AFD and the Development Bank of Latin America Reinforce Their Cooperation

AFD has just granted new substantial financial support to CAF (Corporación Andina de Fomento), the Latin American development bank. A €150 million line of credit was signed on March 20th to finance projects related to fighting climate change. These projects cover a wide range of sectors: water distribution, sanitation, energy efficiency, and urban mobility. They are all part of the Sustainable Development Goals. The investments will take place in Brazil, Ecuador, and Bolivia.

 

AFD is also providing additional resources (€800,000) for the preparation and feasibility study of other future projects, beyond those financed by the new €150 million credit line. These are projects that can be financed by CAF or co-financed by CAF and AFD in the countries where they operate together.

A long-standing cooperation 

Cooperation between AFD and CAF is nothing new. An agreement was signed in 2009 when AFD began its activities in South America. The diversity of projects financed and initiatives carried out since then illustrate this dynamic collaboration, which mainly takes the form of lines of credit granted by AFD. This is the third one in ten years. The first two financed projects in Brazil, Colombia, Ecuador, Peru, and the Dominican Republic.

AFD and CAF also plan on providing the necessary technical assistance: the two organizations have created a program to finance feasibility studies for local projects. Finally, the partnership also covers co-financing operations. By expanding its portfolio of projects, CAF has been able to help AFD start up its activities more quickly than it would have done on its own in some countries such as Bolivia, Ecuador (2015), and Argentina (2017). 

Climate finance at the forefront

Climate finance has been a major area of cooperation between the two organizations for several years, not only through providing financing to combat climate change but also through exchanging best practices and technical expertise. AFD has also shared its carbon footprint calculation tool. A joint advocacy campaign on climate finance is also being conducted by the IDFC (International Development Finance Club), a club of 24 major national, regional, and bilateral development banks. 

The fight against climate change is also the subject of a program for financing studies and pre-investment in urban projects through a LIFE grant from the European Union, delegated to AFD and managed by CAF, amounting to €4.2 million. Cooperation between the two institutions is not a one-way street either. In 2011, CAF acquired a stake in Proparco, AFD's private sector subsidiary.

A substantial financial contribution

Since 2010, the three lines of credit granted to CAF by AFD have reached a total of €450 million. The first, granted in 2010, amounted to €200 million to finance sustainable infrastructure in Latin America. The second (€100 million in 2014) was earmarked for climate change projects in cities, and the last one, recently announced, totals €150 million for climate-friendly public investments.

The "study fund" program, which concerns the feasibility study of local projects, was replenished several times by AFD between 2012 and 2017 for a total of €1.2 million, in addition to the €800,000 recently announced.