Letter to the Shareholders
Economic and investment conditions continue
to improve in most Latin American countries. The
UN Commission for Latin America and the Caribbean
recently reported that the region's growth rate
is expected to reach 5.3% in 2006. This marks
the best of three consecutive years of strong
economic expansion led by exports and private
investment. Remarkably, this growth has been achieved
even as the average inflation rate dropped from
6.1% in 2005 to 4.8% this year. These developments
augur well for the sustainability of the region's
progress.
Other major economic indicators such as unemployment,
per capita income, the current account surplus,
and the level of foreign indebtedness have all
shown improvement. The region has shown resilience
in the face of high global energy prices and over
a dozen presidential and legislative elections.
Argentina, Brazil, Chile and the Dominican Republic
turned in the strongest performance for the year.
As a major producer of agricultural and mineral
commodities, Latin America has benefited from
strong international prices, which have risen
faster than the rate of inflation. This has been
accompanied by a significant increase in foreign
remittances from Latin Americans living overseas.
These transfers are estimated at a record $45
billion this year, an amount almost equal to the
total foreign investment entering the region.
Latin America's financial markets performed well
during the year by taking advantage of high international
liquidity and increased investor confidence in
the broader emerging markets. A growing diversity
of local financial services combined with record
remittances from abroad are funding a rising share
of the region's investments. This augurs well
for sustained growth in Latin America, although
they represent increased competition for LAAD.
Your Company, as a private development finance
institution, has contributed modestly to this
favorable macroeconomic performance, most particularly
by supporting high-value agricultural exports,
which turned in another strong year by competing
successfully in the global market.
We take great pleasure in summarizing continued
strong operational and financial results at LAAD,
which are achieved in the face of stiff competition
from local banks in Central America and Chile,
large client prepayments and temporary disruptions
caused by local elections:
• LAAD disbursed a record US$70 million
to 165 projects in 14 countries.
• These projects are projected to create
over 11,000 new jobs and generate over US$50 million
in foreign exchange earnings as we continue to
target export-oriented investments.
• Our agribusiness portfolio expanded by
4.4% to US$193 million.
• The quality of our agribusiness portfolio
improved, as our non-performing assets as a percentage
of the agribusiness portfolio fell by 8%.
• Net income of US$6.9 million surpassed
last year's results by 6.6.% (thereby setting
another record for the fifth consecutive year)
• The return on average assets remained
relatively steady at 3.2%.
• The Company's financial leverage dropped
to 2.1:1, reflecting a conservative balance sheet.
• Liquidity remains strong as evidenced
by a current ratio of 1.7:1.
We expanded our relationship with multilateral
development institutions by drawing down a US$30
million loan from the IFC. In December 2006, subsequent
to our fiscal year end, we accomplished a significant
goal: the successful procurement of a US$100 million
syndicated term loan led by Rabobank, which will
be used to fund our 2007 disbursements and also
repay more expensive debt in order to reduce our
funding costs.
Our outlook for the coming year remains favorable.
Despite political uncertainties in some countries
where we operate, macro-economic policies generally
favor continued private investment. The region's
growing foreing exchange reserves combined with
the reduced level of external debt provide a "safety
net" against temporary setbacks in commodity
prices of rising global interest rates. Given
this favorable macroeconomic environment, we expect
your Company to continue improving its operational
and financial results while achieving its corporate
mission of helping our clients grow and prosper.
Finally, we would like to recognize the continued
strong efforts and performance by our clients,
who helped your Company achieve this year's accomplishments.
As always, we express our gratitude to our directors,
officers and staff for yet another year of collaborative
hard work and strong financial results, which
form the bedrock of sustained dynamic growth for
the coming years.
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| Benjamín Fernández |
| President |
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