Bladex - 20-F annual report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 20-F

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF
THE SECURITIES EXCHANGE ACT OF 1934

OR

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2001

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to _______

Commission File Number 1-11414

BANCO LATINOAMERICANO DE EXPORTACIONES, S.A.
(Exact name of Registrant as specified in its charter)

Calle 50 y Aquilino de la Guardia
Apartado 6-1497
El Dorado, Panama City
Republic of Panama
507-210-8500
(Address and telephone number of Registrant’s principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Securities registered or to be registered pursuant to Section 12(g) of the Act.
None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

		Yes				No

         Indicate by check mark which financial statement item the Registrant has elected to follow.

		Item 17				Item 18

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BANCO LATINOAMERICANO DE EXPORTACIONES, S.A.

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         In this Annual Report on Form 20-F (this “Annual Report”), all references to the “Bank” or “BLADEX” are to Banco Latinoamericano de Exportaciones, S.A., a specialized multinational bank incorporated under the laws of Panama on November 30, 1977, and its subsidiaries.

         The Bank will provide without charge to each person to whom this Annual Report is delivered, upon the written or oral request of such person, a copy of any or all of the documents incorporated herein by reference (other than exhibits, unless such exhibits are specifically incorporated by reference in such documents). Written requests for such copies should be directed to the attention of Carlos Yap, Vice President — Finance and Performance Management, BLADEX, as follows: (i) if by regular mail, to Apartado 6-1497, El Dorado, Panama City, Republic of Panama, and (ii) if by courier service, to Calle 50 y Aquilino de la Guardia, Panama City, Republic of Panama. Telephone requests may be directed to Mr. Yap at 011-507-210-8581. Written requests may also be faxed to Mr. Yap at 011-507-269-6333 or sent via e-mail to cyap@blx.com. Information is also available on the Bank’s website at: www.blx.com.

         All references to “dollars” or “$” are to United States dollars. The numbers and percentages set out in this Annual Report have been rounded and, accordingly, may not total exactly.

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         The Bank accepts deposits and raises funds principally in United States dollars, grants loans mostly in United States dollars and publishes its consolidated financial statements in United States dollars.

         This Annual Report contains forward-looking statements of expected future developments. The Bank wishes to ensure that such statements are accompanied by meaningful cautionary statements pursuant to the safe harbor established in the Private Securities Litigation Reform Act of 1995. The forward-looking statements in this Annual Report refer to the possibility that the Bank will need to renegotiate and restructure or write-off certain of its Argentine loans, the adequacy of the Bank’s allowance for credit losses to address the likely impact of the Argentine crisis on the Bank’s loan portfolio, the Bank’s ability to execute a planned recapitalization, the availability of future sources of funding for the Bank’s lending operations, the adequacy of the Bank’s sources of liquidity to cover large deposit withdrawals and the impact of the crisis in Argentina and developments in other countries in Latin America on the Bank’s results of operations and financial condition. These forward-looking statements reflect the expectations of the Bank’s management and are based on currently available data; however, actual experience with respect to these factors is subject to future events and uncertainties which could materially impact the Bank’s expectations. Among the factors that can cause actual performance and results to differ materially are as follows: a decline in the willingness of international lenders and depositors to provide funding to the Bank, adverse economic or political developments in the Region, particularly in Argentina or Brazil, which could increase the level of impaired loans in the Bank’s loan portfolio and, if sufficiently severe, result in the Bank’s allowance for probable credit losses being insufficient to cover losses in the portfolio, an unwillingness on the part of the Bank’s existing shareholders or other investors to invest additional equity capital in the Bank, unanticipated developments with respect to international banking transactions, a change in the Bank’s credit ratings, events in Argentina, Brazil or other countries in the Region unfolding in a manner that is detrimental to the Bank or which result in adequate liquidity being unavailable to the Bank.

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PART I

Item 1. Identity of Directors, Senior Management and Advisers

         Not required in this Annual Report.

Item 2. Offer Statistics and Expected Timetable

         Not required in this Annual Report.

Item 3. Key Information

Selected Financial Data

         The following table presents consolidated selected financial data for the Bank. The financial data presented below are at December 31, 1997, 1998, 1999, 2000 and 2001 for the years then ended and are derived from the Bank’s consolidated financial statements for the years indicated, which were audited by KPMG Peat Marwick. The Consolidated Financial Statements (the “Consolidated Financial Statements”) for the Bank for each of the years in the three-year period ended December 31, 2001 are included in this Annual Report, together with the report of KPMG Peat Marwick thereon. The information below is qualified in its entirety by the detailed information, both financial and otherwise, included elsewhere herein and should be read in conjunction with “Information on the Company,” “Operating and Financial Review and Prospects” and the Consolidated Financial Statements and Notes thereto included in this Annual Report.

Consolidated Selected Financial Information

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Common Stockholders’ Equity

         At December 31, 2001, the Bank’s total common stockholders’ equity was $598.4 million compared to $699.2 million at December 31, 2000 and $680.4 million at December 31, 1999, representing 10.1%, 12.4% and 13.2%, respectively, of the Bank’s total assets.

         The following table presents information concerning the Bank’s capital position at the dates indicated below.

         Capital reserves are established by the Bank from retained earnings and are a form of retained earnings according to Panamanian banking regulations. The objective of capital reserves is to strengthen the capital position of the Bank, as reductions of these reserves require the approval of the Board of Directors of the Bank (the “Board of Directors”) and Panamanian banking authorities.

         The increase in common stockholders’ equity in 2000 was due primarily to an increase in retained earnings. The decrease in common stockholders’ equity in 2001 was due primarily to the stock repurchase program and an increased dividend payout ratio approved by the Board of Directors in December 2000. On February 5, 2002, the Board of Directors suspended dividends on common shares believing that it was in the best interest of the shareholders to conserve the Bank’s capital resources until there was more clarity regarding the Bank’s exposure in Argentina.

         In July 1998, the Board of Directors approved a program under which the Bank would offer to repurchase up to 200,000 of its Class B shares of common stock at a price per share not to exceed 90% of the market value of the Bank’s Class E shares of common stock (as quoted on the New York Stock Exchange on the date of purchase). The first and second repurchase offers were completed for 100,000 shares each in December 1998 at a price of $14.50 per share for a total amount of $1.5 million and in March 1999 at a price of $16.00 per share for a total amount of $1.6 million, respectively. Upon repurchase, these Class B shares were cancelled by the Bank.

         In October 1999, the Board of Directors approved a program in which the Bank would offer to repurchase up to 400,000 of its Class B shares at a price per share not to exceed 90% of the market price of the Class E shares (as quoted on the New York Stock Exchange on the date of purchase) or the average per share book value of all

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shares of the Bank’s common stock. The first and only repurchase offer under this program was made for 200,000 shares on November 12, 1999 and was completed at a price of $17.70 per Class B share for a total amount of $3.5 million. Upon repurchase, these Class B shares were cancelled by the Bank.

         During the year 2000, the Board of Directors approved repurchases by the Bank, at the discretion of management, of up to 2,000,000 Class B shares (at the prevailing per share market price of the Class E shares on the date of purchase) from shareholders that requested conversion of their Class B shares into Class E shares. The Bank repurchased an aggregate of 568,010 Class B shares for $15.7 million under this program prior to its cancellation in December 2000. Upon repurchase, these Class B shares were not cancelled by the Bank and were, accordingly, classified as treasury stock.

         In December 2000, the Board of Directors approved a stock repurchase program, an increased dividend payout ratio and a plan to declare and pay dividends on a quarterly basis, rather than annually. Under the repurchase program, the Bank may, from time to time, at the discretion of management, purchase up to an aggregate of $75,000,000 of Class E shares on the open market at the then prevailing market price. The Bank may also make one or more repurchases of up to an aggregate of $25,000,000 of Class A shares of common stock in privately negotiated transactions at the then prevailing market price of the Class E shares. Any repurchases of Class A shares from a Class A shareholder may not exceed 25% of the number of Class A shares owned by such Class A shareholder. On November 8, 2001, the Board of Directors halted the Bank’s share repurchase program, believing that it is in the best interests of shareholders to conserve the Bank’s capital resources until the probable outcome of the Bank’s exposure to Argentina is more clear (see “ – Risk Factors – Regional Economic Conditions). During the years ended December 31, 2001 and 2000, the Bank repurchased the following shares under this program:

         The Bank’s policy with respect to its capital position is to maintain a minimum capital ratio of total common stockholders’ equity to total assets of 7%. At December 31, 2001, this ratio was 10%. In addition, the Bank has established an internal policy of maintaining minimum Tier 1 and total capital to risk weighted asset ratios of 10% and 12.5%, respectively, as defined by the United States Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) and BIS capital adequacy requirements, although the Bank is not subject to these risk weighted capital requirements. However, if the Federal Reserve Board’s fully phased in risk-based capital guidelines had been applicable to the Bank, management believes that as of December 31, 2001 the Bank would have exceeded all applicable capital adequacy requirements. At December 31, 2001, the Bank’s Tier 1 and total capital ratios calculated according to these guidelines were 15.7% and 17.4%, respectively. The Banking Law (as defined under “Information on the Company – Business Overview – Regulation”) in Panama, which became effective on June 12, 1998, requires the Bank to maintain minimum total capital to risk weighted asset ratios of 8% (each, as defined in the Banking Law). At December 31, 2001, the Bank’s total capital to risk weighted asset ratio, calculated according to the guidelines of the Banking Law, was 13.8%. See “Information on the Company – Business Overview – Regulation – Panamanian Law.”

         As described under “Risk Factors – Regional Economic Conditions,” the Bank has determined to increase its allowance for credit losses (which includes allowances for the Bank’s entire credit portfolio) and impairment losses on securities as of June 30, 2002 to approximately $510 million, of which approximately $420 million will relate to its Argentine portfolio. At June 21, 2002, the Bank’s total exposure to Argentina was $920 million (net of impairment losses on securities of $40 million taken in 2001).

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         It is anticipated that the resulting charge against earnings and loss will have the effect of reducing the Bank’s earnings for the second quarter of 2002 by approximately $295 million. At March 31, 2002, the Bank’s allowance for credit losses amounted to $215 million. The exact amount of this increase, and the corresponding charge against earnings, will be determined prior to and announced in connection with the release of the Bank’s second quarter results scheduled for late July or early August 2002. The Bank is formulating a comprehensive strategy to address its ongoing capital and funding needs, including a plan to recapitalize the Bank with additional equity capital.

Risk Factors

Regional Economic Conditions

         All of the Bank’s lending activities are conducted with borrowers in Latin America and the Caribbean (the “Region”). At various times in the past, and particularly during the 1980s, many of the countries in the Region have experienced severe economic difficulties, including periods of slow or negative growth, large government budget deficits, high inflation, currency devaluation and unavailability of foreign exchange, including dollars. As a result, many governments and public and private institutions in the Region were unable to make interest and principal payments on their external debt. Much of the external debt of the Region was restructured to provide for extensions of repayment schedules, grace periods during which payments of principal were suspended and, in certain cases, reduced rates of interest.

         These difficulties have arisen again, particularly in Argentina where an economic crisis has resulted in a default on the country’s external debt. The Argentine crisis has had a significant adverse effect on the Bank’s financial condition and results of operations, and there is no assurance that future developments in the political and economic situation of the countries in the Region, over which the Bank has no control, will not further adversely affect market conditions for the Bank’s funding or securities, or its business, financial condition, results of operation or prospects.

         During 2001, the U.S economy suffered a recession, and was further adversely affected by the attack on New York’s World Trade Center. This had a significant adverse economic effect on the economies of the Latin American countries in which the Bank conducts its lending activities.

         Argentina. A prolonged deterioration in Argentina’s economic and political environment, financial condition and investor confidence, resulted in late December 2001 in a profound crisis which forced the Argentine government to adopt stringent measures, including foreign exchange and deposit controls, bank holidays, and restrictions on the repayment of foreign debt. Given the lack of a clearly defined and comprehensive fiscal, monetary and banking policy framework and the continuing volatility of Argentina’s political and financial situation, there is great uncertainty as to how or when the situation will be resolved.

         The Bank’s exposure to Argentina amounted to $1.1 billion at December 31, 2001, including loans of $804 million, $80 million of securities (net of impairment losses of $40.4 million) and $234 million of off-balance sheet financial risk instruments. This exposure represents a reduction of 27% from December 31, 2000, and is distributed among the country’s top tier local banks (12%), local corporations (14%), state-owned banks (24%), multinational corporations (23%), and international banks (27%, of which 70% represents subsidiaries and 30% represents branches). In addition, the Bank at December 31, 2001 had $292 million of exposure under repurchase agreements with counterparties in Argentina, which were fully secured with U.S. Treasury securities. The Bank does not hold Argentine sovereign debt and 49% of the Bank’s exposure in Argentina at December 31, 2001 was considered trade-related transactions.

         The deterioration of the Argentine economy, reflecting four years of economic recession, and the current crises, have adversely affected the financial condition of the Bank’s Argentine obligors, including banks and corporations, and the quality of the Bank’s loans to those obligors. In response, the Bank has put in place a pragmatic collection program to manage its Argentine exposure. The Bank’s multilateral status, confirmed by the Central Bank of Argentina at the end of February 2002, exempts the Bank from limitations on the convertibility

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and transfer abroad of U.S. dollars for payment of external obligations, thereby contributing to the on-going efforts of this program.

         As a result, the Bank’s exposure to Argentina at June 21, 2002 amounted to approximately $920 million, which represented a reduction of $198 million from December 31, 2001 and a reduction of $40 million from March 31, 2002. All of the Bank’s exposure in Argentina continues to be denominated in U.S. dollars (with a small portion in Japanese yen) as none of the Bank’s loans in Argentina have been converted to an Argentine peso basis. During the year 2002, the Bank collected interest from Argentine borrowers of approximately $27 million while interest in the amount of $2.7 million on non-accruing and accruing assets remained unpaid at June 21, 2002. The Bank intends to place all loans and investments in Argentina on non-accrual status at June 30, 2002. Fees generated by contingencies in Argentina will also be accounted for on a cash basis.

         Even with the benefit of the Bank’s confirmed multilateral status, given the continued severity of the Argentine crises, the Bank believes that it will have to renegotiate and restructure loans, and that it will also face write-offs in its Argentine portfolio. In the absence of any clarity as to the timing or nature of the ways in which the many issues facing the country will be resolved, the Bank’s management and Board of Directors have determined to take a conservative position relative to the Bank’s credit portfolio in Argentina.

         At December 31, 2001, the Bank had a total allowance for credit losses (including loans and contingencies) of $195 million, reflecting additional provisions taken in 2001 of $77 million. In addition, the Bank charged $40 million to earnings in 2001 for impairment losses on securities from Argentina.

         After careful consideration, and based upon rigorous analysis of all the relevant factors, the Bank’s Board of Directors has determined to further increase the allowance for credit losses and impairment losses on securities to approximately $510 million, of which approximately $420 million will relate to its Argentine portfolio. The exact amount of this increase, and the corresponding charge against earnings, will be determined prior to and announced in connection with the release of the Bank’s second quarter results scheduled for late July or early August 2002.

         As part of this decision, the Bank is formulating a comprehensive strategy, with the assistance of financial advisors, designed to address the Bank’s capital and funding needs following the contemplated increase of the credit loss allowance for Argentina. This strategy will include a plan to recapitalize the Bank with additional equity capital. The Bank has retained BNP Paribas Securities Corp. and Deutsche Bank Securities Inc. as financial advisors to assist with this process. The Bank and its advisors are coordinating with the Bank’s credit rating agencies, multilateral organizations and public sector shareholders in formulating this recapitalization plan.

         The Bank believes that these steps will adequately address the likely impact of the Argentine situation on the Bank’s loan portfolio and that the Bank will remain in a strong financial position. There can be no assurance, however, that the Bank will be successful in executing any recapitalization plan or that the political and economic situation in Argentina or any other major country, will not deteriorate further and require additional action.

         The Bank will continue to monitor developments in Argentina closely and take the appropriate additional steps as more information and clarity on the Argentine government’s actions regarding external debt and their effect on the Bank become available.

         Brazil. Investors have recently become increasingly uneasy about Brazil due to, among other factors, a reduction in flows of direct foreign investments and an increasingly uncertain political environment in light of the upcoming 2002 presidential elections. This has resulted in the rapid decline in the value of Brazil’s currency compared to the U.S. dollar and speculation about the ability of Brazil to service its approximately $290 billion of public debt, much of which must be refinanced in the next several years.

         The Bank is proactively managing its exposure in Brazil in line with its conservative credit risk and portfolio management strategy. The Bank’s exposure to Brazil amounted to $2,461 million at December 31, 2001

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and at June 21, 2002 had decreased to approximately $1,671 million. At the present time, all of the Bank’s loans to Brazilian borrowers are current and there are no past due amounts of interest or principal.

Adequacy of Allowances for Credit Losses

         As indicated above, the Bank has determined to increase its allowance for credit losses and impairment losses on securities to approximately $510 million, of which approximately $420 million will relate to its Argentine portfolio. At June 21, 2002, the Bank’s total exposure to Argentina was $920 million (net of impairment losses on securities of $40 million taken in 2001). Management will continue to maintain the allowance for credit losses at a level, which reflects the potential for political and economic instability in countries in the Region and economic cycles. The determination of the appropriate level of allowances for credit losses necessarily requires management’s judgment, including assumptions and estimates made in the context of rapidly changing political and economic conditions in many of the countries in the Region. Accordingly, there is no assurance that the Bank’s current level of reserves will prove to be adequate in light of current and future events.

Funding Issues Resulting from the Argentine Situation

         During the first quarter of 2002, the major rating agencies downgraded the Bank’s credit ratings due to the crisis in Argentina and its potential impact on the Bank’s credit exposure in that country. As of the date hereof, the Bank has long-term debt ratings of Baa3 from Moody’s Investors Services, Inc. (“Moody’s”), BBB- from Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. (“Standard & Poor’s”) and BBB- from Fitch IBCA, Inc. (“Fitch”) and short-term debt ratings of Prime 3, A-3 and F-3 from Moody’s, Standard & Poor’s and Fitch, respectively. The Baa3 rating from Moody’s and the BBB- rating from Standard & Poor’s and Fitch are investment grade ratings. The Bank follows a conservative liquidity management strategy and in view of the volatility in the Region began gradually increasing its net cash position in the second quarter of 2001, reaching a level of approximately $600 million in January 2002, which has been maintained since that time. At May 31, 2002, liquidity levels amounted to $592 million compared to $314 million at December 31, 2000. At May 31, 2002, the Bank’s net cash position represented almost 80% of total deposits. There is no assurance that a further deterioration of the Argentine situation or difficulties in other countries in the Region where the Bank has large exposures will not trigger further downgrades in the Bank’s credit ratings below investment grade ratings, which would adversely affect the Bank’s cost of funds, its deposit base and accessibility to the debt capital markets.

Concentration of Lending and Funding Activities

         At December 31, 2001, approximately 81% in principal amount of the Bank’s total credits were outstanding to borrowers in five countries: Brazil (39%), Argentina (18%), Mexico (17%), Venezuela (4%), and the Dominican Republic (3%). In addition, at December 31, 2001, 24% of the Bank’s total loans were to seven borrowers in Brazil and 9% of the Bank’s total loans were to three borrowers in Mexico. A significant deterioration (or further deterioration) of economic conditions in any of the countries listed above or of the financial condition of any of these borrowers could adversely affect the financial condition and results of operations of the Bank.

         One of the Bank’s sources of funding for its short-term loans is interbank deposits received principally from central banks in the Region. Historically, these deposits have represented approximately 35% of total liabilities. If any of these central banks were to withdraw a substantial portion of its deposits with the Bank, the Bank’s liquidity could be adversely affected, although the Bank believes that it has adequate sources of liquidity to cover any such withdrawals. During the first five months of 2002, deposits declined by 52% from $1,571 million at December 31, 2001 to $746 million at May 31, 2002. Despite this decline in deposits, the Bank was able to maintain its net cash position of around $600 million throughout 2002 owing to, among other things, the repayment of loans funded with these deposits, reflecting the matched nature of the Bank’s loans and deposits. As of May 31, 2002, deposits represented 19% of total liabilities, with the balance composed of short-term obligations primarily from international banks and medium term obligations primarily from the debt capital

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markets. Because Panama does not issue its own paper currency, the Banco Nacional de Panama does not act as a central bank in the traditional sense and is not a lender of last resort to the banking system in Panama. Accordingly, if the Bank faced a liquidity crisis, it would have to rely on commercial sources of liquidity and would not have access to a central bank lender of last resort, as would a bank located in the United States or in certain other countries.

Shares Eligible for Future Sale

         Sales of substantial amounts of the Bank’s Class E shares in the public market could adversely affect the market price of such Class E shares. At the Bank’s annual shareholders’ meeting held on April 28, 2000 (the “2000 Annual Meeting”), shareholders approved all amendments proposed in the amended and restated Articles of Incorporation of the Bank (the “2000 Amended and Restated Articles of Incorporation”). In adopting the 2000 Amended and Restated Articles of Incorporation, the shareholders approved three significant changes thereto, including a change in the capital structure of the Bank’s shares of common stock. This change consolidated the Bank’s Class B and Class C shares of common stock into a single class represented by new Class B shares of common stock and made such new Class B shares of common stock convertible at the option of the applicable shareholder, on a share-for-share basis, into the existing Class E shares. The holders of the new Class B shares may at any time, and with no limitation, exchange Class B shares for Class E shares, at a rate of one (1) Class B share for one (1) Class E share.

         As of May 31, 2002, the conversion of all of the currently outstanding Class B shares would result in the issuance of approximately 3,842,479 additional Class E shares. As of the date of this Annual Report, a total of 55 Class B stockholders have converted 1,098,918 Class B shares for the same number of Class E shares. The conversion of a substantial number of Class B shares, or the availability of such shares for conversion and sale in the market, may adversely affect the market and price for Class E shares.

Competition

         The Bank faces strong competition in making loans, attracting deposits and providing fee-generating services. The Bank’s competition in making loans comes principally from regional and international commercial banks. The Bank competes in its lending and deposit taking activities with other banks and international financial institutions, many of which have greater financial and other resources. See “Information on the Company — Competition.”

Market Risk

         The Bank’s risk management policies are designed to identify and control the Bank’s credit and market risks by establishing and monitoring appropriate limits on the Bank’s credit and market exposures. The Bank’s primary market risks are comprised of liquidity risk and interest rate risk and, to a lesser extent, currency exchange risk and price risk. See “Quantitative and Qualitative Disclosure About Market Risk” and “Operating and Financial Review and Prospects — Liquidity and Capital Resources, — Asset/Liability Management, and — Interest Rate Sensitivity.”

Political Events in Panama

         The government of Panama is a republican and presidential system with a legislative body and an independent judiciary branch. In May 1999, presidential elections took place in an orderly fashion. The new democratically elected government was installed in September 1999. The country has experienced a significant economic recovery since its return to democracy in 1990. According to official Panamanian government figures, Panama’s Gross Domestic Product (“GDP”) grew in 1999 by an estimated 3.2%, in 2000 by an estimated 2.7% and in 2001 by an estimated 0.3%; however, there can be no assurance that such economic growth will be sustained. Panama has used the U.S. dollar as legal tender currency since its independence in 1903 and is, therefore, subject to fluctuations in the value of the U.S. dollar. Should any significant political crisis occur in Panama in the future, the operations of the Bank may be adversely affected.

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Item 4. Information on the Company

History and Development of the Company

         The Bank, headquartered in Panama City, Panama, is a specialized multinational bank established to finance trade in the Region. The Bank was established pursuant to a May 1975 proposal of the XX Assembly of Governors of central banks in the Region, which recommended the creation of a multinational organization to increase the foreign trade financing capacity of the Region. The Bank was incorporated under the laws of the Republic of Panama (“Panama”) on November 30, 1977 and continues to exist thereunder. Panama was selected as the location of the Bank’s headquarters because of the importance of the country as a banking center, the unrestricted circulation in Panama of the U.S. dollar, the absence of exchange controls, the geographic location of Panama and the quality of its communications facilities. Under special legislation enacted in 1978, the Bank was granted certain privileges by the government of Panama, including an exemption from the payment of income taxes in Panama. The Bank is considered a regional risk rather than a Panamanian risk by the Federal Reserve Board. Management believes that this classification is based upon the Bank’s ownership structure and the absence of Panamanian concentration in the Bank’s loan portfolio. The central banks of France, the United Kingdom and Spain do not consider the Bank a Panamanian country risk. The Bank began business operations on January 2, 1979. The Bank commenced operations with common stockholders’ equity of $25 million paid by 186 stockholders. Since then, the Bank’s common stockholders’ equity has increased to $598 million at December 31, 2001.

         Banco Latinoamericano de Exportaciones, S. A. (in its individual capacity, “BLADEX PANAMA”) has three primary subsidiaries: Banco Latinoamericano de Exportaciones, Limited (BLADEX) (“BLADEX Cayman”), BLADEX Representacao Ltda. and BLADEX Holdings Inc. (“BLADEX Holdings”). BLADEX Cayman, which is a wholly owned subsidiary, was incorporated under the laws of the Cayman Islands (B.W.I.) (the “Cayman Islands”) on September 8, 1987 and continues to exist thereunder. BLADEX Representacao Ltda., which was incorporated under the laws of Brazil on January 7, 2000 and continues to exist thereunder, was established to operate the Bank’s representative office in Brazil. BLADEX Representacao Ltda. is 99.999% owned by BLADEX Panama and 0.001% owned by BLADEX Cayman. BLADEX Holdings, which is a wholly owned subsidiary, was incorporated under the laws of the state of Delaware on May 30, 2000 and continues to exist thereunder. BLADEX Holdings has a wholly-owned subsidiary, BLADEX Financial Services, LLC, incorporated under the laws of the state of New York on October 20, 2000 and continues to exist thereunder. BLADEX Financial Services, LLC has a wholly owned subsidiary, BLADEX Securities, LLC, which was established under the laws of the state of New York on October 20, 2000 and continues to exist thereunder.

         The Bank established an agency in the State of New York (the “New York Agency”) which began business operations on March 27, 1989. The New York Agency, which continues to exist in the State of New York, is principally engaged in obtaining inter-bank deposits and short-term borrowings to finance the Bank’s short-term investments and foreign trade loans. Prior to the tragic events that occurred in the United States on September 11, 2001, the New York Agency and BLADEX Securities, LLC, were located at One World Trade Center, Suite No. 3227, in New York City. On October 1, 2001, as a result of the incidents of September 11, 2001, the Bank began leasing facilities for the New York Agency and BLADEX Securities, LLC, at 641 Lexington Avenue, 32nd Floor, New York, N.Y. 10022. The Bank also has a representative office in Buenos Aires, Argentina and on November 29, 2000 opened a representative office in Mexico City, Mexico.

         Central banks from 23 countries in the Region, or governmental financial institutions designated by such countries, own all of the Bank’s Class A shares, which currently comprise 28% of the Bank’s common stock. Currently, 159 commercial banks in the Region own the Bank’s Class B shares, which comprise 24% of the Bank’s common stock. The Bank’s Class E shares, which comprise 48% of its common stock, are listed on the New York Stock Exchange.

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         The Bank is principally engaged in providing short-term and medium-term financing to selected commercial banks in the Region, which in turn lend to businesses primarily engaged in foreign trade and to state and private export institutions. As of December 31, 2001, the Bank provided financing to approximately 57 of its 182 stockholder banks and to 150 non-stockholder institutions. The Bank also lends directly to non-bank private entities, most of which are engaged in foreign trade in the Region, primarily through co-financing and loan syndications with other banks. The majority of the Bank’s short-term financing is extended in connection with specific foreign trade transactions that have been identified by the Bank.

         At the 2000 Annual Meeting, shareholders approved the 2000 Amended and Restated Articles of Incorporation, an English translation of which was attached to the Bank’s annual report on Form 20-F for the financial year ended December 31, 1999, which made three significant changes. The first significant change broadened the Bank’s powers to meet the evolving requirements of the Latin American and international markets in which it operates by restating and expanding the Bank’s primary purpose from promoting foreign trade to promoting the economic development of Latin American countries, mainly through foreign trade. This allowed the Bank to introduce new products and services while preserving and building upon its original mission to support the growth of trade finance in the Region. The intended result was that the Bank would be a more competitive company and be better able to develop its market position.

         The second significant change approved by the shareholders at the 2000 Annual Meeting was a change in the composition of the Bank’s Board of Directors to allow for representation by members of the Board of Directors (each, a “Director”) of various classes of shares to be proportionate to the distribution of capital by class. Pursuant to the 2000 Amended and Restated Articles of Incorporation, the number of Directors comprising the Board of Directors was reduced from 11 Directors prior to the approval of the 2000 Amended and Restated Articles of Incorporation, to nine Directors, in order to have a more efficient Board of Directors. In addition, the 2000 Amended and Restated Articles of Incorporation mandate that one of the candidates nominated as a Director by the Board of Directors be the Chief Executive Officer of the Bank, thereby allowing greater participation of the Bank’s management in the decision and policymaking process. See “Directors, Senior Management and Employees.”

         The third significant change was to consolidate the Bank’s Class B and Class C shares into a single class represented by new Class B shares and to make the new Class B shares convertible at the option of the shareholder, on a share-for-share basis, into the existing Class E shares, which trade on the New York Stock Exchange. The option to convert the new Class B shares provides for greater liquidity for the holders of Class B shares, as well as for the holders of Class E shares, by increasing the number of Class E shares trading on the New York Stock Exchange. Class E shares issued in exchange for Class B shares which have not been outstanding for at least two years, are not (unless they are registered by the Bank under the U.S. Securities Act of 1933, as amended) freely tradable on the New York Stock Exchange until the end of a two-year period, which begins when the Class B shares for which the new Class E shares are exchanged were originally issued.

         On April 16, 2002 at the Bank’s annual shareholders’ meeting (the “2002 Annual Meeting”), shareholders approved an amendment to the 2000 Amended and Restated Articles of Incorporation (as so amended, the “Articles of Incorporation”) to change the structure and composition of the Bank’s Board of Directors. Pursuant to the Articles of Incorporation, the number of Directors comprising the Board of Directors was increased from nine Directors prior to the approval of the amendment to the 2000 Amended and Restated Articles of Incorporation, to ten Directors, in order to have a more efficient Board of Directors.

         The composition of the Board of Directors is as follows: three (3) Directors representing holders of the Class A common shares; two (2) Directors representing holders of the Class B common shares; three (3) Directors representing holders of the Class E common shares; and two (2) Directors representing all classes of common shares.

         The Bank’s lending activities are funded by inter-bank deposits, primarily from central banks and financial institutions in the Region, by short-term and medium-term borrowings and by floating and fixed rate

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placements made with financial institutions and investors in Japan, Europe and North America. The Bank does not provide retail-banking services to the general public such as retail savings accounts or checking accounts and does not take retail deposits.

Business Overview

Credit Portfolio and Lending Policies

         The Bank’s Articles of Incorporation state that the Bank may not lend to an institution in a country in the Region unless the central bank or a designated government entity of that country is a holder of Class A shares of the Bank. It generally has been an operating policy of the Bank to extend credit directly to banks and state-owned export organizations within the Region. The Bank also lends to non-bank private entities, mostly through co-financing and loan participations with other banks. At December 31, 2001, total loans outstanding to non-bank private entities constituted 19.9% of the Bank’s total loans. All credit requests from eligible borrowers are analyzed in the light of commercial criteria, including economic and market conditions.

         One of the most important components of the Bank’s strategy is to maximize its core business. This involves strengthening the operational and technological base of the Bank and a re-engineering of many of its work processes in order to become more efficient in an increasingly competitive marketplace. During 2001, the Bank implemented initiatives to improve the capabilities of its loan desk, implement a portfolio management approach to optimize the return on its credit portfolio, originate and sell more assets with better management of the risks involved, and improve the quality of client service. To improve its capabilities and become more marketing oriented, the Bank hired more specialized staff members, an investment the Bank believes is essential for it to remain competitive in the market. Most of these investments increased the Bank’s operating cost base in 2001 but, management believes, provided the foundation for revenue growth in future years.

         In 2001, a structured trade unit was created in New York within BLADEX Securities, LLC and on May 23, 2001, BLADEX Securities, LLC received a broker-dealer license from the National Association of Securities Dealers, Inc. to buy and sell securities in the United States. During the second quarter of 2002, the Bank discontinued the operations of this unit due to, among other things, changing market conditions that were not favorable to the development of this business.

         The Bank has 36 officers responsible for marketing the Bank’s financial products and services to existing and potential customers. This includes the personnel in its representative offices in Argentina, Brazil and Mexico, and the New York Agency.

         The Bank finances export and import transactions for all types of goods and products, with the exception of the export or import of armaments, ammunition, military equipment, hallucinogenic drugs or narcotics that are not utilized for medical purposes, and any article the trading of which is widely prohibited due to its environmental hazards or due to trading limitations established by international agreements. Exports financed by the Bank are destined for buyers in countries both inside and outside the Region. In the same manner, imports financed by the Bank originate from sellers in countries both inside and outside the Region.

         At regular intervals (usually at least once a year), the Bank conducts a credit review of each of its borrowers and of each country in the Region. The Bank’s credit review includes an analysis of the borrower’s financial condition, trends in the borrower’s financial condition, peer group comparisons, a review of credit references and a review of general economic conditions in the borrower’s home country, and may include discussions with bank regulatory authorities in the borrower’s home country. On the basis of its credit review, the Bank establishes credit limits for each country in the Region and for each of its borrowers. In order to prevent excessive concentration, the outstanding credit portfolio in a given country cannot exceed the lesser of (i) 40% of the total credit portfolio of the Bank, (ii) four times the Bank’s total capital (defined according to the Basle capital adequacy principles), and (iii) the country limit established by management and approved by the Board of Directors.

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         All country credit limits, along with targeted customers, business plans and risk profiles as to tenor and type of risk to be undertaken in a particular country, are approved by the Board of Directors. The Board of Directors reviews and approves the credit limits for each country in the Region at least once a year. The Board of Directors also reviews and monitors the credit portfolio of the Bank, including all criticized credits, at least every quarter.

         The Bank generally establishes lines of credit for each of its borrowers; however, the Bank is not obligated to lend under such lines of credit and must approve each lending transaction on a case-by-case basis. The Bank does not, as a general rule, publish or communicate its lending limits for countries in which it lends or its borrowers, but uses such limits internally as a credit risk management tool. Once a line of credit has been established, credit is generally extended after receipt of a request from the borrower for financing that is usually related to foreign trade. The pricing for such loans is determined in accordance with prevailing market conditions and the credit-worthiness of the borrower.

         For existing borrowers, the Bank’s management has authority to approve credit lines up to the lending limit prescribed by Panamanian law (see “– Regulation – Panamanian Law”), provided that such credit lines are within the country credit limit for the borrower’s country of domicile approved by the Board of Directors. As of December 31, 2001, the lending limit prescribed by Panamanian law for any one borrower amounted to approximately $182 million. For new borrowers, the Bank’s management has authority to approve credit lines of up to $60 million. Any approval of credit lines by the Bank’s management is subject to the concurrence of the Bank’s Credit Committee, which is comprised of the Bank’s Chief Executive Officer, the Chief Operating Officer, and the heads of Risk Administration and Credit and Marketing or their designees. In addition, the Bank’s management may approve credit lines consisting of criticized credits of up $25 million for existing borrowers. Credit lines to new borrowers exceeding $60 million and credit lines to existing borrowers consisting of criticized credits exceeding $25 million must be approved by the Credit Policy and Risk Assessment Committee of the Board of Directors. At December 31, 2001, approximately 46 of the Bank’s existing 246 lines of credit required approval of the Credit Policy and Risk Assessment Committee of the Board of Directors, representing approximately 34% of the available amount under the Bank’s existing lines of credit.

         The Bank’s general lending guidelines limit the amount of total credit that may be extended to any borrower to (i) an amount ranging from 10% to 50% of that borrower’s equity, depending on the type of borrower and its credit-worthiness, and the term and nature of the transaction, (ii) up to 30% of the Bank’s total capital and reserves, depending on the type of borrower and its credit-worthiness, and (iii) up to 5% of the Bank’s total outstanding credit portfolio. The Board of Directors has made exceptions to the foregoing policies with respect to some of the Bank’s borrowers and, subject to the limits imposed by applicable law may make further exceptions in the future. As a result of the Bank’s decision to increase its allowance for credit losses and impairment losses on securities as of June 30, 2002 and the corresponding reduction in the Bank’s earnings, the Bank expects to exceed this 30% limit with respect to several borrowers. The Panamanian Banking Law also contains certain concentration limits, which are strictly adhered to by the Bank. See “ – Regulation – Panamanian Law.”

         The Bank’s loans are generally unsecured. However, in certain instances, based upon its credit review of the borrower and the economic and political situation and trends in the borrower’s home country, the Bank has determined that the level of risk involved requires that a loan be secured by pledged deposits. The Bank has also in some instances either obtained an assignment of the trade related transaction documents and proceeds of the export transaction, such that the importer is obligated to make payments for the exported goods directly to the Bank, or obtained other appropriate collateral.

         The Bank is also engaged in lending transactions not related to trade finance in order to service demand and to complement its overall credit relationship with high quality borrowers. The Bank has developed credit information on its borrowers over an extended period of time. Many of the Bank’s borrowers have been customers and stockholders for periods of over ten years. At December 31, 2001, total non-trade-related loans amounted to $1,555 million or 33% of the Bank’s total loans.

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Credit Portfolio by Country

         The following table sets forth information regarding the credit portfolio of the Bank by country at December 31 of each year set forth below.

Loan Portfolio

         At December 31, 2001, the Bank’s total loans net of unearned income equaled $4,714 million or 80% of total assets. At December 31, 2001, net of allowance for loan losses and unearned income, the Bank’s loans equaled $4,536 million, 65% of which matured within one year. The Bank services all loans in its loan portfolio except syndicated loans, which are serviced through agent banks that are generally appointed by the arrangers of the syndication.

Short-Term Loans

         The majority of the Bank’s short-term financing is extended in connection with specific foreign trade transactions that have been identified to the Bank. At December 31, 2001, short-term loans defined as loans with a maturity of less than one year, had an average term remaining to maturity of approximately 119 days. At that date, short-term loans amounted to $2,586 million or 54.6% of the Bank’s total loans.

Medium-Term Loans

         The Bank is engaged in medium-term lending in which maturities generally range from one to five years. Medium-terms loans are extended primarily to banks and to a lesser extent to state-owned and private export related corporations in the Region. At December 31, 2001, the Bank’s medium-term loans had an average term remaining to maturity of approximately two years and one month. It is the Bank’s current policy to fund such medium-term lending primarily with medium-term liabilities and to limit such lending to between 2% (if the term to maturity is greater than five years) and 40% (if the term to maturity is between twelve and eighteen months) of its total credit portfolio, with additional percentage limitations (based on maturities) within that range. At

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December 31, 2001, medium-term loans amounted to $2,148 million or 45.4% of the Bank’s total loans, of which $587 million had a remaining term to maturity of less than 365 days.

Loans by Country

         The following table sets forth the distribution of the Bank’s loans (including short-term loans, medium-term loans and long-term loans) by country at December 31 of each year set forth below:

         The above table does not include the Bank’s outstanding selected investment securities net of impairment loss (which were purchased as part of its credit portfolio activity), securities purchased under agreements to resell, letter of credit confirmations, customer liabilities under bankers’ acceptances and guarantees, each issued to, or issued by, borrowers in the Region, which totaled $1,663 million at December 31, 2001, and were distributed as of December 31, 2001 as follows: Argentina: $310 million; Brazil: $449 million; Chile: $1 million; Colombia: $56 million; Costa Rica: $2 million; the Dominican Republic: $46 million; Ecuador: $81 million; El Salvador: $42 million; Guatemala: $6 million; Jamaica: $12 million; Mexico: $229 million; Nicaragua: $6 million; Panama: $38 million; Peru: $51 million; Venezuela: $31 million; and Other: $303 million.

         At December 31, 2001, the outstanding balance of medium and long-term loans (long-term loans being defined as having a term to maturity greater than five years) was $2,148 million, which was distributed as follows: Argentina: $480 million; Bolivia: $1 million; Brazil: $945 million; Chile: $18 million; Colombia: $88 million; Costa Rica: $8 million; the Dominican Republic: $70 million; Mexico: $312 million; Nicaragua: $2 million; Panama: $20 million; Peru: $47 million; and Venezuela: $157 million.

         At December 31, 2001, approximately 86% of the aggregate outstanding principal amount of the Bank’s loans was made to borrowers in five countries: Brazil (approximately 43%), Mexico (approximately 18%), Argentina (approximately 17%), Venezuela (approximately 5%), and the Dominican Republic (approximately 4%). In addition, at December 31, 2001, 24% of the Bank’s total loans were to seven borrowers in Brazil and 15% of the Bank’s total loans were to seven borrowers in Mexico.

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Loans by Type of Borrower

         The following table sets forth the amounts of the Bank’s loans by type of borrower in the Region at December 31 of each year set forth below:

Securities Purchased under Agreements to Resell

         The Bank purchases securities under agreements to resell the same or substantially identical securities. These agreements are considered secured loans. The purchased securities generally consist of U.S. Treasury and other debt securities. At December 31, 2001, securities purchased under agreements to resell with counterparties in Argentina had a carrying value of $291.9 million, all of which were fully secured with U.S Treasury securities and, in accordance with market practice, had the additional coverage of a margin call in cash. At December 31, 2001, the term to maturity of these agreements did not exceed 30 days and the interest payments were current. The outstanding balance of these instruments at June 21, 2002 was $152.3 million.

Investments

         The Bank’s investments primarily consist of securities held to maturity and securities available for sale. The Bank’s treasury investment policy contemplates the purchase of investment grade securities (carrying two of the following ratings: A-1, P-1 or F-1 from Standard & Poor’s, Moody’s or Fitch, respectively) having maturities of up to three years.

         The Bank has classified under investments certain securities which do not adhere to the Bank’s treasury investment policy, such as bonds and floating rate notes that were bought as part of its credit portfolio lending policy and which are subject to the same credit approval criteria as the rest of the credit portfolio. At December 31, 2001, these securities represented 98% of total investments. The Bank has classified as “securities available for sale” certain debt instruments, such as negotiable commercial paper, certificates of deposit, bonds and floating rate notes. The Bank buys these securities with the intention of selling them in the future.

         The following table sets forth information regarding the carrying value of the Bank’s investment portfolio at December 31 of each year set forth below:

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         At December 31, 2001, the total carrying value of investment securities is net of an impairment loss of $40.4 million, which was charged to operations, resulting primarily from the impairment of Argentine securities that were purchased under the Bank’s credit portfolio lending policy. See “– Asset Quality and – Impaired Assets.”

         At December 31, 1999 and 2000, the Bank’s New York Agency had pledged certificates of deposit with the State of New York Banking Department, as required by law, with a carrying value of $4.0 million and $3.5 million, respectively. At December 31, 2001 the pledged certificates of deposit had an outstanding balance of $6.0 million. At December 31, 2001, the Bank’s investment portfolio had a weighted average maturity of approximately one year and one month and a weighted average interest rate of 6.95% per annum.

Total Outstandings by Country

         The following table sets forth the aggregate amount of the Bank’s cross-border outstandings, including cash and due from banks, interest-bearing deposits in other banks, investment securities net of impairment loss and loans (collectively “Cross-Border Outstandings”) at December 31 of each year set forth below: