Annual Report 2007

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1 A n n u a l R e p o r t 2 0 0 7 Management Business Review Management from left to right: Ligia Sandoval Retail Division Manager Oscar Villaseca Credit Consultant Jana Donath Finance Division Manager Janet Pacheco Deputy General Manager Pedro Arriola General Manager Monica Flores IT Manager Edwin Andrade Risk Manager Alexandra Carvajal Operations Division Manager
Political and Economic Environment 2007 saw significant changes in Ecuador’s key macroeconomic indicators, due in large measure to the fact that a new government came to power and made proposals for far-reaching changes, creating considerable uncertainty. The GDP growth rate, estimated at less than 3%, was one of the lowest in Latin America and well below the 3.9% recorded in 2006, providing clear evidence of an economic slowdown that was attributable to the highly unstable political environment, and to the effects of significant changes made to the legal and regulatory framework for business. Oil prices remained high throughout the year, allowing the new government to maintain its policy of increasing subsidies as part of its overall political and economic strategy. The government expanded subsidies to cover a range of sectors, despite the lack of any firm basis for this in the medium term. Oil exports accounted for 55% of the country’s total exports and provided more than 30% of the national budget. Despite rising international prices, the volume of oil production fell, due primarily to a lack of investment as a result of changing government policies towards this sector. However, other productive activities made an important contribution to the economy, together with the flow of remittances from migrants, which continues to grow every year and amounted to almost USD 3 billion in 2007. The performance of key macroeconomic indicators in 2007 can be summarised as follows: • There was a significant increase in the price of some basic goods towards the end of year, but the annual inflation rate was 3.3%, an acceptable level for a dollarised economy. • Tax receipts grew steadily, exceeding projections. • The country risk indicator (EMBI 1 ) remained at high levels – around 600 points. However, the government kept all of the commitments it 1 EMBI = JP Morgan Emerging Markets Bond Index M a n a g e m e n t B u s i n e s s R e v i e w 1 had made in terms of economic-policy measures, and this contributed to stability. • The export sector is expected to face certain problems given that negotiations with the United States on a free trade treaty were broken off, and because the programme of preferential tariffs for exports to the US was not renewed. This latter point, together with instability resulting from signficaint changes to the legal framework and the process of drawing up a new political constitution, made businesspeople reluctant to invest. The political situation continued to be characterised by instability, since 2007 was a year of transition. Capitalising on the failures of the traditional parties and the advantages of a favourable political environment in Latin America in which the majority of the countries in the region have left-of-centre governments, a new political movement assumed power in Ecuador. As a result, more power was concentrated in the hands of the new president, who is promoting significant state intervention in the economy. A Constituent Assembly was convened, and the members took their seats at the end of November, with supporters of the government clearly in the majority. This assembly, assuming “full powers”, took control of the legislative process and annulled the actions of the National Congress, the country’s parliament. In 2008, the government will likely seek to consolidate its position and implement its political and economic strategy, which will probably lead to conflict at many levels arising from the passage of controversial legislation such as the planned reforms of the tax code and the financial system.
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Page 3 and 4: Mission Statement 4 Letter from the
Page 5 and 6: Letter from the Board of Directors
Page 7 and 8: ProCredit Holding has an investment
Page 9 and 10: the group as a whole, expressed in
Page 11 and 12: ProCredit in Latin America Microfin
Page 13 and 14: Name Banco Los Andes ProCredit Boli
Page 15: • The bank’s paid-in capital in
Page 19 and 20: small and very small businesses. De
Page 21 and 22: Deposits and Other Banking Services
Page 23 and 24: M a n a g e m e n t B u s i n e s s
Page 25 and 26: In the bank’s Local Financial Sta
Page 27 and 28: tions of “client advisor” and
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Page 31 and 32: B r a n c h N e t w o r k 1
Page 33 and 34: • Staff training programmes were
Page 35 and 36: Business Ethics and Environmental S
Page 37 and 38: Luis Enrique Fueres has a small wor
Page 39 and 40: Segundo Mesías Atapuma, Restaurant
Page 41 and 42: F i n a n c i a l S tat e m e n t s
Page 49 and 50: • IFRIC 13, Customer Loyalty Prog
Page 51 and 52: Gains and losses on disposals are d
Page 53 and 54: Restricted Availability - Liquidity
Page 55 and 56: e held in March 2008. Dividends dec
Page 57 and 58: 12. Liabilities to customers Liabil
Page 59 and 60: Legal Reserve - In accordance with
Page 61 and 62: December 31, 2006 Up to 1 - 3 3 - 1
Page 63 and 64: 3. Capital risk Technical Capital -
Page 65 and 66: 27. Contingent liabilities and comm
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Sangolquí Av. General Enríquez No
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