CAF, the Andean Paradox
CAF, the regional development bank, addresses analysts' concerns over the stability of its borrowers. CAF's management says its preferred-creditor status is strong and sufficient to prevent a default on its loan portfolio.
The Andean Development Corp. (CAF) is an unusual
organization. It is a development bank with a coveted
investment grade, even though it is majority-owned by five
poorly rated Andean governments, which are also its principal
clients. CAF lends more money to the Andean region, the most
turbulent in Latin America, than any other international
agency. But, although CAF has almost $7 billion in loans
outstanding to these countries, it has never suffered a
sovereign default in its 37-year history. Since its member
countries - Bolivia, Colombia, Ecuador, Peru and Venezuela -
have all experienced severe economic and political stress in
the last two years, one might expect CAF be in relatively poor
shape. Indeed, to the alarm of its investors, in February
Standard & Poor's changed its outlook on CAF, which it
still rates A, to negative from stable, warning that at the end
of last year, "more than 53%...
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