It was over half a century ago that the idea of LAAD was conceived by two strangers serendipitously seated side by side on an eight-hour flight from Europe to the United States. Paul Cornelsen, a senior officer of Ralston Purina Company, and William H. Bolin, a vice president of Bank of America responsible for Latin America, discovered they had a lot in common during that flight in 1968.
Paul was flying home after failing to convince the Food and Agriculture Organization of the United Nations (FAO) that, by “financing private efforts all the way through the chain,” they could successfully support projects while simultaneously developing the market. By the time they had landed in Chicago, they had concluded that it would be a worthwhile project for a number of major companies interested in Latin American agribusiness to form a corporation. This corporation would provide financial resources for private-sector agricultural development in the region by first determining market demand and then creating products to meet said demand. For several months they held meetings and phone calls with CEOs, selling their idea of financing their own development company. As a result of these efforts, Bank of America and Ralston Purina – along with Adela Investment Co., Borden Inc. International, Caterpillar Tractor Co., Cargill Foundation, CPC International Inc., Deere & Co., The Dow Chemical Co., Gerber Products Co., Monsanto Co., and Standard Fruit & Steamship Co. – invested $200,000 each for a total of US$2 million in initial capital for a venture they would call “Latin American Agribusiness Development Corporation.” LAAD’s mission was simple: “To promote the economic and social development of Latin America by financing private agribusiness companies” that produced agricultural products for export, thus creating rural employment and foreign exchange.
The first meeting of LAAD’s Board of Directors was held on January 26, 1970, at The University Club in New York City, where Mr. Donald J. Kirchhoff, president of Standard Fruit & Steamship Co., was named chairman of the board. The timing was fortuitous, as Mr. Kirchhoff had recently made a commitment to participate in a venture being organized by Thomas W. Mooney, former representative of Adela Investment Co. for Central America. Mr. Mooney was in negotiations with the United States Agency for International Development (USAID) to obtain a long-term loan for the creation of a similar development company in Central America. As both efforts were complementary to each other, Mr. Kirchhoff brought Mr. Mooney on board. USAID granted LAAD a US$6 million, 20-year term loan, establishing a partnership where they became LAAD’s core funding source for the next two decades. By 1990, LAAD’s portfolio amounted to US$45.4 million, had created 27,000 jobs, and reached an annual return of 9.5% on a net worth of US$17 million.
The 1990s brought much growth in Latin America through the Free Trade Agreement (FTA) and opportunities for private investment. LAAD’s presence increased in the region with the opening of new offices in Peru, Ecuador, and Chile. LAAD also set out to strengthen funding after using the last of the USAID funds. This was achieved through commercial banks, syndications, multilateral and bilateral institutions, US$15 million from 936 U.S. tax funds, and LAAD’s first bond issue. LAAD was able to raise US$100 million from the open market during the decade. By 2000, LAAD’s portfolio amounted to US$105.8 million, had created 47,000 jobs, and achieved an annual return on equity of 11.1% on a net worth of US$38 million.
LAAD’s expansion continued in the 2000s. Offices opened in Uruguay and Brazil and reopened in Nicaragua and Peru, incorporating skilled professionals at all levels. In its fourth decade, LAAD obtained borrowings of US$78 million from multilateral institutions, placed two syndicated loans (US$5.2 million from Bank of America and US$100 million from Rabobank), and borrowed US$172 million from commercial banks. Boasting an experienced and knowledgeable management team and growing partnerships, LAAD was able to overcome the challenges brought on by the global financial crisis in 2008. By 2010, LAAD had a US$309.5 million portfolio, had created 120,000 jobs, and reached an annual return of 10.8% on a net worth of US$87.5 million.
LAAD’s fifth decade started in the aftermath of the financial crisis and ended in the midst of a global pandemic that has changed the world and the way business is conducted. What continues to hold true is the belief that “it’s all about people.” Over the course of five decades, LAAD has not only grown through adversity, but has worked to support its communities during times of need. LAAD has become closer to clients by establishing and growing its local presence over the past ten years, understanding that the commitment to these relationships is what sets LAAD apart.
We begin our sixth decade within the framework of a shifting global landscape and numerous challenges that demand unwavering perseverance and great ingenuity. One year ago, in our letter to shareholders, we wrote: “LAAD derives its ability to overcome challenges from the character and competence of its people.” At the time, no one could have imagined that the greatest of those challenges would be a worldwide pandemic that would radically change our lives. The fiscal year was already off to a rough start with the aftermath of the events that took place at the end of the previous fiscal year, including social demonstrations in Ecuador, Chile and Colombia, as well as political unrest in Peru. In the second quarter, the outbreak of the Coronavirus pandemic drastically changed life as we knew it around the world.
Economies entered into a recession, unemployment increased to unthinkable levels, non-essential workers were forced to stay at home, businesses and families experienced severe financial distress, and the food supply chain was disrupted. For the global community, it was a year of constant distress and hardship.
Within our own LAAD family we experienced the anguish of uncertainty, the frustration of powerlessness, and the sorrow of loss. From a business perspective, because LAAD operates in a region constantly afflicted by political turmoil, social issues, economic challenges, and extreme weather events, we believed we were prepared for any adversity. The truth is, as experienced and proactive as we may be, no one was ready to face a pandemic of this magnitude. Nevertheless, the continuous commitment referred to in last year’s message played a key role in navigating these unprecedented times: we put forward the best version of ourselves and pulled through this difficult period together.
This past year, 2020, marked half a century of LAAD’s existence and the fulfillment of our long-standing goal of reaching $1 billion in loans. The Company reported outstanding financial results, considering the challenges posed by the COVID-19 pandemic and the unstable political landscape. Net income was 11.1% greater than the previous year. LAAD’s portfolio amounted to US$1,049.5 million and reached an annual return of 13.2% on a net worth of US$222.5 million. Loan portfolio growth compared with the previous year was 8.5%, a remarkable result given our cautious decision to only support existing clients due to the general uncertainty and liquidity concerns brought by the pandemic. During 2020, we were able to assist all of our existing clients that required help, and our financing resulted in the creation of 4,871 full-time and 4,787 part-time jobs.
The pandemic prevented us from celebrating these important milestones with the pomp and circumstance we had envisioned, but we are still immensely grateful for and humbly appreciate our hard-earned success. From a non-financial perspective, we feel blessed and fortunate to continue our mission of assisting and supporting agribusiness projects in their role of feeding the world, even in midst of the pandemic. Last, but not least, in a year when unemployment surged in Latin America as well as the rest of the world, all LAAD employees remained part of our family, and we even welcomed new members to support our growth.
Central to LAAD’s mission is creating sustainable impact for small and medium farmers in Latin America. We recognize the importance of transforming agriculture into a sustainable and resilient activity that addresses the social, environmental, and economic challenges posed by climate change and a growing global population. Several initiatives are being developed, including the creation of a “Green Finance Framework” for green loans and bonds, which aligns our objectives with the United Nations Sustainable Development Goals. We are closely working with our clients and partners in transitioning to a climate smart and sustainable agriculture sector.
Leveraging on its 50-year track record, expertise, market intelligence, regional presence, and consolidated relationships with stakeholders, LAAD has created the Strategic Business Unit (SBU) to develop and capture additional benefits along the agribusiness value chain through three new platforms. This will allow LAAD to provide clients with risk mitigation solutions to strengthen their existing core business, reach a broader universe of farmers, and offer innovative corporate finance solutions to mid-size companies. We are working on a new system with cutting-edge technology that will help implement these initiatives.
At the end of the day, “it’s all about people.” The values that define our corporate culture are the foundation and roadmap in striving to do our best. The resilience of our people, adapting to the new reality, embracing virtual communications, and acting with integrity in every moment, were instrumental in attaining our hard-earned success this year.
In closing, we would like to thank every member of the LAAD family for achieving incredible results during one of the worst periods in global history. LAAD is today a better institution thanks to our collective efforts. We are stronger because we overcame unimaginable adversity. The year 2021 will undoubtedly bring many challenges, but with our renewed commitment to give our best, we will have yet another successful year. We are very proud to honor our founders, who believed that development and profit, generally considered mutually exclusive, are in fact quite compatible.