Institutional Presentation - Central American Bank for Economic Integration October 2016 - BCIE

 
Institutional Presentation - Central American Bank for Economic Integration October 2016 - BCIE
Institutional Presentation
Central American Bank for Economic Integration

                                                 October 2016
Institutional Presentation - Central American Bank for Economic Integration October 2016 - BCIE
Central American Bank for Economic Integration

INDEX

                              1. Macroeconomic Overview

                              2. CABEI’s Role and Policy Importance

                              3. Equity and Profitability

                              4. Funding and Liquidity

                              5. Credit Risk Management

                              6. Comparison with other MDBs - Rating
                                                                       2
Institutional Presentation - Central American Bank for Economic Integration October 2016 - BCIE
Central American Bank for Economic Integration
Fact Sheet

                                                                             Guatemala
   Key Economic Facts
   Extension: 547,352 km2                                                    El Salvador

   Population: 55.4 million, over 70% below 39 years of age                  Costa Rica
   Population density: 86.63 people per km2                                   Honduras
   Population Growth: 1.28%
                                                                              Nicaragua
   Regional GDP: US$263 billion
                                                                                  Belize

                                                                                Panama
    Central America is home to 7% of the planet’s biodiversity and
     exhibits great geological, geographic, climatic and biotic diversity.   Dominican
                                                                              Republic     3

    Privileged situation in terms of annual regional water availability
     with an estimated 23 thousand cubic meters per inhabitant.

    The agricultural sector is one of the main drivers of the region’s
     economy, accounting for approximately 11% of GDP; this share
     grows to 18% when agro-industry is included. It is the main source
     of food and industrial inputs and produces 35% of the region’s
     exports.

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Institutional Presentation - Central American Bank for Economic Integration October 2016 - BCIE
Central American Bank for Economic Integration
Key Statistics for Central America: Economic Outlook

                                                                                            During 2000-2007, higher inflation rates were observed across
                   During 2000-2007, average economic growth rate of CA region was          LATAM averaging 7.2% - CA region reached 7.9%.
                    3.9% , whereas LATAM reached 3.6%.
                   After the economic crisis, average growth rate of CA declined to        During 2008-2014, inflation gap between both regions decreased.
                    2.7% - LATAM reached 3.0%.                                               LATAM inflation was reported at 6.7% - CA inflation at 5.5% .
                   The forecast for economic growth for 2015-2016 in Latin America is
                                                                                            The projections for 2015-2016 estimate that LATAM will be around
                    around 0.26% whereas Central America’s forecast is 3.5%.
                                                                                             11.3%; while CA will be 2.9%.

                                 Latin America: Economic Growth                                                 Latin America: Inflation
                                          (Percentage)                                                                (Percentage)
            5.0                                                                          12.0

            4.0                                                                          10.0

                                                                                          8.0
            3.0
                                                                                          6.0
            2.0
                                                                                          4.0
            1.0                                                                           2.0

            0.0                                                                           0.0
                        2000-2007              2008-2014              2015-2016                     2000-2007              2008-2014            2015-2016
                      Latin America and the Caribbean           Central America                  Latin America and the Caribbean           Central America

                                                                                                                                                                4
Institutional Presentation - Central American Bank for Economic Integration October 2016 - BCIE
Central American Bank for Economic Integration
Key Statistics for Central America : Economic Outlook

                                                                                                During 2000-2007, most of CA countries reported fiscal deficits around
              Growth in Central government debt is one of the major concerns for
                                                                                                 LATAM´s regional average (3.0%).
               LATAM and CA authorities.
                                                                                                The impact of recent economic crisis affected the fiscal position of CA
              Public debt has been increasing in order to finance fiscal budget gaps.
                                                                                                 countries. Local authorities keep making and implementing important
               Local governments top this issue in their agendas.
                                                                                                 policy measures.

                                Central America: CG Debt                                                          Central America: Fiscal Deficit
                                  (Percentage of GDP)                                    8.0                          (Percentage of GDP)
       140
                                                                                         7.0
       120
                                                                                         6.0
       100
                                                                                         5.0
        80
                                                                                         4.0
        60                                                                               3.0
        40                                                                               2.0
        20                                                                               1.0
         0                                                                               0.0
                  2000-2007                2008-2014                 2015-2016                         2000-2007                  2008-2014                 2015-2016

             Costa Rica                 El Salvador                Guatemala                           Costa Rica                 El Salvador             Guatemala
             Honduras                   Nicaragua                 LAC                                  Honduras                   Nicaragua               LAC

                                                                                                                                                                           5
Institutional Presentation - Central American Bank for Economic Integration October 2016 - BCIE
Central American Bank for Economic Integration
Vulnerabilities: Central America vs South America

                                                       Given South America’s dependence on hard
                                                    commodity exports, the sub-region has a relatively
                                                    high exposure to a drop in hard commodity prices.

                                                     The situation is different for countries in Central
                                                    America, as it could actually benefit from a drop in
                                                       commodity prices, especially energy prices.

                                                      Central America depends more on economic
                                                    conditions in the U.S., as it is its main commercial
                                                           partner and source of remittances.

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Institutional Presentation - Central American Bank for Economic Integration October 2016 - BCIE
Central American Bank for Economic Integration
Central America: Trade Integration Agreements and Regional Initiatives

         Following substantial work towards regional trade integration over the last half century, Central America has emphasized multilateral initiatives that underpin integration:

                       Initiatives                       Year approved                                                            Benefits

        Free trade agreement between Chile          Formally signed October     Improved hemispheric integration.
        and Central America                                 of 1999             Improved rules for the investments promotion.
                                                                                Create an expanded and secure market for the goods produced.

        Free trade agreement between Panama          Formally signed March      Improved commercial relationship in the region.
        and Central America                                 of 2002             Increased the economic and social development.
        Central America* – USA Free Trade            Formally signed May of     Improved commercial relationship in the region.
        Agreement                                             2004              Increased the market access.
        (DR-CAFTA)                                                              Encouraged a complementary agenda for Central America Region.

        Free trade agreement between Mexico             Formally signed         Improved the competitiveness between Central America en Mexico.
        and Central America                            November of 2011         Increased the economic and social development.
                                                                                Removed commercial barriers and facilitated the trade between Central America and Mexico.

        The European Union - Central America        Formally signed June of     Improved commercial and cooperative relationship between regions.
        Association Agreement (EU-CAAA)                      2012               Increased social development in the Central America Region.

        Free trade agreement between Korea             Under Negotiation        On June 18th 2015, Central American countries and Korea launched negotiations towards a free trade
        and Central America**                                                   agreement. The first round of negotiations for the CA-Korea FTA took place on September 2015, in Seoul,
                                                                                Korea. The second round of free trade negotiations was held on November 2015, in San Salvador, El
                                                                                Salvador. The third round of free trade negotiations between Central America and Korea was held from 22-
                                                                                26 February 2016 in San Francisco, United States. Further talks regarding this free trade agreement took
                                                                                place on March and April 2016 in Seoul, Korea. CABEI is supporting the process through a non-refundable
                                                                                cooperation granted to the Central American countries.
     *Includes Dominican Republic                                                                                                                                                          7
     **Includes Panama
Institutional Presentation - Central American Bank for Economic Integration October 2016 - BCIE
Central American Bank for Economic Integration

INDEX

                              1. Macroeconomic Overview

                              2. CABEI’s Role and Policy Importance

                              3. Equity and Profitability

                              4. Funding and Liquidity

                              5. Credit Risk Management

                              6. Comparison with other MDBs - Rating
                                                                       8
Institutional Presentation - Central American Bank for Economic Integration October 2016 - BCIE
Central American Bank for Economic Integration
CABEI's Objective

                                                 CABEI's Objective
                                     Article No. 2 of the Constitutive Agreement:

                       The Bank’s objective shall be to promote the economic integration and
                       the balanced economic and social development of the Central American
                       region, which includes the founding countries and the non-founding
                       regional countries.

                                                                                               9
Institutional Presentation - Central American Bank for Economic Integration October 2016 - BCIE
Central American Bank for Economic Integration
About CABEI: Member Countries

           Supranational development bank focused on                                                                      Dominican
            Central America, founded in 1960                                                          Belize
                                                                                                                            Republic

           Headquartered in Tegucigalpa, Honduras                                                       Honduras
                                                                               Guatemala
           Founding Members:                                                                                  Nicaragua
               El Salvador                                                            El Salvador
               Guatemala                                                                                                  Panama
               Honduras                                                                          Costa Rica
               Nicaragua
               Costa Rica

           Non-Founding Regional Members:                                                                                 Mexico
              Dominican Republic (2007)
              Panama (2007)
              Belize (2006) (*)
                                                                                                                                                     Spain
           Non-Regional Members:
                                                                                                                           Colombia
              ROC Taiwan (1992)
              Mexico (1992)                                                   Founding Members
              Argentina (1995)                                                Non-Founding Regional Members
              Colombia (1997)                                                 Non-Regional Members
              Spain (2005)

                                                                                                                                       Argentina   ROC (Taiwan)
    (*) As of November 9, 2016, Belize became a non-founding regional member
                                                                                                                                                                  10
Central American Bank for Economic Integration
About CABEI: Organizational Structure

                                                                        Board of
                                                                       Governors

                                                                                            CABEI has 321 employees situated at its
                         On July 15th, 2013, CABEI's Board
                                                                                            headquarters in Tegucigalpa and its 5
                         of Governors re-elected Dr. Nick
                                                                   Board of Directors       regional offices (1 regional office for
                         Rischbieth as CABEI's Executive
                                                                                            each Founding Member Country). In the
                         President for a new five-year
                                                                                            short term, the Bank expects to open two
                         period beginning December 1st,
                                                                                            additional regional offices, one in
                         2013 and ending on November
                                                                                            Panama and the other in Dominican
                         30th, 2018.
                                                                                            Republic.
                                                                   Executive President

                                                                 Executive Vice-President

                      Operations and                                   Financial                                         Credit
                                               Sector and                                   Risk Management
                       Technology                                     Management                                      Management
                                            Countries Division                                   Division
                         Division                                       Division                                        Division
                                                                                                                                       11
Central American Bank for Economic Integration

About CABEI: CABEI’s Preferred Creditor Status

                                                          As a supranational institution and under its Constitutive Agreement, CABEI has
                                                          been accorded in the territory of its member states Preferred Creditor Status.

                              (*) Average ratings based on the individual ratings assigned to Guatemala, El Salvador, Honduras, Nicaragua and Costa Rica by Moody's Investors Service.

         September 2015: “The bank benefits from similar privileges and immunities granted to other multilateral development banks (MDBs). As CABEI is the main provider of long-term
         funding in the region, Fitch Ratings assumes that member countries, even if experiencing severe difficulties, will continue to honour CABEI‘s preferred creditor status and exempt its
         private-sector borrowers from any measures that may affect the transfer and/or convertibility of their debt service payments.”

         June 2015: “Moody's assessment of borrower quality takes into consideration not only the sovereign ratings of the borrowers, but also the likelihood that they will continue to extend
         to CABEI its 'most preferred' creditor status. Based on historical experience, we deem this to be highly likely, more so given CABEI’s critical role as the main source of official
         multilateral financing for the region.”
                                                                                                                                                                                                  12
Central American Bank for Economic Integration
About CABEI: CABEI’s Preferred Creditor Status

                       As a supranational institution and under its Constitutive Agreement, CABEI is granted preferred creditor status
                       on the territory of its member states .

                      All of CABEI’s assets and properties are considered public international property and are immune from search,
                      requisition, confiscation, expropriation or any other form of apprehension or forced alienation by executive or
                      legislative action.

                     CABEI, its income, property and other assets, as well as the operations and transactions it carries out pursuant to
                     its Constitutive Agreement, shall be exempt from all taxation and from all custom duties or other charges of a
                     similar nature. CABEI shall also be exempt from any obligation relating to the payment, withholding or collection
                     of any tax, contribution or duty.

                     No tax or lien may be levied on any obligation or securities issued or guaranteed by CABEI, including any dividend
                     or interest thereon, by whomsoever held.
                                                                                                                                           13
Central American Bank for Economic Integration

CABEI is the dominant MDB in the Central American Region

                                                    CABEI, IADB and World Bank participation (%) of total
                                                disbursements to the Region¹ in the last ten years (2005-2014)

                                                                                                                            1 Includes Guatemala, El Salvador, Honduras,
                                                                                                                            Nicaragua and Costa Rica
                                                                                                                            * Includes CII & FOMIN,
                                                                                                                            ** Includes IFC & IDA,
                                                                    Total Disbursements 2005-2014:                          Source: www.iadb.org, www.worldbank.org
                                                                             US$28.0 billion                                CABEI.

               Through the years CABEI has consolidated its role as the Multilateral Development Bank with the most relevant presence in the Central American region.

               This consolidation has been mainly derived from the Preferred Creditor Treatment conferred to CABEI by its member countries.

                                                                                                                                                                           14
Central American Bank for Economic Integration

Rising importance of CABEI in the region.

              Since its creation, CABEI has disbursed over US$24.4 billion to the Central American region.

              More than 57% of those disbursements have taken place over the past 10 years.

              During periods when several multilateral development banks have frozen disbursements to some Central American countries (Nicaragua, Honduras and
               Guatemala), CABEI continued to fulfill its mandate, thus strengthening the Preferred Creditor Treatment conferred to it by its member countries.
                                                                                                                                                                  15
Central American Bank for Economic Integration
SICA Member Countries

         CABEI / New Members

         SICA’s purpose is to achieve the integration of Central
         America for the Isthmus to become a Region of Peace,
         Freedom, Democracy and Development.

         CABEI is SICA’s financial arm.

                                                                   16
Central American Bank for Economic Integration
Modifications to CABEI´s Constitutive Agreement

              On February 12th, 2015 CABEI’s Board of Governors approved amendments to the Constitutive Agreement with three main objectives:

                                                                                                                  On January 25th, the Legislative
                                                                                                                   Assembly of Costa Rica ratified the
                                                                                                                   modifications to CABEI's Constitutive
                                                                                                                   Agreement.
                                                                                                                  These reforms became effective on June
                                                                                                                   9, 2016, given that literal d) Article 35 of
                                                                                                                   CABEI’s Constitutive Agreement, states
                                                                                                                   that such reforms shall become effective
                                                                                                                   for all its members three (3) months after
                                                                                                                   the date of its official communication,
                                                                                                                   which occurred on March 8, 2016; after
                                                                                                                   the publication of the respective law
                                                                                                                   (No.9350) on Costa Rica’s Official
                                                                                                                   Gazette.
                                                                                                                  Following the change made in Article No.
                                                                                                                   2 of the Constitutive Agreement, now all
                                                                                                                   the member countries of CABEI can be
                                                                                                                   recipients of financing from the Bank to
                                                                                                                   attend programs and projects.

                                                                                                                                                             17
Central American Bank for Economic Integration

                          Regional Projects & Loan Portfolio
                              Diversification Initiatives
                            Over 50 years promoting regional integration

                                                                           18
Central American Bank for Economic Integration
Approvals and Disbursements – June 2016

                                                                   19
                                                 *6 month period
Central American Bank for Economic Integration
Operations by Country & Focus Area: June 2016 Approvals and Disbursements

                                                                            20
Central American Bank for Economic Integration
Operations: Over 50 years promoting regional integration

      CABEI approved ​road infrastructure projects in the                                                             Approvals of more than US$3,800 millions in Energy
      region for US$4,905 millions.                                                                                   Projects.
      Total paved kilometers funded amounted to 4,100                                                                 Increased installed capacity for approximately 4,100
      km., representing 4.2% of total roads.                                                                          MW from 1970-2014, or more than 45.0% of the 2014
                                                                                                                      total.
      Widening and reconstruction of more than 6,000 km.,
      or 6.4 % of paved roads.                                                                                        This installed capacity accounted for more than 30.0%
                                                                                                                      of the total power generated.
      Results:
           Physical integration                                                                                      Funding for the energy sector, focused mainly on
           More efficient transportation for goods and                                                               renewable energy.
             people between countries and cities.
           Increased value of the agricultural, industrial,                                                          Renewable energy funded by CABEI produced savings
             commercial and tourism sectors.                                                                          of US$1,600.0 millions in imported hydrocarbons.

                                                               CABEI has funded more than US$8,686 millions to
                                                               support various programs to impact: micro, small and
                                                               medium size enterprises (SMEs), educational loans,
                                                               housing municipalities, foreign trade, productive
                                                               sectors and financial sector strengthening.
                                                               Disbursements aimed at Programs for SMEs,
                                                               education and social housing have benefited more
                                                               than 971,000 end users.
                                                               CABEI has supported the most vulnerable population
                                                               sectors through microfinance, allowing the Bank to
                                                               reach the poorest households in rural areas, thereby
                                                               promoting social and economic development in
                                                               Central America.
      Central American Road Map                                                                                       Central American Electrical Interconnection

                                                                                                                                                                              21
Central American Bank for Economic Integration
Operations: Notable projects under the Mesoamerican Project

      Social Housing Initiative                                                                                                             Transportation and Facilitation of Trade:
      Integration Goal:                                                                                                                     Integration Goal:
      The program supports low cost housing, develops institutional                                                                         International Network of Mesoamerican Highways (RICAM),
      capacity, and regional and national financial instruments.                                                                            Sea Transport Project (TMCD) and Mesoamerican Multimodal
                                                                                                                                            Transportation System (STMM), focus on more efficient
      This program is executed by CABEI with the advice and partial                                                                         transport of people and goods.
      financial support (19.4%) of the Mexican Government, within
      the Mesoamerican Project initiative.                                                                                                  CABEI's Investment:
                                                                                                                                            CABEI's investment is about US$1,287 millions. Beneficiary
      CABEI's Investment:                                                                                                                   countries: Belize, Guatemala, El Salvador, Honduras, and
      CABEI is providing more than US$222.99 millions through its                                                                           Nicaragua.
      network of 101 regional public and private sector financial
      intermediaries.                                                                                                                       Impact:
                                                                                                                                            More than 500km of roads.
      Impact:                                                                                                                               Generation of more than 3,000 permanent and temporary
      This program provides housing for 48,912 low-income                                                                                   jobs. Daily use of these roads is by more than 170 thousand
      families, distributed amongst the five countries of the region.                                   Energy Interconnectivity            people.

      Social Housing                                                    Integration Goals:                                                  Road Network
                                                                        The SIEPAC has two main goals: (a) support the creation and
                                                                        consolidation of the Regional Electricity Market (MER) with
                                                                        the creation and establishments of legal, institutional and
                                                                        technical mechanisms, which will enable an easier
                                                                        participation of the private sector in the energy sector, and (b)
                                                                        to establish the regional interconnected electricity lines that
                                                                        will allow electricity exchanges between all MER actors.
                                                                        CABEI's Investment:
                                                                        CABEI's investment is about US$100.0 millions, which
                                                                        represents 20.0% of the total project investment.
                                                                        Impact:
                                                                        Increase electricity coverage in the energy integration region.
                                                                        Implemented regional projects increasing installed capacity
                                                                        by 300 MW. Jobs generation during construction phase will
                                                                        be more than 2,000 jobs (700 permanent). Construction of
                                                                        road access related to the electricity lines.

                                                                                                                                                                                                          22
Central American Bank for Economic Integration
Loan Portfolio Diversification: Approvals during 2015

     Program for the Strengthening of Research and Development                                                                            Honda-Puerto Salgar-Girardot Highway (Republic of
     Capacities, (PROFOCAID, for its acronym in Spanish)                                                                                  Colombia)
     (Argentine Republic)
                                                                                                                                          The Project involves the rehabilitation and improvement of
     The program consists of the allocation and transfer of grants to                                                                     190 km of highway, the construction of 32 bridges and the
     research institutions and / or professionals in research and                                                                         reconstruction of other 26 existing bridges, with the objective
     development, to carry out research projects in order to expand                                                                       of improve the accessibility to the Center-South Region of
     the frontiers of knowledge, aiming for exponential multiplier                                                                        Colombia. The project is part of the Fourth Generation
     effect on the competitiveness of the Central American region.                                                                        Program of Road Concessions, promoted by the Government
     As part of the components of this program, 100 doctoral level of                                                                     of Colombia, in the framework of its National Development
     studies scholarships will be awarded to Central Americans to                                                                         Plan 2014-2018.
     study in Argentina.
                                                                                                                                          CABEI Investment:
     CABEI Investment:                                                                                                                    The amount to be financed by is CABEI US$136.0 million.
     CABEI will partially finance the program with an approved
     amount of up to US$50.0 million.
                                                                                                                                          RANC

                                                                        Line 2 of the Panama Metro (Republic of Panama)
                                                                        The overall objective of the Project is to provide an agile,
                                                                        efficient and clean transportation system to improve the
                                                                        country's competitiveness and the quality of life for residents
                                                                        and visitors of Panama City, through a fast, economic, safe and
                                                                        reliable transportation system.

                                                                        CABEI Investment:
                                                                        The amount to be financed by CABEI is US$200.0 million.

                                                                                                                                                                                                      23
Central American Bank for Economic Integration
Loan Portfolio Diversification: Approvals during 2015

              During 2015, CABEI’s loan approvals in regional non-founding and extra-regional member countries reached US$406 million, or 22% of total approvals.
              Such level of approvals begins the loan portfolio diversification process, established as an objective under the amendments to CABEI’s Constitutive Agreement.
              For 2016, 25% (US466 million) of the projected loan approvals are expected to be for non-founding members

                                                                                                                                                                           24
Central American Bank for Economic Integration

                            2015-2019 Institutional Strategy

                                                               25
Central American Bank for Economic Integration
Operations: 2015-2019 Institutional Strategy

                                           The Institutional Strategy seeks to maximize the impact of CABEI's operations on:

                                                          Sustainable Economic Development of the Region.

                                    Sustainable Development Goals (SDGs) of the of the 2030 Agenda for Sustainable Development.

                                                                                                                                   26
Central American Bank for Economic Integration
Operations: 2015-2019 Institutional Strategy - Focus Areas

                                     Productive Infrastructure      Energy

                                     Financial Intermediation and   Rural Development and the
                                     Development Finance            Environment

                                     Human Development and
                                                                    Competitiveness Services
                                     Social Infrastructure

                                                                                                27
Central American Bank for Economic Integration
Diverse Range of Products and Clients

                                        Products                      Our Clients

                                         Loans

                                      Co-Financing                     Public
                                        A/B Loans                      Sector
                                       Guarantees

                                    Letters of Credit

                                  Working Capital Lines
                                                          Corporate                 Financial
                                       Trade Lines
                                                           Private                   Sector
                                        Factoring
                                                            Sector
                                  Pre-investment Loans

                                  Technical Cooperation

                                         Leasing

                                                                                                28
Central American Bank for Economic Integration
Strategic Objectives of the Institutional Strategy (2015-2019)

                                                                 29
Central American Bank for Economic Integration

INDEX

                              1. Macroeconomic Overview

                              2. CABEI’s Role and Policy Importance

                              3. Equity and Profitability

                              4. Funding and Liquidity

                              5. Credit Risk Management

                              6. Comparison with other MDBs - Rating
                                                                       30
Central American Bank for Economic Integration

                                                 Balance Sheet

                                                                 31
Central American Bank for Economic Integration
Balance Sheet

                                                     Balance Sheet as of June 30th, 2016
                                                                (US$ Million)

                                                 Assets                           Liabilities and Equity

                                         Total US$9,266                           Total US$9,266           32
Central American Bank for Economic Integration
Balance Sheet Structure

                                   5.1%
                           9.6%                                             5.7%
                                                         4.9%   7.4%
                                                 10.5%

                                                                       33
Central American Bank for Economic Integration
Financials: Balance Sheet – Loan Portfolio

                                                         As of June 30th, 2016
                                                 Total Loan Portfolio US$6,115 Million

                                                                                         Loan Portfolio by Country
                                      6.4%       0.6%

                                                                                                                     34
Central American Bank for Economic Integration
Financials: Balance Sheet – Loan Portfolio Distribution by Institutional Sector and Focus Area

                  Loan Portfolio by Institutional Sector                                                                        Loan Portfolio by Focus Area
                              (US$ million)

                                          CABEI’s loan portfolio is mainly in the public sector; which grants CABEI preferred creditor status.
                          Within the private sector, the portfolio has a greater proportion corresponding to the financial sector (with 55% ), in line with the
                                                                           trend observed over the past 5 years.

                                                                                                                                                                   35
Central American Bank for Economic Integration
Loan Portfolio – Institutional Sector Distribution

                  As a result of CABEI’s “Back to Basics” strategy, which looks to enhance public sector exposure, there has been a significant shift in the Bank´s loan
                   portfolio distribution by institutional sector. Consequently, private sector exposure has declined from a high of 44% in 2006 to 21% in June 2016.
                                                                                                                                                                            36
Central American Bank for Economic Integration

                                    Profits and Capitalization

                                                                 37
Central American Bank for Economic Integration
Consistent Profits

                 Moody’s: “Net income before provisions grew 35% year-on-year in 2015, the highest growth rate in record, with net income reaching US$159.5 million at
                  the end of the year, up from US$102.9 million. Given CABEI's policy of capitalizing retained earnings, this result will positively contribute to capital growth.”
                                                                                                                                                                                      38
Central American Bank for Economic Integration
Sound Financial Position

                                                     The capital adequacy ratio is the main pillar to assure
                                                                   CABEI’s financial soundness.

                                                  The bank has a strict capital adequacy requirement (35%).

                                                  CABEI also monitors the Capital Adequacy Ratio established
                                                    in Basel II and Basel III Accords; as of June 30th, 2016 the
                                                                       ratio reached 35.4%.

                                                                                                                   39
Central American Bank for Economic Integration
Panama and Dominican Republic Capital Increase

      Request from the Republic of Panama to increase its
                  share subscription in CABEI
                                                                                                                             Total Projected Capital
      As a response to the Constitutive Agreement modifications, on                                                              Installments
       December 14th 2015, the Republic of Panama, requested to                                                                    2016-2019
       increase in US$197.4 million its share subscription on CABEI’s                                                           US$117.9 million
       capital structure.

      Such request was approved by CABEI’s Board of Governors on
       February 12th 2016 by Resolution No. AG-3/2016.

      Request from the Dominican Republic to increase its
                  share subscription in CABEI
      As a response to the Constitutive Agreement modifications, on
       January 13th 2016, the Dominican Republic, requested to
       increase in US$197.4 million its share subscription on CABEI’s
       capital structure.
      Such request was approved by CABEI’s Board of Governors on
       February 12th 2016 by Resolution No. AG-4/2016.                   As a result of the capitalization scheme implementation approved in
                                                                          2009, as well as the capital increase requests conveyed by Panama and
     The aforementioned capital subscriptions will generate               the Dominican Republic, capital payments are now an important source
     new capital installments for the Bank for an aggregate               of capital; complementing the Bank’s consistent net income generation.
      amount of US$98.2 million to be received in 4 years;               All members are current with the payment of their respective capital
      exceeding by US$13.7 million the capital payments to                installments.
       be received as a result of the Capitalization Scheme
             implemented in 2012 (US$84.5 million).                                                                                              40
Central American Bank for Economic Integration
Capital Structure

                                                 Capital Structure as of September 30, 2016

                                                                                              41
Central American Bank for Economic Integration
CABEI’s Projected Capital Structure

                              Projected Capital Structure

                                                            Assumptions:
                                                             Projections include the increase of the share subscription
                                                              of Dominican Republic on CABEI’s capital structure.
                                                             Includes the transformation of the Special Contributions
                                                              made by Belize to “B” Series Shares.

                                                               With the increase of share subscriptions of non-
                                                                founding regional countries, participation of the
                                                                founding member countries goes from 64.4% to
                                                                59.2%.
                                                               Panama´s and the Dominican Republic´s capital
                                                                increases, together with the approved
                                                                amendments to the Constitutive Agreement
                                                                further strengthen CABEI´s "business profile" to
                                                                fortify it´s relationship with all its partners and
                                                                diversify its shareholder structure.

                                                                                                                42
Central American Bank for Economic Integration

INDEX

                              1. Macroeconomic Overview

                              2. CABEI’s Role and Policy Importance

                              3. Equity and Profitability

                              4. Funding and Liquidity

                              5. Credit Risk Management

                              6. Comparison with other MDBs - Rating
                                                                       43
Central American Bank for Economic Integration
Financials: Liquidity Risk - Investment Portfolio & Liquidity Levels

              Cash and Investment Portfolio - June 2016
               Instrument                 US$ Million           %
   Cash                                               22          1%
   Money Market                                    1,637         60%
   Investment Funds                                  137          5%
   Bonds                                             911         34%
   Total Investment Portfolio                      2,686         99%
   Cash + Investment Portfolio                     2,707        100%

       Liquidity risk is mitigated by CABEI’s internal ALM Policy, which requires holding a minimum liquid asset
        coverage of 6 months of gross cash requirements which includes loan disbursements, debt service
        obligations and operating expenses.

       CABEI also maintains a high level of liquid assets in relation to its total assets.

       In line with international risk management standards, CABEI monitors both the Liquidity Coverage Ratio
        (LCR) and the Net Stable Funding Ratio (NSFR) proposed by Basel III. As of December 31st 2015, the
        aforementioned ratios stood at 2.56x and 1.08x, respectively.

       At June 2016, the effective duration of the Investment Portfolio was 0.56 years.

                                                                                                                    44
Central American Bank for Economic Integration
Evolution of Funding Sources

            CABEI's financing structure has been evolving due to an active participation in capital markets, which reflects the good perception international markets have regarding its
                                                                             credit profile and maturity as an institution.

                                                    CABEI's financing structure reflects the institution’s preference for stable funding sources.

                                                                                                                                                                                            45
Central American Bank for Economic Integration
Financials: Funding Diversification

                                               Bonds Payable/Distribution by Markets and Currencies

                             CABEI has a highly diversified funding base and has maintained an uninterrupted access to the international capital markets.

                  As of June 30th, 2016, CABEI has made debt placements in 19 different currencies and 22 different markets (incorporating the Norwegian Crown and
                                                                             Norwegian market in 2016).

                                                                                                                                                                      46
Central American Bank for Economic Integration
Financials: Funding Diversification

                                                                              Europe
                                                                               43%
                              United States
                                   14%
                                                                                                                                             Asia
                                                                                                                                             14%

                                              Latam
                                               29%

                    During the period of global financial turmoil and as an indication of the favorable market perception towards the Institution, CABEI maintained
                                                                uninterrupted access to the international capital markets .

                 On March 2016, CABEI upsized its MTN Program from US$4.0 billion to US$6.0 billion, given its relevance towards the procurement of stable funding.

                                                                                                                                                                       47
Central American Bank for Economic Integration
International Partners

                   To further its mission, for over 50 years CABEI has partnered with a wide range of institutions including governments, development banks, and
                    official agencies to channel resources to key sectors such as microfinance, renewable energy, infrastructure, rural development, and education.

                                                                                                                                                                      48
Central American Bank for Economic Integration
CABEI: A Strong Partner for Combating Climate Change in Central America

   CABEI has made a strong commitment to supporting climate change mitigation and adaptation initiatives in the region.

   The Bank is currently undergoing the process of Accreditation of the Green Climate Fund.
    Recipient of Preparatory Support from the GCF.
    An accreditation decision expected in the upcoming months.
    Strong support for accreditation by Central American NDAs.

   Accredited with EU-DEVCO and the Adaptation Fund.

   Climate Adaptation and Mitigation programs managed by CABEI:
    Green SME Initiative, with KfW and EU.
    ARECA Partial Guarantee Program, with Finland, GEF, and UNDP.
    CAMbio, Biodiversity agriculture program, with GEF and UNDP.

   Member of IDFC, reporting Climate Change activities under the Club’s flagship report “Green Climate Mapping” since 2013.

 CABEI has the competitive advantages to support the region’s climate change priorities:
  Regional presence.
  Sectorial Experience.
  Strong partner articulation.
  Solid track record mobilizing resources and blending.
                                                                                                                              49
Central American Bank for Economic Integration

INDEX

                              1. Macroeconomic Overview

                              2. CABEI’s Role and Policy Importance

                              3. Equity and Profitability

                              4. Funding and Liquidity

                              5. Credit Risk Management

                              6. Comparison with other MDBs - Rating
                                                                       50
Central American Bank for Economic Integration
Financials: Credit Risk - Risk Management Policy

         Capital Adequacy and Leverage
                                                                  Main Credit Policies:                            Main Credit Policies for Derivatives Exposures:
                    Policies:
      CABEI´s Capital Adequacy Ratio requires        CABEI´s participation in project finance private      Subscription of Credit Support Annexes (CSAs) with all
       that total equity represent at least 35% of     sector loans must not exceed 40% of the total          counterparties in order to mitigate the credit exposure. In that
       total risk weighted assets.                     amount of the loan during its life (60% for            sense, CABEI has established thresholds and margin calls
                                                       projects with amounts lower than US$25                 (collateral).
      CABEI´s total loan portfolio shall not          million or with public sector participation).
       exceed 3.5 times its total equity (Gearing                                                            Credit risk in derivatives has been eliminated by requiring daily
       Ratio).                                        For corporate private sector loans, the collateral     collateral and establish a "threshold" of 0. As part of this initiative,
                                                       put forth by the client, must maintain a               since December 2013, a third party provides collateral
      CABEI´s maximum leverage cannot exceed          minimum coverage of 100% of the total loan.            management service to CABEI.
       3 times its total equity (Debt / Equity).
                                                      Single Client Exposure (Private) must not             Calculation of net positions with counterparties under ISDA
      By policy, the ALCO Committee should            exceed 5% of the Bank´s equity, and the                agreements.
       monitor the capital adequacy indicator          exposure to a regulated private financial
       that incorporates the criteria established      economic group must not exceed 10%.                   All counterparties must be approved by the ALCO Committee.
       in the framework of Basel II and III.
                                                      State or mixed institutions with majority state       Counterparties in derivatives contracts must have an investment
      By policy, the ALCO Committee should            participation with NSG should not exceed 20%           grade rating. If an existing counterparty is downgraded below
       monitor the leverage ratio established          of CABEI’s equity.                                     investment grade, no new derivative contracts can be agreed
       under Basel III.                                                                                       between such entity and CABEI.

                                                                                                             Credit exposure limits with derivative counterparties are defined
                                                                                                              by the following conditions:
                                                                                                                    Financial internacional counterparties: Up to US$50
                                                                                                                      million.
                                                                                                                    For clients (Government, Financial Institutions o
                                                                                                                      Corporates): ALCO Approval.
                                                                                                                                                                                 51
Central American Bank for Economic Integration
Credit Risk - Improving Credit Quality

                                                    Loans in non-accrual status are those whose arrears of
                                                     installments of principal or contractual interest exceed
                                                       90 days in the case of Private Sector loans and 180
                                                                   days for Public Sector loans.

                                                        All Public Sector borrowers are current with their
                                                            payments in line with the Preferred Creditor
                                                                     Treatment they grant CABEI.

                                                             CABEI’s asset quality is under control.

                                                                                                         52
Central American Bank for Economic Integration

INDEX

                              1. Macroeconomic Overview

                              2. CABEI’s Role and Policy Importance

                              3. Equity and Profitability

                              4. Funding and Liquidity

                              5. Credit Risk Management

                              6. Comparison with other MDBs - Rating
                                                                       53
Central American Bank for Economic Integration
Key Financial Indicators

                                                 54
Central American Bank for Economic Integration
Peer Comparison

                     Concept                              CABEI                                                Peer Comparison

         Relevance               Very Important for its Regional Shareholders.              More important than IADB and CAF in Central America.

                                 Loan Portfolio Credit Quality Index has improved           Allowance for Loan Losses Coverage is higher than its
         Credit Quality
                                 consistently.                                              peers.

         Leverage                Superior. Well diversified funding structure.              Lower leverage ratios than IADB and CAF.

         Equity/Total Assets     Solid capital ratios without adjustments.                  Average is higher than IADB and CAF.

                                 Currently receiving capital installments from its
         Paid-In Capital         member countries as a result of the capitalization         CAF presents higher frequency in capital increases.
                                 scheme approved in 2009.
                                 Solid and stable profitability ratios; all net income is   Better cost-income ratios, ROE, ROA and NII than IADB
         Profitability
                                 capitalized to the General Reserve.                        and CAF.

         Liquidity               Comparable and more stable.                                Superior than IADB average ratios and lower than CAF.

                                                                                                                                                    55
Central American Bank for Economic Integration
Financials: Credit Ratings

                          Credit Ratings to Date                                                             Key Factors Supporting Investment Grade Rating:

                                Rating                                                                      Multilateral/preferred       Diversified fund procurement
                                                                 Last                                       creditor status
         Agency         Long-        Short-      Outlook
                                                               Reviewed
                        Term         Term                                                                   Strong capitalization        Continued support from the
                                                                                                                                         international community
        Moody's*          A1             P-1      Stable         Jun-15
                                                                                                            High liquidity
          Fitch           A              F1      Positive        Sep-16                                                                  Demonstrated shareholder
                                                                                                            Sound asset quality          support
          S&P             A              A-1     Positive        Jul-16
                                                                                                            Sustained growth             Conservative financial
           JCR           AA-             N/A      Stable        Mar-16                                                                   policies/strict credit policies
     *According to Moody’s Supranational Rating Methodology, CABEI’s
     indicative Rating Range is: Aa1-Aa3.

                                                                       Moody’s (Stable)
                                                                                                      12 Upgrades in 13 years
                                                                       Fitch Ratings (Positive)
                                                                       Standard & Poor’s (Positive)
                                                                       Japan Credit Rating (Stable)

                                                                                                                                                                           56
Central American Bank for Economic Integration

                                                  Banco Centroamericano
                                                 de Integración Económica
                                                      / www.bcie.org

                                                                            57
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