Interview: Enrique García, Executive Director, CAF
When CAF-Development Bank of Latin America was created to promote development and integration among countries in the Andean region of Latin America 47 years ago, the bank’s membership extended to just five countries. Adam Pitt spoke with Enrique García, Executive President of CAF, about the changes he has overseen and how the institution has transformed itself into one of the biggest providers of infrastructure finance in the world You were first elected Executive President of CAF in 1991 and have been in office ever since. What changes have you led within the organisation and what do you see as your key achievements? What are the current challenges facing CAF in fulfilling its mandate? If you go back 25 years to when I started working with CAF, the bank had assets of around US$800 million and on a yearly basis, approvals accounted for US$400 million – 85 percent of which was used to support trade finance. Today, we have assets of US$33 billion and in the last three years, we’ve been approving US$11 billion annually. To put this into perspective, the Inter-American Development Bank (IDB) approves US$13 billion and the World Bank US$9 billion. We have also grown to 19 countries, with a few possible additions coming in the near future. Our investment rating has also been upgraded 14 or 15 times, allowing the bank to borrow at competitive rates and in turn, provide good financing to members. However, this was not always the case. When I came to CAF, I saw a very good institution with great possibilities, but I also saw its work was concentrated on five countries. I knew this was not a viable proposition in the long run, so the question that I had to ask myself was: ‘What could I achieve in this institution?’ My first of three goals was to expand the institution to other Latin America and the Caribbean countries. At that time CAF had a good reputation in trade finance and played a very positive role during the debt crisis in the 1980s, but that’s not the main goal or objective of a development bank. So my second goal was to focus on areas that have impact and relevance for development. The Inter-American Development Bank, the World Bank and other institutions prioritised poverty reduction and social welfare, and infrastructure sort of became a second priority, under the assumption that it would be taken care of by the private sector. This presented a window of opportunity, which we took. My third goal was financial independence and to do that we had to enter the capital markets. Now, these things sounded crazy when I mentioned them on my first day in the job, and it looked like I was dreaming a little bit. People said: ‘It seems he still thinks that he is the treasurer of the IDB’. However, when you look at it, the trigger that made success possible, the reason that countries like Brazil decided to become a stockholder and later a member of CAF was precisely because of the role that CAF has had in infrastructure. And of course the fact we could bring Brazil on board meant Mexico and others joined, and Chile returned. In addition to these achievements, in the 24 years I have been in CAF, I have never had any political pressure to approve things that are not reasonable and I have had no pressure to appoint staff. Plus, in the history of CAF we’ve never had a default from any country. We have no arrears and any arrears in the private sector are low because of our portfolio.
In 2014, CAF approved US$11.7 billion in development projects for the Latin America and Caribbean region, raising the figure of approvals over the last five years (2010-2014) to US$53.7 billion. During this post-recession era, what have been your investment priorities and what are the biggest opportunities for accelerating development in the region? I mentioned infrastructure and the nature of the institution means that this is an area for which CAF is perhaps best known because we have become number one in Latin America. But in the last 25 years, we have also built very good capacity in the social sectors, in education, in health, and in supporting private sector enterprises in industry, mining, manufacturing, and services. To achieve this, the instruments we have been developing include grants and short, medium, and long-term corporation loans, but we have also been developing equity instruments directly with companies. Through this cooperation we’re exploring special purpose vehicles that have the potential to be able to mobilise resources that reflect the catalytic role an institution like CAF can have in expanding the capacity of financing. In the last five or six years, we’ve also put a lot of emphasis on environmental issues in our efforts to support what we call a comprehensive agenda of development. This is based on the philosophy at CAF, which governs our support for initiatives that will foster higher, less volatile, and good quality growth in Latin America. Good quality implies that it’s both stable, efficient in micro-economic terms, inclusive and capable of providing opportunities for the majority of citizens, and that it is environmentally sustainable. Within this context we’re respectful of the priorities of our member countries. For example, there are countries that have a more market-orientated focus, that’s good. Others prefer more state intervention, that’s also fine as long as projects and programmes proposed are environmentally sound. CAF was one of the founder members of the International Development Finance Club in 2011, which brings together 23 regional and national development institutions with German development bank KfW as chair. Are there plans for the IDFC to provide financing itself for development projects or for groups of members to provide joint lending beyond existing alliances?
We have a good relationship with development institutions around the world, including the World Bank, the IDB, and going beyond the region we also have a strong relationship with the Asian Development Bank. As one of the founders of the IDFC, we are able to co-finance a number of projects with banks in China, Japan, Russia, in Africa and Latin America. In working together we put a lot of emphasis on environmental issues and we have a very important presence around the world. In the General Assembly that took place in New York last year, I had the chance to share insights into how we [IDFC members] have been financing over US$90 billion in programmes and projects that will have a green concept every year as a group. We have committed to move beyond US$100 billion starting from 2015. So that’s something we are doing and while we are in different places around the world, we work as though we are in the same building.
by Adam Pitt
Next week Enrique Garcia will speak about lending to Cuba, COP21, and CAFs agenda for 2016. Want to receive updates on Development Finance news? Subscribe here.
Photo: CAF

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