The year 2018 will be remembered as one of the best in the history of LAAD in terms of profitability, portfolio quality and growth. Exceptional results were achieved, as your Company disbursed over US$285 million, created almost 11,000 new jobs, and generated more than US$265 million in foreign exchange while achieving an annual average return on equity of over 12%.
In 2018, multiple factors affected the agribusiness industry on a worldwide level, but the one that has had the biggest impact on our business is the US-China trade war. This trade war is changing the dynamics of the global grain business. The tariffs imposed on US grains have greatly benefitted Brazilian soybean producers, as China, the world’s largest importer of soybean, has turned to Brazil for business. As a result, soybean sales from Brazil to China jumped 20% in 2018. According to a Reuters poll, Brazil’s soy area is expected to grow to a record 36.3 million hectares.
Another factor affecting the Latin American region is the increase of the interest rate by the Federal Reserve System (FED), which in turn affected the LIBOR rate. While the higher value of the LIBOR rate positively impacted revenues, offering rates were somewhat affected by competitive factors due to high liquidity in certain markets. As the FED fund rate remains high, we estimate that liquidity levels in some of the countries where LAAD operates would drop, which will help our business, particularly in countries like Paraguay, where the high liquidity prevented our disbursements from growing as expected, despite lowering our rates to remain competitive.
Geographical and industry diversification proved, once again, to be the best insurance, and Nicaragua’s situation is the best example. April 2018 marked the beginning of radical social and political upheaval in Nicaragua. Despite this turmoil, agriculture was the only sector in the country’s economy that was not drastically affected, allowing our portfolio to continue to perform relatively well. The Company continues to support existing clients, mainly for working capital purposes. Notwithstanding the ever present economic, political and climatic instability, your Company achieved a record disbursement of US$287.9 million to 339 new loans in 15 different countries and created almost 11,000 new jobs. Additionally, LAAD’s financial support will generate over US$265 million per year in foreign currency for the region. The Company took over US$272 million in term loans from local and international financial institutions to finance portfolio growth. It surpassed last year’s net income by 12.8% and achieved 16.3% growth, and – most significantly – attained an average return on equity of 12.3%. This calendar year, we are entering into Argentina for the first time and expect to disburse US$10 million, mainly in loans structured through a well-known third party company that will act as a strategic partner.
In March 2018, we presented our first version of Vision 2025, which was originated from the ideas and recommendations voiced by employees at all levels. We paid close attention to everyone’s observations and are working diligently to implement all the relevant suggestions. Our most ambitious project is the development of a system adapted exclusively to LAAD’s needs that will result in a full, state-of-the-art digital transformation. One of our goals is to operate with cutting edge technology that will give us an advantage over our competitors and enable us to provide optimal service to our clients. Most importantly, this will all be accomplished without losing sight of one of our main values, our personal attention to our clients, because our business “is all about people.”
We recently started a series of presentations to reinforce LAAD’s corporate values to our employees. Integrity, Commitment, Resiliency, Accountability, Teamwork and Adaptability are not our core values because we aspire to attain them, but because we have identified them as inherent in us as individuals and as an organization. Sharing and practicing our core values is essential to preserve our corporate culture as we grow and evolve as a company. This is a non-negotiable responsibility for each and every one of us, as our unique culture makes us proud to be part of LAAD.