As the largest source of public financing in the Andean region and as one of the principal drivers behind South America’s major regional integration programs, the Initiative for the Integration of Infrastructure in South America (IIRSA), the Andean Development Corporation (CAF) plays an important role in shaping dozens of infrastructure mega-projects, including dams, highways, and energy projects that are having an enormous ecological and social impact on the region. CAF is also a major lender in the banking sector--providing significant amounts of short and medium term financing to public and private banks throughout the region.
Over the past 10 years, CAF has significantly expanded its lending in the region, steadily encroaching upon the historically dominant lending flows of the IDB and World Bank. Since 2003, CAF’s lending flows have exploded--increasing by more than 20% a year since 2003, and more than doubling since 1997 to reach $9000 billion in 2009. CAF’s impressive lending growth is expected to continue as its capital base and demand from its new full members (Brazil, Argentina and Uruguay) grows.
CAF’s influence in the region is expected to grow,with Brazil, Argentina and Uruguay joining the Bank’s Andean countries as full shareholder members in 2007. These countries will now have a greater say in the CAF’s Board, which until recently has been made up primarily of Andean country representatives.
CAF claims to be a bank primarily committed to sustainable development and trade integration. Over 50% of CAF’s current portfolio funds infrastructure development. Collectively, many of these projects are causing irreversible damage, spurring unsustainable development and directly impacting sensitive ecosystems and local populations. Across the South American continent, and particularly in the Amazon basin, projects financed by CAF are fueling migration and land speculation, accelerating the process of unsustainable resource extraction, rapid deforestation, and threatening indigenous peoples’ territories– all of which are accelerating biodiversity loss, environmental degradation and poverty around the region. CAF’s lending in the social sector has been minimal, averaging only about 10% of its lending portfolio between 1997-2007.
Despite its significant reach and growing influence, CAF has functioned largely outside of public scrutiny and under the radar of many civil society and public interest groups in the region. In 2008, the Bank Information Center documented serious problems with CAF’s performance in a report titled: Civil Society Guide on the Andean Development Corporation (CAF), focusing on the institution’s operational, safeguard and financial policies, project lending trends and project cycle, governance and internal decision making processes, particularly as they compare to competing multilateral lenders.