Letter to the Shareholders
We are pleased to report that your Company achieved its fifth consecutive year of record
earnings per share, disbursements and gross revenue. Our net worth passed the US$100
million mark and our key financial ratios all remained well within conservative levels.
This success was achieved during a period of slow economic environment marked by a
European debt crisis, slow American economy and a slowing growth rate in China.
Although these are the main markets for Latin American agricultural products, Latin
American farmers were able to secure markets for their increasing production at attractive
As detailed later in this report, earnings per share rose by more than 18% compared to
2011; disbursements to Latin American agricultural projects rose to a record US$135
million, while gross revenue rose in tandem with the agribusiness portfolio by over 18%.
These positive results reflect a sustained increase in agricultural investments throughout
the countries in which we operate.
Our disbursements rose by 12% over those of 2011 and were made to 196 agribusiness
projects in 15 countries. We anticipate that these projects will generate US$170 million
in additional hard currency earnings per year. They are also expected to create some 5,700
new jobs, mostly in rural areas. To accommodate this growth and develop new business,
we significantly expanded our network of offices in Latin America. This year, we opened
three new offices and have hired an investment officer for a fourth.
As in the past few years, our main market was Brazil, where we lent US$28.1 million to
19 agricultural projects. Our portfolio there has increased rapidly to US$84 million, our
highest single country exposure. Many of the projects in Brazil introduced innovative
technologies this year, often improving the efficient use of water for irrigation. In view of
the high demand for our services there, this year we opened a branch office in Cuiaba, in
the state of Mato Grosso.
Colombia showed the greatest percentage increase in disbursements. Our agribusiness
portfolio there surged 67%, reaching US$20 million during the year. The growing
demand for funding in Colombia has led us to open our first office in Bogota. Although
LAAD has operated in Colombia for over 30 years, we had been reluctant to open an
office there due to security concerns. However, the situation has improved in recent
We are expanding our operations in Peru with its growing and diversified agriculture.
This year our Peruvian portfolio expanded by 24%, to US$39 million. Many of these new
projects are located in Peru’s northern valleys far from Lima. This year, we hired a new
investment analyst in the northern coastal city of Trujillo, where we intend to open an
office in 2013.
We resumed modest operations in Paraguay for the first time in over a decade.
Agriculture is the foundation of the Paraguayan economy and has traditionally provided
the bulk of the country’s exports. We are planning to open an office in Ciudad del Este,
located near the border with Brazil and Argentina. This is a well-known area that is the
heart of agribusiness development in this country. Our expectations in Paraguay are very
promising as the country is growing significantly in terms of agribusiness.
We have also decided to reopen an office in Mexico City after nearly four decades of
absence. In the past, we found it difficult to compete with subsidized government
agricultural financing and the inability to secure farm mortgages due to land tenancy
issues. Today, new laws have made it possible for us to secure our loans with mortgages
as collateral. We are working on our first projects, primarily in the state of Chiapas along
the border with Guatemala, and in the gulf state of Veracruz. We are optimistic that we
will be able to build a meaningful portfolio there in the near term.
Our outlook for Latin American agriculture in 2013 is favorable. Although the region’s
economy grew at a relatively slow rate this year, around 3%, the World Bank forecasts an
improvement to 3.5% for next year and projects an average growth of 3.9% in 2014 and
2015. While the region produces the bulk of its own food, its fastest growing markets for
its agricultural products are overseas and the outlook for those countries is one of
continued growth. China’s remarkable transformation from a poor agricultural rural
society to an urban industrial power is changing food consumption patterns there as urban
development occupies growing swaths of farmland. China is a new, dynamic market
opportunity for Latin American farm products.
We are watching, with great interest, the negotiations to create a Pacific-wide free trade
zone known as the Trans Pacific Partnership. Although the United States is taking the
lead in forging this new trading alliance, Latin America’s agriculture will certainly
benefit when it goes into effect. While China is currently excluded, the agreement is
expected to include the many prosperous nations in the Far East, including Japan, Korea,
and Indonesia, as well as the Southeast Asia region. This trading bloc would benefit all of
the Latin American nations along the Pacific coast.
This year, we again financed a broad range of agricultural projects. A few of them are
Our largest single loan this year was made to Nazario Rizek C por A, in San Francisco de
Macoris in the Dominican Republic. The company is the country’s largest producer and
exporter of organic cacao beans. LAAD’s US$4 million loan will be used to complete a
processing facility that will allow the company to export processed organic cacao in the
form of cocoa liquor, butter, and powder. Nazario Rizek will ship its production to
international markets that are already familiar with the quality of its organic cacao. The
new processing facilities will employ an additional 85 workers.
Also in the Dominican Republic, we disbursed a US$600,000 loan to Café Toral S.A. to
refurbish and renovate a 110-hectare Arabica coffee farm in Barahona. The company will
plant new disease-resistant varieties, which will produce high quality coffee for the
European market. The company is a joint venture between a Dominican entrepreneur and
a Spanish specialty coffee company. We expect that the company will hire an additional
60 full-time and 20 part-time workers once the refurbishment has been completed.
In Uruguay, we provided a US$1.8 million loan to Margaritas S.A., a family-owned dairy
farm near La Estanzuela in the Department of Colonia. The company will use LAAD’s
loan primarily to triple the size of its herd to 660 head. The owner has designed his own
simpler, but efficient milking room. He sells fluid milk to a local processing plant, but
most of his production goes to making mozzarella cheese for the pasta and pizza markets.
The company will export its entire production of mozzarella cheese to Mexico and to
several countries in Eastern Europe. The farm operates a novel closed-sanitation system,
whereby all solid and liquid animal waste is removed and piped for processing into
organic fertilizer, which is then spread over its pastures. In addition, the company has a
very sophisticated management system in which the basic source of information is a chip
attached to the leg of every single cow.
In Peru, we provided a US$500,000 working capital loan to Fruto del Monte S.A.C., an
80-hectare cacao farm near Oxapampa in the Department of Pasco, on the eastern slope
of the Andes. The town was founded by German settlers in the 19th century. The
company produces a high quality cocoa that is sold to an exporter. The farm is one of the
few commercial operations located in this undeveloped jungle region. This is LAAD’s
first cocoa project in Peru and the second one located in the remote valleys of the
Department of Pasco.
In Honduras, we lent US$500,000 in working capital to MABO Plants, S.A., near El
Progreso. The company has 56 hectares in production and is one of the country’s largest
producers of ornamental plants, primarily Arica palms and Cycas. The company operates
its own packing plant capable of shipping three million plants per year. MABO Plants
exports its entire production to Europe. We project that the company will hire 50
LAAD’s financial results for 2012 showed steady growth and profitability as our assets
exceeded US$400 million for the first time. Net income rose to US$12.3 million for a
12% return on average net worth. This is the highest percentage in five years. Our only
source of income comes from our agribusiness loan portfolio, which grew by 14% this
As always, we continue to control the quality of our portfolio. The percentage of our
portfolio on non-accrual status grew slightly from last year, but remains well below 4%.
This year we took a net charge-off of US$1.4 million, equal to 0.38% of our agribusiness
portfolio, one of the lowest percentage charge-offs in our history.
As we continue to grow our operations, it becomes increasingly challenging to borrow
the funds to cover our disbursements. However, we continue to have very robust liquidity
commitments from an ever increasing list of banking relationships. At year-end, we had
outstanding borrowings of US$327 million, from 20 financial institutions, of which
US$209 million were provided by commercial banks and US$119 by multilateral
development agencies. The higher borrowings this year caused our net debt to equity
ratio to increase marginally to 2.7:1, still within our normal conservative range.
We are pleased to report that Rabobank, a LAAD shareholder, renewed our revolving
line of credit and doubled it from US$35 million to US$70 million. Bank of America,
also a LAAD shareholder, approved a new term loan of US$15 million, bringing its total
commitment to US$75 million.
We are also pleased to have initiated a new financial relationship with two multilateral
institutions. The Österreichische Entwicklungsbank (ÖEB) and the OPEC Fund for
International Development (OFID), both located in Vienna, each signed seven-year
US$15 million loans with LAAD.
Within this context, we remain optimistic and expect your Company to continue growing
its operational and financial results for the new fiscal year while achieving its corporate
mission of helping our clients grow and prosper, creating jobs and alleviating poverty.
We would like to thank our clients for their hard work and performance; our Board
Members for their time, active role and leadership; and last but not least, our management
team and staff who together enabled your Company to achieve this year’s
accomplishments through their continued dedication and outstanding performance. It is
this collaborative effort that has made LAAD’s continued success possible.
* Including real estate owned & equity investments.
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