total loan portfolio at the respective dates indicated, as well as loans written-off during each period.
As of December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
(in USD millions) | ||||||||||||
Total loan portfolio | 29,595.4 | 27,961.2 | 26,515.8 | |||||||||
Overdue loan principal | — | — | 129.1 | |||||||||
Loans in non-accrual status | 112.1 | 69.1 | 69.8 | |||||||||
Loans written off during period | 48.2 | — | 38.0 | |||||||||
Allowance for loan losses | 76.7 | 95.0 | 91.6 | |||||||||
Troubled debt restructured | 29.2 | 36.5 | — | |||||||||
Overdue principal payment as a percentage of loan portfolio (excluding non-accrual loans) | 0.00 | % | 0.00 | % | 0.49 | % | ||||||
Non-accrual loans as a percentage of loan portfolio | 0.38 | % | 0.25 | % | 0.26 | % | ||||||
Allowance for loan losses as a percentage of loan portfolio | 0.26 | % | 0.34 | % | 0.35 | % |
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Funding Strategy
CAF raises funds for operations primarily in the international financial markets, although a relatively small part is raised within its shareholder countries. CAF’s strategy with respect to funding, to the extent possible under prevailing market conditions, is to match the maturities of its liabilities to the maturities of its loan portfolio. In order to diversify CAF’s funding sources and to offer potential borrowers a wide range of credit facilities, it raises funds through bond issues in both the shareholder countries and the international capital markets. CAF also takes deposits and obtains loans and credit lines from central banks, commercial banks and, to the extent of imports related to projects funded by CAF, export credit agencies.
Within the shareholder countries, CAF raises funds from central banks and financial institutions and by means of regional bond issues. Outside Latin America and the Caribbean, it obtains funding from public sector development and credit agencies, from development banks, from various North American, European and Asian commercial banks, from capital markets and from the U.S. and European commercial paper markets.
Sources of Funded Debt
The breakdown of CAF’s outstanding funded debt, both within and outside the shareholder countries, at each of the dates indicated below, was as follows:
As of December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
(in USD millions) | ||||||||||||
Within the shareholder countries: | ||||||||||||
Deposits | 4,002.6 | 3,337.6 | 2,079.0 | |||||||||
Borrowings | 30.8 | 33.0 | 324.5 | |||||||||
Bonds | 1,391.1 | 656.4.4 | 733.1 | |||||||||
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5,424.5 | 4,027.0 | 3,136.6 | ||||||||||
Outside the shareholder countries: | ||||||||||||
Deposits | — | — | 593.9 | |||||||||
Commercial paper | 2,813.6 | 1,598.7 | 908.1 | |||||||||
Borrowings | 1,770.4 | 1,571.1 | 1,058.6 | |||||||||
Bonds | 23,196.5 | 22,776.8 | 22,658.2 | |||||||||
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27,780.6 | 25,946.6 | 24,904.9 | ||||||||||
Variation effect between spot and original FX rate | 746.2 | 189.9 | (950.3 | ) | ||||||||
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Fair value adjustments on hedging activities | 396.9 | 1,338.4 | 742.4 | |||||||||
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Origination costs | (6.8 | ) | (10.8 | ) | (14.8 | ) | ||||||
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Total | 34,341.4 | 31,491.0 | 28,132.7 | |||||||||
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Maturity of Funded Debt
The breakdown of CAF’s outstanding funded debt, by instrument and maturity, at each of the dates indicated below was as follows:
As of December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
(in USD millions) | ||||||||||||
Term deposits: | ||||||||||||
Up to 1 year | 4,002.6 | 3,337.6 | 2,672.9 | |||||||||
Acceptances, advances and commercial paper and repurchase agreements: | ||||||||||||
Up to 1 year | 2,813.6 | 1,598.7 | 908.1 | |||||||||
Borrowings: | ||||||||||||
Up to 1 year | 178.0 | 166.5 | 406.2 | |||||||||
Between 1 and 3 years | 636.8 | 525.5 | 352.8 | |||||||||
Between 3 and 5 years | 360.3 | 358.5 | 274.1 | |||||||||
More than 5 years | 626.0 | 553.5 | 350.0 | |||||||||
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1,801.2 | 1,604.0 | 1,383.1 | ||||||||||
Bonds: | ||||||||||||
Up to 1 year | 3,944.5 | 3,215.8 | 3,900.9 | |||||||||
Between 1 and 3 years | 7,802.2 | 8,509.0 | 7,073.5 | |||||||||
Between 3 and 5 years | 8,044.6 | 5,852.6 | 4,859.4 | |||||||||
More than 5 years | 4,796.2 | 5,855.8 | 7,557.3 | |||||||||
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24,587.6 | 23,433.2 | 23,391.1 | ||||||||||
Totals: | ||||||||||||
Up to 1 year | 10,938.7 | 8,318.6 | 7,888.1 | |||||||||
Between 1 and 3 years | 8,439.0 | 9,034.5 | 7,426.3 | |||||||||
Between 3 and 5 years | 8,404.9 | 6,211.1 | 5,133.5 | |||||||||
More than 5 years | 5,422.2 | 6,409.3 | 7,907.3 | |||||||||
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33,204.8 | 29,973.5 | 28,355.2 | ||||||||||
Variation effect between spot and original FX rate | 746.2 | 189.9 | (950.3 | ) | ||||||||
Fair value adjustments on hedging activities | 396.9 | 1,338.4 | 742.4 | |||||||||
Originating costs | (6.8 | ) | (10.8 | ) | (14.8 | ) | ||||||
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Total | 34,341.1 | 31,491.0 | 28,132.7 | |||||||||
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CAF’s financial liabilities are primarily U.S. dollar-based: 50.3% of CAF’s total financial liabilities, or 99.2% of financial liabilities after swaps, were denominated in U.S. dollars as of December 31, 2021. The principal amount of non-U.S. dollar financial liabilities outstanding as of December 31, 2021 included 7,955.1 million Euros, 149,300.0 million Yen, 2,100.0 million Swiss Francs, 1,133.7 billion Colombian Pesos, 4,935.0 million Hong Kong Dollars, 11,662.8 million Mexican Pesos, 424.1 million Peruvian Nuevos Soles, 4,800.0 million Norwegian Kroner, 1,303.0 million Australian Dollars, 1,034.1 billion Indonesian Rupee, 2,138.0 million Indian Rupee, 40.0 million Canadian dollars, 6,210.0 million Tenge Kazajo, 1,067.1 million Brazilian Reales and 21.3 million New Zealand Dollars; all of these non-U.S. dollar financial liabilities are swapped or otherwise hedged into U.S. dollars.
CAF has never had an event of default declared with respect to the payment of principal of, or premium or interest on, any debt security it has issued, and it has always met all its debt obligations on a timely basis.
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ASSET AND LIABILITY MANAGEMENT
CAF reduces its sensitivity to interest rate risk by extending its loans on a floating rather than a fixed interest rate basis. As of December 31, 2021, 92.1% of CAF’s outstanding loans were based on LIBOR and subject to interest rate adjustments at least every six months. The liabilities that fund these loans are also contracted at, or swapped into, LIBOR floating interest rates. When CAF makes loans at fixed interest rates, it uses derivatives to hedge the corresponding loan exposure.
CAF requires that counterparties with which it enters into swap agreements be rated “A+/A1” or better by two U.S. nationally recognized statistical rating organizations or have signed a credit support agreement (resulting in the corresponding exchange of collateral), at the time of entering into the swap agreement. As of December 31, 2021, CAF was party to swap agreements with an aggregate notional amount of USD 27.7 billion.
CAF seeks, to the extent possible under prevailing market conditions, to match the maturities of CAF’s liabilities to the maturities of its loan portfolio. As of December 31, 2021, the weighted average life of CAF’s financial assets was 4.4 years and the weighted average life of CAF’s financial liabilities was 3.6 years.
CAF’s management expects the weighted average life of CAF’s financial assets to increase gradually, as it makes more long-term loans for infrastructure development and similar purposes. At the same time, CAF’s management expects that the weighted average life of its liabilities will also increase as a result of its strategy of increasing its presence in the international long-term bond market as market conditions permit.
As of December 31, 2021, 99.0% of CAF’s assets and 50.3% of its liabilities were denominated in U.S. dollars, with the remainder of its liabilities being denominated principally in Euro, Yen, Hong Kong dollar, Australian dollar, Norwegian kroner, Turkish lire, Uruguayan pesos, Colombian peso, Indian rupee, Brazilian real, Canadian dollar, Kazakhstani tenge, New Zealand dollar and Swiss Francs, which liabilities were swapped. After swaps, 98.5% of CAF’s liabilities were denominated in U.S. dollars as of December 31, 2021. Generally, funding that is contracted in currencies other than the U.S. dollar is swapped into U.S. dollars. In some cases, CAF extends its loans in the same non-U.S. dollar currencies as debt is incurred in order to minimize exchange risks. CAF’s shareholders’ equity is denominated entirely in U.S. dollars.
CAF’s treasury asset and liability management involves managing liquidity, funding, interest rate and exchange rate risk arising from non-trading positions through the use of on-balance sheet instruments. CAF’s external asset managers use derivatives to hedge the interest and exchange rate risk exposures of its non-U.S. dollar denominated investments. CAF’s policy is that its total exposure on trade derivatives should not exceed 3% of liquid investments. See Note 19 to CAF’s audited financial statements included elsewhere in this prospectus.
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CAF is governed and administered by the bodies and officials detailed below:
Shareholders’ Assembly
The Shareholders’ Assembly is the ultimate decision-making body within CAF. The Shareholders’ Assembly’s meetings can be ordinary or extraordinary and are governed by the requirement for the presence of a quorum of at least 80% Series “A” shareholders and a simple majority of the other shareholders and compliance with other conditions set out in the Constitutive Agreement.
The ordinary meetings of the Shareholders’ Assembly are held once a year, within 90 days of the close of the financial year, and are convened by the Executive President. During ordinary meetings, the Shareholders’ Assembly:
• | considers the Board of Directors’ annual report and CAF’s financial statements, receives the independent auditors’ report and allocates its net income; |
• | constitutes special funds for particular purposes; |
• | elects the Board of Directors according to the Constitutive Agreement; |
• | appoints external auditors; |
• | determines compensation for the Board of Directors and the external auditors; and |
• | may consider any other matter expressly submitted to it which is not within the purview of any other body of CAF. |
Extraordinary meetings of the Shareholders’ Assembly may be convened after a call has been made at the initiative of the Board of Directors, the Executive President, at least 40% of Series “A” shareholders or any shareholders representing at least 25% of paid-in capital. During extraordinary meetings, the Shareholders’ Assembly may:
• | increase, reduce or replenish CAF’s capital in accordance with the Constitutive Agreement; |
• | dissolve CAF; |
• | change the headquarters of CAF when the Board of Directors so proposes; and |
• | consider any other matter that has been expressly submitted to it that is not within the purview of any other body of CAF. |
Resolutions presented at ordinary meetings of the Shareholders’ Assembly are passed by the votes of at least 60% of Series “A” shareholders and a majority of the votes of the other shares represented at the meeting. Resolutions presented at extraordinary meetings of the Shareholders’ Assembly (including a decision to dissolve CAF) are passed by the votes of 80% of Series “A” shareholders and a majority of the votes of the other shares represented at the meeting, except for resolutions concerning modifications to the structure of the Board of Directors, which requires the votes of all Series “A” shareholders and a majority of the other shares represented at the meeting. In the event of adjournment for lack of a quorum, two Series “A” shareholders, plus a majority of the other shares represented at the meeting, may deliberate and approve decisions at a reconvened meeting.
Board of Directors
The Board of Directors is composed of 20 directors, each of whom is elected for a term of three years and may be re-elected. Each of the Series “A” shareholders is represented by one director. Five directors represent the governments or governmental institutions holding Series “B” shares and one director represents the private financial institutions holding Series “B” shares. Holders of Series “C” shares are entitled to elect two directors. In
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the event of a vacancy in a director position, the corresponding alternate director serves as director until such vacancy has been filled. Responsibilities of the Board of Directors include:
• | establishing and directing CAF’s credit and economic policies; |
• | approving CAF’s budget; |
• | approving CAF’s borrowing limits; |
• | approving credits granted by CAF in excess of a specified limit; |
• | establishing or modifying internal regulations; and |
• | appointing the Executive President. |
As of the date of this prospectus, the Directors (and their Alternates) representing Series “A” shareholders are:
Argentina | Sergio Massa (Leandro Gorgal) | Minister of Economy (Deputy Secretary of International Financial Relations for Development — Secretariat for Strategic Affairs) | ||
Bolivia | Sergio Cusicanqui (Marcelo Laura Guarachi) | Minister of Development Planning (Vice Minister of Public Investment and External Financing) | ||
Brazil | Lucas Pedreira do Couto (Marco Aurelio dos Santos Rocha) | Special Secretary of Foreign Trade and International Affairs — Ministry of Economy (Secretary of International Economic Affairs — Ministry of Economy) | ||
Colombia | José Antonio Ocampo (Germán Mendoza) | Minister of Finance and Public Credit (Minister of Commerce, Industry and Tourism) | ||
Ecuador | Nelson Andrade (Virna Rossi Flores) | President of the Board of Directors of Corporación Financiera Nacional (General Manager of Corporación Financiera Nacional) | ||
El Salvador | José Alejandro Zelaya (Jerson Posada) | Minister of Finance Vice Minister of Finance | ||
Panama | Héctor Alexander (Javier Carrizo) | Minister of Economy and Finance General Manager Banco Nacional de Panamá | ||
Paraguay | Oscar Llamosas (Iván Haas) | Minister of Finance (Vice-Minister of Economy) | ||
Peru | Kurt Burneo (José Armando Calderón) | Minister of Economy and Finance (Vice Minister of Finance) | ||
Trinidad and Tobago | Colm Imbert (Alvin Hilaire) | Minister of Finance (Governor of the Central Bank of Trinidad and Tobago) | ||
Uruguay | Azucena Arbeleche (Diego Labat) | Minister of Economy and Finance (President of Banco Central del Uruguay) | ||
Venezuela | José Felix Rivas (Román Maniglia) | Head of the National Office of Public Credit (Vice Minister of the Banking and Insurance System) |
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As of the date of this prospectus, the Directors (and their Alternates) representing Series “B” shareholders:
Bolivia | Marcelo Montenegro Gómez (Juan Jiménez Soto) | Minister of Economy and Public Finance (Vice Minister of Treasury and Public Credit) | ||
Colombia | To be designated (To be designated) | Ministry of Finance and Public Credit (Ministry of Finance and Public Credit) | ||
Ecuador | Pablo Arosemena (Tatiana Rodriguez) | Minister of Economy and Finance (President of Monetary and Financial Regulation Board) | ||
Peru | Carlos Linares (Alex Contreras) | President of the Board of Directors of Corporación Financiera de Desarrollo (“COFIDE”) (Vice Minister of Economy) | ||
Venezuela | Héctor Obregon (Luis Peréz González) | President of BANDES (Executive Vice President Banco of BANDES) | ||
Private Financial Institutions | Juan Carlos Dao (Darko Zuazo Batchelder) | President — Banco del Caribe C.A. (President of the Board of Directors- Banco Mercantil Santa Cruz S.A.) |
As of June 30, 2022, the directors representing the Series “C” shareholders are Nadia Calviño, Minister of Economy and Enterprise of Spain, and Rogelio Ramírez de la O, Secretary of Finance and Public Credit of Mexico. Their alternates are Róger Madrigal López, President of the Central Bank of Costa Rica, and José Manuel Vicente the Minister of Finance of Dominican Republic, respectively.
The business address of each of the directors and each of the alternate directors listed above is Torre CAF, Piso 9, Avenida Luis Roche, Altamira, Caracas, Venezuela.
The Board of Directors annually elects a Chairman to preside over the meetings of the Board of Directors and the Shareholders’ Assembly. Oscar Llamosas is the current Chairman until March 31, 2023.
The Board of Directors delegates certain functions, including credit approvals within specified limits, to the Executive Committee. This Committee is composed of one director from each full member shareholder country, plus one director representing all of the Series “C” shareholders, and CAF’s Executive President, who presides over the Committee unless the Chairman of the Board of Directors is part of the Committee, in which case he or she will preside.
Executive President
The Executive President is CAF’s legal representative and chief executive officer. He is empowered to decide all matters not expressly reserved to the Board of Directors and the Shareholders’ Assembly. The Executive President is elected by the Board of Directors for a period of five years and may be re-elected.
In July 2021, Sergio Diaz-Granados was elected Executive President of CAF for the next five-year period (September 2021 to August 2026). Previously, the Executive President was Luis Carranza Ugarte, who led the Institution from April 2017 to May 2021.
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Officers
As of the date of this prospectus, the Executive Officers of CAF are:
Sergio Diaz-Granados | Executive President | |
Carolina España | Executive Vice President | |
Christian Asinelli | Corporate Strategic Programming Vice President | |
Jorge Arbache | Vice President of Private Sector | |
Gabriel Felpeto | Vice President of Finance and Chief Financial Officer | |
Jorge Silva | General Counsel | |
Alejandra Claros | General Secretary | |
Anmari San Vicente | General Auditor | |
José Martínez-Aragón | Ombudsperson |
Employees
As of the December 31, 2021, CAF employed 795 professionals and 84 support staff. The senior positions of Executive Vice President, Vice President of Finance, Corporate Strategic Programming Vice President, and Vice President of Private Sector are appointed by the Executive President, subject to ratification by the Board of Directors.
CAF’s management believes that the salaries and other benefits of CAF’s professional staff are competitive and that the local support staff is paid at levels above the prevailing local rates. Although CAF is not subject to local labor laws, it provides its employees with benefits and safeguards at least equivalent to those required under the law of the country where they normally work and reside. CAF offers technical and professional training opportunities through courses and seminars for its employees. CAF’s management considers the relationship with its employees to be good. There is no employee union and there have been no strikes in the history of CAF.
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THE FULL MEMBER SHAREHOLDER COUNTRIES
Certain of the following information has been extracted from publicly available sources. CAF has not independently verified this information. The region occupied by the full member shareholder countries is bordered by the Atlantic Ocean on the east, the Caribbean Sea on the north and the Pacific Ocean on the west, and covers approximately 13.2 million square kilometers in South America (approximately 74% of the South American continent).
Selected Demographic and Economic Data(3)
The following table presents selected demographic and economic data for the full member shareholder countries for the years indicated:
Argentina | Bolivia | Brazil | Colombia | Ecuador | Panama | Paraguay | Peru | Trinidad and | Uruguay | Venezuela | ||||||||||||||||||||||||||||||||||
Population (in millions)(1) | ||||||||||||||||||||||||||||||||||||||||||||
2020 | 45.38 | 11.67 | 212.56 | 50.88 | 17.64 | 4.31 | 7.13 | 32.97 | 1.40 | 3.47 | 28.44 | |||||||||||||||||||||||||||||||||
2019 | 44.94 | 11.51 | 211.05 | 50.34 | 17.37 | 4.25 | 7.04 | 32.51 | 1.39 | 3.46 | 28.52 | |||||||||||||||||||||||||||||||||
2018 | 44.49 | 11.35 | 209.47 | 49.66 | 17.08 | 4.18 | 6.96 | 31.99 | 1.39 | 3.45 | 28.87 | |||||||||||||||||||||||||||||||||
GDP (U.S.$ in billions)(1) | ||||||||||||||||||||||||||||||||||||||||||||
2020 | 389.29 | 36.57 | 1444.73 | 271.44 | 98.81 | 53.98 | 35.67 | 202.01 | 21.59 | 53.63 | 47.25 | (2) | ||||||||||||||||||||||||||||||||
2019 | 451.93 | 40.90 | 1,877.82 | 323.43 | 108.11 | 66.98 | 37.91 | 228.47 | 23.21 | 61.23 | 63.96 | (2) | ||||||||||||||||||||||||||||||||
2018 | 524.82 | 40.29 | 1,916.93 | 334.20 | 107.56 | 64.93 | 40.23 | 222.57 | 23.68 | 64.52 | 98.47 | (2) | ||||||||||||||||||||||||||||||||
GDP per capita (U.S.$ )(1) | ||||||||||||||||||||||||||||||||||||||||||||
2020 | 8,579 | 3,133 | 6,797 | 5,335 | 5,600 | 12,510 | 5,001 | 6,127 | 15,426 | 15,438 | 1,690 | (2) | ||||||||||||||||||||||||||||||||
2019 | 10,057 | 3,552 | 8,898 | 6,425 | 6,223 | 15,774 | 5,381 | 7,028 | 16,637 | 17,688 | 2,299 | (2) | ||||||||||||||||||||||||||||||||
2018 | 11,795 | 3,549 | 9,151 | 6,730 | 6,296 | 15,545 | 5,783 | 6,958 | 17,038 | 18,704 | 3,404 | (2) | ||||||||||||||||||||||||||||||||
Gross reserves (excluding gold) (U.S.$ in millions)(1) | ||||||||||||||||||||||||||||||||||||||||||||
2020 | 35,650 | 2,662 | 351,519 | 58,248 | 5,236 | 9,614 | 8,704 | 72,671 | 6,836 | 16,244 | 1,286 | (5) | ||||||||||||||||||||||||||||||||
2019 | 42,193 | 4,374 | 353,588 | 51,973 | 1,866 | 3,423 | 7,316 | 66,014 | 6,834 | 14,499 | 1,841 | (4) | ||||||||||||||||||||||||||||||||
2018 | 63,964 | 7,178 | 371,934 | 47,359 | 1,896 | 2,121 | 7,360 | 58,904 | 8,029 | 15,552 | 3,168 | (4) | ||||||||||||||||||||||||||||||||
Customer price index growth(2) | ||||||||||||||||||||||||||||||||||||||||||||
2020 | 36.1 | 0.7 | 4.5 | 1.6 | -0.9 | -1.6 | 2.2 | 2.0 | 0.8 | 9.4 | 2,960 | |||||||||||||||||||||||||||||||||
2019 | 53.8 | 1.5 | 4.3 | 3.8 | -0.1 | -0.1 | 2.8 | 1.9 | 0.4 | 8.8 | 9,585 | |||||||||||||||||||||||||||||||||
2018 | 47.6 | 1.5 | 3.7 | 3.2 | 0.3 | 0.2 | 3.2 | 2.2 | 1.0 | 8.0 | 130,060 | |||||||||||||||||||||||||||||||||
Exports of Goods (f.o.b.) (U.S.$ in millions)(1) | ||||||||||||||||||||||||||||||||||||||||||||
2020 | 54,945 | 6,953 | 210,707 | 32,309 | 20,461 | 11,629 | 10,956 | 42,941 | 6,003 | 9,886 | 4,846 | (3) | ||||||||||||||||||||||||||||||||
2019 | 65,155 | 8,819 | 225,800 | 40,656 | 22,774 | 14,647 | 12,111 | 48,224 | 8,764 | 11,743 | 17,016 | (3) | ||||||||||||||||||||||||||||||||
2018 | 61,801 | 8,940 | 239,520 | 42,993 | 22,157 | 14,754 | 13,180 | 49,066 | 10,756 | 11,628 | 37,851 | (3) | ||||||||||||||||||||||||||||||||
Import of Goods (f.o.b.) (U.S.$ in millions)(1) | ||||||||||||||||||||||||||||||||||||||||||||
2020 | 40,315 | 6,517 | 178,337 | 41,179 | 17,079 | 14,343 | 9,712 | 34,709 | 5,019 | 7,837 | 6,806 | (3) | ||||||||||||||||||||||||||||||||
2019 | 46,928 | 9,055 | 199,253 | 50,518 | 21,749 | 22,254 | 11,897 | 41,101 | 6,032 | 8,663 | 6,178 | (3) | ||||||||||||||||||||||||||||||||
2018 | 62,544 | 9,302 | 196,147 | 49,387 | 22,359 | 23,961 | 12,598 | 41,866 | 6,617 | 9,336 | 11,942 | (3) |
(1) | Source: World Development Indicators, World Bank, 2020 |
(2) | Source: World Economic Outlook, International Monetary Fund, October 2021 |
(3) | Source: Trademap. Mirror data |
(4) | Source: CAF Calculations based on BCV |
(5) | Source: CAF calculations based on preliminary data from the BCV |
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DESCRIPTION OF THE DEBT SECURITIES
The following description sets forth certain general terms and provisions of the debt securities to which any prospectus supplement may relate. The particular terms of the debt securities being offered and the extent to which such general provisions may apply will be described in a prospectus supplement relating to such debt securities.
The debt securities will be issued pursuant to a fiscal agency agreement, dated as of March 17, 1998, between CAF and The Bank of New York Mellon (as successor in interest to JPMorgan Chase Bank), as fiscal agent. The following statements briefly summarize some of the terms of the debt securities and the fiscal agency agreement (a copy of which has been filed as an exhibit to the registration statement). These statements do not purport to be complete and are qualified in their entirety by reference to all provisions of the fiscal agency agreement and such debt securities.
General
The debt securities will constitute the direct, unconditional, unsecured and general obligations of CAF. The debt securities will rank equally with all of CAF’s other unsecured Indebtedness, other than such obligations as may be preferred by provisions of law that are both mandatory and of general application. “Indebtedness” means all of CAF’s indebtedness in respect of monies borrowed by CAF and guarantees given by it for monies borrowed by others.
The accompanying prospectus supplement will describe the following terms of the debt securities, as applicable:
(1) | the title; |
(2) | the price or prices at which CAF will issue the debt securities; |
(3) | any limit on the aggregate principal amount of the debt securities or the series of which they are a part; |
(4) | the currency or currency units for which the debt securities may be purchased and in which payments of principal and interest will be made; |
(5) | the date or dates on which principal and interest will be payable; |
(6) | the rate or rates at which any of the debt securities will bear interest, the date or dates from which any interest will accrue, and the record dates and interest payment dates; |
(7) | the place or places where principal and interest payments will be made; |
(8) | the time and price limitations on redemption of the debt securities; |
(9) | CAF’s obligation, if any, to redeem or purchase the debt securities at the option of the holder; |
(10) | the denominations in which any of the debt securities will be issuable, if other than denominations of USD 1,000; |
(11) | if the amount of principal or interest on any of the debt securities is determinable according to an index or a formula, the manner in which such amounts will be determined; |
(12) | whether and under what circumstances CAF will issue the debt securities as global debt securities; and |
(13) | any other specific terms of the debt securities. |
Certain debt securities will be treated for U.S. federal income tax purposes as having been issued with original issue discount (“Discount Securities”) if the excess of the debt security’s “stated redemption price at maturity” over its issue price is more than a “de minimis amount” (as defined for U.S. federal income tax
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purposes). See “Taxation — United States Taxation” for more information regarding the U.S. federal income tax consequences of the ownership and disposition of Discount Securities. If applicable, the prospectus supplement also may describe certain U.S. federal income tax considerations that may be relevant to a beneficial owner of Discount Securities and any other special rules regarding debt securities.
Denominations, Registration and Transfer
The debt securities of each series will be issuable only in fully registered form, without coupons, and, unless otherwise specified in the prospectus supplement, only in denominations of USD 1,000 and integral multiples thereof.
At the option of the holder, subject to the terms of the fiscal agency agreement and the limitations applicable to global debt securities, debt securities of each series will be exchangeable for other debt securities of the same series of any authorized denomination and of a like tenor and aggregate principal amount.
Debt securities may be presented for exchange and for registration of transfer in the manner, at the places and subject to the restrictions set forth in the debt securities and as summarized in the prospectus supplement. Such services will be provided without charge, other than any tax or other governmental charge payable in connection therewith, but subject to the limitations provided in the terms of the debt securities.
If any definitive notes are issued and at that time the notes are listed on the Luxembourg Stock Exchange, CAF will appoint a transfer agent in Luxembourg, which it anticipates being the same entity that serves as CAF’s Luxembourg paying agent. In such circumstances, transfers or exchanges of any definitive notes may be made at the office of CAF’s Luxembourg transfer agent (in addition to the corporate trust office of the fiscal agent).
Global Debt Securities
Some or all of the debt securities of any series may be represented, in whole or in part, by one or more global debt securities that will have an aggregate principal amount equal to that of the debt securities they represent. If applicable, each global debt security will be:
(1) | registered in the name of a depositary or its nominee identified in the prospectus supplement; |
(2) | deposited with the depositary or nominee or the depositary’s custodian; and |
(3) | printed with a legend regarding the restrictions on exchanges and registration of transfer of the security, and any other matters required by the fiscal agency agreement and the terms of the debt securities and summarized in the prospectus supplement. |
Payment and Paying Agent
Unless otherwise indicated in the prospectus supplement, CAF will make payments of principal and interest on debt securities:
(1) | through the fiscal agent; |
(2) | to the person in whose name the debt securities are registered at the close of business on the regular record date for the payments; and |
(3) | at the office of the paying agent or agents designated by us; unless |
• | at CAF’s option, payment is mailed to the registered holder, or |
• | at the request of a registered holder of more than USD 1,000,000 principal amount of the securities, payment is made by wire transfer. |
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Unless otherwise indicated in the prospectus supplement, CAF’s sole paying agent for payments on the debt securities will be the corporate trust office of the fiscal agent in The City of New York.
Any monies CAF pays to its fiscal agent or any paying agent for the payment of the principal of or interest on any debt securities that remains unclaimed at the end of two years after such principal or interest has become due and payable will be repaid to CAF by such agent. Upon such repayment, all liability of CAF’s fiscal agent or any paying agent with respect to such monies shall thereupon cease, without, however, limiting in any way CAF’s unconditional obligation to pay principal of or any interest on the debt securities when due.
Negative Pledge
As long as any of the debt securities are outstanding and unpaid, but only up to the time amounts sufficient for payment of all principal and interest have been placed at the disposal of the fiscal agent, CAF will not cause or permit to be created on any of CAF’s property or assets any mortgage, pledge or other lien or charge as security for any bonds, notes or other evidences of indebtedness heretofore or hereafter issued, assumed or guaranteed by CAF for money borrowed (other than purchase money mortgages, pledges or liens on property purchased by it as security for all or part of the purchase price thereof), unless the debt securities are secured by such mortgage, pledge or other lien or charge equally and ratably with such other bonds, notes or evidences of indebtedness.
Default; Acceleration of Maturity
Each of the following will constitute an “event of default” with respect to the debt securities of any series:
(1) | a failure to pay any principal of or interest on any debt securities of that series when due and the continuance of the failure for 30 days; |
(2) | a failure to perform or observe any material obligation under or in respect of any debt securities of that series or the fiscal agency agreement and the continuance of the failure for a period of 90 days after written notice of the failure has been delivered to CAF and to the fiscal agent by the holder of any debt security of that series; |
(3) | a failure to pay any amount in excess of USD 100,000,000 (or its equivalent in any other currency or currencies) of principal or interest or premium in respect of any indebtedness incurred, assumed or guaranteed by CAF as and when such amount becomes due and payable and the continuance of the failure until the expiration of any applicable grace period or 30 days, whichever is longer; or |
(4) | the acceleration of any indebtedness incurred or assumed by CAF with an aggregate principal amount in excess of USD 100,000,000 (or its equivalent in any other currency or currencies) by any holder or holders thereof. |
If an event of default occurs with respect to the debt securities of any series at the time outstanding, each holder of any debt security of that series may, by written notice to CAF and the fiscal agent, declare the principal of and any accrued interest on all the debt securities of that series held by it to be, and the principal and accrued interest shall thereupon become, immediately due and payable, unless prior to receipt of the notice by CAF all events of default in respect of such series of debt securities are cured. If all the events of default are cured following the declaration, the declaration may be rescinded by any such holder with respect to the previously accelerated series of debt securities upon delivery of written notice of the rescission to CAF and the fiscal agent.
Redemption for Tax Reasons
The debt securities may be redeemed at CAF’s option in whole, but not in part:
(i) at any time (if floating rate note provisions are not specified in the accompanying prospectus supplement as being applicable); or
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(ii) on any interest payment date (if floating rate note provisions are specified in the accompanying prospectus supplement as being applicable),
on giving not less than 30 nor more than 60 days’ notice to the holders of the debt securities (which notice shall be irrevocable), at the principal amount of such debt securities or such other amount as may be specified in, or determined in accordance with, the accompanying pricing supplement, together with interest accrued (if any) to the date fixed for redemption, if:
(A) | CAF has or will become obliged to pay additional amounts as provided or referred to in “— Additional Payments by CAF” as a result of any change in, or amendment to, the laws or regulations of any of the full member shareholder countries or any political subdivision or any authority thereof or therein having power to tax, or any change in the application or official interpretation of such laws or regulations (including a holding by a court of competent jurisdiction), which change or amendment becomes effective on or after the date of issue of the first tranche of the debt securities; and |
(B) | such obligation cannot be avoided by CAF taking reasonable measures available to us, |
provided, however, that no such notice of redemption shall be given earlier than:
(1) | where the debt securities may be redeemed at any time, 90 days prior to the earliest date on which CAF would be obliged to pay such additional amounts if a payment in respect of the debt securities were then due; or |
(2) | where the debt securities may be redeemed only on an interest payment date, 60 days prior to the interest payment date occurring immediately before the earliest date on which CAF would be obliged to pay such additional amounts if a payment in respect of the debt securities were then due. |
Prior to the publication of any notice of redemption pursuant to this section, CAF shall deliver to the fiscal agent (A) a certificate signed by two authorized officers of CAF stating that it is entitled to effect such redemption and setting forth a statement of facts showing that the conditions precedent to the right of CAF so to redeem have occurred and (B) an opinion of independent legal advisers of recognized standing to the effect that CAF has or will become obliged to pay such additional amounts as a result of such change or amendment. Upon the expiration of any such notice as is referred to in this section, CAF shall be bound to redeem the debt securities in accordance with this section.
Additional Payments by CAF
All payments of principal and interest in respect of the debt securities by or on behalf of CAF will be made free and clear of, and without withholding or deduction for or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or on behalf of any of the full member shareholder countries or any political subdivision therein or any authority therein or thereof having power to tax, unless the withholding or deduction of such taxes, duties, assessments or governmental charges is required by law. In that event, CAF will pay such additional amounts as will result in receipt by the holder of debt securities after such withholding or deduction of such amounts as would have been received by them had no such withholding or deduction been required, except that no such additional amounts shall be payable in respect of any debt securities presented for payment:
(1) | by or on behalf of a holder of a debt security of any series who is liable for such taxes, duties, assessments or governmental charges in respect of such debt security by reason of having some connection with any of the full member shareholder countries other than the mere holding of the debt security; or |
(2) | if such withholding or deduction may be avoided by a holder of a debt security of any series complying with a request of CAF relating to any certification, identification or other reporting concerning its nationality, residence, identity or connection with any full member shareholder country if the holder is |
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legally able to comply with the request and CAF has provided the notice in writing at least 60 days before such information is required to be provided by the holder; or |
(3) | more than 30 days after the Relevant Date, except to the extent that the holder of such debt security of any series would have been entitled to such additional amounts on presenting such debt security for payment on the last day of such period of 30 days; or |
(4) | any estate, inheritance, gift, sale, transfer, personal property or similar taxes, duties, assessments or governmental charges; or |
(5) | any taxes, duties, assessments or governmental charges which are payable otherwise than by deduction or withholding from payments made under or with respect to the debt security; or |
(6) | any taxes, duties, assessments or governmental charges that were imposed with respect to any payment on a note to any person who is a fiduciary or partnership or person other than the sole beneficial owner of such payment to the extent that no additional amounts would have been payable had the beneficial owner of the applicable note been the holder of such debt security; or |
(7) | if such withholding or deduction is imposed or required pursuant to Sections 1471 through 1474 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), any current or future regulations or official interpretations thereof, any agreement entered into pursuant to Section 1471(b) of the Code, or any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement entered into in connection with the implementation of such Sections of the Code. |
Any reference in this section to principal or interest shall be deemed to include any additional amounts in respect of principal or interest (as the case may be) which may be payable under this section.
As used in this prospectus, the “Relevant Date” means, in respect of any payment, the date on which such payment first becomes due and payable, but if the full amount of the moneys payable has not been received by the fiscal agent on or prior to the due date, it means the first date on which, the full amount of the moneys having been so received and being available for payment to holders of debt securities of any series, notice to that effect will have been duly published as set forth below under “— Notices.”
Modification and Amendment
Each and every holder of the debt securities in a series must consent to any amendment of a provision of the debt securities or the fiscal agency agreement that would:
(1) | change the due date of the principal of or interest on any series of debt securities; or |
(2) | reduce the principal amount, interest rate or amount payable upon acceleration of the due date of the debt securities of a series; or |
(3) | change the currency or place of payment of principal of or interest on the debt securities of a series; or |
(4) | reduce the proportion of the principal amount of the debt securities of a series that must be held by any of the holders to vote to amend or supplement the terms of the fiscal agency agreement or the debt securities; or |
(5) | change CAF’s obligation to pay additional amounts. |
CAF may, however, with the written consent of the holders of 66 2/3% of the principal amount of the debt securities of a series, modify any of the other terms or provisions of the debt securities of that series or the fiscal agency agreement (as it applies to that series). Also, CAF and the fiscal agent may, without the consent of the holders of the debt securities of a series, modify any of the terms and conditions of the fiscal agency agreement and the debt securities of that series, for the purpose of:
(1) | adding to CAF’s covenants for the benefit of the holders of the debt securities; or |
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(2) | surrendering any right or power conferred on CAF; or |
(3) | securing the debt securities of that series; or |
(4) | curing any ambiguity or correcting or supplementing any defective provision of the fiscal agency agreement or the debt securities; or |
(5) | for any purpose that CAF deems necessary or desirable that does not adversely affect the interests of the holders of the debt securities of that series in any material respect. |
Notices
All notices will be delivered in writing to each holder of the debt securities of any series. If at the time of such notice the debt securities of a series are represented by global debt securities, the notice shall be delivered to the applicable depositary for such securities and shall be deemed to have been given three business days after delivery to such depositary. If at the time of the notice the debt securities of a series are not represented by global debt securities, the notice shall be delivered to the registered holders of the debt securities of the series and in that case shall be deemed to have been given three business days after the mailing of the notice by first-class mail.
Further Issues
CAF may from time to time without the consent of holders of the debt securities create and issue further debt securities so as to form a single series with an outstanding series of debt securities, provided that any new debt securities would be treated as fungible with the original debt securities for United States federal income tax purposes. If such additional notes are not fungible with the original debt securities for United States federal income tax purposes, the additional notes will be issued under a separate CUSIP number.
Governing Law; Submission to Jurisdiction; Waiver of Immunity
The debt securities are governed by, and shall be construed in accordance with, the laws of the State of New York. CAF will accept the jurisdiction of any state or federal court in the Borough of Manhattan, The City of New York, in respect of any action arising out of or based on the debt securities that may be instituted by any holder of a debt security. CAF will appoint CT Corporation in The City of New York as its authorized agent upon which process in any such action may be served. CAF will irrevocably waive any immunity to which it might otherwise be entitled in any action arising out of or based on the debt securities brought in any state or federal court in the Borough of Manhattan, The City of New York. CT Corporation will not be an agent for service of process for actions brought under the United States securities laws, and CAF’s waiver of immunity will not extend to such actions.
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From time to time CAF may issue under this prospectus and applicable prospectus supplement guarantees for the benefit of holders of specified securities of third parties. The issuers of the underlying securities may or may not be affiliated with CAF. A holder of a primary security will also have the benefit of CAF’s guarantee related to the primary security.
The terms and conditions of any guarantee will vary with the terms and conditions of the underlying securities. A complete description of the terms and conditions of any guarantee issued pursuant to this prospectus will be set forth in the prospectus supplement for the issue of the guarantees.
CAF may provide guarantees with respect to the certain obligations of an issuer under its securities, including without limitation:
• | payment of any accrued and unpaid distributions which are required to be paid under the terms of the securities; |
• | payment of the redemption price of the securities, including all accrued and unpaid distributions to the date of the redemption; |
• | payment of any accrued and unpaid interest payments, or payment of any premium which are required to be made on the securities; and |
• | any obligation of the issuer pursuant to a warrant, option or other rights. |
Unless otherwise specified in the applicable prospectus supplement, guarantees issued under this prospectus will rank equally with all of CAF’s other unsecured general debt obligations, other than such obligations as may be preferred by provisions of law that are both mandatory and of general application, and will be governed by the laws of the State of New York.
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Full Member Shareholder Country Taxation
Under the terms of the Constitutive Agreement, CAF is exempt from all types of taxes levied by each of the full member shareholder countries on CAF’s income, property and other assets, and on operations CAF carries out in accordance with that treaty, and it is exempt from all liability related to the payment, retention or collection of any taxes, contributions or tariffs.
Payments of principal and interest in respect of the debt securities to a non-resident of the full member shareholder countries will therefore not be subject to taxation in any of the full member shareholder countries, nor will any withholding for tax of any of the full member shareholder countries be required on any such payments to any holder of debt securities. In the event of the imposition of withholding taxes by any of the full member shareholder countries, CAF has undertaken to pay additional amounts in respect of any payments subject to such withholding, subject to certain exceptions, as described under “Description of the Debt Securities — Additional Payments by CAF.”
United States Taxation
The following is a summary of certain U.S. federal income tax consequences of the acquisition, ownership and disposition by a U.S. Holder (as defined below) of the debt securities CAF is offering. This summary does not address the material U.S. federal income tax consequences of every type of debt security which may be issued, and the relevant prospectus supplement with the terms of the securities in that offering will contain additional or modified disclosure concerning the material U.S. federal income tax consequences relevant to such type of debt security as appropriate. This summary deals only with U.S. Holders that will hold debt securities as capital assets. The discussion does not cover all aspects of U.S. federal income taxation such as the Medicare contribution tax on net investment income that may be relevant to, or the actual tax effect that any of the matters described herein will have on, the acquisition, ownership or disposition of the debt securities by particular investors, and does not address state, local, non-U.S. or tax laws other than U.S. federal income tax law. In particular, this summary does not discuss all of the tax considerations that may be relevant to certain types of investors subject to special treatment under the U.S. federal income tax laws (such as partnerships or other pass-through entities, financial institutions, insurance companies, investors liable for the alternative minimum tax, investors subject to special tax accounting rules as a result of any item of gross income with respect to debt securities being taken into account in an applicable financial statement, individual retirement accounts and other tax-deferred accounts, tax-exempt organizations, dealers in securities or currencies, investors that will hold the debt securities as part of straddles, wash sales, hedging transactions or conversion transactions for U.S. federal income tax purposes, U.S. Holders whose functional currency is not the U.S. dollar or persons holding debt securities in connection with a trade or business conducted outside the United States).
Moreover, this summary deals only with debt securities with a term of 30 years or less. The U.S. federal income tax consequences of owning debt securities with a longer term will be discussed in an applicable prospectus supplement.
The following summary does not discuss debt securities characterized as contingent payment debt instruments for U.S. federal income tax purposes. In the event CAF issue any such debt securities, the applicable prospectus supplement will describe the material U.S. federal income tax consequences thereof.
As used herein, the term “U.S. Holder” means a beneficial owner of debt securities that is, for U.S. federal income tax purposes, (i) a citizen or individual resident of the United States, (ii) a corporation, or other entity treated as a corporation, created or organized under the laws of the United States, any State thereof or the District of Columbia, (iii) an estate the income of which is subject to U.S. federal income tax without regard to its source or (iv) a trust if a U.S. court can exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or the trust has elected to be treated as a domestic trust for U.S. federal income tax purposes.
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If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds debt securities, the U.S. federal income tax treatment of a partner generally will depend on the status of the partner and the activities of the partnership. A U.S. investor that is an entity treated as a partnership for U.S. federal income tax purposes holding debt securities should consult its own tax advisors concerning the U.S. federal income tax consequences to it and its partners of the acquisition, ownership and disposition of debt securities by the partnership.
This summary is based on the tax laws of the United States including the United States Internal Revenue Code of 1986, as amended (the “Code”), its legislative history, existing and proposed Treasury Regulations thereunder, published rulings and court decisions, all as of the date hereof and all subject to change at any time, possibly with retroactive effect.
The discussion assumed that debt securities will be issued only in registered form.
THE SUMMARY OF U.S. FEDERAL INCOME TAX CONSEQUENCES SET OUT BELOW IS FOR GENERAL INFORMATION ONLY. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF OWNING THE DEBT SECURITIES, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL, NON-U.S. AND OTHER TAX LAWS AND POSSIBLE CHANGES IN TAX LAW.
Characterization of the Debt Securities
Whether a debt security is treated as debt (and not equity) for U.S. federal income tax purposes is an inherently factual question and no single factor is determinative. Unless otherwise set forth in an applicable prospectus supplement, CAF believes that the debt securities will be treated as indebtedness for U.S. federal income tax purposes, although no opinions have been sought, and no assurances can be given, with respect to such treatment. The following discussion assumes that such treatment will be respected.
Payments of Interest
Interest on a debt security, whether payable in U.S. dollars or a currency, composite currency or basket of currencies other than U.S. dollars (a “foreign currency”), other than interest on a “Discount Security” that is not “qualified stated interest” (each as defined below under “— Original Issue Discount — General”), will be taxable to a U.S. Holder as ordinary income at the time it is received or accrued, depending on the U.S. Holder’s method of accounting for U.S. federal income tax purposes. Interest paid by CAF on the debt security and original issue discount, if any, accrued with respect to the debt securities (as described below under “Original Issue Discount”) and any additional amounts paid with respect to withholding tax on such debt securities, including withholding tax on payments of such additional amounts will constitute income from sources outside the United States for foreign tax credit purposes.
In the event any foreign withholding tax is imposed, subject to certain limitations, a U.S. Holder will generally be entitled to a credit against its U.S. federal income tax liability, or a deduction in computing its U.S. federal taxable income, for foreign withholding taxes withheld by CAF (paid at the rate applicable to a U.S. Holder). Interest and OID will constitute foreign source income. For purposes of the foreign tax credit limitation, foreign source income is classified as belonging to a specified “basket”, and the credit for foreign taxes on income in any basket is limited to U.S. federal income tax allocable to that basket. Interest on the debt securities will generally be passive category income. There are additional significant and complex limits on a U.S. Holder’s ability to claim foreign tax credits, and recently issued U.S. Treasury regulations that apply to foreign income taxes paid or accrued in taxable years beginning on or after December 28, 2021 further restrict the availability of any such credit based on the nature of the tax imposed by the foreign jurisdiction. U.S. Holders should consult their tax advisors concerning foreign tax credits.
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Original Issue Discount
General. The following is a summary of certain U.S. federal income tax consequences of the ownership of debt securities issued with original issue discount (“OID”).
A debt security, other than a debt security with a term of one year or less (a “Short-Term Security”), will be treated as issued with OID (a “Discount Security”) if the amount by which the debt security’s “stated redemption price at maturity” exceeds its issue price is equal to or greater than a de minimis amount (0.25% of the debt security’s stated redemption price at maturity multiplied by the number of complete years to its maturity). A debt security that provides for the payment of amounts other than qualified stated interest before maturity (an “installment obligation”) will be treated as a Discount Security if the excess of the debt security’s stated redemption price at maturity over its issue price is equal to or greater than 0.25% of the debt security’s stated redemption price at maturity multiplied by the weighted average maturity of the debt security. A debt security’s weighted average maturity is the sum of the following amounts determined for each payment on a debt security (other than a payment of qualified stated interest): (i) the number of complete years from the issue date until the payment is made multiplied by (ii) a fraction, the numerator of which is the amount of the payment and the denominator of which is the debt security’s stated redemption price at maturity. Generally, the issue price of a debt security will be the first price at which a substantial amount of debt securities included in the issue of which the debt security is a part is sold to persons other than bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents, or wholesalers. The stated redemption price at maturity of a debt security is the total of all payments provided by the debt security that are not payments of “qualified stated interest”. A qualified stated interest payment is generally any one of a series of stated interest payments on a debt security that are unconditionally payable in cash or in property (other than debt instruments of the issuer) at least annually at a single fixed rate (with certain exceptions for different rates that take into account different compounding periods), or a variable rate (in the circumstances described below under “— Variable Interest Rate Securities”), applied to the outstanding principal amount of the debt security. Solely for the purposes of determining whether a debt security has OID, CAF will be deemed to exercise any unconditional call option that has the effect of decreasing the yield on the debt security, and the U.S. Holder will be deemed to exercise any unconditional put option that has the effect of increasing the yield on the debt security.
U.S. Holders of Discount Securities (regardless of their method of accounting) must include OID in income as it accrues, using a constant-yield method generally before the receipt of cash attributable to the income, and generally will have to include in income increasingly greater amounts of OID over the life of the Discount Securities. The amount of OID includible in income by a U.S. Holder of a Discount Security is the sum of the daily portions of OID with respect to the Discount Security for each day during the taxable year or portion of the taxable year on which the U.S. Holder holds the Discount Security (“accrued OID”). The daily portion is determined by allocating to each day in any “accrual period” a pro rata portion of the OID allocable to that accrual period. Accrual periods with respect to a Discount Security may be of any length and may vary in length over the term of the Discount Security as long as (i) no accrual period is longer than one year and (ii) each scheduled payment of interest or principal on the Discount Security occurs on either the first or final day of an accrual period. The amount of OID allocable to an accrual period equals the excess of (a) the product of the Discount Security’s adjusted issue price at the beginning of the accrual period and the Discount Security’s yield to maturity (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of each accrual period) over (b) the sum of the payments of qualified stated interest on the Discount Security allocable to the accrual period. The “adjusted issue price” of a Discount Security at the beginning of any accrual period is the issue price of the Discount Security increased by (x) the amount of accrued OID for each prior accrual period and decreased by (y) the amount of any payments previously made on the Discount Security that were not qualified stated interest payments.
The amount of OID allocable to the final accrual period is equal to the difference between: (i) the amount payable at the maturity of a debt security, other than any payment of qualified stated interest, and (ii) the debt security’s adjusted issue price as of the beginning of the final accrual period.
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Acquisition Premium. A U.S. Holder that purchases a Discount Security for an amount less than or equal to the sum of all amounts, other than qualified stated interest, payable on the Discount Security after the purchase date, but in excess of its adjusted issue price (any such excess being “acquisition premium”) and that does not make the election described below under “— Election to Treat All Interest as Original Issue Discount”, is permitted to reduce the daily portions of OID by a fraction equal to the excess of the U.S. Holder’s adjusted basis in the Discount Security immediately after its purchase over the debt security’s adjusted issue price divided by the excess of the sum of all amounts payable on the Discount Security after the purchase date, other than payments of qualified stated interest, over the Discount Security’s adjusted issue price.
Election to Treat All Interest as Original Issue Discount. A U.S. Holder may elect to include in gross income all interest that accrues on a debt security using the constant-yield method described above under “— General”, with certain modifications. For purposes of this election, interest includes stated interest, acquisition discount OID, de minimis OID, market discount, de minimis market discount and unstated interest, as adjusted by any amortizable bond premium (described below under “— Debt Securities Purchased at a Premium”) or acquisition premium. Generally, this election will apply only to the debt security with respect to which it is made and may not be revoked without the consent of the U.S. Internal Revenue Service (“IRS”). If this election is made with respect to a debt security that has amortizable bond premium, the electing U.S. Holder will be treated as having made the election discussed below under “— Debt Securities Purchased at a Premium” to apply amortizable bond premium against interest for all debt instruments with amortizable bond premium, other than debt instruments the interest on which is excludible from gross income, that the U.S. Holder held as of the beginning of the taxable year to which the election applies or acquired in any taxable year thereafter. If this election is made with respect to a Market Discount Security (as defined below), the electing U.S. Holder will be treated as having made the election discussed below under “— Market Discount” to include market discount in income currently over the life of all debt instruments having market discount that are acquired on or after the first day of the first taxable year to which the election applies. U.S. Holders should consult their tax advisors concerning the propriety and consequences of this election.
Variable Interest Rate Securities. It is expected that debt securities that provide for interest at variable rates (“Variable Interest Rate Securities”) generally will bear interest at a “qualified floating rate” (defined below) and thus will be treated as “variable rate debt instruments” under Treasury Regulations governing accrual of OID. A Variable Interest Rate Security will qualify as a “variable rate debt instrument” if (a) its issue price does not exceed the total non-contingent principal payments by more than an amount equal to the lesser of (x) .015 multiplied by the product of the total non-contingent principal payments and the number of complete years to maturity from the issue date, or (y) 15 percent of the total non-contingent principal payments, (b) it provides for stated interest, compounded or paid at least annually, only at (i) one or more qualified floating rates, (ii) a single fixed rate and one or more qualified floating rates, (iii) a single objective rate (defined below), or (iv) a single fixed rate and a single objective rate that is a qualified inverse floating rate, and (c) it does not provide for any principal payments that are contingent (other than as described in (a) above). A qualified floating rate or objective rate in effect at any time during the term of the instrument must be set at a “current value” of that rate. A “current value” of a rate is the value of the rate on any day that is no earlier than three months prior to the first day on which that value is in effect and no later than one year following that first day.
A “qualified floating rate” is any variable rate where variations in the value of the rate can reasonably be expected to measure contemporaneous variations in the cost of newly borrowed funds in the currency in which the Variable Interest Rate Security is denominated. A fixed multiple of a qualified floating rate will constitute a qualified floating rate only if the multiple is greater than 0.65 but not more than 1.35. A variable rate equal to the product of a qualified floating rate and a fixed multiple that is greater than 0.65 but not more than 1.35, increased or decreased by a fixed rate, will also constitute a qualified floating rate. In addition, two or more qualified floating rates that can reasonably be expected to have approximately the same values throughout the term of the Variable Interest Rate Security (e.g., two or more qualified floating rates with values within 25 basis points of each other as determined on the Variable Interest Rate Security’s issue date) will be treated as a single qualified floating rate. The debt security would not have a qualified floating rate, however, if the rate is subject to certain
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restrictions (including caps, floors, governors, or other similar restrictions), unless such restrictions are fixed throughout the term of the debt security or are not reasonably expected to significantly affect the yield of the debt security.
An “objective rate” is a rate that is not itself a qualified floating rate but which is determined using a single fixed formula and that is based on objective financial or economic information. A rate will not qualify as an objective rate if it is based on information that is within CAF’s control (or a related party) or that is unique to its circumstances (or a related party), such as dividends, profits or the value of its stock (although a rate does not fail to be an objective rate merely because it is based on its credit quality). Other variable interest rates may be treated as objective rates if so designated by the IRS in the future. Despite the foregoing, a variable rate of interest on a Variable Interest Rate Security will not constitute an objective rate if it is reasonably expected that the average value of the rate during the first half of the Variable Interest Rate Security’s term will be either significantly less than or significantly greater than the average value of the rate during the final half of the Variable Interest Rate Security’s term.
A “qualified inverse floating rate” is any objective rate equal to a fixed rate minus a qualified floating rate, as long as variations in the rate can reasonably be expected to inversely reflect contemporaneous variations in the qualified floating rate. If a Variable Interest Rate Security provides for stated interest at a fixed rate for an initial period of one year or less followed by a variable rate that is either a qualified floating rate or an objective rate for a subsequent period and the value of the variable rate on the Variable Interest Rate Security’s issue date is intended to approximate the fixed rate (e.g., the value of the variable rate on the issue date does not differ from the value of the fixed rate by more than 25 basis points), then the fixed rate and the variable rate together will constitute either a single qualified floating rate or objective rate, as the case may be.
If a Variable Interest Rate Security that provides for stated interest at either a single qualified floating rate or a single objective rate throughout the term thereof qualifies as a “variable rate debt instrument”, then any stated interest on the Variable Interest Rate Security which is unconditionally payable in cash or property (other than CAF’s debt instruments) at least annually will constitute qualified stated interest and will be taxed accordingly. Thus, a Variable Interest Rate Security that provides for stated interest at either a single qualified floating rate or a single objective rate throughout the term thereof and that qualifies as a “variable rate debt instrument” will generally not be treated as having been issued with OID unless the Variable Interest Rate Security is issued at a price that is below the debt security’s stated principal amount by more than a specified de minimis amount. OID on a Variable Interest Rate Security arising from such discount is allocated to an accrual period using the constant yield method described above by assuming that the variable rate is a fixed rate equal to (i) in the case of a qualified floating rate or qualified inverse floating rate, the value, as of the issue date, of the qualified floating rate or qualified inverse floating rate, or (ii) in the case of an objective rate (other than a qualified inverse floating rate), a fixed rate that reflects the yield that is reasonably expected for the Variable Interest Rate Security.
In general, any other Variable Interest Rate Security that qualifies as a “variable rate debt instrument” will be converted into an “equivalent” fixed rate debt instrument for purposes of determining the amount and accrual of OID and qualified stated interest on the Variable Interest Rate Security. Such a Variable Interest Rate Security must be converted into an “equivalent” fixed rate debt instrument by substituting any qualified floating rate or qualified inverse floating rate provided for under the terms of the Variable Interest Rate Security with a fixed rate equal to the value of the qualified floating rate or qualified inverse floating rate, as the case may be, as of the Variable Interest Rate Security’s issue date. Any objective rate (other than a qualified inverse floating rate) provided for under the terms of the Variable Interest Rate Security is converted into a fixed rate that reflects the yield that is reasonably expected for the Variable Interest Rate Security. In the case of a Variable Interest Rate Security that qualifies as a “variable rate debt instrument” and provides for stated interest at a fixed rate in addition to either one or more qualified floating rates or a qualified inverse floating rate, the fixed rate is initially converted into a qualified floating rate (or a qualified inverse floating rate, if the Variable Interest Rate Security provides for a qualified inverse floating rate). Under these circumstances, the qualified floating rate or qualified inverse floating rate that replaces the fixed rate must be such that the fair market value of the Variable Interest
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Rate Security as of the Variable Interest Rate Security’s issue date is approximately the same as the fair market value of an otherwise identical debt instrument that provides for either the qualified floating rate or qualified inverse floating rate rather than the fixed rate. Subsequent to converting the fixed rate into either a qualified floating rate or a qualified inverse floating rate, the Variable Interest Rate Security is converted into an “equivalent” fixed rate debt instrument in the manner described above.
Once the Variable Interest Rate Security that qualifies as a “variable rate debt instrument” is converted into an “equivalent” fixed rate debt instrument pursuant to the foregoing rules, the amount of OID and qualified stated interest, if any, are determined for the “equivalent” fixed rate debt instrument by applying the general OID rules to the “equivalent” fixed rate debt instrument and a U.S. Holder of the Variable Interest Rate Security will account for the OID and qualified stated interest as if the U.S. Holder held the “equivalent” fixed rate debt instrument. In each accrual period, appropriate adjustments will be made to the amount of qualified stated interest or OID assumed to have been accrued or paid with respect to the “equivalent” fixed rate debt instrument in the event that these amounts differ from the actual amount of interest accrued or paid on the Variable Interest Rate Security during the accrual period.
If a Variable Interest Rate Security does not qualify as a “variable rate debt instrument”, then the debt security will be treated as a contingent payment debt obligation. The U.S. federal income tax treatment of debt securities that are treated as contingent payment debt obligations will be described in an applicable prospectus supplement.
Short-Term Securities. In general, an individual or other cash basis U.S. Holder of a Short-Term Security is not required to accrue OID (as specially defined below for the purposes of this paragraph) for U.S. federal income tax purposes unless it elects to do so (but may be required to include any stated interest in income as the interest is received). Accrual basis U.S. Holders and certain other U.S. Holders are required to accrue OID on Short-Term Securities on a straight-line basis or, if the U.S. Holder so elects, under the constant-yield method (based on daily compounding). In the case of a U.S. Holder not required and not electing to include OID in income currently, any gain recognized on the sale or retirement of the Short-Term Security will be ordinary income to the extent of the OID accrued on a straight-line basis (or, if an election was made, based on the constant-yield method) through the date of sale or retirement. However, U.S. Holders who are not required and do not elect to accrue OID on Short-Term Securities will be required to defer deductions for interest on borrowings allocable to Short-Term Securities in an amount not exceeding the deferred income until the deferred income is recognized.
For purposes of determining the amount of OID subject to these rules, all interest payments on a Short- Term Security are included in the Short-Term Security’s stated redemption price at maturity. A U.S. Holder not otherwise required to accrue OID may elect to do so on a Short-Term Security as if the Short-Term Security had been originally issued to the U.S. Holder at the U.S. Holder’s purchase price for the Short-Term Security. This election will apply to all obligations with a maturity of one year or less acquired by the U.S. Holder on or after the first day of the first taxable year to which the election applies, and may not be revoked without the consent of the IRS.
Market Discount
A debt security, other than a Short-Term Security, generally will be treated as purchased at a market discount (a “Market Discount Security”) if the debt security’s stated redemption price at maturity or, in the case of a Discount Security, the debt security’s “revised issue price”, exceeds the amount for which the U.S. Holder purchased the debt security by at least 0.25% of the debt security’s stated redemption price at maturity or revised issue price, respectively, multiplied by the number of complete years to the debt security’s maturity (or, in the case of a debt security that is an installment obligation, the debt security’s weighted average remaining maturity). For this purpose, the “revised issue price” of a debt security generally equals its issue price, increased by the amount of any OID that has accrued on the debt security and decreased by the amount of any payments
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previously made on the debt security that were not qualified stated interest payments. If this excess is not sufficient to cause the debt security to be a Market Discount Security, then the excess constitutes “de minimis market discount”, and the rules discussed below are not applicable.
Any gain recognized on the maturity or disposition of a Market Discount Security (including any payment on a debt security that is not qualified stated interest) will be treated as ordinary income to the extent of market discount that accrued on the debt security while held by such U.S. Holder. Alternatively, a U.S. Holder of a Market Discount Security may elect to include market discount in income currently over the life of the debt security. This election shall apply to all debt instruments with market discount acquired by the electing U.S. Holder on or after the first day of the first taxable year to which the election applies. This election may not be revoked without the consent of the IRS. A U.S. Holder of a Market Discount Security that does not elect to include market discount in income currently will generally be required to defer deductions for interest on borrowings incurred to purchase or carry a Market Discount Security that is in excess of the interest and OID on the debt security includible in the U.S. Holder’s income, to the extent that this excess interest expense does not exceed the portion of accrued market discount allocable to the days on which the Market Discount Security was held by the U.S. Holder, until maturity or disposition of the Market Discount Security.
Market discount will accrue on a straight-line basis unless the U.S. Holder elects to accrue the market discount on a constant-yield method. This election applies only to the Market Discount Security with respect to which it is made and is irrevocable without the consent of the IRS.
Debt Securities Purchased at a Premium
A U.S. Holder that purchases a debt security for an amount in excess of its principal amount, or for a Discount Security, its stated redemption price at maturity, will not be required to include any OID in its income and may elect to treat the excess as “amortizable bond premium”, in which case the amount required to be included in the U.S. Holder’s income each year with respect to interest on the debt security will be reduced by the amount of amortizable bond premium allocable (based on the debt security’s yield to maturity) to that year, as amount computed with reference to the amount payable on the earlier date of redemption). Any election to amortize bond premium shall apply to all bonds with amortizable bond premium (other than bonds the interest on which is excludable from gross income for U.S. federal income tax purposes) held by the U.S. Holder at the beginning of the first taxable year to which the election applies or thereafter acquired by the U.S. Holder, and is irrevocable without the consent of the IRS. See “— Original Issue Discount — Election to Treat All Interest as Original Issue Discount.”
Purchase, Sale, Retirement or Other Taxable Disposition of Debt Securities
A U.S. Holder’s adjusted tax basis in a debt security will generally be its cost, increased by the amount of any OID or market discount included in the U.S. Holder’s income with respect to the debt security and the amount, if any, of income attributable to de minimis OID and de minimis market discount included in the U.S. Holder’s income with respect to the debt security, and reduced by (i) the amount of any payments that are not qualified stated interest payments, and (ii) the amount of any amortizable bond premium previously applied to reduce interest on the debt security.
A U.S. Holder will generally recognize gain or loss on the sale, retirement or other taxable disposition of a debt security equal to the difference between the amount realized on such disposition, other than amounts attributed to accrued but unpaid interest (which will be taxable as interest income to the extent not previously included in income), and the U.S. Holder’s adjusted tax basis of the debt security. Except to the extent described above under “Original Issue Discount — Market Discount” or “Original Issue Discount — Short Term Security” or attributable to changes in exchange rates (as discussed below), gain or loss recognized on the taxable disposition of a debt security will be capital gain or loss and will be long term capital gain or loss if the U.S. Holder’s holding period in the debt securities exceeds one year. The deductibility of capital losses is subject to
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limitations. Gain or loss realized by a U.S. Holder on the taxable disposition of a debt security generally will constitute income or loss from sources within the United States for U.S. foreign tax credit purposes. As a result, if there are any foreign taxes imposed on any gain, the U.S. Holder may not be able to utilized foreign tax credit with respect to such taxes. In addition, there are recently issued U.S. Treasury regulations that apply to foreign income taxes paid or accrued in taxable years beginning on or after December 28, 2021 further restrict the availability of any such credit based on the nature of the tax imposed by the foreign jurisdiction. U.S. Holders should consult their tax advisors concerning foreign tax credits.
Foreign Currency Debt Securities
Interest. If an interest payment is denominated in, or determined by reference to, a foreign currency (for this purpose, meaning a non-U.S. dollar currency), the amount of income recognized by a cash basis U.S. Holder will be the U.S. dollar value of the interest payment, based on the exchange rate in effect on the date of receipt, regardless of whether the payment is in fact converted into U.S. dollars.
An accrual basis U.S. Holder may determine the amount of income recognized with respect to an interest payment denominated in, or determined by reference to, a foreign currency in accordance with either of two methods. Under the first method, the amount of income accrued will be based on the average exchange rate in effect during the interest accrual period (or, in the case of an accrual period that spans two taxable years, the part of the period within the taxable year).
Under the second method, the U.S. Holder may elect to determine the amount of income accrued on the basis of the exchange rate in effect on the last day of the accrual period (or, in the case of an accrual period that spans two taxable years, the exchange rate in effect on the last day of the part of the period within the taxable year). Additionally, if a payment of interest is actually received within five business days of the last day of the accrual period, an electing accrual basis U.S. Holder may instead translate the accrued interest into U.S. dollars at the exchange rate in effect on the day of actual receipt. Any such election will apply to all debt instruments held by the U.S. Holder at the beginning of the first taxable year to which the election applies or thereafter acquired by the U.S. Holder, and will be irrevocable without the consent of the IRS.
Upon receipt of payment of accrued interest (including a payment attributable to accrued but unpaid interest upon the sale or retirement of a debt security) denominated in, or determined by reference to, a foreign currency, an accrual basis U.S. Holder may recognize exchange gain or loss (taxable as ordinary income or loss) equal to the difference between the amount received (translated into U.S. dollars at the spot rate on the date of receipt) and the amount previously accrued, regardless of whether the payment is in fact converted into U.S. dollars.
OID. OID for each accrual period on a Discount Security that is denominated in, or determined by reference to, a foreign currency, will be determined in the foreign currency and then translated into U.S. dollars in the same manner as stated interest accrued by an accrual basis U.S. Holder, as described above. Upon receipt of an amount attributable to OID (whether in connection with a payment on the debt security or a sale of the debt security), a U.S. Holder may recognize exchange gain or loss (taxable as ordinary income or loss) equal to the difference between the amount received (translated into U.S. dollars at the spot rate on the date of receipt) and the amount previously accrued, regardless of whether the payment is in fact converted into U.S. dollars.
Market Discount. Market Discount on a debt security that is denominated in, or determined by reference to, a foreign currency, will be accrued in the foreign currency. If the U.S. Holder elects to include market discount in income currently, the accrued market discount will be translated into U.S. dollars at the average exchange rate for the accrual period (or portion thereof within the U.S. Holder’s taxable year). Upon the receipt of an amount attributable to accrued market discount, the U.S. Holder may recognize exchange gain or loss (which will be taxable as ordinary income or loss) determined in the same manner as for accrued interest or OID. A U.S. Holder that does not elect to include market discount in income currently will recognize, upon the disposition or maturity of the debt security, the U.S. dollar value of the amount accrued, calculated at the spot rate on that date, and no part of this accrued market discount will be treated as exchange gain or loss.
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Bond Premium. Bond premium (including acquisition premium) on a debt security that is denominated in, or determined by reference to, a foreign currency, will be computed in units of the foreign currency, and any such bond premium that is taken into account currently will reduce interest income in units of the foreign currency. On the date bond premium offsets interest income, a U.S. Holder may recognize exchange gain or loss (taxable as ordinary income or loss) equal to the amount offset multiplied by the difference between the spot rate in effect on the date of the offset and the spot rate in effect on the date the debt securities were acquired by the U.S. Holder. A U.S. Holder that does not elect to take bond premium (other than acquisition premium) into account currently will recognize a capital loss when the debt security matures.
Sale, Retirement or Other Taxable Disposition. As discussed above under “Purchase, Sale, Retirement or Other Taxable Disposition of Debt Securities”, a U.S. Holder will generally recognize gain or loss on the sale, retirement or other taxable disposition of a debt security equal to the difference between the amount realized on such sale, retirement or taxable disposition and its adjusted tax basis in the debt security. A U.S. Holder’s adjusted tax basis in a debt security that is denominated in a foreign currency will be determined by reference to the U.S. dollar cost of the debt security. The U.S. dollar cost of a debt security purchased with foreign currency will generally be the U.S. dollar value of the purchase price on the date of purchase or, in the case of debt securities traded on an established securities market, as defined in the applicable U.S. Treasury Regulations, that are purchased by a cash basis U.S. Holder (or an accrual basis U.S. Holder that so elects), on the settlement date for the purchase.
The amount realized on a sale, retirement or other taxable disposition of a debt security for an amount in foreign currency will be the U.S. dollar value of this amount on the date of such taxable disposition or, in the case of debt securities traded on an established securities market that are sold by a cash basis U.S. Holder (or an accrual basis U.S. Holder that so elects), on the settlement date for the sale. Such an election by an accrual basis U.S. Holder must be applied consistently from year to year and cannot be revoked without the consent of the IRS.
A U.S. Holder will recognize exchange rate gain or loss (taxable as ordinary income or loss) on the taxable disposition of a debt security equal to the difference, if any, between the U.S. dollar values of the U.S. Holder’s purchase price for the debt security on (i) the date of disposition and (ii) the date on which the U.S. Holder acquired the debt security. Any such exchange rate gain or loss will be realized only to the extent of total gain or loss realized on the sale or retirement.
Exchange gain or loss generally constitutes income or loss from sources within the United States for U.S. foreign tax credit purposes.
Backup Withholding and Information Reporting
In general, payments of interest and accruals of any OID on, and the proceeds of a sale, redemption or other disposition of, debt securities payable to a U.S. Holder by a U.S. issuing and paying agent or other U.S.-related intermediary will be reported to the IRS and to the U.S. Holder as may be required under applicable regulations. Backup withholding will apply to these payments and payments of OID if the U.S. Holder fails to provide an accurate taxpayer identification number or certification of exempt status or if the U.S. Holder had been notified that it is subject to backup withholding because of a failure to report all interest and dividends required to be shown on its U.S. federal income tax returns. Certain U.S. Holders (including, among others, corporations) are not subject to backup withholding. U.S. Holders should consult their tax advisors as to their qualification for exemption from backup withholding and the procedure for obtaining an exemption. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against such U.S. Holder’s U.S. federal income tax liability and may entitle such U.S. Holder to a refund, provided that the required information is timely furnished to the IRS and certain other requirements are met.
Certain U.S. Holders who are individuals (or certain specified entities) may be required to report information to the IRS with respect to any interest in debt securities not held in an account maintained by a
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financial institution, or with respect to certain accounts maintained with non-U.S. financial institutions. U.S. Holders who fail to report required information could become subject to substantial penalties. U.S. Holders are urged to consult with their own tax advisors regarding the possible implications of this legislation for their ownership and disposition of the debt securities CAF is offering.
Reportable Transactions
Certain regulations meant to require the reporting of certain tax shelter transactions cover transactions generally not regarded as tax shelters, including certain foreign currency transactions giving rise to losses that equal or exceed a certain threshold. The scope and application of these rules is not entirely clear. A U.S. Holder may be required to treat a foreign currency exchange loss from debt securities as a reportable transaction if the loss exceeds a certain threshold in a single taxable year, if the U.S. Holder is an individual or trust, or higher amounts for other non-individual U.S. Holders. In the event the acquisition, holding or disposition of debt securities constitutes participation in a “reportable transaction” for purposes of those rules, a U.S. Holder will be required to disclose its investment by filing Form 8886 with the IRS. A certain penalty is generally imposed on any taxpayer that fails to timely file an information return with the IRS with respect to a transaction resulting in a loss that is treated as a reportable transaction. Prospective purchasers are urged to consult their tax advisors regarding the application of these rules to the acquisition, holding or disposition of debt securities.
Foreign Account Tax Compliance Act
Pursuant to Sections 1471 to 1474 of the Code (provisions commonly referred to as “FATCA”), and subject to the proposed regulations described below, CAF and other non-U.S. financial institutions through which payments on the debt securities it is offering are made, may be required to withhold tax on all, or a portion of, payments made on any debt securities issued or materially modified on or after the date that is six months after final U.S. Treasury Regulations defining the term “foreign pass-through payment” are filed with the United States Federal Register. Under proposed regulations, any withholding on “foreign pass-through payments” on debt securities that are not otherwise grandfathered would apply to such payments made on or after the date that is two years after the date of publication in the United States Federal Register of applicable final regulations defining “foreign pass-through payments.” Taxpayers generally may rely on these proposed regulations until final regulations are issued. No such final regulations defining “foreign pass-through payments” have been issued as of the date of this offering circular. The rules governing FATCA are subject to change, and the future application of FATCA to CAF and CAF’s debt securities is uncertain. However, such withholding by CAF and other non-U.S. financial institutions through which payments on the debt securities are made, may be required, among others, where (i) CAF or such other non-U.S. financial institution is a foreign financial institution (“FFI”) that agrees to provide certain information on its account holders to the IRS (making CAF and such other non-U.S. financial institution a “participating FFI”) and (ii)(a) the payee itself is an FFI but is not a participating FFI or does not provide information sufficient for the relevant participating FFI to determine whether the payee is subject to withholding under FATCA or (b) the payee is not a participating FFI and is not otherwise exempt from FATCA withholding. Notwithstanding anything herein to the contrary, if an amount of, or in respect of, withholding tax were to be deducted or withheld from interest, principal or other payments on the debt securities as a result of FATCA, CAF would not be required to pay any additional amounts as a result of the deduction or withholding of such tax. THE RULES GOVERNING FATCA ARE COMPLICATED. INVESTORS SHOULD CONSULT THEIR TAX ADVISERS TO DETERMINE WHETHER THESE RULES MAY APPLY TO PAYMENTS THEY WILL RECEIVE UNDER THE DEBT SECURITIES.
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CAF may sell the securities described in this prospectus to one or more underwriters for public offering and sale by them or may sell the securities to investors directly or through agents, which agents may be affiliated with us. Any such underwriter or agent involved in the offer and sale of the securities will be named in the accompanying prospectus supplement.
CAF may sell its guarantees separately from debt securities to guarantee certain obligations associated with the securities of third party issuers. In such cases, CAF may sell the guarantees in the same transaction as the sale of the underlying security or it may sell the guarantee independently to guarantee the obligations of outstanding securities of third party issuers.
Sales of securities offered pursuant to any prospectus supplement may be effected from time to time in one or more transactions at a fixed price or prices which may be changed, at prices related to the prevailing market prices at the time of sale or at negotiated prices. CAF also may, from time to time, authorize underwriters, acting as CAF’s agents, to offer and sell securities upon the terms and conditions set forth in the prospectus supplement. In connection with the sale of securities, underwriters may be deemed to have received compensation from CAF in the form of underwriting discounts or commissions and may also receive commissions from purchasers of securities for whom they may act as agent. Underwriters may sell securities to or through dealers, and such dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters and/or commissions from purchasers of securities for whom they may act as agent.
CAF may offer the securities of any series to present holders of its other securities as consideration for the purchase or exchange by CAF of other securities. This offer may be in connection with a publicly announced tender, exchange or other offer for these securities or in privately negotiated transactions. This offering may be in addition to or in lieu of sales of securities directly or through underwriters or agents as set forth in the applicable prospectus supplement.
Any underwriting compensation CAF pays to underwriters or agents in connection with the offering of securities, and any discounts, concessions or commissions allowed by underwriters to participating dealers, will be set forth in the prospectus supplement. Underwriters, dealers and agents participating in the distribution of the securities may be deemed to be underwriters, and any discounts, concessions or commissions received by them and any profit realized by them on resale of the securities may be deemed to be underwriting discounts and commissions under the Securities Act. Underwriters, dealers and agents may be entitled, under agreements entered into with CAF, to several indemnification against and contribution toward certain civil liabilities, including liabilities under the Securities Act.
Unless otherwise specified in the prospectus supplement, each series of securities will be a new issue with no established trading market. CAF may elect to list any series of securities on any exchange, but it is not obligated to do so.
One or more underwriters may make a market in a series of securities, but they will not be obligated to do so and may discontinue any market making at any time without notice. Neither CAF nor any underwriter can give assurances as to the liquidity of the trading market for the securities.
Certain of the underwriters, agents and their affiliates may be customers of, engage in transactions with and perform services for CAF in the ordinary course of business, for which they received or will receive customary fees and expenses.
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VALIDITY OF THE DEBT SECURITIES
The validity of the debt securities will be passed upon for CAF by Latham & Watkins LLP, and for any underwriters or agents by counsel named in the applicable prospectus supplement. Latham & Watkins LLP and counsel to the underwriters or agents may rely as to certain matters on the opinion of CAF’s General Counsel.
The validity of the guarantees will be passed upon for CAF by Latham & Watkins LLP, and for any underwriters or agents by counsel to be named in the applicable prospectus supplement. Latham & Watkins LLP and counsel to the underwriters or agents may rely as to certain matters on the opinion of CAF’s General Counsel.
The financial statements of Corporación Andina de Fomento as of and for the years ended December 31, 2021, 2020, and 2019 included in this Prospectus and the effectiveness of Corporación Andina de Fomento’s internal control over financial reporting, have been audited by Lara Marambio & Asociados, independent auditors, as stated in their reports. Such financial statements are included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.
AUTHORIZED REPRESENTATIVE
CAF’s authorized representative in the United States of America is Puglisi & Associates. The address of the authorized representative in the United States is 850 Library Avenue, Suite 204, Newark, Delaware 19711.
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WHERE YOU CAN FIND MORE INFORMATION
This registration statement of which the prospectus forms a part, including its various exhibits, is available to the public over the internet at the SEC’s website: http://www.sec.gov.
The information set forth herein, except the information appearing in the section entitled “The Full Member Shareholder Countries,” is stated on the authority of the Executive President of CAF, in his duly authorized capacity as Executive President.
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CORPORACIÓN ANDINA DE FOMENTO (CAF)
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Management’s Report on the Effectiveness of Internal Control over Financial Reporting
Corporación Andina de Fomento (“CAF”)’s internal control over financial reporting is a process effected by those charged with governance, management, and other personnel, designed to provide reasonable assurance regarding the preparation of reliable financial statements in accordance with accounting principles generally accepted in the United States of America. An entity’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the entity; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the entity are being made only in accordance with authorizations of management and those charged with governance; and (3) provide reasonable assurance regarding prevention, or timely detection and correction of unauthorized acquisition, use, or disposition of the entity’s assets that could have a material effect on the financial statements.
Management of CAF is responsible for designing, implementing, and maintaining effective internal control over financial reporting. Management assessed the effectiveness of CAF’s internal control over financial reporting as of December 31, 2021, based on the criteria established in Internal Control — IntegratedFramework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on that assessment, CAF’s Management concluded that CAF’s internal control over financial reporting is effective as of December 31, 2021.
Internal control over financial reporting has inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of its inherent limitations, internal control over financial reporting may not prevent, or detect and correct, misstatements. Also, projections of any assessment of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
CAF’s financial statements as of December 31, 2021 and for the year ended, have been audited by an independent accounting firm, which has also issued an independent auditor’s report on CAF´s internal control over financial reporting. The Independent Auditor´s Report on Internal Control over Financial Reporting, which is included in this document, expresses an unmodified opinion on CAF’s internal control over financial reporting as of December 31, 2021.
Sergio Díaz-Granados |
Executive President |
Gabriel Felpeto | Javier González | |
Vice-President of Finance | Acting Vice-President of Risk |
February 14, 2022
Torre CAF, Av. Luis Roche, Altamira, Caracas, Venezuela. Telf. +58 (212) 209 2111 www.caf.com
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To the Board of Directors and Stockholders of
Corporación Andina de Fomento (CAF)
Opinion on Internal Control Over Financial Reporting
We have audited the internal control over financial reporting of Corporación Andina de Fomento (CAF) as of December 31, 2021, based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, CAF maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We also have audited, in accordance with auditing standards generally accepted in the United States of America (GAAS), the financial statements of CAF as of and the years ended December 31, 2021, 2020 and 2019, and our report dated February 14, 2022 expressed an unmodified opinion on those financial statements.
Basis for Opinion
We conducted our audit in accordance with GAAS. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of Internal Control Over Financial Reporting section of our report. We are required to be independent of CAF and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for Internal Control over Financial Reporting
Management is responsible for designing, implementing, and maintaining effective internal control over financial reporting, and for its assessment about the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on the Effectiveness of Internal Control over Financial Reporting.
Auditor’s Responsibilities for the Audit of Internal Control Over Financial Reporting
Our objectives are to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects and to issue an auditor’s report that includes our opinion on internal control over financial reporting. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit of internal control over financial reporting conducted in accordance with GAAS will always detect a material weakness when it exists.
In performing an audit of internal control over financial reporting in accordance with GAAS, we:
• | Exercise professional judgment and maintain professional skepticism throughout the audit. |
• | Obtain an understanding of internal control over financial reporting, assess the risks that a material weakness exists, and test and evaluate the design and operating effectiveness of internal control over financial reporting based on the assessed risk. |
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Definition and Inherent Limitations of Internal Control over Financial Reporting
An entity’s internal control over financial reporting is a process effected by those charged with governance, management, and other personnel, designed to provide reasonable assurance regarding the preparation of reliable financial statements in accordance with accounting principles generally accepted in the United States of America. An entity’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the entity; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the entity are being made only in accordance with authorizations of management and those charged with governance; and (3) provide reasonable assurance regarding prevention, or timely detection and correction of unauthorized acquisition, use, or disposition of the entity’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent, or detect and correct, misstatements. Also, projections of any assessment of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte
February 14, 2022
Caracas — Venezuela
Lara Marambio & Asociados. A member firm of Deloitte Touche Tohmatsu Limited.
Lara Marambio & Asociados. A member firm of Deloitte Touche Tohmatsu Limited.
www.deloitte.com/ve
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.
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To the Board of Directors and Stockholders of
Corporación Andina de Fomento (CAF)
Opinion
We have audited the financial statements of Corporación Andina de Fomento (CAF), which comprise the balance sheets as of December 31, 2021, 2020 and 2019, and the related statements of comprehensive income, stockholders’ equity, and cash flows for the years then ended, and the related notes to the financial statements (collectively referred to as the “financial statements”).
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of CAF as of December 31, 2021, 2020 and 2019, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with auditing standards generally accepted in the United States of America (GAAS), CAF’s internal control over financial reporting as of December 31, 2021, based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 14, 2022 expressed an unmodified opinion on CAF’s internal control over financial reporting.
Basis for Opinion
We conducted our audits in accordance with GAAS. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of CAF and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about CAF ability to continue as a going concern for one year after date that the financial statements are issued.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
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In performing an audit in accordance with GAAS, we:
• | Exercise professional judgment and maintain professional skepticism throughout the audit. |
• | Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. |
• | Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. |
• | Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. |
• | Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about CAF ability to continue as a going concern for a reasonable period of time. |
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control–related matters that we identified during the audit.
/s/ Deloitte
February 14, 2022
Caracas — Venezuela
Lara Marambio & Asociados. A member firm of Deloitte Touche Tohmatsu Limited.
Lara Marambio & Asociados. A member firm of Deloitte Touche Tohmatsu Limited.
www.deloitte.com/ve
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.
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CORPORACIÓN ANDINA DE FOMENTO (CAF)
As of December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
NOTES | 2021 | 2020 | 2019 | |||||||||||||
ASSETS | ||||||||||||||||
Cash and due from banks | 112,047 | 123,204 | 103,593 | |||||||||||||
Deposits with banks | 3,210,216 | 2,825,086 | 2,417,476 | |||||||||||||
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Cash and due from banks and deposits with banks | 3 | 3,322,263 | 2,948,290 | 2,521,069 | ||||||||||||
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Marketable securities: | ||||||||||||||||
Trading | 4 and 19 | 12,503,067 | 10,961,847 | 10,357,805 | ||||||||||||
Other investments | 5 | 292,392 | 811,205 | 996,917 | ||||||||||||
Loans (US$ 2,389,651, US$ 2,088,750 and US$ 139,768 at fair value as of December 31, 2021, 2020 and 2019, respectively) | 6 and 19 | 29,595,386 | 28,117,867 | 26,520,618 | ||||||||||||
Less loan commissions, net of origination costs | 153,955 | 134,011 | 110,706 | |||||||||||||
Less allowance for loan losses | 6 | 76,650 | 95,015 | 91,642 | ||||||||||||
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Loans, net | 29,364,781 | 27,888,841 | 26,318,270 | |||||||||||||
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Accrued interest and commissions receivable | 357,836 | 386,625 | 531,793 | |||||||||||||
Equity investments | 7 | 433,350 | 432,600 | 463,825 | ||||||||||||
Derivative financial instruments | 18 and 19 | 512,383 | 1,766,932 | 426,260 | ||||||||||||
Property and equipment, net | 8 | 105,987 | 111,734 | 112,318 | ||||||||||||
Other assets | 9 | 700,291 | 1,537,829 | 565,377 | ||||||||||||
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|
|
| |||||||||||
TOTAL | 47,592,350 | 46,845,903 | 42,293,634 | |||||||||||||
|
|
|
|
|
| |||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
LIABILITIES: | ||||||||||||||||
Deposits (US$ 106,119, US$ 24,101 and US$ 60,594 at fair value as of December 31, 2021, 2020 and 2019, respectively), net | 10 and 19 | 4,002,626 | 3,337,574 | 2,672,925 | ||||||||||||
Commercial paper | 11 | 2,813,646 | 1,598,696 | 908,133 | ||||||||||||
Borrowings from other financial institutions (US$ 740,028, US$ 792,217 and US$ 403,912 at fair value as of December 31, 2021, 2020 and 2019, respectively), net | 12 and 19 | 1,772,171 | 1,672,301 | 1,390,218 | ||||||||||||
Bonds (US$ 24,074,774, US$ 24,706,736 and US$ 22,998,554 at fair value as of December 31, 2021, 2020 and 2019, respectively), net | 13 and 19 | 24,260,537 | 24,882,419 | 23,161,362 | ||||||||||||
Accrued interest payable | 288,233 | 308,986 | 403,560 | |||||||||||||
Derivative financial instruments | 18 and 19 | 842,958 | 404,842 | 642,725 | ||||||||||||
Accrued expenses and other liabilities | 14 | 312,540 | 1,646,184 | 317,983 | ||||||||||||
|
|
|
|
|
| |||||||||||
Total liabilities | 34,292,711 | 33,851,002 | 29,496,906 | |||||||||||||
|
|
|
|
|
| |||||||||||
STOCKHOLDERS’ EQUITY: | 16 | |||||||||||||||
Subscribed capital | 7,716,975 | 7,867,755 | 8,095,260 | |||||||||||||
Less callable capital portion | 1,589,660 | 1,589,660 | 1,589,660 | |||||||||||||
Less capital subscriptions receivable | 690,940 | 912,045 | 1,124,885 | |||||||||||||
|
|
|
|
|
| |||||||||||
Paid-in capital | 5,436,375 | 5,366,050 | 5,380,715 | |||||||||||||
|
|
|
|
|
| |||||||||||
Additional paid-in capital | 4,091,298 | 3,961,900 | 3,988,884 | |||||||||||||
Reserves | 3,666,951 | 3,427,129 | 3,101,547 | |||||||||||||
Retained earnings | 105,015 | 239,822 | 325,582 | |||||||||||||
|
|
|
|
|
| |||||||||||
Total stockholders’ equity | 13,299,639 | 12,994,901 | 12,796,728 | |||||||||||||
|
|
|
|
|
| |||||||||||
TOTAL | 47,592,350 | 46,845,903 | 42,293,634 | |||||||||||||
|
|
|
|
|
|
See accompanying notes to the financial statements
F-7
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Statements of Comprehensive Income
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
NOTES | 2021 | 2020 | 2019 | |||||||||||||
Interest income: | ||||||||||||||||
Loans | 2 (g) | 603,903 | 837,815 | 1,157,279 | ||||||||||||
Investments and deposits with banks | 2 (e), 3 and 4 | 23,098 | 203,211 | 413,260 | ||||||||||||
Loan commissions | 2 (g) | 44,990 | 40,139 | 41,252 | ||||||||||||
|
|
|
|
|
| |||||||||||
Total interest income | 671,991 | 1,081,165 | 1,611,791 | |||||||||||||
|
|
|
|
|
| |||||||||||
Interest expense: | ||||||||||||||||
Bonds | 329,247 | 523,480 | 825,821 | |||||||||||||
Borrowings from other financial institutions | 22,427 | 30,768 | 44,734 | |||||||||||||
Deposits | 4,109 | 18,285 | 49,547 | |||||||||||||
Commercial paper | 5,077 | 10,488 | 21,207 | |||||||||||||
Commissions | 10,415 | 12,136 | 9,768 | |||||||||||||
|
|
|
|
|
| |||||||||||
Total interest expense | 371,275 | 595,157 | 951,077 | |||||||||||||
|
|
|
|
|
| |||||||||||
Net interest income | 300,716 | 486,008 | 660,714 | |||||||||||||
Provision for loan losses | 6 | 29,869 | 2,923 | 52,395 | ||||||||||||
|
|
|
|
|
| |||||||||||
Net interest income, after provision for loan losses | 270,847 | 483,085 | 608,319 | |||||||||||||
|
|
|
|
|
| |||||||||||
Non-interest income: | ||||||||||||||||
Dividends and equity in earnings of investees | 7 | 5,108 | 6,979 | 1,624 | ||||||||||||
Other commissions | 2,055 | 2,327 | 2,823 | |||||||||||||
Other income | 7 | 31,794 | 8,411 | 10,045 | ||||||||||||
|
|
|
|
|
| |||||||||||
Total non-interest income | 38,957 | 17,717 | 14,492 | |||||||||||||
|
|
|
|
|
| |||||||||||
Non-interest expenses: | ||||||||||||||||
Administrative expenses | 157,353 | 149,324 | 154,807 | |||||||||||||
Other expenses | 7 | 14,048 | 37,552 | 7,923 | ||||||||||||
|
|
|
|
|
| |||||||||||
Total non-interest expenses | 171,401 | 186,876 | 162,730 | |||||||||||||
|
|
|
|
|
| |||||||||||
Income before unrealized changes in fair value related to other financial instruments and contributions to Stockholders’ Special Funds | 138,403 | 313,926 | 460,081 | |||||||||||||
Unrealized changes in fair value related to other financial instruments | 20 | (3,388) | (2,089) | (5,273) | ||||||||||||
|
|
|
|
|
| |||||||||||
Income before contributions to Stockholders’ Special Funds, net | 135,015 | 311,837 | 454,808 | |||||||||||||
Contributions to Stockholders’ Special Funds | 22 | 30,000 | 72,015 | 129,226 | ||||||||||||
|
|
|
|
|
| |||||||||||
Net income and total comprehensive income | 105,015 | 239,822 | 325,582 | |||||||||||||
|
|
|
|
|
|
See accompanying notes to the financial statements
F-8
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Statements of Stockholders’ Equity
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
Reserves | ||||||||||||||||||||||||||||||||
NOTES | Paid-in capital | Additional paid-in capital | General reserve | Article N° 42 of the Constitutive Agreement | Total reserves | Retained earnings | Total stockholders’ equity | |||||||||||||||||||||||||
BALANCES AS OF DECEMBER 31, 2018 | 5,166,720 | 3,595,133 | 2,384,770 | 493,200 | 2,877,970 | 223,577 | 11,863,400 | |||||||||||||||||||||||||
Capital increase | 16 | 213,995 | 393,751 | — | — | — | — | 607,746 | ||||||||||||||||||||||||
Net income and total comprehensive income | 16 | — | — | — | — | — | 325,582 | 325,582 | ||||||||||||||||||||||||
Appropriated for general reserve | 16 | — | — | 201,177 | — | 201,177 | (201,177 | ) | — | |||||||||||||||||||||||
Appropriated for reserve pursuant to Article N° 42 of the Constitutive Agreement | 16 | — | — | — | 22,400 | 22,400 | (22,400 | ) | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
BALANCES AS OF DECEMBER 31, 2019 | 5,380,715 | 3,988,884 | 2,585,947 | 515,600 | 3,101,547 | 325,582 | 12,796,728 | |||||||||||||||||||||||||
Capital increase | 16 | 212,840 | 391,625 | — | — | — | — | 604,465 | ||||||||||||||||||||||||
Capital decrease due to shares’ repurchase | 6 | (227,505 | ) | (418,609 | ) | — | — | — | — | (646,114 | ) | |||||||||||||||||||||
Net income and total comprehensive income | 16 | — | — | — | — | — | 239,822 | 239,822 | ||||||||||||||||||||||||
Appropriated for general reserve | 16 | — | — | 292,982 | — | 292,982 | (292,982 | ) | — | |||||||||||||||||||||||
Appropriated for reserve pursuant to Article N° 42 of the Constitutive Agreement | 16 | — | — | — | 32,600 | 32,600 | (32,600 | ) | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
BALANCES AS OF DECEMBER 31, 2020 | 5,366,050 | 3,961,900 | 2,878,929 | 548,200 | 3,427,129 | 239,822 | 12,994,901 | |||||||||||||||||||||||||
Capital increase | 16 | 221,105 | 406,833 | — | — | — | — | 627,938 | ||||||||||||||||||||||||
Capital decrease due to shares’ repurchase | 6 | (150,780 | ) | (277,435 | ) | — | — | — | — | (428,215 | ) | |||||||||||||||||||||
Net income and total comprehensive income | 16 | — | — | — | — | — | 105,015 | 105,015 | ||||||||||||||||||||||||
Appropriated for general reserve | 16 | — | — | 215,839 | — | 215,839 | (215,839 | ) | — | |||||||||||||||||||||||
Appropriated for reserve pursuant to Article N° 42 of the Constitutive Agreement | 16 | — | — | — | 23,983 | 23,983 | (23,983 | ) | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
BALANCES AS OF DECEMBER 31, 2021 | 5,436,375 | 4,091,298 | 3,094,768 | 572,183 | 3,666,951 | 105,015 | 13,299,639 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the financial statements
F-9
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
NOTES | 2021 | 2020 | 2019 | |||||||||||
OPERATING ACTIVITIES: | ||||||||||||||
Net income and total comprehensive income | 105,015 | 239,822 | 325,582 | |||||||||||
Adjustments to reconcile net income to net cash used in operating activities: | ||||||||||||||
Unrealized loss (gain) on trading securities | 72,788 | (20,837 | ) | (51,964 | ) | |||||||||
Loan commissions, net of amortization of origination costs | (18,630 | ) | (15,201 | ) | (14,544 | ) | ||||||||
Provision for loan losses | 6 | 29,869 | 2,923 | 52,395 | ||||||||||
Impairment charge for equity investments | 7 | 117 | 5,977 | 2,874 | ||||||||||
Unrealized changes in fair value related to equity investment | 7 | (26,748 | ) | 18,722 | (8,000 | ) | ||||||||
Equity in losses of investees | 7 | 871 | 1,533 | 3,225 | ||||||||||
Amortization of deferred charges | 5,020 | 3,547 | 3,119 | |||||||||||
Depreciation of property and equipment | 8 | 8,895 | 8,231 | 7,030 | ||||||||||
Provision for employees’ severance benefits | 13,207 | 12,799 | 13,020 | |||||||||||
Provision for employees’ savings plan | 823 | 879 | 932 | |||||||||||
Unrealized changes in fair value related to other financial instruments | 3,388 | 2,089 | 5,273 | |||||||||||
Net changes in operating assets and liabilities: | ||||||||||||||
Trading securities, net | (1,620,056 | ) | (579,216 | ) | (651,729 | ) | ||||||||
Accrued interest and commissions receivable | 28,789 | 145,168 | (8,695 | ) | ||||||||||
Other assets | (18,891 | ) | (8,263 | ) | (9,585 | ) | ||||||||
Accrued interest payable | (20,753 | ) | (94,574 | ) | 9,327 | |||||||||
Severance benefits paid or advanced | (10,345 | ) | (5,632 | ) | (11,345 | ) | ||||||||
Employees’ savings plan paid or advanced | (783 | ) | 233 | (3,730 | ) | |||||||||
Accrued expenses and other liabilities | (44,330 | )�� | 22,996 | 177,234 | ||||||||||
|
|
|
|
|
| |||||||||
Total adjustments and net changes in operating assets and liabilities | (1,596,769 | ) | (498,626 | ) | (485,163 | ) | ||||||||
|
|
|
|
|
| |||||||||
Net cash used in operating activities | (1,491,754 | ) | (258,804 | ) | (159,581 | ) | ||||||||
|
|
|
|
|
| |||||||||
INVESTING ACTIVITIES: | ||||||||||||||
Purchases of other investments | 5 | (2,010,262 | ) | (3,171,778 | ) | (4,824,185 | ) | |||||||
Maturities of other investments | 5 | 2,529,075 | 3,357,490 | 4,486,018 | ||||||||||
Loan origination and principal collections, net | 6 | (2,096,433 | ) | (2,050,142 | ) | (1,407,006 | ) | |||||||
Equity investments, net | 7 | 25,010 | 4,993 | (2,257 | ) | |||||||||
Property and equipment,net | 8 | (3,148 | ) | (7,647 | ) | (13,302 | ) | |||||||
|
|
|
|
|
| |||||||||
Net cash used in investing activities | (1,555,758 | ) | (1,867,084 | ) | (1,760,732 | ) | ||||||||
|
|
|
|
|
| |||||||||
FINANCING ACTIVITIES: | ||||||||||||||
Net increase in deposits | 10 | 668,277 | 665,306 | (537,620 | ) | |||||||||
Proceeds from commercial paper | 11 | 24,847,310 | 18,224,698 | 7,446,271 | ||||||||||
Repayment of commercial paper | 11 | (23,632,360 | ) | (17,534,135 | ) | (7,179,433 | ) | |||||||
Net (decrease) increase in derivative-related collateral | (445,293 | ) | 325,875 | 215,256 | ||||||||||
Proceeds from issuance of bonds | 13 | 4,478,803 | 3,950,027 | 3,370,170 | ||||||||||
Repayment of bonds | 13 | (3,320,266 | ) | (3,904,211 | ) | (2,296,329 | ) | |||||||
Proceeds from borrowings from other financial institutions | 374,681 | 922,463 | 333,582 | |||||||||||
Repayment of borrowings from other financial institutions | (177,605 | ) | (701,379 | ) | (239,928 | ) | ||||||||
Proceeds from issuance of shares | 16 | 627,938 | 604,465 | 607,746 | ||||||||||
|
|
|
|
|
| |||||||||
Net cash provided by financing activities | 3,421,485 | 2,553,109 | 1,719,715 | |||||||||||
|
|
|
|
|
| |||||||||
NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKS AND DEPOSITS WITH BANKS | 373,973 | 427,221 | (200,598 | ) | ||||||||||
CASH AND DUE FROM BANKS AND DEPOSITS WITH BANKS AT BEGINNING OF THE YEAR | 2,948,290 | 2,521,069 | 2,721,667 | |||||||||||
|
|
|
|
|
| |||||||||
CASH AND DUE FROM BANKS AND DEPOSITS WITH BANKS AT END OF THE YEAR | 3,322,263 | 2,948,290 | 2,521,069 | |||||||||||
|
|
|
|
|
|
F-10
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Statements of Cash Flows
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
NOTES | 2021 | 2020 | 2019 | |||||||||||||
SUPPLEMENTAL DISCLOSURE: | ||||||||||||||||
Interest paid during the year | 374,796 | 668,793 | 920,093 | |||||||||||||
|
|
|
|
|
| |||||||||||
NONCASH FINANCING ACTIVITIES: | ||||||||||||||||
Principal collections | 6 | 428,215 | 646,114 | 500,000 | ||||||||||||
|
|
|
|
|
| |||||||||||
Capital decrease | 6 | (428,215 | ) | (646,114 | ) | — | ||||||||||
|
|
|
|
|
| |||||||||||
Loan origination | 6 | — | — | (500,000 | ) | |||||||||||
|
|
|
|
|
| |||||||||||
Change in derivative instruments assets | 1,254,549 | (1,340,672 | ) | (241,455 | ) | |||||||||||
|
|
|
|
|
| |||||||||||
Change in derivative instruments liabilities | 438,116 | (237,883 | ) | (234,059 | ) | |||||||||||
|
|
|
|
|
|
See accompanying notes to the financial statements
F-11
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
1. | ORIGIN |
Business description – Corporación Andina de Fomento (CAF) began its operations on June 8, 1970 and was established under public international law which abides by the provisions set forth in its Constitutive Agreement. Series “A” and “B” stockholder countries are: Argentina, Bolivia, Brazil, Colombia, Ecuador, Panama, Paraguay, Peru, Trinidad and Tobago, Uruguay and Venezuela. Series “C” stockholder countries are: Barbados, Chile, Costa Rica, Dominican Republic, Jamaica, Mexico, Portugal and Spain. In addition, there are 13 banks which are Series “B” stockholders.
CAF is headquartered in Caracas, Venezuela and has offices in Asuncion, Paraguay; Bogota, Colombia; Brasilia, Brazil; Buenos Aires, Argentina; Mexico City, Mexico; Panama City, Panama; La Paz, Bolivia; Lima, Peru; Madrid, Spain; Montevideo, Uruguay; Port of Spain, Trinidad and Tobago and Quito, Ecuador.
CAF promotes a sustainable development model through credit, non-refundable resources, and supports in the technical and financial structuring of projects in the public and private sectors of Latin America.
CAF offers financial and related services to the governments of its stockholder countries, as well as their public and private institutions, corporations and joint ventures. CAF’s principal activity is to provide short, medium and long-term loans to finance projects, working capital, trade activities and to undertake feasibility studies for investment opportunities in stockholder countries. Furthermore, CAF manages and supervises third-party cooperation funds owned and sponsored by other countries and organizations, destined to finance programs agreed upon with donor countries and organizations which are in line with CAF’s policies and strategies.
CAF raises funds to finance its operations from sources both within and outside its stockholder countries.
COVID-19
In March 2020, the World Health Organization declared the novel coronavirus (COVID-19) a global pandemic, which has generated high volatility in global capital markets with an impact on equity investments and the mark-to-market value of marketable securities.
To date, CAF has maintained the continuity of its operations, and the demand for loans from our stockholder countries has increased; notwithstanding, decreases or increases have been observed in external risk ratings for most of our borrowers. COVID-19 has had not material effects on the results of operations, cash flows and financial position of CAF for the year ended December 31, 2021.
2. | BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES |
a. | Financial statement presentation – The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles with the U.S. dollar as the functional currency. |
b. | Use of estimates – The preparation of the accompanying financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the balance sheets, as well as the amounts reported as revenues and expenses during the corresponding |
F-12
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
reporting period. The most important estimates related to the preparation of the accompanying financial statements refer to estimating the allowance for loan losses, and valuation and classification at fair values of financial instruments, among others. Management believes these estimates are adequate. Actual results could differ from those estimates. |
c. | Transactions denominated in other currencies – Transactions denominated in currencies other than U.S. dollars are converted into U.S. dollars at exchange rates prevailing in international markets on the dates of the transactions. Currency balances other than U.S. dollars are converted into U.S. dollars at year-end exchange rates. Any foreign exchange gains or losses, including related hedge effects, are included in the statements of comprehensive income. |
d. | Cash and deposits with banks – Cash and deposits with banks comprised of cash, due from banks and short-term deposits with banks with an original maturity of three months or less. |
e. | Marketable securities – These investments are classified as trading marketable securities, according to management’s intention and are recorded on the trade date. Trading marketable securities are securities that are mainly bought and held principally for the purpose of selling them in the near term and therefore held for only a short period of time. Trading marketable securities are recorded at fair value. Gains and losses from sales of trading marketable securities and changes in the fair value of trading marketable securities are included in interest income of investments and deposits with banks in the statements of comprehensive income. |
f. | Reverse repurchase agreements – CAF has entered into reverse repurchase agreements as part of liquidity management. Under a reverse repurchase agreement, CAF purchases securities with an agreement to resell them to the counterparty on a specific date for a specific price plus interests, with earlier resale permitted. Securities purchased under reverse repurchase agreements are included in the balance sheets under account “Securities purchased under resale agreement” and interests thereon are included in the statements of comprehensive income under “Investments and deposits with banks”. |
All securities covered under reverse repurchase agreements are carried at face value, which approximate fair value due to their short-term in nature and minimal credit risk. There are no open positions as of December 31, 2021, 2020 and 2019.
g. | Loans – CAF grants short, medium and long-term loans to finance projects, working capital, trade activities and to undertake feasibility studies for investment opportunities, both to public and private entities, for development and integration programs and projects in stockholder countries. |
For credit risk purposes, CAF classifies its loans as follow:
(i) | Sovereign loans – Include loans granted to national, regional or local governments or decentralized institutions and other loans fully guaranteed by national governments. |
(ii) | Non-sovereign loans – Include loans granted to corporate and financial sectors (public and private sectors), among others, which are not guaranteed by national governments. |
Loans are carried at their unpaid principal balances less: (i) write-offs, (ii) the allowance for loan losses, and (iii) loan commission fees received upon origination net of certain direct origination costs.
F-13
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
Interest income is accrued on the unpaid principal balance. Loan commission fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the effective interest method and are presented as interest income – loan commissions in the statements of comprehensive income.
Private sector loans that are 90 days overdue or public sector loans that are 180 days overdue are placed on non-accrual status and, as result, the accrual for interest on non-accrual loans is discontinued unless the loan are well-secured and in process of collection.
Interest accrued but not collected for loans that are placed on non-accrual loans status is reversed against interest income. The interest on non-accrual loans is accounted for on a cash-basis, until the loans qualify for return to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
Factors considered by management in determining non-accrual are payment status and the probability of collecting scheduled principal and interest payments when due.
When a loan is overdue, CAF will immediately suspend any pending disbursement for said loan and for any other loans in which the client is the borrower, beneficiary or guarantor for CAF. CAF charges late payments fees on these overdue loans.
Loan losses, partial or total, are written off against the allowance for loan losses when management confirms the uncollectability of a loan balance. Subsequent recoveries on written off loans, if any, will be credited to the allowance for loan losses.
CAF maintains risk exposure policies to avoid concentrating its loans in any one country or economic group, which might be affected by market situations or other circumstances. For this purpose, CAF uses certain measurement parameters, such as: CAF’s stockholders’ equity, total loan balance, exposure to economic groups from public and private sectors, among others. CAF reviews, on a semi-annual basis, the credit risk rating of its loans and classifies the risk into the following categories:
(i) | Satisfactory-excellent – Extremely strong capacity to meet financial commitments. |
(ii) | Satisfactory-very good – Strong capacity to meet financial commitments, not significantly vulnerable to adverse economic conditions. |
(iii) | Satisfactory-adequate – Adequate capacity to meet financial commitments, but more vulnerable to adverse economic conditions. |
(iv) | Watch – Acceptable payment capacity however some indicators and elements require special attention otherwise they could result in impairment. |
(v) | Special mention – More vulnerable to adverse economic conditions but currently has the capacity to meet financial commitments. |
(vi) | Sub-standard – Currently vulnerable and dependent on favorable economic conditions to meet financial commitments. |
(vii) | Doubtful – Currently highly vulnerable. |
(viii) | Loss – Payment default on financial commitments. |
F-14
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
h. | Troubled debt restructuring – A restructuring of a loan constitutes a troubled debt restructuring if CAF, for economic or legal reasons related to the borrower´s financial difficulties, grants a concession to the borrower that it would not otherwise consider. |
The concession granted by CAF may include the modifications or renegotiation of the contractual terms of the loans such as interest rate reductions, change in the frequency of payment, extension of loan terms, and other modifications in order to minimize possible economic losses.
Loans whose terms are modified in a troubled debt restructuring, generally, are identified as non-accrual loans. CAF’s management evaluates the compliance with the new terms of the restructured loan for a reasonable period to calculate specific allowances for loan losses and, if the remaining balance of the restructured loan is considered collectible, the restructured loan could return to accrual status.
i. | Allowance for loan losses – The allowance for credit losses is maintained at a level CAF believes to be appropriate to absorb expected lifetime credit losses over the contractual life of the loan portfolio. |
The allowance for loan losses reflects CAF’s current estimate of all expected credit losses based on the information available at the date of the balance sheet, and these information are assessed and updated timely taking into account the market’s characteristics, policies and macroeconomic perspectives to adequately reflect the effect of those changes in borrower credit ratings and therefore in expected credit losses.
For purposes of determining the allowance for expected credit losses, CAF management classifies its loans for credit risk purposes into sovereign loans and non-sovereign loans. The allowance for loan losses is estimated considering the credit risk exposure (undiscounted), cumulative default probability for 1 to 5 year tranches and loss given default, based on external data provided by risk rating agencies, recognizing such life time expected effects in profit or loss for the reporting period.
Sovereign loans within each country exhibit similar risk characteristics, therefore, the allowance for loan losses on sovereign loans is collectively evaluated at country level and established by CAF based on the individual long-term foreign currency debt rating applicable to the borrower countries, which is determined using the average rating of three recognized international credit rating agencies at the date of each of the balance sheet presented. The long-term foreign currency debt rating considers a default probability. Given CAF’s status as a de facto preferred creditor and the immunities and privileges conferred by its stockholder countries, which are established in CAF’s Constitutive Agreement and other similar agreements, adjustments are made to reflect a lower default probability – usually equivalent to three levels to the average rating referred above. Historically, none of its sovereign loans has ever been placed in non-accrual status or has been written off. It is not the policy of CAF to restructure its sovereign loans and management does not have any expectation of writing off such loans.
For the non-sovereign loans, the allowance for loan losses is individually evaluated and calculated on a non-discounted cash flow method by considering CAF’s internal rating of each borrower, using the probability of default corresponding to the average rating of the equivalent categories of the international risk-rating agencies.
F-15
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
For those cases where the category equivalent to the rating of a particular borrower determined in accordance with any of the international risk-rating agencies is higher than the risk rating in local currency of the country corresponding to such borrower, or if for any reason there is no risk rating, the risk rating in local currency of such country determined by international credit rating agencies will be used.
CAF considers that external data provided by risk rating agencies used to determine the probability of default reflects its expectations about the future economic conditions and there are no other adjustments regarding historical loss information and future conditions that should be considered as significant factor to determining the expected collectability.
CAF assesses and determine the loss given default which considers the CAF´s status as a de facto preferred creditor, the immunities and privileges conferred by its stockholder countries, the collateral of each loan, the effect of interest on late payments to avoid the potential impairment derived by the time value of money and the evidence of historical loss data collected for each country through the years. In addition, given the nature of CAF´s lending activities as multilateral bank, in case of delay on payments of sovereign loans, the loss given default reflects the expectation to collect the total amount due, including accrued interests and commissions receivable for the period of delay.
A specific allowance for loan losses is individually evaluated and established by CAF for loans in non-accrual status as these loans do not have the same risk characteristics as other loans. A loan is considered in non-accrual status when, based on currently available information and events, it is probable that CAF will not recover the total amount of principal and interest as agreed in the terms of the original loan contract. The allowance for loan losses is determined on a loan-by-loan basis based on the present value of expected future cash flows, discounted at the original loan’s effective interest rate.
j. | Equity investments – CAF invests in equity securities of companies and funds in strategic sectors, with the objective of promoting the development of such companies and funds and their participation in the securities markets and to serve as a catalyst in attracting resources to stockholder countries. |
If CAF has the ability to exercise significant influence over the operating and financial policies of the investee, which is generally presumed to exist when CAF holds an ownership interest in the voting stock of an investee between 20% and 50%, the equity investments are accounted for using the equity method. Under the equity method, the carrying amount of the equity investment is adjusted to reflect CAF’s proportionate share of earnings or losses, dividends received and certain transactions of the investee Company.
Other than those accounted for under the equity method, CAF recorded investments in equity securities without readily determinable fair value, as follows:
(i) | Direct investments in equity securities of companies – These investments, which do not qualify for the net asset value practical expedient to estimate fair value, are accounted for at cost minus impairment (if any), plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. |
(ii) | Equity investments in funds – These investments are carried at fair value using the net asset value practical expedient to estimate fair value. |
F-16
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
Dividend income from equity investments without readily determinable fair value is recognized when CAF’s right to receive payment has been established.
k. | Property and equipment, net – Property and equipment are stated at cost less accumulated depreciation. Maintenance and repair expenses are charged directly to the statements of comprehensive income for the year as incurred, while improvements and renewals are capitalized. Depreciation is calculated using the straight-line method and charged to the statements of comprehensive income over the estimated useful life of assets. |
The estimated useful life for assets is as follows:
Buildings | 30 years | |
Building improvements | 15 years | |
Leasing building improvements | Term of leasing contract | |
Furniture and equipment | 2 to 10 years | |
Vehicles | 5 years |
l. | Other assets – Other assets mainly include the following: |
(i) | Derivative-related collateral – CAF receives or provides cash collateral from or to individual swap and futures counterparties to mitigate its credit exposure to these counterparties. It is the policy of CAF to restrict and invest cash collateral received from swap and futures counterparties for fulfilling its obligations under the collateral agreement. CAF records cash collateral received in other assets with a corresponding obligation to return the cash collateral received recorded in accrued expenses and other liabilities. Cash collateral provided to swap and futures counterparties, under the collateral agreement, are recorded in other assets. |
(ii) | Intangible assets – Include software investments which are reported at cost less accumulated amortization. The amortization is calculated with the straight-line method over the useful life estimated by CAF. The estimated useful life of these assets is between 2 and 5 years. |
m. | Impairment of investment accounted for under the equity method – An investment accounted for under the equity method is considered impaired and an impairment loss is recognized only if there are circumstances that indicate impairment as a result of one or more events (“loss events”) that have occurred after recognition of such investment. |
An impairment charge is recorded whenever a decline in value of an investment below its carrying amount is determined to be other-than-temporary. In determining if a decline is other-than-temporary, factors such as the length of time and extent to which the fair value of the investment has been less than the carrying amount of the investment, the near-term and longer-term operating and financial prospects of the affiliate and the intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery are considered.
n. | Deposits – Deposits denominated in US$ are recorded at amortized cost. Deposits denominated in currencies other than the US$ are recognized at fair value. Gains or losses resulting from changes in the fair value of these deposits are recognized in the statements of comprehensive income when they occur. |
F-17
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
o. | Commercial paper – Commercial paper are recorded at amortized cost. |
p. | Borrowings from other financial institutions – The borrowings from other financial institutions, both local or foreign financial institutions, are recorded at amortized cost, except for some borrowings that are designated a fair value hedge or as an economic hedge. The up-front costs and fees related to the issuance of borrowings recorded at amortized cost are deferred and reported in the balance sheets as a direct deduction from the face amount of borrowings and amortized during the term of the borrowings as interest expense. The up-front cost and fees related to borrowings that are designated a fair value hedge or as an economic hedge are recognized in the statements of comprehensive income when they occur. |
q. | Bonds – Medium and long-term bond issuances, whose objective is to provide the financial resources required to finance CAF’s operations, are recorded as follows: |
(i) | Bonds denominated in currencies other than the US$ are recognized at fair value. Gains or losses resulting from changes in the fair value of these bonds, as well as the related bond’s up-frontcosts and fees, are recognized in the statements of comprehensive income when they occur. CAF enters into cross-currency and interest rate swaps to economically hedge the interest rate and foreign exchange risks related with these bonds. |
(ii) | Bond denominated in US$ are recognized at fair value. The interest rate risk on US$ denominated bonds is hedged using interest rate swaps, and such interest rate swaps are designated as part of fair value hedge accounting relationships assuming no hedge ineffectiveness (the “shortcut method”). The related bond’s up-front costs and fees are deferred and reported in the balance sheets as a direct deduction from the face amount of the bonds and amortized during the term of the bonds as interest expense. |
Partial repurchases of bond issuances result in derecognition of the corresponding liabilities. The difference between the repurchase price and the bond’s carrying amount is recognized as income/loss for the year.
r. | Employees’ severance benefits – Accrual for severance benefits comprises all the liabilities related to the workers’ vested rights according to CAF’s employee policies and the applicable labor law of the member countries. The accrual for employee severance benefits is presented as part of “Employees’ severance benefits and savings plan” account under “Accrued expenses and other liabilities” caption. |
Under CAF’s employee policies, employees earn a severance benefit equal to five days of salary per month, up to a total of 60 days per year of service. From the second year of service, employees earn an additional two days salary for each year of service (or fraction of a year greater than six months), cumulative up to a maximum of 30 days of salary per year. Severance benefits are recorded in the accounting records of CAF as they are incurred and interest on the amounts owed to employees are paid annually as a result of employees’ rights to receive severance benefits accrued in the year in which earned.
In the case of unjustified dismissal or involuntary termination, employees have the right to an additional severance benefit of one month of salary per year of service.
F-18
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
s. | Pension plan – CAF has established a defined benefit plan (the Plan), which is mandatory for all employees hired on or after the establishment of the Plan and voluntary for all other employees. The Plan’s benefits are calculated based on years of service and the average salary of the three consecutive years in which the employee received the highest salary. CAF periodically updates the benefit obligations considering actuarial assumptions. |
t. | Derivative financial instruments and hedging activities – CAF records all derivative financial instruments on the balance sheets at fair value, regardless of the purpose or intent for holding them. |
CAF’s policy is not to enter into derivative financial instruments for speculative purposes. CAF also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivative financial instruments that are used in hedging transactions are highly effective in offsetting changes in fair values of the hedged items.
Derivative financial instruments that are considered to be hedges from an accounting perspective are recognized in the balance sheet at fair value with changes in fair value either: (1) offset by changes in fair value of the hedged assets, liabilities or firm commitments through earnings within “Derivative financial instruments assets” or “Derivative financial instruments liabilities” if the derivative is designated as a fair value hedge, or (2) recognized in other comprehensive income until the hedged item is recognized in earnings if the derivative is designated as a cash flow hedge. The ineffective portion of the change in fair value for a hedged derivative is immediately recognized in earnings as a component of “Unrealized changes in fair value related to other financial instruments”, regardless of whether the hedged derivative is designated as a cash flow or fair value hedge. In all situations in which hedge accounting is discontinued, CAF, recognizes any changes in its fair value in the statements of comprehensive income.
CAF discontinues hedge accounting prospectively upon determining that the derivative financial instrument is no longer effective in offsetting changes in the fair value of the hedged item; the derivative expires or is sold, terminated or exercised; the derivative is de-designated as a hedging instrument, because it is unlikely that a forecasted transaction will occur, a hedged firm commitment no longer meets the definition of a firm commitment, or management determines that the designation of the derivative financial instrument as a hedging instrument is no longer appropriate.
When hedge accounting is discontinued because it is determined that the derivative financial instrument no longer qualifies as an effective fair value hedge, CAF continues to carry the derivative financial instrument on the balance sheets at its fair value, but no longer adjusts the hedged asset or liability for changes in fair value.
Certain derivative financial instruments, although considered to be an effective hedge from an economic perspective (economic hedge), have not been designated as a hedge for accounting purposes. The changes in the fair value of such derivative financial instruments are recognized in the statements of comprehensive income, concurrently with the change in fair value of the underlying assets and liabilities.
F-19
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
u. | Fair value of financial instruments and fair value measurements – An entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Accounting guidance establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Inputs used to measure fair value may fall into one of three levels: |
Level 1 – Applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2 – Applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3 – Applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
v. | Guarantee fee income – CAF provides guarantees on loans originated by third parties to support projects located within a stockholder country that are undertaken by public and private entities. CAF may offer guarantees of private credit agreements or it may offer public guarantees of obligations of the securities of third-party issuers. CAF generally offers partial credit guarantees with the intention of sharing the risk with private lenders or holders of securities. CAF’s responsibility is limited to paying up to the amount of the guarantee upon default by the client. The guarantee fee income received is deferred and recognized over the period covered by the guarantee. |
w. | Provision for guarantees losses – Provision for guarantees is maintained at a level CAF believes adequate to absorb probable losses inherent to the guaranteed loans originated by third parties as of the date of the financial statements. Guaranteed loans are classified as either sovereign ornon-sovereign. Provision for guarantees is estimated by CAF considering the credit risk exposure, default probability and loss given default. Provision for sovereign guarantees losses is based on the individual long-term foreign currency debt rating of the guarantor countries (“country risk rating”) considering the weighted average rating of three recognized international risk rating agencies at the date of the financial statements’ preparation. These country risk ratings have associated default probability. Given CAF’s status as a de facto preferred creditor, arising from its status as a multilateral financial institution and from the interest of its borrowers in maintaining their credit standing with CAF, and taking into account the immunities and privileges conferred by its stockholder countries, which are established in CAF’s Constitutive Agreement and other similar agreements, a factor that reflects a lower default probability – usually equivalent to three levels up in this weighted average rating is used. For non-sovereign guarantees, the provision is determined by considering the CAF internal rating of each client and the weighted average rating of the aforementioned agencies. |
The provision for guarantees losses, are reported as other liabilities.
F-20
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
x. | Recent accounting pronouncements – |
Recent accounting pronouncements applicable
ASU 2020-04, Reference Rate Reform
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). The ASU provides optional expedients and exceptions, for contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments in this ASU do not apply to contract modifications made or other transactions entered after December 31, 2022. In January 2021, the FASB issued amendments in ASU 2021-01 to the expedients and exceptions in Topic 848 to capture the incremental consequences of the scope clarification and tailor the existing guidance to derivative instruments affected by the discounting transition. CAF is currently assessing the impact of both ASUs and plans to adopt the available expedients and exceptions allowed through December 31, 2022.
LIBOR Replacement
The replacement of the LIBOR rates with a new reference rate or rates is an industry risk due the implications it has on the assets as well as the liabilities of financial institutions. In that regard, CAF has been closely following the recent developments and announcements from groups and organizations that are most closely involved with the phasing out of the LIBOR rate that affect the loan and derivatives markets, including the International Swaps and Derivatives Association (ISDA) and its recent publication of the ISDA 2020 IBOR Fallbacks Protocol which CAF has adhered in January 2021. In addition, CAF has established an interdepartmental task force in charge of preparing the institution for the change in reference rate including measures such as the incorporation of fallback provisions on loans to mitigate any possible impact LIBOR may have. This task force in coordination with management recommended and approved that starting January 1, 2022, all loans originated will be made in the reference rate Term SOFR. New financial liabilities will also be hedged to SOFR. Legacy loans that are referenced to LIBOR rate will be converted after June 2023 when LIBOR rate ceases to be representative. It is for this reason that we expected the LIBOR transition to occur smoothly.
If SOFR or another rate does not achieve wide acceptance as the alternative to LIBOR, there likely will be disruption in financial markets. In the event that SOFR or another reference rate is widely accepted, risks will remain related to outstanding loans, borrowings, derivatives and other instruments using LIBOR related to transitioning those instruments to a new reference rate and the corresponding value transfer that may occur in connection with that transition, as the new reference rate will not exactly mimic LIBOR.
On the funding side, as of December 31, 2021, CAF has ceased issuance of Floating Rate Notes (FRN) linked to LIBOR, and all outstanding LIBOR FRNs (totaling US$ 100 million) will reset before the first half of 2023. On June 15, 2021, CAF issued its first FRN that is linked to the SOFR forUS$ 400 million, an important step in the LIBOR transition process.
F-21
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
3. | CASH AND DUE FROM BANKS AND DEPOSITS WITH BANKS |
Cash and deposits with banks with original maturity of three months or less include the following:
December 31, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||
Cash and due from banks | 112,047 | 123,204 | 103,593 | |||||||||
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Deposits with banks: | ||||||||||||
U.S. dollars | 3,210,216 | 2,825,086 | 2,417,476 | |||||||||
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3,322,263 | 2,948,290 | 2,521,069 | ||||||||||
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4. | MARKETABLE SECURITIES |
Trading
A summary of trading securities follows:
December 31, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||||||||||||||
Amount | Average maturity (years) | Amount | Average maturity (years) | Amount | Average maturity (years) | |||||||||||||||||||
U.S. Treasury Notes | 2,219,711 | 1.60 | 2,038,268 | 1.73 | 2,010,025 | 1.91 | ||||||||||||||||||
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Non-U.S. governments and government entities bonds | 556,230 | 0.80 | 187,446 | 2.86 | 350,440 | 0.97 | ||||||||||||||||||
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Financial institutions and corporate securities: | ||||||||||||||||||||||||
Commercial paper | 3,861,129 | 0.14 | 2,895,110 | 0.14 | 3,100,115 | 0.08 | ||||||||||||||||||
Certificates of deposits(1) | 3,284,428 | 0.24 | 2,912,973 | 0.22 | 2,201,939 | 0.22 | ||||||||||||||||||
Bonds | 1,941,602 | 1.93 | 2,242,321 | 2.41 | 2,045,486 | 2.51 | ||||||||||||||||||
Collateralized mortgage obligation | 290,805 | 5.95 | 286,954 | 4.27 | 343,745 | 4.32 | ||||||||||||||||||
Liquidity funds(2) | 349,162 | 1.00 | 398,775 | 1.00 | 306,055 | 1.00 | ||||||||||||||||||
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9,727,126 | 0.73 | 8,736,133 | 0.93 | 7,997,340 | 0.96 | |||||||||||||||||||
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Trading | 12,503,067 | 0.89 | 10,961,847 | 1.11 | 10,357,805 | 1.14 | ||||||||||||||||||
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(1) | Each certificate of deposit bears a maturity date and specified fixed interest rate. It also is held through The Depository Trust Company and has a CUSIP number, which is a code that identifies a financial security and facilitates trading. |
(2) | The liquidity funds are comprised of short-term (less than one year) securities representing high-quality liquid debt and monetary instruments. |
F-22
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
The fair value of trading securities includes net unrealized loss of US$ 15,600 and gains US$ 57,188 and US$ 51,671 as of December 31, 2021, 2020 and 2019, respectively.
Net realized gains from trading securities of US$22,761, US$ 107,939 and US$ 145,979 for the years ended December 31, 2021, 2020 and 2019, respectively, are included in the statements of comprehensive income as part of Interest income – Investments and deposits with banks. For the year ended December 31, 2021 and 2020, the fluctuation in Interest income – Investments and deposits with banks is mainly due to the reduction of benchmark interest rates and the volatility in global capital markets as a result of COVID-19 pandemic.
CAF places its short-term investments mainly in high grade financial institutions and corporate securities. CAF has conservative investment guidelines that limit the amount of credit risk exposure, considering among other factors, limits as to credit ratings, limits as to duration exposure, specific allocations by type of investment instruments and limits across sector and currency allocation. As of December 31, 2021, 2020 and 2019, CAF does not have any significant concentrations of credit risk according to its investment guidelines. Non-US dollar-denominated securities included in marketable securities amounted to the equivalent of US$ 307,437, US$ 26,294 and US$ 164,597 as of December 31, 2021, 2020 and 2019, respectively.
Maturity of marketable securities are as follows:
December 31, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||
Remaining maturities: | ||||||||||||
Less than one year | 8,891,515 | 7,013,042 | 6,355,563 | |||||||||
Between one and two years | 2,351,677 | 2,326,298 | 2,340,124 | |||||||||
Between two and three years | 500,274 | 696,239 | 795,067 | |||||||||
Between three and four years | 407,059 | 293,262 | 382,925 | |||||||||
Between four and five years | 235,344 | 373,908 | 188,364 | |||||||||
Over five years | 117,198 | 259,098 | 295,762 | |||||||||
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12,503,067 | 10,961,847 | 10,357,805 | ||||||||||
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5. | OTHER INVESTMENTS |
Deposits with banks due with more than 90 days (original maturity) are as follows:
December 31, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||
U.S. dollars | 292,392 | 811,205 | 996,917 | |||||||||
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The interest rates on these deposits ranged from 0.11% to 0.34% at December 31, 2021, from 0.21%to 2.00% at December 31, 2020 and from 1.94% to 3.23% at December 31, 2019.
F-23
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
6. | LOANS |
Loans include short, medium and long-term loans to finance projects, working capital and trade activities. The majority of the loans are to Series “A” and “B” stockholder countries, or to private institutions or companies domiciled in those countries. Loans by country are summarized as follows:
December 31, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||
Stockholder country: | ||||||||||||
Argentina | 3,842,317 | 3,725,343 | 3,743,346 | |||||||||
Barbados | 172,683 | 170,267 | 75,387 | |||||||||
Bolivia | 2,752,463 | 2,612,977 | 2,715,821 | |||||||||
Brazil | 2,698,038 | 2,621,465 | 2,228,617 | |||||||||
Chile | 304,187 | 459,745 | 472,914 | |||||||||
Colombia | 3,403,385 | 2,795,238 | 2,857,926 | |||||||||
Costa Rica | 547,145 | 564,353 | 81,681 | |||||||||
Dominican Republic | 110,789 | 145,010 | 174,667 | |||||||||
Ecuador | 4,201,415 | 4,122,246 | 3,727,546 | |||||||||
Mexico | 825,000 | 885,000 | 500,000 | |||||||||
Panama | 2,562,057 | 2,076,210 | 2,031,635 | |||||||||
Paraguay | 1,511,665 | 1,086,175 | 512,842 | |||||||||
Peru | 1,743,908 | 1,524,531 | 1,987,713 | |||||||||
Trinidad & Tobago | 1,163,978 | 1,048,889 | 788,889 | |||||||||
Uruguay | 903,243 | 923,990 | 945,050 | |||||||||
Venezuela | 2,871,509 | 3,199,717 | 3,671,802 | |||||||||
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Total | 29,613,782 | 27,961,156 | 26,515,836 | |||||||||
Fair value adjustments | (18,396 | ) | 52,196,969 | 4,782 | ||||||||
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Loans | 29,595,386 | 80,158,125 | 26,520,618 | |||||||||
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Fair value adjustments of loans represent mainly adjustments to the amount of loans for which the fair value option is elected.
As of December 31, 2021, 2020 and 2019, loans denominated in currencies other than U.S. dollar were granted for an equivalent of US$ 170,401, US$ 106,858 and US$ 51,435, respectively, mainly in Colombian pesos, Peruvian nuevos soles, Uruguayan pesos and Bolivian bolivianos. All these loans are hedged with Borrowings and Bonds issued in the same currency. As of December 31, 2021, 2020 and 2019, fixed interest rate loans amounted to US$ 2,321,999, US$ 1,898,265 and US$ 165,000, respectively.
There has been an increase in demand for loans from our stockholder countries as a result of COVID-19 pandemic. In that regard, as of December 31, 2021 and 2020, CAF approved emergency credit lines aggregating up to US$ 9.1 billion and US$ 7.3 billion, respectively, available to CAF stockholder countries, of which disbursement for US$ 3.8 billion have been made as of December 31, 2021 and US$ 2.1 billion as of December 31, 2020. The emergency credit lines are aimed at enhancing a prompt and appropriate response in stockholder countries and mitigating the adverse consequences from the pandemic.
F-24
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
Loans classified by sector borrowers and the weighted average yield of the loan portfolio is shown below:
December 31, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||||||||||||||
Amount | Weighted average yield (%) | Amount | Weighted average yield (%) | Amount | Weighted average yield (%) | |||||||||||||||||||
Public sector | 27,723,931 | 2.25 | 25,619,424 | 2.30 | 22,594,948 | 3.82 | ||||||||||||||||||
Private sector | 1,889,851 | 1.98 | 2,341,732 | 2.25 | 3,920,888 | 3.42 | ||||||||||||||||||
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29,613,782 | 2.23 | 27,961,156 | 2.30 | 26,515,836 | 3.76 | |||||||||||||||||||
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Loans by industry segments are as follows:
December 31, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||||||||||||||
Amount | % | Amount | % | Amount | % | |||||||||||||||||||
Social and other infrastructure programs | 12,496,820 | 42 | 10,416,802 | 37 | 7,347,552 | 28 | ||||||||||||||||||
Transport, warehousing and communications | 8,326,436 | 28 | 8,104,691 | 29 | 7,951,318 | 30 | ||||||||||||||||||
Electricity, gas and water supply | 6,025,830 | 20 | 6,482,061 | 23 | 7,022,165 | 26 | ||||||||||||||||||
Financial services – Development banks | 1,367,969 | 5 | 916,277 | 3 | 1,091,215 | 5 | ||||||||||||||||||
Financial services – Commercial banks | 1,230,670 | 4 | 1,816,919 | 6 | 2,822,922 | 11 | ||||||||||||||||||
Agriculture, hunting and forestry | 62,104 | — | 78,402 | 1 | 98,386 | — | ||||||||||||||||||
Manufacturing industry | 32,291 | — | 59,971 | — | 82,036 | — | ||||||||||||||||||
Others | 71,662 | 1 | 86,033 | 1 | 100,242 | — | ||||||||||||||||||
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29,613,782 | 100 | 27,961,156 | 100 | 26,515,836 | 100 | |||||||||||||||||||
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Loans mature as follows:
December 31, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||
Remaining maturities: | ||||||||||||
Less than one year | 5,176,788 | 4,942,050 | 6,222,318 | |||||||||
Between one and two years | 2,721,602 | 2,782,180 | 2,576,004 | |||||||||
Between two and three years | 2,818,766 | 2,642,696 | 2,583,181 | |||||||||
Between three and four years | 2,811,208 | 2,690,045 | 2,457,519 | |||||||||
Between four and five years | 2,575,262 | 2,663,923 | 2,443,410 | |||||||||
Over five years | 13,510,156 | 12,240,262 | 10,233,404 | |||||||||
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29,613,782 | 27,961,156 | 26,515,836 | ||||||||||
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CAF maintains an internal risk rating system to evaluate the quality of the non-sovereign loans, which identifies, through a standardized rating and review parameters, those risks related to credit transactions in order to determine an internal risk rating classification designed by CAF. For purpose of determining the allowance for loan losses of sovereign loans as of December 31, 2021, 2020 and 2019, rating assigned by external agencies are used.
F-25
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
The credit quality of the sovereign loans of estimating the allowance for credit losses is based on the individual long-term foreign currency debt rating applicable to the borrower countries, which is determined using the average rating of three recognized international credit rating agencies. The credit quality by year of origination and taking the Moody’s rating as a reference as of December 31, 2021 is as follows:
Credit Rating | Year of origination | Total | ||||||||||||||||||||||||||
Country | 2021 | 2020 | 2019 | 2018 | Prior | |||||||||||||||||||||||
Argentina | Ca | 509,767 | 460,242 | 4,396 | 639,375 | 2,167,659 | 3,781,439 | |||||||||||||||||||||
Barbados | Caa1 | 12,000 | 100,000 | 195 | — | 60,488 | 172,683 | |||||||||||||||||||||
Bolivia | B2 | 350,000 | 25,000 | 202,352 | 71,970 | 2,012,474 | 2,661,796 | |||||||||||||||||||||
Brazil | Ba2 | — | 363,358 | 263,585 | 250,340 | 1,108,694 | 1,985,977 | |||||||||||||||||||||
Colombia | Baa2 | 500,000 | 350,000 | 500,151 | 300,000 | 994,326 | 2,644,477 | |||||||||||||||||||||
Costa Rica | B2 | — | 500,000 | — | — | 26,817 | 526,817 | |||||||||||||||||||||
Dominican Republic | Ba3 | — | — | — | — | 110,789 | 110,789 | |||||||||||||||||||||
Ecuador | Caa3 | 485,000 | 718,175 | 548,702 | 517,797 | 1,916,470 | 4,186,144 | |||||||||||||||||||||
Mexico | Baa1 | 500,000 | 300,000 | — | — | — | 800,000 | |||||||||||||||||||||
Panama | Baa2 | 350,000 | 387,500 | 341,841 | 4,017 | 1,085,629 | 2,168,987 | |||||||||||||||||||||
Paraguay | Ba1 | 250,000 | 370,046 | 91,966 | 495,380 | 278,773 | 1,486,165 | |||||||||||||||||||||
Peru | Baa1 | 350,000 | — | 250,000 | — | 613,206 | 1,213,206 | |||||||||||||||||||||
Trinidad & Tobago | Ba2 | 135,000 | 324,533 | 200,000 | 260,000 | 244,445 | 1,163,978 | |||||||||||||||||||||
Uruguay | Baa2 | 242,677 | 50,000 | — | 15,601 | 442,083 | 750,361 | |||||||||||||||||||||
Venezuela | C | — | — | 500,000 | — | 2,371,509 | 2,871,509 | |||||||||||||||||||||
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3,684,444 | 3,948,854 | 2,903,188 | 2,554,480 | 13,433,362 | 26,524,328 | |||||||||||||||||||||||
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The credit quality of the Non-sovereign loan portfolio by year of origination, as represented by the internal credit risk classification as of December 31, 2021 is as follows:
Year of origination | ||||||||||||||||||||||||
Credit Rating | 2021 | 2020 | 2019 | 2018 | Prior | Total | ||||||||||||||||||
Satisfactory - outstanding | 150,000 | — | — | — | 210,000 | 360,000 | ||||||||||||||||||
Satisfactory - very good | 782,436 | 99,000 | — | — | 51,931 | 933,367 | ||||||||||||||||||
Satisfactory - adequate | 592,668 | 55,881 | 53,954 | 33,993 | 234,447 | 970,943 | ||||||||||||||||||
Watch | 207,889 | 100,938 | 67,633 | 46,679 | 102,897 | 526,036 | ||||||||||||||||||
Special mention | — | — | 23,198 | 100,209 | — | 123,407 | ||||||||||||||||||
Doubtful | — | — | — | — | 87,059 | 87,059 | ||||||||||||||||||
Sub-standard | — | — | — | 25,000 | 50,575 | 75,575 | ||||||||||||||||||
Loss | — | — | — | — | 13,067 | 13,067 | ||||||||||||||||||
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1,732,993 | 255,819 | 144,785 | 205,881 | 749,976 | 3,089,454 | |||||||||||||||||||
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The internal and external ratings have been updated as of December 31, 2021.
F-26
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
Loan portfolio quality
The loan portfolio quality indicators and the related amounts are presented below:
December 31, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||
During the period CAF recorded the following transactions: | ||||||||||||
Loans written-off | 48,234 | — | 38,000 | |||||||||
Purchases of loan portfolio | — | — | — | |||||||||
Sales of loan portfolio | — | 103,466 | 42,250 | |||||||||
December 31, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||
CAF presented the following amounts and quality indicators as of the end of the period / year: | ||||||||||||
Non-accrual loans | 112,059 | 69,066 | 69,785 | |||||||||
Troubled debt restructured | 29,206 | 36,485 | — | |||||||||
Overdue loans | — | — | 129,087 | |||||||||
Allowance for loan losses as a percentage of loan portfolio | 0.26 | % | 0.34 | % | 0.35 | % | ||||||
Non-accrual loans as a percentage of loan portfolio | 0.38 | % | 0.25 | % | 0.26 | % | ||||||
Overdue loan principal as a percentage of loan portfolio | 0.00 | % | 0.00 | % | 0.49 | % |
For the years ended December 31, 2021 and 2020, a non-sovereign loan, classified as non-accrual status, with an outstanding balance of US$ 29,206 and US$ 36,485 was restructured. The restructuring consisted of an extension of loan term, interest rate reductions and deferment of monthly interest payments until January 2021 resulting in the increase of future cash flows throughout the restructured term of the loan. For the year ended December 31, 2021, CAF has received interest payments according to the restructuring agreement. For the year ended December 31, 2019, there was not restructured loans.
As of December 31, 2021, 2020 and 2019, the total principal amount of non-accrual loans is related to private sector borrowers (non-sovereign loans) which are 2,019 days, 1,654, and 1,289 days overdue, respectively. For the years ended December 31, 2021, 2020 and 2019, there were no interest income recognized for non-accrual loans. The allowance of loan losses for loans in non-accrual status amount to US$ 18,603 as of December 31, 2021 and US$ 16,200 as of December 31, 2020 and 2019.
As December 31, 2019, the total principal amount of overdue loans was US$ 129,087 (not including nonaccrual loans), representing solely overdue amounts from sovereign loans to Venezuela which was 25 days overdue. As of December 31, 2021 and 2020, there were no overdue loans.
On March 31, 2020, CAF implemented the Support Program for the Liquidity Management in Exceptional Situations (the “Program”) approved by CAF’s Shareholders Assembly on March 3, 2020. The Program allows CAF to repurchase the shares of a stockholder country that fulfills the requirements of the Program
F-27
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
and apply the proceeds to that country’s outstanding loans and interest. Pursuant to the Program, CAF notified Venezuela that it fulfills the requirements. Since inception of the Program to December 31, 2021, CAF repurchased a total of 75,657 shares owned by Venezuela totaling US$ 1,074,329 and applied that amount to repay due and overdue amounts of principal and interest and deducting the amount of paid-in capital and additional paid-in capital for US$ 378,285 and US$ 696,044, respectively. For the year ended December 31, 2021, CAF repurchased an additional 30,156 shares totaling US$ 428,215 and applied that amount to repay due and overdue amounts of principal and interest and deducting the amount of paid-in capital and additional paid-in capital for US$ 150,780 and US$ 277,435, respectively. Since the inception of the Program to December 31, 2020, CAF repurchased 45,501 shares totaling US$ 646,114 deducting the amount of paid-in capital and additional paid-in capital for US$ 227,505 and US$ 418,609, respectively. As a result of the repurchases, as of February 14, 2022, Venezuela is current with its loans with CAF.
As of December 31, 2019, balances with Venezuela include past-due installments for US$ 183,033 corresponding to principal for US$ 129,087 and interests and commissions for US$ 53,946. During the year ended December 31, 2019, CAF granted loans for US$ 500,000 to the Central Bank of Venezuela.
A/B Loans
CAF only assumes the credit risk for the portion of its participations of the loan. As of December 31, 2021, 2020 and 2019, CAF had loans of this nature amounting to US$ 103,675, US$ 159,142 and US$ 275,436, respectively, whereas other financial institutions provided funds for US$ 46,215, US$ 92,136 and US$ 160,257, respectively.
Allowance for Loan Losses
The allowance for credit losses is maintained at a level CAF believes to be appropriate to absorb expected lifetime losses over the contractual life of the loan portfolio and consider available information relevant to assessing the collectability of cash flows including a combination of internal and external information relating to past events, current conditions, and reasonable and supportable forecasts.
Changes in the allowance and the balance for loan losses over the outstanding amounts, individually and collectively evaluated, are presented below:
For the years ended | ||||||||||||||||||||||||||||||||||||
December 31, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||||||||||||||||||||||||||
Credit risk | Credit risk | Credit risk | ||||||||||||||||||||||||||||||||||
Sovereign | Non- sovereign | Total | Sovereign | Non- sovereign | Total | Sovereign | Non- sovereign | Total | ||||||||||||||||||||||||||||
Balances at beginning of year | — | 95,015 | 95,015 | 47,475 | 44,167 | 91,642 | 36,715 | 28,133 | 64,848 | |||||||||||||||||||||||||||
Provision for loan losses | — | 29,869 | 29,869 | (47,475 | ) | 50,398 | 2,923 | 10,760 | 41,635 | 52,395 | ||||||||||||||||||||||||||
Loans written-off | — | (48,234 | ) | (48,234 | ) | — | — | — | — | (38,000 | ) | (38,000 | ) | |||||||||||||||||||||||
Recoveries | — | — | — | — | 450 | 450 | — | 12,399 | 12,399 | |||||||||||||||||||||||||||
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Balances at end of year | — | 76,650 | 76,650 | — | 95,015 | 95,015 | 47,475 | 44,167 | 91,642 | |||||||||||||||||||||||||||
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F-28
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
Changes in the provision for contingencies and the off-balance-sheet undisbursed loan commitments and financial guarantees, individually and collectively evaluated, are presented below:
For the years ended | ||||||||||||||||||||||||||||||||||||
December 31, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||||||||||||||||||||||||||
Credit risk | Credit risk | Credit risk | ||||||||||||||||||||||||||||||||||
Sovereign | Non- sovereign | Total | Sovereign | Non- sovereign | Total | Sovereign | Non- sovereign | Total | ||||||||||||||||||||||||||||
Balances at beginning of year | — | 14,833 | 14,833 | 1 | 3,790 | 3,791 | 1 | 1,413 | 1,414 | |||||||||||||||||||||||||||
Provision for contingencies | — | 369 | 369 | (1 | ) | 11,043 | 11,042 | — | 2,377 | 2,377 | ||||||||||||||||||||||||||
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Balances at end of year | — | 15,202 | 15,202 | — | 14,833 | 14,833 | 1 | 3,790 | 3,791 | |||||||||||||||||||||||||||
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Provision for contingencies are included in the statements of comprehensive income as part of other expenses.
7. | EQUITY INVESTMENTS |
Equity investments, which have no readily determinable fair value, are as follows:
December 31, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||
Investments - Equity securities | 380,167 | 378,882 | 421,662 | |||||||||
Investments - Equity method | 53,183 | 53,718 | 42,163 | |||||||||
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433,350 | 432,600 | 463,825 | ||||||||||
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CAF recognized the following in the statements of comprehensive income related to equity securities:
December 31, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||
Dividends | 5,108 | 8,512 | 4,849 | |||||||||
Changes in fair value measurements | 26,748 | (18,722 | ) | 8,000 | ||||||||
Impairment in equity securities | (117 | ) | (5,977 | ) | (2,874 | ) |
For the years ended December 31, 2021, 2020 and 2019, CAF recognized gains of US$ 26,748, losses of US$ 18,722, and gains of US$ 8,000, respectively, corresponding to the net increase and net decrease in the fair value of investments in equity instruments, are included in the statements of comprehensive income as part of other income and other expenses, respectively.
For the years ended December 31, 2021, 2020 and 2019, CAF recognized losses of its equity in earnings of the investees for US$ 871, US$ 1,533, and US$ 3,225, respectively, for investments under the equity method, which are recorded in the statements of comprehensive income as part of Other expenses.
F-29
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
8. | PROPERTY AND EQUIPMENT, NET |
A summary of property and equipment, net follows:
December 31, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||
Land | 29,756 | 29,756 | 29,756 | |||||||||
Buildings | 85,188 | 85,994 | 85,584 | |||||||||
Buildings improvements | 10,942 | 21,787 | 21,205 | |||||||||
Leasing building improvements | 5,168 | 9,497 | 8,743 | |||||||||
Furniture and equipment | 36,030 | 39,816 | 36,801 | |||||||||
Vehicles | 1,041 | 1,083 | 1,079 | |||||||||
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168,125 | 187,933 | 183,168 | ||||||||||
Less accumulated depreciation | 64,612 | 81,248 | 73,480 | |||||||||
Projects in progress | 2,474 | 5,049 | 2,630 | |||||||||
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105,987 | 111,734 | 112,318 | ||||||||||
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Depreciation expenses of US$ 8,895, US$ 8,231 and US$ 7,030 for property and equipment for the years ended December 31, 2021, 2020 and 2019, respectively, are included in the statements of comprehensive income as part of administrative expenses.
9. | OTHER ASSETS |
A summary of other assets follows:
December 31, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||
Derivative related collateral | 645,632 | 1,495,033 | 520,699 | |||||||||
Intangible assets, net of accumulated amortization of US$ 8,381, US$ 7,400 and US$ 6,494, respectively | 25,386 | 18,783 | 14,354 | |||||||||
Receivable from investment securities sold | 4,017 | 6,025 | 12,625 | |||||||||
Other | 25,256 | 17,988 | 17,699 | |||||||||
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700,291 | 1,537,829 | 565,377 | ||||||||||
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10. | DEPOSITS |
A summary of deposits follows:
December 31, 2021 | December 31, 2020 | December 31, 2020 | ||||||||||
Demand deposits | 83,157 | 59,532 | 74,494 | |||||||||
Time deposits: | ||||||||||||
Less than one year | 3,919,679 | 3,277,987 | 2,599,180 | |||||||||
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4,002,836 | 3,337,519 | 2,673,674 | ||||||||||
Fair value adjustments | (210 | ) | 55 | (749 | ) | |||||||
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Carrying value of deposits | 4,002,626 | 3,337,574 | 2,672,925 | |||||||||
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F-30
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
As of December 31, 2021, 2020 and 2019, the weighted average interest rate was 0.11%, 0.67%, and 2.30%, respectively. Deposits are issued for amounts equal to or more than US$ 100. Total deposits denominated in currencies other than the U.S. dollar amounted to an equivalent of US$ 259,991, US$ 24,201 and US$ 60,099 as of December 31, 2021, 2020 and 2019, respectively.
11. | COMMERCIAL PAPER |
As of December 31, 2021, 2020 and 2019, the outstanding amount of commercial paper issued by CAF, amounts to US$ 2,813,646, US$ 1,598,696, and US$ 908,133, respectively, of which matures in 2022, 2021 and 2020, respectively. As of December 31, 2021, 2020 and 2019, the weighted average interest rate was 0.23%, 0.86% and 2.47%, respectively.
12. | BORROWINGS FROM OTHER FINANCIAL INSTITUTIONS |
A summary of borrowings from other financial institutions by currency follows:
December 31, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||
U.S. dollars | 1,179,623 | 1,088,287 | 1,244,480 | |||||||||
Euros | 590,809 | 482,794 | 94,083 | |||||||||
Colombian Pesos | 30,764 | 27,418 | 21,006 | |||||||||
Peruvian nuevos soles | — | 3,591 | 23,512 | |||||||||
Others | — | 1,985 | — | |||||||||
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1,801,196 | 1,604,075 | 1,383,081 | ||||||||||
Fair value adjustments | (28,328 | ) | 68,879 | 7,880 | ||||||||
Less debt issuance costs | 697 | 653 | 743 | |||||||||
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Carrying value of borrowings from other financial institutions | 1,772,171 | 1,672,301 | 1,390,218 | |||||||||
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As of December 31, 2021, 2020 and 2019, the fixed interest-bearing borrowings amounted to US$ 410,531, US$ 503,289 and US$ 472,575, respectively. As of December 31, 2021, 2020 and 2019, the weighted average interest rate after considering the impact of interest rate swaps was 1.52%, 2.49% and 3.56%, respectively.
Borrowings from other financial institutions, by remaining maturities, are summarized below:
December 31, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||
Less than one year | 178,039 | 166,519 | 406,198 | |||||||||
Between one and two years | 388,211 | 369,480 | 206,686 | |||||||||
Between two and three years | 248,616 | 156,064 | 146,097 | |||||||||
Between three and four years | 191,271 | 202,466 | 112,574 | |||||||||
Between four and five years | 169,039 | 156,067 | 161,538 | |||||||||
Over five years | 626,020 | 553,479 | 349,988 | |||||||||
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1,801,196 | 1,604,075 | 1,383,081 | ||||||||||
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F-31
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
The agreements on some borrowing from other financial institutions agreements contains covenants requiring the use of the proceeds for specific purposes or projects.
As of December 31, 2021, 2020 and 2019, there were unused term credit facilities amounting to US$ 1,899,056, US$ 2,279,096 and US$ 2,237,833, respectively.
13. | BONDS |
A summary of outstanding bonds follows:
December 31, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||||||||||||||||||||||||||
At original exchange rate | At spot exchange rate | Weighted average cost, after swaps (%) (period end) | At original exchange rate | At spot exchange rate | Weighted average cost, after swaps (%) (year-end) | At original exchange rate | At spot exchange rate | Weighted average cost, after swaps (%) (year-end) | ||||||||||||||||||||||||||||
U.S. dollars | 8,428,409 | 8,428,409 | 1.35 | 8,281,073 | 8,281,073 | 2.02 | 8,589,113 | 8,589,113 | 4.04 | |||||||||||||||||||||||||||
Euro | 8,637,076 | 8,274,796 | 1.25 | 8,143,452 | 8,370,175 | 1.70 | 8,630,557 | 8,117,818 | 3.25 | |||||||||||||||||||||||||||
Swiss francs | 2,203,076 | 2,297,342 | 1.42 | 2,582,176 | 2,777,778 | 2.29 | 2,465,597 | 2,425,181 | 2.58 | |||||||||||||||||||||||||||
Japanese yen | 1,404,689 | 1,297,358 | 1.28 | 727,654 | 740,777 | 1.95 | 235,206 | 220,548 | 3.73 | |||||||||||||||||||||||||||
Australian dollars | 1,026,690 | 945,521 | 1.58 | 1,070,538 | 1,042,275 | 1.76 | 1,049,646 | 927,957 | 3.52 | |||||||||||||||||||||||||||
Hong Kong dollars | 635,865 | 632,757 | 1.73 | 757,314 | 758,107 | 1.87 | 757,307 | 754,748 | 1.94 | |||||||||||||||||||||||||||
Norwegian kroner | 694,695 | 544,687 | 1.24 | 622,501 | 491,492 | 2.23 | 622,500 | 476,536 | 3.31 | |||||||||||||||||||||||||||
Mexican pesos | 574,643 | 569,250 | 1.41 | 426,031 | 402,436 | 1.89 | 306,312 | 278,897 | 3.30 | |||||||||||||||||||||||||||
Colombian pesos | 334,464 | 248,243 | 1.53 | 334,472 | 294,215 | 1.53 | 266,562 | 231,219 | 3.14 | |||||||||||||||||||||||||||
Uruguayan pesos | 280,304 | 250,040 | 1.27 | 268,556 | 251,676 | 1.34 | 106,835 | 101,775 | 2.64 | |||||||||||||||||||||||||||
Brazilian Real | 201,662 | 191,590 | 0.70 | — | — | — | 68,701 | 54,839 | 2.36 | |||||||||||||||||||||||||||
Indonesian Rupee | 75,000 | 72,467 | 0.46 | 75,000 | 73,601 | 0.54 | 75,000 | 74,262 | 2.59 | |||||||||||||||||||||||||||
Indian Rupee | 31,891 | 28,729 | 2.71 | 31,891 | 29,167 | 2.71 | 31,891 | 29,980 | 2.52 | |||||||||||||||||||||||||||
Canadian dollars | 30,395 | 31,385 | 2.50 | 30,395 | 31,341 | 2.50 | 30,395 | 30,628 | 3.00 | |||||||||||||||||||||||||||
Kazakhstan Tenge | 15,082 | 14,295 | 1.21 | 15,082 | 14,742 | 1.31 | — | — | — | |||||||||||||||||||||||||||
New Zealand Dollar | 13,651 | 14,554 | 1.66 | 13,651 | 15,335 | 1.76 | — | — | — | |||||||||||||||||||||||||||
Peruvian nuevos soles | — | — | — | 53,378 | 48,892 | 0.77 | 53,378 | 53,353 | 2.25 | |||||||||||||||||||||||||||
Turkish lira | — | — | — | — | — | — | 64,483 | 32,279 | 2.62 | |||||||||||||||||||||||||||
South African rand | — | — | — | — | — | — | 37,780 | 41,787 | 2.38 | |||||||||||||||||||||||||||
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24,587,592 | 23,841,423 | 23,433,164 | 23,623,082 | 23,391,263 | 22,440,920 | |||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
Fair value adjustments | 425,217 | 1,269,492 | 734,512 | |||||||||||||||||||||||||||||||||
Less debt issuance costs | 6,103 | 10,155 | 14,070 | |||||||||||||||||||||||||||||||||
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Carrying value of bonds | 24,260,537 | 24,882,419 | 23,161,362 | |||||||||||||||||||||||||||||||||
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A summary of the bonds issued, by remaining maturities at original exchange rate, follows:
December 31, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||
Remaining maturities: | ||||||||||||
Less than one year | 3,944,492 | 3,215,774 | 3,900,936 | |||||||||
Between one and two years | 4,557,150 | 3,946,477 | 3,134,707 | |||||||||
Between two and three years | 3,245,067 | 4,562,569 | 3,938,814 | |||||||||
Between three and four years | 4,256,759 | 1,591,088 | 3,255,194 | |||||||||
Between four and five years | 3,787,884 | 4,261,471 | 1,604,255 | |||||||||
Over five years | 4,796,240 | 5,855,785 | 7,557,357 | |||||||||
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| |||||||
24,587,592 | 23,433,164 | 23,391,263 | ||||||||||
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F-32
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
As of December 31, 2021, 2020 and 2019, fixed interest rate bonds amounted to US$ 24,108,665,US$ 23,350,889 and US$ 23,306,226, respectively, of which US$ 16,173,655, US$ 15,165,519 andUS$ 14,815,856, respectively, are denominated in currencies other than U.S. dollar.
There were no bonds repurchased for the years ended December 31, 2021, 2020 and 2019.
14. | ACCRUED EXPENSES AND OTHER LIABILITIES |
A summary of accrued expenses and other liabilities follows:
December 31, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||
Derivative-related collateral | 148,773 | 1,443,467 | 143,256 | |||||||||
Employees’ severance benefits and savings plan | 104,083 | 107,250 | 89,078 | |||||||||
Payable for investment securities purchased | 17,437 | 14,960 | 18,244 | |||||||||
Provision for contingencies | 15,202 | 14,833 | 3,791 | |||||||||
Contributions to Stockholders´ Special Funds | 12,467 | 55,090 | 53,577 | |||||||||
Other | 14,578 | 10,584 | 10,037 | |||||||||
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312,540 | 1,646,184 | 317,983 | ||||||||||
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15. | PENSION PLAN |
As of December 31, 2021, 2020 and 2019, the plan has 687, 636 and 631 participants and active employees, respectively. The date used to determine pension plan benefit obligation is December 31 of each year.
For the years ended December 31, 2021, 2020 and 2019, a reconciliation of beginning and ending balances of the benefit obligation follows:
2021 | 2020 | 2019 | ||||||||||
Change in benefit obligation: | ||||||||||||
Benefit obligation at beginning of year | 32,079 | 27,339 | 23,792 | |||||||||
Service cost | 3,024 | 2,923 | 2,729 | |||||||||
Interest cost | 1,275 | 1,091 | 945 | |||||||||
Plan participants’ contributions | 2,225 | 2,277 | 1,985 | |||||||||
Actuarial gain | (553 | ) | (682 | ) | (470 | ) | ||||||
Benefit paid | (1,530 | ) | (869 | ) | (1,642 | ) | ||||||
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Benefit obligation at the end of year | 36,520 | 32,079 | 27,339 | |||||||||
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F-33
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
For the years ended December 31, 2021, 2020 and 2019, a reconciliation of beginning and ending balances of the fair value of plan assets follows:
2021 | 2020 | 2019 | ||||||||||
Change in plan assets: | ||||||||||||
Fair value of plan assets at beginning of year | 32,455 | 27,809 | 24,154 | |||||||||
Actual return on plan assets | 1,208 | 1,145 | 1,035 | |||||||||
Contributions | 4,700 | 4,370 | 4,262 | |||||||||
Benefit paid | (1,530 | ) | (869 | ) | (1,642 | ) | ||||||
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Fair value of plan assets at end of year | 36,833 | 32,455 | 27,809 | |||||||||
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Plan assets are as follows:
December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Plan assets: | ||||||||||||
Marketable securities | 36,833 | 32,455 | 27,809 | |||||||||
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The table below summarizes the component of the periodic cost of projected benefits related to the PBO for the years ended December 31, 2021, 2020 and 2019:
2021 | 2020 | 2019 | ||||||||||
Service cost | 3,024 | 2,923 | 2,729 | |||||||||
Interest cost | 1,275 | 1,091 | 945 | |||||||||
Expected return on plan assets | (1,290 | ) | (1,109 | ) | (959 | ) | ||||||
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3,009 | 2,905 | 2,715 | ||||||||||
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A summary of the net projected cost for the year ended December 31, 2021 follows:
Service cost | ||||
Contribution to the plan | 2,425 | |||
Guaranteed benefit | 880 | |||
|
| |||
3,305 | ||||
Interest cost | 1,455 | |||
Expected return on plan assets | (1,467 | ) | ||
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3,293 | ||||
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A summary of the benefits that are expected to be paid for the next five years follows:
2022 | 336 | |||
2023 | 1,037 | |||
2024 | 872 | |||
2025 | 1,002 | |||
2026 | 1,148 |
F-34
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
Weighted-average assumptions used to determine net benefit cost since the origination of the Plan to December 31, 2021, 2020 and 2019 follows:
2021 | 2020 | 2019 | ||||||||||
Discount rate | 4.00 | % | 4.00 | % | 4.00 | % | ||||||
Expected long-term nominal rate return on Plan assets | 4.00 | % | 4.00 | % | 4.00 | % | ||||||
Salary increase rate | 3.00 | % | 3.00 | % | 3.00 | % |
16. | STOCKHOLDERS’ EQUITY |
Authorized capital
The authorized capital of CAF as of December 31, 2021, 2020 and 2019 amounts to US$ 15,000,000, of which US$ 10,000,000 is ordinary capital shares and US$ 5,000,000 is callable capital shares, distributed among Series “A”, “B” and “C” shares.
Additional paid-in capital
The additional paid-in capital is the amount paid by Series “B” and Series “C” stockholders in excess of the par value. The additional paid-in capital of CAF as of December 31, 2021, 2020 and 2019 amounts to US$ 4,091,298, US$ 3,961,900 and US$ 3,988,884, respectively.
Subscribed callable capital
In addition to our subscribed paid-in and un-paid capital, our shareholders have subscribed to callable capital totaling US$ 1,589,660 as of December 31, 2021, 2020 and 2019. Our callable capital (comprised of Series “B” and Series “C” callable capital shares) may be called by the Board of Directors to meet our obligations only to the extent that we are unable to meet such obligations with our own resources.
The Constitutive Agreement provides that the obligation of shareholders to pay for the shares of callable capital, upon demand by the Board of Directors, continues until such callable capital is paid in full. Thus, we consider the obligations of shareholder countries to pay for their respective callable capital subscriptions to be binding obligations backed by the full faith and credit of the respective governments.
Shares
CAF´s Shares are divided into Series “A” Shares, Series “B” Shares and Series “C” Shares.
(i) | Series “A” shares may be owned only by the Member Countries. The term “Member Country” is defined in Article 3 of CAF’s General Regulations as any shareholder country holding at least one Series “A” share that, either is a signatory to the Constitutive Agreement or, being of Latin America or the Caribbean, has adhered to it (as of the date hereof, the Member Countries are the Argentine Republic, the Plurinational State of Bolivia, the Republics of Colombia, Ecuador, Panama, Paraguay, Peru, Trinidad and Tobago, the Federative Republic of Brazil, the Oriental Republic of Uruguay, and the Bolivarian Republic of Venezuela). Each Member Country owns one Series “A” share, which is held by the government, either directly or through a government-designated social or public purpose institution. Each of the Member Countries owning a Series “A” share is entitled to elect one (1) Director and one (1) Alternate Director to our Board of Directors. The nominal value of the Series “A” Shares is US$ 1,200. |
F-35
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
(ii) | Series “B” shares are currently owned by the Member Countries and are held by the governments either directly or through designated governmental entities, except for certain Series “B” shares currently constituting approximately 0.03% of our outstanding shares, which are owned by 13 private sector financial institutions in the Member Countries. As owners of Series “B” shares, the Member Countries collectively are entitled to elect five (5) additional Directors and five (5) additional Alternate Directors through cumulative voting, and the 13 private sector financial institutions collectively are entitled to elect one (1) Director and one (1) Alternate Director. The nominal value of the Series “B” Shares is US$ 5. |
(iii) | Series “C” shares are available for subscription by countries that are not Member Countries to strengthen relationships between these countries and the Member Countries. Series “C” shares are currently owned by eight (8) associated shareholder countries: Barbados, Chile, Costa Rica, Dominican Republic, Jamaica, Mexico, Portugal and Spain. Holders of Series “C” shares collectively are entitled to elect two (2) Directors and two (2) Alternate Directors, and up to two (2) additional Directors with their respective two (2) Alternate Directors if additional new Series “C” Shares are subscribed and paid beyond certain threshold. In order for an additional director to be elected by the series “C” shareholders, the subscription and payment for new series “C” shares must represent an increase of one point five percent (1.5%) of CAF’s subscribed and paid-in capital equity in comparison with the total subscribed and paid-in capital at the end of the most recently completed fiscal year. The nominal value of the Series “B” Shares is US$ 5. |
A summary of the changes in subscribed and paid-in capital for the years ended December 31, 2021, 2020and 2019 follows:
Number of Shares | Nominal Amounts | |||||||||||||||||||||||||||||||
Note | Series “A” | Series “B” | Series “C” | Series “A” | Series “B” | Series “C” | Total | |||||||||||||||||||||||||
As of December 31, 2018 | 11 | 946,211 | 84,493 | 13,200 | 4,731,055 | 422,465 | 5,166,720 | |||||||||||||||||||||||||
Issued for cash | — | 31,804 | 10,995 | — | 159,020 | 54,975 | 213,995 | |||||||||||||||||||||||||
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As of December 31, 2019 | 11 | 978,015 | 95,488 | 13,200 | 4,890,075 | 477,440 | 5,380,715 | |||||||||||||||||||||||||
Issued for cash | — | 39,839 | 2,729 | — | 199,195 | 13,645 | 212,840 | |||||||||||||||||||||||||
Shares’ repurchase | 6 | — | (45,501 | ) | — | — | (227,505 | ) | — | (227,505 | ) | |||||||||||||||||||||
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As of December 31, 2020 | 11 | 972,353 | 98,217 | 13,200 | 4,861,765 | 491,085 | 5,366,050 | |||||||||||||||||||||||||
Issued for cash | — | 42,373 | 1,848 | — | 211,865 | 9,240 | 221,105 | |||||||||||||||||||||||||
Shares’ repurchase | 6 | — | (30,156 | ) | — | — | (150,780 | ) | — | (150,780 | ) | |||||||||||||||||||||
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As of December 31, 2021 | 11 | 984,570 | 100,065 | 13,200 | 4,922,850 | 500,325 | 5,436,375 | |||||||||||||||||||||||||
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Subscribed and paid-in capital as of December 31, 2021 is as follows:
Number of Shares | Nominal Amounts | |||||||||||||||||||||||||||
Series “A” | Series “B” | Series “C” | Series “A” | Series “B” | Series “C” | Total | ||||||||||||||||||||||
Stockholder: | ||||||||||||||||||||||||||||
Argentina | 1 | 119,079 | — | 1,200 | 595,395 | — | 596,595 | |||||||||||||||||||||
Bolivia | 1 | 62,360 | — | 1,200 | 311,800 | — | 313,000 | |||||||||||||||||||||
Brazil | 1 | 94,284 | — | 1,200 | 471,420 | — | 472,620 |
F-36
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
Number of Shares | Nominal Amounts | |||||||||||||||||||||||||||
Series “A” | Series “B” | Series “C” | Series “A” | Series “B” | Series “C” | Total | ||||||||||||||||||||||
Colombia | 1 | 196,613 | — | 1,200 | 983,065 | — | 984,265 | |||||||||||||||||||||
Ecuador | 1 | 65,115 | — | 1,200 | 325,575 | — | 326,775 | |||||||||||||||||||||
Panama | 1 | 37,793 | — | 1,200 | 188,965 | — | 190,165 | |||||||||||||||||||||
Paraguay | 1 | 37,313 | — | 1,200 | 186,565 | — | 187,765 | |||||||||||||||||||||
Peru | 1 | 211,432 | — | 1,200 | 1,057,160 | — | 1,058,360 | |||||||||||||||||||||
Trinidad & Tobago | 1 | 28,037 | — | 1,200 | 140,185 | — | 141,385 | |||||||||||||||||||||
Uruguay | 1 | 39,026 | — | 1,200 | 195,130 | — | 196,330 | |||||||||||||||||||||
Venezuela | 1 | 93,021 | — | 1,200 | 465,105 | — | 466,305 | |||||||||||||||||||||
Barbados | — | — | 3,522 | — | — | 17,610 | 17,610 | |||||||||||||||||||||
Chile | — | — | 5,541 | — | — | 27,705 | 27,705 | |||||||||||||||||||||
Costa Rica | — | — | 11,038 | — | — | 55,190 | 55,190 | |||||||||||||||||||||
Dominican Republic | — | — | 10,556 | — | — | 52,780 | 52,780 | |||||||||||||||||||||
Jamaica | — | — | 182 | — | — | 910 | 910 | |||||||||||||||||||||
Mexico | — | — | 15,367 | — | — | 76,835 | 76,835 | |||||||||||||||||||||
Portugal | — | — | 1,920 | — | — | 9,600 | 9,600 | |||||||||||||||||||||
Spain | — | — | 51,939 | — | — | 259,695 | 259,695 | |||||||||||||||||||||
Commercial banks | — | 497 | — | — | 2,485 | — | 2,485 | |||||||||||||||||||||
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11 | 984,570 | 100,065 | 13,200 | 4,922,850 | 500,325 | 5,436,375 | ||||||||||||||||||||||
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As of December 31, 2021, the detail of unpaid subscribed capital and subscribed callable capital is presented below:
Unpaid Subscribed Capital | Subscribed Callable Capital | |||||||||||||||||||||||||||||||
Series “B” | Series “C” | Series “B” | Series “C” | |||||||||||||||||||||||||||||
Number of shares | Nominal Amount | Number of shares | Nominal Amount | Number of shares | Nominal Amount | Number of shares | Nominal Amount | |||||||||||||||||||||||||
Stockholder: | ||||||||||||||||||||||||||||||||
Argentina | 12,445 | 62,225 | — | — | 25,200 | 126,000 | — | — | ||||||||||||||||||||||||
Bolivia | 2,434 | 12,170 | — | — | 14,400 | 72,000 | — | — | ||||||||||||||||||||||||
Brazil | 33,859 | 169,295 | — | — | 25,200 | 126,000 | — | — | ||||||||||||||||||||||||
Colombia | 19,788 | 98,940 | — | — | 50,400 | 252,000 | — | — | ||||||||||||||||||||||||
Ecuador | — | — | — | — | 14,400 | 72,000 | — | — | ||||||||||||||||||||||||
Panama | 2,434 | 12,170 | — | — | 7,200 | 36,000 | — | — | ||||||||||||||||||||||||
Paraguay | 2,434 | 12,170 | — | — | 7,200 | 36,000 | — | — | ||||||||||||||||||||||||
Peru | 5,403 | 27,015 | — | — | 50,400 | 252,000 | — | — | ||||||||||||||||||||||||
Trinidad y Tobago | 8,801 | 44,005 | — | — | 7,200 | 36,000 | — | — | ||||||||||||||||||||||||
Uruguay | 2,434 | 12,170 | — | — | 7,200 | 36,000 | — | — | ||||||||||||||||||||||||
Venezuela | 48,156 | 240,780 | — | — | 50,400 | 252,000 | — | — | ||||||||||||||||||||||||
Barbados | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Chile | — | — | — | — | — | — | 800 | 4,000 | ||||||||||||||||||||||||
Dominican Republic | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Mexico | — | — | — | — | — | — | 1,600 | 8,000 | ||||||||||||||||||||||||
Portugal | — | — | — | — | — | — | 16,332 | 81,660 | ||||||||||||||||||||||||
Spain | — | — | — | — | — | — | 40,000 | 200,000 | ||||||||||||||||||||||||
Commercial banks | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
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138,188 | 690,940 | — | — | 259,200 | 1,296,000 | 58,732 | 293,660 | |||||||||||||||||||||||||
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F-37
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
Subscribed and paid-in capital as of December 31, 2020 is as follows:
Number of Shares | Nominal Amounts | |||||||||||||||||||||||||||
Series “A” | Series “B” | Series “C” | Series “A” | Series “B” | Series “C” | Total | ||||||||||||||||||||||
Stockholder: | ||||||||||||||||||||||||||||
Argentina | 1 | 112,854 | — | 1,200 | 564,270 | — | 565,470 | |||||||||||||||||||||
Bolivia | 1 | 59,926 | — | 1,200 | 299,630 | — | 300,830 | |||||||||||||||||||||
Brazil | 1 | 92,438 | — | 1,200 | 462,190 | — | 463,390 | |||||||||||||||||||||
Colombia | 1 | 190,017 | — | 1,200 | 950,085 | — | 951,285 | |||||||||||||||||||||
Ecuador | 1 | 65,115 | — | 1,200 | 325,575 | — | 326,775 | |||||||||||||||||||||
Panama | 1 | 35,359 | — | 1,200 | 176,795 | — | 177,995 | |||||||||||||||||||||
Paraguay | 1 | 34,879 | — | 1,200 | 174,395 | — | 175,595 | |||||||||||||||||||||
Peru | 1 | 195,223 | — | 1,200 | 976,115 | — | 977,315 | |||||||||||||||||||||
Trinidad & Tobago | 1 | 26,276 | — | 1,200 | 131,380 | — | 132,580 | |||||||||||||||||||||
Uruguay | 1 | 36,592 | — | 1,200 | 182,960 | — | 184,160 | |||||||||||||||||||||
Venezuela | 1 | 123,177 | — | 1,200 | 615,885 | — | 617,085 | |||||||||||||||||||||
Barbados | — | — | 3,522 | — | — | 17,610 | 17,610 | |||||||||||||||||||||
Chile | — | — | 5,541 | — | — | 27,705 | 27,705 | |||||||||||||||||||||
Costa Rica | — | — | 11,038 | — | — | 55,190 | 55,190 | |||||||||||||||||||||
Dominican Republic | — | — | 10,556 | — | — | 52,780 | 52,780 | |||||||||||||||||||||
Jamaica | — | — | 182 | — | — | 910 | 910 | |||||||||||||||||||||
Mexico | — | — | 15,367 | — | — | 76,835 | 76,835 | |||||||||||||||||||||
Portugal | — | — | 1,920 | — | — | 9,600 | 9,600 | |||||||||||||||||||||
Spain | — | — | 50,091 | — | — | 250,455 | 250,455 | |||||||||||||||||||||
Commercial banks | — | 497 | — | — | 2,485 | — | 2,485 | |||||||||||||||||||||
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11 | 972,353 | 98,217 | 13,200 | 4,861,765 | 491,085 | 5,366,050 | ||||||||||||||||||||||
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As of December 31, 2020, the detail of unpaid subscribed capital and of subscribed callable capital is presented below:
Unpaid Subscribed Capital | Subscribed Callable Capital | |||||||||||||||||||||||||||||||
Series “B” | Series “C” | Series “B” | Series “C” | |||||||||||||||||||||||||||||
Number of shares | Nominal Amount | Number of shares | Nominal Amount | Number of shares | Nominal Amount | Number of shares | Nominal Amount | |||||||||||||||||||||||||
Stockholder: | ||||||||||||||||||||||||||||||||
Argentina | 18,670 | 93,350 | — | — | 25,200 | 126,000 | — | — | ||||||||||||||||||||||||
Bolivia | 4,868 | 24,340 | — | — | 14,400 | 72,000 | — | — | ||||||||||||||||||||||||
Brazil | 35,705 | 178,525 | — | — | 25,200 | 126,000 | — | — | ||||||||||||||||||||||||
Colombia | 26,384 | 131,920 | — | — | 50,400 | 252,000 | — | — | ||||||||||||||||||||||||
Ecuador | — | — | — | — | 14,400 | 72,000 | — | — | ||||||||||||||||||||||||
Panama | 4,868 | 24,340 | — | — | 7,200 | 36,000 | — | — | ||||||||||||||||||||||||
Paraguay | 4,868 | 24,340 | — | — | 7,200 | 36,000 | — | — | ||||||||||||||||||||||||
Peru | 21,612 | 108,060 | — | — | 50,400 | 252,000 | — | — | ||||||||||||||||||||||||
Trinidad y Tobago | 10,562 | 52,810 | — | — | 7,200 | 36,000 | — | — | ||||||||||||||||||||||||
Uruguay | 4,868 | 24,340 | — | — | 7,200 | 36,000 | — | — |
F-38
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
Unpaid Subscribed Capital | Subscribed Callable Capital | |||||||||||||||||||||||||||||||
Series “B” | Series “C” | Series “B” | Series “C” | |||||||||||||||||||||||||||||
Number of shares | Nominal Amount | Number of shares | Nominal Amount | Number of shares | Nominal Amount | Number of shares | Nominal Amount | |||||||||||||||||||||||||
Venezuela | 48,156 | 240,780 | — | — | 50,400 | 252,000 | — | — | ||||||||||||||||||||||||
Barbados | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Chile | — | — | — | — | — | — | 800 | 4,000 | ||||||||||||||||||||||||
Dominican Republic | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Mexico | — | — | — | — | — | — | 1,600 | 8,000 | ||||||||||||||||||||||||
Portugal | — | — | — | — | — | — | 16,332 | 81,660 | ||||||||||||||||||||||||
Spain | — | — | 1,848 | 9,240 | — | — | 40,000 | 200,000 | ||||||||||||||||||||||||
Commercial banks | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
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180,561 | 902,805 | 1,848 | 9,240 | 259,200 | 1,296,000 | 58,732 | 293,660 | |||||||||||||||||||||||||
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Subscribed and paid-in capital as of December 31, 2019 is as follows:
Number of Shares | Nominal Amounts | |||||||||||||||||||||||||||
Series “A” | Series “B” | Series “C” | Series “A” | Series “B” | Series “C” | Total | ||||||||||||||||||||||
Stockholder: | ||||||||||||||||||||||||||||
Argentina | 1 | 106,629 | — | 1,200 | 533,145 | — | 534,345 | |||||||||||||||||||||
Bolivia | 1 | 57,492 | — | 1,200 | 287,460 | — | 288,660 | |||||||||||||||||||||
Brazil | 1 | 89,270 | — | 1,200 | 446,350 | — | 447,550 | |||||||||||||||||||||
Colombia | 1 | 183,421 | — | 1,200 | 917,105 | — | 918,305 | |||||||||||||||||||||
Ecuador | 1 | 57,813 | — | 1,200 | 289,065 | — | 290,265 | |||||||||||||||||||||
Panama | 1 | 32,925 | — | 1,200 | 164,625 | — | 165,825 | |||||||||||||||||||||
Paraguay | 1 | 32,445 | — | 1,200 | 162,225 | — | 163,425 | |||||||||||||||||||||
Peru | 1 | 189,820 | — | 1,200 | 949,100 | — | 950,300 | |||||||||||||||||||||
Trinidad & Tobago | 1 | 24,867 | — | 1,200 | 124,335 | — | 125,535 | |||||||||||||||||||||
Uruguay | 1 | 34,158 | — | 1,200 | 170,790 | — | 171,990 | |||||||||||||||||||||
Venezuela | 1 | 168,678 | — | 1,200 | 843,390 | — | 844,590 | |||||||||||||||||||||
Barbados | — | — | 3,522 | — | — | 17,610 | 17,610 | |||||||||||||||||||||
Chile | — | — | 5,541 | — | — | 27,705 | 27,705 | |||||||||||||||||||||
Costa Rica | — | — | 11,038 | — | — | 55,190 | 55,190 | |||||||||||||||||||||
Dominican Republic | — | — | 9,675 | — | — | 48,375 | 48,375 | |||||||||||||||||||||
Jamaica | — | — | 182 | — | — | 910 | 910 | |||||||||||||||||||||
Mexico | — | — | 15,367 | — | — | 76,835 | 76,835 | |||||||||||||||||||||
Portugal | — | — | 1,920 | — | — | 9,600 | 9,600 | |||||||||||||||||||||
Spain | — | — | 48,243 | — | — | 241,215 | 241,215 | |||||||||||||||||||||
Commercial banks | — | 497 | — | — | 2,485 | — | 2,485 | |||||||||||||||||||||
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11 | 978,015 | 95,488 | 13,200 | 4,890,075 | 477,440 | 5,380,715 | ||||||||||||||||||||||
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F-39
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
As of December 31, 2019, the detail of unpaid subscribed capital and of subscribed callable capital is presented below:
Unpaid Subscribed Capital | Subscribed Callable Capital | |||||||||||||||||||||||||||||||
Series “B” | Series “C” | Series “B” | Series “C” | |||||||||||||||||||||||||||||
Number of shares | Nominal Amount | Number of shares | Nominal Amount | Number of shares | Nominal Amount | Number of shares | Nominal Amount | |||||||||||||||||||||||||
Stockholder: | ||||||||||||||||||||||||||||||||
Argentina | 24,895 | 124,475 | — | — | 25,200 | 126,000 | — | — | ||||||||||||||||||||||||
Bolivia | 7,302 | 36,510 | — | — | 14,400 | 72,000 | — | — | ||||||||||||||||||||||||
Brazil | 38,873 | 194,365 | — | — | 25,200 | 126,000 | — | — | ||||||||||||||||||||||||
Colombia | 32,980 | 164,900 | — | — | 50,400 | 252,000 | — | — | ||||||||||||||||||||||||
Ecuador | 7,302 | 36,510 | — | — | 14,400 | 72,000 | — | — | ||||||||||||||||||||||||
Panama | 7,302 | 36,510 | — | — | 7,200 | 36,000 | — | — | ||||||||||||||||||||||||
Paraguay | 7,302 | 36,510 | — | — | 7,200 | 36,000 | — | — | ||||||||||||||||||||||||
Peru | 27,015 | 135,075 | — | — | 50,400 | 252,000 | — | — | ||||||||||||||||||||||||
Trinidad y Tobago | 11,971 | 59,855 | — | — | 7,200 | 36,000 | — | — | ||||||||||||||||||||||||
Uruguay | 7,302 | 36,510 | — | — | 7,200 | 36,000 | — | — | ||||||||||||||||||||||||
Venezuela | 48,156 | 240,780 | — | — | 50,400 | 252,000 | — | — | ||||||||||||||||||||||||
Barbados | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Chile | — | — | — | — | — | — | 800 | 4,000 | ||||||||||||||||||||||||
Dominican Republic | — | — | 881 | 4,405 | — | — | — | — | ||||||||||||||||||||||||
Mexico | — | — | — | — | — | — | 1,600 | 8,000 | ||||||||||||||||||||||||
Portugal | — | — | — | — | — | — | 16,332 | 81,660 | ||||||||||||||||||||||||
Spain | — | — | 3,696 | 18,480 | — | — | 40,000 | 200,000 | ||||||||||||||||||||||||
Commercial banks | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
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220,400 | 1,102,000 | 4,577 | 22,885 | 259,200 | 1,296,000 | 58,732 | 293,660 | |||||||||||||||||||||||||
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General Reserve
CAF maintains a general reserve approved by the Stockholders’ Assembly, which is considered an equity reserve. Stockholders approved the increase in the general reserve by US$ 215,839, US$ 292,982 andUS$ 201,177 during the years ended December 31, 2021, 2020 and 2019, through appropriations from net income for the years ended December 31, 2020, 2019 and 2018, respectively.
Reserve Pursuant to Article N° 42 of the Constitutive Agreement
CAF’s Constitutive Agreement states that at least 10% of annual net income should be appropriated into a reserve fund until that reserve fund amounts to 50% of the subscribed capital. That reserve fund is considered an equity reserve. Additional appropriation may be approved by the stockholders. The Stockholders’ Assembly held in March 2021, 2020 and 2019, authorized an increase in the reserve fund forUS$ 23,983, US$ 32,600 and US$ 22,400, through an appropriation from net income for the years endedDecember 31, 2020, 2019 and 2018, respectively.
F-40
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
17. | TAX EXEMPTIONS |
Pursuant to its Constitutive Agreement, CAF is exempt, in all of its Member Countries, from all taxes and tariffs on income, properties or assets, and from any liability involving payment, withholding or collection of any taxes.
In addition, CAF has entered into agreements with each of the associated shareholder countries. Pursuant to these agreements, each country that is a shareholder but do not qualify as a Member Country has agreed to extend to CAF, with respect to its activities in and concerning that country, immunities and privileges similar to those than have been granted to CAF in the Member Countries.
18. | DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES |
CAF utilizes derivative financial instruments to reduce exposure to interest rate risk and foreign currency risk. CAF does not hold or issue derivative financial instruments for trading or speculative purposes.
The market risk associated with interest rate and foreign currency is managed by swapping marketable securities - trading, loans, borrowings from other financial institutions and bonds, subject to fixed interest rates and denominated in currency other than the U.S. dollar into floating interest rate instruments denominated in U.S. dollars. CAF enters into derivative financial instruments to offset the economic changes in value of specifically identified marketable securities – trading, loans, borrowings from other financial institutions and bonds.
Derivative financial instruments held by CAF consist of interest rate swaps designated as fair value hedges of specifically identified loans, bonds or borrowings from other financial institutions with fixed interest rates and denominated in U.S. dollars. Also, CAF enters into cross-currency and interest rate swaps as an economic hedge (derivative that is entered into to manage a risk but is not accounted as a hedge) for interest rate and foreign exchange risks related with deposits, bonds, borrowings or loans denominated in currencies other than the U.S. dollar where CAF’s management elected to measure those liabilities and assets at fair value under the fair value option guidance.
When the fair value of a derivative financial instrument is positive, the counterparty owes CAF, creating credit risk for CAF. When the fair value of a derivative financial instrument is negative, CAF owes the counterparty and, therefore, it does not have credit risk. CAF minimizes the credit risk in derivative financial instruments by entering into transactions with high-quality counterparties whose credit rating is “A” or higher.
In order to reduce the credit risk in derivative financial instruments, CAF enters into credit support agreements with its major swap counterparties. This provides risk mitigation, as the swap contracts are regularly marked-to-market, and the party being the net obligor is required to post collateral when net mark to-market exposure exceeds certain predetermined thresholds. This collateral is in the form of cash.
CAF does not offset for each counterparty, the fair value amount recognized for derivative financial instruments with the fair value amount recognized for the collateral, whether posted or received, under master netting arrangements executed with the same counterparty. CAF reports separately the cumulative gross amounts for the receivable from and payable to for derivative financial instruments.
F-41
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
CAF also utilizes futures derivatives instruments to reduce exposure to price risk. These are contracts for delayed delivery of securities or money market instruments in which the seller agrees to make delivery at a specified future date of a specified instrument at a specified price or yield. Initial margin requirements are met with cash or securities. CAF generally closes out open positions prior to maturity. Therefore, cash receipts or payments are limited to the change in fair value of the future contracts. Additionally, CAF utilizes forward contracts to reduce exposure to foreign currency risk.
The balance sheet details related to CAF’s derivative financial instruments are as follows:
Derivative assets | Derivative liabilities | |||||||||||||||||||||||
December 31, 2021 | December 31, 2020 | December 31, 2019 | December 31, 2021 | December 31, 2020 | December 31, 2019 | |||||||||||||||||||
Cross-currency swap | 350,991 | 1,483,935 | 297,080 | 779,146 | 251,676 | 625,962 | ||||||||||||||||||
Interest rate swap | 153,236 | 282,821 | 127,020 | 62,865 | 151,507 | 15,642 | ||||||||||||||||||
U.S Treasury futures | 1,763 | 134 | 2,156 | 628 | 1,364 | 84 | ||||||||||||||||||
Cross-currency forward contracts | 6,393 | 42 | 4 | 319 | 295 | 1,037 | ||||||||||||||||||
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512,383 | 1,766,932 | 426,260 | 842,958 | 404,842 | 642,725 | |||||||||||||||||||
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The following table presents the notional amount and fair values of interest rate swaps and cross-currency swaps and the underlying hedged items:
Notional amount | Fair value | |||||||||||||||
Interest rate swap | Cross- currency swap | Derivative assets | Derivative liabilities | |||||||||||||
As of December 31, 2021: | ||||||||||||||||
Loans | 2,296,334 | — | 38,643 | 18,377 | ||||||||||||
Loans | — | 112,936 | 2,083 | 1,692 | ||||||||||||
Deposits | — | 110,000 | 1,498 | 5,639 | ||||||||||||
Borrowings from other financial institutions | — | 590,809 | — | 26,298 | ||||||||||||
Borrowings from other financial institutions | 177,547 | — | 5,191 | — | ||||||||||||
Bonds | — | 16,143,345 | 347,410 | 745,517 | ||||||||||||
Bonds | 8,250,000 | — | 109,402 | 44,488 | ||||||||||||
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10,723,881 | 16,957,090 | 504,227 | 842,011 | |||||||||||||
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Notional amount | Fair value | |||||||||||||||
Interest rate swap | Cross- currency swap | Derivative assets | Derivative Liabilities | |||||||||||||
As of December 31, 2020: | ||||||||||||||||
Loans | 1,875,442 | — | — | 150,365 | ||||||||||||
Loans | — | (54,327 | ) | 1,447 | 574 | |||||||||||
Deposits | — | 24,758 | — | 702 | ||||||||||||
Borrowings from other financial institutions | — | 482,794 | 28,036 | — | ||||||||||||
Borrowings from other financial institutions | 240,544 | — | 14,659 | — | ||||||||||||
Bonds | — | 15,146,956 | 1,454,452 | 250,400 | ||||||||||||
Bonds | 8,100,370 | — | 268,162 | 1,142 | ||||||||||||
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10,216,356 | 15,600,181 | 1,766,756 | 403,183 | |||||||||||||
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F-42
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
Notional amount | Fair value | |||||||||||||||
Interest rate swap | Cross- currency swap | Derivative assets | Derivative Liabilities | |||||||||||||
As of December 31, 2019: | ||||||||||||||||
Loans | 134,189 | — | 589 | 5,317 | ||||||||||||
Loans | — | 863 | 94 | — | ||||||||||||
Deposits | — | 59,000 | 1,041 | 19 | ||||||||||||
Borrowings from other financial institutions | — | 94,083 | — | 1,580 | ||||||||||||
Borrowings from other financial institutions | 303,542 | — | 7,339 | 530 | ||||||||||||
Bonds | — | 14,809,015 | 295,945 | 624,363 | ||||||||||||
Bonds | 8,405,370 | — | 119,092 | 9,795 | ||||||||||||
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8,843,101 | 14,962,961 | 424,100 | 641,604 | |||||||||||||
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The following table presents the notional amount and fair values of U.S. treasury futures andcross-currency forward contracts:
As of December 31, 2021 | ||||||||||||||
Fair value | ||||||||||||||
Start date | Termination date | Contract Currency | Notional amount | Derivative assets | ||||||||||
Forward contracts | Various | Until January 2022 | Various | 292,582 | 6,393 | |||||||||
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Futures short | Various | Until March 2022 | Various | 1,301,223 | 1,763 | |||||||||
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Fair value | ||||||||||||||
Start date | Termination date | Contract Currency | Notional amount | Derivative liabilities | ||||||||||
Futures long | Various | Until March 2022 | Various | 144,264 | (226 | ) | ||||||||
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Futures short | Various | Until March 2022 | USD | 47,000 | (402 | ) | ||||||||
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Futures contracts | Various | Until March 2022 | Various | 33,684 | (319 | ) | ||||||||
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As of December 31, 2020 | ||||||||||||||
Fair value | ||||||||||||||
Start date | Termination date | Contract Currency | Notional amount | Derivative assets | ||||||||||
Forward contracts | Various | Until January 2021 | Various | 12,408 | 42 | |||||||||
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Futures long | Various | Until March 2021 | USD | 148,600 | 133 | |||||||||
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Futures short | 12/2/2020 | Until March 2021 | EUR | 1,967 | 1 | |||||||||
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F-43
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
As of December 31, 2020 | ||||||||||||||
Fair value | ||||||||||||||
Start date | Termination date | Contract Currency | Notional amount | Derivative liabilities | ||||||||||
Forward contracts | Various | Various | Various | 31,940 | (295 | ) | ||||||||
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Futures long | 11/23/2020 | Until March 2021 | USD | 800 | (1 | ) | ||||||||
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Futures short | Various | Until March 2021 | Various | 1,372,396 | (1,363 | ) | ||||||||
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As of December 31, 2019 | ||||||||||||||
Fair value | ||||||||||||||
Start date | Termination date | Contract Currency | Notional amount | Derivative assets | ||||||||||
Forward contracts | Various | Until March 2020 | Various | 8,576 | 4 | |||||||||
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Futures short | Various | Until March 2020 | USD | 1,428,200 | 2,156 | |||||||||
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Fair value | ||||||||||||||
Start date | Termination date | Contract Currency | Notional amount | Derivative liabilities | ||||||||||
Forward contracts | Various | Until March 2020 | USD | 81,269 | (1,037 | ) | ||||||||
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Futures long | Various | Until March 2020 | EUR | 152,600 | (84 | ) | ||||||||
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The amounts of collateral posted related to U.S. treasury futures as of December 31, 2021, 2020 and 2019, was US$ 8,977, US$ 5,947 and US$ 7,072, respectively. As of December 31, 2021, 2020 and 2019, the amount of collateral received related to U.S. treasury futures was US$ 17, US$ 0 and US$ 16, respectively.
CAF enters into International Swaps and Derivatives Association, Inc. (ISDA) master netting arrangements with substantially all of its derivative counterparties. These legally enforceable master netting arrangements give CAF the right to take cash or liquidate securities held as collateral and to offset receivables and payables with the same counterparty, in the event of default by the counterparty. The following tables present information about the effect of offsetting of derivative financial instruments, although CAF has elected not to offset any derivative financial instruments by counterparty in the balance sheet:
As of December 31, 2021 | ||||||||||||||||
Derivative assets | Gross amounts not offset in the balance sheet | |||||||||||||||
Description | Gross amounts of recognized assets | Financial instruments | Cash and securities collateral received | Net amount | ||||||||||||
Swaps | 504,227 | (329,443 | ) | (148,756 | ) | 26,028 | ||||||||||
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Derivative liabilities | Gross amounts not offset in the balance sheet | |||||||||||||||
Description | Gross amounts of recognized liabilities | Financial instruments | Cash and securities collateral pledged | Net amount | ||||||||||||
Swaps | (842,011 | ) | 329,443 | 636,655 | 124,087 | |||||||||||
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F-44
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
As of December 31, 2020 | ||||||||||||||||
Derivative assets | Gross amounts not offset in the balance sheet | |||||||||||||||
Description | Gross amounts of recognized assets | Financial instruments | Cash and securities collateral received | Net amount | ||||||||||||
Swaps | 1,766,756 | (331,499 | ) | (1,443,467 | ) | (8,210 | ) | |||||||||
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Derivative liabilities | Gross amounts not offset in the balance sheet | |||||||||||||||
Description | Gross amounts of recognized liabilities | Financial instruments | Cash and securities collateral pledged | Net amount | ||||||||||||
Swaps | (403,183 | ) | 331,499 | 1,489,086 | 1,417,402 | |||||||||||
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As of December 31, 2019 | ||||||||||||||||
Derivative assets | Gross amounts not offset in the balance sheet | |||||||||||||||
Description | Gross amounts of recognized assets | Financial instruments | Cash and securities collateral received | Net amount | ||||||||||||
Swaps | 424,100 | (272,815 | ) | (143,240 | ) | 8,045 | ||||||||||
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Derivative liabilities | Gross amounts not offset in the balance sheet | |||||||||||||||
Description | Gross amounts of recognized liabilities | Financial instruments | Cash and securities collateral pledged | Net amount | ||||||||||||
Swaps | (641,604 | ) | 272,815 | 513,627 | 144,838 | |||||||||||
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19. | FAIR VALUE MEASUREMENTS |
The following section describes the valuation methodologies used by CAF to measure various financial instruments at fair value, including an indication of the level in the fair value hierarchy in which each financial instrument is classified. Where appropriate, the description includes details of the valuation methodologies and the key inputs to those methodologies.
When available, CAF generally uses quoted prices in active markets to determine fair value.
If quoted market prices in active markets are not available, fair value is based upon internally developed valuation methodologies that use, where possible, current market-based or independently sourced market inputs, such as interest rates, currency rates, etc.
Where available, CAF may also make use of quoted prices in active markets for recent trading activity in positions with the same or similar characteristics to the financial instrument being valued. The frequency and size of trading activity and the amount of the bid-ask spread are among the factors considered in determining the liquidity of markets and the relevance of observed quoted prices from those markets.
F-45
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
The following valuation methodologies are used to estimate the fair value and determine the classification in the fair value hierarchy of CAF’s financial instruments:
- | Marketable securities: CAF uses quoted prices in active markets to determine the fair value of trading securities. These securities are classified in Level 1 of the fair value hierarchy. |
- | Loans: The fair value of fixed rate loans, is determined using a discounted cash flow technique using the current variable interest rate for similar loans. These loans are classified in Level 2 of the fair value hierarchy. |
- | Derivative assets and liabilities: Derivative financial instruments transactions contracted and designated by CAF as hedges of risks related to interest rates, currency rates or both, for transactions recorded as financial assets or liabilities are also presented at fair value. In those cases the fair value is calculated using market prices provided by an independent financial information services company, which are determined using discounted cash flow valuation technique using observable inputs. Derivative assets and liabilities are classified in Level 2 of the fair value hierarchy. |
- | Bonds, borrowings from other financial institutions and deposits: For CAF’s bonds issued and medium and long term borrowings from other financial institutions and deposits, fair value is determined by using a discounted cash flow technique, taking into consideration benchmark interest yield curves at the end of the reporting period to discount the expected cash flows for the applicable maturity, thus reflecting market fluctuations of key variables such as interest and exchange rates. These yield curves are adjusted to incorporate CAF credit risk spread. Bonds, borrowings from other financial institutions and deposits are generally classified in Level 2 of the fair value hierarchy based on the observability of significant inputs to the discounted cash flow technique. |
Items Measured at Fair Value on a Recurring Basis
The following tables present for each of the fair value hierarchy levels CAF’s financial assets and liabilities that are measured at fair value on a recurring basis:
As of December 31, 2021 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Marketable Securities: | ||||||||||||||||
U.S. Treasury Notes | 2,219,711 | — | — | 2,219,711 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Non-U.S. governments and government entities bonds | 418,413 | 137,817 | — | 556,230 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Financial institutions and corporate securities: | ||||||||||||||||
Commercial paper | — | 3,861,129 | — | 3,861,129 | ||||||||||||
Certificate of deposits | 3,284,428 | — | — | 3,284,428 | ||||||||||||
Bonds | 1,941,602 | — | — | 1,941,602 | ||||||||||||
Collateralized mortgage obligation | 288,583 | 2,222 | — | 290,805 | ||||||||||||
Liquidity funds | 349,162 | — | — | 349,162 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
5,863,775 | 3,863,351 | — | 9,727,126 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Sub-total financial assets at fair value | 8,501,899 | 4,001,168 | — | 12,503,067 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Loans | — | 2,389,651 | — | 2,389,651 | ||||||||||||
|
|
|
|
|
|
|
|
F-46
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
As of December 31, 2021 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Derivative instruments: | ||||||||||||||||
Cross-currency swap | — | 350,991 | — | 350,991 | ||||||||||||
Interest rate swap | — | 153,236 | — | 153,236 | ||||||||||||
U.S Treasury futures | — | 1,763 | — | 1,763 | ||||||||||||
Cross-currency forward contracts | — | 6,393 | — | 6,393 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
— | 512,383 | — | 512,383 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total financial assets at fair value | 8,501,899 | 6,903,202 | — | 15,405,101 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities: | ||||||||||||||||
Deposits | — | 106,119 | — | 106,119 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Borrowings from other financial institutions | — | 740,028 | — | 740,028 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Bonds | — | 24,074,774 | — | 24,074,774 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Derivative instruments: | ||||||||||||||||
Cross-currency swap | — | 779,146 | — | 779,146 | ||||||||||||
Interest rate swap | — | 62,865 | — | 62,865 | ||||||||||||
U.S Treasury futures | — | 628 | — | 628 | ||||||||||||
Cross-currency forward contracts | — | 319 | — | 319 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
— | 842,958 | — | 842,958 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total financial liabilities at fair value | — | 25,763,879 | — | 25,763,879 | ||||||||||||
|
|
|
|
|
|
|
|
As of December 31, 2020 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Marketable Securities: | ||||||||||||||||
U.S. Treasury Notes | 2,038,158 | 110 | — | 2,038,268 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Non-U.S. governments and government entities bonds | 152,550 | 34,896 | — | 187,446 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Financial institutions and corporate securities: | ||||||||||||||||
Commercial paper | — | 2,895,110 | — | 2,895,110 | ||||||||||||
Certificate of deposits | 2,912,973 | — | — | 2,912,973 | ||||||||||||
Bonds | 2,242,321 | — | — | 2,242,321 | ||||||||||||
Collateralized mortgage obligation | 272,028 | 14,926 | — | 286,954 | ||||||||||||
Liquidity funds | 398,775 | — | — | 398,775 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
5,826,097 | 2,910,036 | — | 8,736,133 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Sub-total financial assets at fair value | 8,016,805 | 2,945,042 | — | 10,961,847 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Loans | — | 2,088,750 | — | 2,088,750 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Derivative instruments: | ||||||||||||||||
Cross-currency swap | — | 1,483,935 | — | 1,483,935 | ||||||||||||
Interest rate swap | — | 282,821 | — | 282,821 | ||||||||||||
U.S Treasury futures | — | 134 | — | 134 | ||||||||||||
Cross-currency forward contracts | — | 42 | — | 42 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
— | 1,766,932 | — | 1,766,932 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total financial assets at fair value | 8,016,805 | 6,800,724 | — | 14,817,529 | ||||||||||||
|
|
|
|
|
|
|
|
F-47
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
As of December 31, 2020 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Liabilities: | ||||||||||||||||
Deposits | — | 24,101 | — | 24,101 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Borrowings from other financial institutions | — | 792,217 | — | 792,217 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Bonds | — | 24,706,736 | — | 24,706,736 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Derivative instruments: | ||||||||||||||||
Cross-currency swap | — | 251,676 | — | 251,676 | ||||||||||||
Interest rate swap | — | 151,507 | — | 151,507 | ||||||||||||
U.S Treasury futures | — | 1,364 | — | 1,364 | ||||||||||||
Cross-currency forward contracts | — | 295 | — | 295 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
— | 404,842 | — | 404,842 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total financial liabilities at fair value | — | 25,927,896 | — | 25,927,896 | ||||||||||||
|
|
|
|
|
|
|
|
As of December 31, 2019 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Marketable Securities: | ||||||||||||||||
U.S. Treasury Notes | 2,010,025 | — | — | 2,010,025 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Non-U.S. governments and government entities bonds | 291,382 | 59,058 | — | 350,440 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Financial institutions and corporate securities: | ||||||||||||||||
Commercial paper | 2,227,971 | 872,144 | — | 3,100,115 | ||||||||||||
Certificate of deposits | 2,201,939 | — | — | 2,201,939 | ||||||||||||
Bonds | 2,045,486 | — | — | 2,045,486 | ||||||||||||
Collateralized mortgage obligation | 343,745 | — | — | 343,745 | ||||||||||||
Liquidity funds | 306,055 | — | — | 306,055 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
7,125,196 | 872,144 | — | 7,997,340 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Sub-total financial assets at fair value | 9,426,603 | 931,202 | (1) | — | 10,357,805 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Loans | — | 139,768 | — | 139,768 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Derivative instruments: | ||||||||||||||||
Cross-currency swap | — | 297,080 | — | 297,080 | ||||||||||||
Interest rate swap | — | 127,020 | — | 127,020 | ||||||||||||
U.S Treasury futures | — | 2,156 | — | 2,156 | ||||||||||||
Cross-currency forward contracts | — | 4 | — | 4 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
— | 426,260 | — | 426,260 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total financial assets at fair value | 9,426,603 | 1,497,230 | — | 10,923,833 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities: | ||||||||||||||||
Deposits | — | 60,594 | — | 60,594 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Borrowings from other financial institutions | — | 403,912 | — | 403,912 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Bonds | — | 22,998,554 | — | 22,998,554 | ||||||||||||
|
|
|
|
|
|
|
|
F-48
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
As of December 31, 2019 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Derivative instruments: | ||||||||||||||||
Cross-currency swap | — | 625,962 | — | 625,962 | ||||||||||||
Interest rate swap | — | 15,642 | — | 15,642 | ||||||||||||
U.S Treasury futures | — | 84 | — | 84 | ||||||||||||
Cross-currency forward contracts | — | 1,037 | — | 1,037 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
— | 642,725 | — | 642,725 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total financial liabilities at fair value | — | 24,105,785 | — | 24,105,785 | ||||||||||||
|
|
|
|
|
|
|
|
(1) | CAF reclassified the presentation in 2019 of the fair value of U.S. governments, non-U.S. governments and government entities bonds and commercial paper from levels 1 to level 2 based on the observability of inputs that are significant to the overall fair value measurement. |
Items that are not measured at fair value
The carrying amount and estimated fair values of CAF’s financial instruments that are not recognized in the balance sheets at fair value are as follows:
December 31, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||||||||||||||||||
Hierarchy Levels | Carrying amount | Estimated fair value | Carrying amount | Estimated fair value | Carrying amount | Estimated fair value | ||||||||||||||||||||||
Financial assets: | ||||||||||||||||||||||||||||
Cash and due from banks | 1 | 112,047 | 112,047 | 123,204 | 123,204 | 103,593 | 103,593 | |||||||||||||||||||||
Deposits with banks | 1 | 3,210,216 | 3,210,216 | 2,825,086 | 2,825,086 | 2,417,476 | 2,417,476 | |||||||||||||||||||||
Other investments | 1 | 292,392 | 292,392 | 811,205 | 811,205 | 996,917 | 996,917 | |||||||||||||||||||||
Loans, net | 2 | 26,976,260 | 26,949,431 | 25,800,091 | 25,770,013 | 26,178,502 | 26,201,605 | |||||||||||||||||||||
Accrued interest and commissions receivable | 2 | 357,836 | 357,836 | 386,625 | 386,625 | 531,793 | 531,793 | |||||||||||||||||||||
Derivate related collateral | 1 | 645,632 | 645,632 | 1,495,033 | 1,495,033 | 520,699 | 520,699 | |||||||||||||||||||||
Receivable from investment securities sold | 1 | 4,017 | 4,017 | 6,025 | 6,025 | 12,625 | 12,625 | |||||||||||||||||||||
Financial liabilities: | ||||||||||||||||||||||||||||
Deposits | 2 | 3,896,507 | 3,896,507 | 3,313,473 | 3,313,473 | 2,537,837 | 2,537,837 | |||||||||||||||||||||
Commercial paper | 2 | 2,813,646 | 2,813,646 | 1,598,696 | 1,598,696 | 908,133 | 908,133 | |||||||||||||||||||||
Borrowings from other financial institutions, net | 2 | 1,032,143 | 1,014,964 | 880,084 | 861,770 | 986,306 | 996,925 | |||||||||||||||||||||
Bonds, net | 2 | 185,763 | 176,035 | 175,683 | 168,566 | 162,808 | 174,925 | |||||||||||||||||||||
Accrued interest payable | 2 | 288,233 | 288,233 | 308,986 | 308,986 | 403,560 | 403,560 | |||||||||||||||||||||
Derivate related collateral | 1 | 148,773 | 148,773 | 1,443,467 | 1,443,467 | 143,256 | 143,256 | |||||||||||||||||||||
Payable for investment securities purchased | 1 | 17,437 | 17,437 | 14,960 | 14,960 | 18,244 | 18,244 |
F-49
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
The following methods and assumptions were used to estimate the fair value of those financial instruments not accounted for at fair value:
- | Cash and due from banks, deposits with banks, other investments, accrued interest and commissions receivable, deposits, commercial paper, accrued interest payable, derivate-related collateral, receivable from investment securities sold and payable for investment securities purchased: The carrying amounts approximate fair value because of the short maturity of these instruments. |
- | Loans: CAF is one of the few institutions that grant loans for development projects in the stockholder countries. A secondary market does not exist for the type of loans granted by CAF. As rates on variable rate loans are reset on a semiannual basis, the carrying value, adjusted for credit risk, was determined to be the best estimate of fair value. The fair value of fixed rate loans is determined by using the current variable interest rate for similar loans. The fair value of non-accrual status loans is estimated using the discounted cash flow technique. |
- | Equity investments: The direct investments in equity securities of companies without a readily determinable fair value are measured at cost, less impairment plus or minus observable price changes of an identical or similar instrument of the same issuer. As of December 2021, 2020 and 2019, the carrying amount of those investments amounted to US$ 113,036, US$ 114,152 and US$ 123,755, respectively. In addition, as of December 31, 2021, 2020 and 2019, investments in funds without a readily determinable fair value, with carrying amount of US$ 267,131, US$ 264,731 and US$ 312,746, respectively, and the net effects of impairment and the changes in observable prices for the years ended December 31, 2021, 2020 and 2019 amounted to US$ 26,631, US$ (24,699) and US$ 5,262, respectively, are accounted for at fair value applying the practical expedient, using the net asset value per share. These financial instruments are generally classified in level 3 of the fair value hierarchy based on the observability of significant inputs to the valuation methodology (these instruments are not disclosed in the table above). |
- | Bonds and borrowings from other financial institutions: For CAF’s bonds issued and medium and long term borrowings, fair value is determined using a discounted cash flow technique, taking into consideration yield curves to discount the expected cash flows for the applicable maturity, thus reflecting the fluctuation of variables such as interest and exchange rates. These yield curves are adjusted to incorporate CAF credit risk spread. Those financial instrument are generally classified in Level 2 of the fair value hierarchy based on the observability of significant inputs to the valuation methodology. |
F-50
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
20. | LOSSES ON CHANGES IN FAIR VALUE RELATED TO FINANCIAL INSTRUMENTS |
The losses on changes in fair value of marketable securities – trading, cross-currency swaps and financial liabilities carried at fair value under the fair value option are as follows:
Year ended December 31, 2021 | ||||||||||||
Gain (loss) on derivatives | Gain (loss) on hedged item | Net Gain (loss) | ||||||||||
Cross-currency swaps: | ||||||||||||
Bonds | (1,602,158 | ) | 1,575,875 | (26,283 | ) | |||||||
Deposits | (3,438 | ) | 3,224 | (214 | ) | |||||||
Loans | (482 | ) | (7,970 | ) | (8,452 | ) | ||||||
Borrowings from other financial institutions | (54,335 | ) | 87,737 | 33,402 | ||||||||
|
|
|
|
|
| |||||||
(1,660,413 | ) | 1,658,866 | (1,547 | ) | ||||||||
|
|
|
|
|
| |||||||
Year ended December 31, 2020 | ||||||||||||
Gain (loss) on derivatives | Gain (loss) on hedged item | Net Gain (loss) | ||||||||||
Cross-currency swaps: | ||||||||||||
Bonds | 1,532,469 | (1,517,516 | ) | 14,953 | ||||||||
Deposits | (1,724 | ) | 2,251 | 527 | ||||||||
Loans | 778 | 8,628 | 9,406 | |||||||||
Borrowings from other financial institutions | 29,617 | (54,743 | ) | (25,126 | ) | |||||||
|
|
|
|
|
| |||||||
1,561,140 | (1,561,380 | ) | (240 | ) | ||||||||
|
|
|
|
|
| |||||||
Year ended December 31, 2019 | ||||||||||||
Gain (loss) on derivatives | Gain (loss) on hedged item | Net Gain (loss) | ||||||||||
Cross-currency swaps: | ||||||||||||
Marketable securities - trading | 253,505 | (259,786 | ) | (6,281 | ) | |||||||
Bonds | 1,022 | (1,594 | ) | (572 | ) | |||||||
Loans | (525 | ) | 256 | (269 | ) | |||||||
Borrowings from other financial institutions | (1,669 | ) | 824 | (845 | ) | |||||||
|
|
|
|
|
| |||||||
252,333 | (260,300 | ) | (7,967 | ) | ||||||||
|
|
|
|
|
|
In addition, for the years ended December 31, 2021, 2020 and 2019, CAF recorded net losses of US$ 1,841 and US$ 1,849, and net gains US$ 2,694, respectively, related to changes in fair value of U.S. treasury futures and U.S. treasury forwards and changes in fair value of the U.S. Treasury Notes.
F-51
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
21. | COMMITMENTS AND CONTINGENCIES |
Commitments and contingencies include the following:
December 31, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||
Loan commitments subscribed – eligible | 6,477,638 | 6,324,230 | 5,606,684 | |||||||||
Lines of credit | 3,328,384 | 3,253,540 | 2,579,633 | |||||||||
Loan commitments subscribed – non eligible | 1,561,726 | 1,656,000 | 2,362,122 | |||||||||
Guarantees | 129,804 | 130,556 | 150,148 | |||||||||
Equity investments agreements subscribed | 79,769 | 85,399 | 110,215 |
These commitments and contingencies arose from the normal course of CAF’s business and are related principally to loans that have been approved or committed for disbursement.
In the ordinary course of business, CAF has entered into commitments to extend loans; such loan commitments are reported in the above table upon signing the corresponding loan agreement and are reported as loans in the balance sheets when disbursements are made. Loan commitments that have fulfilled the necessary requirements for disbursement are classified as eligible.
The commitments to extend loans have fixed expiration dates and in some cases expire without a loan being disbursed. Therefore, the amounts of total commitment to extend loans do not necessarily represent future cash requirements. Also, based on experience, portions of the loan commitments are disbursed on average two years after the signing of the loan agreement.
The lines of credit are extended to financial and corporate institutions as a facility to grant short term loans basically to finance working capital and international trade activities.
Guarantees mature as follows:
December 31, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||
Less than one year | 6,338 | 6,336 | 6,524 | |||||||||
Between one and five years | 62,649 | 62,649 | 34,649 | |||||||||
Over five years | 60,817 | 61,571 | 108,975 | |||||||||
|
|
|
|
|
| |||||||
129,804 | 130,556 | 150,148 | ||||||||||
|
|
|
|
|
|
To the best knowledge of CAF’s management, CAF is not involved in any litigation that is material to CAF’s business or that is likely to have any impact on its business, financial condition or results of operations.
F-52
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
22. | SPECIAL FUNDS AND OTHER FUNDS UNDER MANAGEMENT |
CAF, as a multilateral financial institution, acts as administrator of several funds owned by third parties and CAF’s stockholders’ special funds, created to promote technical and financial cooperation, sustainable human development, and management of poverty relief funds in stockholder countries.
The stockholders’ special funds contribute to regional integration and sustainable development through capacity building, increased domestic and international exchanges, generation and use of knowledge, as well as training human resources and fortifying institutions. The stockholders’ special funds are governed by the provisions of the Constitutive Agreement and any other provisions that may be established by the Board of Directors.
The Stockholders’ Assembly of CAF approves a maximum amount to be contributed to stockholders’ special funds during the fiscal year and to recognize these contributions as expenses. The Executive President by delegation of the Stockholders’ Assembly of CAF may authorize, up to the maximum approved amount, the amounts that will be contributed during the current period, based on the analysis of the new commitments contracted or the resources required by the stockholders’ special funds.
The resources of the stockholders’ special funds, that come from a contribution by CAF, are completely independent from the resources of CAF and are thus so maintained, accounted for, presented, utilized, invested, committed and otherwise disposed of. With regard to the use of the stockholders’ special funds, the financial responsibility of CAF, as administrator, is limited to the net assets of each of the constituted stockholders’ special funds. CAF has no residual interest in the net assets of the stockholders’ special funds.
In March 2021, the Stockholders’ Assembly of CAF approved the contribution up to a maximum amount of US$ 30,000 to Technical Cooperation Fund (FCT) for 2021. Subsequently, for the year endedDecember 31, 2021, based on the analysis of the new commitments contracted or the resources required by the stockholders’ special funds, CAF recognized US$ 30,000 as an expense and, as of December 31, 2021 recognized an unconditional obligation (accounts payable) for US$ 12,467 which was paid in January 2022.
In March 2020, the Stockholders’ Assembly of CAF approved the contribution up to a maximum amount of US$ 135,000 to some stockholders’ special funds for 2020. Subsequently, for the year endedDecember 31, 2020, the Executive President directly or by delegation, based on the analysis of the new commitments contracted or the resources required by the stockholders’ special funds, authorized the contributions of US$ 100,000 and US$ 35,000 to Compensatory Financial Fund (FFC) and FCT, respectively. For the year ended December 31, 2020, CAF recognized US$ 72,015 as an expense and, as of December 31, 2020 recognized an unconditional obligation (accounts payable) for US$ 55,090 which was paid in January 2021.
In March 2019, the Stockholders’ Assembly of CAF approved the contribution up to a maximum amount of US$ 130,000 to some stockholders’ special funds for 2019. Subsequently, during the year ended December 31, 2019, the Executive President directly or by delegation, based on the analysis of the new commitments contracted or the resources required by the stockholders’ special funds, authorized the contributions of US$ 100,000 and US$ 29,226 to FFC and FCT, respectively. For the year ended December 31, 2019, CAF recognized US$ 129,226 as an expense and, as of December 31, 2019 recognized an unconditional obligation (accounts payable) for US$ 53,577 which was paid in January 2020.
F-53
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
As of December 31, 2021, 2020 and 2019, managed funds assets are US$ 442,315, US$ 494,932 and US$ 483,271, respectively. The balances of these funds are as follows:
December 31, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||
FFC(1) | 192,250 | 259,723 | 284,198 | |||||||||
FCT | 93,862 | 75,325 | 69,148 | |||||||||
Fund for the Development of Small and Medium Enterprises | 63,130 | 60,357 | 64,495 | |||||||||
Human Development Fund | 4,439 | 5,369 | 7,827 | |||||||||
Others non related with stockholders’ special funds | 88,634 | 94,158 | 57,603 | |||||||||
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| |||||||
442,315 | 494,932 | 483,271 | ||||||||||
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|
(1) | FFC was created by CAF’s stockholders for the purpose of compensating a portion of the interest costs of certain loans granted by CAF to finance economic and social infrastructure projects. For the years ended December 31, 2021, 2020 and 2019, FFC compensated interest amounting to US$ 67,077, US$ 88,526 and US$ 78,155, respectively, which amounts are included in interest income – loans in the statements of comprehensive income. |
23. | SEGMENT REPORTING |
Management has determined that CAF has only one operating and reportable segment since it does not manage its operations by allocating resources based on a determination of the contributions to net income of individual operations. CAF does not differentiate on the basis of the nature of the products or services provided the preparation process, or the method for providing services among individual countries.
For years ended December 31, 2021, 2020 and 2019, loans made to or guaranteed by five countries individually generated in excess, of 10% of interest income on loans, as follows:
2021 | 2020 | 2019 | ||||||||||
Ecuador | 86,239 | 120,745 | 168,032 | |||||||||
Argentina | 85,082 | 121,464 | 175,759 | |||||||||
Colombia | 84,085 | 102,175 | 121,240 | |||||||||
Venezuela | 68,295 | 110,432 | 165,565 | |||||||||
Bolivia | 64,578 | 90,369 | 124,678 | |||||||||
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| |||||||
388,279 | 545,185 | 755,274 | ||||||||||
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F-54
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
24. | SUBSEQUENT EVENTS |
Management has evaluated subsequent events through February 14, 2022, the date these financial statements were available to be issued. As a result of this evaluation, management has determined that there are no subsequent events that require a disclosure in these financial statements except for:
- | During January 2022, CAF repurchased a total of 2,069 shares from Venezuela, totaling US$ 29.4 million. |
- | On January 19, 2022, CAF priced CHF 350 million, 0.45% green bonds due 2027, under its EMTN program. The transaction is expected to settle on February 24, 2022. |
- | On February 04, 2022, CAF issued bonds for UIU 2.0 million, equivalent to US$ 231 thousand, 3.61% due 2039, under its Uruguay Local Debt Programme. |
- | On February 8, 2022, CAF issued bonds for US$ 650 million, 2.25% due 2027, under its US SHELF. |
- | On February 09, 2022, CAF issued bonds for JPY 7.200 million, equivalent to US$ 62.9 million, 0.60% due 2032, under its Japan Shelf. |
F-55
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Unaudited Condensed Interim Balance Sheets
As of June 30, 2022 and December 31, 2021
(In thousands of U.S. dollars)
NOTES | June 30, 2022 | December 31, 2021 | ||||||||||
ASSETS | ||||||||||||
Cash and due from banks | 547,691 | 112,047 | ||||||||||
Deposits with banks | 4,049,214 | 3,210,216 | ||||||||||
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| |||||||||
Cash and due from banks and deposits with banks | 4,596,905 | 3,322,263 | ||||||||||
|
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| |||||||||
Marketable securities: | ||||||||||||
Trading | 3 and 14 | 9,922,754 | 12,503,067 | |||||||||
Other investments | 110,940 | 292,392 | ||||||||||
Loans (US$ 2,221,883 and US$ 2,389,651 at fair value as of June 30, 2022 and December 31, 2021, respectively) | 4 and 14 | 28,364,544 | 29,595,386 | |||||||||
Less loan commissions, net of origination costs | 156,344 | 153,955 | ||||||||||
Less allowance for loan losses | 4 | 68,556 | 76,650 | |||||||||
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|
| |||||||||
Loans, net | 28,139,644 | 29,364,781 | ||||||||||
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|
|
| |||||||||
Accrued interest and commissions receivable | 359,171 | 357,836 | ||||||||||
Equity investments | 410,335 | 433,350 | ||||||||||
Derivative financial instruments | 13 and 14 | 330,366 | 512,383 | |||||||||
Property and equipment, net | 103,008 | 105,987 | ||||||||||
Other assets | 5 | 2,696,089 | 700,291 | |||||||||
|
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|
| |||||||||
TOTAL | 46,669,212 | 47,592,350 | ||||||||||
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| |||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
LIABILITIES: | ||||||||||||
Deposits (US$ 54,090 and US$ 106,119 at fair value as of June 30, 2022 and December 31, 2021, respectively), net | 6 and 14 | 4,806,022 | 4,002,626 | |||||||||
Commercial paper | 7 | 3,906,528 | 2,813,646 | |||||||||
Borrowings from other financial institutions (US$ 645,354 and US$ 740,028 at fair value as of June 30, 2022 and December 31, 2021, respectively), net | 8 and 14 | 1,705,278 | 1,772,171 | |||||||||
Bonds (US$ 19,447,151 and US$ 24,074,774 at fair value as of June 30, 2022 and December 31, 2021, respectively), net | 9 and 14 | 19,641,323 | 24,260,537 | |||||||||
Accrued interest payable | 272,927 | 288,233 | ||||||||||
Derivative financial instruments | 13 and 14 | 2,852,050 | 842,958 | |||||||||
Accrued expenses and other liabilities | 10 | 170,646 | 312,540 | |||||||||
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| |||||||||
Total liabilities | 33,354,774 | 34,292,711 | ||||||||||
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| |||||||||
STOCKHOLDERS’ EQUITY: | ||||||||||||
Subscribed capital | 7,946,005 | 7,716,975 | ||||||||||
Less callable capital portion | 1,625,660 | 1,589,660 | ||||||||||
Less capital subscriptions receivable | 883,845 | 690,940 | ||||||||||
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| |||||||||
Paid-in capital | 5,436,500 | 5,436,375 | ||||||||||
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| |||||||||
Additional paid-in capital | 4,091,528 | 4,091,298 | ||||||||||
Reserves | 3,771,966 | 3,666,951 | ||||||||||
Retained earnings | 14,444 | 105,015 | ||||||||||
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| |||||||||
Total stockholders’ equity | 13,314,438 | 13,299,639 | ||||||||||
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| |||||||||
TOTAL | 46,669,212 | 47,592,350 | ||||||||||
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See accompanying notes to Unaudited Condensed Interim Financial Information
F-56
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Unaudited Condensed Interim Statements of Comprehensive Income
For the six-month periods ended June 30, 2022 and 2021
(In thousands of U.S. dollars)
NOTES | 2022 | 2021 | ||||||||
Interest income: | ||||||||||
Loans | 363,704 | 306,785 | ||||||||
Investments and deposits with banks | 3 | (30,748 | ) | 19,540 | ||||||
Loan commissions | 25,253 | 21,006 | ||||||||
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Total interest income | 358,209 | 347,331 | ||||||||
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Interest expense: | ||||||||||
Bonds | 202,860 | 167,952 | ||||||||
Borrowings from other financial institutions | 17,295 | 11,384 | ||||||||
Commercial paper | 8,855 | 2,866 | ||||||||
Deposits | 8,224 | 2,511 | ||||||||
Commissions | 5,004 | 6,970 | ||||||||
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| |||||||
Total interest expense | 242,238 | 191,683 | ||||||||
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| |||||||
Net interest income | 115,971 | 155,648 | ||||||||
Credit for loan losses | 4 | (3,713 | ) | (7,472 | ) | |||||
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| |||||||
Net interest income, after credit for loan losses | 119,684 | 163,120 | ||||||||
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Non-interest income: | ||||||||||
Other commissions | 1,794 | 1,431 | ||||||||
Dividends and equity in earnings of investees | 10,372 | 2,659 | ||||||||
Other income | 2,409 | 18,373 | ||||||||
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| |||||||
Total non-interest income | 14,575 | 22,463 | ||||||||
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Non-interest expenses: | ||||||||||
Administrative expenses | 84,549 | 77,512 | ||||||||
Other expenses | 4 | 14,551 | 9,106 | |||||||
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| |||||||
Total non-interest expenses | 99,100 | 86,618 | ||||||||
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| |||||||
Income before unrealized changes in fair value related to other financial instruments and contributions to Stockholders’ Special Funds | 35,159 | 98,965 | ||||||||
Unrealized changes in fair value related to other financial instruments | 15 | 1,828 | 5,664 | |||||||
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| |||||||
Income before contributions to Stockholders’ Special Funds, net | 36,987 | 104,629 | ||||||||
Contributions to Stockholders’ Special Funds | 11 | 22,543 | 10,404 | |||||||
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Net income and total comprehensive income | 14,444 | 94,225 | ||||||||
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See accompanying notes to Unaudited Condensed Interim Financial Information
F-57
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Unaudited Condensed Interim Statements of Stockholders’ Equity
For the six-month periods ended June 30, 2022 and 2021
(In thousands of U.S. dollars)
Reserves | ||||||||||||||||||||||||||||||
NOTE | Paid-in capital | Additional paid-in capital | General reserve | Article N° 42 of the Constitutive Agreement | Total reserves | Retained earnings | Total stockholders’ equity | |||||||||||||||||||||||
BALANCES AS OF DECEMBER 31, 2020 | 5,366,050 | 3,961,900 | 2,878,929 | 548,200 | 3,427,129 | 239,822 | 12,994,901 | |||||||||||||||||||||||
Capital increase | 32,980 | 60,684 | — | — | — | — | 93,664 | |||||||||||||||||||||||
Capital decrease due to shares’ repurchase | 4 | (71,240 | ) | (131,082 | ) | — | — | — | — | (202,322 | ) | |||||||||||||||||||
Net income and total comprehensive income | — | — | — | — | — | 94,225 | 94,225 | |||||||||||||||||||||||
Appropriated for general reserve | — | — | 215,839 | — | 215,839 | (215,839 | ) | — | ||||||||||||||||||||||
Appropriated for reserve pursuant to | ||||||||||||||||||||||||||||||
Article N° 42 of the Constitutive Agreement | — | — | — | 23,983 | 23,983 | (23,983 | ) | — | ||||||||||||||||||||||
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BALANCES AS OF JUNE 30, 2021 | 5,327,790 | 3,891,502 | 3,094,768 | 572,183 | 3,666,951 | 94,225 | 12,980,468 | |||||||||||||||||||||||
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BALANCES AS OF DECEMBER 31, 2021 | 5,436,375 | 4,091,298 | 3,094,768 | 572,183 | 3,666,951 | 105,015 | 13,299,639 | |||||||||||||||||||||||
Capital increase | 78,285 | 144,044 | — | — | — | — | 222,329 | |||||||||||||||||||||||
Capital decrease due to shares’ repurchase | 4 | (78,160 | ) | (143,814 | ) | — | — | — | — | (221,974 | ) | |||||||||||||||||||
Net income and total comprehensive income | — | — | — | — | — | 14,444 | 14,444 | |||||||||||||||||||||||
Appropriated for general reserve | — | — | 94,505 | — | 94,505 | (94,505 | ) | — | ||||||||||||||||||||||
Appropriated for reserve pursuant to | ||||||||||||||||||||||||||||||
Article N° 42 of the Constitutive Agreement | — | — | — | 10,510 | 10,510 | (10,510 | ) | — | ||||||||||||||||||||||
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BALANCES AS OF JUNE 30, 2022 | 5,436,500 | 4,091,528 | 3,189,273 | 582,693 | 3,771,966 | 14,444 | 13,314,438 | |||||||||||||||||||||||
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See accompanying notes to Unaudited Condensed Interim Financial Information
F-58
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Unaudited Condensed Interim Statements of Cash Flows
For the six-month periods ended June 30, 2022 and 2021
(In thousands of U.S. dollars)
NOTES | 2022 | 2021 | ||||||||
OPERATING ACTIVITIES: | ||||||||||
Net income and total comprehensive income | 14,444 | 94,225 | ||||||||
Adjustments to reconcile net income to net cash provide by (used in) operating activities: | ||||||||||
Unrealized loss (gain) on trading securities | 64,703 | (19,480 | ) | |||||||
Loan commissions, net of amortization of origination costs | (10,209 | ) | (8,677 | ) | ||||||
Credit for loan losses | 4 | (3,713 | ) | (7,472 | ) | |||||
Impairment charge for equity investments | 836 | 89 | ||||||||
Unrealized changes in fair value related to equity investment | 7,444 | (17,022 | ) | |||||||
Equity in earnings of investees | (6,892 | ) | (442 | ) | ||||||
Amortization of deferred charges | 2,494 | 2,487 | ||||||||
Depreciation of property and equipment | 4,461 | 4,388 | ||||||||
Provision for employees’ severance benefits | 7,219 | 6,620 | ||||||||
Provision for employees’ savings plan | 377 | 416 | ||||||||
Unrealized changes in fair value related to other financial instruments | 15 | (1,828 | ) | (5,664 | ) | |||||
Net changes in operating assets and liabilities: | ||||||||||
Trading securities, net | 2,508,442 | (3,159,217 | ) | |||||||
Accrued interest and commissions receivable | (1,335 | ) | 75,200 | |||||||
Other assets | (5,747 | ) | (6,739 | ) | ||||||
Accrued interest payable | (15,306 | ) | (61,670 | ) | ||||||
Severance benefits paid or advanced | (7,068 | ) | (5,414 | ) | ||||||
Employees’ savings plan paid or advanced | (1,681 | ) | (272 | ) | ||||||
Accrued expenses and other liabilities | (5,612 | ) | (56,081 | ) | ||||||
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| |||||||
Total adjustments and net changes in operating assets and liabilities | 2,536,585 | (3,258,950 | ) | |||||||
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| |||||||
Net cash provided by (used in) operating activities | 2,551,029 | (3,164,725 | ) | |||||||
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INVESTING ACTIVITIES: | ||||||||||
Purchases of other investments | (290,504 | ) | (1,579,578 | ) | ||||||
Maturities of other investments | 471,956 | 1,165,334 | ||||||||
Loan origination and principal collections, net | 4 | 786,828 | 1,118,514 | |||||||
Equity investments, net | 21,627 | 5,753 | ||||||||
Property and equipment, net | (1,482 | ) | (478 | ) | ||||||
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|
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| |||||||
Net cash provided by investing activities | 988,425 | 709,545 | ||||||||
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| |||||||
FINANCING ACTIVITIES: | ||||||||||
Net increase in deposits | 6 | 795,426 | 20,024 | |||||||
Proceeds from commercial paper | 7 | 19,507,173 | 14,176,577 | |||||||
Repayment of commercial paper | 7 | (18,414,291 | ) | (13,803,354 | ) | |||||
Net decrease in derivative-related collateral | (2,123,335 | ) | (46,285 | ) | ||||||
Proceeds from issuance of bonds | 9 | 1,597,413 | 3,286,663 | |||||||
Repayment of bonds | 9 | (3,838,507 | ) | (1,616,944 | ) | |||||
Proceeds from borrowings from other financial institutions | 8 | 83,630 | 182,853 | |||||||
Repayment of borrowings from other financial institutions | 8 | (94,650 | ) | (87,853 | ) | |||||
Proceeds from issuance of shares | 222,329 | 93,664 | ||||||||
|
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| |||||||
Net cash (used in) provided by financing activities | (2,264,812 | ) | 2,205,345 | |||||||
|
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| |||||||
NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKS AND DEPOSITS WITH BANKS | 1,274,642 | (249,835 | ) | |||||||
CASH AND DUE FROM BANKS AND DEPOSITS WITH BANKS AT BEGINNING OF THE PERIOD | 3,322,263 | 2,948,290 | ||||||||
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| |||||||
CASH AND DUE FROM BANKS AND DEPOSITS WITH BANKS AT END OF THE PERIOD | 4,596,905 | 2,698,455 | ||||||||
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SUPPLEMENTAL DISCLOSURE: | ||||||||||
Interest paid during the period | 261,387 | 243,555 | ||||||||
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| |||||||
NONCASH FINANCING ACTIVITIES: | ||||||||||
Principal collections - Loans | 4 | 221,974 | 202,322 | |||||||
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| |||||||
Capital decrease | 4 | (221,974 | ) | (202,322 | ) | |||||
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| |||||||
Change in derivative instruments assets | 182,017 | 787,399 | ||||||||
|
|
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| |||||||
Change in derivative instruments liabilities | 2,009,092 | 79,077 | ||||||||
|
|
|
|
See accompanying notes to Unaudited Condensed Interim Financial Information
F-59
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of June 30, 2022, and December 31, 2021
and for the six-month periods ended June 30, 2022, and 2021
(In thousands of U.S. dollars)
1. | ORIGIN |
Business description – Corporación Andina de Fomento (CAF) began its operations on June 8, 1970; and was established under public international law which abides by the provisions set forth in its Constitutive Agreement. Series “A” and “B” stockholder countries are: Argentina, Bolivia, Brazil, Colombia, Ecuador, El Salvador, Panama, Paraguay, Peru, Trinidad and Tobago, Uruguay, and Venezuela. Series “C” stockholder countries are: Barbados, Chile, Costa Rica, Dominican Republic, Jamaica, Mexico, Portugal, and Spain. In addition, there are 13 banks which are Series “B” stockholders.
CAF is headquartered in Caracas, Venezuela and has offices in Asuncion, Paraguay; Bogota, Colombia; Brasilia, Brazil; Buenos Aires, Argentina; Mexico City, Mexico; Panama City, Panama; La Paz, Bolivia; Lima, Peru; Madrid, Spain; Montevideo, Uruguay; Port of Spain, Trinidad and Tobago and Quito, Ecuador.
CAF promotes a sustainable development model through credit, non-refundable resources, and support in the technical and financial structuring of projects in the public and private sectors of Latin America.
CAF offers financial and related services to the governments of its stockholder countries, as well as their public and private institutions, corporations, and joint ventures. CAF’s principal activity is to provide short, medium, and long-term loans to finance projects, working capital, trade activities and to undertake feasibility studies for investment opportunities in stockholder countries. Furthermore, CAF manages and supervises third-party cooperation funds owned and sponsored by other countries and organizations, destined to finance programs agreed upon with donor countries and organizations which are in line with CAF’s policies and strategies.
CAF raises funds to finance its operations from sources both within and outside its stockholder countries.
COVID-19
In March 2020, the World Health Organization declared the novel coronavirus (COVID-19) a global pandemic, which has generated high volatility in global capital markets with an impact on equity investments and the mark-to-market value of marketable securities.
To date, CAF has maintained the continuity of its operations, and the demand for loans from our stockholder countries has increased; notwithstanding, decreases or increases have been observed in external risk ratings for most of our borrowers. COVID-19 has had not material effects on the financial position of CAF as of June 30, 2022 and on the results of operations and cash flows for the six-month period then ended.
2. | BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES |
Financial statement presentation – The condensed interim financial information as of June 30, 2022, and December 31, 2021, and for the six-month periods ended June 30, 2022 and 2021 is unaudited and has been prepared, in accordance with accounting principles generally accepted in the United States of America. In the opinion of management, such condensed interim financial information includes all adjustments, consisting of normal recurring adjustments, necessary for the fair presentation of the results of the interim periods. The results of operations for the six-month period ended June 30, 2022 are not necessarily an indication of the results to be expected for the full year 2022.
F-60
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of June 30, 2022, and December 31, 2021
and for the six-month periods ended June 30, 2022, and 2021
(In thousands of U.S. dollars)
This condensed interim financial information should be read in conjunction with CAF’s audited financial statements as of and for the years ended December 31, 2021, 2020 and 2019 and the notes thereto (“audited financial statements”).
For a detailed discussion about CAF´s significant accounting policies, refer to Note 2 of the audited financial statements.
Recent accounting pronouncements applicable
ASU 2020-04, Reference Rate Reform
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). The ASU provides optional expedients and exceptions, for contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments in this ASU do not apply to contract modifications made or other transactions entered after December 31, 2022. In January 2021, the FASB issued amendments in ASU 2021-01 to the expedients and exceptions in Topic 848 to capture the incremental consequences of the scope clarification and tailor the existing guidance to derivative instruments affected by the discounting transition. CAF is currently assessing the impact of both ASUs and plans to adopt the available expedients and exceptions allowed through December 31, 2022.
Libor Replacement
The replacement of the LIBOR rates with a new reference rate or rates is an industry risk due the implications it has on the assets as well as the liabilities of financial institutions. In that regard, CAF has been closely following the recent developments and announcements from groups and organizations that are most closely involved with the phasing out of the LIBOR rate that affect the loan and derivatives markets, including the International Swaps and Derivatives Association (ISDA) and its recent publication of the ISDA 2020 IBOR Fallbacks Protocol, to which CAF has adhered in January 2021. In addition, CAF has established an interdepartmental task force in charge of preparing the institution for the change in reference rates, including measures such as the incorporation of fallback provisions on loans to mitigate any possible impact LIBOR may have. This task force in coordination with management recommended and approved that starting January 1, 2022, all loans originated will be made in the reference rate Term SOFR. New financial liabilities will also be hedged to SOFR. Legacy loans that are referenced to LIBOR rate will be converted after June 2023 when LIBOR rate ceases to be representative. It is for this reason that we expected the LIBOR transition to occur smoothly.
If SOFR or another rate does not achieve wide acceptance as the alternative to LIBOR, there likely will be disruption in financial markets. In the event that SOFR or another reference rate is widely accepted, risks will remain related to outstanding loans, borrowings, derivatives and other instruments using LIBOR related to transitioning those instruments to a new reference rate and the corresponding value transfer that may occur in connection with that transition, as the new reference rate will not exactly mimic LIBOR.
F-61
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of June 30, 2022, and December 31, 2021
and for the six-month periods ended June 30, 2022, and 2021
(In thousands of U.S. dollars)
3. | MARKETABLE SECURITIES |
Trading
A summary of trading securities follows:
June 30, 2022 | December 31, 2021 | |||||||||||||||
Amount | Average maturity (years) | Amount | Average maturity (years) | |||||||||||||
U.S. Treasury Notes | 2,073,517 | 1.65 | 2,219,711 | 1.60 | ||||||||||||
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Non-U.S. governments and government entities bonds | 203,274 | 1.75 | 556,230 | 0.80 | ||||||||||||
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Financial institutions and corporate securities: | ||||||||||||||||
Commercial paper | 2,258,932 | 0.25 | 3,861,129 | 0.14 | ||||||||||||
Certificates of deposits(1) | 3,374,981 | 0.37 | 3,284,428 | 0.24 | ||||||||||||
Bonds | 1,384,007 | 1.73 | 1,941,602 | 1.93 | ||||||||||||
Collateralized mortgage obligation | 261,826 | 5.83 | 290,805 | 5.95 | ||||||||||||
Liquidity funds(2) | 366,217 | 1.00 | 349,162 | 1.00 | ||||||||||||
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7,645,963 | 0.80 | 9,727,126 | 0.73 | |||||||||||||
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Trading | 9,922,754 | 1.00 | 12,503,067 | 0.89 | ||||||||||||
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(1) | Each certificate of deposit bears a maturity date and specified fixed interest rate. It also is held through The Depository Trust Company (DTC) and has a CUSIP number, which is a code that identifies a financial security and facilitates trading. |
(2) | The liquidity funds are comprised of short-term (less than one year) securities representing high-quality liquid debt and monetary instruments. |
The fair value of trading securities includes net unrealized loss of US$ 80,303 and US$ 15,600, as of June 30, 2022 and December 31, 2021, respectively.
For the six-month period ended June 30, 2022 and 2021, Interest income – Investments and deposits with banks includes interest income for US$ 49,753 and US$ 34,466, respectively, and loss on the mark-to-market valuations for US$ 80,501 and US$ 14,926, respectively. The fluctuation in Interest income – Investments and deposits with banks is mainly due to the increase of the benchmark interest rates since the start of 2022 due to high inflation expectations and the increase of the short-term interest rates by the U.S. Federal Reserve which affected the mark-to-market valuations of CAF´s trading securities during the six-month period ended June 30, 2022, and during the same corresponding period in 2021, the fluctuation was related to reductions of benchmark interest rates and high volatility in global capital markets and asset valuation as a result of the COVID-19 pandemic.
CAF places its short-term investments mainly in high grade financial institutions and corporate securities. CAF has conservative investment guidelines that limit the amount of credit risk exposure, considering among other factors, limits as to credit ratings, limits as to duration exposure, specific allocations by type of investment instruments and limits across sector and currency allocation. As of June 30, 2022 and December 31, 2021, CAF does not have any significant concentrations of credit risk according to its
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CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of June 30, 2022, and December 31, 2021
and for the six-month periods ended June 30, 2022, and 2021
(In thousands of U.S. dollars)
investment guidelines. Non-US dollar-denominated securities included in marketable securities amounted to the equivalent of US$ 30,921 and US$ 307,437 as of June 30, 2022 and December 31, 2021, respectively.
Maturity of marketable securities are as follows:
June 30, 2022 | December 31, 2021 | |||||||
Remaining maturities: | ||||||||
Less than one year | 6,920,972 | 8,891,515 | ||||||
Between one and two years | 2,125,301 | 2,351,677 | ||||||
Between two and three years | 461,351 | 500,274 | ||||||
Between three and four years | 229,820 | 407,059 | ||||||
Between four and five years | 77,460 | 235,344 | ||||||
Over five years | 107,850 | 117,198 | ||||||
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9,922,754 | 12,503,067 | |||||||
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4. | LOANS |
Loans include short, medium, and long-term loans to finance projects, working capital and trade activities. The majority of the loans are to Series “A” and “B” stockholder countries, or to private institutions or companies domiciled in those countries. Loans by country are summarized as follows:
June 30, 2022 | December 31, 2021 | |||||||
Stockholder country: | ||||||||
Argentina | 3,717,856 | 3,842,317 | ||||||
Barbados | 167,891 | 172,683 | ||||||
Bolivia | 2,575,216 | 2,752,463 | ||||||
Brazil | 2,266,529 | 2,698,038 | ||||||
Chile | 43,364 | 304,187 | ||||||
Colombia | 3,494,787 | 3,403,385 | ||||||
Costa Rica | 540,541 | 547,145 | ||||||
Dominican Republic | 412,915 | 110,789 | ||||||
Ecuador | 4,200,229 | 4,201,415 | ||||||
Mexico | 620,000 | 825,000 | ||||||
Panama | 2,849,121 | 2,562,057 | ||||||
Paraguay | 1,655,640 | 1,511,665 | ||||||
Peru | 1,317,141 | 1,743,908 | ||||||
Trinidad & Tobago | 1,140,596 | 1,163,978 | ||||||
Uruguay | 925,698 | 903,243 | ||||||
Venezuela | 2,687,246 | 2,871,509 | ||||||
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Total | 28,614,770 | 29,613,782 | ||||||
Fair value adjustments | (250,226 | ) | (18,396 | ) | ||||
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Loans | 28,364,544 | 29,595,386 | ||||||
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CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of June 30, 2022, and December 31, 2021
and for the six-month periods ended June 30, 2022, and 2021
(In thousands of U.S. dollars)
Fair value adjustments of loans represent mainly adjustments to the amount of loans for which the fair value option is elected.
As of June 30, 2022 and December 31, 2021, loans denominated in currencies other than U.S. dollar were granted for an equivalent of US$ 279,643 and US$ 170,401, respectively, mainly in Colombian pesos, Brazilian reales, and Uruguayan pesos. All these loans are hedged with Borrowings from other financial institution and Bonds issued in the same currency. As of June 30, 2022 and December 31, 2021, fixed interest rate loans amounted to US$ 2,295,681 and US$ 2,321,999, respectively.
There has been an increase in demand for loans from our stockholder countries as a result of COVID-19 pandemic. In that regard, as of June 30, 2022 and December 31, 2021, CAF approved emergency credit lines aggregating up to US$ 9.1 billion, available to CAF stockholder countries, of which disbursement for US$ 4.2 billion have been made as of June 30, 2022 and US$ 3.8 billion as of December 31, 2021. The emergency credit lines are aimed at enhancing a prompt and appropriate response in stockholder countries and mitigating the adverse consequences from the pandemic.
Loans classified by sector borrowers and the weighted average yield of the loan portfolio is shown below:
June 30, 2022 | December 31, 2021 | |||||||||||||||
Amount | Weighted average yield (%) | Amount | Weighted average yield (%) | |||||||||||||
Public sector | 27,876,248 | 3.58 | 27,723,931 | 2.25 | ||||||||||||
Private sector | 738,522 | 4.97 | 1,889,851 | 1.98 | ||||||||||||
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28,614,770 | 3.62 | 29,613,782 | 2.23 | |||||||||||||
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Loans by industry segments are as follows:
June 30, 2022 | December 31, 2021 | |||||||||||||||
Amount | % | Amount | % | |||||||||||||
Social and other infrastructure programs | 13,479,903 | 47 | 12,496,820 | 42 | ||||||||||||
Transport, warehousing and communications | 8,314,725 | 29 | 8,326,436 | 28 | ||||||||||||
Electricity, gas and water supply | 5,756,962 | 20 | 6,025,830 | 20 | ||||||||||||
Financial services - Commercial banks | 682,045 | 2 | 1,230,670 | 4 | ||||||||||||
Financial services - Development banks | 233,877 | 1 | 1,367,969 | 5 | ||||||||||||
Agriculture, hunting and forestry | 53,956 | — | 62,104 | — | ||||||||||||
Manufacturing industry | 28,905 | — | 32,291 | — | ||||||||||||
Others | 64,397 | 1 | 71,662 | 1 | ||||||||||||
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28,614,770 | 100 | 29,613,782 | 100 | |||||||||||||
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CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of June 30, 2022, and December 31, 2021
and for the six-month periods ended June 30, 2022, and 2021
(In thousands of U.S. dollars)
Loans mature as follows:
June 30, 2022 | December 31, 2021 | |||||||
Remaining maturities: | ||||||||
Less than one year | 3,182,069 | 5,176,788 | ||||||
Between one and two years | 2,834,015 | 2,721,602 | ||||||
Between two and three years | 2,958,649 | 2,818,766 | ||||||
Between three and four years | 2,750,667 | 2,811,208 | ||||||
Between four and five years | 2,764,420 | 2,575,262 | ||||||
Over five years | 14,124,950 | 13,510,156 | ||||||
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28,614,770 | 29,613,782 | |||||||
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CAF maintains an internal risk rating system to evaluate the quality of the non-sovereign loans, which identifies, through a standardized rating and review parameters, those risks related to credit transactions in order to determine an internal risk rating classification designed by CAF. For purpose of determining the allowance for loan losses of sovereign loans as of June 30, 2022 and December 31, 2021 rating assigned by external agencies are used.
The credit quality of the sovereign loans of estimating the allowance for credit losses is based on the individual long-term foreign currency debt rating applicable to the borrower countries, which is determined using the average rating of three recognized international credit rating agencies. The credit quality by year of origination and taking the Moody’s rating as a reference as of June 30, 2022 is as follows:
Country | Credit Rating | Year of origination | ||||||||||||||||||||||||||||||
2022 | 2021 | 2020 | 2019 | 2018 | Prior | Total | ||||||||||||||||||||||||||
Argentina | Ca | 3,113 | 551,078 | 514,530 | 9,396 | 572,755 | 2,015,296 | 3,666,168 | ||||||||||||||||||||||||
Barbados | Caa1 | — | 12,000 | 100,000 | 195 | — | 55,696 | 167,891 | ||||||||||||||||||||||||
Bolivia | B2 | — | 350,000 | 23,810 | 218,352 | 74,270 | 1,890,784 | 2,557,216 | ||||||||||||||||||||||||
Brazil | Ba2 | — | — | 380,517 | 290,058 | 267,592 | 1,066,529 | 2,004,696 | ||||||||||||||||||||||||
Colombia | Baa2 | 300,000 | 500,000 | 350,000 | 500,151 | 300,000 | 922,799 | 2,872,950 | ||||||||||||||||||||||||
Costa Rica | B2 | — | — | 500,000 | — | 24,902 | 524,902 | |||||||||||||||||||||||||
Dominican Republic | Ba3 | 300,000 | 10,947 | — | — | 101,968 | 412,915 | |||||||||||||||||||||||||
Ecuador | Caa3 | 135,000 | 570,305 | 717,545 | 548,895 | 494,154 | 1,724,662 | 4,190,561 | ||||||||||||||||||||||||
Mexico | Baa1 | 300,000 | — | 300,000 | — | — | 600,000 | |||||||||||||||||||||||||
Panama | Baa2 | 320,000 | 354,000 | 387,500 | 343,686 | 4,017 | 1,024,351 | 2,433,554 | ||||||||||||||||||||||||
Paraguay | Ba1 | — | 250,000 | 383,645 | 111,966 | 631,679 | 259,473 | 1,636,763 | ||||||||||||||||||||||||
Peru | Baa1 | — | 372,718 | — | 250,000 | — | 543,323 | 1,166,041 | ||||||||||||||||||||||||
Trinidad & Tobago | Ba2 | — | 135,000 | 323,375 | 200,000 | 248,889 | 233,333 | 1,140,597 | ||||||||||||||||||||||||
Uruguay | Baa2 | — | 290,439 | 47,619 | 18,450 | 411,636 | 768,144 | |||||||||||||||||||||||||
Venezuela | C | — | — | — | 500,000 | — | 2,187,246 | 2,687,246 | ||||||||||||||||||||||||
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1,358,113 | 3,396,487 | 4,028,541 | 2,972,699 | 2,611,806 | 12,461,998 | 26,829,644 | ||||||||||||||||||||||||||
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Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of June 30, 2022, and December 31, 2021
and for the six-month periods ended June 30, 2022, and 2021
(In thousands of U.S. dollars)
The credit quality of the non-sovereign loan portfolio by year of origination, as represented by the internal credit risk classification as of June 30, 2022 is as follows:
Year of origination | ||||||||||||||||||||||||||||
Credit Rating | 2022 | 2021 | 2020 | 2019 | 2018 | Prior | Total | |||||||||||||||||||||
Satisfactory - outstanding | — | — | — | — | — | 195,000 | 195,000 | |||||||||||||||||||||
Satisfactory - very good | 402,307 | 30,000 | — | — | — | 40,524 | 472,831 | |||||||||||||||||||||
Satisfactory - adequate | 54,455 | 97,533 | 60,163 | 55,827 | 34,139 | 225,726 | 527,843 | |||||||||||||||||||||
Watch | 7,500 | 10,237 | 100,000 | 82,838 | 41,395 | 79,994 | 321,964 | |||||||||||||||||||||
Special mention | 30,000 | — | — | 11,748 | 61,019 | — | 102,767 | |||||||||||||||||||||
Doubtful | — | — | — | — | — | 84,590 | 84,590 | |||||||||||||||||||||
Sub-standard | — | — | — | — | 20,000 | 47,064 | 67,064 | |||||||||||||||||||||
Loss | — | — | — | — | — | 13,067 | 13,067 | |||||||||||||||||||||
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494,262 | 137,770 | 160,163 | 150,413 | 156,553 | 685,965 | 1,785,126 | ||||||||||||||||||||||
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The internal and external ratings have been updated as of June 30, 2022.
Loan portfolio quality
The loan portfolio quality indicators and the related amounts are presented below:
June 30, 2022 | June 30, 2021 | |||||||
During the period CAF recorded the following transactions: | ||||||||
Loans written-off | 5,000 | — | ||||||
Purchases of loan portfolio | — | — | ||||||
Sales of loan portfolio | 7,500 | — |
June 30, 2022 | December 31, 2021 | |||||||
CAF presented the following amounts and quality indicators as of the end of the period / year: | ||||||||
Non-accrual loans | 104,590 | 112,059 | ||||||
Troubled debt restructured | 26,738 | 29,206 | ||||||
Overdue loans | — | — | ||||||
Allowance for loan losses as a percentage of loan portfolio | 0.24 | % | 0.26 | % | ||||
Non-accrual loans as a percentage of loan portfolio | 0.37 | % | 0.38 | % | ||||
Overdue loan principal as a percentage of loan portfolio | 0.00 | % | 0.00 | % |
For the six-month period ended June 30, 2022 and for the year ended December 31, 2021, there was not restructured loans.
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CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of June 30, 2022, and December 31, 2021
and for the six-month periods ended June 30, 2022, and 2021
(In thousands of U.S. dollars)
As of June 30, 2022 and December 31, 2021, the total principal amount of non-accrual loans are related to private sector borrowers (non-sovereign loans) which present 2,200 days and 2,019 days overdue, respectively. During the six-month periods ended June 30, 2022 and 2021, there were no interest income recognized for non-accrual loans. The allowance of loan losses for loans in non-accrual status amount to US$ 18,603 as of June 30, 2022 and December 31, 2021.
On March 31, 2020, CAF implemented the Support Program for the Liquidity Management in Exceptional Situations (the “Program”) approved by CAF’s Shareholders Assembly on March 3, 2020. The Program allows CAF to repurchase the shares of a stockholder country that fulfills the requirements of the Program and apply the proceeds to that country’s outstanding loans and interest. Pursuant to the Program, CAF notified Venezuela that it fulfills the requirements. Since inception of the Program to June 30, 2022, CAF repurchased a total of 91,289 shares totaling US$ 1,296,304 and applied that amount to repay dueand overdue amounts of principal and interest and deducting the amount of paid-in capital andadditional paid-in capital for US$ 456,445 and US$ 839,858, respectively. For the six-month period ended June 30, 2022, CAF repurchased an additional 15,632 shares totaling US$ 221,975 and applied that amount to repay due and overdue amounts of principal and interest and deducting the amount of paid-in capital and additional paid-in capital for US$ 78,160 and US$ 143,814, respectively. Since the inception of the Program to December 31, 2021, CAF repurchased 75,657 shares totaling US$ 1,074,329 deducting the amount of paid-in capital and additional paid-in capital for US$ 378,285 and US$ 696,044, respectively. As a result of the repurchases, as of August 30, 2022, Venezuela is current with its loans with CAF.
A/B Loans
CAF only assumes the credit risk for the portion of its participations of the loan. As of June 30, 2022 and December 31, 2021, CAF had loans of this nature amounting to US$ 377,733 and US$ 103,675, respectively, whereas other financial institutions provided funds for US$ 298,509 and US$ 46,215, respectively.
Allowance for Loan Losses
The allowance for credit losses is maintained at a level CAF believes to be adequate to absorb expected lifetime losses over the contractual life of the loan portfolio and consider available information relevant to assessing the collectability of cash flows including a combination of internal and external information relating to past events, current conditions, and reasonable and supportable forecasts.
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Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of June 30, 2022, and December 31, 2021
and for the six-month periods ended June 30, 2022, and 2021
(In thousands of U.S. dollars)
Changes in the allowance and the balance for loan losses over the outstanding amounts, individually and collectively evaluated, are presented below:
For the six-months period ended June 30, | ||||||||||||||||||||||||
2022 | 2021 | |||||||||||||||||||||||
Credit risk | Credit risk | |||||||||||||||||||||||
Sovereign | Non- sovereign | Total | Sovereign | Non- sovereign | Total | |||||||||||||||||||
Balances at beginning of period | — | 76,650 | 76,650 | — | 95,015 | 95,015 | ||||||||||||||||||
Credit for loan losses | — | (3,713 | ) | (3,713 | ) | — | (7,472 | ) | (7,472 | ) | ||||||||||||||
Loan written-off | — | (5,000 | ) | (5,000 | ) | — | — | — | ||||||||||||||||
Recoveries | — | 619 | 619 | — | — | — | ||||||||||||||||||
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Balances at end of period | — | 68,556 | 68,556 | — | 87,543 | 87,543 | ||||||||||||||||||
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Changes in the provision for contingencies and the off-balance-sheet undisbursed loan commitments and financial guarantees, individually and collectively evaluated, are presented below:
For the six-months period ended June 30, | ||||||||||||||||||||||||
2022 | 2021 | |||||||||||||||||||||||
Credit risk | Credit risk | |||||||||||||||||||||||
Sovereign | Non- sovereign | Total | Sovereign | Non- sovereign | Total | |||||||||||||||||||
Balances at beginning of period | — | 15,202 | 15,202 | — | 14,833 | 14,833 | ||||||||||||||||||
Provision for contingencies | — | 110 | 110 | — | 360 | 360 | ||||||||||||||||||
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Balances at end of period | — | 15,312 | 15,312 | — | 15,193 | 15,193 | ||||||||||||||||||
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Provision for contingencies and the off-balance-sheet undisbursed loan commitments and financial guarantees are included in the statements of comprehensive income as part of other expenses.
5. | OTHER ASSETS |
A summary of other assets follows:
June 30, 2022 | December 31, 2021 | |||||||
Derivative related collateral | 2,623,944 | 645,632 | ||||||
Intangible assets, net of accumulated amortization of US$ 10,114 and US$ 8,381, respectively | 24,775 | 25,386 | ||||||
Receivable from investment securities sold | 18,251 | 4,017 | ||||||
Other | 29,119 | 25,256 | ||||||
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2,696,089 | 700,291 | |||||||
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Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of June 30, 2022, and December 31, 2021
and for the six-month periods ended June 30, 2022, and 2021
(In thousands of U.S. dollars)
6. | DEPOSITS |
A summary of deposits follows:
June 30, 2022 | December 31, 2021 | |||||||
Demand deposits | 266,579 | 83,157 | ||||||
Time deposits: | ||||||||
Less than one year | 4,539,248 | 3,919,679 | ||||||
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4,805,827 | 4,002,836 | |||||||
Fair value adjustments | 195 | (210 | ) | |||||
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Carrying value of deposits | 4,806,022 | 4,002,626 | ||||||
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As of June 30, 2022 and December 31, 2021, the weighted average interest rate was 0.47% and 0.11%, respectively. Deposits are issued for amounts equal to or more than US$ 100. Total depositsdenominated in currencies other than the U.S. dollar to an equivalent of US$ 495,544 and US$ 259,991 as of June 30, 2022 and December 31, 2021, respectively.
7. | COMMERCIAL PAPER |
As of June 30, 2022 and December 31, 2021, the outstanding amount of commercial paper issued by CAF, amounts to US$ 3,906,528 and US$ 2,813,646, respectively, of which matures in 2023 and 2022. As of June 30, 2022 and December 31, 2021, the weighted average interest rate was 0.71% and 0.23%, respectively.
8. | BORROWINGS FROM OTHER FINANCIAL INSTITUTIONS |
A summary of borrowings from other financial institutions by currency follows:
June 30, 2022 | December 31, 2021 | |||||||
U.S. dollars | 1,183,069 | 1,179,623 | ||||||
Euros | 574,757 | 590,809 | ||||||
Colombian Pesos | 32,186 | 30,764 | ||||||
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1,790,012 | 1,801,196 | |||||||
Fair value adjustments | (84,201 | ) | (28,328 | ) | ||||
Less debt issuance costs | 533 | 697 | ||||||
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Carrying value of borrowings from other financial institutions | 1,705,278 | 1,772,171 | ||||||
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As of June 30, 2022 and December 31, 2021, the fixed interest-bearing borrowings amounted toUS$ 371,818 and US$ 410,531, respectively. As of June 30, 2022 and December 31, 2021, the weighted average interest rate after considering the impact of interest rate swaps was 2.16% and 1.52%, respectively.
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Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of June 30, 2022, and December 31, 2021
and for the six-month periods ended June 30, 2022, and 2021
(In thousands of U.S. dollars)
Borrowings from other financial institutions, by remaining maturities, are summarized below:
June 30, 2022 | December 31, 2021 | |||||||
Less than one year | 190,169 | 178,039 | ||||||
Between one and two years | 396,504 | 388,211 | ||||||
Between two and three years | 224,666 | 248,616 | ||||||
Between three and four years | 171,858 | 191,271 | ||||||
Between four and five years | 157,172 | 169,039 | ||||||
Over five years | 649,643 | 626,020 | ||||||
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1,790,012 | 1,801,196 | |||||||
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The agreements on some borrowing from other financial institutions agreements contains covenants requiring the use of the proceeds for specific purposes or projects.
As of June 30, 2022 and December 31, 2021, there were unused term credit facilities amounting toUS$ 2,132,671 and US$ 1,899,056, respectively.
9. | BONDS |
A summary of outstanding bonds follows:
June 30, 2022 | December 31, 2021 | |||||||||||||||||||||||
At original exchange rate | At spot exchange rate | Weighted average cost, after swaps (%) (period end) | At original exchange rate | At spot exchange rate | Weighted average cost, after swaps (%) (year-end) | |||||||||||||||||||
U.S. dollars | 6,334,008 | 6,334,008 | 3.44 | 8,428,409 | 8,428,409 | 1.35 | ||||||||||||||||||
Euro | 7,782,829 | 6,817,115 | 2.19 | 8,637,076 | 8,274,796 | 1.25 | ||||||||||||||||||
Swiss francs | 2,435,196 | 2,409,386 | 2.04 | 2,203,076 | 2,297,342 | 1.42 | ||||||||||||||||||
Japanese yen | 1,467,480 | 1,153,279 | 2.37 | 1,404,689 | 1,297,358 | 1.28 | ||||||||||||||||||
Mexican pesos | 1,042,009 | 1,052,389 | 2.26 | 574,643 | 569,250 | 1.41 | ||||||||||||||||||
Australian dollars | 1,035,527 | 908,153 | 2.80 | 1,026,690 | 945,521 | 1.58 | ||||||||||||||||||
Norwegian kroner | 694,695 | 487,329 | 2.32 | 694,695 | 544,687 | 1.24 | ||||||||||||||||||
Hong Kong dollars | 584,332 | 577,935 | 2.13 | 635,865 | 632,757 | 1.73 | ||||||||||||||||||
Colombian pesos | 334,460 | 242,963 | 2.95 | 334,464 | 248,243 | 1.53 | ||||||||||||||||||
Uruguayan pesos | 283,210 | 283,488 | 1.42 | 280,304 | 250,040 | 1.27 | ||||||||||||||||||
Brazilian Real | 201,662 | 203,913 | 1.61 | 201,662 | 191,590 | 0.70 | ||||||||||||||||||
Indonesian Rupee | 75,000 | 69,389 | 1.45 | 75,000 | 72,467 | 0.46 | ||||||||||||||||||
Canadian dollars | 30,395 | �� | 31,073 | 1.77 | 30,395 | 31,385 | 2.50 | |||||||||||||||||
New Zealand Dollar | 28,758 | 26,968 | 3.17 | 13,651 | 14,554 | 1.66 | ||||||||||||||||||
Kazakhstan Tenge | 15,082 | 13,206 | 3.24 | 15,082 | 14,295 | 1.21 | ||||||||||||||||||
Indian Rupee | — | — | — | 31,891 | 28,729 | 2.71 | ||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
22,344,643 | 20,610,594 | 24,587,592 | 23,841,423 | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Fair value adjustments | (965,032 | ) | 425,217 | |||||||||||||||||||||
Less debt issuance costs | 4,239 | 6,103 | ||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Carrying value of bonds | 19,641,323 | 24,260,537 | ||||||||||||||||||||||
|
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|
F-70
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of June 30, 2022, and December 31, 2021
and for the six-month periods ended June 30, 2022, and 2021
(In thousands of U.S. dollars)
A summary of the bonds issued, by remaining maturities at original exchange rate, follows:
June 30, 2022 | December 31, 2021 | |||||||
Remaining maturities: | ||||||||
Less than one year | 2,244,974 | 3,944,492 | ||||||
Between one and two years | 4,128,445 | 4,557,150 | ||||||
Between two and three years | 3,244,419 | 3,245,067 | ||||||
Between three and four years | 5,008,944 | 4,256,759 | ||||||
Between four and five years | 2,742,030 | 3,787,884 | ||||||
Over five years | 4,975,831 | 4,796,240 | ||||||
|
|
|
| |||||
22,344,643 | 24,587,592 | |||||||
|
|
|
|
As of June 30, 2022 and December 31, 2021, fixed interest rate bonds amounted to US$ 21,865,520 and US$ 24,108,665, respectively, of which US$ 16,023,025 and US$ 16,173,655, respectively, are denominated in currencies other than U.S. dollar.
As of June 30, 2022, CAF has ceased issuance of Floating Rate Notes (FRN) linked to LIBOR, and all outstanding LIBOR FRNs (totaling US$ 100 million) will reset before the first half of 2023. On June 15, 2021, CAF issued its first FRN that is linked to the SOFR for US$ 400 million, an important step in the LIBOR transition process.
As of June 30, 2022 and December 31, 2021, there were no bonds repurchased.
10. | ACCRUED EXPENSES AND OTHER LIABILITIES |
A summary of accrued expenses and other liabilities follows:
June 30, 2022 | December 31, 2021 | |||||||
Employees’ severance benefits and savings plan | 104,408 | 104,083 | ||||||
Payable for investment securities purchased | 27,331 | 17,437 | ||||||
Provision for contingencies | 15,312 | 15,202 | ||||||
Contributions to Stockholders´ Special Funds | 14,968 | 12,467 | ||||||
Derivative-related collateral | 3,749 | 148,773 | ||||||
Other | 4,878 | 14,578 | ||||||
|
|
|
| |||||
170,646 | 312,540 | |||||||
|
|
|
|
11. | CONTRIBUTIONS TO STOCKHOLDERS’ SPECIAL FUNDS |
In March 2022, the Stockholders’ Assembly of CAF approved the contribution up to a maximum amount of US$ 89,000 to some stockholders’ special funds for 2022. Subsequently, during the six-month period ended June 30, 2022, based on the analysis of the new commitments contracted or the resources required by the stockholders´ special funds, authorized the contributions of US$ 70,000, US$ 15,000, and US$ 4,000 to Compensatory Financial Found (FFC), Technical Cooperation Fund (FCT), and Human Development Fund
F-71
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of June 30, 2022, and December 31, 2021
and for the six-month periods ended June 30, 2022, and 2021
(In thousands of U.S. dollars)
(FONDESHU), respectively. For the six-month period ended June 30, 2022, CAF has recognized US$ 22,543 as an expense and, as of June 30, 2021 recognized an unconditional obligation (accounts payable) for US$ 14,968 which was paid in July 2022.
In March 2021, the Stockholders’ Assembly of CAF approved the contribution up to a maximum amount of US$ 30,000 to Technical Cooperation Fund (FCT) for 2021. Subsequently, during the six-month period ended June 30, 2021, based on the analysis of the new commitments contracted or the resources required by the stockholders´ special funds, CAF recognized US$ 10,404 as an expense and, as of June 30, 2021, there are not account payable pending to pay.
12. | TAX EXEMPTIONS |
Pursuant to its Constitutive Agreement, CAF is exempt, in all of its Member Countries, from all taxes and tariffs on income, properties or assets, and from any liability involving payment, withholding or collection of any taxes.
In addition, CAF has entered into agreements with each of the associated shareholder countries. Pursuant to these agreements, each country that is a shareholder but do not qualify as a Member Country has agreed to extend to CAF, with respect to its activities in and concerning that country, immunities and privileges similar to those than have been granted to CAF in the Member Countries.
13. | DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES |
CAF utilizes derivative financial instruments to reduce exposure to interest rate risk and foreign currency risk. CAF does not hold or issue derivative financial instruments for trading or speculative purposes.
The market risk associated with interest rate and foreign currency is managed by swapping marketable securities - trading, loans, borrowings from other financial institutions and bonds, subject to fixed interest rates and denominated in currency other than the U.S. dollar into floating interest rate instruments denominated in U.S. dollars. CAF enters into derivative financial instruments to offset the economic changes in value of specifically identified marketable securities – trading, loans, borrowings from other financial institutions and bonds.
Derivative financial instruments held by CAF consist of interest rate swaps designated as fair value hedges of specifically identified loans, bonds or borrowings from other financial institutions with fixed interest rates and denominated in U.S. dollars. Also, CAF enters into cross-currency and interest rate swaps as an economic hedge (derivative that is entered into to manage a risk but is not accounted as a hedge) for interest rate and foreign exchange risks related with deposits, bonds, borrowings or loans denominated in currencies other than the U.S. dollar where CAF’s management elected to measure those liabilities and assets at fair value under the fair value option guidance.
When the fair value of a derivative financial instrument is positive, the counterparty owes CAF, creating credit risk for CAF. When the fair value of a derivative financial instrument is negative, CAF owes the counterparty and, therefore, it does not have credit risk. CAF minimizes the credit risk in derivative financial instruments by entering into transactions with high-quality counterparties whose credit rating is “A” or higher.
F-72
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of June 30, 2022, and December 31, 2021
and for the six-month periods ended June 30, 2022, and 2021
(In thousands of U.S. dollars)
In order to reduce the credit risk in derivative financial instruments, CAF enters into credit support agreements with its major swap counterparties. This provides risk mitigation, as the swap contracts are regularly marked-to-market, and the party being the net obligor is required to post collateral when net mark to-market exposure exceeds certain predetermined thresholds. This collateral is in the form of cash.
CAF does not offset for each counterparty, the fair value amount recognized for derivative financial instruments with the fair value amount recognized for the collateral, whether posted or received, under master netting arrangements executed with the same counterparty. CAF reports separately the cumulative gross amounts for the receivable from and payable to for derivative financial instruments.
CAF also utilizes futures derivatives instruments to reduce exposure to price risk. These are contracts for delayed delivery of securities or money market instruments in which the seller agrees to make delivery at a specified future date of a specified instrument at a specified price or yield. Initial margin requirements are met with cash or securities. CAF generally closes out open positions prior to maturity. Therefore, cash receipts or payments are limited to the change in fair value of the future contracts. Additionally, CAF utilizes forward contracts to reduce exposure to foreign currency risk.
The balance sheet details related to CAF’s derivative financial instruments are as follows:
Derivative assets | Derivative liabilities | |||||||||||||||
June 30, 2022 | December 31, 2021 | June 30, 2022 | December 31, 2021 | |||||||||||||
Cross-currency swap | 58,727 | 350,991 | 2,626,845 | 779,146 | ||||||||||||
Interest rate swap | 262,272 | 153,236 | 224,255 | 62,865 | ||||||||||||
U.S Treasury futures | 8,388 | 1,763 | 879 | 628 | ||||||||||||
Cross-currency forward contracts | 979 | 6,393 | 71 | 319 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
330,366 | 512,383 | 2,852,050 | 842,958 | |||||||||||||
|
|
|
|
|
|
|
|
The following table presents the notional amount and fair values of interest rate swaps and cross-currency swaps and the underlying hedged items:
Notional amount | Fair value | |||||||||||||||
Interest rate swap | Cross- currency swap | Derivative assets | Derivative liabilities | |||||||||||||
As of June 30, 2022: | ||||||||||||||||
Loans | 2,258,951 | — | 256,604 | 678 | ||||||||||||
Loans | — | 216,271 | 8,359 | 11,681 | ||||||||||||
Deposits | — | 50,000 | 4,363 | — | ||||||||||||
Borrowings from other financial institutions | — | 574,757 | — | 92,423 | ||||||||||||
Borrowings from other financial institutions | 154,798 | — | — | 3,315 | ||||||||||||
Bonds | — | 15,989,809 | 46,005 | 2,522,741 | ||||||||||||
Bonds | 6,157,495 | — | 5,668 | 220,262 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
8,571,244 | 16,830,837 | 320,999 | 2,851,100 | |||||||||||||
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F-73
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of June 30, 2022, and December 31, 2021
and for the six-month periods ended June 30, 2022, and 2021
(In thousands of U.S. dollars)
Notional amount | Fair value | |||||||||||||||
Interest rate swap | Cross- currency swap | Derivative assets | Derivative Liabilities | |||||||||||||
As of December 31, 2021: | ||||||||||||||||
Loans | 2,296,334 | — | 38,643 | 18,377 | ||||||||||||
Loans | — | 112,936 | 2,083 | 1,692 | ||||||||||||
Deposits | — | 110,000 | 1,498 | 5,639 | ||||||||||||
Borrowings from other financial institutions | — | 590,809 | — | 26,298 | ||||||||||||
Borrowings from other financial institutions | 177,547 | — | 5,191 | — | ||||||||||||
Bonds | — | 16,143,345 | 347,410 | 745,517 | ||||||||||||
Bonds | 8,250,000 | — | 109,402 | 44,488 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
10,723,881 | 16,957,090 | 504,227 | 842,011 | |||||||||||||
|
|
|
|
|
|
|
|
The following table presents the notional amount and fair values of U.S. treasury futures and cross-currency forward contracts:
As of June 30, 2022
Fair value | ||||||||||||||
Start date | Termination date | Contract Currency | Notional amount | Derivative assets | ||||||||||
Forward contracts | Various | Until September 2022 | Various | 70,085 | 979 | |||||||||
|
|
|
| |||||||||||
Futures short | Various | Until September 2022 | Various | 1,347,557 | 8,222 | |||||||||
|
|
|
| |||||||||||
Futures long | June 2022 | Until September 2022 | EUR | 20,530 | 166 | |||||||||
|
|
|
|
Fair value | ||||||||||||||
Start date | Termination date | Contract Currency | Notional amount | Derivative liabilities | ||||||||||
Futures long | Various | Until September 2022 | US$ | 145,100 | (815 | ) | ||||||||
|
|
|
| |||||||||||
Futures short | Various | Until September 2022 | EUR | 13,722 | (64 | ) | ||||||||
|
|
|
| |||||||||||
Forward contracts | Various | Various | Various | 7,032 | (71 | ) | ||||||||
|
|
|
|
As of December 31, 2021
Fair value | ||||||||||||||
Start date | Termination date | Contract Currency | Notional amount | Derivative assets | ||||||||||
Forward contracts | Various | Until January 2022 | Various | 292,582 | 6,393 | |||||||||
|
|
|
| |||||||||||
Futures short | Various | Until March 2022 | Various | 1,301,223 | 1,763 | |||||||||
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F-74
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of June 30, 2022, and December 31, 2021
and for the six-month periods ended June 30, 2022, and 2021
(In thousands of U.S. dollars)
Fair value | ||||||||||||||
Start date | Termination date | Contract Currency | Notional amount | Derivative liabilities | ||||||||||
Futures long | Various | Until March 2022 | Various | 144,264 | (226 | ) | ||||||||
|
|
|
| |||||||||||
Futures short | Various | Until March 2022 | US$ | 47,000 | (402 | ) | ||||||||
|
|
|
| |||||||||||
Forward contracts | Various | Until March 2022 | Various | 33,684 | (319 | ) |
The amounts of collateral posted related to U.S. treasury futures as of June 30, 2022 and December 31, 2021, was US$ 2,296 and US$ 8,977, respectively. As of June 30, 2022 and December 31, 2021, the amount of collateral received related to U.S. treasury futures was US$ 3,749 and US$ 17, respectively.
CAF enters into International Swaps and Derivatives Association, Inc. (ISDA) master netting arrangements with substantially all of its derivative counterparties. These legally enforceable master netting arrangements give CAF the right to take cash or liquidate securities held as collateral and to offset receivables and payables with the same counterparty, in the event of default by the counterparty. The following tables present information about the effect of offsetting of derivative financial instruments, although CAF has elected not to offset any derivative financial instruments by counterparty in the balance sheet:
As of June 30, 2022
Derivative assets | Gross amounts not offset in the balance sheet | |||||||||||||||
Description | Gross amounts of recognized assets | Financial instruments | Cash and securities collateral received | Net amount | ||||||||||||
Swaps | 320,999 | (297,271 | ) | — | 23,728 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Derivative liabilities | Gross amounts not offset in the balance sheet | |||||||||||||||
Description | Gross amounts of recognized liabilities | Financial instruments | Cash and securities collateral pledged | Net amount | ||||||||||||
Swaps | (2,851,100 | ) | 297,271 | 2,621,648 | 67,819 | |||||||||||
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F-75
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of June 30, 2022, and December 31, 2021
and for the six-month periods ended June 30, 2022, and 2021
(In thousands of U.S. dollars)
As of December 31, 2021
Derivative assets | Gross amounts not offset in the balance sheet | |||||||||||||||
Description | Gross amounts of recognized assets | Financial instruments | Cash and securities collateral received | Net amount | ||||||||||||
Swaps | 504,227 | (329,443 | ) | (148,756 | ) | 26,028 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Derivative liabilities | Gross amounts not offset in the balance sheet | |||||||||||||||
Description | Gross amounts of recognized liabilities | Financial instruments | Cash and securities collateral pledged | Net amount | ||||||||||||
Swaps | (842,011 | ) | 329,443 | 636,655 | 124,087 | |||||||||||
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|
14. | FAIR VALUE MEASUREMENTS |
The following section describes the valuation methodologies used by CAF to measure various financial instruments at fair value, including an indication of the level in the fair value hierarchy in which each financial instrument is classified. Where appropriate, the description includes details of the valuation methodologies and the key inputs to those methodologies.
When available, CAF generally uses quoted prices in active markets to determine fair value.
If quoted market prices in active markets are not available, fair value is based upon internally developed valuation methodologies that use, where possible, current market-based or independently sourced market inputs, such as interest rates, currency rates, etc.
Where available, CAF may also make use of quoted prices in active markets for recent trading activity in positions with the same or similar characteristics to the financial instrument being valued. The frequency and size of trading activity and the amount of the bid-ask spread are among the factors considered in determining the liquidity of markets and the relevance of observed quoted prices from those markets.
The following valuation methodologies are used to estimate the fair value and determine the classification in the fair value hierarchy of CAF’s financial instruments:
- | Marketable securities: CAF uses quoted prices in active markets to determine the fair value of trading securities. These securities are classified in Level 1 of the fair value hierarchy. |
- | Loans: The fair value of fixed rate loans, is determined using a discounted cash flow technique using the current variable interest rate for similar loans. These loans are classified in Level 2 of the fair value hierarchy. |
- | Derivative assets and liabilities: Derivative financial instruments transactions contracted and designated by CAF as hedges of risks related to interest rates, currency rates or both, for transactions recorded as financial assets or liabilities are also presented at fair value. In those cases the fair value is calculated using market prices provided by an independent financial information services company, which are determined using discounted cash flow valuation technique using observable inputs. Derivative assets and liabilities are classified in Level 2 of the fair value hierarchy. |
F-76
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of June 30, 2022, and December 31, 2021
and for the six-month periods ended June 30, 2022, and 2021
(In thousands of U.S. dollars)
- | Bonds, borrowings from other financial institutions and deposits: For CAF’s bonds issued and medium and long term borrowings from other financial institutions and deposits, fair value is determined by using a discounted cash flow technique, taking into consideration benchmark interest yield curves at the end of the reporting period to discount the expected cash flows for the applicable maturity, thus reflecting market fluctuations of key variables such as interest and exchange rates. These yield curves are adjusted to incorporate CAF credit risk spread. Bonds, borrowings from other financial institutions and deposits are generally classified in Level 2 of the fair value hierarchy based on the observability of significant inputs to the discounted cash flow technique. |
Items Measured at Fair Value on a Recurring Basis
The following tables present for each of the fair value hierarchy levels CAF’s financial assets and liabilities that are measured at fair value on a recurring basis:
As of June 30, 2022 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Marketable Securities: | ||||||||||||||||
U.S. Treasury Notes | 2,073,517 | — | — | 2,073,517 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Non-U.S. governments and government entities bonds | 103,340 | 99,934 | — | 203,274 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Financial institutions and corporate securities: | ||||||||||||||||
Commercial paper | — | 2,258,932 | — | 2,258,932 | ||||||||||||
Certificate of deposits | 3,374,981 | — | — | 3,374,981 | ||||||||||||
Bonds | 1,384,007 | — | — | 1,384,007 | ||||||||||||
Collateralized mortgage obligation | 261,826 | — | — | 261,826 | ||||||||||||
Liquidity funds | 366,217 | — | — | 366,217 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
5,387,031 | 2,258,932 | — | 7,645,963 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Sub-total financial assets at fair value | 7,563,888 | 2,358,866 | — | 9,922,754 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Loans | — | 2,221,883 | — | 2,221,883 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Derivative instruments: | ||||||||||||||||
Cross-currency swap | — | 58,727 | — | 58,727 | ||||||||||||
Interest rate swap | — | 262,272 | — | 262,272 | ||||||||||||
U.S Treasury futures | — | 8,388 | — | 8,388 | ||||||||||||
Cross-currency forward contracts | — | 979 | — | 979 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
— | 330,366 | — | 330,366 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total financial assets at fair value | 7,563,888 | 4,911,115 | — | 12,475,003 | ||||||||||||
|
|
|
|
|
|
|
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F-77
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of June 30, 2022, and December 31, 2021
and for the six-month periods ended June 30, 2022, and 2021
(In thousands of U.S. dollars)
As of June 30, 2022 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Liabilities: | ||||||||||||||||
Deposits | — | 54,090 | — | 54,090 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Borrowings from other financial institutions | — | 645,354 | — | 645,354 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Bonds | — | 19,447,151 | — | 19,447,151 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Derivative instruments: | ||||||||||||||||
Cross-currency swap | — | 2,626,845 | — | 2,626,845 | ||||||||||||
Interest rate swap | — | 224,255 | — | 224,255 | ||||||||||||
U.S Treasury futures | — | 879 | — | 879 | ||||||||||||
Cross-currency forward contracts | — | 71 | — | 71 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
— | 2,852,050 | — | 2,852,050 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total financial liabilities at fair value | — | 22,998,645 | — | 22,998,645 | ||||||||||||
|
|
|
|
|
|
|
|
As of December 31, 2021 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Marketable Securities: | ||||||||||||||||
U.S. Treasury Notes | 2,219,711 | — | — | 2,219,711 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Non-U.S. governments and government entities bonds | 418,413 | 137,817 | — | 556,230 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Financial institutions and corporate securities: | ||||||||||||||||
Commercial paper | — | 3,861,129 | — | 3,861,129 | ||||||||||||
Certificate of deposits | 3,284,428 | — | — | 3,284,428 | ||||||||||||
Bonds | 1,941,602 | — | — | 1,941,602 | ||||||||||||
Collateralized mortgage obligation | 288,583 | 2,222 | — | 290,805 | ||||||||||||
Liquidity funds | 349,162 | — | — | 349,162 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
5,863,775 | 3,863,351 | — | 9,727,126 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Sub-total financial assets at fair value | 8,501,899 | 4,001,168 | — | 12,503,067 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Loans | — | 2,389,651 | — | 2,389,651 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Derivative instruments: | ||||||||||||||||
Cross-currency swap | — | 350,991 | — | 350,991 | ||||||||||||
Interest rate swap | — | 153,236 | — | 153,236 | ||||||||||||
U.S Treasury futures | — | 1,763 | — | 1,763 | ||||||||||||
Cross-currency forward contracts | — | 6,393 | — | 6,393 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
— | 512,383 | — | 512,383 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total financial assets at fair value | 8,501,899 | 6,903,202 | — | 15,405,101 | ||||||||||||
|
|
|
|
|
|
|
|
F-78
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of June 30, 2022, and December 31, 2021
and for the six-month periods ended June 30, 2022, and 2021
(In thousands of U.S. dollars)
As of December 31, 2021 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Liabilities: | ||||||||||||||||
Deposits | — | 106,119 | — | 106,119 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Borrowings from other financial institutions | — | 740,028 | — | 740,028 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Bonds | — | 24,074,774 | — | 24,074,774 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Derivative instruments: | ||||||||||||||||
Cross-currency swap | — | 779,146 | — | 779,146 | ||||||||||||
Interest rate swap | — | 62,865 | — | 62,865 | ||||||||||||
U.S Treasury futures | — | 628 | — | 628 | ||||||||||||
Cross-currency forward contracts | — | 319 | — | 319 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
— | 842,958 | — | 842,958 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total financial liabilities at fair value | — | 25,763,879 | — | 25,763,879 | ||||||||||||
|
|
|
|
|
|
|
|
Items that are not measured at fair value
The carrying amount and estimated fair values of CAF’s financial instruments that are not recognized in the balance sheets at fair value are as follows:
June 30, 2022 | December 31, 2021 | |||||||||||||||||||
Hierarchy Levels | Carrying amount | Estimated fair value | Carrying amount | Estimated fair value | ||||||||||||||||
Financial assets: | ||||||||||||||||||||
Cash and due from banks | 1 | 547,691 | 547,691 | 112,047 | 112,047 | |||||||||||||||
Deposits with banks | 1 | 4,049,214 | 4,049,214 | 3,210,216 | 3,210,216 | |||||||||||||||
Other investments | 1 | 110,940 | 110,940 | 292,392 | 292,392 | |||||||||||||||
Loans, net | 2 | 25,917,761 | 25,905,624 | 26,976,260 | 26,949,431 | |||||||||||||||
Accrued interest and commissions receivable | 2 | 359,171 | 359,171 | 357,836 | 357,836 | |||||||||||||||
Derivate related collateral | 1 | 2,623,944 | 2,623,944 | 645,632 | 645,632 | |||||||||||||||
Receivable from investment securities sold | 1 | 18,251 | 18,251 | 4,017 | 4,017 | |||||||||||||||
Financial liabilities: | ||||||||||||||||||||
Deposits | 2 | 4,751,932 | 4,751,932 | 3,896,507 | 3,896,507 | |||||||||||||||
Commercial paper | 2 | 3,906,528 | 3,906,528 | 2,813,646 | 2,813,646 | |||||||||||||||
Borrowings from other financial institutions, net | 2 | 1,059,924 | 1,053,997 | 1,032,143 | 1,014,964 | |||||||||||||||
Bonds, net | 2 | 194,172 | 191,919 | 185,763 | 176,035 | |||||||||||||||
Accrued interest payable | 2 | 272,927 | 272,927 | 288,233 | 288,233 | |||||||||||||||
Derivate related collateral | 1 | 3,749 | 3,749 | 148,773 | 148,773 | |||||||||||||||
Payable for investment securities purchased | 1 | 27,331 | 27,331 | 17,437 | 17,437 |
F-79
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of June 30, 2022, and December 31, 2021
and for the six-month periods ended June 30, 2022, and 2021
(In thousands of U.S. dollars)
The following methods and assumptions were used to estimate the fair value of those financial instruments not accounted for at fair value:
- | Cash and due from banks, deposits with banks, other investments, accrued interest and commissions receivable, deposits, commercial paper, accrued interest payable, derivate-related collateral, receivable from investment securities sold and payable for investment securities purchased: The carrying amounts approximate fair value because of the short maturity of these instruments. |
- | Loans: CAF is one of the few institutions that grant loans for development projects in the stockholder countries. A secondary market does not exist for the type of loans granted by CAF. As rates on variable rate loans are reset on a semiannual basis, the carrying value, adjusted for credit risk, was determined to be the best estimate of fair value. The fair value of fixed rate loans is determined by using the current variable interest rate for similar loans. The fair value of non-accrual status loans is estimated using the discounted cash flow technique. |
- | Equity investments: The direct investments in equity securities of companies without a readily determinable fair value are measured at cost, less impairment plus or minus observable price changes of an identical or similar instrument of the same issuer. As of June 30, 2022 and December 31, 2021, the carrying amount of those investments amounted to US$ 118,171 and US$ 113,036, respectively. In addition, as of June 30, 2022 and December 31, 2021, investments in funds without a readily determinable fair value, with carrying amount of US$ 243,802 and US$ 267,131, respectively, and the net effects of impairment and the changes in fair value related to equity investment for the six-month period ended as of June 30, 2022 and 2021 amounted to US$ (8,280) and US$ 16,933, respectively, are accounted for at fair value applying the practical expedient, using the net asset value per share. These financial instruments are generally classified in level 3 of the fair value hierarchy based on the observability of significant inputs to the valuation methodology (these instruments are not disclosed in the table above). |
- | Bonds and borrowings from other financial institutions: For CAF’s bonds issued and medium and long term borrowings, fair value is determined using a discounted cash flow technique, taking into consideration yield curves to discount the expected cash flows for the applicable maturity, thus reflecting the fluctuation of variables such as interest and exchange rates. These yield curves are adjusted to incorporate CAF credit risk spread. Those financial instrument are generally classified in Level 2 of the fair value hierarchy based on the observability of significant inputs to the valuation methodology. |
F-80
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of June 30, 2022, and December 31, 2021
and for the six-month periods ended June 30, 2022, and 2021
(In thousands of U.S. dollars)
15. | NET GAINS ON CHANGES IN FAIR VALUE RELATED TO FINANCIAL INSTRUMENTS |
The gains on changes in fair value of marketable securities – trading, cross-currency swaps and financial liabilities carried at fair value under the fair value option are as follows:
For the six-month period ended June 30, 2022 | ||||||||||||
Gain (loss) on derivatives | Gain (loss) on hedged item | Net Gain (loss) | ||||||||||
Cross-currency swaps: | ||||||||||||
Deposits | 8,503 | (7,971 | ) | 532 | ||||||||
Bonds | (2,078,629 | ) | 2,102,073 | 23,444 | ||||||||
Loans | (3,713 | ) | 1,941 | (1,772 | ) | |||||||
Borrowings from other financial institutions | (66,124 | ) | 47,367 | (18,757 | ) | |||||||
|
|
|
|
|
| |||||||
(2,139,963 | ) | 2,143,410 | 3,447 | |||||||||
|
|
|
|
|
|
For the six-month period ended June 30, 2021 | ||||||||||||
Gain (loss) on derivatives | Gain (loss) on hedged item | Net Gain (loss) | ||||||||||
Cross-currency swaps: | ||||||||||||
Deposits | (2,861 | ) | 2,930 | 69 | ||||||||
Bonds | (879,204 | ) | 879,275 | 71 | ||||||||
Loans | (7,258 | ) | (2,029 | ) | (9,287 | ) | ||||||
Borrowings from other financial institutions | (22,593 | ) | 36,487 | 13,894 | ||||||||
|
|
|
|
|
| |||||||
(911,916 | ) | 916,663 | 4,747 | |||||||||
|
|
|
|
|
|
In addition, during the six-month periods ended June 30, 2022 and 2021, CAF recorded net losses of US$ 1,619 and net gains US$ 917, respectively, related to changes in fair value of U.S. treasury futures and cross-currency forwards and changes in fair value of the U.S. Treasury Notes.
16. | COMMITMENTS AND CONTINGENCIES |
Commitments and contingencies include the following:
June 30, 2022 | December 31, 2021 | |||||||
Loan commitments subscribed – eligible | 6,942,397 | 6,477,638 | ||||||
Lines of credit | 5,179,245 | 3,328,384 | ||||||
Loan commitments subscribed – non eligible | 1,592,195 | 1,561,726 | ||||||
Guarantees | 128,143 | 129,804 | ||||||
Equity investments agreements subscribed | 77,078 | 79,769 |
These commitments and contingencies arose from the normal course of CAF’s business and are related principally to loans that have been approved or committed for disbursement.
In the ordinary course of business, CAF has entered into commitments to extend loans; such loan commitments are reported in the above table upon signing the corresponding loan agreement and are
F-81
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of June 30, 2022, and December 31, 2021
and for the six-month periods ended June 30, 2022, and 2021
(In thousands of U.S. dollars)
reported as loans in the balance sheets when disbursements are made. Loan commitments that have fulfilled the necessary requirements for disbursement are classified as eligible.
The commitments to extend loans have fixed expiration dates and in some cases expire without a loan being disbursed. Therefore, the amounts of total commitment to extend loans do not necessarily represent future cash requirements. Also, based on experience, portions of the loan commitments are disbursed on average two years after the signing of the loan agreement.
The lines of credit are extended to financial and corporate institutions as a facility to grant short term loans basically to finance working capital and international trade activities.
Guarantees mature as follows:
June 30, 2022 | December 31, 2021 | |||||||
Less than one year | 6,463 | 6,338 | ||||||
Between one and five years | 62,649 | 62,649 | ||||||
Over five years | 59,031 | 60,817 | ||||||
|
|
|
| |||||
128,143 | 129,804 | |||||||
|
|
|
|
To the best knowledge of CAF’s management, CAF is not involved in any litigation that is material to CAF’s business or that is likely to have any impact on its business, financial condition, or results of operations.
17. | SEGMENT REPORTING |
Management has determined that CAF has only one operating and reportable segment since it does not manage its operations by allocating resources based on a determination of the contributions to net income of individual operations. CAF does not differentiate on the basis of the nature of the products or services provided the preparation process, or the method for providing services among individual countries.
For the six-month periods ended June 30, 2022 and 2021, loans made to or guaranteed by four countries individually generated in excess, of 10% of interest income on loans, as follows:
June 30, 2022 | June 30, 2021 | |||||||
Ecuador | 52,920 | 44,145 | ||||||
Colombia | 51,711 | 36,428 | ||||||
Argentina | 50,835 | 43,284 | ||||||
Brazil | 38,250 | 25,884 | ||||||
|
|
|
| |||||
193,716 | 149,741 | |||||||
|
|
|
|
F-82
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to the Unaudited Condensed Interim Financial Information
As of June 30, 2022, and December 31, 2021
and for the six-month periods ended June 30, 2022, and 2021
(In thousands of U.S. dollars)
18. | SUBSEQUENT EVENTS |
Management has evaluated subsequent events through August 30, 2022, the date these financial statements were available to be issued. As a result of this evaluation, management has determined that there are no subsequent events that require a disclosure in these financial statements except for:
- | On July 13, 2022, CAF issued bonds for AUD 55 million, equivalent to US$ 37.5 million, 5.00%due 2029, under its Medium-Term Note Programme. |
- | On July 13, 2022, CAF issued bonds for EUR 500 million, equivalent to US$ 509.9 million, 2.375% due 2027, under its Medium-Term Note Programme. |
- | On July 30, 2022, CAF issued bonds for UYU 4.6 million, equivalent to US$ 113 thousand, 3.61%due 2039, under its Uruguay Local Debt Programme. |
- | On August 1, 2022, CAF issued bonds for UYU 45.6 million, equivalent to US$ 1.1 million, 3.20% due 2037, under its Uruguay Local Debt Programme. |
- | On August 12, 2022, CAF issued bonds for UYU 17.3 million, equivalent to US$ 431 thousand, 4.26% due 2039, under its Uruguay Local Debt Programme. |
- | On August 22, 2022, CAF’s Shareholder Assembly (the “Shareholder Assembly”) approved Honduras and Chile as full member shareholder countries effective after they meet all the necessary requirements. As of the date of these financial statements, Honduras and Chile must fulfill certain pending requirements in order to formalize their respective change of status to full member shareholder country. |
- | On August 29, 2022, CAF issued bonds for EUR 110 million, equivalent to US$ 109 million, 2.72% due 2046, as a private issuance under Schuldschein format. |
- | During July and August 2022, CAF repurchased a total of 3,871 shares from Venezuela, totalingUS$ 55 million. |
F-83
Table of Contents
CORPORACIÓN ANDINA DE FOMENTO (CAF)
SUPPLEMENTARY INFORMATION (UNAUDITED)
As of June 30, 2022
BONDS
Title | Interest Rate | Coupon | Date of Agreement of Issue | Year of Final Maturity | Currency | Principal Amount Outstanding as of June 30, 2022 (in millions) | ||||||||
7.875% Yankee Bonds | Fixed | 7.88% | 2002 | 2022 | USD | 85 | ||||||||
4.25% Euro Bond (Schuldschein) | Fixed | 4.25% | 2012 | 2027 | EUR(1) | 82 | ||||||||
4.375% Euro Bond (Schuldschein) | Fixed | 4.38% | 2012 | 2032 | EUR | 60 | ||||||||
5.0% Euro Dollar Bond | Fixed | 5.00% | 2012 | 2042 | USD | 50 | ||||||||
4.0% Euro Hong Kong Dollar Bonds | Fixed | 4.00% | 2012 | 2024 | HKD(2) | 398 | ||||||||
1.85% Euro Yen Bonds | Fixed | 1.85% | 2012 | 2023 | JPY(3) | 6,000 | ||||||||
3.25% Euro Bonds | Fixed | 3.25% | 2013 | 2033 | EUR | 100 | ||||||||
3.25% Euro Bonds | Fixed | 3.25% | 2013 | 2033 | EUR | 100 | ||||||||
4.27% Euro Hong Kong Dollar Bonds | Fixed | 4.27% | 2013 | 2028 | HKD | 940 | ||||||||
Euro Dollar Bonds | Floating | L3M + 97 bps | 2013 | 2023 | USD | 100 | ||||||||
1.85% Euro Yen Bonds | Fixed | 1.85% | 2013 | 2023 | JPY | 4,600 | ||||||||
3.66% Euro Bond | Fixed | 3.66% | 2013 | 2033 | EUR | 51 | ||||||||
3.625% Euro Bond (Schuldschein) | Fixed | 3.63% | 2013 | 2033 | EUR | 200 | ||||||||
6.25% Kangaroo Bonds | Fixed | 6.25% | 2013 | 2023 | AUD(4) | 225 | ||||||||
3.31% Euro Bonds | Fixed | 3.31% | 2013 | 2028 | EUR | 226 | ||||||||
3.31% Euro Bonds | Fixed | 3.31% | 2013 | 2028 | EUR | 25 | ||||||||
2.0% Euro Bonds | Fixed | 2.00% | 2014 | 2024 | CHF(5) | 300 | ||||||||
3.51% Euro Bonds | Fixed | 3.51% | 2014 | 2034 | EUR | 65 | ||||||||
3.500% Euro Bonds | Fixed | 3.50% | 2014 | 2039 | EUR | 200 | ||||||||
4.29% Euro Bonds | Fixed | 4.29% | 2014 | 2026 | NOK(6) | 1,500 | ||||||||
4.070% Euro Bonds | Fixed | 4.07% | 2014 | 2024 | NOK | 900 | ||||||||
3.925% Euro Bonds | Fixed | 3.93% | 2014 | 2029 | HKD | 1,257 | ||||||||
3.05% Euro Bonds | Fixed | 3.05% | 2014 | 2030 | EUR | 50 | ||||||||
1.50% Swiss Franc Bonds | Fixed | 1.50% | 2014 | 2028 | CHF | 225 | ||||||||
0.51% Swiss Franc Bonds | Fixed | 0.51% | 2015 | 2026 | CHF | 200 | ||||||||
0.68% Euro Yen Bonds | Fixed | 0.68% | 2015 | 2025 | JPY | 8,900 | ||||||||
0.51% Swiss Franc Bonds | Fixed | 0.51% | 2015 | 2026 | CHF | 150 | ||||||||
3.05% Euro Bonds | Fixed | 3.05% | 2015 | 2035 | NOK | 1,000 | ||||||||
4.50% Kangaroo Bonds | Fixed | 4.50% | 2015 | 2025 | AUD | 225 | ||||||||
4.50% Kangaroo Bonds | Fixed | 4.50% | 2015 | 2025 | AUD | 50 | ||||||||
0.46% Swiss Franc Bonds | Fixed | 0.46% | 2015 | 2023 | CHF | 200 | ||||||||
4.50% Kangaroo Bonds | Fixed | 4.50% | 2015 | 2025 | AUD | 50 | ||||||||
3.05% Euro Bonds | Fixed | 3.05% | 2015 | 2030 | NOK | 800 | ||||||||
0.45% Samurai Market | Fixed | 0.45% | 2016 | 2026 | JPY | 4,500 | ||||||||
0.304% Swiss Market Bond | Fixed | 0.30% | 2016 | 2024 | CHF | 125 | ||||||||
0.51% Swiss Market Bond | Fixed | 0.51% | 2016 | 2026 | CHF | 125 | ||||||||
2.89% Euro Bonds | Fixed | 2.89% | 2016 | 2026 | HKD | 320 | ||||||||
4.50% Kangaroo Market Bond | Fixed | 4.50% | 2016 | 2026 | AUD | 110 | ||||||||
1.70% Euro Bonds | Fixed | 1.70% | 2016 | 2031 | EUR | 70 | ||||||||
1.803% Euro Bonds | Fixed | 1.80% | 2016 | 2031 | EUR | 100 | ||||||||
4.50% Kangaroo Market Bond | Fixed | 4.50% | 2016 | 2026 | AUD | 80 | ||||||||
1.796% Euro Bonds | Fixed | 1.80% | 2016 | 2031 | EUR | 50 | ||||||||
3.50% Euro Bonds | Fixed | 3.50% | 2017 | 2037 | CAD(7) | 40 | ||||||||
5.88% Uridashi Bond | Fixed | 5.88% | 2017 | 2022 | INR(8) | 2,138 | ||||||||
4.50% Kangaroo Market Bond | Fixed | 4.50% | 2017 | 2027 | AUD | 175 |
F-84
Table of Contents
Title | Interest Rate | Coupon | Date of Agreement of Issue | Year of Final Maturity | Currency | Principal Amount Outstanding as of June 30, 2022 (in millions) | ||||||||
3.265% Euro Bonds | Fixed | 3.27% | 2017 | 2027 | HKD | 1,620 | ||||||||
0.30% Swiss Market Bond | Fixed | 0.30% | 2017 | 2025 | CHF | 160 | ||||||||
2.75% Yankee Bond | Fixed | 2.75% | 2017 | 2023 | USD | 1,000 | ||||||||
4.50% Kangaroo Market Bond | Fixed | 4.50% | 2017 | 2027 | AUD | 75 | ||||||||
4.50% Kangaroo Market Bond | Fixed | 4.50% | 2018 | 2027 | AUD | 75 | ||||||||
1.125% Euro Bond | Fixed | 1.13% | 2018 | 2025 | EUR | 1,000 | ||||||||
8.50% Mexican Pesos Bonds | Fixed | 8.50% | 2018 | 2028 | MXN(9) | 3,000 | ||||||||
6.50% Indonesian Rupiah Bond | Fixed | 6.50% | 2018 | 2023 | IDR(10) | 1,034,100 | ||||||||
0.30% Swiss Market Bond | Fixed | 0.30% | 2018 | 2025 | CHF | 115 | ||||||||
6.77% Euro Bond | Fixed | 6.77% | 2018 | 2028 | COP(11) | 510,000 | ||||||||
6.75% Euro Bond | Fixed | 6.75% | 2018 | 2028 | COP | 150,000 | ||||||||
0.75% Euro Bond | Fixed | 0.75% | 2018 | 2023 | EUR | 500 | ||||||||
3.385% Euro Dollar Bond | Fixed | 3.39% | 2018 | 2023 | USD | 30 | ||||||||
3.4% Kangaroo Market Bond | Fixed | 3.40% | 2018 | 2023 | AUD | 100 | ||||||||
3.73% Euro Dollar Bond | Fixed | 3.73% | 2018 | 2023 | USD | 50 | ||||||||
3.75% Yankee Bond | Fixed | 3.75% | 2018 | 2023 | USD | 750 | ||||||||
0.63% Euro Bond | Fixed | 0.63% | 2019 | 2024 | EUR | 750 | ||||||||
3.90% Uruguayan bond | Fixed | 3.90% | 2019 | 2040 | UIU(12) | 39 | ||||||||
6.77% Colombian Pesos Bond | Fixed | 6.77% | 2019 | 2028 | COP | 99,500 | ||||||||
1.68% Kangaroo Bond | Fixed | 1.68% | 2019 | 2023 | AUD | 12 | ||||||||
9.60% Mexican Pesos | Fixed | 9.60% | 2019 | 2039 | MXN | 965 | ||||||||
0.17% Euro Bond | Fixed | 0.17% | 2019 | 2023 | EUR | 40 | ||||||||
3.90% Uruguayan bond | Fixed | 3.90% | 2019 | 2040 | UIU | 7 | ||||||||
2.97% Euro Dollar Bond | Fixed | 2.97% | 2019 | 2029 | USD | 140 | ||||||||
10.4% Uruguayan Peso Bond | Fixed | 10.40% | 2019 | 2024 | UIU | 1,752 | ||||||||
0.18% Euro Bond | Fixed | 0.18% | 2019 | 2027 | EUR | 50 | ||||||||
10.4% Uruguayan Peso Bond | Fixed | 10.40% | 2019 | 2024 | UYU(13) | 1,814 | ||||||||
3.76% Uruguayan bond | Fixed | 3.76% | 2019 | 2039 | UIU | 3 | ||||||||
0.625% Euro Bond | Fixed | 0.63% | 2019 | 2026 | EUR | 750 | ||||||||
3.90% Uruguayan bond | Fixed | 3.90% | 2019 | 2040 | UIU | 8 | ||||||||
2.0% Dollar Bond | Fixed | 2.00% | 2020 | 2023 | USD | 120 | ||||||||
3.76% Uruguayan bond | Fixed | 3.76% | 2020 | 2039 | UIU | 5 | ||||||||
3.78% Uruguayan bond | Fixed | 3.78% | 2020 | 2038 | UIU | 2 | ||||||||
3.30% Uruguayan bond | Fixed | 3.20% | 2020 | 2037 | UIU | 7 | ||||||||
4.2581% Uruguayan bond | Fixed | 4.26% | 2020 | 2039 | UIU | 1 | ||||||||
3.76% Uruguayan bond | Fixed | 3.76% | 2020 | 2039 | UIU | 6 | ||||||||
3.78% Uruguayan bond | Fixed | 3.78% | 2020 | 2038 | UIU | 6 | ||||||||
2.3750% Dollar Bond | Fixed | 2.38% | 2020 | 2023 | USD | 800 | ||||||||
1.025% Japanese Bond | Fixed | 1.03% | 2020 | 2040 | JPY | 3,000 | ||||||||
6.78% Mexican Bond | Fixed | 6.78% | 2020 | 2027 | MXN | 1,200 | ||||||||
3.30% Uruguayan bond | Fixed | 3.20% | 2020 | 2037 | UIU | 15 | ||||||||
1.625% Euro Bond | Fixed | 1.63% | 2020 | 2025 | EUR | 700 | ||||||||
3.78% Uruguayan bond | Fixed | 3.78% | 2020 | 2038 | UIU | 9 | ||||||||
10.4% Kazakhstan Bond | Fixed | 10.40% | 2020 | 2023 | KZT(14) | 6,210 | ||||||||
7.5% Mexican Bond | Fixed | 7.50% | 2020 | 2030 | MXN | 1,525 | ||||||||
1.80% New Zealand Bond | Fixed | 1.80% | 2020 | 2025 | NZD(15) | 21 | ||||||||
1.83% Australian Bond | Fixed | 1.83% | 2020 | 2025 | AUD | 31 | ||||||||
0.70% Japanese Bond | Fixed | 0.70% | 2020 | 2023 | JPY | 3,800 | ||||||||
0.65% Japanese Bond | Fixed | 0.65% | 2020 | 2025 | JPY | 3,500 | ||||||||
3.76% Uruguayan bond | Fixed | 3.76% | 2020 | 2039 | UIU | 7 | ||||||||
3.45% Uruguayan bond | Fixed | 3.45% | 2020 | 2023 | UYU | 6,335 | ||||||||
0.77% Japanese Bond | Fixed | 0.77% | 2020 | 2025 | JPY | 17,200 | ||||||||
0.70% Swiss Market Bond | Fixed | 0.70% | 2020 | 2025 | CHF | 350 |
F-85
Table of Contents
Title | Interest Rate | Coupon | Date of Agreement of Issue | Year of Final Maturity | Currency | Principal Amount Outstanding as of June 30, 2022 (in millions) | ||||||||
0.50% Japanese Bond | Fixed | 0.50% | 2020 | 2023 | JPY | 5,000 | ||||||||
1.60% Euro Bond | Fixed | 1.60% | 2020 | 2025 | USD | 40 | ||||||||
0.727% Japanese Bond | Fixed | 0.73% | 2020 | 2025 | JPY | 20,000 | ||||||||
6.75% Colombian Bond | Fixed | 6.75% | 2020 | 2028 | COP | 104,200 | ||||||||
3.30% Uruguayan bond | Fixed | 3.20% | 2020 | 2037 | UIU | 11 | ||||||||
4.26% Uruguayan bond | Fixed | 4.26% | 2020 | 2029 | UIU | 5 | ||||||||
1.625% Euro Bond | Fixed | 1.63% | 2020 | 2025 | USD | 750 | ||||||||
3.76% Uruguayan bond | Fixed | 3.76% | 2020 | 2039 | UIU | 9 | ||||||||
0.098% Euro Bond | Fixed | 0.10% | 2020 | 2023 | EUR | 90 | ||||||||
3.78% Uruguayan bond | Fixed | 3.78% | 2020 | 2038 | UIU | 11 | ||||||||
6.77% Colombian Bond | Fixed | 6.77% | 2020 | 2028 | COP | 145,000 | ||||||||
3.78% Uruguayan Bond | Fixed | 3.78% | 2020 | 2037 | UIU | 5 | ||||||||
1.332% Euro Bond | Fixed | 1.33% | 2020 | 2025 | USD | 30 | ||||||||
4.2581% Uruguayan bond | Fixed | 4.26% | 2020 | 2039 | UIU | 6 | ||||||||
0.84% Euro Bond | Fixed | 0.84% | 2020 | 2023 | USD | 30 | ||||||||
1.327% Euro Bond | Fixed | 1.33% | 2020 | 2025 | USD | 30 | ||||||||
3.76% Uruguayan Bond | Fixed | 3.76% | 2021 | 2039 | UIU | 6 | ||||||||
0.8% Euro Bond | Fixed | 0.80% | 2021 | 2024 | USD | 30 | ||||||||
0.25% Euro Bond | Fixed | 0.25% | 2021 | 2026 | EUR | 1,250 | ||||||||
3.78% Uruguayan Bond | Fixed | 3.78% | 2021 | 2038 | UIU | 12 | ||||||||
0.85% Euro Bond | Fixed | 0.85% | 2021 | 2024 | USD | 100 | ||||||||
0.85% Euro Bond | Fixed | 0.85% | 2021 | 2024 | USD | 50 | ||||||||
0.35% Samurai Bond | Fixed | 0.35% | 2021 | 2026 | JPY | 13,300 | ||||||||
0.45% Samurai Bond | Fixed | 0.45% | 2021 | 2028 | JPY | 1,400 | ||||||||
0.35% Samurai Bond | Fixed | 0.35% | 2021 | 2026 | JPY | 16,600 | ||||||||
6.8% Mexican Bond | Fixed | 6.82% | 2021 | 2031 | MXN | 3,535 | ||||||||
1.58% Euro Bond | Fixed | 1.58% | 2021 | 2026 | USD | 50 | ||||||||
0.25% Samurai Bond | Fixed | 0.25% | 2021 | 2024 | JPY | 5,000 | ||||||||
3.78% Uruguayan Bond | Fixed | 3.78% | 2021 | 2037 | UIU | 9 | ||||||||
4.26% Uruguayan Bond | Fixed | 4.26% | 2021 | 2039 | UIU | 9 | ||||||||
3.76% Uruguayan Bond | Fixed | 3.76% | 2021 | 2039 | UIU | 5 | ||||||||
1.00% Samurai Bond | Fixed | 1.00% | 2021 | 2026 | AUD | 30 | ||||||||
2.5% Euro Bonds | Fixed | 2.50% | 2021 | 2031 | NOK | 600 | ||||||||
3.78% Uruguayan Bond | Fixed | 3.78% | 2021 | 2038 | UIU | 9 | ||||||||
Brazilian Real Bond | Index-linked | N.A. | 2021 | 2033 | BRL(16) | 215 | ||||||||
Brazilian Real Bond | Index-linked | N.A. | 2021 | 2026 | BRL | 70 | ||||||||
0.30% Euro Yen Bonds | Fixed | 0.30% | 2021 | 2031 | JPY | 3,000 | ||||||||
Brazilian Real Bond | Index-linked | N.A. | 2021 | 2033 | BRL | 239 | ||||||||
Brazilian Real Bond | Index-linked | N.A. | 2021 | 2026 | BRL | 80 | ||||||||
3.54% Mexican Bond | Fixed | 3.54% | 2021 | 2031 | MXN UDI(17) | 211 | ||||||||
Euro Bond | Floating | SOFR + 0.62% | 2021 | 2024 | USD | 400 | ||||||||
0.45% Japanese Bond | Fixed | 0.45% | 2021 | 2028 | JPY | 20,000 | ||||||||
0.32% Japanese Bond | Fixed | 0.32% | 2021 | 2027 | JPY | 5,500 | ||||||||
0.09% Japanese Bond | Fixed | 0.09% | 2021 | 2024 | JPY | 3,000 | ||||||||
0.22% Japanese Bond | Fixed | 0.22% | 2021 | 2026 | JPY | 5,000 | ||||||||
3.20% Uruguayan Bond | Fixed | 3.20% | 2021 | 2037 | UIU | 7 | ||||||||
3.61% Uruguayan Bond | Fixed | 3.61% | 2021 | 2039 | UIU | 1 | ||||||||
4.26% Uruguayan Bond | Fixed | 4.26% | 2021 | 2039 | UIU | 6 | ||||||||
3.78% Uruguayan Bond | Fixed | 3.78% | 2021 | 2038 | UIU | 12 | ||||||||
Brazilian Real Bond | Index-linked | N.A. | 2021 | 2026 | BRL | 261 | ||||||||
Brazilian Real Bond | Index-linked | N.A. | 2021 | 2026 | BRL | 40 |
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Title | Interest Rate | Coupon | Date of Agreement of Issue | Year of Final Maturity | Currency | Principal Amount Outstanding as of June 30, 2022 (in millions) | ||||||||
Brazilian Real Bond | Index-linked | N.A. | 2021 | 2033 | BRL | 163 | ||||||||
2.16% Australian Bond | Fixed | 2.16% | 2021 | 2031 | AUD | 65 | ||||||||
1.92% Euro Bond | Fixed | 1.92% | 2021 | 2031 | USD | 50 | ||||||||
3.90% Uruguayan Bond | Fixed | 3.90% | 2021 | 2040 | UIU | 8 | ||||||||
3.76% Uruguayan Bond | Fixed | 3.76% | 2021 | 2039 | UIU | 4 | ||||||||
3.78% Uruguayan Bond | Fixed | 3.78% | 2021 | 2038 | UIU | 7 | ||||||||
4.26% Uruguayan Bond | Fixed | 4.26% | 2021 | 2039 | UIU | 2 | ||||||||
3.61% Uruguayan Bond | Fixed | 3.61% | 2021 | 2039 | UIU | 2 | ||||||||
1.25% Yankee Bond | Fixed | 1.25% | 2021 | 2024 | USD | 1,000 | ||||||||
3.20% Uruguayan Bond | Fixed | 3.20% | 2021 | 2037 | UIU | 7 | ||||||||
0.46% Swiss Franc Bonds | Fixed | 0.46% | 2022 | 2027 | CHF | 350 | ||||||||
2.25% Yankee Bond | Fixed | 2.25% | 2022 | 2027 | USD | 650 | ||||||||
0.60% Samurai Bond | Fixed | 0.60% | 2022 | 2032 | JPY | 7,200 | ||||||||
3.64% Uruguayan Bond | Fixed | 3.64% | 2022 | 2039 | UIU | 2 | ||||||||
6.8% Mexican Bond | Fixed | 6.82% | 2022 | 2031 | MXN | 7,500 | ||||||||
9.0% Mexican Bond | Fixed | 9.00% | 2022 | 2027 | MXN | 2,000 | ||||||||
3.64% Uruguayan Bond | Fixed | 3.64% | 2022 | 2039 | UIU | 4 | ||||||||
4.04% Uridashi Bond | Fixed | 6.82% | 2022 | 2027 | NZD | 22 | ||||||||
3.40% Uridashi Bond | Fixed | 3.40% | 2022 | 2027 | AUD | 12 | ||||||||
2.81% Uridashi Bond | Fixed | 2.81% | 2022 | 2027 | USD | 7 | ||||||||
3.61% Uruguayan Bond | Fixed | 3.61% | 2022 | 2039 | UIU | 1 | ||||||||
4.26% Uruguayan Bond | Fixed | 4.26% | 2022 | 2039 | UIU | 4 | ||||||||
2.88% Uruguayan Bond | Fixed | 2.88% | 2022 | 2039 | UIU | 15 |
(1) | Euros |
(2) | Hong Kong Dollars |
(3) | Japanese Yen |
(4) | Australian Dollars |
(5) | Swiss Francs |
(6) | Norwegian Kroner |
(7) | Canadian Dollar |
(8) | Indian Rupee |
(9) | Mexican Pesos |
(10) | Indonesian Rupiah |
(11) | Colombian Pesos |
(12) | Uruguayan Indexed Units |
(13) | Uruguayan Pesos |
(14) | Kazakhstan tenge |
(15) | New Zealand Dollar |
(16) | Brazilian Real |
(17) | Mexican Indexed Units |
Subsequent Events related to supplementary information:
• | On July 13, 2022, CAF issued bond for EUR 500.0 million, 2.375% due 2027, under its EMTN program. |
• | On July 13, 2022, CAF issued bonds for AUD 55 million, 5.00% due 2029, under its EMTN Program. |
• | On July 29, 2022, CAF issued bonds for UIU 4.6 million, equivalent to USD 0.8 million, 3.61% due 2039, under its Uruguay Local Debt Program. |
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• | On August 1, 2022, CAF issued bonds for UIU 8.3 million, equivalent to USD 1.1 million, 3.20% due |
2037, under its Uruguay Local Debt Program.
• | On August 12, 2022, CAF issued bonds for UIU 3.2 million, equivalent to USD 431.5 thousand, 4.26% due 2039, under its Uruguay Local Debt program. |
• | On August 29, 2022, CAF issued bonds for EUR 110.0 million, 2.715% due 2046, as a private issuance under German NSV format. |
• | On August 31, 2022, CAF issued bonds for CHF 225.0 million, 2.08% due 2028, under its Medium Term Note program. |
• | On September 23, 2022, CAF issued bonds for UIU 12.8 million, equivalent to USD 1.7 million, 2.88% due 2039, under its Uruguay Local Debt Program. |
• | On September 30, 2022, CAF issued bonds for USD 200.0 million, 3.50% (with a step-up coupon of 0.5% every five years) due 2042, under its Medium Term Note program. |
• | On September 30, 2022, CAF issued bonds for MXN UDI 99.6 million, equivalent to USD 36.7 million, 4.83% due 2042, under its Medium Term Note program. |
• | On 22 August 2022, the Shareholders’ Assembly approved Honduras and Chile as full member shareholder countries effective after they meet all the necessary requirements. As of the date of these financial statements, Honduras and Chile must fulfill certain pending requirements in order to formalize their respective change of status to full member shareholder country. |
• | During the months of July, August and September 2022, CAF repurchased a total of 4,667 shares from Venezuela, totaling USD 66.3 million. |
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LOANS FROM COMMERCIAL BANKS, ADVANCES, DEPOSITS, COMMERCIAL PAPER AND REPURCHASE AGREEMENTS
Title | Interest Rate | Date of Agreement of Issue | Year of Final Maturity | Currency | Principal Amount Outstanding as of June 30, 2022 | |||||||
(in USD millions) | ||||||||||||
Medium and Long-term Loans | Various | Various | Various | Various | 1,705.3 | |||||||
Deposits | Floating | Various | Various | Various | 4,806.0 | |||||||
Commercial Paper | Floating | Various | Various | USD | 3,906.5 |
LOANS FROM MULTILATERALS AND BILATERALS, EXIMS AND EXPORT CREDIT AGENCIES
Title | Interest Rate | Date of Agreement of Issue | Year of Final Maturity | Currency | Principal Amount Outstanding as of June 30, 2022 (in USD millions) | |||||||
Agencia Francesa de Desarrollo — AfD | Various | Various | Various | Various | 359.1 | |||||||
Banco Bilbao Viscaya IBF | Floating | 07/30/2020 | 08/08/2023 | USD | 200.0 | |||||||
Interamerican Development Bank — IDB | Fixed | 05/24/1997 | 05/24/2023 | USD | 0.3 | |||||||
Cassa Depositi e Prestiti S.P.P.A | Floating | Various | Various | EUR | 200.8 | |||||||
Financiera de Desarrollo Nacional S.A. | Fixed | Various | Various | COP | 32.2 | |||||||
Instituto de Crédito Oficial — ICO | Floating | Various | Various | USD | 255.0 | |||||||
JBIC, Japan | Floating | Various | Various | USD | 144.1 | |||||||
KfW (Germany) | Various | Various | Various | USD | 528.8 | |||||||
Nordic Investment Bank | Floating | Various | Various | USD | 15.8 |
GUARANTEED DEBT
Borrower | Date of Issue | Year of Final Maturity | Principal Amount Outstanding as of June 30, 2022 (in USD millions) | |||||||||
Isolux Corsan Argentina S.A. | 15/09/2011 | 15/09/2023 | 34.6 | |||||||||
Republic of Peru | 13/02/2006 | 13/02/2025 | 28.0 | |||||||||
H2Olmos S.A. | 24/10/2012 | 25/10/2032 | 25.6 | |||||||||
Planta de Reserva Fría de Generación de Eten S.A | 05/12/2013 | 05/12/2033 | 21.8 | |||||||||
Promotora de infraestructura registral, S.A de C.V SOFOM | 23/08/2010 | 23/08/2030 | 12.2 | |||||||||
ATN 3 S.A. | 21/06/2013 | 21/06/2023 | 5.0 |
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USD 800,000,000
CORPORACIÓN ANDINA DE FOMENTO
5.250% Notes Due 2025
PROSPECTUS SUPPLEMENT
Joint Book-Running Managers
Barclays | Citigroup | Daiwa | J.P. Morgan |