The Andean Reserve Fund (FAR) was created in 1978 as a Regional Financing Arrangement (RFA), in response to the needs of Bolivia, Colombia, Ecuador, Peru and Venezuela to have their own financial institution, to address the problems resulting from the imbalances in the external sector of their economies and to facilitate the regional integration process. It became the second oldest RFA in the world.
In 1989, based on the solid foundations of a fully operating body, FAR became the Latin American Reserve Fund (FLAR) due to the interest of the Andean countries in expanding the Andean Reserve Fund (FAR) to all Latin America. Thus, Costa Rica, Uruguay, Paraguay and Chile adhered as FLAR members in 2000, 2009, 2015 and 2022 respectively.
Its purposes are to:
- Support member countries' balances of payments, by providing loans or by guaranteeing third-party loans.
- Improve the investment conditions for the member countries’ international reserves.
- Contribute to the harmonization of the member countries' exchange rate, monetary and financial policies.
FLAR is a one-of-a-kind regional body and it has represented an important step towards greater macroeconomic stability and regional integration. To date, it has provided more than 50 loans, and during some historical episodes, provided more loans to its member countries than the International Monetary Fund (IMF). In extreme cases, FLAR facilitated the return of some of its member countries to the international markets.
FLAR has evolved from a reserve pool structure to a regional financial intermediary structure. It has access to its own paid-in capital and to international financial markets to increase its funds. Furthermore, FLAR receives deposits from the region’s central banks, official institutions and multilateral entities, from both member and non-member countries.
FLAR is an example of a credible and well-functioning institution, with a successful track record of more than 40 years, as evidenced by the fact that it is the highest rated issuer in Latin America. Its only headquarters are in Bogotá, Colombia, as set forth in the 1978 Constitutive Agreement.