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
 
ýx  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended December 31, 20082010
 
OR
 
¨  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
OR
 
¨  SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
Date of event requiring this shell company report______________________
report……………………………
For the transition period from ______ to _______
Commission File Number 1-11414

BANCO LATINOAMERICANO DE COMERCIO EXTERIOR, S.A.
(Exact name of Registrant as specified in its charter)
 
FOREIGN TRADE BANK OF LATIN AMERICA, INC.REPUBLIC OF PANAMA
 (Translation of Registrant’s name into English) (Jurisdiction of incorporation or organization)

Calle 50 y Aquilino de la Guardia
P.O. Box 0819-08730
Panama City, Republic of Panama
 (Address of principal executive offices)

Jaime Celorio
 Christopher Schech
Chief Financial Officer
(507) 210-8500
Email address:  jcelorio@bladex.comcschech@bladex.com
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each className of each exchange on which registered
Class E Common StockNew York Stock Exchange
 
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.
 
6,342,189Shares of Class A Common Stock
2,617,7842,542,021Shares of Class B Common Stock
27,453,11527,826,330Shares of Class E Common Stock
36,413,088                 0Shares of Class F Common Stock
36,710,540Total Shares of Common Stock
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
 
¨Yes   ýx No
 
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
 
¨Yes   ýx No
 
Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
 
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.
ýYes¨   No
x Yes                                      ¨ No       
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.  (Check one):
¨
Large Accelerated Filerý
x Accelerated Filer
¨
Non-accelerated Filer
 
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
ý
x U.S. GAAP
¨IFRS
IFRS
¨
Other
 
Indicate by check mark which financial statement item the Registrant has elected to follow.
¨ Item 17                                 x Item 18
¨Item 17ý   Item 18
 
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
¨YesýNo
¨ Yes                                      x No       
 
 
 
 

BANCO LATINOAMERICANO DE COMERCIO EXTERIOR, S.A.
 
TABLE OF CONTENTS
 
  Page
PART I
   
PART I5
Item 1.
Identity of Directors, Senior Management and Advisers5
Item 2.Offer Statistics and Expected Timetable5
Item 3.Key Information5
A.Selected Financial Data5
B.Capitalization and Indebtedness6
C.Reasons for the Offer and Use of Proceeds6
D.Risk Factors67
Item 4.Information on the Company911
A.History and Development of the Company911
B.Business Overview1012
C.Organizational Structure2329
D.Property, Plant and Equipment2329
Item 4A.Unresolved Staff Comments2430
Item 5.Operating and Financial Review and Prospects2430
A.Operating Results2430
B.Liquidity and Capital Resources3951
C.Research and Development, Patents and Licenses, etc.4459
D.Trend Information4460
E.Off-Balance Sheet Arrangements4561
F.Contractual Obligations and Commercial Commitments4561
Item 6.Directors, Executive Officers and Employees4662
A.Directors and Executive Officers4662
B.Compensation5067
C.Board Practices5470
D.Employees5875
E.Share Ownership5976
Item 7.Major Stockholders and Related Party Transactions5976
A.Major Stockholders5976
B.Related Party Transactions6078
C.Interests of Experts and Counsel6078
Item 8.Financial Information6079
A.Consolidated Statements and Other Financial Information6079
B.Significant Changes6179
Item 9.The Offer and Listing6180
A.Offer and Listing Details6180
B.Plan of Distribution6180
C.Markets6180
D.Selling Stockholders6280
E.Dilution6280
F.Expenses of the Issue80

 
2
 

F.Expenses of the Issue62
Item 10.
Additional Information6281
A.Share Capital6281
B.Memorandum and Articles of Association6281
C.Material Contracts6283
D.Exchange Controls6283
E.Taxation6283
F.Dividends and Paying Agents6688
G.Statement by Experts6688
H.Documents on Display6688
I.Subsidiary Information66
Item 11.Quantitative and Qualitative Disclosure About Market Risk66
Item 12.Description of Securities Other than Equity Securities6989
   
Item 11.Quantitative and Qualitative Disclosure About Market Risk
89
Item 12.Description of Securities Other than Equity Securities
94
PART II95
Item 13.Defaults, Dividend Arrearages and Delinquencies
95
   
Item 13.Defaults, Dividend Arrearages and Delinquencies69
Item 14.
Material Modifications to the Rights of Security Holders and Use of Proceeds6995
Item 15.
Controls and Procedures6995
Item 16.     [Reserved][Reserved]7197
Item 16A.
Audit and Compliance Committee Financial ExpertExpert
7197
Item 16B.Code of Ethics7197
Item 16C.Principal Accountant Fees and Services7197
Item 16D.Exemptions from the Listing Standards for Audit Committees7298
Item 16E.Purchases of Equity Securities by the Issuer and Affiliated Purchasers7298
Item 16F.Change in Registrant’s Certifying Accountant98
Item 16G.Corporate Governance7298
   
PART III99
  
Item 17.Financial Statements7399
Item 18.Financial Statements7399
Item 19.Exhibits73100

 
3
 

In this Annual Report on Form 20-F, (this “Annual Report”),or this Annual Report, references to the “Bank” or “Bladex” are to Banco Latinoamericano de Comercio Exterior, S.A., a specialized supranational bank incorporated under the laws of the Republic of Panama, (“Panama”)or Panama, and its consolidated subsidiaries.  References to “Bladex Head Office” are to Banco Latinoamericano de Comercio Exterior, S.A. in its individual capacity.  References to “U.S. dollars” or “$” are to United States dollars.  The Bank accepts deposits and raises funds principally in United StatesU.S. dollars, grants loans mostly in United StatesU.S. dollars and publishes its consolidated financial statements in United StatesU.S. dollars.  The numbers and percentages set out in this Annual Report have been rounded and, accordingly, may not total exactly.

Upon written or oral request, the Bank will provide without charge to each person to whom this Annual Report is delivered, a copy of any or all of the documents listed as exhibits to this Annual Report (other than exhibits to those documents, unless the exhibits are specifically incorporated by reference in the documents).  Written requests for copies should be directed to the attention of Jaime Celorio,Christopher Schech, Chief Financial Officer, Bladex, as follows: (1) if by regular mail, to P.O. Box 0819-08730, Panama City, Republic of Panama, and (2) if by courier, to Calle 50 y Aquilino de la Guardia, Panama City, Republic of Panama.  Telephone requests may be directed to Mr. CelorioSchech at 011 + (507) 210-8630.  Written requests may also be faxed to Mr. CelorioSchech at 011 + (507) 269-6333 or sent via e-mail to jcelorio@bladex.com.cschech@bladex.com.  Information is also available on the Bank’s website at: http://www.bladex.com.
 
Forward-Looking Statements

This Annual Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, (the “Securities Act”),or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”).or the Exchange Act.  Forward-looking statements involve risks and uncertainties, and actual results may differ materially from those discussed in any such statement.  Factors that could cause actual results to differ materially from these forward-looking statements include the risks described in the section titled “Risk Factors.”  Forward-looking statements include statements regarding:

·
the anticipated growth of the Bank’s credit portfolio, including its trade finance portfolio;
·
the Bank’s ability to increase the number of clients;
·
the Bank’s ability to maintain its investment-grade credit ratings and preferred creditor status;
·
the effects of changing interest rates, inflation, exchange rates and of an improving macroeconomic environment in Latin America (“and the Region”)Caribbean on the Bank’s financial condition;
·
the execution of the Bank’s strategies and initiatives, including its revenue diversification strategy;
·
the anticipated operating income and return on equity in future periods;
·the Bank’s level of capitalization and debt;
·
the implied volatility of the Bank’s Treasury and Asset Management trading revenues;
·
levels of defaults by borrowers and the adequacy of the Bank’s allowance for and provisions for credit losses;
·
the availability and mix of future sources of funding for the Bank’s lending operations; and
·
the adequacy of the Bank’s sources of liquidity to replacecover large deposit withdrawals.
withdrawals;
·management’s expectations and estimates concerning the Bank’s future financial performance, financing, plans and programs, and the effects of competition;
·existing and future governmental banking and tax regulations, including the impact of complying with the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, on the Bank’s business, business practices, and costs of operation;
·credit and other risks of lending and investment activities; and
·the Bank’s ability to sustain or improve its operating performance.

In addition, the statements included under the headings “Strategy”“Strategy in 2011” and “Trends”“Trend Information” are forward-looking statements.  All forward-looking statements in this Annual Report are made as of the date hereof, based on information available to the Bank as of the date hereof, and the Bank assumes no obligation to update any forward-looking statement.

 
4
 

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.
 
Item3.Item 3. Key Information
 
A.           Selected Financial Data
 
The following table presents consolidated selected financial data for the Bank.  The financial data presented below are at and for the years ended December 31, 2010, 2009, 2008, 2007, 2006, 2005, and 20042006, and are derived from the Bank’s consolidated financial statements for the years indicated, which were prepared in accordance with accounting principles generally accepted in the United States of America, (“or U.S. GAAP”).GAAP, and are stated in U.S. dollars.  The consolidated financial statements for the years ended December 31, 2010, 2009, 2008 and 2007 were  audited by the independent registered public accounting firm Deloitte,Inc., and the consolidated financial statementsstatement of the Bank for the yearsyear ended December 31, 2006, 2005, and 2004 werewas audited by the independent registered public accounting firm KPMG. The consolidated financial statements of the Bank for each of the three years in the period ended December 31, 2008 (the “Consolidated2010, or the Consolidated Financial Statements”)Statements, are included in this Annual Report, together with the reportsreport of the independent registered public accounting firmsfirm Deloitte, Inc. and KPMG. The information below is qualified in its entirety by the detailed information included elsewhere herein and should be read in conjunction with Item 4, “Information on the Company,” Item 5, “Operating and Financial Review and Prospects,” and the Consolidated Financial Statements and notes thereto included in this Annual Report.
 
Consolidated Selected Financial Information
 
  As of and for the Year Ended December 31, 
  2010  2009  2008  2007  2006 
  (In $ thousand, except per share data and ratios) 
Income Statement Data:               
Net interest income $74,503  $64,752  $77,847  $70,570  $58,837 
Fees and commissions, net  10,326   6,733   7,252   5,555   6,393 
Reversal (provision) for credit losses (1)
  4,835   (14,830)  1,544   1,475   13,045 
Derivative financial instruments and hedging  (1,446)  (2,534)  9,956   (989)  (225)
Recoveries, net of impairment of assets  233   (120)  (767)  (500)  5,551 
Net gain (loss) from investment fund trading  (7,995)  24,997   21,357   23,878   1,091 
Net gain (loss) from trading securities  (3,603)  13,113   (20,998)  (12)  (212)
Net gain on sale of securities available-for-sale  2,346   546   67   9,119   2,568 
Gain (loss) on foreign currency exchange  1,870   613   (1,596)  115   (253)
Other income (expense), net  833   912   656   (6)  36 
Total operating expenses  (42,081)  (38,202)  (39,990)  (37,027)  (28,929)
Net income  39,821   55,980   55,327   72,177   57,902 
Net income (loss) attributable to the redeemable noncontrolling interest  (2,423)  1,118   208   0   0 
Net income attributable to Bladex  42,244   54,862   55,119   72,177   57,902 
Balance Sheet Data:                    
Trading assets  50,412   50,277   44,939   0   0 
Investment securities  386,431   456,984   636,328   468,360   471,351 
Investment fund  167,291   197,575   150,695   81,846   105,199 
Loans  4,064,332   2,779,262   2,618,643   3,731,838   2,980,772 
Allowance for loan losses  78,615   73,789   54,648   69,643   51,266 
Total assets  5,100,087   3,878,771   4,362,678   4,698,571   3,922,373 
Total deposits  1,820,925   1,256,246   1,169,048   1,462,371   1,056,278 
Trading liabilities  3,938   3,152   14,157   13   0 
Securities sold under repurchase agreements and short-term borrowings  1,360,327   399,132   1,212,921   1,504,710   1,595,604 
Borrowings and long-term debt  1,075,140   1,390,387   1,204,952   1,010,316   558,860 
Total liabilities  4,384,087   3,168,234   3,783,665   4,086,320   3,338,477 
Capital Stock  279,980   279,980   279,980   279,980   279,980 
Total stockholders’ equity  697,050   675,637   574,324   612,251   583,896 
  
At and for the Year Ended December 31,
 
  
2008
  
2007
  
2006
  
2005
  
2004
 
  (in $ thousands, except per share amounts and ratios) 
Income Statement Data:               
Net interest income $77,847  $70,570  $58,837  $45,253  $42,025 
Fees and commissions, net  7,252   5,555   6,393   5,826   5,928 
Reversal of provision for credit losses 1
  1,544   1,475   13,045   38,374   112,271 
Derivative financial instruments and hedging  9,956   (989)  (225)  2,338   48 
Recoveries on assets, net of impairments  (767)  (500)  5,551   10,206   0 
Gain on early extinguishment of debt  0   0   0   0   6 
Net gain from investment fund trading  21,357   23,878   1,091   0   0 
Net loss from trading securities  (20,998)  (12)  (212)  0   0 
Net gain on sale on securities available-for-sale  67   9,119   2,568   206   2,922 
Gain (loss) on foreign currency exchange  (1,596)  115   (253)  3   (194)
Other income (expense), net  656   (6)  36   3   77 
Total operating expenses  (39,990)  (37,027)  (28,929)  (24,691)  (21,352)
Income before cumulative effect of changes in accounting principles and minority interest in the investment fund  55,327   72,177   57,902   77,518   141,730 
Cumulative effect of accounting changes  0   0   0   2,583   0 
Participation of the minority interest in gains of the investment fund  (208)  0   0   0   0 
Net income  55,119   72,177   57,902   80,101   141,730 
Balance Sheet Data:                    
Trading assets  44,939   0   0   0   0 
Investment securities  636,328   468,360   471,351   208,570   192,856 
Investment fund  150,695   81,846   105,199   0   0 
Loans  2,618,643   3,731,838   2,980,772   2,610,019   2,441,686 
Allowance for loan losses  54,648   69,643   51,266   39,448   106,352 
Total assets  4,362,678   4,698,571   3,922,373   3,159,231   2,732,940 
Total deposits  1,169,048   1,462,371   1,056,278   1,046,618   864,160 
Trading liabilities  14,157   13   0   0   0 

 
5
 

  As of and for the Year Ended December 31, 
  2010  2009  2008  2007  2006 
  (In $ thousand, except per share data and ratios) 
Income Statement Data:               
Weighted average number of shares outstanding  36,647   36,493   36,388   36,349   37,065 
Weighted average number of diluted shares outstanding  36,814   36,571   36,440   36,414   37,572 
Per Common Share Data:                    
Basic earnings per share  1.15   1.50   1.51   1.99   1.56 
Diluted earnings per share  1.15   1.50   1.51   1.98   1.54 
Book value per share (period end)  18.99   18.49   15.77   16.83   16.07 
Regular cash dividends per share  0.67   0.60   0.88   0.88   0.75 
Special cash dividends per share  0.00   0.00   0.00   0.00   1.00 
Selected Financial Ratios:                    
Performance Ratios:                    
Return on average assets  0.97%  1.38%  1.09%  1.76%  1.70%
Return on average stockholders’ equity  6.21%  8.60%  8.99%  11.91%  9.96%
Net interest margin (2)
  1.70%  1.62%  1.55%  1.73%  1.78%
Net interest spread (2)
  1.43%  1.12%  0.98%  0.78%  0.69%
Total operating expenses to total average assets  0.97%  0.96%  0.79%  0.90%  0.85%
Regular cash dividend payout ratio  58.12%  39.91%  58.09%  44.32%  48.01%
Special cash dividend payout ratio  0.00%  0.00%  0.00%  0.00%  64.01%
Liquidity Ratios:                    
Liquid assets(3) / total assets
  8.25%  10.36%  18.92%  8.43%  10.16%
Liquid assets(3) / total deposits
  23.10%  32.00%  70.62%  27.08%  37.72%
Asset Quality Ratios:                    
Non-accrual loans to total loans (4)
  0.71%  1.82%  0.00%  0.00%  0.00%
Impaired loans to total loans (4)
  0.71%  1.29%  0.00%  0.00%  0.00%
Charged-off loans to total loans  0.13%  0.00%  0.00%  0.00%  0.00%
Allowance for loan losses to total loans, net of unearned income and deferred commission  1.94%  2.66%  2.09%  1.87%  1.72%
Allowance for losses on off-balance sheet credit risk to total contingencies  3.50%  8.28%  6.95%  2.51%  4.18%
Capital Ratios:                    
Stockholders’ equity to total assets  13.67%  17.42%  13.16%  13.03%  14.89%
Average stockholders’ equity to total average assets  15.62%  16.06%  12.11%  14.75%  17.09%
Leverage ratio(5)
  7.3x  5.7x  7.6x  7.7x  6.7x
Tier 1 capital to risk-weighted assets(6)
  20.5%  25.8%  20.4%  21.2%  23.8%
Total capital to risk-weighted assets(7)
  21.8%  27.0%  21.6%  22.5%  25.1%
Risk-weighted assets $3,416,782  $2,633,482  $3,143,971  $2,917,393  $2,436,812 
  
At and for the Year Ended December 31,
 
  
2008
  
2007
  
2006
  
2005
  
2004
 
  (in $ thousands, except per share amounts and ratios) 
Securities sold under repurchase agreements and Short-term borrowings  1,212,921   1,504,710   1,595,604   760,699   704,718 
Borrowings and long-term debt  1,204,952   1,010,316   558,860   533,860   403,621 
Total liabilities  3,783,665   4,086,320   3,338,477   2,542,449   2,076,810 
Total stockholders’ equity  574,324   612,251   583,896   616,782   656,130 
Average number of shares outstanding  36,388   36,349   37,065   38,550   39,232 
Average number of diluted shares outstanding  36,440   36,414   37,572   38,860   39,372 
Per Common Share Data:                    
Basic earnings per share  1.51   1.99   1.56   2.01   3.61 
Diluted earnings per share  1.51   1.98   1.54   1.99   3.60 
Book value per share (period end)  15.77   16.83   16.07   16.19   16.87 
Regular cash dividends per share  0.88   0.88   0.75   0.60   0.50 
Special cash dividends per share  0.00   0.00   1.00   2.00   1.00 
Selected Financial Ratios:                    
Performance Ratios:                    
Return on average assets  1.09%  1.76%  1.70%  3.00%  5.83%
Return on average stockholders’ equity  8.99%  11.91%  9.96%  12.85%  22.75%
Net interest margin 2
  1.55%  1.73%  1.78%  1.70%  1.65%
Net interest spread 2
  0.98%  0.78%  0.69%  0.67%  0.98%
Total operating expenses to total average assets  0.79%  0.90%  0.85%  0.93%  0.88%
Regular cash dividend payout ratio  58.09%  44.32%  48.01%  29.84%  13.84%
Special cash dividend payout ratio  0.00%  0.00%  64.01%  99.46%  27.68%
Asset Quality Ratios:                    
Impaired loans to total loans 3
  0.00%  0.00%  0.00%  1.11%  10.50%
Charged-off loans to total loans  0.00%  0.00%  0.00%  0.36%  0.53%
Allowance for loan losses to total loans, net of unearned income and deferred commission  2.09%  1.87%  1.72%  1.51%  4.37%
Allowance for credit losses to non-accruing credits  0%  0%  0%  217%  48%
Capital Ratios:                    
Stockholders’ equity to total assets  13.16%  13.03%  14.89%  19.52%  24.01%
Tier 1 capital to risk-weighted assets 4
  20.4%  21.2%  23.8%  33.7%  42.5%
Total capital to risk-weighted assets 5
  21.6%  22.5%  25.1%  35.0%  43.8%

_____________________
(1)Includes reversal of (provision for) loan losses and for losses on off-balance sheet credit risks. For information regarding reversal of (provision for) credit losses, see Item 5, “Operating and Financial Review and Prospects/Operating Results.”
(2)For information regarding calculation of the net interest margin and the net interest spread, see Item 5A, “Operating and Financial Review and Prospects/Operating Results/Net Interest Income and Margins.”
(3)
Liquid assets consist of investment-grade ‘A’ securities, and cash and due from banks, excluding pledged regulatory deposits.  See Item 18, “Financial Statements” Note 3 to the Audited Financial Statements.
(4)
Non-accrual loans amounted $29 million in 2010, all of which corresponded to impaired loans, and $51 million in 2009 of which $36 million corresponded to impaired loans in 2009.  In determining impairment factors considered by the Bank’s Management include collection status, collateral value, the probability of collecting scheduled principal and interest payments when due, and economic conditions in the borrower’s  country of residence.
(5)Leverage ratio is the ratio of total assets to stockholders’ equity.
(6)Tier 1 capital is calculated according to Basel I capital adequacy guidelines, and is equivalent to stockholders’ equity, excluding the Other Comprehensive Income account effect of the available-for-sale portfolio. The Tier 1 capital ratio is calculated as a percentage of risk-weighted assets. Risk-weighted assets are, in turn, also calculated based on Basel I capital adequacy guidelines.
(7)Total capital refers to Tier 1 capital plus Tier 2 capital, based on Basel I capital adequacy guidelines.  Total capital refers to the total capital ratio as a percentage of risk-weighted assets.
 
1 Includes reversal of (provision for) loan losses and for losses on off-balance sheet credit risks. For information regarding reversal of (provision for) credit losses, see Item 5, “Operating and Financial Review and Prospects/Operating Results.”
2 For information regarding calculation of the net interest margin and the net interest spread, see Item 5A, “Operating and Financial Review and Prospects/Operating Results/Net Interest Income and Margins.”
3 Repossessed assets or troubled debt restructurings as defined in Statement of Financial Accounting Standards No. 15 amounted to $23 million in 2005, and $202 million in 2004, and related mostly to Argentine credits.
4 Tier 1 capital is calculated according to the U.S. Federal Reserve Board and Basel I capital adequacy guidelines, and is equivalent to stockholders’ equity, excluding the Other Comprehensive Income (“OCI”) account effect of the available-for-sale portfolio. The Tier 1 capital ratio is calculated as a percentage of risk-weighted assets. Risk-weighted assets are, in turn, also calculated based on U.S. Federal Reserve Board and Basel I capital adequacy guidelines. 
5 Total capital refers to Tier 1 capital plus Tier 2 capital, based on U.S. Federal Reserve Board and Basel I capital adequacy guidelines.  Total capital refers to the total capital ratio as a percentage of risk-weighted assets.   
B.          Capitalization and Indebtedness
 
Not required in this Annual Report.
 
C.          Reasons for the Offer and Use of Proceeds
 
Not required in this Annual Report.

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D.          Risk Factors
 
Risks Relating to the Bank’s Business
Bladex faces liquidity risk, and its failure to adequately manage this risk could result in a liquidity shortage, which could adversely affect its financial condition, results of operations and cash flows.

Bladex, like all financial institutions, faces liquidity risk, or the risk of not being able to maintain adequate cash flow to repay its deposits and borrowings and fund its credit portfolio on a timely basis. Failure to adequately manage its liquidity risk could produce a cash shortage as a result of which the Bank would not be able to repay its obligations as they become due.

As of December 31, 2010, approximately 26% of the Bank’s funding represents short-term borrowings from international banks, the majority of which are European, North American and Asian institutions, which compete with the Bank in its credit extension activity and represent a source of business for the Bank. If these international banks cease to provide funding to the Bank, the Bank would have to seek funding from other sources, which may not be available, or if available, may be at a higher cost.

Financial turmoil in the international markets could negatively impact liquidity in the financial markets, reducing the Bank’s access to credit or increasing its cost of funding, which could lead to tighter lending standards. An example of this situation is the liquidity constraint experienced in the second half of 2007 in the international financial markets, which intensified during the third quarter of 2008, driven first by the subprime crisis in the United States and then followed by the credit crisis. The reoccurrence of such unfavorable market conditions could have a material adverse effect on the Bank’s liquidity.

As of December 31, 2010, approximately 65% of the Bank’s total deposits represented deposits from central banks.

As a U.S. dollar-based economy, Panama does not have a central bank in the traditional sense, and there is no lender of last resort to the banking system in the country. Central Banks in Latin America (“and the Region”)Caribbean, or the Region would not be obligated to act as lenders of last resort if Bladex were to face a liquidity shortage and the Bank would have to rely on commercial liquidity sources to cover the shortfall.

The credit ratings of Bladex are an important factor in maintaining the Bank’s liquidity.  A reduction in the Bank’s credit rating could reduce the Bank’s access to debt markets or materially increase the cost of issuing debt, trigger additional collateral or funding requirements, and decrease the number of investors and counterparties willing or permitted, contractually or otherwise, to do business with or lend to the Bank.  This in turn, could reduce the Bank’s liquidity and negatively impact its operating results and financial position.

The Bank’s allowances for credit losses could be inadequate to cover credit losses related to its loans and contingencies.

The Bank determines the appropriate level of allowances for credit losses based on a process that estimates the probable loss inherent in its portfolio, which is the result of a statistical analysis supported by the Bank’s historical portfolio performance, external sources, and and the qualitative judgment of the Bank’s Management. The latter includes assumptions and estimates made in the context of changing political and economic conditions in the Region. The Bank’s allowances could be inadequate to cover losses in its commercial portfolio due to exposure concentration or deterioration in certain sectors or countries, which in turn, could have a material adverse effect on the Bank’s financial condition, results of operations and cash flows.

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The Bank’s businesses are subject to market risk.

Market risk generally represents the risk that values of assets and liabilities or revenues will be adversely affected by changes in market conditions. Market risk is inherent in the financial instruments associated with many of the Bank’s operations and activities, including loans, deposits, investment and trading securities, short-term borrowings, long-term debt, derivatives and trading positions. Among many other market conditions that may shift from time to time are fluctuations in interest rates and currency exchange rates, changes in the implied volatility of interest rates and changes in securities prices, due to changes in either market perception or actual credit quality of either the issuer or its country of origin. Accordingly, depending on the instruments or activities impacted, market risks can have wide ranging, complex adverse effects on the Bank’s financial condition, results of operations, cash flows and business.

See Item 11, “Quantitative and Qualitative Disclosure About Market Risk.”

The Bank faces sovereign risk that is inherent in each country's economic performance which may change by political or social events which could threaten our clients risk profile.

The Bank maintains a permanent follow up of each country's risk profile evolution, supporting our analysis with various factors, both quantitative and qualitative, being the main driving factors: the evolution of macroeconomic policies (fiscal, monetary, exchange rate policy), fiscal and external performance, price stability, level of liquidity in foreign currency, improvements on the legal framework and institutional strenghts, and social and political developments, among others.   

The Bank faces interest rate risk that is caused by the mismatch in maturities of interest-earning assets and interest-bearing liabilities. If not properly managed, this mismatch can reduce net interest income as interest rates fluctuate.

As a bank, Bladex faces interest rate risk because interest-bearing liabilities generally reprice at a different pace than interest-earning assets.  Bladex’s exposure to instruments whose values vary with the level or volatility of interest rates contributes to its interest rate risk.  Failure to adequately manage eventual mismatches may reduce the Bank’s net interest income during periods of fluctuating interest rates.
 
The Bank’s credit portfolio may decrease or may not continue to grow at the present or a similar rate.

It is difficult to predict that the Bank’s credit portfolio, including the Bank’s foreign trade portfolio, will continue to grow in the future at historical rates.  A reversal in the growth rate of the Region’s economy and trade volumes could adversely affect the growth rate of the Bank’s credit portfolio.

Increased competition and banking industry consolidation could limit the Bank’s ability to grow and may adversely affect results of operations.

Most of the competition the Bank faces in the trade finance business comes from domestic and international banks, the majority of which are European and North American institutions.  Many of these banks have substantially greater resources than the Bank and enjoy access to less expensive funding than the Bank does.  It is difficult to predict how increased competition will affect the Bank’s growth prospects and results of operations.

Over time, there has been substantial consolidation among companies in the financial services industry, and this trend accelerated in 2008 and 2009 as the credit crisis led to numerous mergers and asset acquisitions among industry participants and in certain cases reorganization, restructuring, or even bankruptcy.  Merger activity in the financial services industry has produced companies that are capable of offering a wide array of financial products and services at competitive prices.  In addition, whenever economic conditions and risk perception improve in the Region, competition from commercial banks, the securities markets and other new participants generally increases.

Globalization of the capital markets and financial services industries exposes the Bank to further competition.  To the extent the Bank expands into new business areas and new geographic regions, the Bank may face competitors with more experience and more established relationships with clients, regulators and industry participants in the relevant market, which could adversely affect the Bank’s ability to compete.  The Bank’s ability to grow its business and therefore, its earnings, is affected by these competitive pressures.

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Operational problems or errors can have a material adverse impact on the Bank’s business, financial condition, results of operations and cash flows.

Bladex, like all financial institutions, is exposed to operational risks, including the risk of fraud by employees and outsiders, failure to obtain proper internal authorizations, failure to properly document transactions, equipment failures, and errors by employees.  For example, any failure, interruption or breach in the security or operation of the Bank’s information technology systems could result in interruptions in the Bank’s risk management, deposit servicing, loan organization and/or other important activities.  Operational problems or errors may occur, and their occurrence may have a material adverse impact on the Bank’s business, financial condition, results of operations and cash flows.

Any delays or failure to implement business initiatives that the Bank may undertake could prevent the Bank from realizing the anticipated revenues and benefits of the initiatives.

Part of the Bank’s strategy is to diversify income sources through business initiatives, including targeting new clients and developing new products and services.  These initiatives may not be fully implemented within the time frame the Bank expects, or at all.  In addition, even if such initiatives are fully implemented, they may not generate revenues as expected.  Any delays in implementing these business initiatives could prevent the Bank from realizing the anticipated benefits of the initiatives, which could adversely affect the Bank’s business, results of operations and growth prospects.

Any failure to remain in compliance with applicable banking laws in the jurisdictions in which the Bank operates could harm its reputation and/or cause it to become subject to fines, sanctions or legal enforcement, which could have an adverse effect on the Bank’s business, financial condition and results of operation.

Bladex has adopted various policies and procedures to ensure compliance with applicable laws, including internal controls and “know-your-customer” procedures aimed at preventing money laundering and terrorist financing; however, participation of multiple parties in any given trade finance transaction can make the process of due diligence difficult.  Further, because trade finance can be more document-based than other banking activities, it is susceptible to documentary fraud, which can be linked to money laundering, terrorism financing, illicit activities and/or the circumvention of sanctions or other restrictions (such as export prohibitions, licensing requirements, or controls).  While the Bank is alert to high-risk transactions, it is also aware that efforts, such as forgery, double invoicing, partial shipments of goods and use of fictitious goods, may be used to evade applicable laws and regulations.  If the Bank’s policies and procedures are ineffective in preventing third parties from using it as a conduit for money laundering or terrorist financing without its knowledge, the Bank’s reputation could suffer and/or it could become subject to fines, sanctions or legal enforcement (including being added to any “blacklists” that would prohibit certain parties from engaging in transactions with the Bank), which could have an adverse effect on the Bank’s business, financial condition and results of operations.

Recent legislation regarding the financial services industry may subject the Bank to significant and extensive regulation, which may have an impact on the Bank’s operations.

On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or Dodd-Frank Act, was signed into law.  The Dodd-Frank Act is intended primarily to overhaul the financial regulatory framework in the United States following the global financial crisis and may impact substantially all financial institutions including the Bank. The Dodd-Frank Act, among other things, imposes higher prudential stardards, including more stringent risk-based capital, leverage, liquidity and risk-management requirements, establishes a Bureau of Consumer Financial Protection, establishes a systemic risk regulator, consolidates certain federal bank regulators and imposes increased corporate governance and executive compensation requirements. While many of the provisions in the Dodd-Frank Act will affect institutions that engage in activities in which the Bank does not engage, it will likely increase the Bank’s regulatory compliance burden.

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Additionally, the Dodd-Frank Act requires various U.S. federal agencies to adopt a broad range of new implementing rules and regulations. The federal agencies are given significant discretion in drafting such implementing rules and regulations, and consequently, many of the details and much of the impact of the Dodd-Frank Act is still uncertain.  Any such rules and regulations may require the Bank to change certain business practices, or to raise additional regulatory capital and could expose the Bank to significant additional compliance costs and impact the profitability of the Bank’s business activities.

Risk Relating to the Region

The Bank’s credit portfolio is concentrated in the Region. The Bank also faces borrower concentration. Adverse economic changes in those countriesthe Region or in the condition of the Bank’s largest borrowers could adversely affect the Bank’s growth, asset quality, prospects, profitability, financial condition and financial condition.

results.
6

The Bank’s credit activities are concentrated in the Region, which is a reflection of the Bank’s mission and strategy.  Historically, economies of countries in the Region have occasionally experienced significant volatility characterized, in some cases, by political uncertainty, slow growth or recessions, declining investments, government and private sector debt defaults and restructurings, and significant inflation and/or devaluation. Global economic changes, including oil prices, commodities prices,  U.S. dollar interest rates, the U.S. dollar exchange rate, and slower economic growth in industrialized countries, could have a significant adverse effect on the economic condition of countries in the Region.  In turn, adverse changes affecting the economies of countries in the Region could have a significant adverse impact on the quality of the Bank’s credit portfolio, including increased loan loss provisions, debt restructuring, and loan losses.  As a result, this could also have an adverse impact on the Bank’s asset growth, asset quality, prospects, profitability and financial condition.

The Bank’s credit activities are concentrated in a relatively small number of countries.  Adverse changes affecting the economies in one or more of those countries which could have an adverse impact on the Bank’s credit portfolio and, as a result, its financial condition, growth, prospects, results of operations and financial condition, if one or morecondition.  As of those countries encounters economic difficulties.  At December 31, 2008,2010, approximately 71%75% of the Bank’s credit portfolio was outstanding to borrowers in the following fourfive countries: Brazil ($1,5761,742 million, or 42%36%), Colombia ($704 million, or 14%), Mexico ($477505 million, or 13%10%), ColombiaChile ($453356 million, or 12%7%), and ArgentinaPeru ($151343 million, or 4%7%).

In addition, atas of December 31, 2008,2010, of the Bank’s total credits, 11%credit portfolio balances, 10% were to five borrowers in Brazil, 16%10% were to fourfive borrowers fromin Colombia, 4% were to five borrowers in Mexico, (6%), four6% were to five borrowers from Colombia (8%)in Chile, and four6% were to five borrowers from Argentina  (3%).in Peru.  A significant deterioration of the financial or economic condition of any of these countries or borrowers could have an adverse impact on the Bank’s credit portfolio, requiring the Bank to create additional allowances for credit losses, or suffer credit losses with the effect being accentuated because of this concentration.

Local country foreign exchange controls or currency devaluation may harm the Bank’s borrowers’ ability to pay U.S. dollar-denominated obligations.

The Bank makes mostly U.S. dollar-denominated loans and investments. As a result, the Bank faces the risk that local country foreign exchange controls will restrict the ability of the Bank’s borrowers, even if they are exporters, to acquire dollars to repay loans on a timely basis, and/or that significant currency devaluation might occur, which could increase the cost, in local currency terms, to the Bank’s borrowers of acquiring dollars to repay loans.

 
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Increased risk perception in countries in the Region where the Bank has large credit exposure could have an adverse impact on the Bank’s credit ratings, funding activities and funding costs.

Increased risk perception in any country in the Region where the Bank has large exposures could trigger downgrades to the Bank’s credit ratings. A credit rating downgrade would likely increase the Bank’s funding costs, and reduce its deposit base and access to the debt capital markets. In that case, the Bank’s ability to obtain the necessary funding to carry on its financing activities in the Region at meaningful levels could be affected in an important way.
Risks Relating to the Bank’s Business
Bladex faces liquidity risk, and its failure to adequately manage this risk could result in a liquidity shortage, which could adversely affect its financial condition, results of operations and cash flows.

Bladex, like all financial institutions, faces liquidity risk, or the risk of not being able to maintain adequate cash flow to repay its deposits and borrowings, and fund its credit portfolio on a timely basis.  Failure to adequately manage its liquidity risk could produce a cash shortage as a result of which the Bank would not be able to repay these obligations as they become due.
Approximately one third of the Bank’s funding represents short-term borrowings from international banks, the majority of which are European, North American and Asian institutions, which also compete with the Bank in its credit extension activity, and also represent a source of business for the Bank.  If these international banks ceased to provide funding to the Bank, the Bank would have to seek funding from other sources, which may not be available, or if available, may be at a higher cost.

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Financial turmoil in the international markets could negatively impact liquidity in the financial markets, reducing the Bank’s access to credit or increasing its cost of funding, which could lead to tighter lending standards.  An example of this situation is the liquidity constraint experienced since the second half of 2007 in the international financial markets, which intensified during the third quarter of 2008, driven first by the subprime crisis in the United States and then followed by the credit crisis.  The persistence or worsening of these unfavorable market conditions could have a material adverse effect on the Bank’s liquidity.
Approximately 28% of the Bank’s short term funding represents deposits from Central Banks.

As a U.S. dollar-based economy, Panama does not have a central bank in the traditional sense, and there is no lender of last resort to the banking system in the country.  Central banks in the Region would not be obligated to act as lenders of last resort if Bladex were to face a liquidity shortage.  Accordingly, if the Bank faced a liquidity shortage, it would have to rely on commercial liquidity sources to resolve the liquidity shortage.
The Bank’s allowances for credit losses could be inadequate to cover credit losses related to its loans and contingencies.
The Bank determines the appropriate level of allowances for credit losses based on a process that estimates the probable loss inherent in its portfolio, which is the result of a statistical analysis supported by the Bank’s historical portfolio performance and the qualitative judgment of the Bank’s management.  The latter includes assumptions and estimates made in the context of changing political and economic conditions in the Region.  The Bank’s allowances could be inadequate to cover losses in its credit portfolio due to exposure concentration, which in turn, could have a material adverse effect on the Bank’s financial condition, results of operations and cash flows.
The Bank’s businesses are subject to market risk.
Market risk generally represents the risk that values of assets and liabilities or revenues will be adversely affected by changes in market conditions.  Market risk is inherent in the financial instruments associated with many of the Bank’s operations and activities, including loans, deposits, investment and trading securities, short-term borrowings, long-term debt, derivatives and trading positions.  Among many other market conditions that may shift from time to time are fluctuations in interest rates and currency exchange rates, changes in the implied volatility of interest rates and changes in securities prices, due to changes in either market perception or actual credit quality of either the issuer or its country of origin.  Accordingly, depending on the instruments or activities impacted, market risks can have wide ranging, complex adverse affects on the Bank’s financial condition, results of operations, cash flows and business.  See Item 11, “Quantitative and Qualitative Disclosure About Market Risk.”
The Bank faces interest rate risk which is caused by the mismatch in maturities of interest earning assets and interest bearing liabilities.  If not properly managed, this mismatch can reduce net interest income as interest rates fluctuate.
As a bank, Bladex faces interest rate risk because interest-bearing liabilities generally reprice at a different pace than interest-earning assets.  Failure to adequately manage eventual mismatches may reduce the Bank’s net interest income during periods of fluctuating interest rates.
Operational problems or errors can have a material adverse impact on the Bank’s business, financial condition, results of operations and cash flows.
Bladex, like all financial institutions, is exposed to operational risks, including the risk of fraud by employees and outsiders, failure to obtain proper internal authorizations, failure to properly document transactions, equipment failures, and errors by employees.  Operational problems or errors may occur, and their occurrence may have a material adverse impact on the Bank’s business, financial condition, results of operations and cash flows.
Bladex, has an Operational Risk department that evaluates the operational risk level of every key product or process that could have an impact on Bladex’s financial statements.  This department coordinates periodic training for all personnel and self-evaluations with the participation of those personnel controlling each process.  Each incident reported, with real or potential loss, is registered in an operational risk database.  On a quarterly basis, the Bank’s management is informed of the relevant incidents that occurred (if any) and the suggested mitigation plan.

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The Bank’s credit portfolio may decrease or may not continue to grow at the same or similar rate.
It is difficult to predict that, in the future, the Bank’s credit portfolio, including the Bank’s foreign trade portfolio, will continue to grow at historical rates.  A reversal in the growth rate of the Region’s economy and trade volumes could adversely affect the growth rate of the Bank’s credit portfolio.
Increased competition and banking industry consolidation could limit the Bank’s ability to grow and may adversely affect results of operations.
Most of the competition the Bank faces in the trade finance business comes from international banks, the majority of which are European and North American institutions.  Many of these international banks have substantially greater resources than the Bank and enjoy access to less expensive funding than the Bank does.  It is difficult to predict how increased competition will affect the Bank’s growth prospects and results of operations.
Merger activity in the financial services industry has produced companies that are capable of offering a wide array of financial products and services at competitive prices.  Globalization of the capital markets and financial services industries exposes the Bank to further competition.  The Bank’s ability to grow its business and, therefore, its earnings, is affected by these competitive pressures.
Any delays or failure to implement business initiatives that the Bank may undertake could prevent the Bank from realizing the anticipated revenues and benefits of the initiatives.
Part of the Bank’s strategy is to diversify income sources through business initiatives, including targeting new clients and developing new products and services.  These initiatives may not be fully implemented within the time frame the Bank expects, or at all.  In addition, even if such initiatives are fully implemented, they may not generate revenues as expected.  Any delays in implementing these business initiatives could prevent the Bank from realizing the anticipated benefits of the initiatives, which could adversely affect the Bank’s business, results of operations and growth prospects.
 
Item 4.                Information on the Company
 
A.           History and Development of the Company

The Bank, a corporation (sociedad anónima) organized under the laws of Panama and headquartered in Panama City, Panama, is a specialized supranational bank originally established by central banks of Latin American and Caribbean countries to promote trade finance 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 supranational organization to increase the Region’s foreign trade financing capacity. The Bank was constituted in 1978 as a corporation pursuant to the laws of the Republic of Panama (“Panama”) as “Banco Latinoamericano de Exportaciones, S.A.” and commenced operations on January 2, 1979.  The Bank operates under the commercial name of “Bladex.” Panama was selected as the location of the Bank’s headquarters because of the country’s importance as a banking center in the Region, the benefits of a fully U.S. dollar-based economy, the absence of foreign exchange controls, its geographic location, and the quality of its communications facilities. Under a special contractContract No. 103-78 signed between Panama and Bladex, signed on 1978, the Bank was granted certain privileges by the government of Panama, including an exemption from payment of income taxes in Panama.

On June 17, 2009, the Bank changed its name from “Banco Latinoamericano de Exportaciones, S.A.” to “Banco Latinoamericano de Comercio Exterior, S.A.,” although it continues to operate under the commercial name of “Bladex.”

Bladex offers its services through its head office and subsidiaries in Panama City, its subsidiaries and offices in New York City, including its agency, (the “Newor the New York Agency”)Agency, and Bladex Asset Management Inc. (“, or Bladex Asset Management” or “BAM”),Management, its subsidiaries in Brazil and the Cayman Islands, its international administrative office in Miami and its representative offices in Mexico City and Buenos Aires, as well as through a worldwide network of correspondent banks. On May 27, 2010, the Bank received authorization from the Superintendency of Banks of Panama, or the Superintendency of Banks, to open representative offices in the cities of Porto Alegre, Brazil and Monterrey, Mexico, which have since started operations.  On August 12, 2010, the Bank also received authorization to open a representative office in the city of Lima, Peru.  Additionally, on September 24, 2010, the Bank received authorization to open two new subsidiaries: one in the Cayman Islands and another in Brazil.  Bladex’s shares of Class E common stock are listed on the New York Stock Exchange under the symbol “BLX.”

Bladex Asset Management Inc., serves as investment manager for Bladex Offshore Feeder Fund, (the “Feeder”)or the Feeder and Bladex Capital Growth Fund, (the “Fund”).or the Fund, both entities incorporated in Cayman Islands.  In April 2008,2009, the FeederFund was registered with the Cayman IslandIslands Monetary Authority (“CIMA”), under the Mutual Funds Law of the Cayman Islands.  Until April 30, 2008, the Feeder was a wholly-owned subsidiary of Bladex.  On May 1, 2008, the FeederIslands and began receiving third party investments.  On September 8, 2009, Bladex Asset Management registered as a foreign entity in Panama, establishing a branch in Panama that is engaged mainly in providing administrative and operating services to Bladex Asset Management in the United States.

 
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Bladex Head Office owns 50% of the equity shares of BCG PA LLC, a company incorporated under the laws of the State of Delaware, USA.  This companyDelaware.  BCG PA LLC owns “Class C” shares of the Fund that entitleentitling it to receive a performance allocation on third-party investments in the Feeder.

Feeder and in the Fund.
9

Bladex’s head office isheadquarters are located at Calle 50 y Aquilino de la Guardia, Panama City, Panama, and its telephone number is country code + (507) 210-8500.

Bladex’s financial statements are prepared in accordance with U.S. GAAP.

See Item 18, “Financial Statements,” note 1.
Amendments to the Articles of Incorporation

During the Bank’s Annual Shareholders’ Meeting, which took place on April 15, 2009, the Bank’s shareholders approved the following amendments to the Bank’s Articles of Incorporation, effective June 17, 2009:
· An amendment to change the name of the Bank from “Banco Latinoamericano de Exportaciones, S.A.” to “Banco Latinoamericano de Comercio Exterior, S.A.” in Spanish, and from “Latin American Export Bank” to “Foreign Trade Bank of Latin America, Inc.” in English.  The Bank will continue to use the name “Bladex” in order to identify itself for branding, marketing and other purposes.
· An amendment to broaden the scope of the Bank’s activities to encompass all types of banking, investment, and financial or other businesses that support foreign trade flows and the development of Latin American countries.
· Amendments authorizing (1) the increase in the total share capital of the Bank to 290 million shares, which includes up to ten million new shares of preferred stock, par value US$10.00 per share, to be issued in one or more series from time to time at the discretion of the Bank’s Board of Directors; and (2) the establishment of a new class of common shares (class F) only to be issued to (a) state entities and agencies of non-Latin American countries, including, among others, central banks and those banks with the related state agency as the majority shareholder, and (b) multilateral institutions that are international or regional institutions.  The class F common shares will not have any special privileges with respect to voting rights, and each class F common share will entitle its holder to one vote at any of the Bank’s shareholder meetings, and to cumulative voting rights with respect to the election of directors of its class.  The authorized number of class A, B and E common shares, and the rights and privileges associated with these common shares, have not changed.
See Item 19, “Exhibits,” Exhibit 1.1notes 1 and 2(a).
 
B.           Business Overview

Overview

The Bank’s mission is to provide seamless support to Latin America’s foreign trade, while creating value for its stockholders.  The Bank is principally engaged in providing trade financing to selected commercial banks, middle-market companies and corporations in the Region.
Bladex intermediates in the financial and capital markets throughout the Region, through three business platforms:
The Commercial Division, which comprises the Bank’s financial intermediation and fee generation activities, including the Bank’s trade finance products, such as loans for pre and post-export financing and import of goods, letters of credit, banker’s acceptances and guarantees.  The majority of the Bank’s loans are extended in connection with specific identified foreign trade transactions.  Through its revenue diversification strategy, the Bank’s Commercial Division has introduced a broader range of products, services and solutions associated with foreign trade, including co-financing arrangements, underwriting of syndicated credit facilities, structured trade financing, asset-based financing in the form of factoring, vendor financing and leasing, as well as other fee-based services, such as U.S.-clearing electronic services.
The Treasury Division, which is responsible for ensuring the Bank’s funding and liquidity, managing the Bank’s interest rate, liquidity, and currency risks, and for Bladex’s investments in fixed-income securities.

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The Bank’s lending and investing activities are funded by interbank deposits, primarily from central banks and financial institutions in the Region, by borrowings from international commercial banks and, to a lesser extent, by sales of the Bank’s debt securities to financial institutions and investors in Asia, Europe, North America and the Region.  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.

Bladex intermediates in the financial and capital markets throughout the Region, through three business units:

The Commercial Division is responsible for the Bank’s core business of financial intermediation and fee generation activities.  The division’s portfolio includes loans and contingencies.  The majority of the Bank’s loans are extended in connection with specifically identified foreign trade transactions.  Through its revenue diversification strategy, the Bank’s Commercial Division has introduced a broader range of products, services and solutions associated with foreign trade, including co-financing arrangements, underwriting of syndicated credit facilities, structured trade financing, asset-based financing in the form of factoring, vendor financing and leasing, and other fee-based services, such as electronic clearing services.

The Treasury Division is responsible for the Bank’s liquidity management and investment securities activities, including management of the Bank’s interest rate, liquidity, price and currency risks.

The Asset Management DivisionUnit, which is based in New York and commenced operations in April 2006, providesCity, is responsible for the Bank’s asset management activities, including investment advisory services tofor funds and managed accounts, andaccounts.  The Asset Management Unit conducts business through Bladex Asset Management, which serves as investment manager for the Feeder and the Fund, both incorporated in the Cayman Islands.Fund.  The Feeder invests substantially all of its assets in the Fund.  Currently, the Fund follows a macro strategy by trading a combination of products including foreign exchange, interest rate swaps, and derivative products to establish long and short positions mainly in Latin American markets.  Capital preservation is one of Fund’s main objectives, and the Fund’s trading strategy emphasizes high liquidity, moderate volatility and lower leverage.

Historically, trade finance has been afforded favorable treatment under Latin American debt restucturings.restructurings. This has been, in part, due to the perceived importance that governments and other borrowers in the Region have attributed to maintaining access to trade finance. The Bank believes that, in the past, the combination of its focus on trade finance orientation and the composition of its Class A shareholding haveshareholders has been instrumental in obtaining some exceptions on U.S. dollars convertibility and transfer limitations imposed on the servicing of external obligations ("preferred creditor status"). WhileAlthough the Bank mantainsmaintains both its focus on trade finance orientation and its Class A shareholding,shareholders, it cannot guarantee that such exceptions will be granted in all future debt restructurings.

 
At
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As of December 31, 2008,2010, the Bank had 5258 employees across its offices responsible for marketing the Bank’s financial products and services to existing and potential customers.

Developments During 20082010

Working within a challenging financialThe macroeconomic environment in the last quarterRegion in 2010 showed signs of a positive trend, which the Bank’s Management believes is not expected to change.  The Region was one of the year, Bladex achieved solid resultsleast affected by the international crisis that started in 2008 in terms of impact of GDP growth, increase in fiscal deficit and increase in unemployment, and showed a great recovery capacity, with counter-cyclical measures that could only be implemented due to the fiscal discipline of countries in the Region in previous years.  The Region also benefited from the sustained demand for raw materials from China and other emerging countries.

Despite a general reduction in interest rates in most countries, inflation remained close to the targets set by central banks in the Region. A key factor for the year,regional economic dynamics has been the strength of the financial sector, which has allowed for counter-cyclical monetary incentives to be implemented and maintained its strong fundamentals.
2008 washas ensured the availability of banking credit to the private sector. In addition to banking credit, capital markets also played an important role in funding expansion in the Region.  The positive trend in the Region’s risk profile resulting from these factors has been reflected by the Region’s stability and by upgrades to the international risk rating of Latin American countries, representing a unique year ascontrast in comparison to the Commercial Division achieved its best performancerisk ratings trends of developed economies during the past five years, despite an unprecedented global financial crisisperiod.

In this environment, Bladex has developed even further its capacity to support both international and interregional trade, which has resulted in its highest-ever geographic diversification of placements and a downtrend in the last quarter.  systemic risk related to these placements throughout the period.

Net income increased by 35%, from $43.6attributable to Bladex amounted to $42.2 million in 2010, compared to $59.1 million.  Average lending spreads increased by 56%, and the Commercial Division added 44 new clients to the Bank’s client base.  The Bank responded to the global financial crisis by actively managing its credit and liquidity risks, reducing the size and concentration of its credit portfolio, and as a result, reinforced its liquidity position.  This was made possible by the structure of the Bank’s credit portfolio, which generally consists of short-term trade finance assets, as well as the quality of the Bank’s client base.
The Asset Management Division’s net income was $12.3$54.9 million for the year 20082009.  Bladex’s Tier 1 capitalization ratio reached 20.5% and its leverage ratio was 7.3 times as of December 31, 2010, compared to $18.525.8% and 5.7 times, respectively, as of December 31, 2009.  The Bank’s commercial portfolio grew by 43% during 2010, amounting to $4,446 million in 2007.  The Division’s Investment Fund follows a Latin America macro strategy, utilizing a combinationas of products (foreign exchange, interest rate swaps, and credit derivative products)December 31, 2010, compared to establish long and short positions in Latin America markets.
The Treasury Division, during 2008, concentrated its efforts on effectively managing the Bank’s liquidity position and diversifying its funding base, in light$3,110 million as of the overall reduction in credit available in the global financial markets, stemming from the worldwide economic downturn.  In this context, the Bank finalized a $200 million five-year bilateral term loan facility with the China Development Bank at the end of the first quarter of 2008, as a result of the Cooperation Agreement between both institutions.  Additionally, the Bank entered into a two-year syndicated term loan facility, jointly lead-arranged by Santander Investment Securities and Standard Chartered Bank.  The original $150 million facility was substantially oversubscribed, closing with $245 million in total commitments among thirteen international financial institutions.  These facilities, coupled with continued support from depositors and correspondent banks, helped the Bank close the year withDecember 31, 2009.  Bladex maintained a strong liquidity position during 2010, totaling $421 million at year end, supported by increasingly diversified funding sources, while maintaining adequate reserve coverage levels.  This careful management of $826liquidity and reserve levels protected a portfolio of solid and improving quality while limiting return on equity to 6.2%.  The Bank’s 2010 results were driven by strong performance of the Commercial Division, mainly driven by portfolio growth mitigated by an improvement of the risk profile in the Region, with net income amounting to $56.8 million, partially offset by net losses of $9.7 million from the Asset Management Unit and net losses of $4.9 million from the Treasury Division, compared to net income of $34.8 million from the Commercial Division, $14.1 million from the Asset Management Unit and $6.1 million from the Treasury Division in 2009.

During 2010, the Bank’s Board of Directors, or the Board, approved increases in quarterly dividends distributed to holders of common shares from $0.15 to $0.17 per share pertaining to the third quarter of 2010 and from $0.17 to $0.20 per share pertaining to the fourth quarter 2010.  This increase in quarterly dividends reaffirmed the Bank’s commitment to a dividend policy that reflects the Bank’s growing core business.

The Bank opened representative offices in Porto Alegre, Brazil, and Monterrey, Mexico, and started operations in such offices in 2010.  In addition, Bladex received approval from the Superintendency of Banks of Panama on August 12, 2010, and from the Superintendency of Peru on November 15, 2010, to open another representative office in Lima, Peru, in order to further increase the Bank’s network and to gain more effective access to the Bank’s current and new clients, which represented 23% of interest – bearing liabilities.commenced operations in March, 2011.

 
1113
 

The 2008 net income results were affected byOn January 20, 2011 Bladex received approval from the accounting treatment relatedSuperintendency of Banks of Panama, to certain securities-based financing transactions (i.e. repurchase agreements, or repos), which were recorded as salesopen another representative office in accordance withBogota, Colombia and obtained on April 19, 2011 the approval from the Financial Accounting Standards Board (“FASB”) Statement No. 140 “Accounting for Transfers and ServicingSuperintendency of Financial Assets and Extinguishments of Liabilities” (“FASB Statement No. 140”).  The Bank has routinely entered into repo transactions as part of its normal business operations, accounting for the repos as financing transactions.  However, a particularly tight interbank market caused the Bank to renew some repos under new terms that resulted in the Bank receiving advances or lower percentage of receivables of the underlying securities (“repo haircuts” or “haircuts”) than it had under normal market conditions.  Based on the application of FASB Statement No. 140 and related guidance, the Bank determined that the repo transactions contracted under the new terms should be treated as sales of the underlying securities, rather than as financings or borrowings.Colombia.

See Item 5, “Operating and Financial Review and Prospects/Operating Results/Net Income” and Item 18, “Financial Statements,” note 26.25.
 
StrategyStrategies for 2011 and subsequent years

Further extend the Bank’s business into politically and economically stable, high-growth markets
The Bank’s expertise in risk and capital management and extensive knowledge of the Region allows it to identify and strategically focus on stable and growth-oriented markets, including investment grade countries in the Region. Bladex maintains strategically placed representative offices in order to provide focused service and products in markets that the Bank considers key to its continued growth. In addition, the Bank continually considers establishing a presence in other strategic locations throughout the Region in order to respond to stability and growth trends it identifies.

Targeted growth in expanding and diversifying the Bank’s client base
The Bank’s strategy to participate in a broad range of activities and further diversify its client base includes targeting clients that offer the potential for longstanding relationships and a wider presence in the Region, such as financial institutions, large corporations and middle - market companies, including through participation in bilateral and co-financed transactions. The Bank intends to continue to cultivate existing and new longstanding client relationships through the quality of the Bank’s services and the Bank’s agile decision-making and credit approval processes.

Grow current products and services while providing sector-specific solutions in the Region
The Bank intends to continue its focus on the development of expertise in the sectors in which the Bank currently operates, while strategically targeting industries with significant growth potential by offering sector-specific products and solutions to clients in these industries. These sectors include some of the most profitable industries in the Region, such as oil & gas, food, mining and agribusiness commodities, as well as growth sectors such as Latin American intra-regional trade. Bladex also intends to continue to explore key regional and local partnerships to bolster its range of services and increase its presence in key economic sectors throughout the Region.

Increase the range of products and services that the Bank offers
Due to the Bank’s relationships throughout, and knowledge of, the Region, the Bank is strongly positioned to strategically identify key additional products and services to offer to clients. Following amendments to the Bank’s Articles of Incorporation in 2009, the Bank’s scope of potential activities was broadened to encompass all types of banking, investment, and financial and other businesses that support foreign trade flows and the development of the Region. The amendments reflect the Bank’s ongoing strategy to develop new products and services, such as factoring, debt intermediation in primary and secondary markets, and structure financing, including export insurance programs, that complement the Bank’s expertise in foreign trade finance and risk management.

The Bank’s prioritiesManagement expects a positive business environment for trade finance in 2011, and believes the short term are focused on two main goals: first,Bank is well positioned to continue prudently pursuingcapture the growth forecasted for the Region, to transfer such value to its shareholders, and to comply with the Bank’s mission to provide clients and the Region with secure and reliable financing; and second, to leverage the opportunities that will arise from the ongoing transformation of the financial industry.support foreign trade in Latin America.  

 
For 2009, Bladex intends to continue focusing its efforts on diversifying its revenue sources across its three business units, with the objective of achieving improved return on equity levels, while preserving and optimizing the Bank’s stockholders’ equity.
14
 
The Commercial Division will continue to develop a stronger client base, particularly trade finance for the Bank’s traditional institutional and corporate clients, to maintain the asset quality of the Bank’s credit portfolio and maintain adequate reserve levels for credit losses.
The Bank will continue to focus its Treasury Division activities on prudent liquidity management, and the available-for-sale and trading securities portfolios, and to issue additional bonds in capital markets.
The Asset Management Division intends to continue to expand its operations and to continue generating trading revenues and fee income.
Lending Policies

The Bank extends credit directly to banks, corporations and state-owned export organizationsmiddle–market companies within the Region. The Bank analyzes credit requests from eligible borrowers in light of credit risk criteria, including economic and market conditions.  The Bank maintains a consistent lending policy and applies the same credit criteria to all types of potential borrowers in evaluating creditworthiness.
The Bank finances import and export transactions for all types of goods and products, with the exception of articles such as weapons, ammunition, military equipment, hallucinogenic drugs or narcotics not utilized for medical purposes. Imports and exports financed by the Bank are destined for buyers/sellers in countries both inside and outside the Region. The Bank analyzes credit requests from eligible borrowers in the light of credit risk criteria, including economic and market conditions. The Bank maintains a consistent lending policy and applies the same credit criteria to all types of potential borrowers in evaluating creditworthiness.

Due to the nature of trade finance, the Bank’s loans generally are unsecured. However, in certain instances, based upon itsthe Bank’s 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 requiresmay require that a loan be secured by pledged deposits and other collateral.

12
Country Credit Limits

Bladex has a methodology for capital allocation by country and its risk weights for assets. The Credit Policy and Risk Assessment Committee, (the “CPER”)or the CPER, of the Bank’s Board of Directors (the “Board”) approves a level of “allocated capital” for each country, in addition to nominal exposure limits. These country capital limits are reviewed at least annually in the quarterly meetings of the CPER. The methodology helps to establish the capital equivalent of each transaction, based on the internal numeric rating assigned to each country, which is approved by the CPER.

The amounts of capital allocated to a transaction is based on customer type (sovereign, state-owned or private, corporationsmiddle-market companies, corporate or financial institutions)institution), the type of transaction (trade or non-trade), and the average remaining term of the transaction (from 1one to 180 days, 181 days to a year, between one and three years, or longer than three years). Capital utilizations by the business units cannot exceed the Bank’s reported stockholders’ equity.

Borrower Lending Limits

The Bank generally establishes lines of credit for each borrower according to the results of its risk analysis and potential business prospects; however, the Bank is not required to lend under these lines of credit. Once a line of credit has been established, credit generally is extended after receipt of a request from the borrower for financing, usually related to foreign trade.trade, which accounted for 56% of such credit as of December 31, 2010.  Loan pricing is determined in accordance with prevailing market conditions and the borrower’s creditworthiness.

For existing borrowers, the Bank’s managementManagement has authority to approve credit lines up to the legal lending limit prescribed by Panamanian law (see Item 4, “Information on the Company/Business Overview/Regulation—“Regulation—Panamanian Law”), provided that the credit lines comply fully with the country credit limits and conditions for the borrower’s country of domicile set by the Board. Approved borrower lending limits are reported to the CPER quarterly. Panamanian lawLaw prescribes certain concentration limits, which are applicable and strictly adhered to by the Bank, including a 30%thirty percent limit as a percentage of capital and reserves for any one borrower and borrower group, in the case of financial institutions, and a 25%twenty-five percent limit as a percentage of capital and reserves for any one borrower and borrower group, in the case of corporate, sovereign and sovereign borrowers.middle-market companies. As of December 31, 2008,2010, the legal lending limit prescribed by Panamanian law for corporations and sovereign borrowers amounted to approximately $144$174 million, and for financial institutions and financial groups amounted to approximately $172$209 million. On a quarterly basis, the CPER reviews the Bank’s impaired portfolio, if any, along with certain non-impaired credits.
At   As of December 31, 2008,2010, the Bank was in full compliance with all regulatory limits. See Item 4, “Information on the Company/Business Overview/Regulation/Panamanian Law.”

 
15

Credit Portfolio

The Bank’s credit portfolio, which consists of the commercial portfolio and investment securities portfolio increased to $4,884 million as of December 31, 2010, from $3,621 million as of December 31, 2009 and, from $3,718 million as of December 31, 2008.  The $1.3 billion or 35% credit portfolio increase during 2010 was largely attributable to increased demand from the treasury portfolio.Bank’s established client base of corporations ($776 million, or 49%), financial institutions ($518 million, or 35%), and middle-market companies ($96 million, or 74%) as demand in the Region increased, offset by a $127 million decrease in sovereign clients mostly related to the sale of securities available for sale.

The Bank’s credit portfolio at December 31, 2008 decreasedyear 2010 was defined by a strong economic recovery in Latin America, which brought about  increased trade flows that added  significant scale and  diversification to $3,718 million from $4,753 million at December 31, 2007. The credit portfolio balance at December 31, 2006 amounted to $4,006 million.the bank's  business.

Commercial Portfolio

The commercial portfolio includes the book value of loans,loan portfolio and contingencies and other assets (including confirmed and stand-by letters of credit and guarantees covering commercial and country risks, credit commitments, reimbursement undertakings, equity investments and customers’ liabilities under acceptances).

AtThe Bank’s commercial portfolio increased to $4,446 million as of December 31, 2010 from $3,110 million as of December 31, 2009, a 43% increase, and from $3,062 million as of December 31, 2008, a 45% increase.  The increase in 2010 was largely attributable to increased demand from the commercial portfolio amounted to $3,062 million, compared to $4,281 million atBank’s established client base of corporations and financial institutions.

As of December 31, 2007 and to $3,634 million at December 31, 2006.
At December 31, 2008, 66%2010, 59% of the Bank’s commercial portfolio represented trade related credits.credits, and the remaining balance consisted primarily of lending to banks and corporations.  The corporate market segment represented 60%50% of the total commercial portfolio, of which 63%72% represented trade financing.  The middle - market companies segment represented 5% of the total commercial portfolio, of which 69% represented trade financing.

The following table sets forth the distribution of the Bank’s commercial portfolio, by product category atas of December 31 of each year (excluding non-accruing credits for the years 2005 and 2004 of $42 million and $293 million, respectively):

year:
13
  
As of December 31,
 
  
2010(1)
  
%
  
2009(2)
  
%
  
2008
  
%
  
2007
  
%
  
2006
  
%
 
  (in $ million, except percentages) 
Loans $4,064   91.4  $2,779   89.4  $2,619   85.5  $3,732   87.2  $2,981   82.0 
Contingencies and other assets  382   8.6   331   10.6   444   14.5   550   12.8   654   18.0 
Total $4,446   100.0  $3,110   100.0  $3,062   100.0  $4,281   100.0  $3,634   100.0 
 
(1)Includes non-accrual loans for $29 million as of December 31, 2010.
  
At December 31,
 
  
2008
  
%
  
2007
  
%
  
2006
  
%
  
2005
  
%
  
2004
  
%
 
  (in $ million, except percentages) 
Loans $2,619   85.5  $3,732   87.2  $2,981   82.0  $2,581   76.7  $2,186   88.7 
Contingencies and other assets  444   14.5   550   12.8   654   18.0   784   23.3   277   11.3 
Total $3,062   100.0  $4,281   100.0  $3,634   100.0  $3,365   100.0  $2,463   100.0 
(2)Includes non-accrual loans for $51 million as of December 31, 2009.

Loan Portfolio

AtAs of December 31, 2008,2010, the Bank’s total loans amounted to $2,619$4,064 million, compared to $3,732$2,779 million atas of December 31, 2007.2009, and compared to $2,619 million as of December 31, 2008.  As of December 31, 2010, 70% of the Bank’s loans were scheduled to mature within one year.  See Item 5, “Operating and Financial Review and Prospects/Operating Results/Changes in Financial Condition” and Item 18, “Financial Statements,” note 8.7.

 
16

Loans by Country

The following table sets forth the distribution of the Bank’s loans by country at December 31 of each year:the dates indicated:
  
As of December 31,
 
  
2010
  
% of
Total
Loans
  
2009
  
% of
Total
Loans
  
2008
  
% of
Total
Loans
  
2007
  
% of
Total
Loans
  
2006
  
% of
Total
Loans
 
  (in $ million, except percentages) 
Argentina $237   5.8  $73   2.6  $151   5.8  $264   7.1  $203   6.8 
Bolivia  0   0.0   0   0.0   0   0.0   5   0.1   5   0.2 
Brazil (1)
  1,583   38.9   1,335   48.0   1,289   49.2   1,379   37.0   1,317   44.2 
Chile  328   8.1   258   9.3   8   0.3   10   0.3   175   5.9 
Colombia  585   14.4   200   7.2   285   10.9   400   10.7   163   5.5 
Costa Rica  88   2.2   83   3.0   55   2.1   77   2.1   85   2.9 
Dominican Republic  135   3.3   31   1.1   48   1.8   29   0.8   9   0.3 
Ecuador  18   0.4   23   0.8   36   1.4   61   1.6   43   1.4 
El Salvador  39   1.0   41   1.5   76   2.9   47   1.2   82   2.8 
Guatemala  92   2.3   74   2.7   61   2.3   96   2.6   89   3.0 
Honduras  38   0.9   23   0.8   45   1.7   49   1.3   36   1.2 
Jamaica  64   1.6   31   1.1   15   0.6   77   2.1   49   1.6 
Mexico (2)
  404   9.9   302   10.9   380   14.5   410   11.0   168   5.6 
Nicaragua  0   0.0   1   0.0   4   0.2   13   0.3   10   0.3 
Panama  47   1.2   41   1.5   47   1.8   140   3.7   180   6.1 
Peru  343   8.4   161   5.8   50   1.9   454   12.2   262   8.8 
Trinidad & Tobago  63   1.6   72   2.6   23   0.9   88   2.3   104   3.5 
Uruguay  0   0.0   30   1.1   45   1.7   0   0.0   0   0.0 
Venezuela  0   0.0   0   0.0   0   0.0   135   3.6   1   0.0 
Total $4,064   100.0  $2,779   100.0  $2,619   100.0  $3,732   100.0  $2,981   100.0  
 
(1)Includes non-accrual loans in Brazil of $1 million in 2010 and $7 million in 2009.
  
At December 31,
 
  
2008
  
%
  
2007
  
%
  
2006
  
%
  
2005
  
%
  
2004
  
%
 
  (in $ million, except percentages) 
Argentina $151   5.8  $264   7.1  $203   6.8  $51   2.0  $207   8.5 
Bolivia  0   0.0   5   0.1   5   0.2   0   0.0   0   0.0 
Brazil  1,289   49.2   1,379   37.0   1,317   44.2   1,095   42.0   1,054   43.2 
Chile  8   0.3   10   0.3   175   5.9   283   10.8   322   13.2 
Colombia  285   10.9   400   10.7   163   5.5   249   9.5   148   6.1 
Costa Rica  55   2.1   77   2.1   85   2.9   54   2.1   38   1.5 
Dominican Republic  48   1.8   29   0.8   9   0.3   1   0.0   0   0.0 
Ecuador  36   1.4   61   1.6   43   1.4   25   1.0   51   2.1 
El Salvador  76   2.9   47   1.2   82   2.8   81   3.1   44   1.8 
Guatemala  61   2.3   96   2.6   89   3.0   41   1.6   38   1.6 
Honduras  45   1.7   49   1.3   36   1.2   26   1.0   6   0.2 
Jamaica  15   0.6   77   2.1   49   1.6   24   0.9   26   1.1 
Mexico  380   14.5   410   11.0   168   5.6   161   6.1   262   10.7 
Nicaragua  4   0.2   13   0.3   10   0.3   2   0.1   5   0.2 
Panama  47   1.8   140   3.7   180   6.1   156   6.0   89   3.7 
Peru  50   1.9   454   12.2   262   8.8   180   7.0   55   2.2 
Trinidad & Tobago  23   0.9   88   2.3   104   3.5   177   6.8   92   3.8 
Uruguay  45   1.7   0   0.0   0   0.0   4   0.1   0   0.0 
Venezuela  0   0.0   135   3.6   1   0.0   0   0.0   5   0.2 
Total $2,619   100.0  $3,732   100.0  $2,981   100.0  $2,610   100.0  $2,442   100.0 
(2)Includes non-accrual loans in Mexico of $28 million in 2010 and $44 million in 2009.
 
Loans by Type of Borrower
 
The following table sets forth the amounts of the Bank’s loans by type of borrower at December 31 of each year:the dates indicated:
 
  
As of December 31,
 
  
2010
  
% of
Total
Loans
  
2009
  
% of
Total
Loans
  
2008
  
% of
Total
Loans
  
2007
  
% of
Total
Loans
  
2006
  
% of
Total
Loans
 
  (in $ million, except percentages) 
Private sector commercial banks and financial institutions $1,381   34.0  $875   31.5  $577   22.0  $1,491   39.9  $1,167   39.2 
State-owned commercial banks  320   7.9   334   12.0   322   12.3   241   6.5   273   9.2 
Central banks  0   0.0   0   0.0   25   1.0   0   0.0   0   0.0 
Sovereign debt  54   1.3   96   3.4   67   2.6   113   3.0   123   4.1 
State-owned exporting organizations  312   7.7   193   7.0   50   1.9   282   7.6   138   4.6 
Private middle-market companies (1)
  225   5.5   129   4.6   0   0.0   0   0.0   0   0.0 
Private corporations (2)
  1,772   43.6   1,153   41.5   1,577   60.2   1,605   43.0   1,279   42.9 
Total (3)
 $4,064   100.0  $2,779   100.0  $2,619   100.0  $3,732   100.0  $2,981   100.0 
  
At December 31,
 
  
2008
  
2007
  
2006
  
2005
  
2004
 
  (in $ million) 
Private sector commercial banks $577  $1,491  $1,167  $1,583  $1,243 
State-owned commercial banks  322   241   273   118   563 
Central banks  25   0   0   0   13 
Sovereign debt  67   113   123   49   58 
State-owned exporting organizations  50   282   138   402   363 
Private corporations  1,577   1,605   1,279   458   201 
Total $2,619  $3,732  $2,981  $2,610  $2,442 
(1)60% of loans to private middle-market companies correspond to the industrial sector, 24% of loans correspond to the agricultural sector, and 5% correspond to oil and petroleum and derived products.
(2)43% of loans to private corporations correspond to the industrial sector, 28% of loans correspond to the agricultural sector, 18% of loans correspond to oil and and petroleum derived products, and 5% of loans correspond to mining sector.
(3)Includes $29 million and $51 million in non-accrual loans in 2010 and 2009, respectively.

During 2008,As of December 31, 2010, the Bank reduced itsBank’s loan portfolio by $1.1 billion,amounted to $4,064 million, an increase of $1,285 million, or 46%, from 2009 year-end balances. The increase resulted from improved conditions in the financial markets and increased demand for the Bank’s lending products.  As of December 31, 2010, 18% of the Bank’s $2,309 million loan exposure to private corporations, state-owned exporting organizations and middle market – companies was concentrated in the oil & gas industry in countries such as liquidity was strengthenedBrazil, Chile, Argentina, Dominican Republic, Trinidad & Tobago, Mexico, Peru, and exposures of potential vulnerable sectors and/or concentrations were reduced in response to deteriorating macroeconomic conditions.Venezuela.

 
1417
 
During 2007, the Bank increased its exposure to private corporations by $326 million, reflecting its strategy of developing a stronger client base focused on a growing corporate segment.

Maturities and SensitivitesSensitivities of the Loan Portfolio

The following table sets forth the remaining term of the maturity profile of the Bank’s loan portfolio atas of December 31, 2008,2010, by type of rate and type of borrower:
 
  
As of December 31, 2010
 
  (in $ million) 
  
Due in one year or
less
  
Due after one
year through five
years
  
Due after five
years through
ten years (1)
  
Total
 
FIXED RATE            
Private sector commercial banks and financial institutions $784  $0  $0  $784 
State-owned commercial banks  316   0   0   316 
Sovereign debt  27   8   0   35 
State-owned exporting organizations  257   0   0   257 
Private middle-market companies  105   13   0   118 
Private corporations  473   20   0   493 
Sub-total $1,962  $42  $0  $2,004 
FLOATING RATE                
Private sector commercial banks and financial institutions $411  $186  $0  $597 
State-owned commercial banks  4   0   0   4 
Sovereign debt  12   7   0   19 
State-owned exporting organizations  55   0   0   55 
Private middle-market companies  61   46   0   106 
Private corporations  341   911   27   1,279 
Sub-total $883  $1,150  $27  $2,061 
Total $2,845  $1,192  $27  $4,064 
  
At December 31, 2008
 
  (in $ million) 
  
Due in one year or less
  
Due after one year
through five years
  
Due after five
years
  
Total
 
FIXED RATE            
Private sector commercial banks $177  $0  $0  $177 
State-owned commercial banks  185   20   0   205 
Sovereign debt  25   39   0   64 
State-owned exporting organizations  8   0   0   8 
Private corporations  455   24   0   479 
Sub-total $850  $83  $0  $933 
FLOATING RATE                
Private sector commercial banks $162  $218  $19  $399 
State-owned commercial banks  80   38   0   118 
Sovereign debt  1   2   0   2 
Central banks  25   0   0   25 
State-owned exporting organizations  41   1  0   43 
Private corporations  438   625   35   1,098 
Sub-total $747  $884  $54  $1,685 
Total $1,597  $968  $54  $2,619 
(1)The Bank’s loan portfolio contains no maturities after eight years.
 
Contingencies and Other Assets

The Bank’s contingencies and other assets included in the commercial portfolio consist of selected financial instruments with off-balance sheet credit risk, and customer liabilities under acceptances.acceptances, and equity investment.

The Bank, on behalf of its client base, advises and confirms letters of credit to facilitate foreign trade transactions. The Bank also provides stand-by letters of credit, and guarantees, including country risk guarantees, which cover the country risk arising from the risk of convertibility and transferability of local currency of countries in the Region into hard currency and from political risks, such as expropriation, nationalization, war and/or civil disturbances.  The Bank also provides commitments to extend credit, which are a combination of either non-binding orbinding legal agreements to lend to a customer.

The Bank applies the same credit policies used in its lending process to its evaluation of these instruments, and, once issued, the commitment is irrevocable and remains valid until its expiration. AtAs of December 31, 2010, total contingencies and other assets in the commercial portfolio amounted to $382 million (9% of the total commercial portfolio), of which 68% corresponded to letters of credit mainly in Ecuador and Venezuela.  As of December 31, 2009, total contingencies and other assets in the commercial portfolio amounted to $331 million (11% of the total commercial portfolio).  As of December 31, 2008, total contingencies and other assets in the commercial portfolio amounted to $444 million, representing 14%(15% of the total commercial portfolio.  portfolio).

18

The following table presents the amount of contingencies and other assets, as of December 31 of each year:

  As of December 31, 
  
2010
  
2009
  
2008
 
  
Amount
  
% of Total
Contingencies
and other
assets
  
Amount
  
% of Total
Contingencies
and other
assets
  
Amount
  
% of Total
Contingencies
and other
assets
 
  (in $ million, except percentages) 
Customers’ liabilities under acceptances $27   7.1  $2   0.5  $1   0.3 
Contingencies                        
Brazil  67   17.4   22   6.8   151   34.0 
Chile  0   0.0   0   0.0   83   18.8 
Colombia  0   0.0   0   0.0   1   0.3 
Costa Rica  32   8.4   24   7.3   20   4.4 
Dominican Republic  0   0.0   0   0.0   14   3.1 
Ecuador  121   31.7   112   33.5   86   19.5 
El Salvador  0   0.0   2   0.5   0   0.1 
Guatemala  1   0.4   1   0.3   5   1.0 
Honduras  0   0.1   0   0.1   0   0.1 
Mexico  53   13.8   60   18.0   4   1.0 
Panama  1   0.3   0   0.0   15   3.4 
Switzerland  1   0.1   0   0.0   0   0.0 
Uruguay  0   0.0   16   4.8   0   0.0 
Venezuela  78   20.5   92   27.8   62   13.9 
Total Contingencies $355   92.9  $330   99.5  $442   99.7 
Total Contingencies and Other Assets $382   100.0  $331   100.0  $444   100.0 

See Item 18,  “Financial Statements,” note 19.18.
Treasury Portfolio
The treasury portfolio includes selected investment securities, trading assets and credit default swaps.  Investment securities and trading assets as of December 31, 2008 amounted to $653 million.  Credit default swaps as of this same date amounted to $3 million.

Investment Securities Portfolio

The Bank’s investment securities consistportfolio consists of debt securities available-for-sale, securities held-to maturity and securities held-to-maturity. See Item 18,  “Financial Statements,”  notes 2 (i) and 6.trading assets.

15
In the normal course of business, the Bank utilizes interest rate swaps for hedging purposes with respect to its assets (mainly its investment securities) and liabilities management activities.

AtAs of December 31, 2010, the Bank’s securities available-for-sale amounted to $353 million and consisted of investments with issuers in the Region, of which 63% corresponded to sovereign borrowers and 37% corresponded to state and private corporations.  The $104 million decrease in the securities available-for-sale portfolio during 2010 compared to 2009 reflects the sale of $135 million in nominal value which generated net gains of $2.3 million during 2010.

As of December 31, 2009, the Bank’s securities available-for-sale amounted to $457 million and consisted of investments with issuers in the Region, of which 80% were securities of banks and sovereign borrowers and 20% were securities of corporations.

As of December 31, 2008, the Bank’s securities available-for-sale amounted to $608 million and consisted of investments with issuers in the Region, of which 74% were securities of banks and sovereign borrowers and 26% were securities of corporations.  The year-on-year decrease in the securities available-for-sale portfolio for 2008 and 2009 reflects the sale of $147 million in book value of the securities portfolio, which generated net gains of $0.5 million during 2009.

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The held-to-maturity portfolio amounted to $33 million as of December 31, 2010, and $28 million atas of December 31, 2008.  For the year 2008, the Bank’s held-to-maturity portfolio had a weighted average annual interest rateAs of 3.39%.
Trading assets
At December 31, 2008,2009 the Bank had no securities held-to-maturity.

See Item 18,  “Financial Statements,”  notes 2 (i) and 5.

As of December 31, 2010, the Bank’s trading assets amounted to $50 million, compared to the same amount as of December 31, 2009, and compared to $45 million.million as of December 31, 2008.  See Item 18, “Financial Statements,”Statements”, notes 2(h) and 5.4.
Asset Management Portfolio

The asset managementfollowing table sets forth information regarding the carrying value of the Bank’s investment securities portfolio incorporatesat the dates indicated.
  As of December 31, 
  
2010
  
2009
  
2008
 
  (in $ millions) 
Trading assets - Bonds $50  $50  $45 
Securities held-to-maturity - Bonds $33  $0  $28 
Securities available-for-sale - Bonds $353  $457  $608 
Total investment securities $437  $507  $681 

Investment Fund

The investment fund consists of the Bank’s investment in the Fund’s assets and liabilities and is managed by the Asset Management Division through Bladex Asset Management.

Currently, the Division follows a macro strategy by trading a combinationThe Fund’s net assets are composed of products (foreign exchange,cash, investment in equity indexes, interest rate swaps, and creditdebt instruments, and derivative products) to establish longfinancial instruments that are quoted and short positions mainlytraded in Latin Americanactive markets.  Capital preservation is one of the Division’s main objectives, and the Division’s trading strategy emphasizes high liquidity, moderate volatility, and lower leverage.

The Board of Directors of the Fund controls the exposure of the Fund to certain risks through a risk matrix, which contains guidelines and parameters that the Fund’s managers must follow. Specific risk management guidelines include limitations regarding capital usage and portfolio concentrations.

The Investment Fund’s balance totaled $167 million as of December 31, 2010, compared to $198 million as of December 31, 2009, and compared to $151 million atas of December 31, 2008, of which the minority interest in the investment fund amounted to $19 million, $35 million and $128$5 million, atrespectively.

Bladex’s ownership of the Feeder was 88.67% as of December 31, 2007, which included $47 million in funds deposited2010, 82.34% as of December 31, 2009, and 96.89% as of December 31, 2008, with the Bank.remaining balances owned by third party investors.   See Item 18, “Financial Statements,” notes 1, 2(d), 7,2(j), 6, and 23.22.

Total Outstandings by Country

The following table sets forth the aggregate amount of the Bank’s cross-border outstandings, consisting of cash and due from banks, interest-bearinginterest-earning deposits in other banks, trading assets, investment securities, loans and investment fund, , but not including contingencies and other assets (collectively, “cross-border outstandings”) atas of December 31 of each year:

 
1620
 

 As of December 31, 
 
2008
  
2007
  
2006
  
2010
  
2009
  
2008
 
 
Amount
  
% of Total
Outstandings
  
Amount
  
% of Total
Outstandings
  
Amount
  
% of Total
Outstandings
  
Amount
  
% of Total
Outstandings
  
Amount
  
% of Total
Outstandings
  
Amount
  
% of Total
Outstandings
 
 (in $ million, except percentages)  (in $ million, except percentages) 
Argentina $151  3.5  $283  6.0  $212  5.5  $237   4.6  $73   1.9  $151   3.5 
Austria 0  0.0  45  1.0  0  0.0   0   0.0   0   0.0   0   0.0 
Brazil 1,424  32.7  1,508  32.2  1,449  37.5   1,676   32.8   1,461   37.4   1,424   32.7 
Chile 59  1.4  52  1.1  207  5.4   366   7.2   296   7.6   59   1.4 
Colombia 449  10.3  526  11.2  261  6.8   704   13.8   340   8.7   449   10.3 
Costa Rica 66  1.5  77  1.6  85  2.2   93   1.8   83   2.1   66   1.5 
Dominican Republic 55  1.3  42  0.9  9  0.2   138   2.7   38   1.0   55   1.3 
Ecuador 36  0.8  61  1.3  43  1.1   18   0.4   23   0.6   36   0.8 
El Salvador 95  2.2  57  1.2  87  2.3   55   1.1   57   1.4   95   2.2 
France 24  0.5  45  1.0  50  1.3   11   0.2   20   0.5   24   0.5 
Germany 20  0.5  60  1.3  0  0.0   0   0.0   0   0.0   20   0.5 
Guatemala 64  1.5  96  2.0  89  2.3   103   2.0   85   2.2   64   1.5 
Honduras 45  1.0  49  1.0  36  0.9   38   0.7   23   0.6   45   1.0 
Jamaica 15  0.3  77  1.7  49  1.3   64   1.3   31   0.8   15   0.3 
Japan 60  1.4  40  0.9  33  0.9   62   1.2   100   2.6   60   1.4 
Mexico 472  10.9  437  9.3  243  6.3   455   8.9   359   9.2   472   10.9 
Panama 133  3.1  212  4.5  200  5.2   97   1.9   85   2.2   133   3.1 
Peru 77  1.8  484  10.3  262  6.8   343   6.7   191   4.9   77   1.8 
Spain 40  0.9  48  1.0  73  1.9   0   0.0   0   0.0   40   0.9 
Switzerland 22  0.5  30  0.6  40  1.0   32   0.6   22   0.6   22   0.5 
Trinidad & Tobago 23  0.5  88  1.9  104  2.7   63   1.2   72   1.8   23   0.5 
United Kingdom 54  1.2  10  0.2  0  0.0   1   0.0   20   0.5   54   1.2 
United States 633  14.5  23  0.5  107  2.8   297   5.8   239   6.1   633   14.5 
Uruguay 45  1.0  0  0.0  0  0.0   0   0.0   30   0.8   45   1.0 
Venezuela 0  0.0  135  2.9  1  0.0 
Other countries1
  139   3.2   118   2.5   116   3.0 
Multilateral Organization  65   1.3   50   1.3   34   0.8 
Other countries (1)
  20   0.4   14   0.3   105   2.4 
Sub-Total $4,201   96.5  $4,602   98.3  $3,756   97.3  $4,938   96.7  $3,711   94.9  $4,201   96.5 
Investment fund2
  151   3.5   82   1.7   105   2.7 
Total $4,351   100.0  $4,684   100.0  $3,861   100.0 
Investment fund (2)
  167   3.3   198   5.1   151   3.5 
Total (3)
 $5,105   100.0  $3,909   100.0  $4,351   100.0 

1(1)
Other consists of cross-border outstandings to countries in which cross-border outstandings did not exceed 1% for any of the periods indicated above.
indicated.  Other countries in the year 2010 was comprised of $20 million in Finland.  Other Countries in the year 2009 was comprised of $10 million in Portugal, $1 million in Nicaragua and $3 million of cash and due from banks.  Other Countries in the year 2008 was comprised of $40 million in Canada, $20 million in Australia, $20 million in Finland, $10 million in Sweden, $4 million in Nicaragua and $11 million in cash and due from banks.
2(2)The balances in the investment fund  represent the participation of the Feeder in the net asset value  (NAV) of the Fund.
(3)The outstandings by country does not include contingencies.  See Item 4, “Business Overview / Contingencies and other assets.”

In allocating country risk limits, the Bank applies a portfolio management approach that takes into consideration several factors, including the Bank’s perception of country risk levels, business opportunities, and economic and political analyses, applying aanalysis.

The composition of the outstandings per country portfolio management approach.has remained fairly stable over the 2008 to 2010 period.  Some exposures in certain countries have been adjusted in accordance with the Bank’s risk perception.

Cross-border outstandings in countries outside the Region correspond principally to the Bank’s liquidity placements.  See Item 5, “Operating and Financial Review and Prospects/Liquidity and Capital Resources/Liquidity.”

 
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The following table sets forth the amount of the Bank’s cross-border outstandings by type of institution atas of December 31 of each year:

  
As of December 31,
 
  
2010
  
2009
  
2008
 
  (in $ million) 
Private sector commercial banks and financial institutions $1,552  $1,172  $1,235 
State-owned commercial banks  402   354   362 
Central banks  265   178   320 
Sovereign debt  301   425   506 
State-owned exporting organizations  354   245   132 
Private middle-market companies  225   129   0 
Private corporations  1,840   1,208   1,645 
Sub-Total $4,938  $3,711  $4,201 
Investment fund  167   198   151 
Total $5,105  $3,909  $4,351 
  
2008
  
2007
  
2006
 
  (in $ million) 
Private sector commercial banks $1,235  $1,868  $1,567 
State-owned commercial banks  362   306   324 
Central banks  320   0   0 
Sovereign debt  506   389   350 
State-owned exporting organizations  132   364   219 
Private corporations  1,645   1,675   1,295 
Sub-Total $4,201  $4,602  $3,756 
Investment fund  151   82   105 
Total $4,351  $4,684  $3,861 

17
Net Revenues Per Country

The following table sets forth information regarding the Bank’s net realized/ unrealized gains (losses) perrevenues by country at December 31 of each year,the dates indicated, with net revenues calculated as the sum of net interest income, net fees and commissions, net, derivative financial instruments and hedging, net gain (loss) from investment fund trading, net gain (loss) from trading securities, net gain (loss) on sale of securities available-for-sale, net gain (loss) on foreign currency exchange, and other income (expense), net:
  
For the year ended December 31,
 
  
2008
  
2007
  
2006
 
  (in $ million) 
Argentina $6.2  $4.8  $4.2 
Brazil  24.4   33.2   31.4 
Chile  1.0   1.4   2.7 
Colombia  10.4   7.8   3.6 
Costa Rica  1.6   0.9   1.6 
Dominican Republic  1.3   0.9   1.0 
Ecuador  2.2   3.2   2.9 
El Salvador  (3.8)  0.9   1.5 
Guatemala  (2.5)  1.5   1.3 
Honduras  1.3   0.9   0.7 
Jamaica  1.6   1.5   1.5 
Mexico  25.1   12.4   5.0 
Panama  (1.7)  3.8   3.6 
Peru  9.2   4.5   3.4 
Trinidad and Tobago  2.0   2.4   1.8 
Venezuela  1.8   3.3   1.0 
Other countries1
  (3.7)  0.6   0.5 
Asset Management Division  18.1   24.1   0.6 
Total $94.5  $108.2  $68.2 

  
For the year ended December 31,
 
  
2010
  
2009
  
2008
 
  (in $ million) 
Argentina $4.9  $2.0  $6.2 
Brazil  28.6   25.9   24.4 
Chile  2.9   1.9   1.0 
Colombia  5.1   5.8   10.4 
Costa Rica  2.0   4.2   1.6 
Dominican Republic  1.3   0.7   1.3 
Ecuador  4.1   3.0   2.2 
El Salvador  0.8   5.4   (3.8)
Guatemala  1.4   8.8   (2.5)
Honduras  1.4   1.1   1.3 
Jamaica  1.1   0.6   1.6 
Mexico  15.7   16.8   25.1 
Panama  1.6   3.3   (1.7)
Peru  5.0   0.5   9.2 
Trinidad and Tobago  1.3   1.0   2.0 
Uruguay  0.5   1.2   0.8 
Venezuela  4.6   2.5   1.8 
Other countries(1)
  2.0   2.5   (4.5)
Asset Management Unit  (7.7)  22.1   18.1 
Total net revenues $76.8  $109.1  $94.5 
Reversal (provision) for credit losses  4.8   (14.8)  1.5 
Recoveries, net of impairment of assets  0.2   (0.1)  (0.8)
Operating expenses  (42.1)  (38.2)  (40.0)
Net income $39.8  $56.0  $55.3 
Net income (loss) attributable to the redeemable noncontrolling interest  (2.4)  1.1   0.2 
Net income attributable to Bladex $42.2  $54.9  $55.1 
1(1)Other consists of net revenues per country in which net revenues did not exceed $1 million for any of the periods indicated above.
Net revenues per country reflectin which net revenues did not exceed $1 million for any of the periods indicated above.

22

The previous table provides a reconciliation of the net revenues derived(as defined previously) to the Bank’s net income. Net revenues do not include the effects of reversals (provisions) for credit losses, recoveries on assets, net of impairments and operating expenses. The objective of the aforementioned table is to show net revenues before operating expenses generated from the Bank’s commercial portfolio (loans and contingencies), treasury portfolio (investment securities, trading assets and credit derivative) and asset management portfolio (investment fund), throughout the Region.  See Item 4, “Information on the Company/Business Overview/Commercial Portfolio,Division, Treasury PortfolioDivision and Asset Management Portfolio”Unit, on a by-country basis. Given  that the Bank’s business segments generate revenues not only from net interest income, but from other sources including fees and Item 5, “Operatingcommissions, gains and Financial Reviewlosses on investments and Prospects/Operating Results/Net Income.”derivative financial instruments, which form part of other income rather than net interest income, the Bank adds those amounts to net interest income to show net revenues earned before operating expenses. Reversals (provisions) for credit losses, and recoveries, net of impairment of assets, are not included as part of net revenues as the Bank believes such amounts, which are based on Management estimates, may distort trend analysis. Thus, the Bank believes excluding such amounts from, net revenues provides a more accurate and clear indicator of the Bank’s performance within its three segments for each country, and thus provides a better analysis of the efficiency of the Bank. The Bank also believes the presentation of net revenues helps facilitate comparisons of performance between periods. However, net revenues should not be considered a substitute for, or superior to, financial measures calculated differently on a U.S. GAAP basis. Furthermore, net revenues may be calculated differently by other companies in the financial industry.  

Competition

The Bank operates in a highly competitive environment in most of its markets, and faces competition principally from regional and international banks, the majority of which are European or North American, in making loans and providing fee-generating services. The Bank competes in its lending and deposit - taking activities with other banks and international financial institutions, many of which have greater financial resources, enjoy access to less expensive funding and offer sophisticated banking services. Whenever economic conditions and risk perception improve in the largest countries of the Region, competition from commercial banks, the securities markets and other new participants generally increases. Competition may have the effect of reducing the spreads of the Bank’s lending rates over its funding costs and constraining the Bank’s profitability.

Increased open account exports and new financing requirements from multinational corporations are changing the way banks intermediate foreign trade financing. Trade finance volumes are also dependantdependent on global economic conditions.

The Bank also faces competition from investment banks and the local and international securities markets, which provide liquidity to the financial systems in certain countries in the Region, as well as non-bank specialized financial institutions. The Bank competes primarily on the basis of agility, pricing, and quality of service. See Item 3, “Key Information/Risk Factors.”

18
During 2008, there was less credit available, as well as higher risks and less competition in the Region.  As a result, the Bank was able to increase lending margins from new disbursements.
Regulation

General

The Superintendency of Banks of Panama (the “Superintendency of Banks”) regulates, supervises and examines the Bank. The New York Agency is regulated, supervised and examined by the New York Banking Department and the Board of Governors of the Federal Reserve System, or the U.S. Federal Reserve Board, and the Florida International Administrative Office is regulated, supervised and examined by the Florida Office of Financial Regulation and the U.S. Federal Reserve Board. The Bank’s direct and indirect nonbanking subsidiaries doing business in the United States are subject to regulation by the U.S. Federal Reserve Board. The Feeder and the Fund are regulated by government authorities in the Cayman Islands. The regulation of the Bank by relevant Panamanian authorities differs from the regulation generally imposed on banks, including foreign banks, in the United States by U.S. federal and state regulatory authorities.

 
23

The Superintendency of Banks has signed and executed agreements or letters of understanding with 24 foreign supervisory authorities for the sharing of supervisory information under the principles of reciprocity, appropriateness, national agreement, and confidentiality. These 24 entities include the U.S. Federal Reserve Board, the Office of the Comptroller of Currency of the Treasury Department, (the “OCC”),or the OCC, the Federal Deposit Insurance Corporation and the Office of Thrift Supervision. In addition, the Statement of Cooperation between the United States and Panama promotes cooperation between U.S. and Panamanian banking regulators and demonstrates the commitment of the U.S. regulators and the Superintendency of Banks to the principles of comprehensive and consolidated supervision.

Panamanian Law

The Bank operates in Panama under a General Banking License issued by the National Banking Commission, predecessor of the Superintendency of Banks. Banks operating under a General Banking License, (“or General License Banks”)Banks, may engage in all aspects of the banking business in Panama, including taking local and offshore deposits, as well as making local and international loans.

On February 22, 2008, the Panamanian cabinet voted to adopt Decree-LawDecree Law No. 2, which is a revision and restatement of the Decree-Law No.9Decree Law No. 9 of February 26, 1998, (the “Old Banking Law”).which previously governed banking institutions.  This new legislation came into effect on August 25, 2008. Due to the issuance ofThe Executive Branch merged Decree Law 2 of February 22 of 2008, the Executive Branch elaborated a systematic order as a sole text of the Decree LawNo. 9 of 1998 and all its amendments into one text, which was approved by means of Executive Decree 52 of April 30, 2008, hereinafteror the “Banking Law”.Banking Law.

Under the Banking Law, a bank’s capital composition includes primary, secondary and tertiary capital. Primary capital is made up of paid-in capital, declared reserves and retained earnings. Secondary capital is made up of undeclared reserves, hybrid instruments of debt and equity, and long-term subordinated debt. Tertiary capital is made up of short-term subordinated debt incurred for the management of market risk. Under the Banking Law, the sum of secondary and tertiary capital cannot exceed primary capital.

General License Banks must have paid-in capital of not less than $10 million. Additionally, they must maintain a minimum total capital of 8% of their total risk-weighted assets, and primary equity capital must be equal to or greater than 4% of the bank’s assets and off-balance sheet operations that represent a contingency to the bank. The Superintendency of Banks may nowis authorized to take into account market risks, operational risks and country risks, among others, to evaluate capital adequacy standards. Theadequacy.  In addition, the Superintendency of Banks is authorized to increase the minimum capital requirement percentage in Panama in the event that generally accepted international capitalization standards (the standards set by the Basel Committee on Banking Supervision) become more stringent.

General License Banks are required to maintain 30% of their global deposits in liquid assets (which include short-term loans to other banks and other liquid assets) of the type prescribed by the Superintendency of Banks. Under the Banking Law, deposits from central banks and other similar depositories of the international reserves of sovereign states are immune from attachment or seizure proceedings.

19
UnderPursuant to the Old Banking Law, banks could notcannot grant loans or issue guarantees or any other obligation, (“or Credit Facilities”)Facilities, to any one person or group of related persons in excess of twenty-five percent (25%) of the Bank’s total capital. The Banking Law has maintained thisThis limitation with respect to banks, and also extended this limitationextends to Credit Facilities granted to parties related to the ultimate parent of the banking group. However, the Old Banking Law and the Banking Law establishestablishes that, in the case of Credit Facilities granted by mixed-capital banks with headquarters in Panama whose principal business is the granting of loans to other banks, the limit will beis thirty percent (30%) of the bank’s capital funds. As confirmed by the Superintendency of Banks, the Bank currently applies the limit of thirty percent (30%) of the Bank’s total capital with respect to the Bank’s credit facilities in favor of financial institutions and the limit of twenty-five percent (25%) of the Bank’s total capital with respect to the Bank’s credit facilities in favor of corporations, middle-market companies and sovereign borrowers.

 
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Under the Banking Law, a bank and the ultimate parent of the banking group may not grant loans or issue guarantees or any other obligation to “related parties” that exceed (1) 5% of its total capital, in the case of unsecured transactions, and (2) 10% of its total capital, in the case of collateralized transactions (other than loans secured by deposits in the bank). For these purposes, a “related party” is (a) any one or more of the bank’s directors, (b) any stockholder of the bank who directly or indirectly owns 5% or more of the issued and outstanding capital stock of the bank, (c) any company of which one or more of the bank’s directors is a director or officer or where one or more of the bank’s directors is a guarantor of the loan or credit facility, (d) any company or entity in which the bank or any one of its directors or officers can exercise a controlling influence, (e) any company or entity in which the bank or any one of its directors or officers owns 20% or more of the issue and outstanding capital stock of the company or entity and (f) managers, officers and employees of the bank, or their respective spouses (other than home mortgage loans or guaranteed personal loans under general programs approved by the bank for employees). The Superintendency of Banks currently limits the total amount of secured and unsecured Credit Facilities (other than Credit Facilities secured by deposits in the bank) granted by a bank or the ultimate parent of a banking group to related parties to 25% of the total capital of the bank.

The Superintendency of Banks may authorize the total or partial exclusion of loans or credits from the computation of these limitations in cases of unsecured loans and other credits granted by mixed-capital banks with headquarters in Panama whose principal business is the granting of loans to other banks, which is the case of the Bank. This authorization is contingent onsubject to the following conditions: (i) the ownership of shares in the debtor bank –directlybank–directly or indirectly–by the shared director or shared officer, may not exceed five percent (5%) of the bank'sbank’s capital, or may not amount to any sum that would ensure his or her majority control over the decisions of the bank; (ii) the ownership of shares in the creditor bank–directly or indirectly–by the debtor bank represented in any manner by the shared director or shared officer, may not exceed five percent (5%) of the shares outstanding of the creditor bank, or may not amount to any sum that would ensure his or her majority control over the decisions of the bank; (iii) the shared director or shared officer must abstain from participating in the deliberations and in the voting sessions held by the creditor bank regarding the loan or credit request; and (iv) the loan or credit must strictly comply with customary standards of discretion set by the grantor bank'sbank’s credit policy. The Superintendency of Banks will determine the amount of the exclusion in the case of each loan or credit submitted for its consideration.

The Banking Law contains additional limitations and restrictions with respect to related party loans and credit facilities.Credit Facilities. For instance, under the Banking Law, banks may not grant Credit Facilities to any employee in an amount that exceeds the employee’s annual compensation package, and all Credit Facilities to managers, officers, employees or stockholders who are owners of 5% or more of the issued and outstanding capital stock of the lending bank or the ultimate parent of the banking group, will be made on terms and conditions similar to those given by the bank to its clients in arm’s-length transactions and which reflect market conditions for a similar type of operation. Shares of a bank cannot be pledged or offered as security for loans or credit facilitiesCredit Facilities issued by the bank.

In addition to the foregoing requirements, there are certain other restrictionsrequirements applicable to General License Banks, including (1) a requirement that a bank must notify the Superintendency of Banks before opening or closing a branch or office in Panama and obtain approval from the Superintendency of Banks before opening or closing a branch or subsidiary outside Panama, (2) a requirement that a bank obtain approval from the Superintendency of Banks before it liquidates its operations, merges or consolidates with another bank or sells all or substantially all of its assets, (3) a requirement that a bank must notify the Superintendency of Banks, within the first three months of each fiscal term, the name of the certified public accounting firm that it wishes to contract to carry out the duty of external auditing for the new fiscal term, and (4) a requirement that a bank obtain prior approval from the Superintendency of Banks of the risk rating entityagency it wishes to hire to perform the risk rating.rating of the bank, (5) a requirement that a bank must publish in a local newspaper the risk rating issued by the rating agency and any risk rating update, and (6) a requirement that a bank must provide written affirmation of the Bank’s audited financial statements signed by the Bank’s Chairman of the Board, the Chief Executive Officer and Chief Financial Officer.  The subsidiaries of Panamanian banks established in foreign jurisdictions must observe the legal and regulatory provisions applicable in Panama regarding the sufficiency of capital, as prescribed under the Banking Law.

 
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The Banking Law regulates banks and now the entire “banking group” to which each bank belongs. Banking groups are defined as the holding company and all direct and indirect subsidiaries of the holding company, including the bank in question. Banking groups must comply with audit standards and various limitations set forth in the Banking Law, in addition to all compliance required of the bank in question. The Banking Law provides that banks and now banking groups in Panama are subject to inspection by the Superintendency of Banks, which must take place at least once every two years. The Superintendency of Banks is empowered to request from any bank or any company that belongs to the economic group of which a bank in Panama is a member, the documents and reports pertaining to its operations and activities. Banks are required to file with the Superintendency of Banks weekly, monthly, quarterly and annual information, including financial statements, an analysis of their credit facilities and any other information requested by the Superintendency of Banks. In addition, banks are required to make available for inspection any reports or documents that are necessary for the Superintendency of Banks to ensure compliance with Panamanian banking laws and regulations. Banks subject to supervision may be fined by the Superintendency of Banks for violations of Panamanian banking laws and regulations. The Superintendency of Banks last inspected the Bank during Marchthe months of 2008,February through April, 2010, and the results of this inspection were fully satisfactory.

Panamanian Anti-Money Laundering laws and regulations.  

In Panama, all banks and trust corporations must take necessary measures to prevent their operations and/or transactions from being used to commit the felony of money laundering, terrorism financing or any other illicit activity contemplated in the laws and regulations addressing this matter.

United States Law

Bladex operates a New York state-licensed agency in New York, New York and maintains a direct wholly-owned non-banking subsidiary in Delaware, Bladex Holdings Inc. (“, or Bladex Holdings”), thatHoldings, which is not engaged in activities other than owning one wholly owned subsidiary incorporated under the laws of the State of Delaware: Bladex Asset Management, Inc. incorporated on May 24, 2006. In February 2007, another wholly-owned subsidiary, Clavex LLC,which was incorporated on June 15, 2006, became non-operative. On October 30, 2006, the Bank established an international administrative office in Miami, Florida, (the “Floridaor the Florida International Administrative Office”).Office.  On April 16, 2008, Bladex incorporated a direct fifty percent (50%) owned subsidiary in Delaware with the name of BCG PA Llc.,LLC, which is used as an investment vehicle to receivereceives the performance allocation of Bladex Capital Growth Fund.    

Federal Law

In addition to being subject to New York and Florida state laws and regulations, the New York Agency and the Florida International Administrative Office are subject to federal regulations, primarily under the International Banking Act of 1978, as amended, or IBA, and are subject to examination and supervision by the U.S. Federal Reserve Board. The IBA generally extends federal banking supervision and regulation to the U.S. offices of foreign banks and to the foreign bank itself. Under the IBA, the U.S. branches and agencies of foreign banks, including the New York Agency, are subject to reserve requirements on certain deposits. At present, the New York Agency has no deposits subject to such requirements. The New York Agency also is subject to reporting and examination requirements imposed by the U.S. Federal Reserve Board similar to those imposed on domestic banks that are members of the U.S. Federal Reserve System. The Foreign Bank Supervision Enhancement Act of 1991, or the FBSEA, amended the IBA to enhance the authority of the U.S. Federal Reserve Board to supervise the operations of foreign banks in the United States. In particular, the FBSEA expanded the U.S. Federal Reserve Board’s authority to regulate the entry of foreign banks into the United States, supervise their ongoing operations, conduct and coordinate examinations of their U.S. offices with state banking authorities, and terminate their activities in the United States for violations of law or for unsafe or unsound banking practices.

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In addition, under the FBSEA, state-licensed branches and agencies of foreign banks may not engage in any activity that is not permissible for a “federal branch” (i.e., a branch of a foreign bank licensed by the federal government through the OCC, rather than by a state), unless the U.S. Federal Reserve Board has determined that such activity is consistent with sound banking practices.

The New York Agency does not engage in retail deposit-taking from persons in the United States.  Under the FBSEA, the New York Agency may not obtain Federal Deposit Insurance Corporation, or FDIC, insurance and generally may not accept deposits of less than $100,000, from persons in the United States, but may maintain credit balances incidental to its lawful powers, issue large-denomination obligations ($100,000 or more) to corporations, partnerships and associations, and accept deposits from non-U.S. citizens who are non-U.S. residents but must inform each customer that the deposits are not insured by the FDIC.

The IBA also restricts the ability of a foreign bank with a branch or agency in the United States to engage in non-banking activities in the United States, to the same extent as a U.S. bank holding company. Bladex is subject to certain provisions of the Federal Bank Holding Company Act of 1956, or the BHCA, because it maintains an agency in the United States. Generally, any nonbanking activity engaged in by Bladex directly or through a subsidiary in the United States is subject to certain limitations under the BHCA. Under the Gramm-Leach-Bliley Financial Modernization Act of 1999, or GLB Act, a foreign bank with a branch or agency in the United States may engage in a broader range of non-banking financial activities, provided it is qualified and has filed a declaration with the U.S. Federal Reserve Board to be a “financial holding company”.  Bladex filed an application with the U.S. Federal Reserve Board to obtain financial holding company status on January 29, 2008. The U.S. Federal Reserve Board is in the process of evaluating Bladex’s application. At present, Bladex has two wholly-owned subsidiaries in the United States. The first direct subsidiary is Bladex Holdings, a company incorporated under Delaware law that is not engaged in any activity, other than owning Bladex Asset Management, Inc., and Clavex LLC, both Delaware companies. The other subsidiary is BCG PA LLC, a fifty percent (50%) owned subsidiary incorporated under the laws of Delaware.

In addition, pursuant to the Financial Services Regulatory Relief Act of 2006, the U.S. Securities and Exchange Commission, or the SEC, and the U.S. Federal Reserve Board finalized Regulation R. Regulation R defines the scope of exceptions provided for in the GLB Act for securities brokerage activities which banks may conduct without registering with the SEC as securities brokers or moving such activities to a broker-dealer affiliate. The “push out” rules exceptions contained in Regulation R enable banks, subject to certain conditions, to continue to conduct securities transactions for customers as part of the bank’s trust and fiduciary, custodial, and deposit “sweep” functions, and to refer customers to a securities broker-dealer pursuant to a networking arrangement with the broker-dealer. The New York Agency is subject to Regulation R with respect to its securities activities.

Section 716 of the Dodd-Frank Act prohibits banks in the United States from obtaining certain federal assistance if the bank is a swap entity.  An exception was provided for FDIC-insured banks but not branches and agencies of foreign banks.

Finally, under the regulations of the Office of Foreign Asset Control, or OFAC, the Bank are required to monitor and block transactions with certain “specially designated nationals” which OFAC has determined pose a risk to U.S. national security.

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New York State Law.  

The New York Agency, established in 1989, is licensed by the Superintendent of Banks of the State of New York, (the “Superintendent”)or  the Superintendent, under the New York Banking Law. The New York Agency maintains an international banking facility that also is regulated by the Superintendent and the U.S. Federal Reserve Board. The New York Agency is examined by the New York State Banking Department and is subject to banking laws and regulations applicable to a foreign bank that operates a New York agency. New York agencies of foreign banks are regulated substantially the same as, and have similar powers to, New York state-chartered banks, except with respect to capital requirements and deposit-taking activities.

The Superintendent is empowered by law to require any branch or agency of a foreign bank to maintain in New York specified assets equal to a percentage of the branch’s or agency’s liabilities, as the Superintendent may designate. Under the current requirement, the New York Agency is required to maintain a pledge of a minimum of $2 million with respect to its total third-party liabilities and such pledge may be up to 1% of the agency’s third party liabilities, or upon meeting eligibility criteria, up to a maximum amount of $100 million. AtAs of December 31, 2008,2010, the New York Agency maintained a pledge of $5.5$3.0 million, complying with the minimum required amount.

In addition, the Superintendent retains the authority to impose specific asset maintenance requirements upon individual agencies of foreign banks on a case-by-case basis. No special requirement has been prescribed for the New York Agency.

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The New York Banking Law generally limits the amount of loans to any one person to 15 percent of the capital, surplus fund and undivided profits of a bank. For foreign bank agencies, the lending limits are based on the capital of the foreign bank and not that of the agency.

The Superintendent is authorized to take possession of the business and property of a New York agency of a foreign bank whenever an event occurs that would permit the Superintendent to take possession of the business and property of a state-chartered bank. These events include the violation of any law, unsafe business practices, an impairment of capital, and the suspension of payments of obligations. In liquidating or dealing with an agency’s business after taking possession of the agency, the New York Banking Law provides that the claims of creditors which arose out of transactions with the agency may be granted a priority with respect to the agency’s assets over other creditors of the foreign bank.

Florida Law.  

The Florida International Administrative Office, established in October 2006, is licensed and supervised by the Florida Office of Financial Regulation under the Florida Financial Institutions Codes. The activities of the Florida International Administrative Office are subject to the restrictions described below as well as to Florida banking laws and regulations that are applicable generally to foreign banks that operate offices in Florida. The Florida International Administrative Office is also subject to regulation by the U.S. Federal Reserve Board under the International Banking Act of 1978 (the “IBA”).IBA.

Pursuant to Florida law, the Florida International Administrative Office is authorized to conduct certain “back office” functions on behalf of the Bank, including administration of the Bank’s personnel and operations, data processing and record keeping activities, and negotiating and servicing loans or extensions of credit and investments. Under the provisions ofthe Florida Financial Institutions Codes, as well as the IBA and the regulations of the U.S. Federal Reserve Board, the Florida International Administrative Office is also permitted to function as a representative office of the Bank. In this capacity it may solicit new business for the Bank and conduct research. It may also act in a liaison capacity between the Bank and its customers.
Federal Law.  In addition to being subject to New York and Florida state laws and regulations, the New York Agency and the Florida International Administrative Office are subject to federal regulations, primarily under the IBA, and are subject to examination and supervision by the U.S. Federal Reserve Board.  The IBA generally extends federal banking supervision and regulation to the U.S. offices of foreign banks and to the foreign bank itself.  Under the IBA, the U.S. branches and agencies of foreign banks, including the New York Agency, are subject to reserve requirements on certain deposits.  At present, the New York Agency has no deposits subject to such requirements.  The New York Agency also is subject to reporting and examination requirements imposed by the U.S. Federal Reserve Board similar to those imposed on domestic banks that are members of the U.S. Federal Reserve System.  The Foreign Bank Supervision Enhancement Act of 1991 (the “FBSEA”) amended the IBA to enhance the authority of the U.S. Federal Reserve Board to supervise the operations of foreign banks in the United States.  In particular, the FBSEA expanded the U.S. Federal Reserve Board’s authority to regulate the entry of foreign banks into the United States, supervise their ongoing operations, conduct and coordinate examinations of their U.S. offices with state banking authorities, and terminate their activities in the United States for violations of law or for unsafe or unsound banking practices.
In addition, under the FBSEA, state-licensed branches and agencies of foreign banks may not engage in any activity that is not permissible for a “federal branch” (i.e., a branch of a foreign bank licensed by the federal government through the OCC, rather than by a state), unless the U.S. Federal Reserve Board has determined that such activity is consistent with sound banking practices.
The New York Agency does not engage in retail deposit-taking in the United States, and deposits with the New York Agency are not insured by the Federal Deposit Insurance Corporation (“FDIC”).  Under the FBSEA, the New York Agency may not obtain FDIC insurance and generally may not accept deposits of less than $100,000, but may accept limited types of deposits over $100,000 to the extent authorized by the Superintendent of Banks of the State of New York.

 
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The IBA also restricts the ability of a foreign bank with a branch or agency in the United States to engage in non-banking activities in the United States, to the same extent as a U.S. bank holding company.  Bladex is subject to certain provisions of the Federal Bank Holding Company Act of 1956 (the “BHCA”) because it maintains an agency in the United States.  Generally, any nonbanking activity engaged in by Bladex directly or through a subsidiary in the United States is subject to certain limitations under the BHCA.  Under the Gramm-Leach-Bliley Financial Modernization Act of 1999 (the “GLB Act”), a foreign bank with a branch or agency in the United States may engage in a broader range of non-banking financial activities, provided it is qualified and has filed a declaration with the U.S. Federal Reserve Board to be a “financial holding company” (“FHC”).  Bladex filed an application with the U.S. Federal Reserve Board to obtain financial holding company status on January 29, 2008.  The U.S. Federal Reserve Board is in the process of evaluating Bladex’s application.  At present, Bladex has two direct subsidiaries in the United States.  The first direct subsidiary is Bladex Holdings, a company incorporated under Delaware law that is not engaged in any activity, other than owning Bladex Asset Management, Inc., and Clavex LLC, both Delaware companies.  The other direct subsidiary is BCG PA, LLC, a fifty percent (50%) owned subsidiary incorporated under the laws of Delaware.
In addition, pursuant to the Financial Services Regulatory Relief Act of 2006, the Securities and Exchange Commission (“SEC”) and the U.S. Federal Reserve Board finalized Regulation R.  Regulation R defines the scope of exceptions provided for in the GLB Act for securities activities which banks may conduct without registering with the SEC as securities brokers or moving such activities to a broker-dealer affiliate.  The “push out” rules exceptions contained in Regulation R enable banks, subject to certain conditions, to continue to conduct securities transactions for customers as part of the bank’s trust and fiduciary, custodial, and deposit “sweep” functions, and to refer customers to a securities broker-dealer pursuant to a networking arrangement with the broker-dealer.  The New York Agency is subject to Regulation R with respect to its securities activities.
Anti-Money Laundering Laws.Laws

U.S. anti-money laundering laws, as amended by the USA PATRIOT Act of 2001, impose significant compliance and due diligence obligations, on financial institutions doing business in the United States. Both the New York Agency and the Florida International Administrative Office are “financial institutions” for these purposes. Failure of a financial institution to comply with the requirements of these laws and regulations could have serious legal and reputational consequences for an institution. The New York Agency and the Florida International Administrative Office have adopted comprehensive policies and procedures to address these requirements.

Cayman Islands Law

Bladex OffshoreThe Feeder Fund and Bladex Capital Growththe Fund are exempted companies that were incorporated in the Cayman Islands with limited liability on February 21, 2006 underpursuant to the Companies Law (2010 Revision) of the Cayman Islands.Islands, or the Companies Law. The registered office of these companies is atc/o Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman KY1-1104, Cayman Islands.

The Companies Law (2007 Revision) of the Cayman Islands (the "Companies Law") is derived, to a large extent, from the older Companies Acts of England, although there are significant differences between the Companies Law and the current Companies Act of England. Section 193174 of the Companies Law does not permit the Bladex Offshore Feeder Fund and the Bladex Capital Growth Fund to trade in the Cayman Islands with any person, firm or corporation except in furtherance of the business of these companies carried on outside the Cayman Islands. This does not prevent the Bladex Offshore Feeder Fund and the Bladex Capital Growth Fund from executing contracts in the Cayman Islands and exercising in the Cayman Islands all of their powers necessary for the carrying on of their business outside the Cayman Islands.

The Proceeds of Crime Law, 2008 of the Cayman Islands and the Terrorism Law 2003(2009 Revision) of the Cayman Islands impose reporting obligations on residents of the Cayman Islands who know or suspect, or have reasonable grounds for knowing or suspecting, the involvement of another person in money launderingcriminal conduct or with terrorism or terrorist activities.property and the information for that knowledge or suspicion came to their attention in the course of business in the regulated sector.

C.Organizational Structure
The Bank is subject to banking regulations in each jurisdiction in which the Bank has a physical presence.

C.           Organizational Structure

For information regarding the Bank’s organizational structure, see Item 18, “Financial Statements,” note 1.

D.           Property, Plant and Equipment
D.Property, Plant and Equipment

The Bank owns its main branch,headquarters office, with 6,161 square meters of office space, located at Calle 50 and Aquilino de la Guardia in Panama City.City, Panama. The Bank leases 11.2 square meters of computer equipment hosting, located at Gavilan Street Balboa in Panama City, Panama and 21.2 square meters of office space and Internetinternet access in case of a contingency, located at 75E Street San Francisco, in Panama City.City, Panama. In addition, the Bank leases office space for its representative offices in Mexico City and Monterrey, Mexico, Buenos Aires, Argentina, Lima, Peru, Bladex Representação Ltda. in Sao Paulo and Porto Alegre, Brazil, its New York Agency and Bladex Asset Management in New York City, New York, and the Florida International Administrative Office in Miami.Miami, Florida. See Item 18, “Financial Statements,” notes 2(o)2(q), 9 and 20.19. 

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Item 4A.Unresolved Staff Comments

None.

Item 5.Operating and Financial Review and Prospects

The following discussion should be read in conjunction with the Bank’s Consolidated Financial Statements and the notes thereto included elsewhere in this Annual Report.  See Item 18, “Financial Statements.”

Nature of Earnings

The Bank derives income from net interest income, fees and commissions, derivative financial instruments and hedging, recoveries, on assets, net of impairments;impairment of assets, net gain (loss) from investment fund trading, net gain (loss) from trading securities, net gain on sale of securities available-for-sale, and net gain (loss) on foreign currency exchange.exchange, and other income (net). Net interest income, or the difference between the interest income the Bank receives on its interest-earning assets and the interest it pays on interest-bearing liabilities, is generated principally by the Bank’s lending activities. The Bank generates fees and commissions mainly through the issuance, confirmation and negotiation of letters of credit and guarantees covering commercial and country risk, and through loan origination and sales.origination.

A.Operating Results

The following table summarizes changes in components of the Bank’s net income and performance at and for the periods indicated:
 
  For the Year Ended December 31, 
  2010  2009  2008 
  (in $ thousand, except per share amounts and percentages) 
Total interest income $119,478  $141,964  $244,243 
Total interest expense  44,975   77,212   166,396 
Net interest income  74,503   64,752   77,847 
Reversal (provision) for loan losses  (9,091)  (18,293)  18,540 
Net interest income, after reversal (provision ) for loan losses  65,412   46,459   96,387 
Other income (expense):            
Reversal (provision) for losses on off-balance sheet credit risk  13,926   3,463   (16,997)
Fees and commissions, net  10,326   6,733   7,252 
Derivative financial instruments and hedging  (1,446)  (2,534)  9,956 
Recoveries, net of impairment of assets  233   (120)  (767)
Net gain (loss) from investment fund trading  (7,995)  24,997   21,357 
Net gain (loss) from trading securities  (3,603)  13,113   (20,998)
Net gain on sale of securities available-for-sale  2,346   546   67 
Gain (loss) on foreign currency exchange  1,870   613   (1,596)
Other income (expense), net  833   912   656 
Net other income (expense)  16,490   47,723   (1,070)
Total operating expenses  (42,081)  (38,202)  (39,990)
Net income  39,821   55,980   55,327 
Net income (loss) attributable to the redeemable noncontrolling interest  (2,423)  1,118   208 
Net income attributable to Bladex $42,244  $54,862  $55,119 
Basic earnings per share $1.15  $1.50  $1.51 
Diluted earnings per share $1.15  $1.50  $1.51 
Return on average assets  0.97%  1.38%  1.09%
Return on average stockholders’ equity  6.21%  8.60%  8.99%
  At and For the Year Ended December 31, 
  2008  2007  2006 
  (in $ thousand, except per share amounts and percentages) 
Total interest income $244,243  $264,869  $203,350 
Total interest expense  166,396   194,299   144,513 
Net interest income  77,847   70,570   58,837 
Reversal (provision) for loan losses  18,540   (11,994)  (11,846)
Net interest income after reversal (provision ) for loan losses  96,387   58,576   46,991 
Other income (expense):            
Reversal (provision) for losses on off-balance sheet credit risk  (16,997)  13,468   24,891 
Fees and commissions, net  7,252   5,555   6,393 
Derivative financial instruments and hedging  9,956   (989)  (225)
Recoveries of assets, net of  impairments  (767)  (500)  5,551 
Net gain (loss) from investment fund trading  21,357   23,878   1,091 
Net gain (loss) from trading securities  (20,998)  (12)  (212)
Net gain on sale of securities available-for-sale  67   9,119   2,568 
Gain (loss) on foreign currency exchange  (1,596)  115   (253)
Other income (expense), net  656   (6)  36 
Net other income  (1,070)  50,628   39,840 
Total operating expenses  (39,990)  (37,027)  (28,929)
Income before participation of the minority interest in gains of the investment fund  55,327   72,177   57,902 
Participation of the minority interest in gains of the investment fund  (208)  0   0 
Net income $55,119  $72,177  $57,902 
Basic earnings per share  1.51   1.99   1.56 
Diluted earnings per share  1.51   1.98   1.54 
Return on average assets  1.09%  1.76%  1.70%
Return on average stockholders’ equity  8.99%  11.91%  9.96%

 
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Business Segment Analysis
Net Income
For further information on net income by business segment, see Item 18, “Financial Statements,” note 25.

The Bank’s net income for 2008 was $55 million compared to $72 million for 2007. The Bank’s 2008 results were mainly driven by the Commercial Division’s net income of $59 million and the Asset Management Division’s net income of $12 million, partially offset by the Treasury Division’s net loss of $16 million.  The Bank’s 2008 results also include the impact of classifying certain securities financings (repos) as outright sales, mostly recorded by the Treasury Division required by the application of FASB Statement No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities” (“FASB Statement No. 140”), as well as the positive impact of FASB Statement No. 157, “Fair Value Mensurements” (“FASB Statement No. 157”). The application of these two FASB Statements amounted to a loss of $13 million during the particulary volatile second half of 2008.

The Commercial Division is responsible for the Bank’s core business of financial intermediation and fee generation activities.  The division’s portfolio includes loan portfolio and contingencies and other assets.  The Commercial Division’s net income, which includes net interest income from loans, fees and commissions, and other income derived from financial services and off-balance sheet credits (letters of credit, guarantees and credit commitments), allocated operating expenses, and reversals of (provisions for)the reversal (provision) for credit losses, and any impairment on assets, net of recoveries.

The Commercial Division’s net income amounted to $59$56.8 million in 2008,for the year ended December 31, 2010, compared to $44$34.8 million in 2007.for the year ended December 31, 2009.  The $15$22.0 million or 63% net increase during the year was primarily due to higher(i) a $19.6 million positive variation in reversal (provisions) for credit losses, due to an increase in the loan portfolio which was partially mitigated by an improvement of the risk profile of the Region, (ii) a $5.4 million increase in net interest income mostly attributable to the income effects of an increase in average loan portfolio balances of $35227%, (iii) a $3.2 million increase in commissions and fees from loan commitments and letters of credit, and (iv) a $6.5 million increase in operating expenses as the Commercial Division expanded its sales force and local presence in various markets.

The Commercial Division’s portfolio balance amounted to $4,446 million as of December 31, 2010, compared to $3,110 million as of December 31, 2009.  The 43% portfolio increase in 2010 compared to 2009 was attributable to increased demand from the Bank’s established client base of corporations and financial institutions, in addition to the Bank’s continued business expansion into the middle-market segment continued.  In 2010, the Bank disbursed $5.5 billion in new loans, an increase of $2.2 billion, or 66% compared to the year 2009.  Of these disbursements during 2010, $326 million in loans were made to the middle-market companies.  Credit quality improved, with non-accruing portfolio amounting to $29.0 million as of December 31, 2010 compared to $50.5 million as of December 31, 2009.
Net interest income amounted to $72 million during 2010 an increase of $5 million, or 10%8% over 2009 as a result of increased average balances of Commercial Division’s loan portfolio, which increased by $700 million during 2010, or 27%.  The loan portfolio growth offset the year, as well as higher weighted127 bps decrease in lending rates mainly attributable to lower market interest rates.

The Commercial Division’s net income was $34.8 million in 2009, compared to a net income of $59.1 million in 2008.  This $24.3 million decrease was due to a $1.1 billion, or a 30%, decrease in the average loan portfolio and a 188 bps decrease in this portfolio’s average LIBOR rate, partially offset by a 94 bps increase in average lending spreads, which increased 57 basis points, or 56%, duringspreads. The lower average volumes in the year.commercial portfolio resulted from the Bank’s decision, in late 2008, to slow its lending activities in line with the adverse economic environment, collecting maturities in vulnerable sectors, building liquidity balances, and responding to a decrease in funding sources.

The Treasury Division

The Treasury Division is responsible for the Bank’s liquidity management and investment securities activities. The Treasury Division’s net income includes net interest income on treasury assets (interest-bearing deposits with banks, investment securities, and trading assets), related net other; non-interest operating income (expense), such as net gain (loss) from trading securities, the sale of securities available-for-sale, foreign currency exchange, and derivative financial instruments and hedging; and allocated operating expenses.

31

The Treasury Division reported a net loss of $16$4.9 million for 2008,the year ended December 31, 2010, compared to a net income of $10$6.1 million for 2007.  the year ended December 31, 2009.  The 2010 results were mainly driven by a $3.6 million loss from trading securities, compared to a gain of $13.1 million in the year 2009.  The $11.0 million decrease from 2009 to 2010 was primarily driven by trading portfolio valuations, as increases in securities valuations were more than offset by the diminished valuations of associated trading derivatives.  This offset the $2.3 million gain on sale of securities available – for - sale during the year 2010 compared to a gain on sale of securities available-for-sale of $0.5 million in the year 2009.

Liquidity balance as of December 31, 2010 amounted to $421 million, compared to $402 million as of December 31, 2009, representing 8.2% of total assets and 23.1% of liability deposits, compared to 10.4% and 32.0%, respectively, as of December 31, 2009.  Deposit balances increased $565 million or 45% to $1,821 million as of December 31, 2010 compared to December 31, 2009.

Funding costs continued to improve as weighted average funding cost for the year ended December 31, 2010 amounted to 1.26%, a decrease of 112 bps, or 47% compared to 2.38% for the year ended December 31, 2009, as a result of improvement in funding costs of short term borrowings.  Borrowings and securities sold under repurchase agreements balances increased 36% during 2010 to $2,435 million as of December 31, 2010.
The Treasury Division’s 2008 results were affected byDivision recorded net income of $6.1 million for the accounting treatment relatedyear ended December 31, 2009, compared to certain securities-based financing transactions (repos)a net loss of $16.3 million for the year ended December 31, 2008. This $22.4 million, or 137%, which were recorded as sales.  Based on the application of FASB Statement No. 140 and related guidance, the higher haircuts appliedincrease was mainly attributable to the repos due$13.1 million in gains from trading securities, compared to market conditions resulted$20.9 million in the Bank having to recognize these transactions as outright securities sales, rather than as secured borrowings (financing).  This accounting treatment resultedlosses from trading in a non-cash charge to earnings of $25 million, partially offset by a $12 million gain related to the application of FASB Statement No. 157 to the Bank’s local funding cross currency swaps during the particularly volatile fourth quarter of 2008.

The Asset Management DivisionUnit

The Asset Management Unit is responsible for the Bank’s asset management activities. The Asset Management Division’sUnit’s net income whichattributable to Bladex includes net interest and fee income onfrom the investment fund, gains (losses) from investment fund trading, related other income (loss), direct and allocated operating expenses, amountednet of net income attributable to $12the redeemable non-controlling interest.

During 2010, the Asset Management Unit reported a net loss of $9.7 million, compared to a net income of $14.1 million in 2008,2009.  The $23.8 million year-over-year decrease was mainly due to the combined effects of: (i) a $32.7 million decrease in non-interest operating income attributable to the absence of the significant trading gains attained during 2009, and to the impact of trading losses experienced primarily during the second quarter of 2010, (ii) a $3.1 million positive variance in net interest income, and (iii) a $2.3 million decrease in operating expenses as a result of lower variable compensation tied to the performance of the Investment Fund.  Third party participation in the Fund dropped to 11.3% as of December 31, 2010 from 17.6% as of December 31, 2009, and 3.1% as of December 31, 2008.

The Asset Management Unit has reviewed the Fund’s risk parameters with a goal of reducing volatility.  The Bank has determined to gradually reduce its exposure to the Fund to its original $100 million investment, freeing close to $50 million to be used to fund more fee generating activities.  During 2010, the Bank redeemed $6.0 million from its investment in the Fund.

As of December 31, 2010, the Fund’s net assets totaled $167 million.

For the year ended December 31, 2009, net income of the Asset Management Unit amounted $14.1 million, compared to $18$12.3 million for the year ended December 31, 2008. This $1.8 million, or 15% increase in 2007.  The $6net income attributable to Bladex was mainly due to the combined effect of a $4.1 million decrease was attributable principallyincrease in non-interest operating income attributed to lower netincreased gains from investment fund trading, partially offset by a $1.2 million increase in operating expenses, mainly related to an increase in performance-based expenses and lowerby a $0.9 million increase in net interest income resulting mainly from decreased market interest rates.attributable to the redeemable noncontrolling interest.

32

As of December 31, 2009, the Fund’s net assets totaled $198 million.

Net Income attributable to Bladex

Net income attributable to Bladex for 2010 was $42.2 million, compared to $54.9 million in 2009.  The 2010 results were mostly driven by the Commercial Division’s net income of $56.8 million, offset by net losses of $9.7 million and $4.9 million in the Asset Management Unit and Treasury Division, respectively.

The Bank’s 2010 results reflect the Bank’s capacity to leverage the trade flows that the Region has been recovering, to expand its operations and grow its core business through higher average credit volumes and higher fee income, strengthening even further its critical role in financial relations between Latin America and the international markets.

For the year ended December 31, 2009, net income for 2007attributable to Bladex was $72$54.9 million, compared to $58decreasing from $55.1 million for 2006, a $14the year ended December 31, 2008. The 2009 results were driven by $34.8 million or 25%, increase.  This increase was mainlyin net income in the Commercial Division, $14.1 million in net income attributable to a $12 million, or 20%, increaseBladex in net interest income (mostly from the Commercial Division), $23 million in higher gains from investment fund trading by the Asset Management Division, and a $7$6.1 million increase in net gain on sale of securities available-for-sale byincome in the Treasury Division, partlycompared to a net income of $59 million in the Commercial Division, a net income of $12 million in the Asset Management Unit, and a net loss of $16 million in the Treasury Division in 2008.  The 2009 results, when compared to 2008, reflect lower average credit volumes and lower average market interest rates during an extremely difficult global market environment, partially offset by an $8 million increase in operating expenses, an $11 million decrease in reversal of provision for off-balance sheet credit risk and a $6 million decrease in recoveries on assets, net of impairments.higher lending spreads.

For further information on net income by business segment, see Item 18, “Financial Statements,” note 26.
Net Interest Income and Margins

The following table sets forth information regarding net interest income, the Bank’s net interest income, net interest margin (the net(net interest income divided by the average balance of interest-earning assets), and the net interest spread (the average yield earned on interest-earning assets, less the average yield paid on interest-bearing liabilities) for the periods indicated:

25
  For the Year Ended December 31, 
  2010  2009  2008 
  (in $ million, except percentages) 
Net interest income         
Commercial Division $71.6  $66.2  $78.1 
Treasury Division  3.2   2.0   3.0 
Asset Management Unit  (0.3)  (3.4)  (3.2)
Consolidated $74.5  $64.8  $77.9 
Net interest margin  1.70%  1.62%  1.55%
Net interest spread  1.43%  1.12%  0.98%
  For the Year Ended December 31, 
  2008  2007  2006 
  (in $ million, except percentages) 
Net interest income         
Commercial Division $78.1  $64.5  $50.7 
Treasury Division  3.0   5.9   6.9 
Asset Management Division  (3.2)  0.1   1.2 
Consolidated $77.9  $70.5  $58.8 
Net interest margin  1.55%  1.73%  1.78%
Net interest spread  0.98%  0.78%  0.69%
The $7 million, or 10%, increase in net interest income in 2008 compared to 2007 mainly reflected increased lending spreads and higher average loan balances for the first three quarters of 2008 in the Commercial Division.  The 18 basis points decrease in net interest margin in 2008 compared to 2007 was mainly due to lower interest rates, as well as the cost of carrying higher liquidity, particularly towards the end of the 2008.  During 2008, there was less credit available, as well as higher risks and less competition in the Region.  As a result the Bank was able to increase lending margins on new disbursements.
The $12 million, or 20%, increase in net interest income in 2007 compared to 2006 was the result of higher average balances in the loan portfolio (24%) and increased weighted average lending spreads over the cost of funds.  The 5 basis points decrease in net interest margin in 2007 compared to 2006 was mainly due to higher leveraging of the balance sheet and by non-recurring interest income on non-accrual loans received on a cash basis during 2006, both of which offset higher lending spreads during 2007.
The 2008 and 2007 increase in loan portfolio average balances and lending spreads was attributable to the Bank’s strategy to improve client and geographic portfolio diversification, by increasing its exposure to the corporate client segment in several countries in the Region.

Distribution of Assets, Liabilities and Stockholders’ Equity; Interest Rates and Differentials

The following table presents the distribution of consolidated average assets, liabilities and stockholders’ equity, as well as the total dollar amounts of interest income from average interest-earning assets and the resulting yields, the dollar amounts of interest expense and average interest-bearing liabilities, and corresponding information regarding rates. Average balances have been computed on the basis of consolidated daily average balance sheets:balances:

33
 
Year ended December 31,
  
Fort he Year ended December 31,
 
 
2008
  
2007
  
2006
  
2010
  
2009
  
2008
 
Description
 
Average
balance
  
Interest
  
Average
yield/rate
  
Average
balance
  
Interest
  
Average
yield/rate
  
Average
balance
  
Interest
  
Average
yield/rate
  
Average
balance
  
Interest
  
Average
yield/rate
  
Average
balance
  
Interest
  
Average
yield/rate
  
Average
balance
  
Interest
  
Average
yield/rate
 
 (in $ million, except percentages)  (in $ million, except percentages) 
Interest-Earning Assets                                                      
Interest-bearing deposits with banks $414  $8  1.80% $248  $13  5.06% $126  $6  4.73%
Loans, net 3,718  200  5.29% 3,366  222  6.49% 2,715  166  6.02%
Interest-earning deposits with banks $384  $1   0.22% $592  $1   0.21% $414  $8   1.80%
Loans, net of unearned income & deferred loan fees  3,243   102   3.09%  2,569   113   4.36%  3,718   200   5.29%
Non-accrual loans  44   3   7.55%  17   1   4.92%  0   0  n.m.(*)
Trading assets 0  1  n.m(*) 0  0  n.m.(*) 0  0  n.m.(*)  51   3   6.11%  102   7   6.95%  0   1  n.m.(*)
Investment securities 756  32  4.23% 345  21  5.99% 390  23  5.76%
Investment securities(1)
  468   8   1.79%  546   17   3.15%  756   32   4.23%
Investment fund  138   3   2.49%  113   10   8.40%  69   9   12.47%  190   2   1.14%  172   2   1.01%  138   3   2.49%
Total interest-earning assets $5,025  $244   4.78% $4,072  $265   6.42% $3,300  $203   6.08% $4,378  $119   2.69% $3,998  $142   3.50% $5,025  $244   4.78%
Non-interest-earning assets 93          88          89           42           46           93         
Allowance for loan losses (70)         (62)         (44)          (75)          (79)          (70)        
Other assets  15           11           16           12           9           15         
Total Assets $5,064          $4,108          $3,361          $4,357          $3,975          $5,064         
Interest-Bearing Liabilities                                                                        
Deposits $1,500  $44  2.91% $1,321  $70  5.26% $1,106  $57  5.05% $1,555  $9   0.54% $1,218  $11   0.93% $1,500  $44   2.91%
Investment Fund 0  2  n.m(*) 0  4  n.m(*) 0  5  n.m.(*)
Trading liabilities  4   0  n.m.(*)  9   0  n.m.(*)  0   0  n.m(*)
Investment fund  0   1  n.m.(*)  0   2  n.m.(*)  0   2  n.m(*)
Securities sold under repurchase agreements 540  17  3.09% 253  14  5.36% 306  16  5.29%  179   1   0.79%  263   6   2.24%  540   17   3.09%
Short-term borrowings 1,089  46  4.18% 1,019  57  5.47% 736  39  5.17%  545   7   1.19%  501   18   3.50%  1,089   46   4.18%
Borrowings and long-term debt  1,182   56   4.70%  809   49   6.02%  500   28   5.57%  1,241   27   2.18%  1,208   40   3.24%  1,182   56   4.70%
Total interest-bearing liabilities $4,310  $166   3.80% $3,402  $194   5.63% $2,647  $145   5.38% $3,524  $45   1.26% $3,199  $77   2.38% $4,310  $166   3.80%
Non-interest bearing liabilities and other liabilities  137           100           132          $119          $122          $137         
Total Liabilities $4,448          $3,502          $2,779          $3,643          $3,321          $4,448         
Minority interest in investment fund 3          0          0         
Redeemable noncontrolling interest in the investment fund  34           16           3         
Stockholders’ equity  613           606           581           681           638           613         
Total Liabilities and Stockholders’ Equity $5,064          $4,108          $3,361          $4,357          $3,975          $5,064         
Net Interest Spread         0.98%         0.78%         0.69%
Net Interest Income and Net Interest Margin     $78   1.55%     $71   1.73%     $59   1.78%
Net interest spread          1.43%          1.12%          0.98%
Net interest income and net interest margin     $75   1.70%     $65   1.62%     $78   1.55%
 
(*) “n.m.“n.m.” means not meaningfulmeaningful.
(1)The average yield of the investment securities portfolio using cost-based average balances, would have been 2.02%, 3.46%, and 4.55% for 2010, 2009, and 2008, respectively.
26

Changes in Net Interest Income — Volume and Rate Analysis

Net interest income is affected by changes in volume and changes in interest rates. Volume changes are caused by differences in the level of interest-earning assets and interest-bearing liabilities. Rate changes result from differences in yields earned on interest-earning assets and rates paidaccrued on interest-bearing liabilities. The following table sets forth a summary of the changes in net interest income of the Bank resulting from changes in average interest-earning asset and interest-bearing liability balances (volume)volume and changes in average interest rates for 20082010 compared to 20072009 and for 20072009 compared to 2006.2008. Volume and rate variances have been calculated based on on daily movements in average balances over the period and changes in interest rates on average interest-earning assets and average interest-bearing liabilities.  Variances caused by changes in both volume and rates have been allocated equally to volume and rate.

34

  
2010 vs. 2009
  
2009 vs. 2008
 
  
Volume(*)
  
Rate(*)
  
Net Change
  
Volume(*)
  
Rate(*)
  
Net Change
 
  (in $ thousand) 
Increase (decrease) in interest income                  
Interest-bearing deposits with banks $(453) $32  $(421) $368  $(6,681) $(6,313)
Loans, net  21,017   (32,996)  (11,979)  (50,992)  (35,573)  (86,565)
Non-accrual loans  2,036   452   2,488   847   0   847 
Trading assets  (3,162)  (863)  (4,025)  7,157   (647)  6,510 
Investment securities  (1,425)  (7,559)  (8,984)  (6,733)  (8,301)  (15,034)
Investment fund  201   234   435   351   (2,073)  (1,723)
Total increase (decrease) $18,214  $(40,700) $(22,486) $(49,003) $(53,276) $(102,279)
Increase (decrease) in interest expense                        
Deposits $1,853   (4,816)  (2,963) $(2,724) $(30,148) $(32,871)
Trading liabilities  0   0   0   0   0   0 
Investment fund  (7)  (1,355)  (1,362)  318   (289)  29 
Securities sold under repurchase agreement and Short-term borrowings  (438)  (12,936)  (13,374)  (24,351)  (17,482)  (41,833)
Borrowings and long-term debt  714   (15,253)  (14,539)  853   (15,361)  (14,509)
Total increase (decrease) $2,123   (34,359)  (32,237) $(25,904) $(63,280) $(89,184)
Increase (decrease) in net interest income $16,091  $(6,340) $9,751  $(23,099) $10,004  $(13,095)
 
  
2008 vs. 2007
  
2007 vs. 2006
 
  
Volume
  
Rate
  
Net Change
  
Volume
  
Rate
  
Net
Change
 
  (in $ thousand) 
Increase (decrease) in interest income                  
Interest-bearing deposits with banks $3,036  $(8,192) $(5,155) $6,282  $412  $6,694 
Loans, net  19,135   (40,712)  (21,576)  42,863   12,957   55,819 
Trading assets  0   648   648   0   0   0 
Investment securities  17,659   (6,101)  11,559   (2,728)  896   (1,832)
Investment fund  637   (6,739)  (6,102)  3,693   (2,854)  839 
Total increase (decrease) $40,468  $(61,094) $(20,627) $50,109  $11,411  $61,519 
Increase (decrease) in interest expense                        
Deposits $5,325  $(31,403) $(26,078) $11,502  $2,330  $13,832 
Investment Fund  0   (1,900)  (1,900)  0   (443)  (443)
Securities sold under repurchase agreements  9,019   (5,805)  3,214   (2,895)  204   (2,690)
Short-term borrowings  2,998   (13,269)  (10,271)  15,746   2,239   17,986 
Borrowings and long term debt  17,853   (10,720)  7,133   18,844   2,257   21,101 
Total increase (decrease) $35,195  $(63,098) $(27,903) $43,198  $6,588  $49,786 
Increase (decrease) in net interest income $5,273  $2,004  $7,276  $6,911  $4,823  $11,734 
(*)Volume variation effect in net interest income is calculated by multiplying the difference in average volumes by the current year’s average yield.  Rate variation effect in net interest income is calculated by multiplying the difference in average yield by the prior year’s average volume.

Net interest income for 2008 increased $7 million compared to 2007 due to: (1) increased average volumes, mainly in the loanInterest Income and investment securities portfolios, mainly funded by increased levels of borrowings, which resulted in a $5 million net increase in net interest income, and (2) lower inter-bank market rates in the Bank’s assets and liabilities, which resulted in a $2 million net increase in net interest income, as the liabilities’ rate decrease at a higher pace.Net Interest Margin Variation

2010 vs. 2009

The $12$9.7 million, or 15% increase in net interest income for 2007the year ended December 31, 2010 compared to 2006the year ended December 31, 2009 primarily reflects:

i.Higher average interest-earning assets balances, primarily average loan portfolio balances, which increased by $700 million, or 27%, from $3.2 billion in 2009 to $2.6 billion in 2010, resulted in a $18.2 million overall increase in interest income, partially offset by, $2.1 million increase in interest expense associated with an increase in average interest-bearing liability balances.  The effect of higher average volumes in interest-earning assets and interest-bearing liabities was a $16.1 million net increase in net interest income.

ii.Lower average interbank market rates for the Bank’s assets and liabilities, resulted in a $6.3 million decrease in net interest income during 2010 due to rate variances, as the average yield paid on interest-bearing liabilities decreased 112 bps to 1.26% in 2010 (from 2.38% in 2009), while the average yield on interest-earning assets decreased by 81 bps, to 2.69% in 2010 (from 3.50% in 2009), both effects were mostly attributable to lower interbank market rates.

Net interest margin was due1.70% in 2010 compared to 1.62% in 2009 as the Bank (i) reduced its average liquidity balance throughout the year at a minimal return, and replaced it with more profitable lending balances, and (ii) increased its average deposit balances bearing lower cost of funds, than that of its borrowings and debt, which average balances decreased for the year.

2009 vs. 2008

The $13.1 million, or 17% decrease in net interest income for the year ended December 31, 2009 compared to the year ended December 31, 2008 primarily reflects:

35

i.Lower average volumes in the loan and investment securities portfolio, which decreased by $1.2 billion, or 28%, from $4.4 billion in 2008 to $3.2 billion in 2009, and resulted in a $49.0 million decrease in interest income, partly offset by a $25.9 million decrease in interest expense due to an overall decrease of $1.1 billion, or 37%, in average short-term liabilities (deposits, securities sold under repurchase agreements and short-term borrowings), from $3.1 billion in 2008 to $2.0 billion in 2009.  The net effect of lower average volumes in interest-earning assets and interest-bearing liabilities was a $23 million decrease in net interest income, and was the result of the deteriorating global economic environment, which led the Bank to collect loans in vulnerable sectors, allowing it to build levels of liquidity and respond to tighter funding sources in anticipation of worsening economic conditions.  Through this course of action, the Bank was able to largely offset the negative effect of decline in client deposits and decreases in interbank funding lines; and

ii.Lower average interbank market rates for the Bank’s assets and liabilities, which resulted in a $10.0 million increase in net interest income due to rate variances, as the rates for liabilities decreased at a higher pace than the rates for assets.  The average yield paid on interest-bearing liabilities decreased by 142 bps to 2.38% in 2009 (from 3.80% in 2008), mainly due to lower interbank market rates, while the average yield on interest-earning assets decreased by 128 bps, to 3.50% in 2009 (from 4.78% in 2008), also attributable to lower interbank market rates, the effects of which were partially offset by higher lending credit spreads in the Bank’s loan portfolio.

Net interest margin was 1.62% in a $5 million2009 compared to 1.55% in 2008.  The 7 bps increase in net interest income, reflectingmargin during 2009, compared to 2008, was mainly attributable to higher average lending spreads over(net interest spread in the loan portfolio increased by 48 basis points), given the disproportionate decreases in interest rates for assets versus liabilities, partially offset by the cost of funds for the Bank’s loan portfolio and higher average inter-bank market rates in the Bank’s assets and liabilities.  The $7 million increase in net interest income derived from higher volumes during 2007 was mainly attributable to an increase in the average loan portfolio andmaintaining a higher average liquidity balances (interest-bearing deposits with banks), partially offset by an increase inbalance throughout the Bank’s funding through higher average liability deposits and borrowings.year at a minimal yield.

Reversal (Provision) for Loan Losses

  
For the year ended December 31,
 
  
2010
  
2009
  
2008
 
  (in $ million) 
Brazil specific reserve reversals (provisions)  2.1   (2.4)  0.0 
Mexico specific reserve reversals (provisions)  (2.3)  (12.0)  0.0 
Total specific reserve reversals (provisions)  (0.3)  (14.4)  0.0 
Generic reserve reversals (provisions) - due to changes in credit portfolio composition and risk levels  (8.8)  (3.9)  18.5 
Total generic reserve reversals (provisions)  (8.8)  (3.9)  18.5 
Total reversals (provisions) of allowance for loan losses $(9.1) $(18.3) $18.5 

As of December 31, 2010, the Bank had $29.0 million in non-accruing loans, all of which correspond to impaired loans for which specific reserves of $11.5 million have been allocated.

As of December 31, 2009, the Bank had $50.5 million in non-accruing loans.  Based on analysis of these loans, the Bank has identified impaired loans of $35.8 million for which specific reserves of $14.4 million have been allocated.  The remaining of the non-accrual portfolio, of $14.8 million, does not present impairment; therefore, no additional specific reserves have been recorded.

During 2008 and 2007, the Bank did not have any impaired or non-accrual loans outstanding.

During 2010, the Bank reverse $0.8 million in specific provisions assigned to the impaired portfolio.

During 2009, and 2008, there were no reversals of specific provisions for loan losses related to the impaired and restructured portfolio.

36

The $9.1 million provision for loan losses in 2010 was primarily due to an increase in the loan portfolio which was partially mitigated by an improvement of the risk profile of the Region.

The $18.3 million provision for loan losses in 2009 was the result of: (i) a $14.4 million specific reserves provision assigned to non-accruing loans, and (ii) a $3.9 million increase in generic provision for loan losses, as the Bank reduced its impaired portfolio to zero at December 31, 2006.  The impaired portfolio reversals amounted to $11 million in 2006.a reflection of higher loan balances.

The Bank’s $19$18.5 million reversal of provision for loan losses in 2008 was due to lower generic provisions as a result of decreased loan balances.  Nevertheless, the Bank increased its

The Bank’s loan loss reserve coverage fromwas 1.9% atas of December 31, 2007 to 2.1% at2010, a decrease from 2.7% as December 31, 2008, reflecting2009, and from decrease of 2.1% as December 31, 2008.  The decrease in the loan loss reserve coverage reflects the impact of decreased risk levels in the Region on the Bank’s reserve model of increasing risk levels in the Region.

27
model.

The Bank’s $12 million provision for loan losses in 2007 was mainly due to the net effect of:following table summarizes information regarding non-accruing loans, and interest amounts on non-accruing loans:

·a $18 million generic provision charge, resulting from increased loan exposure; and
  
For the year ended December 31,
 
  
2010
  
2009
  
2008
 
  (in $ thousands) 
Loans in non-accrual status         
Private corporations $28,000  $39,000  $0 
Private middle-market companies  1,002   11,534   0 
Total loans in non-accrual status $29,002  $50,534  $0 
             
Foregone interest revenue at beginning of the year $928  $0  $0 
Interest which would have been recorded if the loans had not been in a non-accrual status  3,403   1,775   0 
Interest income collected on non-accruing loans  (3,335)  (847)  0 
Foregone interest revenue at end of the year $996  $928  $0 
·a $6 million recovery on previously charged-off loans.
The Bank’s $12 million provision for loan losses in 2006 was mainly due to the net effect of:
·a $23 million generic provision charge, resulting from increased loan exposure;
·a $10 million reversal related to the collection of  Argentine restructured loans during the year; and
·a $1 million reversal related to the collection of a Brazilian restructured loan during the year.
At December 31, 2008, 2007 and 2006, the Bank had zero specific provisions for loan losses, as it had zero credits in non-accruing status (impaired).

For more detailed information, see Item 5, “Operating and Financial Review and Prospects/Operating Results/Asset Quality and Allowance for Credit Losses,” and Item 18, “Financial Statements,” note 9.8.

For more detailed information about Non-Accrual Loans, see Item 18 “Financial Statements,” note 7.

Reversal (Provision) for Losses on Off-Balance Sheet Credit Risk

The $17$13.9 million reversal of provision for losses on off-balance sheet credit risk in 2010 was primarily the net result of due to changes in volume, composition, and improvement of the risk profile of the portfolio, together with the purchase of international insurance to mitigate exposures on the off-balance sheet credit risk portfolio.

The $3.5 million reversal of provision for losses on off-balance sheet credit risk in 2009 was primarily due to lower off-balance sheet balances in the commercial portfolio (acceptances and contingencies), and the impact on the Bank’s reserve model of prudent off-balance sheet portfolio management considering risk levels in the Region.

The $17.0 million provision for losses on off-balance sheet credit risk in 2008 was due to the impact of increased risk levels in the Region on the Bank’s generic reserve model.  As a result, the

The off-balance sheet reserve coverage increaseddecreased to 3.5% as of December 31, 2010, compared to 8.2% as of December 31, 2009, and compared to 6.9% atas of December 31, 2008, compared to 2.5% at December 31, 2007.2008.

 
The $13 million reversal of provision for losses on off-balance sheet credit risk in 2007 was mainly due to decreased letter of credit exposure in higher risk countries, as well as improved risk profiles in certain countries.
37
 
The $25 million reversal of provision for losses on off-balance sheet credit risk in 2006 was mainly due to a $15 million reduction in generic reserves driven by exposure reductions in certain countries and a $10 million reversal in specific reserves resulting from the maturity of Argentine impaired contingencies.

For more detailed information, see Item 5, “Operating and Financial Review and Prospects/Operating Results/Asset Quality and Allowance for Credit Losses,” and Item 18, “Financial Statements,” note 9.8.

Fees and Commissions, Netnet

The Bank generates fee and commission income primarily from originating letters of credit confirmation,confirmations, guarantees (including commercial and country risk coverage), loan origination and distribution, and service activities. The following table shows the components of the Bank’s fees and commissions, net, for the periods indicated:

  
For the Year Ended December 31,
 
  
2010
  
2009
  
2008
 
     (in $ thousand)    
Letters of credit $8,314  $4,973  $4,725 
Guarantees  158   1,017   1,108 
Loan Commitments  1,195   224   584 
Third party investors (Bladex Asset Management)  516   281   (8)
Other(1)
  143   239   844 
Fees and commissions, net $10,326  $6,733  $7,252 
  
For the Year Ended December 31,
 
  
2008
  
2007
  
2006
 
     (in $ thousand)    
Letters of credit $4,725  $2,842  $4,121 
Guarantees  1,108   1,088   1,419 
Loans  584   836   556 
Other  (1)
  835   789   297 
Fees and commissions, net $7,252  $5,555  $6,393 

(1) Net of commission expense.
 
The $2$3.6 million or 53% increase in net2010 mainly reflects increased commission income from the  letter of credit business, as a result of higher volumes of letters of credit in a more favorable economic environment.

The $0.5 million decrease in fees and commissions for 2008during 2009 compared to 2007 mainly reflected higher margins2008 mostly reflects lower loan commissions from the Commercial Division’s letters of credit activity.
The decrease of $1 million in net feesreduced average loan and commissions for 2007 compared to 2006 was attributable to lower letter of credit balances, reflecting credit risk and guarantee activity duringdemand considerations in the beginningfirst half of 2007, partially offset by increased loan fees and other service activities.

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2009.

For more information, see Item 18, “Financial Statements,” notes 2(p).

Derivative Financial Instruments and Hedging

TheIn 2010, 2009 and 2008, the Bank recorded a net loss of $1.4 million, a net loss of $2.5 million and a gain of $10$10.0 million, respectively, in derivative financial instruments and hedging. These results reflect the effect of recording the effectiveness (ineffectiveness) on hedging activity in 2008.  This gain mainly related torelationships and the applicationdiscount of FASB Statement No. 157 to the Bank’s own credit risk when calculating the fair value of its cross currency swap portfolio that it contracts for hedging purposes, which had a liability balance as of December 31, 2010.  The fair value of these cross currency swaps that had been contracted for hedging purposes.
The Bank recorded losses of $1 millionimproved during 2010 and $225 thousand in 20072009 and, 2006, respectively, related  to hedgingas a consequence, the credit risk discount decreased when valuing these derivative instruments.  The 2007 losses related mainly to the fair value at their inception of interest rate swaps contracted for fair value hedge relationships that classify under the short-cut method.  The difference in price at inception of these derivatives is attributable solely to the bid-ask spread between the entry transaction and a hypothetical exit transaction.  The Bank maintains a policy of recognizing these price differences at the inception of a hedge relationship.

For additional information, see Item 11, “Quantitative and Qualitative Disclosure about Market Risk,” and Item 18, “Financial Statements,” notes 2(r)2(u) and 21.20.

Recoveries (Impairment), on AssetsNet Gain (Loss) from Investment Fund Trading

The Bank recorded $767 thousandnet loss of $8.0 million from investment fund trading in impairment on assets2010, compared to net gains of $25.0 million in 2009, and net gains of $21.4 million in 2008 compared to $500 thousand in 2007.  The 2008 amount was related to an equity investment in a private investment fund with book valuethe performance of $2 million at the endtrading activities of 2008.  The 2007 amount was related to an equity investment in a company specializing in digital solutions, which was written-off and charged to earnings as its impairment was considered other than temporary.the Fund.
 
For additional information, see Item 18, “Financial Statements,” notes 2(i)6 and 11.22.

 
Net Gain (Loss) from Investment Fund Trading
38
 
The Bank achieved $21 million in gain from investment fund trading, compared to $24 million in 2007 and $1 million in 2006.  The $21 million gain was due to the net effect of a net realized gain on investments and foreign currency transactions of $20.9 million and net change in unrealized appreciation (depreciation) on investments and foreign currency of $0.4 million.  For additional information, see Item 18, “Financial Statements,” notes 7 and 23.

Net Gain (Loss) from Trading Securities

The Bank recorded a $21$3.6 million loss from trading securities in 2010, compared to $13.1 million gain in 2009, and compared to $21.0 million loss in 2008.  The $3.6 million loss in 2010 was due to the increases in securities valuations which were more than offset by the diminished valuations of trading derivatives that were previously designated as fair value interest rate hedges.

The $13.1 million gain in 2009 was due to the appreciation in mark-to-market of the trading securities portfolio in 2009, which is composed of all the securities that were sold in 2008 under repo agreements accounted for as sales.

The $21.0 million loss in 2008 was mainly due to the mark-to-market effect of mark-to-market on such securities and related to the impact of classifying certain securities financings (repos) as outright sales in 2008, as required by the application of FASB Statement No. 140U.S. GAAP, and the changes in the fair value of financial instruments resulting from transfers of securitiestransferred under repurchase agreements.

For additional information, see Item 18, “Financial Statements,” notes 54 and 13.12.

Net Gain on Sale of Securities Available-for-Sale

The Bank purchases debt instruments as part of its Treasury activity with the intention of selling them prior to maturity. These debt instruments are classified as securities available-for-sale and are included as part of the Bank’s credit portfolio.

The Bank’s net gain on the sale of securities available-for-sale in 20082010 was $67 thousand, which included a$2.3 million, compared to $0.5 million in 2009 and compared to $0.1 million in 2008.  Detail of the net gain of  $2 million related to the sale of securities for a nominal amount of $74 million, partially offset by a loss of $2 million resulting mainly from the sale of securities under repurchase agreements accounted forgains is as sales at the transfer date of those securities, as required by FASB Statement No. 140.follows:

  
For the year ended December 31,
 
  
2010
  
2009
  
2008(1)
 
  (in $ millions) 
Nominal amount $135.0  $137.0  $249.2 
Amortized cost $(151.3) $(146.5) $(271.0)
Proceeds  167.2   150.6   229.9 
Net effect of unwinding hedging derivatives of the available for-sale securities portfolio  (13.6)  (3.6)  (2.4)
Forward repurchase agreements  0.0   0.0   43.6 
Total net gain on sale of securities available-for-sale $2.3  $0.5  $0.1 
 
The Bank’s net gain on the sale of securities available-for-sale was $9 million and $3 million in 2007 and 2006, respectively, related to the sale of securities for a nominal amount of $509 million and $105 million, respectively.
(1)The 2008 amount included a net gain of $2.1 million related to the sale of securities for a nominal amount of $74 million, partially offset by a loss of $2 million resulting mainly from the sale of securities under repurchase agreements (nominal amount of $175.2 million) accounted for as sales at the transfer of those securities.
 
For additional information, see Item 18, “Financial Statements,” notes 65 and 13.12.

 
2939
 

Operating Expenses
 
The following table shows a breakdown of the components of the Bank’s total operating expenses for the periods indicated:

 
For the Year Ended December 31,
  
For the Year Ended December 31,
 
 
2008
  
2007
  
2006
  
2010
  
2009
  
2008
 
 (in $ thousand)  (in $ thousand) 
Salaries and other employee expenses $20,227  $22,049  $16,826  $23,499  $20,201  $20,227 
Depreciation, amortization and impairment of premises and equipment. 3,720  2,555  1,406   2,510   2,671   3,720 
Professional services 3,765  3,181  2,671   4,945   3,262   3,765 
Maintenance and repairs 1,357  1,188  1,000   1,616   1,125   1,357 
Expenses from the investment fund 2,065  381  0   890   3,520   2,065 
Other operating expenses  8,856   7,673   7,026   8,621   7,423   8,856 
Total Operating Expenses $39,990  $37,027  $28,929 
Total operating expenses $42,081  $38,202  $39,990 

The $3$3.9 million or 8%10.2%, increase in operating expenses in 2008for the year ended December 31, 2010 compared to 2007the year ended December 31, 2009 is attributable to:  The net effect of higher salary and other employee expenses associated with higher average headcount and professional fees associated with the support of the expansion of the Commercial Division and the expansion in risk management as well as capital market issuance programs; partially offset by lower performance – related expenses from the Fund.

The $1.8 million, or 4.5%, decrease in operating expenses for the year ended December 31, 2009 compared to the year ended December 31, 2008 was mainly due to:

 ·a $2 million costThe effect of general growth and structurecost-cutting measures that resulted in the investment fund;
·a $1 million cost for the write-off of an information technology application;
·a $1 million increase in otherlower overall operating expenses;expenses as average business volumes declined during 2009; and
 ·a $1 million increasewrite-off of an information technology application in professional services.
Offsetting these increases was a $2 million decrease in salaries and other employee expenses mainly related to a 33% decrease in employee variable compensation.

The $8 million, or 28%, increase in operating expenses in 2007 compared to 2006 was mainly due to:
·a $5 million increase in salaries and other employee expenses, mainly driven2008; offset by a $3 million increase in performance-based variable compensation for the Bank’s proprietary asset management team, and the remaining $2 million mainly related to the stock compensation plan for the Bank’s senior management, a one-time event accrual of employee vacation, and an increase in performance-based variable compensation provision for business lines other than proprietary asset management;
·a $1 million increase in maintenance and depreciation expenses related to the Bank’s new technology platform;
·a $1 million increase in professional services, mainly due to legal expenses related to the Bank’s business; and
 ·a $1 million increase in expenses attributable to general growth and better results in the Fund, mainly related to marketing and business travel.increased performance-based expenses.
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Changes in Financial Condition
 
The following table presents components of the Bank’s balance sheet at December 31 of each year:the dates indicated:

  
As of December 31,
 
  
2010
  
2009
  
2008
 
  (in $ thousand) 
Assets         
Cash and due from banks $5,570  $2,961  $11,474 
Interest-bearing deposits in banks  431,144   421,595   889,119 
Trading assets  50,412   50,277   44,939 
Securities available-for-sale  353,250   456,984   607,918 
Securities held-to-maturity  33,181   0   28,410 
Investment fund  167,291   197,575   150,695 
Loans  4,064,332   2,779,262   2,618,643 
Less:            
Allowance for loan losses  (78,615)  (73,789)  (54,648)
Unearned income and deferred fees  (4,389)  (3,989)  (4,689)
Loans, net  3,981,328   2,701,484   2,559,306 
Customers’ liabilities under acceptances  27,213   1,551   1,375 
Accrued interest receivable  31,110   25,561   46,319 
Premises and equipment, net  6,532   7,749   7,970 
Derivative financial instruments used for hedging - receivable  2,103   828   7,777 
Other assets  10,953   12,206   7,376 
Total Assets $5,100,087  $3,878,771  $4,362,678 
Liabilities and Stockholders’ Equity            
Deposits $1,820,925  $1,256,246  $1,169,048 
Trading liabilities  3,938   3,152   14,157 
Securities sold under repurchase agreements  264,927   71,332   474,174 
Short-term borrowings  1,095,400   327,800   738,747 
Acceptances outstanding  27,213   1,551   1,375 
Accrued interest payable  10,084   11,291   32,956 
Borrowings and long-term debt  1,075,140   1,390,387   1,204,952 
Derivative financial instruments used for hedging - payable  53,029   65,137   91,897 
Reserve for losses on off-balance sheet credit risk  13,335   27,261��  30,724 
Other liabilities  20,096   14,077   25,635 
Total Liabilities $4,384,087   3,168,234   3,783,665 
Redeemable noncontrolling interest in the investment fund  18,950   34,900   4,689 
Stockholders’ Equity            
Common stock, no par value  279,980   279,980   279,980 
Additional paid-in capital in excess of assigned value of common stock  133,815   134,820   135,577 
Capital reserves  95,210   95,210   95,210 
Retained earnings  320,153   301,389   268,435 
Accumulated other comprehensive loss  (6,441)  (6,160)  (72,115)
Treasury stock  (125,667)  (129,602)  (132,763)
Total Stockholders’ Equity  697,050   675,637   574,324 
Total Liabilities and Stockholders’ Equity $5,100,087  $3,878,771  $4,362,678 

 
40
  
2008
  
2007
  
2006
 
  (in $ thousand) 
Assets         
Cash and due from banks $11,474  $596  $401 
Interest-bearing deposits in banks  889,119   400,932   303,426 
Trading assets  44,939   0   0 
Investment securities  636,328   468,360   471,351 
Investment fund  150,695   81,846   105,199 
Loans  2,618,643   3,731,838   2,980,772 
Less:            
Allowance for loan losses  (54,648)  (69,643)  (51,266)
Unearned income and deferred loan fees  (4,689)  (5,961)  (4,425)
Loans, net $2,559,306  $3,656,234  $2,925,081 
Customers’ liabilities under acceptances  1,375   9,104   46,006 
Premises and equipment, net  7,970   10,176   11,136 
Accrued interest receivable  46,319   62,375   52,488 
Derivative instruments used for hedging - receivable  7,777   122   541 
Other assets  7,376   8,826   6,743 
Total Assets $4,362,678  $4,698,571  $3,922,373 
Liabilities and Stockholders’ Equity            
Deposits  1,169,048   1,462,371   1,056,277 
Trading liabilities  14,157   13   0 
Securities sold under repurchase agreements  474,174   283,210   438,356 
Short-term borrowings  738,747   1,221,500   1,157,248 
Borrowings and long-term debt  1,204,952   1,010,316   558,860 
Acceptances outstanding  1,375   9,104   46,006 
Accrued interest payable  32,956   38,627   27,295 
Derivative instruments used for hedging - payable  91,897   16,899   2,634 
Reserve for losses on off-balance sheet credit risk  30,724   13,727   27,195 
Other liabilities  25,635   30,553   24,606 
Total Liabilities $3,783,665  $4,086,320  $3,338,477 
Minority interest  4,689   0   0 
Stockholders’ Equity            
Common stock, no par value  279,980   279,980   279,980 
Capital surplus  135,577   135,142   134,945 
Capital reserves  95,210   95,210   95,210 
Retained earnings  268,435   245,348   205,200 
Accumulated other comprehensive income (loss)  (72,115)  (9,641)  3,328 
Treasury stock  (132,763)  (133,788)  (134,768)
Total Stockholders’ Equity $574,324  $612,251  $583,896 
Total Liabilities and Stockholders’ Equity $4,362,678  $4,698,571  $3,922,373 

2010 vs. 2009

During 2008,2010, total assets decreased $336increased by $1,221 million, compared to 2007, principally drivenor 31%, strengthened by a $1 billion decrease46%, or $1,285 million increase in the Bank’s loan portfolio during the same period as a result of solid growth in the commercial activity of the Bank built liquidity, reduced vulnerable exposures, and/or concentrations,as a result of strong recovery in Latin American economy and preserved its capitalization in response to deteriorating macroeconomic conditionsincreased trade flows in the last quarterRegion.  As of 2008.   At December 31, 2008,2010, the Bank’s loan portfolio amounted to $2,619$4,064 million, withand had an average maturity term of 480389 days, with 61%70% of the portfolio scheduled to mature within one year. 61%56% of the loan portfolio was trade related in nature and 39%44% constituted non-trade loans mainly extended to private banks and private corporations.

The increase in assets during 2010 was offset by a $104 million decrease in the securities available-for-sale portfolio, mainly resulting from the sale of securities available-for-sale for a nominal amount of $135 million (carrying value of $151 million).

As of December 31, 2010, the Bank’s liquidity amounted to $421 million, compared to $402 million as of December 31, 2009.

The increase in assets in 2010 was accompanied by a $1,216 million increase in liabilities, especially in deposits, securities sold under repurchase agreements and short term borrowing ($1,526 million), offset by a $315 million decrease in borrowings and long-term debt as a result of increased liquidity levels in international markets, more demand from credit, and more confidence from the Bank’s international correspondent banks.

41

2009 vs. 2008

During 2009, total assets decreased by $484 million, mainly as a result of a $476 million decrease in interest-bearing deposit in banks, as the Bank gradually returned to historical liquidity levels as funding markets improved during the year 2009, and a $151 million decrease in the securities available-for-sale portfolio, mainly resulting from the sale of securities for a nominal amount of $137 million (or $147 million in carrying value). These decreases were partially offset by a $161 million increase in the loan portfolio due to improving market conditions in the Region in the second half of 2009. As of December 31, 2009, the loan portfolio amounted to $2,779 million, with an average maturity term of 389 days, with 66% of the portfolio scheduled to mature within one year. A majority, or 59%, of the loan portfolio was trade related in nature and 41% constituted non-trade loans mainly extended to banks, or sovereignsovereigns or exporting corporations. The corporate segment, which includes state-owned exporting organizations and private corporations, represented 62%53% of the loan portfolio, and ofwithin this corporate segment, 60%62% was trade related.  At

As of December 31, 2008,2009, the Bank’s liquidity stood atamounted to $402 million, and compared to $826 million compared to $396 million atas of December 31, 2007.2008.

The 2009 decrease in assets during 2008 was accompanied by a $303$615 million decrease in liabilities, principally driven by a $293 million decreaseespecially in depositssecurities sold under repurchase agreements and a $483 million decrease in short-term borrowings, as a result of the global financial crisis during the last quarter of 2008.  These decreases were partly offset by a $191 millionan increase in long-term borrowings, as the Bank finalized a $200 million five-year bilateral term loan facility with the China Development Bank at the end of the first quarter 2008, and contracted a two-year syndicated term loan facility, jointly lead-arranged by Santander Investment Securities and Standard Chartered Bank.  The original $150 million facility was substantially oversubscribed, closing with $245$185 million in borrowings and long-term debt associated with two two-year loan syndications in the second half of 2009 for a total commitments among thirteen international financial institutions.

31
of $213 million.

The $776 million increase in total assets in 2007 was mainly due to a $751 million increase in the loan portfolio, resulting from the continued execution of the Bank’s strategy of diversifying its portfolio concentration specifically by increasing its loans within the corporate segment.  At December 31, 2007, the average maturity of the loan portfolio was 429 days, and 68% of the portfolio was scheduled to mature within one year.  60% of the portfolio was trade related and 40% constitutes non-trade loans mainly extended to banks or sovereign or exporting corporations.  The corporate segment, which includes state-owned exporting organizations and private corporations, represented 51% of the loan portfolio in 2007, compared to 48% in 2006, and of this corporate segment, 66% and 74% was trade related in 2007 and 2006, respectively.

The increase in assets in 2007 was mainly financed by (1) a $406 million increase in deposits from central and commercial banks in the Region, and (2) a $451 million increase in medium-and long-term borrowings and debt, including a bond issuance in Peruvian Nuevo Soles, interbank borrowings in Mexican Pesos, a five-year international loan syndication for an amount of $150 million, and a three-year borrowing for an additional $75 million, among other borrowings.
Asset Quality

The Bank believes that its asset quality is a function of its strong client base, the importance that governments and borrowers alike attribute to maintaining continued access to trade financing, its preferred creditor status, and its strict adherence to commercial criteria in its credit activities.
The Bank’s management and the CPER review periodically a report of all loan delinquencies. The Bank’s collection policies include rapid internal notification of any delinquency and prompt initiation of collection efforts, usually involving senior management.

The Bank maintains a system of internal credit quality indicators. These indicators are assigned depending on several factors which include: profitability, quality of assets, liquidity and cash flows, capitalization and indebtedness, economic environment and positioning, regulatory framework and/or industry, sensitivity scenarios and the quality of debtor’s management and shareholders. A description of these indicators is as follows:

RatingClassificationDescription
1 to 6NormalClients with payment ability to satisfy their financial commitments.
7Special MentionClients exposed to systemic risks specific to the country or the industry in which they are located, facing adverse situations in their operation or financial condition. At this level, access to new funding is uncertain.
8SubstandardClients whose primary source of payment (operating cash flow) is inadequate and who show evidence of deterioration in their working capital that does not allow them to satisfy payments on the agreed terms, endangering recovery of unpaid balances.
9DoubtfulClients whose operating cash flow continuously shows inability to service the debt on the originally agreed terms. Due to the fact that the debtor presents an impaired financial and economic situation, the likelihood of recovery is low.
10UnrecoverableClients with operating cash flow that does not cover their costs, are in suspension of payments, or will likely have difficulties in fulfilling possible restructuring agreements, are in a state of insolvency, or have filed for bankruptcy, among others.

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Impaired Assets and Contingencies

The Bank’s impaired assets that are subject to impairment consist mainly of impaired loans and impaired securities. For more information on impaired loans, see Item 18, “Financial Statements,” notes 2(k)Statements”, Notes 2(l) and 8.7. For more information on impaired securities, see Item 18, “Financial Statements,” notes 2(i) and 6.
Loans and contingencies are identified as impaired and placed on non-accrual status when any payment of principal and fees or commissions relating thereto is over 90 days past due or if the Bank’s management determines that the item may become payable by the Bank and its ultimate collection of principal or commission is doubtful.5.  For more information on contingencies, see Item 18, “Financial Statements,” notes 2(k)Statements”, note 18, and 19.see Item 5, “Operating and Financial Review and Prospects/Operating Results/Reversal (Provision) for Loan Losses.”
 
The Bank identifies as delinquent those loans where no principal and/or interest payment has been received for 30 days after such payments were due.  The outstanding balance of a loan is considered past due when the total principal balance of a single balloon payment has not been received within 30 days after such payment was due, or when no agreed-upon periodic payment has been received for a period of 90 days after the agreed-upon date.   Loans are placed on a cash basis (non-accrual) when interest or principal is overdue for 90 days or more, or before if the Bank’s management believes there is uncertainty with respect to the ultimate collection of principal or interest.

Factors considered by the Bank’s management in determining impairment include collection status, collateral value, the probability of collecting scheduled principal and interest payments when due, and economic conditions in the borrower’s country of residence.

The following table sets forth information regarding the Bank’s impaired assets and contingencies at December 31 of each year:the dates indicated:
  As of December 31, 
  2010  2009  2008  2007  2006 
  (in $ million, except percentages) 
Impaired loans $29  $36  $0  $0  $0 
Allocation from the allowance for loan losses  12   14   0   0   0 
Impaired loans as a percentage of total loans, net of unearned income and deferred commission  0.7%  1.3%  0.0%  0.0%  0.0%
Impaired contingencies $0  $0  $0  $0  $0 
Allocation from the reserve for losses on off balance-sheet credit risks  0   0   0   0   0 
Impaired contingencies as a percentage of total contingencies  0.0%  0.0%  0.0%  0.0%  0.0%
Impaired securities (par value) $0  $0  $0  $0  $0 
Estimated fair value adjustments on options and impaired securities(1)
  0   0   0   0   0 
Estimated fair value of impaired securities $0  $0  $0  $0  $0 
Impaired securities as a percentage of total securities(2)
  0.0%  0.0%  0.0%  0.0%  0.0%
Impaired assets and contingencies as a percentage of total credit portfolio(3)
  0.6%  1.0%  0.0%  0.0%  0.0%
 
  2008  2007  2006  2005  2004 
  (in $ million, except percentages) 
Impaired loans $0  $0  $0  $29  $256 
Allocation from the allowance for loan losses  0   0   0   11   82 
Impaired loans as a percentage of total loans, net of unearned income and deferred commission  0.0%  0.0%  0.0%  1.1%  10.5%
Impaired contingencies $0  $0  $0  $13  $32 
Allocation from the reserve for losses on off balance-sheet credit risks  0   0   0   9   21 
Impaired contingencies as a percentage of total contingencies  0.0%  0.0%  0.0%  1.7%  10.5%
Impaired securities (par value) $0  $0  $0  $0  $5 
Estimated fair value adjustments on options and impaired securities1
  0   0   0   0   4 
Estimated fair value of impaired securities $0  $0  $0  $0  $1 
Impaired securities as a percentage of total securities2
  0.0%  0.0%  0.0%  0.0%  0.5%
                     
Impaired assets and contingencies as a percentage of total credit portfolio3
  0.0%  0.0%  0.0%  1.2%  9.8%
1 Includes impairment losses on securities, estimated unrealized gain (loss) on impaired securities, premiums and discounts.
(1)Includes impairment losses on securities, estimated unrealized gain (loss) on impaired securities, premiums and discounts.
2  Total securities consist of investment securities considered part of the Bank’s credit portfolio.
(2)Total securities consist of investment securities considered part of the Bank’s credit portfolio.
3 The total credit portfolio consists of loans net of unearned income, fair value of investment securities, securities purchased under agreements to resell and contingencies.
(3)The total credit portfolio consists of loans net of unearned income, fair value of investment securities, securities purchased under agreements to resell and contingencies.
As of December 31, 2008, 2007 and 2006 the Bank did not have any impaired credits in its portfolio nor any credits with specific reserves.
32

Allowance for Credit Losses

The allowance for credit losses, which includes the allowance for loan losses and the reserve for losses on off-balance sheet credit risk, covers the credit risk on loans and contingencies.  The allowance for credit losses is provided for losses derived from the credit extension process, inherent in the loan portfolio and off-balance sheet financial instruments, using the reserve method of providing for credit losses.  Additions to the allowance for credit losses are made by creating a provision against earnings.  Credit losses are deducted from the allowance, and subsequent recoveries are added.  The allowance is also decreased by reversals of the allowance back to earnings.  The allowance attributable to loans is reported as a deduction of loans and the allowance for off-balance sheet credit risk, such as letters of credit and guarantees, is reported as a liability.

43

The allowance for credit losses includes an asset-specific component and a formula-based component satisfying the requirements of  FASB Statement No. 5, “Accounting for Contingencies” (“FASB Statement No. 5”).component. The asset-specific component relates to a provision for losses on credits considered impaired and measured on a case-by-case basis pursuantbasis. A specific allowance is established when the discounted cash flows (or observable market price of collateral) of the credit is lower than the carrying value of that credit.  The formula-based component is applied to FASB Statement No. 114, “Accountingthe Bank’s performing credit portfolio and is established based in a process that estimates the probable loss inherent in the portfolio, based on statistical analysis and management’s qualitative judgment.  The statistical calculation is a product of internal risk classifications, probabilities of default and loss given default.  The probability of default is supported by CreditorsBladex’s historical portfolio performance complemented by probabilities of default provided by external sources, in view of the greater robustness of this external data for Impairment of a Loan” (“FASB Statement No. 114”).  For additional information regarding allowance for creditsome cases.  The loss given default is based on Bladex’s historical losses see Item 18, “Financial Statements,” notes 2(l)experience and 9.best practices.

The reserve balances for estimating generic allowances, for both onis applicable to all classes of loans and off-balance sheet credit exposures, are calculated applyingfinancial instruments of the following formula:Bank.
Reserves = S(E x PD x LGD)
Reserves = S(E x PD x LGD)
where:
where:
 a)
Exposure (E)(*) = the total accounting balance (on(on- and off-balance sheet) at the end of the period under review, segregated by country.review.
 b)Probabilities of Default (PD) = one-year probability of default applied to the portfolio in each country.portfolio.  Default rates are based on the Bank’s historical portfolio performance per rating category,  during a ten-year period, complemented by Standard & Poor’s, or S&P’s probabilities of default data from international credit rating agencies for high risk cases,categories 6, 7 and 8, in view of the greater robustness of credit rating agenciesS&P data for such cases.
 c)Loss Given Default (LGD) = a factor of 45% is utilized, based on historical information and best practices in the banking industry.  This factorManagement applies to all countries, except those classified as higher risk, in which case the Bank’s management appliesjudgment for imprecision and uncertainty and historical loss experience on a case-by-case basis.experience.

Management may also apply judgment to capture elements of a prospective nature or loss expectations based on risks identified in the environment that are not necessarily included in the historical data.

For additional information regarding allowance for credit losses, see Item 18, “Financial Statements,” notes 2(n) and 8.

The following table sets forth information regarding the Bank’s allowance for credit losses with respect to the total creditscommercial portfolio outstanding atas of December 31 of each year:

 
As of December 31,
 
 
2008
  
2007
  
2006
  
2005
  
2004
  
2010
  
2009
  
2008
  
2007
  
2006
 
 (in $ millions, except percentages)  (in $ million, except percentages) 
Components of the allowance for credit losses                              
Allowance for loan losses                              
Balance at beginning of the year $70  $51  $39  $106  $224  $74  $55  $70  $51  $39 
Provision (reversal) (19) 12  12  (54) (111)  9   18   (19)  12   12 
Cumulative effect on prior years (2004) of a change in credit loss reserve methodology 0  0  0  (6) 0 
Recoveries 4  6  0  3  6   1   1   4   6   0 
Loans charged-off  0   0   0   (9)  (13)  (5)  (0)  0   0   0 
Balance at the end of the year $55  $70  $51  $39  $106   79   74   55   70   51 
                    
Reserve for losses on off-balance sheet credit risk:                                        
Balance at beginning of the year $14  $27  $52  $33  $34   27   31   14   27   52 
Provision (reversal) 17  (13) (25) 16  (1)  (14)  (3)  17   (13)  (25)
Cumulative effect on prior years (2004) of a change in credit loss reserve methodology  0   0   0   3   0 
Balance at end of the year $31  $14  $27  $52  $33   13   27   31   14   27 
                    
Total allowance for credit losses $85  $83  $78  $92  $139  $92  $101  $85  $83  $78 
Allowance for credit losses to total commercial portfolio 2.8% 1.9% 2.2% 2.7% 5.1%  2.1%  3.2%  2.8%  1.9%  2.2%
Net charge offs to average loans outstanding  0.1%  0.0%  0.0%  0.0%  0.0%

 
3344
 
The allowance for credit losses amounted to $85 million at December 31, 2008.  The ratio of the allowance for credit losses to the commercial portfolio as of December 31, 2008 was 2.8% compared to 1.9% as of December 31, 2007.  The increase in the allowance for credit losses to the commercial portfolio reflects the impact of increasing risk levels in the Region on the Bank’s reserve model.

The following table sets forth information regarding the Bank’s allowance for credit losses allocated by country of exposure atas of December 31 of each year:

  As of December 31, 
  
2010
  
2009
  
2008
 
  
Total
  
%
  
Total
  
%
  
Total
  
%
 
  (in $ million, except percentages) 
Allowance for loan losses 
Argentina $28   35.1  $14   18.4  $25   46.3 
Brazil  13  ��15.9   17   23.5   5   8.8 
Chile  1   1.1   2   2.2   0   0.1 
Colombia  5   5.8   3   4.0   2   4.2 
Costa Rica  2   3.0   4   4.8   0   0.6 
Dominican Republic  5   6.9   2   2.7   0   0.4 
Ecuador  2   2.7   4   5.1   11   20.3 
El Salvador  1   1.3   2   2.3   1   1.1 
Guatemala  1   1.4   1   1.9   1   0.9 
Honduras  2   1.9   1   2.0   3   5.3 
Jamaica  3   3.2   2   2.6   1   1.7 
Mexico  14   18.0   19   25.1   4   6.8 
Peru  2   3.1   2   2.5   0   0.2 
Uruguay  0   0.0   1   1.7   0   0.9 
Other  0   0.6   1   1.1   1   2.5 
Total Allowance for loan losses $79   100.0  $74   100.0  $55   100.0 
                         
Reserve for losses on off-balance sheet credit risk                        
Brazil $0   1.3  $0   0.3  $1   1.8 
Chile  0   0.0   0   0.0   0   0.1 
Costa Rica  1   6.4   1   3.8   0   0.3 
Dominican Republic  0   0.0   0   0.3   0   0.2 
Ecuador  10   72.5   21   75.8   26   85.5 
El Salvador  0   0.0   0   0.3   0   0.0 
Guatemala  0   0.3   0   0.1   0   0.0 
Honduras  0   0.1   0   0.1   0   0.1 
Mexico  0   1.4   0   1.6   0   0.1 
Uruguay  0   0.0   1   2.4   0   0.0 
Venezuela  2   18.0   4   15.3   4   11.6 
Other  0   0.0   0   0.0   0   0.5 
Total Reserve for losses on off-balance sheet credit risk $13   100.0  $27   100.0  $31   100.0 
                         
Allowance for credit losses                        
Argentina $28   30.0  $14   13.4  $25   29.7 
Brazil  13   13.8   17   17.3   5   6.2 
Chile  1   0.9   2   1.6   0   0.1 
Colombia  5   5.0   3   2.9   2   2.7 
Costa Rica  3   3.5   5   4.5   0   0.5 
Dominican Republic  5   5.9   2   2.1   0   0.3 
Ecuador  12   12.8   24   24.2   37   43.8 
El Salvador  1   1.1   2   1.8   1   0.7 
Guatemala  1   1.2   1   1.4   1   0.6 
Honduras  2   1.7   2   1.5   3   3.4 
Jamaica  3   2.7   2   1.9   1   1.1 
Mexico  14   15.6   19   18.8   4   4.3 
Peru  2   2.7   2   1.8   0   0.1 
Uruguay  0   0.0   2   1.9   0   0.5 
Venezuela  2   2.6   4   4.1   4   4.2 
Other (1)
  0   0.5   1   0.8   1   1.7 
Total Allowance for credit losses $92   100.0  $101   100.0  $85   100.0 
  
2008
  
2007
  
2006
 
  
Total
  
%
  
Total
  
%
  
Total
  
%
 
  (in $ million, except percentages) 
Argentina $25   29.7  $32   38.4  $25   32.4 
Brazil  5   6.2   11   13.2   11   14.3 
Colombia  2   2.7   2   2.7   2   2.2 
Dominican Republic  0   0.3   0   0.3   3   3.3 
Ecuador  37   43.8   17   20.2   30   38.3 
Jamaica  1   1.1   4   5.0   2   3.1 
Mexico  4   4.3   3   3.5   1   1.6 
Nicaragua  1   0.8   1   1.7   0   0.6 
Peru  0   0.1   2   2.9   1   0.8 
Venezuela  4   4.2   7   8.3   0   0.1 
Other1
  6   6.8   3   3.7   3   3.4 
Total Allowance for Credit Losses $85   100.0  $83   100.0  $78   100.0 
1(1)
Other consists of allowanceallowances for credit losses allocated to countries in which allowanceallowances for credit losses outstanding did not exceed $1 million as of December 31, 2008.
2010.

 
45

The following table sets forth information regarding the Bank’s allowance for credit losses by type of borrower atas of December 31 of each year:

  
As of December 31,
 
  
2010
  
2009
  
2008
 
  
Total
  
%
  
Total
  
%
  
Total
  
%
 
  (in $ million, except percentages) 
Private sector commercial banks and Financial Institutions $15   15.5  $14   13.7  $11   12.3 
State-owned commercial banks  7   7.1   10   10.0   3   3.7 
Central banks  9   9.9   20   20.3   27   32.0 
Sovereign debt  0   0.4   1   1.1   1   0.8 
State-owned exporting organization  5   5.7   5   5.0   1   1.0 
Private middle - market companies  5   8.8   7   7.3   0   0.0 
Private corporations  50   52.5   43   42.6   43   50.1 
Total $92   100.0  $101   100.0  $85   100.0 
  
2008
  
2007
  
2006
 
  (in $ million) 
Private sector commercial banks $11  $22  $15 
State-owned commercial banks  3   2   5 
Central banks  27   9   21 
Sovereign debt  1   1   1 
State-owned exporting organization  1   10   2 
Private corporations  43   39   35 
Total $85  $83  $79 

The following table sets forth the distribution of the Bank’s loans charged-off against the allowance for loan losses by country atas of December 31 of each year:

  
2008
  
%
  
2007
  
%
  
2006
  
%
  
2005
  
%
  
2004
  
%
 
  (in $ million, except percentages) 
Argentina $0   0.0  $0   0.0  $0   0.0  $5   53.7  $13   100.0 
Brazil  0   0.0   0   0.0   0   0.0   4   46.3   0   0.0 
Total $0   0.0  $0   0.0  $0   0.0  $9   100.0  $13   100.0 
Reversals (Provisions) for Credit Losses
The following table sets forth information regarding the Bank’s reversals (provisions) of allowance for loan losses during the periods indicated:
  
As of December 31,
 
  
2010
  
%
  
2009
  
%
  
2008
  
%
  
2007
  
%
  
2006
  
%
 
  (in $ million, except percentages) 
                               
Brazil  2   40.5   0   0.0   0   0.0   0   0.0   0   0.0 
Mexico  3   59.5   0   0.0   0   0.0   0   0.0   0   0.0 
Total $5   100.0  $0   0.0  $0   0.0  $0   0.0  $0   0.0 

 
3446
 
  
For the year ended December 31,
 
  
2008
  
2007
  
2006
 
  (in $ million) 
Argentine Specific Reserve Reversals $0.0  $0.0  $10.2 
Brazil Specific Reserve Reversals  0.0   0.0   1.0 
Total Specific Reserve Reversals $0.0  $0.0  $11.2 
Generic Reserve Reversals (Provisions) - due to changes in credit portfolio composition and risk levels  15.0   (18.4)  (23.0)
Total Generic Reserve Reversals (Provisions) $15.0  $(18.4) $(23.0)
Recoveries - Argentine credits  1.5   2.0   0.0 
Recoveries - Other credits  2.0   4.4   0.0 
Total Recoveries $3.5  $6.4  $0.0 
Total Reversals (Provisions) of Allowance for Loan Losses $18.5  $(12.0) $(11.8)
From 2002 to 2005, the Bank negotiated the restructurings of its Argentine portfolio and sold at a discount most of the positions that the Bank estimated had the lowest probability of collection.  At the close of 2005, the Bank had restructured, sold or charged-off all of its non-performing exposures.  As a result, the Bank was able to decrease its impaired Argentine loan portfolio to zero at December 31, 2006, resulting in reversals of loan loss provisions related to the portfolio for $10 million during 2006.  The reversal resulted from loan collections and sales that exceeded their respective net book values.

Critical Accounting Policies

General

The Bank prepares its Consolidated Financial Statementsconsolidated financial statements in conformity with U.S. GAAP.  As a result, the Bank is required to use methods, make estimates, judgments and assumptions in applying its accounting policies that have a significant impact on the results it reports in its Consolidated Financial Statements.consolidated financial statements.  Some of the Bank’s accounting policies require managementManagement to makeuse subjective judgments,judgment, often as a result of the need to make estimates of matters that are inherently uncertain. The Bank’s managementManagement bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances. Actual results may differ from the estimates.

Most of theThe Bank’s critical accounting estimates include assessments of allowances for credit losses, impairments on the value of securities that are “other than temporary,” and the fair value of certain financial instruments.instruments, credit losses, and impairment of securities available-for-sale and held-to-maturity.  For information regarding the Bank’s significant accounting policies, see Item 18, “Financial Statements,”  note 2.

Allowance for Credit Losses

The classification of the Bank’s credit portfolio for allowances for credit losses under U.S. GAAP is determined by risk management and approved by the Credit Policy and Risk Assessment Committee (“CPER”) of the Bank’s board of directors through statistical modeling, internal risk ratings and estimates. Informed judgments must be made when identifying deteriorated loans, the probability of default, the expected loss, the value of collateral and current economic conditions.  Even though the Bank’s management considers its allowances for credit losses to be adequate, the use of different estimates and assumptions could produce different allowances for credit losses, and amendments to the allowances may be required in the future due to changes in the value of collateral, the amount of cash to be received or other economic events.  In  addition risk management has established and maintains reserves for the potential credit losses related to the Bank’s off-balance sheet exposure.  See Item 18, “Financial Statements,” note 2(l).
The estimates of the inherent risks of the Bank’s portfolio and overall recovery vary with changes in the economy, individual industries or sectors, and countries and individual borrowers’ or counterparties’ concentrations, ability, capacity and willingness to repay their obligations. The degree to which any particular assumption effects the allowance for credit losses depends on the severity of the change and its relationship to the other assumptions.  See Item 5, “Operating and Financial Review and Prospects/Operating Results/Allowance for Credit Losses.”
35
Fair Value of Financial Instruments

In 2008, theThe Bank began to determinedetermines the fair value of its financial instruments using the fair value hierarchy established in FASB Statement No. 157, “Fair Value Measurements,” (“FASB 157”)U.S. GAAP, which requires the Bank to maximize the use of observable inputs (those that reflect the assumptions that market participants would use in pricing the asset or liability developed based on market information obtained from sources independent of the reporting entity) and to minimize the use of unobservable inputs (those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances) when measuring fair value. Fair value is used on a recurring basis to measure assets and liabilities in which fair value is the primary basis of accounting. Additionally, fair value is used on a non-recurringnonrecurring basis to evaluate assets and liabilities for impairment or for disclosure purposes. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Depending on the nature of the asset or liability, the Bank uses somevarious valuation techniques and assumptions when estimating fair value, which are in accordance with FASB Statement No. 157.  value.

The Bank appliesapplied the following fair value hierarchy:

Level 1 – Assets or liabilities for which an identical instrument is traded in an active market, such as publicly-traded instruments or futures contracts.

Level 2 – Assets or liabilities valued based on observable market data for similar instruments, quoted prices in markets that are not active, or other observable inputs that can be corroborated by observable market data for substantially the full term of the asset or liability.

Level 3 – Assets or liabilities for which significant valuation assumptions are not readily observable in the market, in which case instruments are measured based on the best available information, which might include some internally-developed data, as well asLevel 3 – Assets or liabilities for which significant valuation assumptions are not readily observable in the market. Instruments are measured based on the best available information, which might include some internally-developed data and considers risk premiums that a market participant would require.

When determining the fair value measurements for assets and liabilities that are required or permitted to be recorded at fair value, the Bank considers the principal or most advantageous market in which it would transact and considers the assumptions that market participants would use when pricing the asset or liability. When available,possible, the Bank generally uses quoted market prices (composite prices)active and observable markets to determine fair value,price identical assets or liabilities. When identical assets and classifies such items within Level 1 of the fair value hierarchy established under FASB Statement No. 157.  If quoted market pricesliabilities are not available, fair value is based upon internally developed valuation models that use, where possible, current market-based or independently sourcedtraded in active markets, the Bank uses observable market parameters, such as interest ratesinformation for similar assets and currency rates.  Where a model is internally developedliabilities. However, certain assets and used to price a significant product, it is subject to validation and testing by independent personnel. Such models are often based on a discounted cash flow analysis.  Additionally, 19% of the Bank’s assets are accounted for at fair value, and 5% of total assetsliabilities are not actively traded in observable markets for whichand the Bank must use alternative valuation techniques to determine the fair value measurement.  The frequency of transactions, the size of the bid-ask spread and the size of the investment are factors considered in determining the liquidity of markets and the relevance of observed prices in those markets.  When there has been a significant decrease in the volume or level of activity for a financial asset or liability, the Bank uses the present value technique which considers market information to determine a representative fair value in usual market conditions.

47

Additionally, as of December 31, 2010, 11% of the Bank’s assets were accounted for at fair value using quoted market prices in an active market, and 3% of total assets were accounted for at fair value using internally developed models with significant observable market information.

The Bank’s managementManagement uses its best judgment in estimating the fair value of the Bank’s financial instruments; however, there are limitations in any estimation technique.  Therefore, for substantially all financial instruments whose fair value is not measured on a recurring basis, the fair value estimates herein are not necessarily indicative of the amounts the Bank could have realized in a sale transaction on the dates indicated. The estimated fair value amounts have been measured as of their respective year-ends, and have not been re-expressed or updated subsequent to the dates of these consolidated financial statements.  As a result, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each year-end.
The Bank holds fixed income, securities, derivative instruments, and investments in private equity. In addition, the Bank sells securities under agreements to repurchase. The Bank holds its investments, trading assets and liabilities, and repurchase agreements on the balance sheet to manage liquidity needs and interest rate risks, and for proprietary trading.

36
Fair value calculations are only provided for a limited portion of the Bank’s financial assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparison of fair value information of the Bank and other companies may not be meaningful for comparative analysis.

Under FASB Statement No. 157A description of the Bankvaluation methodologies used for assets and liabilities measured at fair value on a recurring basis, including the general classification of such assets and liabilities under the fair value hierarchy is required to take into accountpresented below:

Trading assets and liabilities and securities available-for-sale

When quoted prices are available in an active market, available-for-sale securities and trading assets and liabilities are classified in level 1 of the fair value hierarchy. If quoted market prices are not available or they are available in markets that are not active, then fair values are estimated based upon quoted prices of similar instruments, or where these are not available, by using internal valuation techniques, principally discounted cash flows models. Such securities are classified within level 2 of the fair value hierarchy.

Investment fund

The Fund is not traded in an active market and, therefore, representative market quotes are not readily available. Its fair value is adjusted on a monthly basis based on its own credit risk when measuringfinancial results, its operating performance, its liquidity and the fair value of derivative positions as well as other liabilities for which it has elected fair value accounting.  Thisits long and short investment portfolio that are quoted and traded in active markets. Such investment is recognized on the balance sheet as a reduction in the associated liability to arrive atclassified within level 2 of the fair value of the liability.  See Item 5 “Operating and Financial Review and Prospects/Treasury Division.”
Notwithstanding the level of subjectivity inherent in determining fair value, the Bank’s management believes that its estimates of fair value are adequate. The use of different models or assumptions could lead to changes in the Bank’s reported results.
See Item 18, “Financial Statements,” note 23.
Securities sold under repurchase agreements
The Bank enters into financing transactions under repurchase agreements in order to keep its liquidity at adequate levels required to finance its operations.  Through these transactions, the Bank receives cash and transfers securities to and/or places cash with counterparties as a guarantee for those financing transactions.  Repurchase agreements should be accounted for in the financial statements either as sales of securities or as secured financings.  SFAS No. 140 and related supporting literature emphasizes accounting for the form, rather than the substance of these transactions, which causes the application of SFAS No. 140 to become especially complex in periods of high volatility.
Despite the transfer of assets in repurchase agreements, they qualify as secured financings if and only if the following conditions are met: (1) the assets to be repurchased are the same or substantially the same as those transferred; (2) the transferor is able to repurchase them with the collateral received, keeping substantially the agreed terms, even in the event of default of the transferee; (3) the agreement is to repurchase or redeem them before maturity, at a fixed and determinable price; and (4) the agreement is entered into concurrently at the transfer date.  In order to be able to repurchase assets on substantially the agreed terms, even in the case of default from the counterparty, the transferor must at all times, during the contract term, have obtained cash or other collateral sufficient to fund substantially all the cost of purchasing the transferred assets from the counterparties.  The Bank uses its judgement to establish the “substantially all” criteria, which is regularly assessed.hierarchy.

Changes in fair value of derivative financial instruments resulting from transfers of securities under repurchase agreements are reported in the current year’s earnings in the net gain (loss) from trading securities line item.  Changes in fair value of sovereign bonds reacquired in repurchase transactions, that are included in the trading portfolio, are also reported in the net gain (loss) from trading securities line item.  The Bank discontinued hedge accounting for interest rate swaps that hedged securities transferred under these agreements and reports them as trading derivatives.  Changes in fair value of these interest rate swaps are recorded in the net gain (loss) from trading securities line item.
See Item 18, “Financial Statements,” note 13.
DerivativesDerivative financial instruments

Derivative instruments are recorded at their nominal amount, ("or notional amount")amount in memorandum accounts. Interest rate swapsThe accounting for changes in value of a derivative depends on whether the contract is for trading purposes or has been designated and qualifies for hedge accounting.

The valuation techniques and inputs depend on the type of derivative and the nature of the underlying instrument.  Exchange-traded derivatives that are made eithervalued using quoted prices are classified within level 1 of the fair value hierarchy.

For those derivative contracts without quoted market prices, fair value is based on internal valuation techniques using inputs that are readily observable and that can be validated by information available in a single currency or cross currency for a prescribed periodthe market.  The principal technique used to exchange a series ofvalue these instruments is the discounted cash flows model and the key inputs considered in this technique include interest rate flows, which involve fixed for floating interest payments.  The Bank also engages in some foreign exchange trades to serve customers’ transaction needs and to manage the foreign currency risk.  All such positions are hedged with an offsetting contract for the same currency.  The Bank manages and controls the risks on these foreign exchange trades by establishing counterparty credit limits by customer and by adopting policies that do not allow for open positions in the credit and investment portfolio.  Derivativeyield curves and foreign exchange instruments negotiated byrates.  These derivatives are classified within level 2 of the Bank are executed mainly over-the-counter (OTC).  These contracts are executed between two counterparties that negotiate specific agreement terms, including notional amount, exercise price and maturity.fair value hierarchy.

 
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Types of Derivative and Foreign Exchange Instruments
Interest rate swaps are contracts in which a series of interest rate flows in a single currency are exchanged over a prescribed period.  The Bank designated a portion of these derivative instruments as fair value hedges and a portion as cash flow hedges.  Cross currency interest rate swaps are contracts that generally involve the exchange of both interest and principal amounts in two different currencies.  Forward foreign exchange contracts represent an agreement to purchase or sell foreign currency at a future date at agreed-upon terms.  The Bank designates these derivative financial instruments as fair value hedges.
The fair value adjustments applied by the Bank to its derivative carrying values consist of the following items:
Creditinclude credit valuation adjustments, (CVA)or CVA, which are applied to over-the-counter derivative instruments, in which the base valuation generally discounts expected cash flows using the London Interbank Offered Rate, or LIBOR, interest rate curves.  Because not all counterparties have the same credit risk as that implied by the relevant LIBOR curve, a CVA is necessary to incorporate the market view of both counterparty credit risk and the Company’s own credit risk in the valuation.

The Bank’s CVA methodology comprises two steps. First, the exposure profile for each counterparty is determined using the terms of all individual derivative positions and a quantitative analysis to generate a series of expected cash flows at future points in time. This process identifies specific, point in time future cash flows that are subject to nonperformance risk. Second, market-based views of default probabilities derived from observed credit spreads in the credit default swap, or CDS, market are applied to the expected future cash flows determined in step one. Own-credit CVA is determined using a fair value curve consistent with the Bank’s credit rating. Generally, counterparty CVA is determined using CDS spread indices for each credit rating and tenor. For certain identified facilities where individual analysis is practicable, counterparty-specific CDS spreads are used. The CVA adjustment is designed to incorporate a market view of the credit risk inherent in the derivative portfolio. However, most derivative instruments are negotiated bilateral contracts and are not commonly transferred to third parties. Derivative instruments are normally settled contractually, or if terminated early, are terminated at a value negotiated bilaterally between the counterparties. Therefore, the CVA (both counterparty and own-credit) may not be realized upon a settlement or termination in the normal course of business. In addition, all or a portion of the credit valuation adjustments may be reversed or otherwise adjusted in future periods in the event of changes in the credit risk of Bladex or its counterparties, or changes in credit mitigants (collateral and netting agreements) associated with the derivative instruments or due to the anticipated termination of the transactions.
See Item 18, “Financial Statements,” note 21.20.

Under U.S. GAAP the Bank is required to take into account its own credit risk when measuring the fair value of derivative positions as well as other liabilities for which it has elected fair value accounting.  This is recognized on the balance sheet as a reduction in the associated liability to arrive at the fair value of the liability.

Notwithstanding the level of subjectivity inherent in determining fair value, the Bank’s Management believes that its estimates of fair value are adequate. The use of different models or assumptions could lead to changes in the Bank’s reported results.  See Item 18, “Financial Statements,” note 22.

Allowance for Credit Losses

The classification of the Bank’s credit portfolio for allowances for credit losses under U.S. GAAP is determined by risk management and approved by the Credit Policy and Risk Assessment Committee, or CPER, of the Bank’s Board through statistical modeling, internal risk ratings and estimates. Informed judgments must be made when identifying impaired loans, the probability of default, the expected loss, the value of collateral and current economic conditions. Even though the Bank’s Management considers its allowances for credit losses to be adequate, the use of different estimates and assumptions could produce different allowances for credit losses, and amendments to the allowances may be required in the future due to changes in the value of collateral, the amount of cash expected to be received or other economic events. In addition, risk management has established and maintains reserves for the probable credit losses related to the Bank’s off-balance sheet exposures. See Item 18, “Financial Statements,” note 2(n).

49
 
The estimates of the inherent risks of the Bank’s portfolio and overall recovery vary with changes in the economy, individual industries or sectors, and countries and individual borrowers’ or counterparties’ concentrations, ability, capacity and willingness to repay their obligations. The degree to which any particular assumption affects the allowance for credit losses depends on the severity of the change and its relationship to the other assumptions.  See Item 5, “Operating and Financial Review and Prospects/Operating Results/Allowance for Credit Losses.”

Impairment of Investment Securities

The Bank conducts periodic reviews of all securities with unrealized losses to evaluate whether the impairment is other-than-temporary. Impairment of securities is evaluated considering numerous factors, and their relative significance varies case-by-case. Factors considered in determining whether a loss is temporary include: (1) the length of time and extent to which the market value has been less than cost, (2) the severity of the impairment, (3) the cause of the impairment and the financial condition of the issuer, (4) activity in the market of the issuer which may indicate adverse credit conditions, and (5) the intent and ability of the Bank to retain the security for a sufficient period of time to allow for an anticipated recovery in market value.value (with respect to equity securities) and  the intent and probability of the Bank to sell the security before the recovery of its amortized cost (with respect to debt securities). If, based on the analysis, it is determined that the impairment is other-than-temporary, the security is written down to its fair value, and a loss is recognized through earnings as impairment loss on assets.  Interest accrual is suspended on securities

In cases where the Bank does not intend to sell a debt security and estimates that are in default, or on which it is likely that future interest payments will not be receivedrequired to sell the security before the recovery of its amortized cost basis, the Bank periodically estimates if it will recover the amortized cost of the security through the present value of expected cash flows. If the present value of expected cash flows is less than the amortized cost of the security, it is determined that an other-than-temporary impairment has occurred. The amount of this impairment representing credit loss is recognized through earnings and the residual of the other-than-temporary impairment related to non-credit factors is recognized in other comprehensive income (loss).

In periods subsequent to the recognition of the other-than-temporary impairment, the difference between the new amortized cost and the expected cash flows to be collected is accreted as scheduled.interest income. The present value of the expected cash flows is estimated over the life of the debt security. The other-than-temporary impairment of securities held-to maturity that has been recognized in other comprehensive income is accreted to the amortized cost of the debt security prospectively over its remaining life.

See Item 18, “Financial Statements,” note 2(i).

Recently issued accounting standards

During 2010, new accounting standards, modifications, interpretations, and updates to standards (“ASU”), applicable to the Bank, have been issued and are not in effect; or if effective, have not had an impact on the consolidated financial statements. These standards establish the following:

ASU 2010-10 – Consolidation (Topic 810)

The objective of this update is to defer the application of FAS 167 (ASU 2009-17 - Consolidations) for certain investment companies that have attributes subject to Topic 946 – Financial Services – Investment Companies.

This update is effective for financial statements beginning after November 15, 2009. This update has not had an impact on the Bank’s consolidated financial statements.

 
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ASU 2010-20 – Receivables (Topic 310)

This update requires that entities disclose information for financial receivables at disaggregated levels, roll-forward schedules of the allowance for credit losses and information regarding the credit quality of receivables, its aging, and disclosures about troubled debt restructurings.

The disclosures related to the credit quality of receivables are in effect as of December 31, 2010, and are included in “Financial Statements,” notes 7 and 8.  The disclosures about the activity of the allowance for credit losses are effective for annual periods beginning on or after December 15, 2010.  The Bank is evaluating the potential impact of the disclosures for the allowance for credit losses. Disclosure requirements about troubled debt restructurings have been temporarily delayed as prescribed by ASU 2011-01 “Deferral of the effective date of disclosures about troubled debt restructurings”.

ASU 2011-02 – Receivables (Topic 310)

The objective of this update is to provide additional guidance to creditors for evaluating whether a modification or restructuring of a receivable constitutes a troubled debt restructuring.

This update is effective for the first interim or annual period beginning on or after June 15, 2011 and should be applied retrospectively to the beginning of the annual period of adoption.  The Bank is evaluating the potential impact of the adoption of this guidance.

B.           Liquidity and Capital Resources

Liquidity

Liquidity refers to the Bank’s ability to maintain adequate cash flows to fund operations and meet obligations and other commitments on a timely basis. The Bank maintains its liquid assets mainly in demand deposits, overnight funds and time deposits with well-known international banks, as well as highly rated marketable securities.banks.  These liquid assets are adequate to cover 24-hour deposits from customers, which theoretically could be withdrawn on the same day. AtAs of December 31, 2008,2010, the Bank’s 24-hour deposits from customers (overnight deposits, demand deposit accounts and call deposits) amounted to $113$100 million, representing 10%6% of the Bank’s total deposits. The liquidity requirement resulting from these maturities is satisfied by (1) the Bank’s liquid assets, which atas of December 31, 20082010 were $826$421 million (representing 71%23% of total deposits), of which $150 million corresponds to time deposits, and (2) average dailymonthly maturities of the loan portfolio in 2010 of approximately $210$388 million.

As established by the Bank’s liquidity policy, the Bank’s liquid assets are held in the form of inter-bankinterbank deposits with reputable international banks that have A1, P1, or F1 ratings from two of the major internationally – recognized rating agencies and are located outside of the Region. These banks must have a correspondent relationship with the Bank and be approved by the Board on an annual basis.Bank. In addition, the Bank’s liquidity policy allows for investing in negotiable money market instruments, including Euro certificates of deposit, commercial paper, bankers’ acceptances and other liquid instruments with maturities of up to three years. The majority of theseThese instruments must be of investment grade quality A or better and must have a liquid secondary market.

The Bank performs daily reviews and controls on its liquidity position, including the application of a series of limits to restrict its overall liquidity risk. Specific limits have been established to control (1) cumulative maturity “gaps” between assets and liabilities, for each maturity classification presented in the Bank’s internal liquidity reports, and (2) concentrations of deposits taken from any client or economic group maturing in one day and total maximum deposits maturing in one day. The Bank has also established a minimum amount of liquidity to be maintained at the end of each day, as a percentage of total assets. As a precautionary measure, since the onset of the global financial crisis in September 2008, the Bank has consistently maintained a cash position in excess of the minimum required.

 
In 2007, the
51

The Bank updated itsfollows a Contingent Liquidity Plan, which provides for regular stress-testing of its liquidity position. The plan contemplates the regular monitoring of several quantified internal and external reference points (such as deposit level, quality of assets, Emerging Markets Bonds Index Plus, (“EMBI+”), cost of funds and market interest rates), which in cases of high volatility would trigger implementation of a series of precautionary measures to reinforce the Bank’s liquidity position.  In the Bank’s opinion, its working capital is sufficient for the Bank’s present requirements.

The following table shows the Bank’s liquid assets, which consist of short-term funds deposited with other banks, broken down by principal geographic area atas of December 31 of each year:

  
As of December 31,
 
  
2010
  
2009
  
2008
 
  (in $ million) 
Europe $60  $60  $135 
United States  287   219   548 
Other O.E.C.D.  74   123   142 
Total $421  $402  $826 
  
At December 31,
 
  
2008
  
2007
  
2006
 
  (in $ million) 
Europe $135  $298  $264 
United States  548   17   81 
Other O.E.C.D.  142   81   54 
Total $826  $396  $398 

While the Bank’s liabilities generally mature over somewhat shorter periods than its assets, the associated liquidity risk is diminished by the short-term nature of the loan portfolio, as the Bank is engaged primarily in the financing of foreign trade. AtAs of December 31, 2008,2010, the average original term to maturity of the Bank’s short-term loan portfolio maturing up to one year based on original term was approximately 258212 days.

Medium-term assets (maturing beyond one year)year based on original term) totaled $1.6 billion$2,200 million as of December 31, 2008.2010. Of that amount, $593$309 million was comprised of liquid bonds held primarily in the Bank’s securities available-for-sale portfolio ($258 million) and trading assets and securities available-for-sale portfolio.($50 million).  The remaining $1.0 billion$1,891 million in medium-term assets represented commercial loans.  These medium-term loans and $20 million in securities held-to-maturity.

Credit ratings

The cost and availability of financing for the Bank are fundedinfluenced by medium-term borrowings (68%)its credit ratings, among other factors.  The credit ratings of the Bank as of December 31, 2010, were as follows:

As of December 31,
Standard
& Poor’s
Moody’sFitch
Short -TermA-2P-2F2
Long-TermBBBBaa2BBB
Rating OutlookStableStableStable

The credit ratings from Moody’s Investor Service, Inc., or Moody’s have been unchanged since December 19, 2007, and on February 28, 2011, Moody’s confirmed its ratings of the Bank.  The credit ratings from Fitch Ratings Ltd., or Fitch, have been unchanged since July 7, 2008, and on August 3, 2010, Fitch confirmed its credit ratings of the Bank.  The credit ratings from Standard & Poor’s have been unchanged since May 13, 2008, and on April 14, 2011, Standard & Poor’s confirmed its ratings of the Bank.

Critical factors in maintaining the Bank’s equity (32%).high credit ratings include a substantial expansion in core earnings,  the maintenance of a high-quality balance sheet, and strong tier one capitalization.    Although the Bank closely monitors and manages factors influencing its credit ratings, there is no assurance that such ratings will not be lowered in the future.

 
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Funding Sources

The Bank’s principal sources of funds are deposits, borrowed funds and floating-floating and fixed-ratefixed rate placements. While these sources are expected to continue to provideproviding the majority of the funds neededrequired by the Bank in the future, the exact composition of the Bank’s funding sources, as well as the possible use of other sources of funds, will depend upon future economic and market conditions. The following table shows the Bank’s funding distribution atas of December 31 of each year:

  
As of December 31,
 
  
2010
  
2009
  
2008
 
     (in percentages)    
Interbank deposits  41.5%  39.7%  30.9%
Securities sold under repurchase agreements  6.0%  2.3%  12.5%
Borrowings and debts  49.5%  54.2%  51.4%
Other liabilities.  2.9%  3.9%  5.2%
Total liabilities  100.0%  100.0%  100.0%
 
Short- and medium-term borrowings and placements are important funding sources for the Bank’s loan portfolio because they permit the Bank to diversify its funding sources outside the Region, and because the Bank uses these borrowings and placements, which generally have longer maturities than deposits, to manage its asset and liability positions. See Item 5 “Asset/Liability Management.”
  
At December 31,
 
  
2008
  
2007
  
2006
 
     (in percentages)    
Inter-bank deposits  30.9%  35.8%  31.6%
Securities sold under repurchase agreements  12.5%  6.9%  13.1%
Borrowings and debts  51.4%  54.6%  51.4%
Other liabilities.  5.2%  2.7%  3.8%
Total liabilities  100.0%  100.0%  100.0%

Deposits

The Bank obtains deposits principally from central and commercial banks in the Region. AtAs of December 31, 2008,2010, approximately 61%65% of the deposits held by the Bank were deposits made by central banks of countries in the Region.Region and 22% of deposits held by the Bank were made by state owned banks. Many of these banks deposit a portion of their dollar reserves with the Bank. The average term remaining to maturity of deposits from central banks of countries in the Region atas of December 31, 2010, 2009, and 2008 and 2007 was 3153 days, 57 days, and 3631 days, respectively. The bulk of the Bank’s other deposits is obtained primarily from commercial banks located in the Region. AtAs of December 31, 2008,2010, deposits from the Bank’s five largest depositors, of which threefour were central banks in the Region, represented 61%55% of the Bank’s total deposits. See Item 18, “Financial Statements,” note 12.11.

The following table showsanalyzes the Bank’s deposits by country atas of December 31 of each year:

 At December 31,  
As of December 31,
 
 
2008
  
2007
  
2006
  
2010
  
2009
  
2008
 
    (in $ million)        (in $ million)    
Argentina $90  $75  $91  $78  $87  $90 
Bahamas  2   0   0 
Barbados  14   28  5   5   21   14 
Brazil  277   322  400   359   266   277 
Cayman Island  14  33  27   41   105   14 
Colombia  38   154  47   7   55   38 
Costa Rica  0   10  7   12   9   0 
Dominican Republic  5   21  27   0   10   5 
Ecuador  205   70  99   437   234   205 
El Salvador  28   26  27   18   28   28 
Finland  0   10  10 
Guatemala  0   0  1   60   0   0 
Haiti  3   3  3   3   3   3 
Honduras  56   27  14   99   151   56 
Jamaica  2   2  2   1   1   2 
Japan  0   1   0 
Mexico  3   332  35   50   0   3 
The Netherlands  26   21  18   0   0   26 
Nicaragua  30   11  2   50   50   30 
Panama  36   80  48   147   50   36 
Paraguay  200   0   0 
Peru  103   41  43   31   2   103 
Trinidad and Tobago  20   20  10   19   20   20 
Uruguay  1   0  0   0   0   1 
United Kingdom  0   40  0   50   0   0 
United States  0   20  19   15   0   0 
Venezuela  219   117   121   137   162   219 
Total $1,169  $1,462  $1,056  $1,821  $1,256  $1,169 

 
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Securities Sold Under Repurchase Agreements and Short-Term Borrowings

The Bank enters into repurchase agreements, (“repos”)repos, with international banks, utilizing its investment securities portfolio as collateral to secure cost-effective funding. Repurchase agreements are accounted for in the financial statements either as sales of securities or as secured financings.financings in the financial statements. As of December 31, 2008, repos2010, securities sold under repurchase agreements amounted to $474$265 million, an increase of $191$194 million from $283$71 million as of December 31, 2007.2009.  See Item 18, “Financial Statements,” notes 13 and 14.note 12.

The Bank’s short-term borrowings consist of borrowings from banks that have maturities of up to 365 days. These borrowings are made available to the Bank on an uncommitted basis for the financing of trade-related loans. Approximately 35 European and North American and 5four Asian banks provide these short-term borrowings to the Bank.

As of December 31, 2008,2010, short-term borrowings amounted to $739$1,095 million, a decreasean increase of $483$767 million from the amount as of December 31, 2007.2009. The decreaseincrease in short-term borrowings was the result of reducedincreased levels of liquidity in international markets, and reduced availability ofmore demand for credit.  The average term remaining to maturity of short-term borrowings atas of December 31, 20082010 was approximately 86135 days.  See Item 18, “Financial Statements,” note 14.13.

The following table presents information regarding the amounts outstanding under, and interest rates on, the Bank’s short-term borrowings and securities sold under repurchase agreements at the dates and during the periods indicated:indicated.

  
As of and for the Year Ended December 31,
 
  
2010
  
2009
  
2008
 
  (in $ million, except percentages) 
Short-term borrowings and securities sold under repurchase agreements         
Advances from banks $1,095  $328  $739 
Securities sold under repurchase agreements  265   71   474 
Total short-term borrowings and securities sold under repurchase agreements $1,360  $399  $1,213 
             
Maximum amount outstanding at any month-end $1,360  $1,094  $1,783 
Amount outstanding at year-end $1,360  $399  $1,213 
Average amount outstanding $724  $764  $1,629 
Weighted average interest rate on average amount outstanding  1.09%  2.77%  3.82%
Weighted average interest rate on amount outstanding at year end  0.58%  1.61%  3.77%
  
At and for the Year Ended December 31,
 
  
2008
  
2007
  
2006
 
  (in $ million, except percentages) 
Short-term borrowings and securities sold under repurchase agreements         
Advances from banks $739  $1,222  $1,147 
Discounted acceptances  0   0   10 
Securities sold under repurchase agreements  474   283   438 
Total short-term borrowings and securities sold under repurchase agreements $1,213  $1,505  $1,596 
             
Maximum amount outstanding at any month-end $1,783  $1,505  $1,634 
Amount outstanding at year-end $1,213  $1,505  $1,596 
Average amount outstanding $1,629  $1,272  $1,042 
Weighted average interest rate on average amount outstanding  3.82%  5.45%  5.21%
Weighted average interest rate on amount outstanding at year end  5.13%  5.34%  5.51%

Borrowings and Long-Term Debt

Borrowings consist of long termlong-term and syndicated loans obtained from international banks. Debt instruments consist of notes issued under the Bank’s Euro Medium Term Note, or EMTN, Program and a local – currency bond issuance in Latin America.

 
The interest
54

Interest rates on most long-term borrowings are adjusted quarterly or semi-annually based on short-term LIBOR rates plus a credit spread.  The credit spread which is based ondefined according to several factors, including credit ratings, risk perception, and the remaining term to maturity. The Bank uses these funds to finance its medium-term and long-term loan portfolio. AtAs of December 31, 2008,2010, the average term remaining to maturity of the Bank’s medium and long-term debt was 2.31.5 years.
The Bank’s EMTN Program has a maximum aggregate limit of $2.3 billion.  Notes issued under the EMTN Program are placed in the Euro (Regulation S), or 144A markets and are general obligations of the Bank.  The EMTN Program may be used to issue notes with maturities ranging from 90 days up to a maximum of 30 years, at fixed or floating interest rates and in various currencies.  As of December 31, 2008, the total amount outstanding under the EMTN Program with medium-term maturities was $5 million.

During 2008,2009, the Bank finalizedentered into two syndicated loans with Asian lenders. The first syndicated loan, in the amount of $100 million, has a $200 million five-year bilateraltwo-year term loan facility with theand was structured and placed by Mizuho Corporate Bank, Ltd. and China Development Bank and contracted a $150Corporation. The second syndicated loan, in the amount of $113 million, two-year syndicated term loan facility, jointly lead-arranged by Santander Investment Securities and Standard Chartered Bank.

41

In the third quarter of 2007, the Bank established a program for bond issuances in Peru.  The program has a maximum aggregate limit of the equivalent of $300 million.  Bonds issued under the program are denominatedtwo-year term and was structured by Mizuho Corporate Bank, Ltd. These loans were Bladex’s first syndicated loans placed in Peruvian Nuevo Soles (PEN), may be issued in several series with different maturities and interest rate structures, will be offered exclusivelyAsia were intended to institutional investors domiciled in Peru, and will rank pari-passu with other debt obligations of the Bank.  The funds raised from the program are used to financediversify the Bank’s credit portfoliofunding sources and to coverstrengthen its general long-term financial needs.  The first placement of bonds underpresence in the program consisted of bonds with a maturity of seven years and a fixed rate of interest, and was subsequently swapped into U.S. dollars through a cross-currency swap.  As of December 31, 2008, the total amount outstanding under the program was PEN 123,000,000 (equivalent to $39 million).Asian markets.

As part of its interest rate and currency risk management, the Bank may from time to time enter into foreign exchange forwards, cross-currency contracts and interest rate swaps to hedge the interest and/or currency risk associated with a portion of the notes issued under its various programs.

The following table presents information regarding the amounts outstanding under, and interest rates on, the Bank’s borrowings and long-term debt at the dates and during the periods indicated.  See Item 18, “Financial Statements,” notes 15, 2114, 20 and Item 11, “Quantitative and Qualitative Disclosure About Market Risk.”  See Item 18, Consolidated Balance Sheet as of December 31, 2010 and 2009.

  
As of and for the Year Ended December 31,
 
  
2010
  
2009
  
2008
 
  (in $ million, except percentages) 
Borrowings and long-term debt         
Amount outstanding at year-end $1,075  $1,390  $1,205 
             
Maximum amount outstanding at any month-end $1,400  $1,390  $1,330 
Average amount outstanding $1,241  $1,208  $1,182 
Weighted average interest rate on average amount outstanding  2.07%  3.07%  4.65%
Weighted average interest rate on amount outstanding at year end  2.10%  2.07%  4.58%

Cost and Maturity Profile of Borrowed Funds and Floating-Floating-Rate and Fixed-Rate Placements

The following table sets forth certain information regarding the weighted average cost and the remaining maturities of the Bank’s borrowed funds and floating and fixed-rate placements at(including securities sold under repurchase agreements) as of December 31, 2008:2010:

55

  
Amount
  
Weighted Average Cost
 
  (in $ million, except percentage) 
Short-term borrowings and Securities sold under repurchase agreements at fixed interest rate      
Due in 0 to 30 days  251   0.99%
Due in 31 to 90 days  490   1.00%
Due in 91 to 180 days  335   1.06%
Due in 181 to 365 days  189   1.45%
Total $1,265   1.08%
Short-term borrowings at floating interest rate        
Due in 91 to 180 days  10   0.85%
Due in 181 to 365 days  85   1.06%
Total $95   1.04%
Medium and long-term borrowings at fixed interest rate        
Due in 0 to 30 days  5   6.15%
Due in 31 to 90 days  6   5.65%
Due in 91 to 180 days  5   8.20%
Due in 181 to 365 days  4   8.20%
Due in 1 through 6 years  6   8.52%
Total $27   7.31%
Medium and long-term borrowings at floating interest rate        
Due in 31 to 90 days  3   0.54%
Due in 91 to 180 days  14   0.68%
Due in 181 to 365 days  351   1.64%
Due in 1 through 6 years  636   1.87%
Total $1,004   1.77%
Medium and long-term fixed-rate placements        
Due in 1 through 6 years  44   6.50%
Total $44   6.50%
 
The lines granted to Bladex are advised, they are not committed.  The utilization of lines from correspondent banks may contain restrictions such as the assets to be financed should be trade related.

Cash flows

For the years ended December 31, 2010, 2009, and 2008, cash and due from banks increased $2.6 million, decreased $8.5 million, and increased $10.9 million, respectively.  The following discussion highlights the major activities and transactions that affected the Bank’s cash flows during 2010, 2009, and 2008.

Cash flows from operating activities

The Bank’s operating assets and liabilities reflect the Bank’s capital markets and lending activities, including the origination of loans and the purchase of securities such as the Bank’s portfolio of securities available-for-sale.  Operating assets and liabilities can vary significantly in the normal course of business due to the amount and timing of cash flows, which are affected by client-driven activities, market conditions, and trading strategies.  Management believes cash flows from operations, adequate reserve coverage levels, and the Bank’s ability to generate cash through short and long-term borrowings are sufficient to fund its operating liquidity needs.

For the year ended December 31, 2010, net cash provided by operating activities was $69.0 million.  Net cash was provided by net income, net decrease in the investment fund portfolio by $30.3 million, and a $5.5 million increase in accrued interest receivable mainly due to increase in the credit portfolio.  Net cash was provided by net income and from adjustments for non-cash items such as the provision for credit losses, depreciation and amortization and stock-based compensation.

For the years ended December 31, 2009 and 2008, net cash provided by operating activities was $17.5 million and $50.7 million, respectively.  In 2009, the net decline in trading liabilities and accrued interest payable was a result of the impact of the challenging environment that existed in 2008, and continued into the first half of 2009.  In 2009 and 2008, net cash generated from operating activities was lower than net income, largely as a result of net increases in the balance of the Fund in each year.

56
  
Amount
  
Weighted Average Cost
 
  (in $ million)    
Short-term borrowings at fixed interest rate      
Due in 0 to 30 days $295   3.91 
Due in 31 to 90 days  657   3.82 
Due in 91 to 180 days  231   3.80 
Due in 181 to 365 days  109   4.62 
Total $1,291   3.90%
Short-term borrowings at floating interest rate        
Due in 31 to 90 days  3   3.78 
Due in 91 to 180 days  32   2.94 
Due in 181 to 365 days  97   3.50 
Total $133   3.37%
Medium and long-term borrowings at fixed interest rate        
Due in 1 through 6 years $61   6.911 
Total $61   6.91%
Medium and long-term borrowings at floating interest rate        
Due in 1 through 6 years  889   4.39 
Total $889   4.39%
Medium and long-term fixed-rate placements        
Due in 1 through 6 years $39   6.50 
Total $39   6.50%
Medium and long-term floating-rate placements        
Due in 1 through 6 years $5   4.75 
Total $5   4.75%

Cash flows from investing activities

The Bank’s investing activities predominantly include loans originated by the Bank, as well as the portfolio of securities available-for-sale and securities held-to-maturity.  For the year ended December 31, 2010, net cash of $1,226 million was used in investing activities.  This resulted primarily from [a net increase in loans originated by the Bank due to improved conditions in the financial markets and increased demand for the Bank’s lending products.

For the year ended December 31, 2009, net cash of $104.8 million was provided by investing activities, primarily from proceeds from the redemption and sale of securities available-for-sale and from the maturity of securities held-to-maturity.  Offsetting these cash proceeds was a net increase in loans originated by the Bank, resulting primarily from the recovery of foreign trade in the Region and the resulting increase in demand for the Bank’s lending products.

For the year ended December 31, 2008, net cash of $795.5 million was provided by investing activities, primarily resulting from the net decrease in loans originated by the Bank as a result of the outbreak of a liquidity and credit crisis in the financial markets near the end of 2008, and a net increase in the securities available-for-sale portfolio.

Cash flows from financing activities

The Bank’s financing activities primarily reflect cash flows related to raising deposits, short-term borrowings and securities sold under repurchase agreements, and proceeds from, and repayments of, borrowings and long-term debt.  In 2010, net cash provided by financing activities was $1,175 million.  This resulted from an increase in deposits and short-term borrowings and securities sold under repurchase agreements.

In 2009, net cash used in financing activities was -$545.8 million; this reflected primarily a net decrease in short-term borrowings and securities sold under repurchase agreements, and the repayments of borrowings and long-term debt, and was partially offset by proceeds from borrowings and long-term debt, and a net increase in due to depositors.
 
1Represent fixed-rate interest-bearing liabilities bookedIn 2008, net cash used in local currencyfinancing activities was -$416.7 million, used primarily to fund fixed-rate interest-earning assetsrepay borrowings and long-term debt and reflecting in addition a net decrease in due to depositors, a net decrease in short-term borrowings and securities sold under repurchase agreements.  The effect of these activities was partially offset by the same local currency.proceeds from borrowings and long-term debt.

Asset/Liability Management

The Bank seeks to manage its assets and liabilities to reduce the potential adverse impact on net interest income that could result from interest rate changes. The Bank controls interest rate risk through systematic monitoring of maturity mismatches. The Bank’s investment decision-making takes into account not only the rates of return and the respective underlying degrees of risk, but also liquidity requirements, including minimum cash reserves, withdrawal and maturity of deposits and additional demand for funds. For any given period, a matched pricing structure exists when an equal amount of assets and liabilities are repriced. An excess of assets or liabilities over these matched items results in a “gap” or “mismatch,” as shown in the table under “Interest Rate Sensitivity” below. A negative gap denotes liability sensitivity and normally means that a decline in interest rates would have a positive effect on net interest income, while an increase in interest rates would have a negative effect on net interest income. Substantially allMost of the Bank’s assets and most of its liabilities are denominated in U.S. dollars and, therefore, the Bank has no material foreign exchange risk. Non-dollar assets or liabilities are generally converted to U.S. dollars through the use of derivatives, which, though economically perfectly hedged, might give rise to some accounting volatility.

 
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Interest Rate Sensitivity

The following table presents the projected maturities and interest rate adjustment periods of the Bank’s assets, liabilities and stockholders’ equity based upon the contractual maturities and adjustment dates atas of December 31, 2008.2010.  The Bank’s interest-earning assets and interest-bearing liabilities and the related interest rate sensitivity gap shown in the following table may not reflect positions in subsequent periods:periods.
The Bank actively uses interest rate swaps as part of its interest rate risk management. Interest rate swaps are contracted either in a single currency or cross-currency for a prescribed period in order to exchange a series of interest payment flows, which generally involve swapping fixed for floating-rate.

See Item 11, “Quantitative and Qualitative Disclosure About Market Risk”.
 
  
Total
  
0-30 Days
  
31-90 Days
  
91-180
Days
  
181-365 Days
  
More than
365 Days
  
Non-
Interest
Sensitive
 
  (in $ million, except percentages) 
Interest-earning assets                     
Cash, due from banks &  interest-bearing deposits with banks  437   437   0   0   0   0   0 
Trading assets  50   0   5   45   0   0   0 
Securities available-for-sale  353   133   188   32   0   0   0 
Securities held to maturity  33   0   13   5   16   0   0 
Investment fund  167   0   0   0   0   0   167 
Loans, net  3,981   764   1,798   1,188   218   96   (83)
Total interest-earning assets  5,022   1,334   2,004   1,269   233   96   86 
Non-interest earning assets  67   0   0   0   0   0   67 
Other assets  11   0   0   0   0   0   11 
Total assets  5,100   1,334   2,004   1,269   233   96   164 
Interest-bearing liabilities                            
Deposits                            
Demand  100   100   0   0   0   0   0 
Time  1,721   1,173   287   143   117   0   0 
Trading liabilities  4   0   0   0   0   4   0 
Securities sold under repurchase agreements  265   118   147   0   0   0   0 
Short-term borrowings  1,095   133   438   335   189   0   0 
Borrowings and long-term debt  1,075   74   698   238   9   56   0 
Total interest-bearing liabilities  4,260   1,599   1,571   716   315   60   0 
Non-interest-bearing liabilities  123   0   0   0   0   0   123 
Total liabilities  4,383   1,599   1,571   716   315   60   123 
Redeemable noncontrolling interest in the investment fund  19   0   0   0   0   0   19 
Stockholders’ equity  698   0   0   0   0   0   698 
Total liabilities and stockholders’ equity  5,100   1,599   1,571   716   315   60   840 
Interest rate sensitivity gap      (265)  433   553   (82)  37   (676)
Cumulative interest rate sensitivity gap      (265)  168   721   640   676     
Cumulative gap as a % of total interest-earning assets      -5%  3%  14%  13%  13%    
  
Total
  
0-30 Days
  
31-90 Days
  
91-180 Days
  
181-365 Days
  
More than
365 Days
  
Non-Interest
Sensitive
 
  (in $ million, except percentages) 
Interest-earning assets                     
Cash and due from banks $536   536   0   0   0   0   0 
Interest-bearing deposits with banks  365   365   0   0   0   0   0 
Trading assets  45   0   0   0   0   45   0 
Securities available-for-sale  608   35   91   15   0   467   0 
Securities held-to-maturity  28   0   28   0   0   0   0 
Investment fund  151   0   0   0   0   0   151 
Loans, net $2,559   540   1,189   558   197   135   (59)
Total interest-earning assets  4,292   1,475   1,308   573   197   647   91 
Non-interest earning assets  63   0   0   0   0   0   63 
Other assets  7   0   0   0   0   0   7 
Total assets $4,363  $1,475  $1,308  $573  $197  $647  $162 
Interest-bearing liabilities                            
Deposits                            
Demand  113   113   0   0   0   0   0 
Time  1,056   766   262   27   0   0   0 
Trading liabilities  14   0   0   0   0   14   0 
Securities sold under repurchase agreements  474   84   292   99   0   0   0 
Short-term borrowings  739   187   342   125   85   0   0 
Borrowings and long-term debt  1,205   190   775   65   32   143   0 
Total interest-bearing liabilities  3,601   1,340   1,671   316   117   157   0 
Non-interest-bearing liabilities  183   0   0   0   0   0   183 
Total liabilities  3,784   1,340   1,671   316   117   157   183 
Minority interest  5   0   0   0   0   0   5 
Stockholders’ equity  574   0   0   0   0   0   574 
Total liabilities and stockholders’ equity $4,363  $1,340  $1,671  $316  $117  $157   762 
Interest rate sensitivity gap      135   (363)  257   81   490   (600)
Cumulative interest rate sensitivity gap      135   (229)  29   109   599     
Cumulative gap as a % of total interest-earning assets      3%  -5%  1%  3%  14%    

The Bank’s interest rate risk is the exposure of earnings (current and potential) and capital to adverse changes in interest rates and is managed by attempting to match the term and repricing characteristics of the Bank’s interest rate sensitive assets and liabilities. The Bank’s interest rate risk typically arises from the Bank’s liability sensitive short-term position, which means that the Bank’s interest-bearing liabilities reprice more quickly than the Bank’s interest-earning assets. As a result, there is a potential adverse impact on the Bank’s net interest income from interest rate increases. The Bank’s policy with respect to interest rate risk provides that the Bank establishesestablish limits with regards to:  (1) changes in net interest income due to a potential impact, given certain movements in interest rates, (2) changes in the amount of available equity funds of the Bank, given a one basis point movement in interest rates, and (3) changes in value-at-risk (“VaR”) of the Bank’s portfolio, based on statistical analysis of the historical volatility of the Bank’s portfolio.  The Bank also has used interest rate swaps as part of its interest rate risk management.  Interest rate swaps are made either in a single currency or cross-currency for a prescribed period in order to exchange a series of interest rate flows, which involve fixed for floating-rate interest payments or vice versa.

 
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As part of its normal Treasury operation, Bladex is exploring new markets for short and medium term financing, anticipating funding needs related to the projected Bank's growth.  These funding sources should come from the international correspondent banks and from new financings obtained in the capital markets.

Stockholders’ Equity

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

  As of December 31, 
  2010  2009  2008 
  (in $ thousand) 
Common stock $279,980  $279,980  $279,980 
Additional paid-in capital in excess of assigned value of common stock  133,815   134,820   135,577 
Capital reserves  95,210   95,210   95,210 
Retained earnings  320,153   301,389   268,435 
Accumulated other comprehensive loss  (6,441)  (6,160)  (72,115)
Treasury stock  (125,667)  (129,602)  (132,763)
Total stockholders’ equity $697,050  $675,637  $574,324 
  
At December 31,
 
  
2008
  
2007
 ��
2006
 
  (in $ thousand) 
Common stock $279,980  $279,980  $279,980 
Capital surplus  135,577   135,142   134,945 
Capital reserves  95,210   95,210   95,210 
Retained earnings  268,435   245,348   205,200 
Accumulated other comprehensive income (loss)  (72,115)  (9,641)  3,328 
Treasury stock  (132,763)  (133,788)  (134,768)
Total stockholders’ equity $574,324  $612,251  $583,896 

As of December 31, 2010, stockholders’ equity amounted $697 million compared to $676 million as of December 31, 2009.  The $38$21 million decrease in stockholder’s equityincrease during 2008the year was the net result of:of increased retained earnings as a result to net income attributable to Bladex of $42 million, partially offset by $23 million declared as cash dividends, and a $4 million net variance in treasury stock mostly due to compensation cost and the exercised of stock based compensation plans.

The $101 million increase in stockholders’ equity during 2009 was mainly the net result of:
 ·Deterioration inReduction of accumulated other comprehensive incomeloss by $62$66 million, mostly related to net unrealized lossesgains from the investment securities portfolio (available-for-sale) due to mark-to-market;mark-to-market adjustments; and
 ·Increased retained earnings due to the Bank’s net income attributable to Bladex of $55 million, partially offset by a total of $32$22 million declared and paid in dividends paid to common stockholders.cash dividends.
The $28 million increase in stockholders’ equity during 2007 was the net result of:
·Increased retained earnings due to the Bank’s net income of $72 million, partially offset by a total of $32 million in dividends paid to common stockholders; and
·Decreased accumulated other comprehensive income related to derivative hedging instruments, due to the lowering of interest rates by the U.S. Federal Reserve Board in response to the global financial crisis.  This decrease was not offset by the investment securities portfolio, which is covered by interest rate swaps, due to an increase in credit spreads as a result of the liquidity shortgage in the market.

Capital reserves are established by the Bank from retained earnings and are a form of retained earnings required by Panamanian banking regulations.earnings. Capital reserves are intended to strengthen the Bank’s capital position. Reductions of these reserves, including for purposes such as the payment of dividends, require the approval of the Board and Panamanian banking authorities. Panamanian banking regulations do not require the Bank to maintain any particular level of capital reserves.

AtAs of December 31, 2008,2010, the capital ratio of total stockholders’ equity to total assets was 13.16%.  Although the Bank is not subject to the capital adequacy requirements of the U.S. Federal Reserve Board, if the U.S. Federal Reserve Board’s risk-based capital guidelines applied to the Bank, the Bank's ratios would have exceeded all applicable capital adequacy requirements.  At December 31, 2008,13.7% and the Bank’s Tier 1 and total capital ratios calculated according to theseBasel I capital adequacy guidelines were 20.4%20.5% and 21.6%21.8%, respectively. The Banking Law (as defined under Item 4, “Information onBank is evaluating the Company/Business Overview/Regulation”), which became effective on August 25, 2008, requires the Bank to maintain a minimum total capital to risk-weighted asset ratioimpact of 8%.  AtBasel II and Basel III regulations.  As of December 31, 2008,2010, the Bank’s total capital to risk-weighted asset ratio, calculated according to the guidelines of the Banking Law, was 19%16.4%.  See Item 4, “Information on the Company/Company / Business Overview/Regulation/Panamanian Law.Overview / Regulation.”

C.           Research and Development, Patents and Licenses, etc.

Not applicable.

 
59

D.           Trend Information

The following are the most important trends, uncertainties and events that are likely to materially affect the Bank or that would cause the financial information disclosed herein to not to be indicative of the Bank’s future operating results or financial condition:

 ·The effect of changes in global economic conditions, including prices of oil and other commodities, prices, the U.S. dollar exchange rate, interest rates, and slower economic growth in developed countries and trading partners, and the effect that these changes may have on the economic condition of countries in the Region, including the Region’s foreign trade growth, and, therefore, onthe growth of the Bank’s capacity to grow its trade financing business.business;

44

 ·The effect that an economic slowdown or political events in the Region may have on the Bank’s asset quality, results of operations and growth prospects.prospects;
 ·Risk perception in the Bank’s markets in which the Bank operates, increased competition, and U.S. dollar liquidity, which could affect spreads over the cost of funds on the Bank’s loan portfolio, and in turn impact the Bank’s net interest spreads.spreads; and
 ·A continued downturn in the capital markets, or a continued downturn in investor confidence, which could affect the Bank’s access to funding or increase its cost of funding.

Year 2010

The Bank’s performance during 2010 was characterized by solid growth in the commercial activity of the Bank, improving the scope and diversification of the Bank’s business against background of a strong recovery in Latin America and of the increase in trade flows in the Region.  The increase in commercial activity in the Region resulted in part from the improvement in the risk profile of countries in the Region, reflected by a general reduction of fiscal deficits, relative price stability and strengthened foreign reserves.  As a result, the Bank’s commercial portfolio as of December 31, 2010 amounted to $4,446 million, compared to $3,110 million as of December 31, 2009, resulting in a $1,336 million or 43% increase during the year.  Market interest rates such as 6M LIBOR decreased from an average of 112 bps in 2009 to 52 bps in 2010, leading to a compression of lending spreads.  Net interest margin improved to 1.70% for 2010 from 1.62% for 2009, as a result of lower costs of funds.  Funding costs decreased to 126 bps in 2010 from 238 bps in 2009, due to increased average balances of deposits, borrowings and long-term debt.  Liquidity balances remained high, amounting to $421 million as of December 31, 2010.  The Bank’s net income for the year 2010 resulted from the strong performance of the Commercial Division, offset by the losses from the Asset Management Unit and Treasury Division.

Year 2009

Specific trends that affected the Bank’s performance during 2009 included the pronounced decrease in market rates such as 6M LIBOR which saw a decrease from an average 306 bps in 2008 to an average of 112 bps in 2009, leading to a compression of lending spreads.  An increase in funding margins from an average of 35 bps in 2008 to an average of 70 bps in 2009 as liquidity and access to capital markets became limited due to the repercussions of the financial crisis, also affected the Bank’s lending spreads, particularly during the first half of 2009.  During this period, the Bank maintained higher than normal levels of liquidity with adverse effect on margins.  These effects were partially offset by an increase in lending margins from an average of 168 bps in 2008 to an average of 262 bps in 2009, as the Bank was able to pass on higher funding costs.  The Bank also benefited from an improvement in market valuations in 2009 compared to the previous year which impacted favorably the results of the Bank’s Asset Management Unit and Treasury Division.

In addition, see Item 3, “Key Information/Risk Factors,” for a discussion of the risks the Bank faces, which could affect the Bank’s business, results of operations and/or financial condition.

 
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E.           Off-Balance Sheet Arrangements

In the ordinary course of business, in order to meet the financing needs of its customers, the Bank enters into arrangements that are not recognized on its balance sheet. AtAs of December 31, 2008,2010, the Bank’s off-balance sheet arrangements included letters of credit, stand-by letters of credit, guarantees (commercial risk and country risk), credit derivatives and credit commitments (including unused commitments and other commitments). These arrangements are kept off-balance sheet as long as the Bank does not incur an obligation relating to them or itself become entitled to an asset. ASuch off-balance sheet arrangements are exposed to credit risk. Therefore, a reserve for losses on off-balance sheet credit risk is recognized on the balance sheet, with the resulting lossprovision recorded in the income statement.  As of December 31, 2010, total reserves for losses on off-balance sheet amounted to $13 million, compared to $27 million as of December 31, 2009.  See Item 18, “Financial Statements,” note 19.8 and 18.

FeesAs of December 31, 2010, the total off-balance sheet portfolio amounted $381 million, compared to $332 million as of December 31, 2009.

For the year ended December 31, 2010, fees and commissionscommission income from off-balance sheet arrangements amounted to $7 million in 2008, compared to $6 million in 2007.$10 million.  For additional information, see Item“Item 5, “Operating and Financial Review and Prospects/Operating Results/Fees and Commissions, Net.net.”  In 2008, the Bank was committed to invest $1.4 million in 2008, compared to $1.5 million in 2007, in a private investment fund with the main objective of generating long-term capital appreciation through the purchase of shares and convertible debt, mainly from Mexican manufacturing corporations or foreign corporations trying to establish or expand their operations in Mexico.  See Item 18, “Financial Statements,” note 11.

No obligations have arisen from variable interest entities as defined in Financial Interpretation (“FIN”) 46R, “Consolidation of Variable Interest Entities - Reviewed,”U.S. GAAP, including indemnification agreements with the Bank’s executive officers and directors. The Bank provides indemnity insurance pursuant to which directors and officers are indemnified or insured against liability or loss under certain circumstances, including liabilities or related losses arising under the Securities Act and the Exchange Act.

F.           Contractual Obligations and Commercial Commitments

The following tables set forth information regarding the Bank’s contractual obligations and commercial commitments as of December 31, 2008:2010.

  Payments Due by Period 
Contractual Obligations (1)
 Total  
Less than 1
year
  
1 – 3
years
  3 – 5 years  
More
than 5
years
 
  (in $ million) 
Deposits $1,821  $1,821  $0  $0  $0 
Trading liabilities  4   0   4   0   0 
Securities sold under repurchase agreement  265   265   0   0   0 
Short-term borrowings  1,095   1,095   0   0   0 
Borrowings and long-term debt (2)
  1,075   389   686   0   0 
Accrued interest payable  10   10   0   0   0 
Leasehold obligations  2   1   1   0   0 
Total contractual obligations $4,272  $3,581  $691  $0  $0 
  Payments Due by Period 
Contractual Obligations 
Total
  
Less than 1 year
  
1 – 3 years
  
3 – 5 years
  
More than 5 years
 
  (in $ million) 
Deposits $1,169  $1,169  $0  $0  $0 
Trading liabilities  14   14   0   0   0 
Securities sold under repurchase agreement  474   474   0   0   0 
Short-term borrowings  739   739   0   0   0 
Borrowings and long-term debt 1
  1,205   210   498   458   39 
Accrued interest payable  33   33   0   0   0 
Commitment to repurchase securities sold under repurchase agreements  138   138   0   0   0 
Lease obligations  3   1   1   1   0 
Total contractual obligations $3,775  $2,778  $499  $458  $39 
   
  Amount of Commitment Expiration by Period
Other Commercial Commitments 
Total
  
Less than 1 year
  
1 – 3 years
  
3 – 5 years
  
More than 5 years
  (in $ million)
Letters of credit $137  $137  $0  $0  $0 
Stand-by letters of credit  41   41   0   0   0 
Guarantees  179   144   35   0   0 
Credit derivative  3   0   3   0   0 
Other commercial commitments  84   81   2   0   1 
Total Commercial Commitments $444  $403  $39  $0  $1 
(1)The contractual obligations exclude future contractual interest payment obligations as some obligations have floating interest rates.
(2)Certain debt obligations are subject to covenants that could accelerate the payment of these obligations.

1 Certain debt obligations are subject to covenants that could accelerate the payment of these obligations.
  Amount of Commitment Expiration by Period 
Other Commercial Commitments 
Total
  
Less than 1
year
  
1 – 3 years
  
3 – 5 years
  
More than
5 years
 
  (in $ million) 
Letters of credit (3)
 $223  $223  $0  $0  $0 
Stand-by letters of credit  38   38   0   0   0 
Guarantees  0   0   0   0   0 
Credit derivative  0   0   0   0   0 
Other commercial commitments  119   92   26   0   1 
Total Commercial Commitments $381  $354  $26  $0  $1 
(3)
 Includes acceptances outstanding for a total amount of $27 million as of December 31, 2010.

 
4561
 
 
The covenants included in some of our liabilities contracts are standard market covenants.  Bladex has been and expects to continue to be in compliance with regards to these covenants.
See Item 18, “Financial Statements,” note 19.

Item 6.    Directors, Executive Officers and Employees

A.           Directors and Executive Officers

Directors
The following table sets forth certain information concerning the directorsDirectors of the Bank as of the date of this Annual Report:Report.

Name
 
Country of
Citizenship
 
Position Held with
The Bank
 
Year Term
Expires
 
Director
Since
 
Age
 
CLASS A           
Esteban Alejandro Acerbo           
Director           
Banco de la Nación Argentina, Argentina Argentina Director 2014 2010 49 
Manuel Sánchez González           
Deputy Governor           
Banco de Mexico, Mexico Mexico Director 2014 2011 60 
João Carlos Nobrega Pecego           
Regional General Manager – Head of Latin America Banco do Brasil, Brazil Brazil Director 2013 2010 47 
            
CLASS E           
Mario Covo           
Chief Executive Officer           
Finaccess International, Inc., U.S.A. U.S.A. Director 2014 1999 53 
Herminio Blanco           
Chief Executive Officer           
Soluciones Estratégicas Consultoría, Mexico Mexico Director 2013 2004 60 
Maria da Graça França           
Brazil Brazil Director 2013 2004 62 
William D. Hayes           
President           
Whaleco, Inc.  . U.S.A. Director 2013 2004 67 
Guillermo Güémez García           
Mexico Mexico Director 2012 1997 70 
            
ALL CLASSES OF COMMON STOCK (*)
           
Gonzalo Menéndez Duque           
Director   Chairman of the       
Banco de Chile, Chile Chile Board 2012 1990 62  
Jaime Rivera           
Chief Executive Officer           
Bladex, Panama Guatemala Director 2012 2004 58 

(*) Denotes class(es) of common stock of the Bank that elect the directors listed.

Esteban Alejandro Acerbo has served as Director of Banco de la Nación Argentina since 2006 and President of Nación Leasing since 2006.  Mr. Acerbo is President of the following Commissions of Banco de la Nación Argentina:  Commercial and Individual Banking since 2010 and from 2006 until 2008, Risk and Collection from 2008 to 2010 and Planning and Control from 2009 until 2010.  He also has served as Vice President of the International Relations and Foreign Trade Commission of Banco de la Nación Argentina since 2008 and was Vice President of the Finance and Credit Policy Commission from 2006 to 2008.  Mr. Acerbo was an Associate of the Treasury Division of the Ministry of Economy of Argentina in 2005, Advisor and associate in accounting, taxes and finance to the Chamber of Commerce, Industry and Production from 1991 to 2001.  Prior to that, Mr. Acerbo was Principal of Estudio Acerbo y Asociados from 1989 to 2005, Principal of the Development Commission of the Production Office of the Daireaux Municipality, Argentina from 2001 to 2004 and associate in tax policy for the creation of industrial parks in different districts of the Buenos Aires Province in Argentina from 1999 to 2001.

 
62
Name
 
Position Held
with
The Bank
 
Country of
Citizenship
 
Year 
Term Expires
 
 
Director 
Since
 
Age
CLASS A          
José Maria Rabelo
Brazil
 Director Brazil 2010 2007 53
Guillermo Güémez García
Deputy Governor
Banco de Mexico, Mexico
 Director Mexico 2011 1997 68
Roberto Feletti
Vice President
Banco de la Nación Argentina, Argentina
 Director Argentina 2011 2008 50
CLASS E          
Mario Covo
Chief Executive Officer
Finaccess International, Inc., U.S.A.
 Director U.S.A 2011 1999 51
Maria da Graça França
Brazil
 Director Brazil 2010 2004 60
Herminio Blanco
Chief Executive Officer
Soluciones Estratégicas Consultoría, Mexico
 Director Mexico 2010 2004 58
William D. Hayes
President
Wellstone Global Finance, LLC, U.S.A.
 Director U.S.A. 2010 2004 65
Will C. Wood
Principal
Kentwood Associates, U.S.A.
 Director U.S.A. 2012 1999 69
ALL CLASSES OF COMMON STOCK          
Gonzalo Menéndez Duque
Director
Banco de Chile, Chile
 Chairman of the Board of Directors Chile 2012 1990 60
Jaime Rivera
Chief Executive Officer
Bladex, Panama
  Director  Guatemala  2012  2004  56
 
Guillermo Güémez GarcíaManuel Sánchez González has served as Deputy Governor of Banco de Mexico since 1995 and served as2009.  He was Director of Investment of Valanza Mexico, a Board Membercapital risk unit of the National Insurance Commission and Casa de Moneda de Mexico since 1995. He served as President of the Executive Committee of Grupo Azucarero Mexico and Vice Chairman of Grupo de Embotelladoras Unidas, S.A. de C.V. from 1993 to 1994.  Mr. Güémez served as Co-Chairman of the North American Committee, Board Member of Home Mart, S.A. de C.V. and Vice Chairman of the Board of Grupo Embotelladoras Unidas, S.A. de C.V. from 1986 to 1994.  He served on the Mexican Business Coordinating Council for the North American Free Trade Agreement (“NAFTA”) in the capacity of Executive Director from 1991 to 1993.BBVA.  He was employed by Banco Nacional de Mexico (Banamex)Grupo Financiero BBVA Bancomer (formerly Grupo Financiero Bancomer) in various capacities1993 as Director of Financial Analysis and Investor Relations.  Dr. Sánchez was Director of Planning and Finance of the Banking Services Division of Grupo Financiero BBVA Bancomer from 19741995 to 1991, including Manager for Foreign Currency Funding and International Credits from 1974 to 1978, Representative in London from 1979 to 1981, Executive Vice President of International Treasury and Foreign Exchange, Exchange Controls and Ficorca from 1982 to 1986, and Executive Vice President for International Products from 1986 to 1990.  Mr. Güémez founded1997 and was PresidentCorporate Director of Euromex Casa de Cambio and Euroamerican Capital CorporationEconomic Studies from 19861997 to 1990.  He also has served as a Board Member of the Institute of International Finance and as a Board Member and Chairman of the Executive Committee of International Mexican Bank Ltd.2004.  Prior to that, Mr. Güémezhe was employed byGeneral Director of the Analysis and Investigation Center of Instituto Autónomo de México (ITAM).  Dr. Sánchez was professor of economics at ITAM and at various local and foreign universities, including Boston College and the University of Chicago.  He is the author of several articles for books and specialized magazines.  He was coordinator and editor of Procesos de Privatización en América Latina, with the participation of investigation centers of Chile, Mexico, Colombia and Argentina.  Dr. Sánchez is the author of Economía Mexicana para Desencantados, published in 2006.  He also wrote essays for different newspapers and a column for Reforma.  Dr. Sánchez was advisor and consultant for various companies and international organizations, including the International Monetary Fund, the World Bank and the International Development Bank.  Prior to that, he was chief economist for Grupo Vitro and an economist for Grupo Industrial Alfa, in Monterrey, Mexico.  Dr. Sánchez has a bachelor degree in economics from ITAM and Estudios Superiores from Universidad de Monterrey, a master of America Corporationscience degree from the University of Missouri and master and doctorate degrees in Mexico as Assistant Representative.economics from the University of Chicago.  In 1980 he was honored with an excellence award for his master thesis from the American Agricultural Economic Association.

46
 
José Maria RabeloJoão Carlos de Nobrega Pecego has served as Vice PresidentDirector of International and Wholesale Businessour Board since 2010.  Mr. Pecego has served as Regional General Manager – Head of Latin America of Banco do Brasil from July 2005 to Maybased in Argentina since 2009.  He washas been employed by Banco do Brasil in various capacities since 1975,1978, holding the positions of Director of Foreign Trade from 2004 to 2005, GeneralExecutive Regional Manager of the Operational Assets Restructuring UnitSouth Region of Brazil (Rio Grande do Sul, Santa Catarina and Parana) from 2006 to 2009, Executive Manager responsible for Corporate and Project Finance from 2003 to 2004,2006, Executive SuperintendentManager of the Credit UnitCorporate Area of Banco do Brasil in Sao Paulo from 19992000 to 2000, Executive2003, Regional Superintendent of the Sao Paulo Business Unit from 19981995 to 1999, Executive2000, General Manager of the Credit Function Unit in 1997, Executive Manager of the Distribution Unit from 1996 to 1997, and Superintendent of the Rio Grande do Norte State Unit in 1996.  Mr. Rabelo was Commercial Director of Aliança do Brasil Insurance Company from 2000 to 2002 and has been, since 2008, the President of the Deliberative Council of PREVI, the pension fund of the employeesmain agencies of Banco do Brasil S.A.
Roberto José Feletti has served as Vice President of Banco de la Nación Argentina since 2006, President of Nación Fideicomisos since March 2008, Member of the Administrative Council of Economicin Sao Paulo from 1990 to 1995, and Finance Center Foundation for Argentina’s Development since April 2007 and Technical Representative for the Third Meeting of the Strategic Commission of Reflection on South American Integration Process held in September and October 2006 and March 2007. He also served as Secretary of Infrastructure and Planning of the City of Buenos Aires, Argentina from 2003 to 2006, President from 2001 to 2003 and Director from 1998 to 2000, both of Banco de la Ciudad de Buenos Aires, Argentina, Chairman of the Board from 2001 to 2002 and Director from 2002 to 2003, both for Red Link, and Coordinator of the Economic Studies Area of the Institute of Studies on State and Participation of State Workers’ Association in Argentina from 1991 to 1997.  Mr. Feletti also was employed in various other capacities by Banco Central de la Republica Argentina from 1981 to 1991, and served as fiscal audit assistant of General Tax Administration from 1980 to 1981 and cost analyst from 1978 to 1979, both for La Vascongada in Argentina.1990.  Mr. Pecego’s professional experience related to the banking industry qualifies him to serve on the Board.
 
Mario Covo has served as Director of our Board since 1999 and Director of Bladex Asset Management Inc. (“Bladex Asset Management”) since 2008.  Dr. Covo is the Managing Partner of Helios Advisors in New York.  He was a founding partner of Finaccess International, Inc. and has been Managing Partner of Helios Advisors in New York since 2000.  He also is one of the founders2000 and of Columbus Advisors where hein 1995.  Dr. Covo worked from 1995 to 1999.  Mr. Covo was previously employed at Merrill Lynch from 1989 to 1995, where he was Head of Emerging Markets-Capital Markets from 1989 to 1995.Markets. Prior to working atfor Merrill Lynch, he was employed byDr. Covo worked at Bankers Trust Company of New York from 1985 to 1989 as Vice President in the Latin American Merchant Banking Group, from  1985  to  1989,  focusing on corporate finance and debt-for-equity swaps. Prior to that Mr.Dr. Covo was employed as an International Economist for Chase Econometrics from 1984 to 1985, focusing primarily on Venezuela and Colombia.
Will C. Wood has served as  Dr. Covo’s qualifications to serve on the founding principal of Kentwood Associates of Menlo Park, California since 1993. He is a trustee of Dodge & Cox mutual funds.  He was employed by Wells FargoBoard include his extensive background and experience in the International Banking Groupfinancial services industry, and served as an Executive Vice President from 1986his exposure to 1989. While at Wells Fargo, Mr. Wood also was a Director of the Bankers’ Association for Foreign Trade and PEFCO, a privately owned export finance company. He was employed by Crockermarkets where the Bank and served as Executive Vice President in charge of the International Division and Manager of the Latin America Area from 1975 to 1986. Mr. Wood previously worked for Citibank in La Paz, Bolivia, Lima, Peru and Rio de Janeiro and Sao Paulo, Brazil, and began his career with Citibank’s Overseas Division in New York in 1964.operates.

63
 
Herminio A. Blanco is the founder and since 2002 has served as Chief Executive OfficerDirector of our Board since 2004.  Mr. Blanco is the founder of Soluciones Estratégicas Consultoría, Mexico City, and since 2020 has served as its Chief Executive Officer.  Mr. Blanco is also a founding partner of IQOM and since 2005 has served as Chairman of IQOM.its Chairman.  He has been a member of the Advisory Board of SSA Mexico since 2008. Mr. Blanco has served as a board member of Banco Mercantil del Norte-Banorte and CYDSA since 2006, the United States Chamber of Commerce Foundation since 2005 and Arcelor Mittal Steel USU.S. since 2004. He has been a member of the International Advisory Committee of Mitsubishi Corporation and the Trilateral Commission since 2000. He was a senior member of the economic cabinet for President Ernesto Zedillo and the Secretary of Trade and Industry of Mexico from 1994 to 2000. He was Undersecretary for International Trade and Negotiations of the Ministry of Trade and Industry of Mexico from 1993 to 1994 and from 1988 to 1990, and was Mexico’s Chief Negotiator of the North American Free Trade Agreement (NAFTA) from 1990 to 1993. Mr. Blanco was one of the three members of the Council of Economic Advisors to the President of Mexico from 1985 to 1988. He was responsible for the negotiation of the Mexico-European Union free trade agreement and various other free trade agreements with Latin American countries and with Israel. Mr. Blanco also contributed to the launching of negotiations for a free trade agreement with Japan. He was Assistant Professor of Economics at Rice University, Houston, Texas from 1980 to 1985. Mr. Blanco was senior advisor to the Finance Minister of Mexico from 1978 to 1980.

47
William Dick Hayes has served as President of Whaleco, Inc., New York, President of Wellstone Global Finance, LLC, San Francisco, California  Mr. Blanco’s extensive experience and Connecticut,background in foreign trade and Managing Directorhis academic and charter member ofconsultant skills are among the Board of Directors andqualifications he possesses to serve on the Investment Committee of WestLB-Tricon Forfaiting Fund Limited, Bermudas since 1999.  He served as Managing Director-Emerging Markets and in various other capacities for West Merchant Bank and Chartered WestLB from 1987 to 1999. Mr. Hayes served as Senior Vice President- Trading for Libra Bank Limited, New York Agency from 1986 to 1987, Principal of W.D. Hayes and Associates, California from 1984 to 1986, and in various capacities for Wells Fargo Bank, N.A., San Francisco, California from 1969 to 1984.Board.
 
Maria da Graça França has served as Director of our Board since 2004. Ms. Graça França served as Director of Internal Control of Banco do Brasil from 2006 to 2007. She also was employed by Banco do Brasilserved in various other capacities sinceduring her tenure with Banco do Brasil, starting in 1971, including Head of North America and General Manager of Banco do Brasil, New York Branch from 2004 to 2005, Executive General Manager of the International Division in Brasilia, Brazil from 2002 to 2003, Regional Manager for the operations of the Bank in South America based in Argentina in 2002, General Manager of Banco do Brasil, Paris Branch from 1999 to 2002, Deputy General Manager of Banco do Brasil, Miami Branch from 1993 to 1999, General Manager of the department responsible for Banco do Brasil’s foreign network from 1992 to 1993, Deputy General Manager for foreign exchange from 1989 to 1992, Assistant Manager within the Risk Management Area from 1988 to 1989, Assistant Manager for foreign exchange internal controls from 1984 to 1987 and employee in the Foreign Exchange Department from 1971 to 1984.  Ms. Graça França’s qualifications to serve on the Board include her experience managing operations and internal controls in international banking.
William Dick Hayes has served as Director of our Board since 2004 and has served as a Director of Bladex Asset Management since 2008.  Mr. Hayes has served as President of Whaleco, Inc., New York, Managing Director of MacGregor Design Development, LLC, Connecticut and since 1999, as Chairman and charter member of the Board of Directors and the Investment Committee of Tricon Forfaiting Fund Limited, Bermuda.  He served as Managing Director-Emerging Markets and in various other capacities for West Merchant Bank and Chartered WestLB from 1987 to 1999. Mr. Hayes served as Senior Vice President- Trading for Libra Bank Limited, New York Agency from 1986 to 1987, Principal of W.D. Hayes and Associates, California from 1984 to 1986, and in various capacities for Wells Fargo Bank, N.A., San Francisco, California from 1969 to 1984.  Mr. Hayes’ qualifications to serve on the Board include his background in the financial services industry, experience in emerging markets, and exposure to international capital markets.
Guillermo Güémez García has served as Deputy Governor of Banco de Mexico since 1995 and served as a Board Member of the National Insurance Commission and Casa de Moneda de Mexico since 1995. He served as President of the Executive Committee of Grupo Azucarero Mexico and Vice Chairman of Grupo de Embotelladoras Unidas, S.A. de C.V. from 1993 to 1994. Mr. Güémez served as Co-Chairman of the North American Committee, Board Member of Home Mart, S.A. de C.V. and Vice Chairman of the Board of Grupo Embotelladoras Unidas, S.A. de C.V. from 1986 to 1994. He served on the Mexican Business Coordinating Council for the North American Free Trade Agreement, NAFTA, in the capacity of Executive Director from 1991 to 1993. He was employed by Banco Nacional de Mexico (Banamex) in various capacities from 1974 to 1991, including Manager for Foreign Currency Funding and International Credits from 1974 to 1978, Representative in London from 1979 to 1981, Executive Vice President of International Treasury and Foreign Exchange, Exchange Controls and Ficorca from 1982 to 1986, and Executive Vice President for International Products from 1986 to 1990. Mr. Güémez founded and was President of Euromex Casa de Cambio and Euroamerican Capital Corporation from 1986 to 1990. He also has served as a Board Member of the Institute of International Finance and as a Board Member and Chairman of the Executive Committee of International Mexican Bank Ltd. Prior to that Mr. Güémez was employed by Bank of America Corporation in Mexico as Assistant Representative.

64
 
Gonzalo Menéndez Duque has served as Director of our Board since 1990.  Mr. Menéndez Duque is a senior director of the Luksic companies in Chile and serves as Director of the following Luksic group holding companies:  Banco de Chile since 2001, Aguas de Antofagasta S.A. since 2004, Andsberg Investment Ltd. since 2007, Andsberg Ltd. since 2007, Antofagasta Group since 1997, Antofagasta PLC since 1985, Banchile Factoring S.A. since 2010, Holdings Quiñenco since 1996, Minera el Tesoro since 2006, Minera Los Pelambres since 2004, Minera Michilla S.A. since 1996, and Antofagasta PLCSocofin S.A. since 1985.2010.  In addition, he serveshas served as President of the following Luksic group companies:  Banchile Corredores de Bolsa, S.A. since 2007 and Inversiones Vita since 2000.2000, a Luksic group company.  He also has servedserves as Vice Chairman of Fundación Andrónico Luksic A. and Fundación Pascual Baburizza since 2005.  Previously, Mr. Menéndez Duque served as Director and President of several companies related to Grupo Luksic since 1985, including the following:  Banco de A. Edwards and related companies, Banco Santiago, Empresas Lucchetti, S.A., Banco O’Higgins, Antofagasta Group,Banchile Corredores de Bolsa S.A. and Banchile Administradora General de Fondos.  Mr. Menéndez Duque’s skills, leadership and managerial experience in large complex organizations of various industries which are subject to extensive regulations, and his experience as a board member in different companies, qualify him to serve on the Board.

Jaime Rivera has served as a directorDirector of the Bank since 2004, when he was appointed Chief Executive Officer.  He joined the Bank in 2002 as Chief Operating Officer.  Previously, Mr. Rivera served in various capacities for Bank of America Corporation, beginningincluding positions in 1978, includingthe U.S. as Managing Director of the Latin America Financial Institutions Group in Miami and the Latin America Corporate Finance team in New York,and on-site as General Manager in Brazil, Argentina, Uruguay and Guatemala, as Marketing Manager in Chile, and as Manager of Latin America Information Systems in Venezuela.  He has held boardBoard positions with the Council of the Americas, the Florida International Bankers’ Association, and the Latin American Agribusiness Development Corporation. Mr. Rivera is a member of the International Advisory Committee (IAC) to the Board of Directors of the New York Stock Exchange (the “NYSE”).NYSE Euronext.  He has an MBA degree from Cornell University, a Master of Science degree from Northwestern University, and a Bachelor of Science degree from Northrop University.   Mr. Rivera’s solid academic background and his previous international banking experience throughout Latin America have provided him with the business skills, leadership and managerial abilities that qualify him to serve on the Board.

48
Executive Officers

The following table and information sets forth the names of the executive officers of the Bank andBladex, their respective positions as ofat the date of this Annual Reporthereof and positions held by them with the Bank and other entities in prior years:

Name
 
Position Held with The Bank
 
Country of Citizenship
 
Age
Jaime Rivera Chief Executive Officer Guatemala 5658
Rubens V. Amaral Jr. Executive Vice President, - Chief Commercial Officer Brazil 5052
Gregory D. Testerman Executive Vice President - Senior Managing Director, Treasury & Capital Markets U.S.A. 4648
Miguel Moreno Executive Vice President, Chief Operating Officer Colombia 5658
Miguel A. Kerbes Senior Vice President, Chief Risk Officer Uruguay 4951
Bismark E. RodriguezSenior Vice President, ControllerVenezuela41
Jaime CelorioChristopher Schech Senior Vice President, Chief Financial Officer MexicoGermany 3746
Ana Maria de AriasGustavo Díaz Senior Vice President, Organizational Performance and DevelopmentController PanamaColombia 4548
Manuel Mejía-Aoun 
Head ofChief Investment Officer
Bladex Asset Management
(Bladex Asset Management)
 Panama 5052

 
Jaime Rivera has served as
65

Presented below is a directorbrief biographical description of the Bank since 2004, when he was appointed Chief Executive Officer.  He joined the Bank in 2002 as Chief Operating Officer.  Previously, Mr. Rivera served in various capacities for Bank of America Corporation beginning in 1978, including Managing Director of the Latin America Financial Institutions Group in Miami and the Latin America Corporate Finance team in New York, as General Manager in Brazil, Argentina, Uruguay and Guatemala, as Marketing Manager in Chile, and as Manager of Latin America Information Systems in Venezuela.  He has held board positions with the Council of the Americas, the Florida International Bankers’ Association, and the Latin American Agribusiness Development Corporation. Mr. Riveraeach executive officer that is not a member of the International Advisory Committee (IAC) to the Board of Directors of the NYSE.  He has an MBA degree from Cornell University, a Master of Science degree from Northwestern University, and a Bachelor of Science degree from Northrop University.Bank’s Board:

Rubens V. Amaral Jr. has served as Executive Vice President, Chief Commercial Officer of the Bank since March 2004.  He previously served as General Manager and Managing Director for North America of Banco do Brasil, New York Branch, since 2000.  Mr. Amaral served in various capacities with Banco do Brasil since 1975, holding the positions of Managing Director of the International Division and alternate member of the board of directors in 1998, Executive General Manager of the International Division in Sao Paulo from 1998 to 2000, Deputy General Manager in the New York Branch in charge of the Trade Finance and Correspondent Banking Department from 1994 to 1998, Head of Staff of the International Division from 1993 to 1994 and Advisor, Head of Department and General Manager in the Trade Finance Area at the International Department Division – Head Office from 1989 to 1993.  Mr. Amaral also served as a representative in banking supervision for the Central Bank of Brazil from 1982 to 1988.
 
Gregory D. Testerman has served as Executive Vice President, Senior Managing Director, Treasury & Capital Markets of the Bank since 2007.  Mr. Testerman has served as a Director of Bladex Asset Management since 2006.  Mr. Testerman previously served as Senior Vice President and Treasurer of the Bank from 2005 to 2006.  Mr. Testerman served in various capacities with Banco Santander Central Hispano, S.A. from 1986 to 2003, including General Manager, Miami Agency, from 1999 to 2003, General Manager, Tokyo Branch and Country Manager in Japan from 1995 to 1999, Vice President, Head of Financial Control, Benelux and Asia Pacific, from 1991 to 1995, Second Vice President, Special Credit Valuation Assignment, London Branch, in 1991, Second Vice President, Treasury Operations Manager, Belgium, from 1989 to 1991, and Second Vice President, Management Reporting, Belgium, from 1986 to 1989.  Mr. Testerman began his career with The Chase Manhattan Bank, N.A. and served as Assistant Treasurer in Belgium in 1986, and previously participated inafter completing his training at the Corporate Controllers Development Programbank´s headquarters  in New York, from 1984 to 1986.

49
Miguel Moreno has served as Executive Vice President, Chief Operating Officer since July 2007.  He previously served as Senior Vice President and Controller of the Bank since September 2001.  He was a Management Consulting Partner for PricewaterhouseCoopers LLP, Bogotá, Colombia, from 1988 to 2001, and served as Vice President of Information Technology and Operations for Banco de Crédito, Bogotá, Colombia, from 1987 to 1988.  Mr. Moreno served as Chief Executive Officer of TM Ingeniería, Bogotá, Colombia, from 1983 to 1987, and as Head of the Industrial Engineering Department, Los Andes University, Colombia, from 1982 to 1984.  Mr. Moreno was employed by SENA, Colombia, as Chief of the Organization and Systems Office, from 1977 to 1981, and served as Advisor to the Minister for the Finance and Public Credit Ministry of Colombia, from 1976 to 1977.
 
Miguel A. Kerbes has served as Senior Vice President, Chief Risk Officer for the Bank since July 2002.  Mr. Kerbes previously served as Vice President, Risk Management from 2000 to 2002.  He served as the Risk Officer, Southern Cone Area for Banco Santander, with domicile in Chile, from 1995 to 2000, overseeing the Country Risk Managers for the area. From 1992 to 1995 he served with Bank of Boston, Chile as the Risk Director for credit and treasury risks and as Senior Risk Officer.  From 1989 to 1992, Mr. Kerbes participated in the start-up of ING Bank in Chile, continuing as its Risk Officer, with domicile in Chile. He had previously served with ING Bank in Uruguay and participated in the start-up of ING Bank in Argentina from 1982 to 1992.
 
Bismark E. Rodríguez Christopher Schechhas served as the Bank’s Controller since July 2007.  Mr. Rodriguez previously served as Vice President of the Internal Audit DepartmentChief Financial Officer of the Bank since 2004.September 2009.  Previously, Mr. Rodriguez alsoSchech served as Senior ManagerChief Financial Officer in the Region International division at PricewaterhouseCoopersVolvo Financial Services, part of AB Volvo Group based in Gothenburg, Sweden, covering operations in Latin America, Eastern Europe, Asia and Australia. Prior to that, Mr. Schech served in various capacities in Audit, Finance, and countriesBusiness Development at General Electric Company (GE), from 19911996 to 2003.2008, including an assignment as Regional Manager, Financial Planning and Analysis at BAC Credomatic Network, a GE Capital Services joint venture based in Costa Rica, from 2005 to 2008. Mr. Rodriguez is a Certified Public Accountant (CPA), a Certified Internal Auditor (CIA), a CertifiedSchech’s background also includes serving in various positions in the Financial Services Auditor (CFSA),Audit Division at Coopers & Lybrand Deutsche Revision in Frankfurt, Germany, from 1990 to 1996.

66

Gustavo Díaz was appointed Senior Vice President Controller of the Bank in September 2009. Prior to joining the Bank, he served as Chief Audit Executive for Central American Bank for Economic Integration (CABEI) in Tegucigalpa, Honduras covering operations in Central America, from 2000 to 2009. Prior to that, he served as Director of Internal Audit and a Certified Control Self-Assessment Specialist (CCSA); all designationsChief Compliance Officer for Corporación Financiera del Valle (Corfivalle) in Colombia, from 1994 to 2000. Mr. Díaz was External Auditing Manager for KPMG Peat Marwick in Colombia and Chile, from 1985 to 1994 specializing in the financial industry. Mr. Díaz has CIA, CFSA, and CCSA certifications, granted by The Institute of Internal Auditors (IIA). and AML/CA certification granted by FIBA and FIU.
 
Jaime Celorio was appointed Senior Vice President, Chief Financial Officer of the Bank, in February 2008.  Mr. Celorio previously served as Chief Financial Officer and Chief Administrative Officer for Merrill Lynch Mexico S.A. de C.V., Casa de Bolsa, Mexico from 2002 to 2007.  Mr. Celorio served as Controller Associate of Emerging Markets in New York from 1998 to 2001 and Controller Associate in Mexico from 1995 to 1998, both for the Goldman Sachs Group.  Mr. Celorio also served as Senior Auditor in the Audit Division and Supervisor in Financial Advisory Services from 1991 to 1994, both for PricewaterhouseCoopers, Mexico.
Ana Maria de Arias has served as Senior Vice President, Organizational Performance and Development of the Bank since September 2008.  Ms. Arias previously served as Senior Vice President of Human Resources and Administration from 2007 to 2008 and Senior Vice President of Human Resources and Corporate Operations from 2004 to 2007, both for the Bank.  Prior to her employment with the Bank she served as Vice President of Human Resources from 2000 to 2004 and Assistant Vice President of Human Resources from 1999 to 2000, both for Banco General, S.A., Panama.  She served in various capacities with the Human Resources department of the Panama Canal Commission, Panama, from 1990 to 1999.

Manuel Mejía-Aoun has served as Head of Asset ManagementChief Investment Officer of Bladex Asset Management since November 2005.2005, and as a Director of Bladex Asset Management since 2008.  Mr. Mejía-Aoun has over 1925 years of investment experience in emerging markets. Prior to joining the Bank, he was Chief Executive Officer of Maxblue, Deutsche Bank’s first personal financial consultancy business, focusing on high net worth investors in Latin America.  Prior to that he headed the Latin American Foreign Exchange and Local Money Markets Sales and Trading Group at Deutsche Bank.  In 1995, Mr. Mejía-Aoun served as Chief Emerging Markets Strategist at Merrill Lynch, covering fixed income securities in Latin America, Eastern Europe, Africa and Asia. From 1987 to 1995, he established and headed the Emerging Markets Trading Group at Merrill Lynch.

B.           Compensation

Cash and Stock-Based Compensation

Executive Officers Compensation
The aggregate amount of cash compensation paid by the Bank during the year ended December 31, 2008 to the executive officers employed in the Bank’s head office as a group for services in all capacities was $3,264,589.  During the year ended December 31, 2008, the Bank accrued, and in February 10, 2009 paid, performance-based bonuses to the Bank’s executive officers in the aggregate amount of $817,560.  At December 31, 2008, the total amount set aside or accrued by the Bank to provide pension, retirement or similar benefits for executive officers was approximately $863,801.

50

The aggregate amount of cash compensation paid by the Bank during the year ended December 31, 2008,2010, to the executive officers employed in Bladex’s Head Office as a group for services in all capacities was $2,294,295.  During the fiscal year ended December 31, 2010, the Bank accrued, and paid on February 28, 2011, performance-based bonuses to the Bank’s executive officers in the aggregate amount of $1,140,000.

In addition, the aggregate amount of salaries and revenue sharing earned by the executive and non-executive employees of Bladex Asset Management a wholly-owned subsidiary of Bladex Holdings, Inc., which is in turn a wholly-owned subsidiary ofduring the Bank,year ended December 31, 2010, as a group, for services in all capacities, was $3,922,580.  During the fiscal year ended December 31, 2008, the Bank accrued, and on January 30 and February 4, 2009 paid, performance-based allocations and bonuses to this group of executives in the aggregate amount of $1,754,110 and $442,000, respectively.$3,720,839.48.

In February 2008, the Board approved the 2008 Stock Incentive Plan (the “2008 Plan”), which allows the Bank to grant restricted shares, restricted stock units, stock options and/or other similar compensation instruments to the directors, executive officers and other non-executive employees of the Bank.

On February 12, 2008,9, 2010, the Bank awarded an aggregate of 172,106 stock options and 39,239granted 65,390 restricted stock units under the 2008 Planand 271,081 stock options to executive officers of the Bank.  The Bank granted an additional aggregate of 52,930 stock options and 12,06536,106 restricted stock units under the 2008 Planand 149,696 stock options to other non-executive employees of the Bank.  AsThese stock options have an exercise price of December 31, 2008, the compensation cost charged against 2008 income in connection with these$13.52 and an expiration date of February 9, 2017.  The restricted stock units and stock options was $178,280 and $178,301, respectively.  The remaining compensation cost for these restricted stock units and options to be charged against income is $1,255,210 over a period of the next 3.12 years.  Under the 2008 Plan, the restricted stock units originally provided for a cliff vesting period of four years.  The stock options awarded under the 2008 Plan expire seven years after the award date and are exercisable on the fourth anniversary of the award date.
In November 2008, the Board approved certain amendments to the outstanding restricted stock units and stock options awarded under the 2008 Plan, providing that they now vest at a rate of 25% per year on each anniversary of the award date.  These amendments did not result in additional compensation costs.  In November 2008, the Board approved amendments to the 2004 Indexed Option Plan (“the 2004 Plan”), as well as amendments to outstanding options under the plan, to extend the term of the options by an additional three years (to a term of ten years), and to update the index used to determine the exercise price of the options anually.  The November 2008 amendments also included an adjustment to the standard vesting schedule for options granted under the 2004 Plan, and a related amendment to the vesting schedule of options already issued under the plan, so that these outstanding options will vest at a rate of 25% per year, measured from the award date, (withwith vesting occurring on each anniversary of the award date).  Finally, the Board also amended the exercise price of outstandingdate.  The options held by U.S. taxpayers under the 2004 Plan to provide for a minimum exercise price equal to the fair market value of the Bank’s class E shares on the date of award.  As of December 31, 2008, the compensation cost charged against 2008 income in connection with options granted to executive officers under the 2004 Plan was $379,381, and the remaining compensation cost for the options of $236,162 will be charged against income over a period of the next 1.08 years.
In November 2008, the Board also approved amendments to the 2006 Stock Option Plan related to the exercise terms of the outstanding options granted under the plan, which now vest at a rate of 25% per year, measured from the award date, with vesting occurring on each anniversary of the award date.  These amendments do not result in an additional compensation cost.  As of December 31, 2008,2010, the compensation cost charged against 2008the Bank’s 2010 income in connection with these restricted stock units and stock options was $201,944,$272,082 and the$272,100 respectively.  The total remaining $428,283 compensation cost for the optionsof $1,900,451 will be charged against income over a period of the next 2.123.11 years.

 
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The Bank sponsors a defined contribution plan for its expatriate officers.  The Bank’s contributions are determined as a percentage of the eligible officer’s annual salary, with each officer contributing an additional amount withheld from his or her salary.  All contributions are administered by a trust through an independent third party.  During 2008,2010, the Bank charged to salaries expense $240,594$117,273 with respect to the contribution plan.  As of December 31, 2008,2010, the accumulated liability payable undertotal amount set aside or accrued by the contribution plan amountedBank in 2010 to $420,370.

provide pension, retirement or similar benefits for executive officers was approximately $307,257.
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20082010 Chief Executive Officer Compensation

The 20082010 compensation of the Bank's Chief Executive Officer included a base salary of $300,000, a performance-based cash bonus of $350,000,$150,000, a performance-based stock option and a restricted stock units grant (under the 2008 Plan) with a value of $300,000,$475,000, a retirement plan that included a contribution from the Bank of $22,407$24,602 during 2008,2010, and other benefits amounting to $10,315.$10,450.  In addition, the Chief Executive Officer has a contractual severance payment of $300,000 in casethe event of his termination without cause of $300,000.cause.

Board of Directors Compensation

Each non-employee director of the Bank receives an annual cash retainer of $40,000 for his or her services as a director and the Chairman of the Board receives an annual cash retainer in the amount of $85,000.  This annual retainer covers seven Board and/or stockholdersshareholders’ meetings.  If the Board meets more than seven times, the Bank will pay each director an attendance fee of $1,500 for each additional Board and/or stockholdersshareholders’ meeting.  The Chairman of the Board is eligible to receive an additional 50% of the attendance fee for each such additional Board, stockholdersshareholders or committee meeting attended.
 
The Chairman of the Audit and Compliance Committee receives an annual retainer of $20,000 and the Chairmen of the Assets and Liabilities Committee, Nomination and Compensation Committee, Credit Policy and Risk Assessment Committee, and Business Committee each receive an annual retainer of $15,000.  The non-Chairman members of the Audit Committee receive an annual retainer of $10,000 and the non-Chairman members of the Assets and Liabilities Committee, Nomination and Compensation Committee, Credit Policy and Risk Assessment Committee, and Business Committee, each receive an annual retainer of $7,500.  These annual retainers cover seven meetings of the Audit Committee and six meetings each of the Assets and Liabilities Committee, Nomination and Compensation Committee, Credit Policy and Risk Assessment Committee, and Business Committee.  When the Audit Committee has met more than seven times and the Assets and Liabilities Committee, Nomination and Compensation Committee, Credit Policy and Risk Assessment Committee, and Business Committee have each met more than six times, the Bank will pay an attendance fee of $1,000 for each additional committee meeting.  The Chairman of each committee of the Board is eligible to receive an additional 50% for each additional committee meeting attended.
 
The aggregate amount of cash compensation paid by the Bank during the year ended December 31, 2008,2010 to the directors of the Bank as a group for their services as directors was $789,590.$742,450.
 
The aggregate number of shares of restricted stockshares awarded during the year ended December 31, 2008,2010 to non-employee directors of the Bank as a group under the 2008 Plan was 31,24638,115 class E shares, equal to $50,000 for each non-employee director of the Bank and $75,000 for the Chairman of the Board.  As of December 31, 2008,2010, the compensationtotal cost charged against 2008 income in connection with thefor these restricted shares amounted to $474,913  of restricted stock awarded under the 2008 Planwhich $44,474 was $43,981,registered during 2010, and the remaining compensation cost of $430,439 for these shares of restricted stock of $430,959shares will be charged against income over a period of the next 4.544.53 years.

In November 2008, the Board amended the terms of the restricted stocks granted under the 2003 Restricted Stock Plan.  In connection with these amendments, awards of restricted stock that were outstanding under the 2003 Restricted Stock Plan were amended to provide for a vesting schedule of 36% in 2008, 20% in 2009, 17% in 2010, 15% in 2011, and 12% in 2012 (on each anniversary of the date of award).  These amendments do not result in an additional compensation cost.  As of December 31, 2008, the compensation cost charged against income in 2008 in connection with the restricted stock awards granted to non-employee directors was $216,628 as of December 31, 2008, and the remaining compensation cost for these restricted stock awards of $370,685 will be charged against income over a period of the next 3.26 years.

As noted in “Executive Officers Compensation” above, in November 2008, the Board approved certain amendments to the 2004 Plan, and the outstanding options granted under this plan.  These amendments provided for a ten-year term for each option, an updated index to determine the exercise price of these options, and an adjusted vesting schedule under the plan.  For outstanding options granted under the 2004 Plan, the vesting schedule was specifically amended to a rate of 25% per year, measured from the award date (with vesting occurring on each anniversary of the award date) and the exercise price for options held by U.S. taxpayers was adjusted to include a minimum exercise price equal to the fair market value of the Bank’s class E shares on the date of award.  As of December 31, 2008, the compensation cost charged against 2008 income in connection with options granted to directors under the 2004 Plan was $60,449, and the remaining compensation cost for these options of $21,512 will be charged against income over a period of the next 1.08 years.

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In November 2008, the Board also approved certain amendments to the vesting schedule of options awarded under the 2006 Stock Option Plan, with 25% of these options vesting on each anniversary of the date of award.  These amendments do not result in an additional compensation cost.  As of December 31, 2008, the compensation cost charged against 2008 income in connection with the options granted under the 2006 Stock Option Plan was $34,391, and the remaining compensation cost for these options of $39,648 will be charged against income over a period of the next 2.12 years.
Beneficial Ownership

As of December 31, 2008,2010, the Bank’s executive officers and directors and members of the Advisory Council, as a group, owned an aggregate of 151,666189,045 class E shares, which was approximately 0.6%0.68% of all issued and outstanding class E shares.

 
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The following tables set forth information regarding the number of shares, stock options,  deferred equity units, and restricted stock units, and indexed stock options owned by the Bank’s executive officers as of December 31, 2008, as well as the restricted stock units and stock options granted in February 2009 under the 2008 Plan:2010.

Name and Position of
Executive Officer(1)
 
Number of
Shares
Beneficially
Owned as of
Dec. 31,
2008
  
Number of
Shares that
may be
acquired
within 60
days of Dec.
31, 2008
  
Stock
Options (2)
(1999 Stock
Option Plan
and 2006
Stock Option
Plan)
(pending to
vest)
  
Deferred
Equity
Units (3)
  
Indexed
Stock
Options (4)
(pending
to vest)
  
Restricted
Stock Units
(2008 Stock
Incentive
Plan) (5)
  
Stock
Options
(2008
Stock
Incentive
Plan) (5)
(pending
to vest)
  
Number of
Shares
Beneficially
Owned as of Dec.
31, 2010 (1)
  
Number of
Shares that may
be acquired
within 60 days of
Dec. 31, 2010 (2)
  
Stock
Options (3)
  
Restricted Stock
Units (2008 Stock
Incentive Plan) (4)
  
Deferred
Equity
Units (5)
 
Jaime Rivera
Chief Executive Officer
  1,400   181,973   26,495   0   13,319   30,353   137,129   1,400   252,158   124,552   28,754   0 
Rubens V. Amaral Jr.
Executive Vice President
Chief Commercial Officer
  0   118,012   13,248   0   8,779   29,138   131,800   8,885   212,554   116,322   26,792   0 
Gregory D. Testerman
Executive Vice President
Senior Managing Director,
Treasury & Capital Markets
  0   38,996   10,599   0   5,250   30,110   136,064 
Miguel Moreno
Executive Vice President,
Chief Operating Officer
  5,724   44,216   5,299   0   3,819   13,113   59,115 
Gregory D. Testerman
Executive Vice President
Senior Managing Director
Treasury and Capital Markets
  10,463   156,490   117,744   27,116   0 
Miguel Moreno
Executive Vice President
Chief Operating Officer
  0   73,765   47,371   10,892   0 
Miguel A. Kerbes
Senior Vice President,
Chief Risk Officer
  31,840   28,459   11,698   621   3,020   7,619   34,318   0   62,328   27,002   6,207   621 
Bismark E. Rodriguez L.
Senior Vice President
Controller
  0   1,745   0   0   0   3,278   14,778 
Jaime Celorio
Senior Vice President,
Chief Financial Officer
  0   588   0   0   0   904   4,067 
Ana Maria de Arias
Senior Vice President,
Organizational Performance and Development
  1,670   27,170   5,299   0   1,812   7,163   32,417 
Christopher Schech
Senior Vice President,
Chief Financial Officer
  0   0   0   0   0 
Gustavo Díaz
Senior Vice President,
Controller
  0   0   0   0   0 
Manuel Mejía-Aoun (6)
Chief Investment Officer
Bladex Asset Management
  5,000   0   0   0   0 
Total  40,634   441,159   72,638   621   35,999   121,678   549,688   25,748   757,295   432,991   99,761   621 

53
(1)Includes shares purchased by the executive or restricted stock units transferred to the executive.
(2)Includes vested indexed and traditional stock options, as well as options and restricted stock units that will vest within 60 days of December 31, 2010.
(3)Includes 203,313, 190,589, and 39,089 unvested stock options granted to executives officers on February 9, 2010, February 10, 2009, and February 12, 2008 respectively, under the 2008 Plan.  Also, an aggregate amount of 149,696; 154,062; and 30,230 stock options were granted to other non-executive employees under the 2008 Plan on February 9, 2010, February 10, 2009, and February 12, 2008 respectively; and an aggregate amount of 11,133 stock options were granted to other non-executive employees on February 13, 2007, under the 2006 Stock Option Plan.  The exercise price and expiration date of these stock options are as follows:  Grant of February 9, 2010, exercise price of $13.52 and expiration date of February 9, 2017; Grant of February 10, 2009, exercise price of $10.15 and expiration date of February 10, 2016; Grant of February 12, 2008, exercise price of $15.43 and expiration date of February 12, 2015.
(4)Includes 49,044, 41,804, and 8,913 unvested restricted stock units granted to executive officers on February 9, 2010, February 10, 2009, and, February 12, 2008, respectively, under the 2008 Plan. Also, an aggregate amount of 36,106, 33,791, and 6,898 restricted stock units were granted to other non-executive officers under the 2008 Plan on February 9, 2010, February 10, 2009, and February 12, 2008 respectively.
(5)Deferred Equity Units under the Bank's Deferred Compensation Plan.
(6)The executive and non-executive employeesnon-executives of Bladex Asset Management Inc., are not eligible to receive grants under any of the equity compensation plans.

(2)Only includes 68,888 stock options granted to executive officers on February 13, 2007, under the 2006 Stock Incentive Plan, and 3,750 stock options granted under the Bank’s 1999 Stock Option Plan.  In addition, an aggregate number of  33,911 stock options were granted to other non-executive employees under the 2006 Stock Option Plan.
(3)Deferred Equity Units granted under the Bank's Deferred Compensation Plan (“DC Plan”).  In addition, as of the date hereof, there are 2,439 outstanding units that were granted to former executive officers of the Bank under the DC Plan.
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(4)An aggregate amount of 23,549 indexed stock options was granted to other non-executive employees.
(5)Only includes 549,688 stock options and 121,678 restricted stock units granted to executive officers on February 12, 2008, and February 10, 2009.  Additionally, an aggregate amount of 52,930 stock options and 12,065 restricted stock units were granted to other non-executive employees of the Bank on February 12, 2008, and an aggregate amount of 181,379 stock options and 39,773 restricted stock units were granted to other non-executive employees of the Bank on February 10, 2009.

The following table sets forth information regarding ownership of the Bank’s shares by members of its Board, including restricted shares, indexed stock options, and stock options, held as of December 31, 2008:2010:

Name of
Director
 
Number of
Shares
Beneficially
Owned as of Dec.
31, 2010 (1)
  
Number of
Shares that may
be acquired
within 60 days of
Dec. 31, 2010 (2)
  
Stock
Options (3)
  
Restricted
Shares (4)
 
Esteban Alejandro Acerbo (5)
  0   0   0   0 
Manuel Sánchez González (6)
  0   0   0   0 
João Carlos de Nobrega Pecego (7)
  0   0   0   0 
Will C. Wood  18,485   8,079   0   10,246 
Mario Covo  16,485   8,079   0   10,246 
Herminio Blanco  36,010   8,079   0   10,246 
Maria da Graça França  13,635   0   0   10,119 
William Dick Hayes  13,680   8,079   0   10,246 
Guillermo Güémez García (8)
  0   0   0   0 
Gonzalo Menéndez Duque  24,731   12,121   0   15,369 
Total  123,026   44,437   0   66,472 
Name of
Director
 
Number of
Shares
Beneficially
Owned as of
Dec. 31, 2008 (1)
  
Number of
Shares that may
be acquired
within 60 days
of Dec. 31, 2008
  
Stock Options
(2006 Stock
Option Plan)
(pending to vest)
  
Restricted
Shares (2)
  
Indexed Stock
Options
(pending to vest)
 
Guillermo Güémez García (3)
  0   0   0   0   0 
Roberto Feletti (4)
  0   0   0   0   0 
José Maria Rabelo (5)
  0   0   0   0   0 
Will C. Wood  10,480   6,482   1,061   5,895   536 
Mario Covo  8,480   6,482   1,061   5,895   536 
Herminio Blanco  28,005   6,482   1,061   5,895   536 
William Hayes  20,275   6,482   1,061   5,895   536 
Maria da Graça França  5,630   0   0   5,162   0 
Gonzalo Menéndez Duque  12,722   9,727   1,591   8,844   803 
Total  85,592   35,655   5,835   37,586   2,947 

(1)Includes class E shares held under the 2003 Restricted Stock Plan and the 2008 Stock Incentive Plan.
(2)UnderIncludes vested indexed and traditional stock options that will vest within 60 days of December 31, 2010.
(3)At present, all the stock options granted to directors have been vested.
(4)Includes unvested restricted class E shares granted under the 2003 Restricted Stock Plan and the 2008 Stock Incentive Plan, directors receiving restricted shares will have the same rights as stockholders of the Bank, except that all such shares will be subject to restrictions on transferability, which will lapse on the fifth anniversary from the award date.  In November 2008, the Board of Directors approved partial vestings of 20% each year on the anniversary date of the grant.Plan.
(3)
8,480(5)
4,012 class E shares corresponding to Mr. Acerbo’s entitlement under the 2008 Plan have been issued to his employer, Banco de la Nación Argentina.
(6)Mr. Sánchez was not a Director as of December 31, 2010, he was appointed member of the Board on April 20, 2011.
(7)4,012 class E shares corresponding to Mr. Pecego's entitlement under the 2008 Plan have been issued to his employer, Banco do Brasil.
(8)16,485 class E shares corresponding to Mr. Güemez'sémez's entitlement under the 2003 Restricted Stock Plan and the 2008 Stock Incentive Plan have been issued to his employer, Banco de Mexico.  In addition, an aggregate number of 2,119 stock options to which Mr. Güemezémez was entitled under the 2006 Stock Option Plan have been granted to Banco de Mexico; 1,058 of these options may be acquired within 60 days of December 31, 2008. Mexico.
(4)3,289 class E shares corresponding to Mr. Feletti's entitlement under the 2008 Stock Incentive Plan have been issued to his employer, Banco de la Nación Argentina.
(5)5,630 class E shares corresponding to Mr. Rabelo's entitlement under the 2003 Restricted Stock Plan and the 2008 Stock Incentive Plan were issued to his employer, Banco do Brasil.

For additional information regarding stock options granted to executive officers and directors, see Item 18, “Financial Statements,” note 14.16.

C.           Board Practices

Non-Executive Officers of the Board, Dignatarios

The following table sets forth the names, countries of citizenship, and ages of the Bank’s non-executive officers of the Board, or Dignatarios, and their current office or position with other institutions.  Dignatarios are elected annually by the members of the Board.  Dignatarios attend meetings of the Board, participate in discussions and offer advice and counsel to the Board, but do not have the power to vote, unless they also are directors of the Bank.

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Name
Country of Citizenship
Position held by
Dignatario
with the Bank
Age
Gonzalo Menéndez Duque
Director
Banco de Chile, Chile
ChileChairman of the Board62
Maria da Graça FrançaBrazilTreasurer62
Ricardo Manuel Arango
Partner
Arias, Fábrega & Fábrega
PanamaSecretary50

For information regarding the date of expiration of the current term of office of the members of the Board and the period during which the directors have served in that office, see Item 6 “Directors and Executive Officers.”

Committees of the Board

The Board conducts its business through meetings of the Board and through its committees.  During the fiscal year ended December 31, 2010, the Board held eleven meetings.  Each director attended an average of 96% of the total number of Board meetings held during the fiscal year ended December 31, 2010.  All directors except one attended the prior year’s annual meeting.
 
C. Board Practices
The following table sets forth the five committees established by the Board, the current number of members of each committee and the total number of meetings held by each committee during the fiscal year ended December 31, 2010:

Committee
 
Number of members
 
Total number of meetings held
Audit and Compliance Committee 4 7
Credit Policy and Risk Assessment Committee 5 5
Assets and Liabilities Committee 5 7
Business Committee 5 6
Nomination and Compensation Committee 4 10

Corporate Governance Committee

The Board has decided not to establish a corporate governance committee.  Given the importance that corporate governance has for the Bank, the Board has decided to address all matters related to corporate governance at the Board level and the Audit and Compliance Committee is responsible for promoting continued improvement in the Bank’s corporate governance and verifying compliance with all applicable policies.
 
The Bank has included the information regarding its corporate governance practices necessary to comply with Section 303A of the NYSE’s Listed Company Manual/Corporate Governance Rules (the “NYSE Rules”) on its website at http://www.bladex.com.  See Item 16G, “Corporate Governance.”

Stockholders,Shareholders, employees of the Bank, and other interested parties may communicate directly with the Board by corresponding to the address below:

54

Attn: Board of Directors of Banco Latinoamericano de Comercio Exterior, S.A.
c/o Mr. Gonzalo Menéndez Duque
Director &and Chairman of the Board of Directors
Calle 50 and Aquilino de la Guardia
P.O. Box 0819-08730
Panama City, Republic of Panama

 
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In addition, the Bank has selected EthicsPoint, an on-line reporting system, to provide stockholders,shareholders, employees of the Bank, and other interested parties with an alternative channel to report anonymously, any actual or possible violations of the Bank’s Code of Ethics, as well as other work-related situations or irregular or suspicious transactions, accounting matters, internal audit or accounting controls.  In order to file a report, a link is provided on the Bank’s website at http://www.bladex.com/www.bladex.com/Investors Center/Corporate Governance, under “Corporate Governance – Private Filing of Reports.”
Information as to Non-Executive Officers of the Board (“Dignatarios”)
The following table sets forth the names, countries of citizenship, and ages of the Bank’s non-executive officers (“Dignatarios”), and their current office or position with other institutions.  Dignatarios are elected annually by the members of the Board.  Dignatarios attend meetings of the Board, participate in discussions and offer advice and counsel to the Board, but do not have the power to vote, unless they also are directors of the Bank)Reports”.

Name
Country of Citizenship
Position held by Dignatario
with the Bank
Age
Gonzalo Menéndez Duque 1
Director
Banco de Chile, Chile
ChileChairman of the Board60
Maria da Graça FrançaBrazilTreasurer60
Ricardo Manuel Arango
Partner
Arias, Fábrega & Fábrega
PanamaSecretary48
1    Mr. Gonzalo Menéndez Duque was re-elected Chairman in April 2009 by the Board.

Committees of the Board
The Board conducts its business through meetings of the Board and through its committees.  During the year ended December 31, 2008, the Board held ten meetings.  Each director attended an average of 91% of the total number of Board meetings held during the year ended December 31, 2008.  Each director also attended the prior year’s annual shareholder’s meeting.
The following table sets forth the five committees established by the Board, the current number of members of each committee and the total number of meetings held by each committee during the fiscal year ended December 31, 2008:
Committee
 
Number of members
 
Total number of meetings held
Audit and Compliance Committee 4 8
Credit Policy and Risk Assessment Committee 5 5
Assets and Liabilities Committee 5 8
Business Committee 5 5
Nomination and Compensation Committee 4 11
Audit and Compliance Committee

The Audit and Compliance Committee is a standing committee of the Board.  According to its Charter, the Audit and Compliance Committee must be comprised of at least three directors.  The current members of the Audit and Compliance Committee are Will C. WoodHerminio Blanco (Chairman), Gonzalo Menéndez Duque, Esteban Alejandro Acerbo and Maria da Graça França, and Roberto Feletti.

55
a.

The Board has determined that all members of the Audit and Compliance Committee are independent directors under the terms defined by applicable laws and regulations, including rules promulgated by the SEC under the Sarbanes-Oxley Act, of 2002 (the “Sarbanes-Oxley Act”), Section 303A of the rules of the New York Stock Exchange, or NYSE, Rules, and Agreement No. 04-2001 of the Superintendency of Banks.Superintendency.  In addition, at least one of the members of the Audit and Compliance Committee is a “financial expert,” as defined in the rules enacted by the SEC under the Sarbanes-Oxley Act. The Audit and Compliance Committee’s financial expert is Gonzalo Menéndez Duque.

The purpose of the Audit and Compliance Committee is to provide assistance to the Board in fulfilling its oversight responsibilities regarding the processing of the Bank’s financial information, the integrity of the Bank’s financial statements, the Bank’s system of internal controls over financial reporting, the processperformance of both the internal audit and external audit,the independent registered public accounting firm, the Bank’s corporate governance, compliance with legal and regulatory requirements and the Bank’s Code of Ethics.  The Audit and Compliance Committee meets with each of the internal and independent auditors, and Bank’s management to discuss the Bank’s audited consolidated financial statements and management’s discussion and analysis.
 
The Audit and Compliance Committee meets at least six times a year, as required by the Superintendency of Banks, or more often if the circumstances so require.  During the fiscal year ended December 31, 2008,2010, the committee met eightseven times.
 
The Audit and Compliance Committee, in its capacity as a committee of the Board, is directly responsible for the appointment,final approval of the Board’s recommendation to the shareholders for the renewal or replacement of the Bank’s independent auditors at the Annual Shareholders’ Meeting, the compensation of the independent auditors (including the pre-approval of all audit and non-audit services), and oversight of the Bank’s independent auditors, including the resolution of disagreements regarding financial reporting between the Bank’s managementManagement and the independent auditors. The Bank’s independent auditors are required to report directly to the committee.

The Charter of the Audit and Compliance Committee requires an annual self-evaluation of the committee’s performance.
The Audit and Compliance Committee’s Charter may be found on the Bank’s website at http://www.bladex.com.
 
See Item 16A, “Audit and Compliance Committee Financial Expert” and Item 16C, “Principal Accountant Fees and Services.”

The Audit and Compliance Committee’s Charter may be found on the Bank’s website at http://www.bladex.com.

72

Credit Policy and Risk Assessment Committee (“CPER”)

The Credit Policy and Risk Assessment Committee is a standing committee of the Board.  No member of the Credit Policy and Risk Assessment Committee can be an employee of the Bank.  The Board has determined that, except for Guillermo Güémez García, all members of the Credit Policy and Risk Assessment Committee are independent.  The current members of the Credit Policy and Risk Assessment Committee are Guillermo Güémez GarcíaMario Covo (Chairman), Gonzalo Menéndez Duque, Will C. Wood,Guillermo Güémez García, , Herminio Blanco, and  José Maria Rabelo.João Carlos de Nobrega Pecego.

The Credit Policy and Risk Assessment Committee is in charge ofresponsible for reviewing and recommending to the Board all credit policies and procedures related to the management of the Bank’s risks.  The committee also reviews the quality and profile of the Bank’s credit facilities and the risk levels that the Bank is willing to assume.  The committee’s responsibilities also include, among other things, the review of operational and legal risks, the presentation for Board approval of country limits and limits exceeding delegated authority, and the approval of exemptions to credit policies.

The Credit Policy and Risk Assessment Committee performs its duties through the review of periodic reports from the Bank’s Risk Management, Department, and by way of its interaction with the Chief Risk Officer and other members of the Bank’s management.  The committee meets at least four times per year.  During the yearfiscal period ended December 31, 2008,2010, the committee held five meetings.

The Credit Policy and Risk Assessment Committee Charter may be found on the Bank’s website at http://www.bladex.com.

www.bladex.com.
56

Assets and Liabilities Committee

The Assets and Liabilities Committee is a standing committee of the Board.  No member of the Assets and Liabilities Committee can be an employee of the Bank. The Board has determined that except for Guillermo Güémez García, all members of the Assets and Liabilities Committee are independent directors. The current members of the Assets and Liabilities Committee are Mario Covo (Chairman), Herminio Blanco, Guillermo Güémez García (Chairman), Mario Covo, William Dick Hayes, João Carlos de Nobrega Pecego, and José Maria Rabelo.Manuel Sánchez González.
 
The Assets and Liabilities Committee is responsible for reviewing and recommending to the Board all policies and procedures related to the Bank’s managementManagement of assets and liabilities to meet profitability, liquidity, and market risk control objectives.  As part of its responsibilities, the committee reviews and recommends to the Board, among other things, policies related to the Bank’s funding, interest rate and liquidity gaps, liquidity investments, securities investments, derivative positions, funding strategies, and market risk.
 
The Assets and Liabilities Committee carries out its duties by reviewing periodic reports that it receives from the Bank’s management, and by way of its interaction with the Executive Vice President-Senior Managing Director, Treasury & Capital Markets and other members of the Bank’s management. The committee meets at least four times per year.  During the fiscal year ended December 31, 2008,2010, the committee held eightseven meetings.
 
The Assets and Liabilities Committee Charter may be found on the Bank’s website at http://www.bladex.com.www.bladex.com.

Business Committee

The Business Committee is a standing committee of the Board and was established in February 2008.  The Board has determined that all members of the Business Committee are independent directors. The current members of the Business Committee are William Dick Hayes (Chairman), Gonzalo Menéndez Duque, Herminio Blanco, Mario Covo Herminio Blanco and José Maria Rabelo.João Carlos de Nobrega Pecego.

 
73

The Business Committee’s primary responsibility is to support the Bank’s management with business ideas and strategies and to provide follow-up on the business directives of the Board. The committee’s main objective will always beis to improve the Bank’s efficiency in the management of the Bank’s various business units.
 
The Business Committee meets at least four times per year. During the fiscal year ended December 31, 2008,2010, the committee held fivesix meetings.

The Business Committee Charter may be found on the Bank’s website at http://www.bladex.com.

Nomination and Compensation Committee

The Nomination and Compensation Committee is a standing committee of the Board.  No member of the Nomination and Compensation Committee canmay be an employee of the Bank.  The Board has determined that all members of the Nomination and Compensation Committee are independent underin accordance with the terms defined by applicable laws and regulations, including rules promulgated by the SEC under the Sarbanes-Oxley Act, Section 303A of the rules of the NYSE, Rules, and Agreement No. 04-2001 of the Superintendency of Banks.  The current members of the Nomination and Compensation Committee are Maria da Graça França (Chairman), Mario Covo,Esteban Alejandro Acerbo, William Dick Hayes and Roberto Feletti.and Manuel Sánchez González.
 
The Nomination and Compensation Committee meets at least fourfive times per year. During the fiscal year ended December 31, 2008,2010, the committee held eleventen meetings.
 
The Nomination and Compensation Committee’s primary responsibilities are to assist the Board by identifying candidates to become Board members and recommending nominees for the annual meetings of stockholders;shareholders; by making recommendations to the Board concerning candidates for Chief Executive Officer and other executive officers and counseling on succession planning for executive officers; by recommending compensation for Board members and committee members, including cash and equity compensation; by recommending compensation for executive officers and employees of the Bank, including cash and equity compensation, policies for senior management and employee benefit programs and plans; by reviewing and recommending changes to the Bank’s Code of Ethics; and by advising executive officers on issues related to the Bank’s personnel.
 

57
The Nomination and Compensation Committee will considerconsiders qualified director candidates recommended by stockholders.shareholders.  All director candidates will beare evaluated in the same manner regardless of how they are recommended, including recommendations by stockholders.shareholders.  For the current director nominees, the committee considers candidate qualifications and other factors, including, but not limited to, diversity in background and experience, industry knowledge, educational level and the needs of the Bank.  StockholdersShareholders can mail any recommendations and an explanation of the qualifications of the candidates to the Secretary of the Bank at Calle 50 and Aquilino de la Guardia, P.O. Box 0819-08730, Panama City, Republic of Panama.
 
Although the Bank does not have a formal policy or specific guidelines for the consideration of diversity by the Nomination and Compensation Committee in indentifying nominees for director, diversity is one of the factors the Nomination and Compensation Committee considers. The Nomination and Compensation Committee generally views and values diversity from the perspective of professional and life experiences, and recognizes that diversity in professional and life experiences may include considerations of gender, race, national origin or other characteristics, in identifying individuals who possess the qualifications that the Committee believes are important to be represented on the Board. The current composition of the Bank’s Board of Directors, where out of a total of ten (10) members six (6) different nationalities are represented, reflects the importance given to diversity by the Nomination and Compensation Committee. 

74

The Charter of the Nomination and Compensation Committee requires an annual self-evaluation of the committee’s performance.
 
The Nomination and Compensation Committee Charter may be found on the Bank’s website at http://www.bladex.com.www.bladex.com.

Mr. Jaime Rivera is the only executive officer that serves as a member of the Board.  None of the Bank’s executive officers serve as a director or a member of the Nomination and Compensation Committee, or any other committee serving an equivalent function, or of any other entity that has one or more of its executive officers serving as a member of thesuch entity’s Board or the Nomination and Compensation Committee. None of the members of the Nomination and Compensation Committee has ever been an employee of the Bank.

Advisory Council

The Advisory Council was created by the Board in April 2000 pursuant to the powers granted to the Board under the Bank’s Amended and Restated Articles of Incorporation.  The dutiesprimary duty of Advisory Council members consist primarily of providingis to provide advice to the Board with respect to the business of the Bank in their areas of expertise.  Each member of the Advisory Council receives $5,000 for each Advisory Council meeting attended. The aggregate amount of fees for services rendered by the Advisory Council during 20082010 amounted to $10,000.$15,000.  During the fiscal year ended December 31, 2008,2010, the Advisory Council met once.  The Advisory Council meets when convened by the Board.

The following table sets forth the names, positions, countries of citizenship and ages of the members of the Advisory Council of the Bank:

Name
 
Position
 
Country of Citizenship
 
Age
Roberto Feletti
Secretary of Economy
Ministry of Economy and Public Finance
Argentina52
Roberto Teixeira da Costa 
Board Member
Sul America, S.A.
 Brazil 7476
Carlos Martabit 
General Manager, Finance Division
Banco del Estado de ChileBancoEstado
 Chile 55
Alberto Motta, Jr
President
Inversiones Bahía Ltd.
Panama62
Enrique CornejoMinister of Transportation and Communications, PeruPeru5257
Santiago Perdomo 
President
Banco Colpatria – Red Multibanca Colpatria
 Colombia 5153
Alberto Motta, Jr
President
Inversiones Bahía Ltd.
Panama64
Enrique CornejoMinister of Transportation and Communications, PeruPeru54

D.           Employees

As of December 31, 2008,The following table presents the total number of permanent employees, was 194, which were geographically distributed, as follows: Head Office in Panama: 155; New York Agency: 7; Bladex Asset Management: 5; representative office in Argentina: 5; representative office in Brazil: 13; representative office in Mexico: 5; and Florida International Administrative Office: 4.
at the dates indicated:

 
5875
 

E. Share Ownership
  
As of December 31,
 
  
2010
  
2009
  
2008
 
Bladex Head Office in Panama  132   127   155 
New York Agency  7   7   7 
Bladex Asset Management  9   5   5 
Representative Office in Argentina  4   3   5 
Representative Office in Brazil  18   12   13 
Representative Office in Mexico  12   6   5 
Florida International Administrative Office  6   4   4 
Total Number of Permanent Employees  188   164   194 
 
The increase in number of permanent employees during 2010 was associated with the expansion of the Bank’s Commercial Division and the risk management area, as a result of the deployment of the Bank’s strategic plan.
In February 2009, the Bank conducted a reduction in workforce mainly at its headquarters for the purpose of reducing headcount and associated personnel expenses.
E.           Share Ownership

See Item 6,6.B, “Directors, Senior ManagementExecutive Officers and Employees/Compensation/Beneficial Ownership.”

Item 7.    Major Stockholders and Related Party Transactions

A.           Major Stockholders

As of December 31, 2008,2010, the Bank was not directly or indirectly owned or controlled by another corporation or any foreign government, and no person was the registered owner of more than 9.7%7.4% of the total outstanding shares of voting capital stock of the Bank.

The following table sets forth information regarding the Bank’s stockholders that are the beneficial owners of 5% or more of any one class of the Bank’s voting stock atas of December 31, 2008:2010:

 
  
At December 31, 2008
 
  
Number of Shares
  
% of Class
  
% of Total
 
Class A         
Banco de la Nación Argentina1
Bartolomé Mitre 326
1036 Buenos Aires, Argentina
  1,045,348.00   16.5   2.9 
Banco do Brasil2
SBS Quadra 1-Bloco A
CEP 70.0070-100
Brasilia, Brazil
  974,551.00   15.4   2.7 
Banco de Comercio Exterior de Colombia
Edif. Centro de Comercio Internacional
Calle 28 No. 13A-15
Bogotá, Colombia
  488,547.00   7.7   1.3 
Banco de la Nación (Perú)
Ave. Republica de Panamá 3664
San Isidro, Lima, Perú
  446,556.00   7.0   1.2 
Banco Central del Paraguay
Federación Rusa y Sargento Marecos
Asunción, Paraguay
  434,658.00   6.9   1.2 
Banco Central del Ecuador
Ave. Amazonas entre Juan Pablo Sanz y Atahualpa
Quito, Ecuador
  431,217.00   6.8   1.2 
Banco del Estado de Chile
Ave. Libertador Bernardo O’Higgins 1111
Santiago, Chile
  323,412.75   5.1   0.9 
Sub-total shares of Class A Common Stock  4,144,289.75   65.3%  11.4%
Total Shares of Class A Common Stock  6,342,189.16   100.0%  17.4%
             
Class B 
Number of Shares
  
% of Class
  
% of Total
 
Banco de la Provincia de Buenos Aires.
San Martin 137
C1004AAC Buenos Aires, Argentina
  884,460.98   33.8   2.4 
Banco de la Nación Argentina
Bartolomé Mitre 326
1036 Buenos Aires, Argentina
  295,944.50   11.3   0.8 
The Korea Exchange Bank
181, Euljiro 2GA
Jungu, Seoul, Korea
  147,172.50   5.6   0.4 
Sub-total shares of Class B Common Stock  1,327,577.98   50.7%  3.6%
Total Shares of Class B Common Stock  2,617,783.63   100.0%  7.2%
             
Class E 3
 
Number of Shares
  
% of Class
  
% of Total
 
Arnhold and S. Bleichroeder Advisers, LLC
1345 Avenue of the Americas
New York, New York 10105-4300
  3,541,212.00   12.9   9.7 
Brandes Investment Partners, LP
11988 El Camino Real, Suite 500
San Diego, California 92130
  2,173,513.00   7.9   6.0 
Sub-total shares of Class E Common Stock  5,714,725.00   20.8%  15.7%
Total Shares of Class E Common Stock  27,453,115.00   100.0%  75.4%
             
Total Shares of Common Stock  36,413,087.79   100.0%  100.0%
76

  
As of December 31, 2010
 
  
Number of Shares
  
% of Class
  
% of Total Common
Stock
 
Class A Common Stock         
Banco de la Nación Argentina (1)
Bartolomé Mitre 326
1036 Buenos Aires, Argentina
  1,045,348.00   16.5   2.8 
Banco do Brasil (2)
SBS Quadra 1-Bloco A
CEP 70.0070-100
Brasilia, Brazil
  974,551.00   15.4   2.7 
Banco de Comercio Exterior de Colombia
Edif. Centro de Comercio Internacional
Calle 28 No. 13A-15
Bogotá, Colombia
  488,547.00   7.7   1.3 
Banco de la Nación (Perú)
Ave. Republica de Panamá 3664
San Isidro, Lima, Perú
  446,556.00   7.0   1.2 
Banco Central del Paraguay
Federación Rusa y Sargento Marecos
Asunción, Paraguay
  434,658.00   6.9   1.2 
Banco Central del Ecuador
Ave. Amazonas entre Juan Pablo Sanz y Atahualpa
Quito, Ecuador
  431,217.00   6.8   1.2 
Banco del Estado de Chile
Ave. Libertador Bernardo O’Higgins 1111
Santiago, Chile
  323,412.75   5.1   0.9 
Sub-total shares of Class A Common Stock  4,144,289.75   65.3   11.3 
Total Shares of Class A Common Stock  6,342,189.16   100.0   17.3 

Class B Common Stock 
Number of Shares
  
% of Class
  
% of Total Common
Stock
 
Banco de la Provincia de Buenos Aires.
San Martin 137
C1004AAC Buenos Aires, Argentina
  884,460.98   34.8   2.4 
Banco de la Nación Argentina
Bartolomé Mitre 326
1036 Buenos Aires, Argentina
  295,944.50   11.6   0.8 
The Korea Exchange Bank
181, Euljiro 2GA
Jungu, Seoul, Korea
  147,172.50   5.8   0.4 
Sub-total shares of Class B Common Stock  1,327,577.98   52.2   3.6 
Total Shares of Class B Common Stock  2,542,020.93   100.0   6.9 

Class E Common Stock (3)
 
Number of Shares
  
% of Class
  
% of Total Common
Stock
 
Brandes Investment Partners, LP
11988 El Camino Real, Suite 500
San Diego, California 92130
  2,732,294.00   9.8   7.4 
LSV Asset Management
1 N. Wacker Drive, Suite 4000
Chicago, Illinois 60606
  1,628,617.00   5.9   4.4 
Sub-total shares of Class E Common Stock  4,360,911.00   15.7   11.9 
Total Shares of Class E Common Stock  27,826,330.00   100.0   75.8 

Class F Common Stock 
Number of Shares
  
% of Class
  
% of Total Common
Stock
 
Total Shares of Class F Common Stock  0   0.0   0.0 
Total Shares of Common Stock  36,710,540.09       100.0 

1 (1)Does not include an aggregate of 3,28911,294 class E common shares corresponding to Mr. Roberto Feletti’s entitlementformer Directors’ entitlements under the 2008 Stock Incentive Plan, that were issued to histheir employer, Banco de la Nación Argentina.
2 (2)Does not include an aggregate of 5,63012,492 class E common shares corresponding to Mr. José Maria Rabelo’s entitlementformer Directors’ entitlements under the 2003 Restricted Stock Plan and the 2008 Stock Incentive Plan that were issued to histheir employer, Banco do Brasil.
3(3) Source:  Schedule 13G filing with the U.S. Securities and Exchange Commission dated December 31, 2008.2010.

 
5977
 

All common shares have the same rights and privileges regardless of their class, except that:
 ·The affirmative vote of three-quarters (3/4) of the issued and outstanding Class A shares is required (1) to dissolve and liquidate the Bank, (2) to amend certain material provisions of the Amended and Restated Articles of Incorporation, (3) to merge or consolidate the Bank with another entity and (4) to authorize the Bank to engage in activities other than those described in its Amended and Restated Articles of Incorporation;
 ·The Class E shares are freely transferable without restriction to any person, while the Class A shares, Class B shares and Class BF shares can only be transferred to qualified holders;holders of each class;
 ·The Class B shares and Class F shares may be converted into Class E shares;
 ·The holders of Class A shares, Class B shares and Class BF shares benefit from pre-emptive rights in respect of shares of the same class of shares owned by them that may be issued by virtue of a capital increase, in proportion to the shares of the class owned by them, but the holders of Class E shares do not; and
 ·All classes vote separately for their respective directors.  The holders of the Class A common shares have the right to elect three (3) Directors; the holders of the Class E common shares can elect five (5) Directors; and the holders of the Class F common shares have the right to elect one (1) Director, so long as the number of issued and outstanding Class F common shares is equal to or greater than fifteen per cent (15%) of the total number of issued and outstanding common shares of the corporation.

Set forth below are the number of shares of each class of the Bank’s stock issued and outstanding as of December 31, 2010:
Class of Shares
Number of Shares
Outstanding as of
December 31, 2010
Class A Common Shares6,342,189.16
Class B Common Shares2,542,020.93
Class E Common Shares27,826,330.00
Class F Common Shares0
Total Common Shares36,710,540.09

The Bank had no preferred stock issued and outstanding as of December 31, 2010.

B.Related Party Transactions

Certain directors of the Bank are executive officers of banks and/or other institutions located in Latin America, the Caribbean and elsewhere.  Some of these banks and/or other institutions own shares of the Bank’s common stock and have entered into loan transactions with the Bank in the ordinary course of business.  The terms and conditions of the loan transactions, including interest rates and collateral requirements, are substantially the same as the terms and conditions of comparable loan transactions entered into with other persons under similar market conditions.conditions, and did not involve more than the normal risk of collectability or present other unfavorable features. As a matter of policy, directors of the Bank do not participate in the approval process for credit facilities extended to institutions of which they are executive officers or directors, nor do they participate with respect to decisions regarding country exposure limits in countries in which thesuch institutions are domiciled.

AtAs of December 31, 2008,2010, the Bank did not have any outstanding credit facility with any related parties as defined by the Superintendency of Banks.

C.           Interests of Experts and Counsel

Not required in this Annual Report.

 
78

Item 8.     Financial Information

A.           Consolidated Statements and Other Financial Information

The information included in Item 18 of this Annual Report is referred to and incorporated by reference into this Item 8.A.

There have been no legal or arbitration proceedings, which may have, or have had in the recent past, significant effects on the Bank’s financial position or profitability, including proceedings pending or known to be contemplated.

Dividends

The Board’s policy is to declare and distribute quarterly cash dividends on the Bank’s common stock, and the Board from time to time has declared special dividends to its stockholders.stock.  Dividends are declared at the Board’s discretion.discretion and, from time to time, the Bank has declared special dividends.

  
During 2010, the Bank increased quarterly dividends from $0.15 to $0.17 in the third quarter of the fiscal year 2010 and from $0.17 to $0.20 per share in the fourth quarter of fiscal year 2010.
60
During 2010, Bladex declared $24.6 million in quarterly dividends, compared to $21.9 million in 2009, and compared to $32.0 million in 2008.  No special dividends were declared during 2010, 2009 and 2008.

The following table showspresents information about common dividends paid on the dates indicated:

Payment date
 
Record date
 
Dividend per share
 
February 11, 2011 February 3, 2011 $0.20 
November 1, 2010 October 22, 2010 $0.17 
August 4, 2010 July 26, 2010 $0.15 
May 6, 2010 April 26, 2010 $0.15 
February 8, 2010 January 29, 2010 $0.15 
November 2, 2009 October 23, 2009 $0.15 
August 3, 2009 July 23, 2009 $0.15 
May 7, 2009 April 27, 2009 $0.15 
February 9, 2009 January 29, 2009 $0.22 
October 31, 2008 October 22, 2008 $0.22 
July 31, 2008 July 21, 2008 $0.22 
April 4, 2008 March 25, 2008 $0.22 
January 17, 2008 January 7, 2008 $0.22 
Payment date
 
Record date
 
Dividend per share
 
May 7, 2009 April 27, 2009 $0.15 
February 9, 2009 January 29, 2009 $0.22 
October 31, 2008 October 22, 2008 $0.22 
July 31, 2008 July 21, 2008 $0.22 
April 4, 2008 March 25, 2008 $0.22 
January 17, 2008 January 7, 2008 $0.22 

The following table showspresents information about preferred dividends paid on the dates indicated:
 
Payment date
 
Record date
 
Dividend per share
 
May 15, 2006 April 28, 2006 $2.22 
November 15, 2005 October 31, 2005 $2.18 
May 16, 2005 April 29, 2005 $2.15 
November 15, 2004 November 8, 2004 $1.90 
May 17, 2004 April 30, 2004 $0.40 
Payment date
 
Record date
 
Dividend per share
 
May 15, 2006 April 28, 2006 $2.22 
November 15, 2005 October 31, 2005 $2.18 
May 16, 2005 April 29, 2005 $2.15 
November 15, 2004 November 8, 2004 $1.90 
May 17, 2004 April 30, 2004 $0.40 
The Bank has no preferred shares issued and outstanding as of December 31, 2010.

B.           Significant Changes

No significant change has occurred since the date of the annual financial statements (December 31, 2008) and /or since the most recent interim financial statements (March 31, 2009)2010).

 
Item 9.                    The Offer and Listing
79

Item 9.The Offer and Listing

A.Offer and Listing Details

The Bank’s Class E shares are listed on the NYSE under the symbol “BLX.”  The following table shows the high and low sales prices of the Class E shares on the NYSE for the periods indicated:

  
Price per Class E Share (in $)
 
  
High
  
Low
 
2010  18.99   11.87 
2009  15.09   6.83 
2008  20.74   8.17 
2007  23.17   15.52 
2006  18.70   14.59 
2011:        
Abril  18.04   16.75 
March  17.89   16.51 
February  18.11   16.41 
January  19.03   17.00 
2010:        
December  18.99   16.42 
November  16.93   15.13 
         
2010:        
First Quarter  15.14   13.33 
Second Quarter  16.48   11.87 
Third Quarter  15.00   11.90 
Fourth Quarter  18.99   14.16 
2009:        
First Quarter  14.99   6.83 
Second Quarter  13.89   9.26 
Third Quarter  15.09   11.80 
Fourth Quarter  15.00   13.10 
  
Price per Class E Share (in $)
 
  
High
  
Low
 
2008  20.74   8.17 
2007  23.17   15.52 
2006  18.70   14.59 
2005  25.50   15.34 
2004  20.00   14.00 
2009:        
May  13.89   11.92 
April  12.94   9.26 
March  11.48   6.83 
February  11.38   8.61 
January  14.99   8.78 
2008:        
December  14.89   11.09 
2009:        
First Quarter  14.99   6.83 
2008:        
First Quarter  16.53   13.33 
Second Quarter  19.46   15.50 
Third Quarter  20.74   13.25 
Fourth Quarter  14.89   8.17 
2007:        
First Quarter  17.12   15.52 
Second Quarter  21.60   16.50 
Third Quarter  23.17   16.53 
Fourth Quarter  21.29   15.81 

B.Plan of Distribution

Not required in this Annual Report.

C.Markets

The Bank’s Class A shares and Class B shares were sold in private placements or sold in connection with the Bank’s 2003 rights offering, are not listed on any exchange and are not publicly traded.  The Bank’s Class E shares, which constitute the only class of shares publicly traded (listed on the NYSE), represent approximately 75%75.8% of the total shares of the Bank’s common stock issued and outstanding atas of December 31, 2008.2010.  The Bank’s Class B shares are convertible into Class E shares on a one-to-one basis.

61
D.Selling Stockholders

Not required in this Annual Report.

E.Dilution

Not required in this Annual Report.

F.Expenses of the Issue

Not required in this Annual Report.

80

Item 10.Additional Information

A.Share Capital

Not required in this Annual Report.
Item 10.                  Additional Information
A. Share Capital
Not required in this Annual Report.

B.Memorandum and Articles of Association

Articles of Incorporation

Bladex is a bank organized under the laws of the Republic of Panama, and its Articles of Incorporation are recorded in the Public Registry Office of Panama, Republic of Panama, Section of Mercantile Persons, at microjacket 021666, roll 1050 and frame 0002.

Article 2 of Bladex’s Articles of Incorporation states that the purpose of the Bank is to promote the economic development and foreign trade of Latin American countries.  To achieve this purpose, the Bank may engage in any banking or financial business, investment or other activity intended to promote the foreign trade and economic development of countries in Latin America.  The Articles of Incorporation provide that Bladex may engage in activities beyond those described above provided that it has obtained stockholder approval in a resolution adopted upon the affirmative majority vote of the common shares, either present or represented, in a meeting of stockholders called to obtain such authorization, including the affirmative vote of the holders of three-fourths (3/4) of the Class A shares issued and outstanding.

Bladex’s Articles of Incorporation provide that the Board shall direct and control the business and management of the assets of the Bank, except for those matters specifically reserved to stockholders by law or the Articles of Incorporation.  The Board, however, may grant general and special powers of attorney authorizing directors, officers and employees of the Bank or other persons to transact such business and affairs within the competence of the Board, as the Board may deem convenient to entrust to such persons.

The Articles of Incorporation of Bladex do not contain a provision limiting the ability of the Board to approve a proposal, arrangement or contract in which a Director is materially interested, a provision limiting the ability of the Board to fix the compensation of its members, a provision requiring the mandatory retirement of a Director at any prescribed age, or a provision requiring a person to own a certain number of shares to qualify as a Director.

The Board consists of ten members: three Directors elected by the holders of the Class A common shares; five Directors elected by the holders of the Class E common shares; and two Directors elected by the holders of all common shares.  For so long as the number of Class F common shares issued and outstanding is equal to or greater than fifteen percent (15%) of the total number of common shares issued and outstanding, the holders of the Class F common shares will have the right to elect one director and the Board will consist of eleven members.  As of December 31, 2010, no Class F shares or preferred shares were issued and outstanding.

The number of Class F shares issued and outstanding is measured annually as provided in the Articles of Incorporation to determine whether the holders of Class F shares have a right to elect a Director or, if the holders of Class F shares have previously elected a Director whose term is not scheduled to expire, to determine whether to retain or replace such Director on the Board at the following annual ordinary shareholders’ meeting.

The Directors are elected by stockholders for periods of three (3) years and they may be re-elected.  The holders of the Class A, Class E and Class F shares vote separately as a class in the election of Directors representing their respective class.  In the election of Directors, each stockholder of each class electing a Director has a number of votes equal to the number of shares of such class held by such stockholder multiplied by the number of Directors to be elected by such class.  The stockholder may cast all votes in favor of one candidate or distribute them among two or more of the Directors to be elected, as the shareholder may decide.

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All common shares have the same rights and privileges regardless of their class, except that:
·the affirmative vote of three-quarters (3/4) of the issued and outstanding Class A shares is required (A) to dissolve and liquidate the Bank, (B) to amend certain material provisions of the Articles of Incorporation, (C) to merge or consolidate the Bank with another entity and (D) to authorize the Bank to engage in activities other than those described as the purposes of the Bank in its Articles of Incorporation;
·the Class E  shares are freely transferable, but the Class A  shares, Class B  shares and Class F shares may only be transferred to qualified holders;
·the Class B  shares and Class F shares may be converted into Class E shares;
·the holders of Class A  shares, Class B  shares and Class F shares benefit from pre-emptive rights, but the holders of Class E  shares do not;
·the classes vote separately for their representative directors; and
·the rights, preferences, privileges and obligations of the preferred shares are determined by the Board at the time of their issuance in a certificate of designation.

Under the Bank’s Articles of Incorporation, preferred shares have no voting rights, except in accordance with their certificate of designation mentioned above.  Holders of preferred shares will have the right to elect one Director only upon a default in the terms of such preferred shares and only if contemplated in the certificate of designation.  In the event the holders of the preferred shares are entitled to elect a Director, the total number of Directors in the Board will be increased by one.  The rights of the holders of the common shares may be changed by an amendment to the Articles of Incorporation of the Bank.

Amendments to the Articles of Incorporation may be adopted by the affirmative majority vote of the common shares represented at the respective meeting, except for the following amendments which require, in addition, the affirmative vote of three-quarters (3/4) of all issued and outstanding Class A shares:  (i) any amendment to the Bank’s purposes or powers, (ii) any amendment to the capital structure of the Bank and the qualifications to become a holder of any particular class of shares, (iii) any amendment to the provisions relating to the notice, quorum and voting at stockholders’ meetings, (iv) any amendment to the composition and election of the Board, as well as notices, quorum and voting at meetings of Directors, (v) any amendments to the powers of the Chief Executive Officer of the Bank and (vi) any amendments to the fundamental financial policies of the Bank.

The Articles of Incorporation of Bladex provide that there will be a general meeting of holders of the common shares every year, on such date and in such place as may be determined by resolution of the Board, to elect Directors and transact any other business duly submitted to the meeting by the Board.  In addition, extraordinary meetings of holders of the common shares may be called by the Board, as it deems necessary.  The Board or the Chairman of the Board must call an extraordinary meeting of holders of the common shares when requested in writing by one or more holders of common shares representing at least one-twentieth (1/20) of the issued and outstanding capital.

Notice of meetings of stockholders, whether ordinary or extraordinary, are personally delivered to each registered shareholder or sent by fax, telex, courier, air mail or any other means authorized by the Board of the Directors, at least 30 days before the date of the meeting, counted from the date that the notice is sent.  The notice of the meeting must include the agenda of the meeting.  At any meeting of stockholders, stockholders with a right to vote may be represented by a proxy, who need not be a shareholder and who may be appointed by public or private document, with or without power of substitution.

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Upon request to the Board or the Chairman of the Board, stockholders representing at least one-twentieth (1/20) of the issued and outstanding shares of any given class may hold a meeting separately as a class for the purpose of considering any matter which, in accordance with the provisions of the Articles of Incorporation and the By-laws, is within their competence.  In order to have a quorum at any meeting of stockholders, a majority of the common shares issued and outstanding must be represented at the meeting.  Whenever a quorum is not obtained at a meeting of stockholders, the meeting shall be held on the second date set forth in the notice of the meeting.  All resolutions of stockholders shall be adopted by the affirmative majority vote of the common shares represented at the meeting where the resolution was adopted, except where a super-majority vote of the Class A shareholders is required, as described above.

Class A shares may be issued only as registered shares in the name of the following entities in Latin American countries:  (i) central banks, (ii) banks in which the State is the majority shareholder or (iii) other government agencies.  Class B shares may be issued only in the name of banks or financial institutions.  Class E shares and preferred shares may be issued in the name of any person, whether a natural person or a legal entity.  Class F shares may be issued only (i) in the name of state entities or agencies of countries that are not Latin American countries, including central banks and banks in which the State is the majority shareholder or (ii) in the name of multilateral financial institutions, whether international or regional.

Neither Bladex’s Articles of Incorporation nor its By-laws contain any provision requiring disclosure with respect to a shareholder’s ownership above a certain threshold. There are no conditions imposed by the Articles of Incorporation regarding changes in capital that are more stringent than conditions imposed by Panamanian law.
 
The Amended and Restated Articles of Incorporation were filed as an exhibit to the Form 20-F for the fiscal year ended December 31, 20022008 filed with the SEC on February 24, 2003June 26, 2009 and Item 10.B ofthe By-Laws were filed as an exhibit to the Form 20-F for the fiscal year ended December 31, 20042009 filed with the SEC on June 23, 2005 are referred to and incorporated by reference into this Item 10.B.11, 2010.

C.Material Contracts

The Bank has not entered into any material contract outside the ordinary course of business during the two-year period immediately preceding the date of this Annual Report.  See Item 18, “Financial Statements,” note 20.

D.Exchange Controls

Currently, there are no restrictions or limitations under Panamanian law on the export or import of capital, including foreign exchange controls, the payment of dividends or interest, or the rights of foreign stockholders to hold or vote stock.

E.Taxation

The following is a summary of certain U.S. federal and Panamanian tax matters that may be relevant with respect to the acquisition, ownership and disposition of the Bank’s Class E shares.  Prospective purchasers of Class E shares should consult their own tax advisors as to the United States, Panamanian or other tax consequences of the acquisition, ownership and disposition of Class E shares.

This summary does not address the consequences of the acquisition, ownership or disposition of the Bank’s Class A or Class B shares.

 
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United States Taxes

This summary describes the principalmaterial U.S. federal income tax consequences of the ownership and disposition of the Class E shares, but does not purport to be a comprehensive description of all of the tax considerations that may be relevant to holders of Class E shares.  This summary applies only to current holders that hold Class E shares as capital assets and does not address classes of holders that are subject to special treatment under the United States Internal Revenue Code of 1986, as amended, (the “Code”),or the Code, such as dealers in securities or currencies, financial institutions, tax-exempt entities, regulated investment companies, insurance companies, securities traders that elect mark-to-market tax accounting, persons subject to the alternative minimum tax, certain U.S. expatriates, persons holding Class E shares as part of a hedging, constructive ownership or conversion transaction or a straddle, holders whose functional currency is not the U.S. dollar, or a holder that owns 10% or more (directly, indirectly or constructively) of the voting shares of the Bank.

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This summary is based upon the Code, existing, temporary and proposed regulations promulgated there under, judicial decisions and administrative pronouncements, as all in effect on the date of this Annual Report and which are subject to change (possibly on a retroactive basis) and to differing interpretations.  Purchasers or holders of Class E shares should consult their own tax advisors as to the U.S. federal, state and local, and foreign tax consequences of the ownership and disposition of Class E shares in their particular circumstances.

As used herein, a “U.S. Holder” refers to a beneficial holder of Class E shares that is, for U.S. federal income tax purposes, (1) an individual citizen or resident of the United States, (2) a corporation, or an entity treated as a corporation, organized or created in or under the laws of the U.S. or any political subdivision thereof, (3) an estate the income of which is subject to U.S. federal income taxation without regard to the source of its income, (4) a trust, if both (A) a court within the United States is able to exercise primary supervision over the administration of the trust and (B) one or more U.S. persons (as defined in the Code) have the authority to control all substantial decisions of the trust, or a trust that has made a valid election under U.S. Treasury Regulations to be treated as a domestic trust, and (5) any holder otherwise subject to U.S. federal income taxation on a net income basis with respect to Class E shares (including a non-resident alien individual or foreign corporation that holds, or is deemed to hold, any Class E share in connection with the conduct of a U.S. trade or business).  If a partnership (including for this purpose any entity treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of Class E shares, the U.S. federal income tax consequences to a partner in the partnership will generally depend on the status of the partner and the activities of the partnership.  A holder of Class E shares that is a partnership and the partners in such partnership should consult their own tax advisors regarding the U.S. federal income tax consequences of the ownership and disposition of Class E shares.

Taxation of Distributions

Subject to the “Passive Foreign Investment Company Status” discussion below, to the extent paid out of current or accumulated earnings and profits of the Bank as determined under U.S. federal income tax principles (“earnings and profits”), distributions made with respect to Class E shares (other than certain pro rata distributions of capital stock of the Bank or rights to subscribe for shares of capital stock of the Bank) will be includable in income of a U.S. Holder as ordinary dividend income in accordance with the U.S. Holder’s regular method of accounting for U.S. federal income tax purposes whether paid in cash or Class E shares.  To the extent that a distribution exceeds the Bank’s earnings and profits, such distribution will be treated, first, as a nontaxable return of capital to the extent of the U.S. Holder’s tax basis in the Class E shares and will reduce the U.S. Holder’s tax basis in such shares, and thereafter as a capital gain from the sale or disposition of Class E shares.  See Item 10, “Additional Information/Taxation/United States Taxes-Taxation of Capital Gains.”  The amount of the distribution will equal the gross amount of the distribution received by the U.S. Holder, including any Panamanian taxes withheld from such distribution.

 
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Distributions made with respect to Class E shares out of earnings and profits generally will be treated as dividend income from sources outside the United States.  U.S. Holders that are corporations will not be entitled to the “dividends received deduction” under Section 243 of the Code with respect to such dividends.  Dividends may be eligible for the special 15% rate applicable to “qualified dividend income” received by an individual, provided, that (1) the Bank is not a “passive foreign investment company” in the year in which the dividend is paid nor in the immediately preceding year, (2) the class of stock with respect to which the dividend is paid is readily tradable on an established securities market in the U.S., and (3) the U.S. Holder held his shares for more than 60 days during the 121-day period beginning 60 days prior to the ex-dividend date and meets other holding period requirements.  Subject to certain conditions and limitations, Panamanian tax withheld from dividends will be treated as a foreign income tax eligible for deduction from taxable income or as a credit against a U.S. Holder’s U.S. federal income tax liability.  Distributions of dividend income made with respect to Class E shares generally will be treated as “passive” income or, in the case of certain U.S. Holders, “general category income,” for purposes of computing a U.S. Holder’s U.S. foreign tax credit.

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Less than 25 percent of the Bank’s gross income is effectively connected with the conduct of a trade or business in the United States, and the Bank expects this to remain true.  If this remains the case, a holder of Class E shares that is not a U.S. Holder, (a “non-U.S. Holder”)or non-U.S. Holder, generally will not be subject to U.S. federal income tax or withholding tax on distributions received on Class E shares that are treated as dividend income for U.S. federal income tax purposes.  Special rules may apply in the case of non-U.S. Holders (1) that are engaged in a U.S. trade or business, (2) that are former citizens or long-term residents of the United States, “controlled foreign corporations,” corporations that accumulate earnings to avoid U.S. federal income tax, and certain foreign charitable organizations, each within the meaning of the Code, or (3) certain non-resident alien individuals who are present in the United States for 183 days or more during a taxable year.  Such persons should consult their own tax advisors as to the U.S. federal income or other tax consequences of the ownership and disposition of Class E shares.

Taxation of Capital Gains

Subject to the “Passive Foreign Investment Company Status” discussion below, gain or loss realized by a U.S. Holder on the sale or other disposition of Class E shares will generally be subject to U.S. federal income tax as capital gain or loss in an amount equal to the difference between the U.S. Holder’s tax basis in the Class E shares and the amount realized on the disposition.  Such gain will be treated as long-term capital gain if the Class E shares are held by the U.S. Holder for more than one year at the time of the sale or other disposition.  Otherwise, the gain will be treated as a short-term capital gain.  Gain realized by a U.S. Holder on the sale or other disposition of Class E shares generally will be treated as U.S. source income for U.S. foreign tax credit purposes, unless the gain is attributable to an office or fixed place of business maintained by the U.S. Holder outside the United States or is recognized by an individual whose tax home is outside the United States, and certain other conditions are met.  For U.S. federal income tax purposes, capital losses are subject to limitations on deductibility.  As a general rule, U.S. Holders that are corporations can use capital losses for a taxable year only to offset capital gains in that year.  A corporation may be entitled to carry back unused capital losses to the three preceding tax years and to carry over losses to the five following tax years.  In the case of non-corporate U.S. Holders, capital losses in a taxable year are deductible to the extent of any capital gains plus ordinary income of up to $3,000.  Unused capital losses of non-corporate U.S. Holders may be carried over indefinitely.

A non-U.S. Holder of Class E shares will generally not be subject to U.S. federal income tax or withholding tax on gain realized on the sale or other disposition of Class E shares.  However, special rules may apply in the case of non-U.S. Holders (1) that are engaged in a U.S. trade or business, (2) that are former citizens or long-term residents of the United States, “controlled foreign corporations,” corporations which accumulate earnings to avoid U.S. federal income tax, and certain foreign charitable organizations, each within the meaning of the Code, or (3) certain non-resident alien individuals who are present in the United States for 183 days or more during a taxable year.  Such persons should consult their own tax advisors as to the United States or other tax consequences of the purchase, ownership and disposition of the Class E shares.

 
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Passive Foreign Investment Company Status

Under the Code, certain rules apply to an entity classified as a “passive foreign investment company” (“PFIC”)., PFIC.  A PFIC is defined as any foreign (i.e., non-U.S.) corporation if either (1) 75% or more of its gross income for the taxable year is passive income (generally including, among other types of income, dividends, interest and gains from the sale of stock and securities) or (2) 50% or more of its assets (by value) produce, or are held for the production of, passive income.  The Code provides an exception for foreign institutionsapplication of the PFIC rules to banks is not entirely clear under present U.S. federal income tax law.  Banks generally derive a substantial part of their income from assets that are interest bearing or that otherwise could be considered passive under the PFIC rules.  The Internal Revenue Service, or IRS, issued a notice in 1989, or the Notice and has proposed regulations, the Proposed Regulations, that exclude from passive income any income derived in the active conduct of a banking business providedby a qualifying foreign bank, or the institution is licensed“active bank exception”. The Notice and Proposed Regulations have different requirements for qualifying as an active foreign bank, and for determining the banking income that may be excluded from passive income under the active bank exception.  Moreover, the Proposed Regulations have been outstanding since 1994 and will not be effective unless finalized.
While the Bank conducts, and intends to docontinue to conduct, a significant banking business, inthere can be no assurance that the United States.  Under proposed regulations,Bank will satisfy the specific requirements for the active bank exception is extended to a foreign corporation that is not licensed to dounder either the Notice or the Proposed Regulations.  However, based on certain estimates of the Bank’s gross income and gross assets and the nature of its business, as a bank in the United States so long as such foreign corporation is an “active foreign bank.”  Based on its current and intended method of operations as described herein, the Bank believes that it iswas not classified as a PFIC under current U.S. federal income tax law because it is eligible for the exception available to active foreign banks in the Code and the proposed regulations.  The Bank intends to continue to operate in a manner that will entitle the Bank to rely upon that exception to avoid classification as a PFIC.taxable year ending December 31, 2010.

If the Bank were to become a PFIC for purposes of the Code, unless a U.S. Holder makes the election described below, a U.S. Holder generally will be subject to a special tax charge with respect to (a) any gain realized on the sale or other disposition of Class E shares and (b) any “excess distribution” by the Bank to the U.S. Holder (generally, any distributions including return of capital distributions, received by the U.S. Holder on the Class E shares in a taxable year that are greater than 125 percent of the average annual distributions received by the U.S. Holder in the three preceding taxable years, or, if shorter, the U.S. Holder’s holding period).  Under these rules (1) the gain or excess distribution would be allocated ratably over the U.S. Holder’s holding period for the Class E shares, (2) the amount allocated to the current taxable year would be treated as ordinary income, (3) the amount allocated to each prior year generally would be subject to tax at the highest rate in effect for that year; and (4) an interest charge at the rate generally applicable to underpayments of tax would be imposed with respect to the resulting tax attributable to each such prior year.  For purposes of the foregoing rules, a U.S. Holder of Class E shares that uses such stock as security for a loan will be treated as having disposed of such stock.
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If the Bank were a PFIC, U.S. Holders of interests in a holder of Class E shares may be treated as indirect holders of their proportionate share of the Class E shares and may be taxed on their proportionate share of any excess distributions or gain attributable to the Class E shares.  An indirect holder also must treat an appropriate portion of its gain on the sale or disposition of its interest in the actual holder as gain on the sale of Class E shares.

If the Bank were to become a PFIC, a U.S. Holder could make an election, provided the Bank complies with certain reporting requirements, to have the Bank treated, with respect to such U.S. Holder, as a “qualified electing fund” (hereinafter, hereinafter referred to as a “QEF election”),QEF election, in which case, the electing U.S. Holder would be required to include annually in gross income the U.S. Holder’s proportionate share of the Bank’s ordinary earnings and net capital gains, whether or not such amounts are actually distributed.  If the Bank were to become a PFIC, the Bank intends to so notify each U.S. Holder and to comply with all reporting requirements necessary for a U.S. Holder to make a QEF election and will provide to record U.S. Holders of Class E shares such information as may be required to make such QEF election.

If the Bank is a PFIC in any year, a U.S. Holder that beneficially owns Class E shares during such year must make an annual return on Internal Revenue Service Form 8621, which describes the income received (or deemed to be received if a QEF election is in effect) from the Bank.  The Bank will, if applicable, provide all information necessary for a U.S. Holder of record to make an annual return on Form 8621.

 
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Additionally, recently enacted legislation creates an additional annual filing requirement for U.S. persons who are shareholders of a PFIC.  The legislation does not describe what information will be required to be included in the additional annual filing, but rather grants the Secretary of the U.S. Treasury authority to decide what information must be included in such annual filing.   If the Bank were a PFIC for a given taxable year, then U.S. Holders should consult their tax adviser concerning their annual filing requirements.

A U.S. Holder that owns certain “marketable stock” in a PFIC may elect to mark-to-market such stock and, subject to certain exceptions, include in income any gain (increases in market value) or loss (decreases in market value to the extent of prior gains recognized) realized as ordinary income or loss to avoid the adverse consequences described above.  U.S. Holders of Class E shares are urged to consult their own tax advisors as to the consequences of owning stock in a PFIC and whether such U.S. Holder would be eligible to make either of the aforementioned elections to mitigate the adverse effects of such consequences.

Information Reporting and Backup Withholding

Each U.S. payor making payments in respect of Class E shares will generally be required to provide the Internal Revenue Service, (the “IRS”)or the IRS, with certain information, including the name, address and taxpayer identification number of the beneficial owner of Class E shares, and the aggregate amount of dividends paid to such beneficial owner during the calendar year.  Under the backup withholding rules, a holder may be subject to backup withholding at a current rate of 28% with respect to proceeds received on the sale or exchange of Class E shares within the United States by non-corporate U.S. Holders and to dividends paid, unless such holder (1) is a corporation or comes within certain other exempt categories (including securities broker-dealers, other financial institutions, tax-exempt organizations, qualified pension and profit sharing trusts and individual retirement accounts), and, when required, demonstrates this fact or (2) provides a taxpayer identification number, certifies as to no loss of exemption and otherwise complies with the applicable requirements of the backup withholding rules.  However, U.S. Holders should be aware that under recently passed legislation, the information reporting requirement is extended to all holders, including corporations (other than tax-exempt corporations), for payments made after December 31, 2011.  Non-U.S. Holders are generally exempt from information reporting and backup withholding, but may be required to provide a properly completed Form W-8BEN (or other similar form) or otherwise comply with applicable certification and identification procedures in order to prove their exemption.  This backup withholding tax is not an additional tax and any amounts withheld from a payment to a holder of Class E shares will be refunded (or credited against such holder’s U.S. federal income tax liability, if any) provided that the required information is timely furnished to the IRS.

There is no income tax treaty between Panama and the United States.

Foreign Asset Reporting
For taxable years beginning after March 18, 2010, certain U.S. Holders who are individuals are required to report information relating to an interest in the Bank’s Class E Shares, subject to certain exceptions (including an exception for ordinary shares held in accounts maintained by certain financial institutions). U.S. Holders are urged to consult their tax advisors regarding their information reporting obligations with respect to their ownership and disposition of the Class E Shares.
The above description is not intended to constitute a complete analysis of all tax consequences relating to the acquisition, ownership and disposition of the Class E Shares. Prospective purchasers should consult their own tax advisors to determine the tax consequences of their particular situations.

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Panamanian Taxes

The following is a summary of the principal Panamanian tax consequences arising in connection with the ownership and disposition of the Bank’s Class E shares.  This summary is based upon the laws and regulations of Panama, as well as court precedents and interpretative rulings, in effect as of the date of this Annual Report, all of which are subject to prospective and retroactive change.

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General Principle

The Bank is exempt from income tax in Panama under a special exemption granted to the Bank pursuant to Contract 103-78 of July 25, 1978 between the Nation and Bladex.  In addition, under general rules of income tax in Panama, only income that is deemed to be Panamanian source income is subject to taxation in Panama. Accordingly, since the Bank’s income is derived primarily from sources outside of Panama and is not deemed to be PanamaianPanamanian source income, even in the absence of the special exemption, the Bank would have limited income tax liability in Panama.

Taxation of Distributions

Dividends, whether cash or in kind, paid by the Bank in respect of its shares are also exempt from dividend tax or other withholding under the special exemption described above.  In the absence of this special exemption, there would be a 10% withholding tax on dividends or distributions paid in respect of the Bank’s registered shares to the extent the dividends were paid from income derived by the Bank from Panamanian sources, and a 5% withholding tax on dividends or distributions paid from income derived by the Bank from non-Panamanian sources.

Taxation of Capital Gains

Since the Class E shares are listed on the NYSE, any capital gains realized by an individual or a corporation, regardless of its nationality or residency, on the sale or other disposition of such shares outside of Panama, would be exempted from capital gains taxes or any other taxes in Panama.

F.           
F.Dividends and Paying Agents

Not required in this Annual Report.

G.          
G.Statement by Experts

Not required in this Annual Report.

H.           
H.Documents on Display

Upon written or oral request, the Bank will provide without charge to each person to whom this Annual Report is delivered, a copy of any or all of the documents listed as exhibits to this Annual Report (other than exhibits to those documents, unless the exhibits are specifically incorporated by reference in the documents).  Written requests for copies should be directed to the attention of Mr. Jaime Celorio,Christopher Schech, Chief Financial Officer, Bladex, as follows: (1) if by regular mail, to P.O. Box 0819-08730, Panama City, Republic of Panama, and (2) if by courier, to Calle 50 y Aquilino de la Guardia, Panama City, Republic of Panama.  Telephone requests may be directed to Mr. CelorioSchech at country code + (507) 210-8630.  Written requests may also be faxed to Mr. CelorioSchech at country code + (507) 269-6333 or sent via e-mail to jcelorio@bladex.com.cschech@bladex.com.  Information is also available on the Bank’s website at: http://www.bladex.com.

 
I.            Subsidiary Information
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I.Subsidiary Information

Not applicable.

Item 11.Quantitative and Qualitative Disclosure About Market Risk

The Bank’s risk management policies, as approved by the Board from time to time, 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.  Certain members of the Board constitute the Assets and Liabilities Committee, which meets on a regular basis and monitors and controls the risks in each specific area.  At the managementManagement level, the Bank has a Risk Management Department that measures and controls the credit and market exposure of the Bank.

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The Bank’s businesses are subject to market risk.  The components of this market risk are interest rate risk inherent in the Bank’s balance sheet, foreign exchange risk, and the price risk in the Bank’s principal investment portfolio and market value risk in the Bank’s trading portfolios.

For quantitative information relating to the Bank’s interest rate risk and information relating to the Bank’s managementManagement of interest rate risk, see Item 5, “Operating and Financial Review and Prospects/Liquidity and Capital Resources,Resources.” and Item 18, “Financial Statements,” notes 2(r)  and 21.

For information regarding derivative financial instruments, see Item 18, “Financial Statements,” notes 2(r)2(u) and 21.  20.

For information regarding investment securities, see Item 4, “Information on the Company/Business Overview/Investment Securities,” and Item 18, “Financial Statements,” note 6.5.

The table below lists for each of the years 2009from 2011 to 20132015 the notional amounts and weighted interest rates, as of December 31, 2008,2010, for derivative financial instruments and other financial instruments that are sensitive to changes in interest rates, including the Bank’s investment securities, loans, borrowings and placements, interest rate swaps, cross currency swaps, forward currency exchange agreements, and trading assets and liabilities.
Expected maturity date 
  2009  2010  2011  2012  2013  
There-
after
  
Without
maturity
  Total 2008  
Fair value
2008
 
($ Equivalent in thousand) 
NON-TRADING ASSETS                           
Investment Securities                           
Fixed rate                           
U.S. Dollars  87,975   30,000   29,222   50,000   90,000   233,000   -   520,197   555,481 
Average fixed rate  5.19%  7.46%  8.90%  9.69%  9.83%  8.21%  -   8.11%    
Floating rate                                    
U.S. Dollars  -   41,000   -   25,000   -   25,000   -   91,000   80,581 
Average floating rate  -   3.30%  -   2.82%  -   3.95%  -   3.34%    
Loans                                    
Fixed rate                                    
U.S. Dollars  823,126   6,888   24,643   3,777   1,479   -   -   859,913   850,312 
Average fixed rate  5.03%  6.81%  7.04%  7.11%  6.83%  -   -   5.11%    
Mexican Peso  26,766   31,105   11,677   2,249   1,524   -   -   73,321   76,706 
Average fixed rate  10.29%  10.27%  9.72%  11.69%  12.07%  -   -   10.27%    
Floating rate                                    
U.S. Dollars  738,680   305,905   265,387   221,802   88,585   53,998       1,674,357   1,536,705 
Average floating rate  4.79%  4.53%  4.12%  3.52%  4.43%  5.01%      4.46%    
Mexican Peso  7,304   -   -   -   -   -   -   7,304   7,257 
Average floating rate  11.78%  -   -   -   -   -   -   11.78%    
Euro  1,216   1,574   783   175   -   -   -   3,748   3,626 
Average floating rate  6.21%  6.21%  6.22%  6.26%  -   -   -   6.21%    
LIABILITIES                                    
Borrowings and Placements(1)
                                    
Fixed rate                                    
U.S. Dollars  1,138,394   14,919   4,852       -   -   -   1,158,165   1,156,233 
Average fixed rate  3.75%  3.95%  2.76%      -   -   -   3.75%    
Mexican Peso  27,726   27,726   10,710   1,846   1,087   -   -   69,095   71,657 
Average fixed rate  8.38%  8.38%  8.42%  9.36%  9.59%  -   -   8.43%    
Euro  80,333   -   -   -   -   -   -   80,333   80,453 
Average fixed rate  5.70%  -   -   -   -   -   -   5.70%    
Yen  44,114   -   -   -   -   -   -   44,114   44,046 
Average fixed rate  1.79%  -   -   -   -   -   -   1.79%    
Peruvian Soles  -   -   -   -   -   39,135   -   39,135   38,362 
Average fixed rate  -   -   -   -   -   6.50%  -   6.50%    
Floating rate                                    
U.S. Dollars  132,634   428,135   11,405   150,000   200,00   -   -   922,174   857,154 
Average floating rate  3.37%  3.78%  3.53%  1.88%  4.73%  -   -   3.61%    
Mexican Peso  -   -   -   -   104,857   -   -   104,857   90,062 
Average floating rate  -   -   -   -   9.63%  -   -   9.63%    
                                     
Interest Rate Swaps                                    
U.S. Dollars floating to fixed  15,000   30,000   28,400   70,000   90,000   233,000   -   466,400   (48,557)
  Amounts presented below exclude the Bank’s participation in the Investment Fund.  The Bank consolidates the Feeder retaining the specialized accounting for investment companies applied by the Feeder in the Fund, reporting it within the “Investment Fund” line in the consolidated balance sheet; see Item 18, “Financial Statements”, notes 2 (d) and 6.

 
6789
 

Interest Rate Risk Management and Sensitivity

As of December 31, 2010

Expected maturity date 
  2011  2012  2013  2014  2015  
There-
after
  
Without
maturity
  
Total
2010
  
Fair value
2010
 
($ Equivalent in thousand) 
NON-TRADING ASSETS                           
Investment Securities                           
Fixed rate                           
U.S. Dollars  31,601   5,000   101,250   70,000   70,000   10,000   -   287,851   323,371 
Average fixed rate  6.44%  10.00%  8.54%  9.24%  7.34%  3.75%  -   8.05%    
Floating rate                                    
U.S. Dollars  -   25,000   -   -   38,000   -   -   63,000   63,085 
Average floating rate  -   0.90%  -   -   2.08%  -   -   1.62%    
Loans (1)
                                    
Fixed rate                                    
U.S. Dollars  1,938,172   11,214   1,929   17,584   1,127   -   -   1,970,026   1,973,505 
Average fixed rate  2.68%  6.92%  5.93%  3.74%  5.85%  -   -   2.72%    
Mexican Peso  23,848   6,688   2,442   627   -   -   -   33,605   37,471 
Average fixed rate  10.02%  10.48%  11.78%  12.50%  -   -   -   10.28%    
Floating rate                                    
U.S. Dollars  881,734   453,895   297,863   140,274   257,551   27,343   -   2,058,660   1,997,316 
Average floating rate  2.52%  3.04%  3.41%  4.00%  2.93%  3.19%  -   2.92%    
Mexican Peso  1,116   -   -   -   -   -   -   1,116   1,151 
Average floating rate  11.00%  -   -   -   -   -   -   11.00%    
Euro  753   172   -   -   -   -   -   925   920 
Average floating rate  2.28%  2.24%  -   -   -   -   -   2.28%    
LIABILITIES                                    
Borrowings and Placements (2)
                                 
Fixed rate                                    
U.S. Dollars  1,270,179   -   -   -   -   -   -   1,270,179   1,267,917 
Average fixed rate  1.09%  -   -   -   -   -   -   1.09%    
Mexican Peso  15,610   4,923   1,507   -   -   -   -   22,040   23,653 
Average fixed rate  8.22%  8.31%  9.21%  -   -   -   -   8.31%    
Peruvian Soles  -   -   -   43,827   -   -   -   43,827   47,753 
Average fixed rate  -   -   -   6.50%  -   -   -   6.50%    
Floating rate                                    
U.S. Dollars  463,314   293,272   226,109   -   -   -   -   982,695   953,767 
Average floating rate  1.48%  0.81%  1.24%  -   -   -   -   1.22%    
Mexican Peso  -   -   116,726   -   -   -   -   116,726   111,133 
Average floating rate  -   -   5.79%  -   -   -   -   5.79%    
                                     
Interest Rate Swaps                                    
U.S. Dollars fixed to floating  17,800   5,000   95,000   70,000   70,000   10,000   -   267,800   (25,146)
Average pay rate  8.66%  10.00%  8.73%  9.24%  7.34%  3.75%  -   8.34%    
Average receive rate  5.21%  6.68%  4.89%  5.19%  2.91%  2.30%  -   4.41%    
U.S. Dollars floating to fixed  -   20,000   -   -   -   -   -   20,000   (1,499)
Average pay rate  -   5.94%  -   -   -   -   -   5.94%    
Average receive rate  -   0.68%  -   -   -   -   -   0.68%    
                                     
Cross Currency Swaps                                    
Receive U.S. Dollars  1,144   645   552   600   -   -   -   2,941   (168)
U.S. Dollars fixed rate  7.04%  7.04%  7.04%  7.04%  -   -   -   7.04%    
U.S. Dollars floating rate  2.08%  2.76%  3.84%  -   -   -   -   2.47%    
Pay US Dollars  -   -   147,242   41,020   -   -   -   188,262   (24,182)
U.S. Dollars fixed rate  -   -   -   5.35%  -   -   -   5.35%    
U.S. Dollars floating rate  -   -   2.29%  -   -   -   -   2.29%    
Receive Mexican Peso  -   -   147,242   -   -   -   -   147,242     
Mexican Peso floating rate  -   -   5.83%  -   -   -   -   5.83%    
Pay Mexican Peso  428   483   552   600   -   -   -   2,063     
Mexican Peso fixed rate  12.50%  12.50%  12.50%  12.50%  -   -   -   12.50%    
 
90
Expected maturity dateExpected maturity date Expected maturity date 
 2009 2010 2011 2012 2013 
There-
after
 
Without
maturity
 Total 2008 
Fair value
2008
  2011  2012  2013  2014  2015  
There-
after
  
Without
maturity
  
Total
2010
  
Fair value
2010
 
($ Equivalent in thousand)($ Equivalent in thousand) ($ Equivalent in thousand) 
Average pay rate  8.50%  7.46%  8.88%  8.62%  9.83%  8.21%  -   8.58%   
Average receive rate  7.24%  5.52%  8.10%  6.83%  7.66%  6.46%  -   6.81%   
Cross Currency Swaps                   
Receive US Dollars  871   1,126   560   125   -   -   -   2,682   (263)
U.S. Dollars fixed rate  4.17%  4.17%  4.17%  4.19%  -   -   -   4.17%   
Pay US Dollars  102   116   131   148   146,744   41,020   -   188,261   (40,901)
U.S. Dollars fixed rate  5.94%  5.94%  5.94%  5.94%  6.38%  -   -   6.38%   
U.S. Dollars fixed rate  -   -   -   -   -   5.35%  -   5.35%   
Pay Euro  871   1,126   560   125   -   -   -   2,682   
Euro fixed rate  7.96%  7.82%  7.83%  7.36%  -   -   -   7.84%   
Receive Mexican Peso  102   116   131   148   146,744   -   -   147,241   
Mexican peso fixed rate  16.10%  16.10%  16.10%  16.10%  9.63%  -   -   9.65%   
Receive Peruvian Soles  -   -   -   -   -   41,020   -   41,020     -   -   -   41,020   -   -   -   41,020    
Peruvian Soles fixed rate  -   -   -   -   -   6.50%     6.50%     -   -   -   6.50%  -   -   -   6.50%   
Pay Euro  716   162   -   -   -   -   -   878    
Euro floating rate  2.28%  2.24%  -   -   -   -   -   2.28%   
                                   
Forward Currency Exchange Agreements                                    Forward Currency Exchange Agreements                                
Receive U.S. Dollars/Pay Mexican Pesos  11,723   4,820   1,236   436   350   -   -   18,565   3,580   1,302   455   351   -   -   -   -   2,108   69 
Average exchange rate  11.25   11.83   11.96   12.51   13.13   -   -   11.52   
Pay U.S. Dollars/Receive Mexican Pesos  180   11   -   -   -   -   -   191   (4)
Average exchange rate  11.18   11.75   -   -   -   -   -   11.21   
Pay U.S. Dollars/Receive Euro  84,673   -   -   -   -   -   -   84,673   (2,176)
Average exchange rate  1.43   -   -   -   -   -   -   1.43   
Pay U.S. Dollars/Receive Yen  40,132   -   -   -   -   -   -   40,132   4,201 
Average exchange rate  100.12   -   -   -   -   -   -   100.12     12.08   12.63   13.14   -   -   -   -   12.37     
TRADING                                                       
Trading Assets                                                       
Debt securities:                                                       
Fixed rate                                                       
U.S. Dollars  -   -   11,000   -   -   10,000   -   21,000   21,965   10,000   -   36,800   -   -   -   -   46,800   50,412 
Average fixed rate  -   -   9.62%  -   -   7.25%  -   8.49%     10.25%  -   5.73%  -   -   -   -   6.69%    
Forward repurchase agreements                   
U.S. Dollars  16,043   -   -   -   -   -   -   16,043   16,087 
Average fixed rate  3.97%  -   -   -   -   -   -   3.97%   
Retained interest on repurchase agreements  6,886   -   -   -   -   -   -   6,886   6,886 
U.S. Dollars  8.10%  -   -   -   -   -   -   8.10%   
                                    
Trading Liabilities                                                       
Interest rate swaps:                                                       
U.S. Dollars floating to fixed  -   -   59,527   -   90,700   25,000   -   175,227   14,065 
U.S. Dollars fixed to floating  10,000   -   36,800   -   -   -   -   46,800   (3,031)
Average pay rate  -   -   9.00%  -   7.73%  6.07%  -   7.92%     10.25%  -   5.73%  -   -   -   -   6.69%    
Average receive rate  -   -   8.17%  -   6.27%  5.37%  -   6.79%     7.40%  -   2.07%                  3.21%    
Credit derivative:                   
U.S. Dollars  -   3,000   -   -   -   -   -   3,000   91 
Average fixed rate  -   0.5%  -   -   -   -   -   0.5%   
Cross currency swap:                                    
Receive US Dollars  7,296   883   -   -   -   -   -   8,179   (907)
U.S. Dollars floating rate  4.79%  4.79%  -   -   -   -   -   4.79%    
Pay Mexican Peso  7,296   883   -   -   -   -   -   8,179     
Mexican Peso fixed rate  11.00%  11.00%  -   -   -   -   -   11.00%    
(1) U.S. Dollars floating rate loans include $29.0 million of impaired loans.
(2) Borrowings and placements include securities sold under repurchase agreements and short and long-term borrowings and debt.

As of December 31, 2009

Expected maturity date 
  2010  2011  2012  2013  2014  
There-
after
  
Without
maturity
  
Total
2009
  
Fair value
2009
 
($ Equivalent in thousand) 
NON-TRADING ASSETS                           
Investment Securities                           
Fixed rate                           
U.S. Dollars  30,000   21,175   5,000   90,000   73,000   135,000   -   354,175   408,127 
Average fixed rate  7.46%  8.79%  10%  9.83%  9%  7.69%  -   8.58%    
Floating rate                                    
U.S. Dollars  -   -   25,000   -   -   25,000   -   50,000   48,857 
Average floating rate  -   -   0.86%  -   -   2.08%  -   1.47%    
Loans                                    
Fixed rate                                    
U.S. Dollars  1,195,586   39,545   6,988   1,479   -   -   -   1,243,598   1,243,022 

 
6891
 

Expected maturity date 
  2010  2011  2012  2013  2014  
There-
after
  
Without
maturity
  
Total
2009
  
Fair value
2009
 
($ Equivalent in thousand) 
Average fixed rate  2.97%  5.19%  6.07%  6.83%  -   -   -   3.06%   
Mexican Peso  41,944   19,037   3,606   1,980   590   -   -   67,157   71,294 
Average fixed rate  10.50%  10.20%  11.59%  12.15%  12.50%  -   -   10.54%    
Floating rate                                    
U.S. Dollars (1)
  595,873   369,933   297,207   112,341   59,782   28,335   -   1,463,471   1,426,741 
Average floating rate  3.04%  2.65%  2.90%  3.42%  4.51%  3.42%  -   3.01%    
Mexican Peso  1,375   1,051   -   -   -   -   -   2,426   2,523 
Average floating rate  11.17%  11.17%  -   -   -   -   -   11.17%    
Euro  1,623   807   180   -   -   -   -   2,610   2,595 
Average floating rate  2.30%  2.28%  2.25%  -   -   -   -   2.29%    
LIABILITIES                                    
Borrowings and Placements (2)
                                 
Fixed rate                                    
U.S. Dollars  404,051   24,852   -   -   -   -   -   428,903   428,841 
Average fixed rate  1.67%  2.35%                      1.71%    
Mexican Peso  29,196   11,278   1,944   1,145   -   -   -   43,563   46,226 
Average fixed rate  8.38%  8.42%  9.36%  9.59%  -   -   -   8.46%    
Peruvian Soles  -   -   -   -   42,575   -   -   42,575   48,966 
Average fixed rate  -   -   -   -   6.50%  -   -   6.50%    
Floating rate                                    
U.S. Dollars  494,995   281,264   189,280   200,000   -   -   -   1,165,539   1,147,296 
Average floating rate  1.16%  1.80%  0.61%  1.49%  -   -   -   1.28%    
Mexican Peso  -   -   -   108,939   -   -   -   108,939   108,902 
Average floating rate  -   -   -   5.95%  -   -   -   5.95%    
                                     
Interest Rate Swaps                                    
U.S. Dollars fixed to floating  30,000   20,600   5,000   90,000   73,000   135,000       353,600   (30,756)
Average pay rate  7.46%  8.77%  10.00%  9.83%  9.00%  7.69%      8.58%    
Average receive rate  2.87%  5.39%  6.94%  5.51%  4.66%  3.57%      4.39%    
U.S. Dollars floating to fixed          20,000                   20,000   (1,956)
Average pay rate          5.94%                  5.94%    
Average receive rate          0.63%                  0.63%    
                                     
Cross Currency Swaps                                    
Receive U.S. Dollars  6,126   1,154   656   564   497   -   -   8,997   (294)
U.S. Dollars fixed rate  5.62%  7.04%  7.04%  7.04%  7.04%  -   -   5.98%    
U.S. Dollars floating rate  2.15%  2.27%  2.88%  3.82%      -   -   2.36%    
Pay US Dollars  -   -   -   147,242   41,020   -   -   188,262   (32,131)
U.S. Dollars fixed rate  -   -   -   -   5.35%  -   -   5.35%    
U.S. Dollars floating rate  -   -   -   2.57%  -   -   -   2.57%    
Receive Mexican Peso  -   -   -   147,242   -   -   -   147,242     
Mexican Peso floating rate  -   -   -   5.94%              5.94%    
Pay Mexican Peso  4,694   438   494   564   497           6,687     
Mexican Peso fixed rate  11.15%  12.50%  12.50%  12.50%  12.50%          11.55%    
Receive Peruvian Soles  -   -   -   -   41,020   -   -   41,020     
Peruvian Soles fixed rate  -   -   -   -   6.50%          6.50%    
Pay Euro  1,432   716   162   -   -   -   -   2,310     
Euro floating rate  2.30%  2.27%  2.25%  -   -   -   -   2.29%    

92

Expected maturity date 
  2010  2011  2012  2013  2014  
There-
after
  
Without
maturity
  
Total
2009
  
Fair value
2009
 
($ Equivalent in thousand) 
Forward Currency Exchange Agreements                         
Receive U.S. Dollars/Pay Mexican Pesos  4,820   1,237   436   350   -   -   -   6,843   829 
Average exchange rate  11.83   11.96   12.51   13.13   -   -   -   11.96     
Pay U.S. Dollars/Receive Mexican Pesos  11   -   -   -   -   -   -   11   (1)
Average exchange rate  11.75   -   -   -   -   -   -   11.75     
TRADING                                    
Trading Assets                                    
Debt securities:                                    
Fixed rate                                    
U.S. Dollars  -   10,000   -   36,800   -   -   -   46,800   50,275 
Average fixed rate  -   10.25%  -   5.73%  -   -   -   6.69%    
Credit derivative:                                    
U.S. Dollars  3,000   -   -   -   -   -   -   3,000   2 
Average fixed rate  0.50%  -   -   -   -   -   -   0.50%    
                                     
Trading Liabilities                                    
Interest rate swaps:                                    
U.S. Dollars fixed to floating  -   10,000   -   36,800   -   -   -   46,800   (2,514)
Average pay rate  -   10.25%  -   5.73%  -   -   -   6.69%    
Average receive rate      7.52%  -   2.11%  -   -   -   3.27%    
Cross currency swap:                                    
Receive US Dollars  7,317   7,296   883   -   -   -   -   15,496   (638)
U.S. Dollars floating rate  4.77%  4.77%  4.77%  -   -   -   -   4.77%    
Pay Mexican Peso  7,317   7,296   883   -   -   -   -   15,496     
Mexican Peso fixed rate  11.00%  11.00%  11.00%  -   -   -   -   11.00%    
(1) U.S. Dollars floating rate loans include $35.8 million of impaired loans.
(2) Borrowings and placements include securities sold under repurchase agreements and short and long-term borrowings and debt.

Although certain assets and liabilities may have similar maturities or periods of re-pricing, they may be impacted in varying degrees to changes in market interest rates. The maturity of certain types of assets and liabilities may fluctuate in advance of changes in market rates, while the maturity of other types of assets and liabilities may lag behind changes in market rates. In the event of a change in interest rates, prepayment and early withdrawal levels could deviate significantly from the maturities assumed in calculating the table above.

For information regarding the fair value disclosure of financial instruments, see Item 18,  “Financial Statements,” note 23.22.  For information regarding the fair value of trading assets and liabilities of the Fund, See Item 18, “Financial Statements,” notes 2(d) and 7.6.

 
93

Foreign Exchange Risk Management and Sensitivity

The Bank accepts deposits and raises funds principally in U.S. dollars, and makes loans mostly in U.S. dollars.  Currency exchange risk arises when the Bank accepts deposits or raises funds in one currency and lends or invests the proceeds in another.  In general, foreign currency-denominated assets are funded with liability instruments denominated in the same currency.  In those cases where assets are funded in different currencies, forward foreign exchange or cross-currency swap contracts are used to fully hedge the risk resulting from this cross currency funding.  During 2008,2010, the Bank did not hold significant open foreign exchange positions. The Fund invests in securities denominated in foreign currency, as well as forward foreign currency exchange contracts and cross currency swap contracts, all for trading purposes.  AtAs of December 31, 2008,2010, the Bank had an equivalent of $338$35 million in non-U.S. dollar financial assets and $183 million of non-U.S. dollar financial liabilities which matched funded asset transactionsare fully hedged.

Price Risk Management and Sensitivity

Price risk corresponds to the risk that arises from the volatility in the same currency.price of the financial instruments held by the Bank, which may result from observed transaction prices that fluctuate freely according to supply and demand or from changes in the risk factors used for determining prices (interest rates, exchange rates, credit risk spreads, etc.).  The table below lists the carrying amount and fair value of the investment securities portfolio and the interest rate swaps associated with this portfolio as of December 31, 2010.

  
Carrying
Amount
  
Fair
Value
 
($ Equivalent in thousand) 
       
NON-TRADING ASSETS      
Investment Securities      
Investment available for sale  353,250   353,250 
Investment held-to-maturity  33,181   33,206 
LIABILITIES        
Interest rate swaps  (25,737)  (25,737)
         
TRADING ASSETS        
Trading Assets  50,412   50,412 
TRADING LIABILITIES        
Interest rate swaps  (3,031)  (3,031)
The table below lists the carrying amount and fair value of the investment securities portfolio and the interest rate swaps associated with this portfolio as of December 31, 2009.
  
Carrying
Amount
  
Fair
Value
 
($ Equivalent in thousand) 
       
NON-TRADING ASSETS      
Investment Securities      
Investment available for sale  456,984   456,984 
LIABILITIES        
Interest rate swaps  (30,756)  (30,756)
         
TRADING ASSETS        
Trading Assets  50,275   50,275 
TRADING LIABILITIES        
Interest rate swaps  (2,514)  (2,514)
 
Item 12.Description of Securities Other than Equity Securities
 
Not applicable.

 
94

PART II
 
Item 13.Defaults, Dividend Arrearages and Delinquencies
 
None.
 
Item 14.Material Modifications to the Rights of Security Holders and Use of Proceeds
 
None.
 
Item 15.Controls and Procedures
 
a) Disclosure Controls and Procedures

The Bank maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports it files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’sSEC’s rules and forms.  Such controls include those designed to ensure that information for disclosure is accumulated and communicated to the members of the Board and management,Management, as appropriate to allow timely decisions regarding required disclosure.

The Chief Executive Officer, or CEO, and the Chief Financial Officer, (the “CFO”),or CFO, evaluated the effectiveness of the Bank’s disclosure controls and procedures as of December 31, 2008.  Refer to Item 18, Section c.

2010, and concluded that they were effective as of December 31, 2010.
69

b) Management’s Annual Report on Internal Control Over Financial Reporting (“ICFR”)

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f) or 15d-15(f).  WithManagement, with the participation and supervision of the Bank’s CEO and CFO, its management has assessedevaluated  the effectiveness of its internal control over financial reporting as of December 31, 2008.

The assessment includes2010 and based its conclusion on such evaluation, which included (i) the documentation and understanding of the Bank’s internal control over financial reporting.  Management evaluatedreporting and (ii) a test of the design effectiveness and tested the operationaloperating effectiveness of internal controls over financial reporting to form its conclusion.reporting.  This evaluation was the basis of Management’s conclusions.

Management’s evaluation was based on the criteria set forth by the Internal Control-Integrated Framework of the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.Commission.

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Bank’s internal control over financial reporting includes those policies and procedures that:

(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the Bank’s transactions and dispositions of its assets;

(2) provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with generally accepted accounting principles, and that the Bank’s receipts and expenditures are being made only in accordance with authorizations of the Bank’s managementManagement and the Board; and

(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Bank’s assets that could have a material effect on its financial statements.

95

Because of its inherent limitations, internal control over financial reporting determined to be effective can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect all misstatements.  Also, projections of any evaluation of the effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Policies, proceduresBased on the assessment and controls established to assess the risks over financial information related to: a) recognition as sales of securities of certain repurchase agreements in accordance with FASB Statement No. 140, and b) the fair value measurement of  financial liabilities that resulted from certain hedging derivative contracts (forward contracts) due to the adoption of FASB Statement No.157, did not identify effectively if (i) the escalating credit and liquidity crisis of international markets in late 2008 as it relates to the application of FASB Statement No. 140 and (ii) the implementation of the new accounting standard FASB Statement No. 157, impacted the effectiveness of existing policies, procedures and controls over financial information, or required changes in their design.  As a result,criteria described above, the Bank’s policies, procedures and financial controls related to the two items discussed above were not modified in response to the rapid deteriorationManagement concluded that, as of liquidity in the market regarding repurchase agreements with respect to FASB Statement No. 140 or designed appropriately with respect to the fair value of financial liabilities under certain hedging derivative contracts under FASB Statement No. 157, and thus were ineffective at December 31, 2008.  This material weakness resulted in an audit adjustment to recognize a net charge to results in the fourth quarter of 2008 in the amount of $13 million.  See Item 5, “Operating and Financial Review and Prospects/Operating Results/Net Income.”

As a result of the specified weakness regarding certain aspects related to FASB Statement No. 140 and FASB Statement No. 157, the CEO and CFO have concluded that2010, the Bank’s internal control over financial reporting was not effective as of December 31, 2008.  No other material weaknesses, other than the aforementioned, that may expose the Bank to financial information risks at such date.

70
effective.

c) Attestation Report of the Registered Public Accounting Firm
The Company’s independent registered public accounting firm, Deloitte Inc, has issued an attestation report on the effectiveness of the Bank’s internal control over financial reporting.

c) Attestation Report of the Registered Public Accounting Firm

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Banco Latinoamericano de Comercio Exterior, S.A. and Subsidiaries

We have audited the internal control over financial reporting whichof Banco Latinoamericano de Comercio Exterior, S.A. and Subsidiaries (the "Bank") as of December 31, 2010, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Bank's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in ItemManagement’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Bank's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

96

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Bank maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2010 of Banco Latinoamericano de Comercio Exterior, S.A. and Subsidiaries and our report dated February 18, “Financial Statements”, for reference.2011 expressed an unqualified opinion on those financial statements.

/S/ Deloitte, Inc.

February 18, 2011
Panama, Republic of Panama

d) Changes in Internal ControlsControl over Financial Reporting

There has been no change in the Bank’s internal control over financial reporting  during the fiscal year ended December 31, 2008 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.  During the first quarter of 2009, the Bank’s management has taken necessary actions in order to remediate the material weakness, through revisions improving its accounting policies and procedures related to the recognition and measurement of the types of transactions involved, as well as providing training to reinforce the monitoring of this types of transactions.  In addition, the Bank’s management has performed self-assessments using checklists and has carried effectiveness tests to determine that the new controls implemented are being executed in an effective manner.
·There has been no change in the Bank’s internal control over financial reporting  during the fiscal year ended December 31, 2010 that has materially affected, or is reasonably likely to materially affect, the Bank’s internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.

Item 16.[Reserved]
 
Item 16A.
Audit and Compliance Committee Financial ExpertExpert
 
The Board has determined that at least one member of the Audit and Compliance Committee is a “financial expert,” as defined in the rules enacted by the SEC under the Sarbanes-Oxley Act. The Audit and Compliance Committee’s financial expert is Mr. Gonzalo Menéndez Duque.  Mr. Gonzalo Menéndez Duque is independent as defined by NYSE Rules.
See Item 6.A, “Directors and Executive Officers.”
 
Item 16B.Code of Ethics
 
The Bank has adopted a codeCode of ethicsEthics that applies to the Bank’s principal executive officers andofficer, principal financial and principal accounting officers.  The Bank’s Code of Ethics  includes the information regarding its corporate governance practices necessary to comply with Section 303A of the NYSE Rules. A copy of the Bank’s Code of Ethics iswas filed as Exhibit 14.1an exhibit to this Annual Reportthe Form 20-F for the fiscal  year ended December 31, 2009 filed with the SEC on Form 20-F. StockholdersJune 11, 2010, and may request a hard copy ofalso be found on the Bank’s website (http://www.bladex.com) at Investor Center / Corporate Governance / Code of Ethics freeand Addenda to the Code of charge, fromEthics (For purposes of the following contact:
Mr. Jaime Celorio
Chief Financial Officer
Banco Latinoamericano de Comercio Exterior, S.A. (Bladex)
Tel.: (507) 210-8630
Fax: (507) 269-6333
e-mail: jcelorio@bladex.comsection 406 of the Sarbanes-Oxley Act of 2002).
 
Item 16C.Principal Accountant Fees and Services
 
The following table summarizes the fees paid or accrued by the Bank for audit and other services provided by Deloitte, Inc., the Bank’s independent accounting firm, for each of the years ended December 31, 20072010 and 2008:2009:

 
7197
 

 2008  2007 
       
2010
  
2009
 
Audit fees $482,000  $426,495  $595,000  $565,000 
Audit-related fees $277,000  $93,500 
Tax fees 0  0  $0  $0 
All other fees  71,000   39,509  $0  $0 
Total $553,000  $466,004  $872,000  $658,500 
 
The following is a description of the type of services included within the categories listed above:
 
 ·Audit fees include aggregate fees billed for professional services rendered by Deloitte, Inc. for the audit of the Bank’s annual financial statements and services that are normally provided in connection with statutory and regulatory filings or engagements.  During 2008 and 2007, no audit-related fees were paid by the Bank.
 ·TaxAudit–related fees include, aggregate fees billed for professional services for tax compliance, tax advice and tax planning.  
·All other fees includerendered by Deloitte, Inc. related to the revision of the renewal of the Bank’s EMTN Program in 2010.  In 2009, aggregate fees billed for products andprofessional services providedrendered by Deloitte, Inc. related to the Bank, other than the services described in the two preceding paragraphs.application of FASB ASC Topic 860.

Audit and Compliance Committee Pre-Approval Policies and Procedures

The Audit and Compliance Committee pre-approves all audit and non-audit services to be provided to the Bank by the Bank’s independent accounting firm.  All of the services related to the audit fees, audit-related fees, tax fees and all other fees described above were approved by the Audit and Compliance Comitte.Committee.

Item 16D.Exemptions from the Listing Standards for Audit Committees
 
Not applicable.
 
Item 16E.Purchases of Equity Securities by the Issuer and Affiliated Purchasers
 
Not applicable.

Item 16F.Change in Registrant’s Certifying Accountant
Not applicable.

Item 16G.Corporate Governance
 
There are two significant differences between theThe corporate governance practices of the Bank and those required by the NYSE for domestic companies in the United States.States differ in two significant ways:

First, under Section 303A.04 of the NYSE Rules, a listed company must have a nomination/corporate governance committee comprised entirely of independent directors.  However, it is common practice among public companies in Panama not to have a corporate governance committee.  The Bank addresses all corporate governance matters in plenary meetings of the Board, and the Audit and Compliance Committee has been given the responsibility of improving the Bank’s corporate governance practices and monitoring compliance with such practices.

Second, under Section 303A.08 of the NYSE Rules, stockholders must approve all equity compensation plans and material revisions to such plans, subject to limited exceptions.  However, under Panamanian law, any contracts, agreements and transactions between the Bank and one or more of its directors or officers, or companies in which they have an interest, only need to be approved by the Board, including equity compensation plans.  The Board though must inform stockholders of the equity compensation plans and/or material revisions to such plans at the next stockholders’ meeting.  In addition, stockholders may revoke the Board’s approval of the equity compensation plans and/or material revisions to such plans at a meeting, if there is adequate justification and whenever convenient, by invoking the fiduciary duty of the directors that approved such plans and/or revisions.

 
7298
 

PART III
 
Item 17.Financial Statements
 
The Bank is providing the financial statements and related information specified in Item 18.
 
Item 18.Financial Statements

List of Consolidated Financial Statements 
  
ReportsReport of Independent Registered Public Accounting FirmsFirmF-3
Consolidated Balance Sheets atas of December 31, 20082010 and 20072009F-6F-4
Consolidated Statements of Income for the Years  Ended December 31, 2008, 20072010, 2009 and 20062008F-7F-5
Consolidated Statements of Changes in Stockholders’ Equity and Redeemable Noncontrolling Interest in the Investment Fund for the Years Ended December 31, 2008, 20072010, 2009 and 20062008F-8F-6
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2008, 20072010, 2009 and 20062008F-9F-7
Consolidated Statements of Cash Flows for the Years Ended December 31, 2008, 20072010, 2009 and 20062008F-10F-8
Notes to Consolidated Financial StatementsF-11
Item 19. Exhibits
List of Exhibits
Exhibit 1.1. Amended and Restated Articles of Incorporation
Exhibit 1.2.By-Laws*
Exhibit 12.1.Rule 13a-14(a) Certification of Principal Executive Officer
Exhibit 12.2. Rule 13a-14(a) Certification of Principal Financial Officer
Exhibit 13.1. Rule 13a-14(b) Certification of Principal Executive Officer
Exhibit 13.2. Rule 13a-14(b) Certification of Principal Financial Officer
Exhibit 14.1. Code of Ethics**
*Filed as an exhibit to the Form 20-F for the fiscal year ended December 31, 2002 filed with the SEC on February 24, 2003.
**Filed as an exhibit to the Form 20-F for the fiscal year ended December 31, 2007 filed with the SEC on June 20, 2008.F-9

 
7399
 
 
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
BANCO LATINOAMERICANO DE COMERCIO EXTERIOR, S.A.

/s/ JAIME RIVERA
Jaime Rivera
Chief Executive Officer

June 26, 2009
74

Banco Latinoamericano
de Exportaciones,Comercio Exterior, S. A.
and Subsidiaries

With Reports of Independent Registered
Public Accounting Firm

Consolidated Balance Sheets as of December 31, 20082010 and 2007,
2009, and Related Consolidated Statements of Income, Stockholders’
Equity, Comprehensive Income (Loss) and Cash Flows for Each of the
Three Years in the Period Ended December 31, 20082010

Deloitte-Panamá

 
F-1
 

Banco Latinoamericano de Exportaciones,Comercio Exterior, S. A.
and Subsidiaries

Independent Auditors’ Report and
Consolidated Financial Statements 2008, 20072010, 2009 and 20062008

Contents Pages 
    
Report of Independent Registered Public Accounting Firm -– Consolidated Financial Statements F-3 
    
Consolidated balance sheets F-6F-4 
    
Consolidated statements of income F-7F-5 
    
Consolidated statements of changes in stockholders’ equity and redeemable noncontrolling interest in the investment fund F-8F-6 
    
Consolidated statements of comprehensive income (loss) F-9F-7 
    
Consolidated statements of cash flows F-10F-8 
    
Notes to consolidated financial statements F-11
Report of Independent Registered Public Accounting FirmF-9 – Internal Control Over Financial ReportingF-62F-58 

 
F-2
 
 
Deloitte, Inc.
Contadores Públicos Autorizados
Apartado 0816-01558
Panamá,Panamá Rep. de Panamá
Teléfono: (507) 303-4100
Facsimile :
Facsimile: (507) 269-2386
infopanama@deloitte.com
www.deloitte.com/pa
www.deloitte.com.pa

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Directors and Stockholders of
Banco Latinoamericano de Exportaciones,Comercio Exterior, S.A. and Subsidiaries

We have audited the accompanying consolidated balance sheets of Banco Latinoamericano de Exportaciones,Comercio Exterior, S.A. and subsidiariesSubsidiaries (the “Bank”“Bank”) as of December 31, 20082010 and 2007,2009, and the related consolidated statements of income, changes in stockholders’stockholders’ equity and redeemable noncontrolling interest in the investment fund, comprehensive income (loss) and cash flows for each of the three years then ended.in the period ended December 31, 2010. These financial statements are the responsibility of the Bank’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Banco Latinoamericano de Exportaciones,Comercio Exterior, S.A. and subsidiariesSubsidiaries as of December 31, 20082010 and 2007,2009, and the consolidated results of their operations and their cash flows for each of the three years thenin the period ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.
As discussed in Note 3 to the consolidated financial statements, in 2008 the Bank’s subsidiary, Bladex Offshore Feeder Fund, began to account for its investment in the Bladex Capital Growth Fund using the specialized accounting for investment companies in the American Institute of Certified Public Accountants Audit and Accounting Guide for Investment Companies. The Bank maintained this specialized accounting in its consolidated financial statements. This change was accounted for as a change in reporting entity on a retrospective basis.
Auditoría . Impuestos . Consultoría . Asesoría Financiera.
A member firm of
Deloitte Touche Tohmatsu
F-3

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Bank’s internal control over financial reporting as of December 31, 2008,2010, based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 16, 2009February 18, 2011 expressed an adverseunqualified opinion on the Bank’s internal control over financial reporting because of a material weakness.reporting.

The accompanying consolidated financial statements have been translated into English for the convenience of readers outside of Panama.

(Signed by Deloitte)/S/ Deloitte, Inc.

February 18, 2011

Audit · Tax · Consulting · Corporate Finance ·
A member firm of
Deloitte Touche Tohmatsu
 
March 16, 2009
Panama, Republic
F-3
Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Consolidated balance sheets
December 31, 2010 and 2009
(in US$ thousand, except share amounts)

  Notes  2010  2009 
Assets         
Cash and due from banks 3,22   5,570   2,961 
Interest-bearing deposits in banks (including pledged deposits           
of $16,075 in 2010 and $22,582 in 2009) 3,22   431,144   421,595 
Trading assets (including pledged securities to creditors of           
$34,208 in 2010) 4,22   50,412   50,277 
Securities available-for-sale (including pledged securities to creditors of           
$235,581 in 2010 and $78,512 in 2009) 5,22   353,250   456,984 
Securities held-to-maturity (market value of $33,206 in 2010)           
(including pledged securities to creditors of $13,018) 5,22   33,181   - 
Investment fund 6,22   167,291   197,575 
Loans 7,22   4,064,332   2,779,262 
Less:           
Allowance for loan losses 8,22   78,615   73,789 
Unearned income and deferred fees     4,389   3,989 
Loans, net     3,981,328   2,701,484 
            
Customers' liabilities under acceptances 22   27,213   1,551 
Accrued interest receivable 22   31,110   25,561 
Premises and equipment (net of accumulated depreciation and           
amortization of $16,640 in 2010 and $14,290 in 2009) 9   6,532   7,749 
Derivative financial instruments used for hedging - receivable 20,22   2,103   828 
Other assets 10   10,953   12,206 
Total assets     5,100,087   3,878,771 
            
Liabilities and stockholders' equity           
Deposits: 11,22         
Noninterest-bearing - Demand     705   788 
Interest-bearing - Demand     99,647   50,587 
Time     1,720,573   1,204,871 
Total deposits     1,820,925   1,256,246 
            
Trading liabilities 4,22   3,938   3,152 
Securities sold under repurchase agreement 3,4,5,12,22   264,927   71,332 
Short-term borrowings 13,22   1,095,400   327,800 
Acceptances outstanding 22   27,213   1,551 
Accrued interest payable 22   10,084   11,291 
Borrowings and long-term debt 14,22   1,075,140   1,390,387 
Derivative financial instruments used for hedging - payable 20,22   53,029   65,137 
Reserve for losses on off-balance sheet credit risk 8   13,335   27,261 
Other liabilities     20,096   14,077 
Total liabilities     4,384,087   3,168,234 
            
Commitments and contingencies 18,19,20,23         
            
Redeemable noncontrolling interest in the investment fund     18,950   34,900 
            
Stockholders' equity: 15,16,17,21,24         
"Class A" common stock, no par value, assigned value of $6.67           
(Authorized 40,000,000; outstanding 6,342,189)     44,407   44,407 
"Class B" common stock, no par value, assigned value of $6.67           
(Authorized 40,000,000; outstanding 2,542,021 in 2010           
and 2,584,882 in 2009)     20,736   21,099 
"Class E" common stock, no par value, assigned value of $6.67           
(Authorized 100,000,000; outstanding 27,826,330 in 2010           
and 27,618,545 in 2009)     214,837   214,474 
Additional paid-in capital in excess of assigned value of common stock     133,815   134,820 
Capital reserves     95,210   95,210 
Retained earnings     320,153   301,389 
Accumulated other comprehensive loss 5,20,21   (6,441)  (6,160)
Treasury stock 15   (125,667)  (129,602)
Total stockholders' equity     697,050   675,637 
            
Total liabilities and stockholders' equity     5,100,087   3,878,771 

The accompanying notes are part of Panamathese consolidated financial statements.

 
F-4
 

KPMG
Teléfono: (507) 208-0700
Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Apartado Postal 816-1089Fax:          (507) 263-9852
Panamá 5, República de Panamá
Consolidated statements of income
Internet:   www.kpmg.comYears ended December 31, 2010, 2009 and 2008
(in US$ thousand, except per share amounts)
         
Report of Independent Registered Public Accounting Firm
  Notes  2010  2009  2008 
Interest income: 20          
Deposits with banks     839   1,260   7,574 
Trading assets     3,133   7,158   648 
Investment securities:               
Available-for-sale     8,188   17,267   31,745 
Held-to-maturity     285   190   746 
Investment fund     2,198   1,763   3,485 
Loans     104,835   114,326   200,045 
Total interest income     119,478   141,964   244,243 
Interest expense: 20             
Deposits     8,531   11,493   44,364 
Investment fund     963   2,325   2,296 
Short-term borrowings     8,058   23,729   63,239 
Borrowings and long-term debt     27,423   39,665   56,497 
Total interest expense     44,975   77,212   166,396 
Net interest income     74,503   64,752   77,847 
                
Reversal (provision) for loan losses 8   (9,091)  (18,293)  18,540 
                
Net interest income, after reversal (provision)               
for loan losses     65,412   46,459   96,387 
                
Other income (expense):               
Reversal (provision) for losses on off-balance sheet credit risk 8   13,926   3,463   (16,997)
Fees and commissions, net     10,326   6,733   7,252 
Derivative financial instruments and hedging 20   (1,446)  (2,534)  9,956 
Recoveries, net of impairment of assets     233   (120)  (767)
Net gain (loss) from investment fund trading     (7,995)  24,997   21,357 
Net gain (loss) from trading securities     (3,603)  13,113   (20,998)
Net gain on sale of securities available-for-sale 5   2,346   546   67 
Gain (loss) on foreign currency exchange     1,870   613   (1,596)
Other income (expense), net     833   912   656 
Net other income (expense)     16,490   47,723   (1,070)
                
Operating expenses:               
Salaries and other employee expenses     23,499   20,201   20,227 
Depreciation, amortization and impairment of premises and equipment     2,510   2,671   3,720 
Professional services     4,945   3,262   3,765 
Maintenance and repairs     1,616   1,125   1,357 
Expenses from the investment fund     890   3,520   2,065 
Other operating expenses     8,621   7,423   8,856 
Total operating expenses     42,081   38,202   39,990 
                
Net income     39,821   55,980   55,327 
                
Net income (loss) attributable to the redeemable noncontrolling interest     (2,423)  1,118   208 
                
Net income attributable to Bladex     42,244   54,862   55,119 
                
Basic earnings per share 17   1.15   1.50   1.51 
                
Diluted earnings per share 17   1.15   1.50   1.51 
                
Weighted average basic shares 17   36,647   36,493   36,388 
                
Weighted average diluted shares 17   36,814   36,571   36,440 

The Boardaccompanying notes are part of Directors and Stockholders
Banco Latinoamericano de Exportaciones, S. A.:
We have audited the accompanying consolidated statements of income, changes in stockholders’ equity, comprehensive income, and cash flows of Banco Latinoamericano de Exportaciones, S. A. and subsidiaries for the year ended December 31, 2006. These consolidated financial statements are the responsibility of the Bank’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of operations and the cash flows of Banco Latinoamericano de Exportaciones, S. A. and subsidiaries for the year ended December 31, 2006, in conformity with U.S. generally accepted accounting principles.
February 28, 2007
Panama, Republic of Panama
 
 
F-5
 

Banco Latinoamericano de Exportaciones, S. A.
Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Consolidated statements of changes in stockholders' equity and redeemable noncontrolling interest in the investment fund
Years ended December 31, 2010, 2009 and 2008
(in US$ thousand)

   Stockholders' equity    
     Additional                   
     paid-in capital                   
     in excess of        Accumulated        Redeemable 
     assigned value        other     Total  noncontrolling 
  Common  of common  Capital  Retained  comprehensive  Treasury  stockholders'  interest in the 
  stock  stock  reserves  earnings  income (loss)  stock  equity  investment fund 
                         
Balances at January 1, 2008  279,980   135,142   95,210   245,348   (9,641)  (133,788)  612,251   - 
Net income  -   -   -   55,119   -   -   55,119   208 
Redeemable noncontrolling interest - subscriptions  -   -   -   -   -   -   -   6,000 
Redeemable noncontrolling interest - redemptions  -   -   -   -   -   -   -   (1,519)
Other comprehensive loss  -   -   -   -   (62,474)  -   (62,474)  - 
Compensation cost - stock options and                                
stock units plans  -   1,033   -   -   -   -   1,033   - 
Issuance of restricted stock  -   (484)  -   -   -   745   261   - 
Exercised options  -   (114)  -   -   -   280   166   - 
Dividends declared  -   -   -   (32,032)  -   -   (32,032)  - 
Balances at December 31, 2008  279,980   135,577   95,210   268,435   (72,115)  (132,763)  574,324   4,689 
Net income  -   -   -   54,862   -   -   54,862   1,118 
Redeemable noncontrolling interest - subscriptions  -   -   -   -   -   -   -   32,090 
Redeemable noncontrolling interest - redemptions  -   -   -   -   -   -   -   (2,997)
Other comprehensive income  -   -   -   -   65,955   -   65,955   - 
Compensation cost - stock options and                                
stock units plans  -   1,596   -   -   -   -   1,596   - 
Issuance of restricted stock  -   (905)  -   -   -   905   -   - 
Exercised options and stock units vested  -   (1,448)  -   -   -   2,256   808   - 
Dividends declared  -   -   -   (21,908)  -   -   (21,908)  - 
Balances at December 31, 2009  279,980   134,820   95,210   301,389   (6,160)  (129,602)  675,637   34,900 
Net income (loss)  -   -   -   42,244   -   -   42,244   (2,423)
Redeemable noncontrolling interest - subscriptions  -   -   -   -   -   -   -   9,900 
Redeemable noncontrolling interest - redemptions  -   -   -   -   -   -   -   (23,427)
Other comprehensive loss  -   -   -   -   (281)  -   (281)  - 
Compensation cost - stock options and                                
stock units plans  -   2,099   -   -   -   -   2,099   - 
Issuance of restricted stock  -   (909)  -   -   -   909   -   - 
Exercised options and stock units vested  -   (2,195)      -   -   3,029   834   - 
Repurchase of common stock "Class E"  -   -   -   -   -   (3)  (3)  - 
Dividends declared  -   -   -   (23,480)  -   -   (23,480)  - 
Balances at December 31, 2010  279,980   133,815   95,210   320,153   (6,441)  (125,667)  697,050   18,950 

Consolidated balance sheets
December 31, 2008 and 2007
(in US$ thousand, except share amounts)

 Notes  2008  2007 
Assets        
Cash and due from banks4,23   11,474   596 
Interest-bearing deposits in banks (including pledged deposits of $75,004 in 2008 and $5,500 in 2007)4,23   889,119   400,932 
Trading assets (including pledged assets of $21,965 in 2008)5,23   44,939   - 
Securities available-for-sale (including pledged securities of $479,724 in 2008 and $322,926 in 2007)6,23   607,918   468,360 
Securities held-to-maturity (market value of $28,144 in 2008) (including pledged securities of $28,410 in 2008)6,23   28,410   - 
Investment fund7,23   150,695   81,846 
Loans8,23   2,618,643   3,731,838 
Less:          
Allowance for loan losses9,23   54,648   69,643 
Unearned income and deferred fees    4,689   5,961 
Loans, net    2,559,306   3,656,234 
           
Customers' liabilities under acceptances23   1,375   9,104 
Premises and equipment (net of accumulated depreciation and  amortization of $11,594 in 2008 and $9,704 in 2007)10   7,970   10,176 
Accrued interest receivable23   46,319   62,375 
Derivative financial instruments used for hedging - receivable21,23   7,777   122 
Other assets11   7,376   8,826 
Total assets3   4,362,678   4,698,571 
           
Liabilities and stockholders' equity          
           
Deposits:12,23         
Noninterest-bearing - Demand    718   890 
Interest-bearing - Demand    112,304   110,606 
Time    1,056,026   1,350,875 
Total deposits    1,169,048   1,462,371 
           
Trading liabilities5,23   14,157   13 
Securities sold under repurchase agreements4,5,6,13,23   474,174   283,210 
Short-term borrowings14,23   738,747   1,221,500 
Borrowings and long-term debt15,23   1,204,952   1,010,316 
Acceptances outstanding23   1,375   9,104 
Accrued interest payable23   32,956   38,627 
Derivative financial instruments used for hedging - payable21,23   91,897   16,899 
Reserve for losses on off-balance sheet  credit risk9   30,724   13,727 
Other liabilities    25,635   30,553 
Total liabilities3   3,783,665   4,086,320 
           
Commitments and contingent liabilities11,19,20,21,24         
           
Minority interest in the investment fund    4,689   - 
           
Stockholders' equity:16,17,18,22,25         
Class "A" common stock, no par value, assigned value of $6.67 (Authorized 40,000,000; outstanding 6,342,189)    44,407   44,407 
Class "B" common stock, no par value, assigned value of $6.67 (Authorized 40,000,000; outstanding 2,617,784 in 2008 and 2,660,847 in 2007)    21,241   21,528 
Class "E" common stock, no par value, assigned value of $6.67 (Authorized 100,000,000; outstanding 27,453,115 in 2008 and 27,367,113 in 2007)    214,332   214,045 
Additional paid-in capital in excess of assigned value of common stock    135,577   135,142 
Capital reserves    95,210   95,210 
Retained earnings    268,435   245,348 
Accumulated other comprehensive loss6,22   (72,115)  (9,641)
Treasury stock16   (132,763)  (133,788)
Total stockholders' equity    574,324   612,251 
           
Total liabilities and stockholders' equity    4,362,678   4,698,571 

The accompanying notes are part of these consolidated financial statements.

 
F-6
 

Banco Latinoamericano de Exportaciones, S. A.
Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Consolidated statements of comprehensive income (loss)
Years ended December 31, 2010, 2009 and 2008
(in US$ thousand)
        
Consolidated statements of income
Years ended December 31, 2008, 2007 and 2006
(in US$ thousand, except per share amounts)
 Notes 2008  2007  2006 
Interest income:          
Deposits with banks   7,574   12,729   6,035 
Trading assets   648   -   - 
Investment securities:             
Available-for-sale   31,745   19,595   16,780 
Held-to-maturity   746   1,337   5,985 
Investment fund   3,485   9,587   8,748 
Loans   200,045   221,621   165,802 
Total interest income   244,243   264,869   203,350 
Interest expense:             
Deposits   44,364   70,443   56,611 
Investment fund   2,296   4,197   4,639 
Short-term borrowings   63,239   70,244   55,000 
Borrowings and long-term debt   56,497   49,415   28,263 
Total interest expense   166,396   194,299   144,513 
Net interest income   77,847   70,570   58,837 
              
Reversal (provision) for loan losses 9  18,540   (11,994)  (11,846)
Net interest income, after reversal (provision) for loan losses   96,387   58,576   46,991 
              
Other income (expense):             
Reversal (provision) for losses on off-balance sheet credit risk 9  (16,997)  13,468   24,891 
Fees and commissions, net   7,252   5,555   6,393 
Derivative financial instruments and hedging 21  9,956   (989)  (225)
Recoveries on assets, net of impairments 6,11  (767)  (500)  5,551 
Net gain (loss) from investment fund trading   21,357   23,878   1,091 
Net gain (loss) from trading securities 13  (20,998)  (12)  (212)
Net gain on sale of securities available-for-sale 6  67   9,119   2,568 
Gain (loss) on foreign currency exchange   (1,596)  115   (253)
Other income (expense), net   656   (6)  36 
Net other income (expense)   (1,070)  50,628   39,840 
              
Operating expenses:             
Salaries and other employee expenses   20,227   22,049   16,826 
Depreciation, amortization and impairment of premises and equipment 10  3,720   2,555   1,406 
Professional services   3,765   3,181   2,671 
Maintenance and repairs   1,357   1,188   1,000 
Expenses from the investment fund   2,065   381   - 
Other operating expenses   8,856   7,673   7,026 
Total operating expenses   39,990   37,027   28,929 
              
Income before participation of the minority interest in gains of  the investment fund   55,327   72,177   57,902 
              
Participation of the minority interest in gains of the investment fund   (208)  -   - 
              
Net income   55,119   72,177   57,902 
              
Basic earnings per share   1.51   1.99   1.56 
              
Diluted earnings per share   1.51   1.98   1.54 
              
Average basic shares 18  36,388   36,349   37,065 
              
Average diluted shares 18  36,440   36,414   37,572 
  Notes  2010  2009  2008 
             
Net income     39,821   55,980   55,327 
                
Other comprehensive income (loss)               
                
Unrealized gains (losses) on securities available-for-sale:               
Unrealized gains (losses) arising from the year  21   2,325   63,556   (58,453)
Less: reclassification adjustments for net gains                
included in net income  21   (2,825)  (649)  (67)
Net change in unrealized gains (losses) on securities                
available-for-sale      (500)  62,907   (58,520)
                 
Unrealized gains (losses) on derivative financial instruments:                
Unrealized gains (losses) arising from the year  21   1,391   1,971   (2,433)
Less: reclassification adjustments for net (gains) losses                
included in net income  21   (1,172)  1,077   (1,521)
Net change in unrealized gains (losses) on derivative financial                
instruments      219   3,048   (3,954)
                 
Other comprehensive income (loss)      (281)  65,955   (62,474)
                 
Comprehensive income (loss)      39,540   121,935   (7,147)
                 
Comprehensive income (loss) attributable to the redeemable noncontrolling interest      (2,423)  1,118   208 
                 
Comprehensive income (loss) attributable to Bladex      41,963   120,817   (7,355)

The accompanying notes are part of these consolidated financial statements.

 
F-7
 

Banco Latinoamericano de Exportaciones, S. A.
Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Consolidated statements of cash flows
Years ended December 31, 2010, 2009 and 2008
(in US$ thousand)

  2010  2009  2008 
Cash flows from operating activities:         
Net income  39,821   55,980   55,327 
Adjustments to reconcile net income to net cash provided by            
operating activities:            
Activities of derivative financial instruments and hedging  (6,498)  1,391   30,198 
Depreciation, amortization and impairment of premises and equipment  2,510   2,671   3,720 
Provision (reversal of provision) for loan losses  9,091   18,293   (18,540)
Provision (reversal of provision) for losses on off-balance sheet credit risk  (13,926)  (3,463)  16,997 
Impairment loss on assets  -   120   767 
Net gain on sale of securities available-for-sale  (2,346)  (546)  (67)
Compensation cost - compensation plans  2,099   1,596   1,033 
Issuance of restricted stock  -   -   261 
Exercised deferred compensation units  -   -   15 
Amortization of premium and discounts on investments  7,597   9,382   12,115 
Net decrease (increase) in operating assets:            
Trading assets  (135)  (5,338)  (1,355)
Investment fund  30,284   (46,880)  (68,849)
Accrued interest receivable  (5,549)  20,758   16,056 
Other assets  (24,409)  (5,126)  683 
Net increase (decrease) in operating liabilities:            
Trading liabilities  786   (11,005)  14,144 
Accrued interest payable  (1,207)  (21,665)  (5,671)
Other liabilities  30,921   1,303   (6,088)
Net cash provided by operating activities  69,039   17,471   50,746 
             
Cash flows from investing activities:            
Net decrease (increase) in pledged deposits  6,507   52,422   (69,504)
Net decrease (increase) in loans  (1,308,935)  (160,471)  1,089,851 
Proceeds from the sale of loans  20,000   -   25,617 
Acquisition of premises and equipment  (1,293)  (2,450)  (1,514)
Proceeds from the redemption of securities available-for-sale  33,074   50,509   58,074 
Proceeds from the sale of securities available-for-sale  151,267   146,471   229,877 
Proceeds from the maturity of securities held-to-maturity  -   28,275   - 
Purchases of investments available for sale  (93,009)  (9,994)  (507,795)
Purchases of investments held to maturity  (33,196)  -   (29,085)
Net cash provided by (used in) investing activities  (1,225,585)  104,762   795,521 
             
Cash flows from financing activities:            
Net increase (decrease) in due to depositors  564,679   87,198   (293,323)
Net increase (decrease) in short-term borrowings            
and securities sold under repurchase agreements  961,195   (813,789)  (291,789)
Proceeds from borrowings and long-term debt  212,960   335,598   631,099 
Repayments of borrowings and long-term debt  (528,207)  (150,163)  (436,463)
Dividends paid  (22,720)  (34,593)  (30,862)
Subscriptions of redeemable noncontrolling interest in the investment fund  9,900   32,090   6,000 
Redemptions of redeemable noncontrolling interest in the investment fund  (23,427)  (2,997)  (1,519)
Exercised stock options  834   808   151 
Repurchase of common stock  (3)  -   - 
Net cash provided by (used in) financing activities  1,175,211   (545,848)  (416,706)
             
Net increase (decrease) in cash and cash equivalents  18,665   (423,615)  429,561 
Cash and cash equivalents at beginning of the year  401,974   825,589   396,028 
Cash and cash equivalents at end of the year  420,639   401,974   825,589 
             
Supplemental disclosures of cash flow information:            
Cash paid during the year for interest  46,182   98,877   172,067 

Consolidated statements of changes in stockholders' equity
Years ended December 31, 2008, 2007 and 2006
(in US$ thousand)

              Accumulated       
     Additional        other     Total 
  Common  paid-in  Capital  Retained  comprehensive  Treasury  stockholders’ 
  stock  capital  reserves  earnings  income (loss)  stock  equity 
                      
Balances at January 1, 2006  279,979   134,340   95,210   212,916   619   (106,282)  616,782 
Net income  -   -   -   57,902   -   -   57,902 
Other comprehensive income  -   -   -   -   2,709   -   2,709 
Compensation cost - indexed stock option plan  -   606   -   -   -   -   606 
Issuance of restricted stock  -   -   -   (49)  -   144   95 
Exercised stock options pursuant to compensation plan  -   -   -   (14)  -   27   13 
Repurchase of Class "E" common stock  -   -   -   -   -   (28,657)  (28,657)
Difference in fractional shares in conversion of common stocks  1   (1)  -   -   -   -   - 
Dividends declared  -   -   -   (65,555)  -   -   (65,555)
Balances at December 31, 2006  279,980   134,945   95,210   205,200   3,328   (134,768)  583,895 
Net income  -   -   -   72,177   -   -   72,177 
Other comprehensive loss  -   -   -   -   (12,969)  -   (12,969)
Compensation cost - indexed stock option plan  -   1,130   -   -   -   -   1,130 
Issuance of restricted stock  -   (644)  -   -   -   531   (113)
Exercised stock options pursuant to compensation plan  -   (289)  -   -   -   449   160 
Dividends declared  -   -   -   (32,029)  -   -   (32,029)
Balances at December 31, 2007  279,980   135,142   95,210   245,348   (9,641)  (133,788)  612,251 
Net income  -   -   -   55,119   -   -   55,119 
Other comprehensive loss  -   -   -   -   (62,474)  -   (62,474)
Compensation cost - stock option  and restricted stock unit plans  -   1,033   -   -   -   -   1,033 
Issuance of restricted stock  -   (484)  -   -   -   745   261 
Exercised stock options pursuant to compensation plan  -   (114)  -   -   -   280   166 
Dividends declared  -   -   -   (32,032)  -   -   (32,032)
Balances at December 31, 2008  279,980   135,577   95,210   268,435   (72,115)  (132,763)  574,324 

The accompanying notes are part of these consolidated financial statements.

 
F-8
 

Banco Latinoamericano de Exportaciones,Comercio Exterior, S. A.
and Subsidiaries

Consolidated statements of comprehensive income (loss)
Years ended December 31, 2008, 2007 and 2006
(in US$ thousand)

 Notes  2008  2007  2006 
            
Net income:    55,119   72,177   57,902 
               
Other comprehensive income (loss):              
               
Unrealized gains (losses) on securities available-for-sale:              
Unrealized gains (losses) arising from the year22   (58,453)  (1,912)  5,349 
Less:  Reclassification adjustments for gains included in net income6,22   (67)  (9,119)  (2,568)
Net change in unrealized gains (losses) on securities available-for-sale    (58,520)  (11,031)  2,781 
               
Unrealized losses on derivative financial instruments:              
Unrealized losses arising from the year22   (2,433)  (2,081)  (72)
Less: Reclassification adjustments for net (gains) losses included in net income22   (1,521)  143   - 
               
Net change in unrealized losses on derivative financial instruments    (3,954)  (1,938)  (72)
               
Other comprehensive income (loss)    (62,474)  (12,969)  2,709 
               
Comprehensive income (loss)    (7,355)  59,208   60,611 

The accompanying notes are part of these consolidated financial statements.

F-9

Banco Latinoamericano de Exportaciones, S. A.
and Subsidiaries

Consolidated statements of cash flows
Years ended December 31, 2008, 2007 and 2006
(in US$ thousand)

  2008  2007  2006 
Cash flows from operating activities:         
Net income  55,119   72,177   57,902 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:            
Activities of derivative financial instruments and hedging  30,198   1,258   312 
Depreciation and amortization of premises and equipment  3,720   2,555   1,406 
Provision (reversal) for loan losses  (18,540)  11,994   11,846 
Provision (reversal) for losses on off-balance sheet credit risk  16,997   (13,468)  (24,891)
Impairment loss on assets  767   500   - 
Net gain on sale of securities available-for-sale  (67)  (9,119)  (2,568)
Compensation cost - stock options plans  1,033   1,130   606 
Issuance of restricted stock  261   (113)  95 
Deferred compensation awards  -   -   13 
Exercised stock options pursuant to compensation plan  15   -   - 
Amortization of premiums and discounts on investments  12,115   6,268   4,748 
Net decrease (increase) in operating assets:            
Trading assets  (1,355)  -   - 
Investment fund  (68,849)  23,353   (105,199)
Accrued interest receivable  16,056   (9,887)  (22,234)
Other assets  683   (2,583)  4,552 
Net increase (decrease) in operating liabilities:            
Trading liabilities  14,144   13   - 
Accrued interest payable  (5,671)  11,332   12,559 
Other liabilities  (6,088)  3,631   2,100 
Net cash provided by (used in) operating activities  50,538   99,041   (58,753)
             
Cash flows from investing activities:            
Net increase in pledged interest bearing deposits  (69,504)  -   (500)
Net decrease (increase) in loans  1,089,851   (864,971)  (384,433)
Proceeds from the sale of loans  25,617   121,824   12,500 
Net acquisition of premises and equipment  (1,514)  (1,595)  (9,289)
Proceeds from the redemption of securities available-for-sale  58,074   19,074   20,000 
Proceeds from the maturity of securities held-to-maturity  -   125,000   9,000 
Proceeds from the sale of securities available-for-sale  229,877   578,697   129,731 
Purchases of investment securities  (536,880)  (716,472)  (419,143)
Net cash provided by (used in) investing activities  795,521   (738,443)  (642,134)
             
Cash flows from financing activities:            
Net increase (decrease) in due to depositors  (293,323)  406,094   9,659 
Net (decrease) increase in short-term borrowings  and securities sold under repurchase agreements  (291,789)  (90,894)  834,905 
Proceeds from borrowings and long-term debt  631,099   613,126   133,680 
Repayments of borrowings and long-term debt  (436,463)  (161,670)  (108,680)
Dividends paid  (30,862)  (29,713)  (63,364)
Proceeds from the minority interest in the investment fund  4,689   -   - 
Redemption of redeemable preferred stock  -   -   (3,216)
Exercised stock options  151   160   - 
Repurchase of common stock  -   -   (28,657)
Net cash (used in) provided by financing activities  (416,498)  737,103   774,327 
             
Net increase in cash and cash equivalents  429,561   97,701   73,440 
Cash and cash equivalents at beginning of the year  396,028   298,327   224,887 
Cash and cash equivalents at end of the year  825,589   396,028   298,327 
             
Supplemental disclosures of cash flow information:            
Cash paid during the year for interest  172,067   183,521   130,829 

The accompanying notes are part of these consolidated financial statements.

F-10
Banco Latinoamericano de Exportaciones, S. A.
   and Subsidiaries

Notes to consolidated financial statements


1.Organization

Banco Latinoamericano de Exportaciones,
Banco Latinoamericano de Comercio Exterior, S. A. (“Bladex Head Office” and together with its subsidiaries “Bladex” or the “Bank”), headquartered in Panama City, Republic of Panama, is a specialized supranational bank established to finance trade in Latin America and the Caribbean (the “Region”).  The Bank was established pursuant to a May 1975 proposal presented to the 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 organized in 1977, incorporated in 1978 as a corporation pursuant to the laws of the Republic of Panama, and officially initiated operations on January 2, 1979.  Under a contract signed in 1978 between the Republic of Panama and Bladex, the Bank was granted certain privileges by the Republic of Panama, including an exemption from payment of income taxes in Panama.

On April 15, 2009, the Bank’s shareholders approved at its Annual Shareholders’ Meeting some amendments to the Bank’s Articles of Incorporation.  The amendments, that were effective on June 17, 2009, include, among others:

-A change in the legal name of the Bank from Banco Latinoamericano de Exportaciones, S. A. to Banco Latinoamericano de Comercio Exterior, S. A.

-An extension of the scope of the Bank’s activities to encompass all types of banking, investment, and financial or other businesses that support foreign trade and the development of Latin American countries.

-Authorization of: (1) an increase in the total share capital of the Bank to two hundred ninety million (290,000,000) shares, including  up to ten million of new preferred stock, with a par value US$10 each, to be issued in one or more series from time to time at the discretion of the Bank’s Board of Directors; and (2) the establishment of a new class of common shares (Class F) that will only be issued to (a) state entities and agencies of non-Latin American countries, including, among others, central banks and majority state-owned banks in those countries, and (b) multilateral financial institutions either international or regional institutions.  When the number of issued and outstanding Class F common shares is equal to or greater than 15% of the total number of issued and outstanding common shares, the Class F shareholders shall have the right to elect one director of the Bank.

The Bank operates under a general banking license issued by the National Banking Commission of Panama, predecessor of the Superintendency of Banks of Panama (the “SBP”).

In the Republic of Panama, banks are regulated by the SBP through Executive Decree No.52 of April 30, 2008, which adopts the text of the Law Decree No. 9 of February 26, 1998, modified by the Law Decree No. 2 of February 22, 2008.  Banks are also regulated by the resolutions and agreements issued by this entity.  The main aspects of this law and its regulations include: the authorization of banking licenses, minimum capital and liquidity requirements, consolidated supervision, procedures for management of credit and market risks, measures to prevent money laundering, the financing of terrorism and related illicit activities, and procedures for banking intervention and liquidation, among others.

F-9
Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
Notes to consolidated financial statements
Bladex Head Office’s consolidated subsidiaries are the following:

 -Bladex Holdings Inc., is a wholly owned subsidiary, incorporated under the laws of the State of Delaware, United States of America (USA), on May 30, 2000.  Bladex Holdings Inc. exercises control over the following subsidiary companies:

 ·Bladex Asset Management Inc., incorporated on May 24, 2006, under the laws of the State of Delaware, USA, serves as investment manager for Bladex Offshore Feeder Fund (the “Feeder”) and Bladex Capital Growth Fund (the “Fund”).  On September 8, 2009, Bladex Asset Management Inc. was registered as a foreign entity in the Republic of Panama, to establish a branch in Panama, which is mainly engaged in providing administrative and operating services to Bladex Asset Management Inc. in USA.

 ·Clavex, LLC incorporated on June 15, 2006, under the laws of the State of Delaware, USA, ceased operations ina dormant company since February 2007.

 -The Feeder is an entity in which Bladex Head office owned 96.89% atowns 88.67% as of December 31, 2008,2010, and 100% at82.34% as of December 31, 2007.2009.  The Feeder was incorporated on February 21, 2006 under the laws of the Cayman Islands, and invests substantially all its assets in the Fund, which wasis also incorporated under the laws of the Cayman Islands.  The Feeder and the Fund are registered with the Cayman Island Monetary Authority (“CIMA”), under the Mutual Funds Law of the Cayman Islands. The objective of the Fund is to achieve capital appreciation by investing in Latin American debt securities, stock securities,indexes, currencies, and trading derivative instruments.  In April 2008, the Feeder was registered with the Cayman Island Monetary Authority (CIMA), under the Mutual Funds Law of the Cayman Islands.  Until April 30, 2008, the Feeder was a wholly owned subsidiary of Bladex Head Office.  On May 1, 2008, the Feeder began receiving third party investments.

 -Bladex Representacao Ltda., incorporated under the laws of Brazil on January 7, 2000, acts as the Bank’s representative office in Brazil.  Bladex Representacao Ltda. is 99.999% owned by Bladex Head Office and the remaining 0.001% owned by Bladex Holdings Inc.

F-11

Banco Latinoamericano de Exportaciones, S. A.
   and Subsidiaries

Notes to consolidated financial statements

 -Clavex, S.A.S. A., is a wholly owned subsidiary, incorporated on May 18, 2006, under the laws of the Republic of Panama, to mainly provide specialized training.

Bladex Head Office has an agency in New York City, USA (the "New“New York Agency"Agency”), which began operations on March 27, 1989.  The New York Agency is principally engaged in financing transactions related to international trade, primarilymostly the confirmation and financing of letters of credit for customers of the Region.  The New York Agency is also licensed by the State of New York Banking Department, USA, to operate an International Banking Facility (“IBF”).

The Bank also has representative offices in Buenos Aires, Argentina, and in Mexico City, D.F., Mexico, in Porto Alegre, Brazil, and in Monterrey, Mexico, and an international administrative office in Miami, Florida, USA. The offices in Porto Alegre and Monterrey started operations in 2010.

Bladex Head Office owns 50% of the equity shares of BCG PA LLC, a company incorporated under the laws of the State of Delaware, USA.  This company owns “Class C” shares of the Fund that entitle it to receive a performance allocation on third-party investments in the Feeder.Feeder and in the Fund.

F-10

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
Notes to consolidated financial statements

On August 12, 2010, the Bank received authorization to open a representative office in the city of Lima, Peru. Additionally, on September 24, 2010, the Bank received authorization to open two new subsidiaries, one in Cayman Islands and the other in Brazil.
2.Summary of significant accounting policies

 a)Basis of presentation

These consolidated financial statements have been prepared under accounting principles generally accepted in the United States of America (“U.S. GAAP”).  All amounts presented in the consolidated financial statements and notes are expressed in thousands of dollars of the United Stated of America (“US$”), which is the Bank’s functional currency.  The accompanying consolidated financial statements have been translated from Spanish to English for users outside of the Republic of Panama.

The Accounting Standards Codification (the “ASC”) issued by the Financial Accounting Standards Board (the “FASB”) constitute the single official source of authoritative, non-governmental GAAP, other than guidance issued by the Securities and Exchange Commission (“SEC”).  All other literature is considered non-authoritative.

 b)Principles of consolidation

The consolidated financial statements include the accounts of Bladex Head Office and its subsidiaries.  Bladex Head Office consolidates its subsidiaries in which it holds a controlling financial interest.  All intercompany balances and transactions have been eliminated for consolidation purposes.

When Bladex holds an interest in investment companies under the Feeder-Master structure where the Feeder’s shareholding has not been diluted and it has not been registered as a mutual fund with any regulatory body, the Feeder, and thereby Bladex indirectly, fully consolidates the Master.  In cases where the participation in the Feeder is diluted and such entity is registered as a mutual fund with a regulatory body, it is considered an investment company and the Feeder, and thereby Bladex indirectly, consolidates its participation in the Master utilizing the specialized accounting in the American Institute of Certified Public Accountants (“AICPA”) Audit and Accounting Guide for Investment Companies (the “Guide”).

F-12

Banco Latinoamericano de Exportaciones, S. A.
   and Subsidiaries

Notes to consolidated financial statements
When Bladex holds an interest in investment companies under the “Feeder-Master” structure where the Feeder’s shareholding is diluted and such entity is registered as a mutual fund with a regulatory body, it is considered an investment company.  In those cases, the Feeder, and thereby Bladex indirectly, consolidates its participation in the Fund in one line item in the balance sheet, as required by the specialized accounting in the ASC Topic 946 - Financial Services – Investment Companies.

 c)Equity method

Investments in companies in which Bladex Head Office exercises significant influence, but not control over its financial and operating policies, and holds an equity participation of at least 20%, but not more than 50%, are initially accounted for at cost, which is subsequently adjusted to record the participation of the investment in gains (losses) of the investee after the acquisition date.

 d)Adoption of the specializedSpecialized accounting for investment companies

Until April 30, 2008, the Feeder was a 100% subsidiary of Bladex Head Office and was a 100% owner of the Fund.  Accordingly, amounts from the consolidated assets, liabilities, revenues and expenses of the Fund were reported in the respective line items of the consolidated balance sheet and statement of income of the Feeder, and ultimately of the Bank.

In April 2008, the Feeder was registered with CIMA under the Mutual Funds Law of Cayman Islands.  Since May 1, 2008, the Feeder began receiving third party investments.  Since that date, the Feeder began accounting for its investments in the Fund as an investment company, in accordance with the Guide.  The Feeder and the Fund are organized under a “Feeder-Master” structure.  Under this structure, the Feeder invests all its assets in the Fund which in turn invests in various assets on behalf of its investor.  Specialized accounting for investment companies within the Guide requires the Feeder to reflect its investment in the Fund in a single line item equal to its proportionate share of the net assets of the Fund, regardless of the level of Feeder’s interest in the Fund.  The Feeder records the Fund’s results by accounting for its participation in the net interest income and expenses of the Fund, as well as its participation in the realized and unrealized gains or losses of the Fund.

F-11

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
Notes to consolidated financial statements

As permitted by Emerging Issues Task Force (“EITF”) 85-12, “Retention of Specialized Accounting for Investments in Consolidation”,ASC Topic 810-10-25-15 – Consolidation, when Bladex consolidates its investment in the Feeder, it retains the specialized accounting for investment companies applied by the Feeder in the Fund, reporting it within the “Investment fund” line item in the consolidated balance sheet, and presenting the third party investments in the Feeder in the “Minority“Redeemable noncontrolling interest in the investment fund” line item between liabilities and stockholders’ equity.  The Bank reports interest income and expense from the Fund in the Investment fund line item within interest income and expense, and realized and unrealized gains and losses in the “Net gain (loss) from investment fund trading” line item.  Expensesitem, and expenses from the Fund are reported in “Expenses from the investment fund” line item in the consolidated statements of income.  As this treatment, adopted in 2008, is considered a change in reporting entity, for comparative purposes, the financial statements as of and for the years ended December 31, 2007 and 2006 have been adjusted to apply the treatment retrospectively.

The Fund invests in trading assets and liabilities that are carried at fair value, which is based upon quoted market prices when available.  For financial instruments for which quoted prices are not available, the Fund uses independent valuations from pricing providers that use their own proprietary valuation models that take into consideration discounted expected cash flows, using market rates commensurate with the credit quality and maturity of the security.  These prices are compared to independent valuations from counterparties.  The Fund reports trading gains and losses from negotiation of these instruments as realized and unrealized gains and losses on investments.

F-13

Banco Latinoamericano de Exportaciones, S. A.
   and Subsidiaries

Notes to consolidated financial statements

 e)Use of estimates

The preparation of the consolidated financial statements requires management to make estimates and use assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Material estimates that are particularly susceptible to significant changes relate to the determination of the allowances for credit losses, impairment losses on assets, impairment of securities available-for-sale and held-to-maturity, and the fair value of financial instruments.  Actual results could differ from those estimates.  Management believes these estimates are adequate.

 f)Cash equivalents

Cash equivalents consist ofinclude demand deposits in banks and interest-bearing deposits in banks with original maturities of three months or less, less deposits pledged.excluding pledged deposits.

 g)Repurchase agreements

Repurchase agreements representare generally treated as collateralized financing transactions usedtransactions. When the criteria set forth in the following paragraph are met to increase liquidity and areaccount for the transaction as secured financing, the transaction is recorded at the amounts at which the securities will be subsequently reacquired including accrued interest paid, as specified in the respective agreements.  The Bank’s policyInterest is to relinquish possessionrecognized in the statement of income over the life of the securities sold under agreements to repurchase.transaction. The market value of securities to be repurchased is permanentlycontinuously monitored, and additional collateral is obtained or provided where appropriate, to protect against credit exposure.

Transactions similarThe Bank’s policy is to relinquish possession of the securities sold under agreements to repurchase.  Despite such relinquishment of possession, repurchase agreements qualify as secured financing thatfinancings if and only if all of the following conditions are met: the assets to be repurchased are the same or substantially the same as those transferred; the transferor is able to repurchase them with the collateral received, keeping substantially the agreed terms, even in the event of default of the transferee; the agreement is to repurchase or redeem them before maturity, at a fixed and determinable price; and the agreement is entered into concurrently at the transfer date.  In order to be able to repurchase assets on substantially the agreed terms, even in the case of default from the counterparty, the transferor must at all times, during the contract term, have obtained cash or other collateral sufficient to fund substantially all the cost of purchasing the transferred assets from other counterparties.

F-12

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
Notes to consolidated financial statements

When repurchase agreements do not meet certain criteriathe above-noted conditions, they qualify as sales of Statement of Financial Accounting Standards (“SFAS”) 140, “Accountingsecurities, for Transferswhich the related security is removed from the balance sheet and Servicing of Financial Assets and Extinguishment of Liabilities”, to be accounteda forward purchase agreement is recognized for as secured financing, are recorded as a sale of the transferred security with a forward obligation to repurchase the financial instrument.  The forward repurchase obligation is accounted for as a financial derivative instrument and is recorded at fair valuesecurity.  Changes in the consolidated balance sheet with changes in the fair value recorded in gains (losses) from trading securities.  At the date of the repurchase agreement, the Bank recognizes as income the retained interest in the repurchase agreements accounted for as sales.  The fair value of the retained interest is based upon quoted market prices when available,forward purchase agreement as well as any gain or onloss resulting from the present valuesale of future expected cash flows usingsecurities under repurchase agreements are reported in  earnings of the information related to credit losses, prepayment speeds, forward yield curves, and discount rates commensurate with the risks involved.  period within  net gain (loss) from trading securities.

 h)Trading assets and liabilities

Trading assets and liabilities include bonds acquired for trading purposes, and receivables (unrealized gains) and payables (unrealized losses) related to derivative financial instruments.instruments which are not designated as hedges or which do not qualify for hedge accounting.  These amounts include the derivative assets and liabilities net of cash received or paid, respectively, under legally enforceable master netting agreements.  Trading assets and liabilities are carried at fair value, which is based upon quoted prices when available, or if quoted market prices are not available, on discounted expected cash flows using market rates commensurate with the credit quality and maturity of the security.

Unrealized and realized gains and losses on trading assets and liabilities are recorded in earnings as net gain (loss) from trading securities.

F-14

Banco Latinoamericano de Exportaciones, S. A.
   and Subsidiaries

Notes to consolidated financial statements

 i)Investment securities

Securities are classified at the date of purchase based on the ability and intent to sell or hold them as investments. These securities consist of debt securities such as: negotiable commercial paper, bonds and floating rate notes.

Securities available-for-sale

These securities consist of debt instruments that the Bank buys with the intention of selling them prior to maturity and are subject to the same approval criteria as the rest of the credit portfolio.  These securities are carried at fair value, based on quoted market prices when available, or if quoted market prices are not available, based on discounted expected cash flows using market rates commensurate with the credit quality and maturity of the security.  Unrealized gains and losses are reported as net increases or decreases to the accumulated other comprehensive income (loss) (OCI) in the stockholders’ equity until they are realized. Realized gains and losses from the salessale of securities which are included in net gain on sale of securities are determined using the specific identification method.

Securities held-to-maturity

Securities classified as held-to-maturity represent securities that the Bank has the ability and the intent to hold until maturity.  These securities are carried at amortized cost and are subject to the same approval criteria as the rest of the credit portfolio.

Interest on securities is recognized based on the interest method. Amortization of premiums and accretion of discounts are included in interest income as an adjustment to the yield.

Impairment

The Bank conducts periodic reviews of all securities with unrealized losses to evaluate whether the impairment is other-than-temporary.  Impairment of securities is evaluated considering numerous factors, and their relative significance varies case by case.  Factors considered in determining whether a loss is temporary include: the length of time and extent to which the market value has been less than cost, the severity of the impairment, the cause of the impairment and the financial condition of the issuer, activity in the market of the issuer which may indicate adverse credit conditions, and the intent and ability of the Bank to retain the security for a sufficient period of time to allow for an anticipated recovery in market value.  If, based on the analysis, it is determined that the impairment is other-than-temporary, the security is written down to its fair value, and a loss is recognized through earnings as impairment loss on assets.  Interest accrual is suspended on securities that are in default, or on which it is likely that future interest payments will not be received as scheduled.

 
F-15F-13
 

Banco Latinoamericano de Exportaciones,Comercio Exterior, S. A.
and Subsidiaries

Notes to consolidated financial statements

Impairment

The Bank conducts periodic reviews of all securities with unrealized losses to evaluate whether the impairment is other-than-temporary.  Impairment of securities is evaluated considering numerous factors, and their relative significance varies case by case.  Factors considered in determining whether unrealized losses are temporary include: the length of time and extent to which the market value has been less than cost, the severity of the impairment, the cause of the impairment and the financial condition of the issuer, activity in the market of the issuer which may indicate adverse credit conditions, the intent and ability of the Bank to retain the security for a sufficient period of time to allow of an anticipated recovery in the market value (with respect to equity securities) and  the intent and probability of the Bank to sell the security before the recovery of its amortized cost (with respect to debt securities).  If, based on the analysis, it is determined that the impairment is other-than-temporary, the security is written down to its fair value, and a loss is recognized through earnings as impairment loss on assets.

In cases where the Bank does not intend to sell a debt security and estimates that it will not be required to sell the security before the recovery of its amortized cost basis, the Bank periodically estimates if it will recover the amortized cost of the security through the present value of expected cash flows.  If the present value of expected cash flows is less than the amortized cost of the security, it is determined that an other-than-temporary impairment has occurred.  The amount of this impairment representing credit loss is recognized through earnings and the residual of the other-than-temporary impairment related to non-credit factors is recognized in other comprehensive income (loss).

In periods subsequent to the recognition of the other-than-temporary impairment, the difference between the new amortized cost and the expected cash flows to be collected is accreted as interest income.  The present value of the expected cash flows is estimated over the life of the debt security.

The other-than-temporary impairment of securities held-to-maturity that has been recognized in other comprehensive income is accreted to the amortized cost of the debt security prospectively over its remaining life.

Interest accrual is suspended on securities that are in default, or on which it is likely that future interest payments will not be received as scheduled.

 j)Investment Fund

The Feeder records its investment in the Fund at fair value, which is the Feeder’s proportionate interest in the net assets of the Fund.

The Fund invests in trading assets and liabilities that are carried at fair value, which is based upon quoted market prices when available.  For financial instruments for which quoted prices are not available, the Fund uses independent valuations from pricing providers that use their own proprietary valuation models that take into consideration discounted expected cash flows, using market rates commensurate with the credit quality and maturity of the security.  These prices are compared to independent valuations from counterparties.  The Fund reports trading gains and losses from negotiation of these instruments as realized and unrealized gains and losses on investments.

F-14

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
Notes to consolidated financial statements

k)Other investments

Other investments that mainly consist of unlisted stock are recorded at cost and are included in other assets.  The Bank determined that it is not practicable to obtain the market value of these investments, as these shares are not traded in a secondary market.  ImpairmentPerformance of these investments is evaluated periodically and declines that are determined to be other-than-temporary are charged to earnings as impairment on assets.assets (See Note 10).

 k)l)Loans

Loans are reported at their principal outstanding amounts net of unearned income, deferred fees and allowance for loan losses.  Interest income is recognized as accrued.
Loans are reported at their principal outstanding amounts net of unearned income, deferred fees and allowance for loan losses.  Interest income is recognized using the interest method.  The amortization of net unearned income and deferred fees are recognized as an adjustment to the related loan yield using the effective interest method.

Purchased loans are recorded at acquisition cost.  The difference between the principal and the acquisition cost of loans, the premiums and discounts, is amortized over the life of the loan as an adjustment to the yield.  All other costs related to acquisition of loans are expensed when incurred.

Loans are identified as impaired and placed on a cash (non-accrual) basis when interest or principal is past due for 90 days or more, or before if the Bank’s management determines that the ultimate collection of principal or interest is doubtful.  
The Bank identifies loans as delinquent when no debt service and/or interest payment has been received for 30 days after such payments were due. The outstanding balance of a loan is considered past due when the total principal balance with one single balloon payment has not been received within 30 days after such payment was due, or when no agreed-upon periodical payment has been received for a period of 90 days after the agreed-upon date.

Loans are placed on a cash basis (non-accrual) when interest or principal is overdue for 90 days or more, or before if the Bank’s management believes there is an uncertainty with respect to the ultimate collection of principal or interest.

Factors considered by the Bank’s management in determining impairment include collection status, collateral value, the probability of collecting scheduled principal and interest payments when due, and economic conditions in the borrower’s  country of residence.  Any interest receivable on non-accruing loans is reversed and charged-off against current year’s earnings.  Interest on non-accruingthese loans is only recorded as earned when collected.  Non-accruing loans are returned to an accrual status when (1) all contractual principal and interest amounts are currentcurrent; (2) there is a sustained period of repayment performance in accordance with the contractual terms of at least six months; and (3) if in the Bank management’s opinion the loan is fully collectible.  When current events or available information confirm that specific impaired loans or portions thereof are uncollectible, such impaired loans are charged-off against the allowance for loan losses.

A loan is classified as a troubled debt restructuring if a significant concession in amount, maturity or interest rate is granted to the borrower due to the deterioration in its financial condition.  Marketable securities received in exchange for loans under troubled debt restructurings are initially recorded at fair value, with any gain or loss recorded as a recovery or charge to the allowance, and are subsequently accounted for as securities available-for-sale.

The Bank maintains a system of internal credit quality indicators.  These indicators are assigned depending on several factors which include: profitability, quality of assets, liquidity and cash flows, capitalization and indebtedness, economic environment and positioning, regulatory framework and/or industry, sensitivity scenarios and the quality of debtor’s management and shareholders.  A description of these indicators is as follows:

 
F-16F-15
 

Banco Latinoamericano de Exportaciones,Comercio Exterior, S. A.
and Subsidiaries

Notes to consolidated financial statements

RatingClassificationDescription
1 to 6Normal
Clients with payment ability to satisfy their financial commitments.
7Special Mention
Clients exposed to systemic risks specific to the country or the industry in which they are located, facing adverse situations in their operation or financial condition. At this level, access to new funding is uncertain.
8Substandard
Clients whose primary source of payment (operating cash flow) is inadequate and who show evidence of deterioration in their working capital that does not allow them to satisfy payments on the agreed terms, endangering recovery of unpaid balances.
9Doubtful
Clients whose operating cash flow continuously shows insufficiency to service the debt on the originally agreed terms.  Due to the fact that the debtor presents an impaired financial and economic situation, the likelihood of recovery is low.
10UnrecoverableClients with operating cash flow that does not cover their costs, are in suspension of payments, presumably they will also have difficulties to fulfill possible restructuring agreements, are in a state of insolvency, or have filed for bankruptcy, among others.

Loans with ratings between 1 and 4 are reviewed annually, ratings 5 and 6 are reviewed semi-annually, and those with greater ratings are reviewed quarterly.

The Bank's lending portfolio is summarized in the following segments: corporations, sovereign, middle-market companies and banking and financial institutions.  The distinction between corporations and middle-market companies depends on the client’s level of annual sales in relation to the country risk, among other criteria. Except for the sovereign segment, segments are broken down into state-owned and private.

The Bank's lending policy is applicable to all classes of loans.

m)Transfer of financial assets

Transfers of financial assets, primarily loans, are accounted for as sales when control over the assets has been surrendered.  Control over transferred assets is deemed to be surrendered when: (1) the assets have been isolated from the Bank even in bankruptcy or other receivership; (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets; and (3) the Bank does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or does not have the right to cause the assets to be returned.  Upon completion of a transfer of assets that satisfies the conditions described above to be accounted for as a sale, the Bank recognizes the assets as sold and records in earnings any gain or loss on the sale.  The Bank may retain interest in loans sold in the form of servicing rights.  Gains or losses on sale of loans depend in part on the carrying amount of the financial assets involved in the transfer, and its fair value at the date of transfer.  The fair value of instruments is determined based upon quoted market prices when available, or are based on the present value of future expected cash flows using information related to credit losses, prepayment speeds, forward yield curves, and discounted rates commensurate with the risk involved.

F-16

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
Notes to consolidated financial statements

 l)n)Allowance for credit losses

The allowance for credit losses is provided for losses derived from the credit extension process, inherent in the loan portfolio and off-balance sheet financial instruments, using the reserve method of providing for credit losses.  Additions to the allowance for credit losses are made by charges toaccreting earnings.  Credit losses are deducted from the allowance, and subsequent recoveries are added.  The allowance is also decreased by reversals of the allowance back to earnings.  The allowance attributable to loans is reported as a deduction of loans and the allowance for off-balance sheet credit risk, such as, letters of credit and guarantees, is reported as a liability.

The allowance for possible credit losses includes an asset-specific component and a formula-based component.  The asset-specific component relates to the provision for losses on credits considered impaired and measured on a case-by-case basis.  AnA specific allowance is established when the discounted cash flows (or collateral value of observable market price)price of collateral) of the credit is lower than the carrying value of that credit.  The formula-based component covers the Bank’s performing credit portfolio and is established based in a process that estimates the probable loss inherent in the portfolio, based on statistical analysis and management’s qualitative judgment.  The statistical calculation is a product of internal risk classifications, probabilities of default and loss given default.  The probability of default is supported by Bladex’s historical portfolio performance complemented by probabilities of default provided by external sources, for higher risk cases, in view of the greater robustness of this external data for suchsome cases.  The loss given default is based on Bladex’s historical losses experience and best practices.  The reserve balances, for both on and off-balance sheet credit exposures, are calculated applying the following formula:

Reserves = ∑(E x PD x LGD); where:

 -Exposure (E) = the total accounting balance (on and off-balance sheet) at the end of the period under review.

F-17

Banco Latinoamericano de Exportaciones, S. A.
   and Subsidiaries

Notes to consolidated financial statements

 -Probabilities of Default (PD) = one-year probability of default applied to the portfolio.  Default rates are based on Bladex’s historical portfolio performance per rating category, during an eight-year period, complemented by Standard&Poor’s & Poor’s (“S&P”) probabilities of default for high risk cases,categories 6, 7 and 8, in view of the greater robustness of S&P data for such cases.

 -Loss Given Default (LGD) = a factor is utilized, based on historical information, samessame as based on best practices in the banking industry. Management applies judgementjudgment and historical loss experience on a case-by-case basis.experience.

Management can also apply complementary judgment to capture elements of  prospective nature or loss expectations based on risks identified in the environment that are not necessarily reflected in the historical data.

The allowance policy is applicable to all classes of loans and off-balance sheet financial instruments of the Bank.

F-17

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
Notes to consolidated financial statements

 m)o)Fair value of guarantees including indirect indebtedness of others

The Bank recognizes at inception a liability for the fair value of obligations undertaken such as stand-by letters of credit and guarantees.  Fair value is calculated based on the present value of the premium to be received or a specific allowance for off-balance sheet credit contingencies, whichever is greater.

 n)p)Fees and commissions

Loan origination fees, net of direct loan origination costs, are deferred, and the net amount is recognized as revenue over the contractual term of the loans as an adjustment to the yield.  These net fees are not recognized as revenue during periods in which interest income on loans is suspended because of concerns about the realization of loan principal or interest.  Underwriting fees are recognized as revenue when the Bank has rendered all services to the issuer and is entitled to collect the fee from the issuer, when there are no contingencies related to the fee.  Underwriting fees are recognized net of syndicate expenses.  In addition, the Bank recognizes credit arrangement and syndication fees as revenue after satisfying certain retention, timing and yield criteria.  Fees received in connection with a modification of terms of a troubled debt restructuring are applied as a reduction of the recorded investment in the loan.  Fees earned on letters of credit, guarantees and other commitments are amortized using the straight-line method over the life of such instruments.

 o)q)Premises and equipment

Premises and equipment, including the electronic data processing equipment, are carried at cost less accumulated depreciation and amortization, except land, which is carried at cost.  Depreciation and amortization are charged to operations using the straight-line method, over the estimated useful life of the related asset.  The estimated original useful life for building is 40 years and for furniture and equipment is three to five years.

The Bank defers the cost of internal-use software that has a useful life in excess of one year in accordance with Statement of Position (“SOP”) 98-1, “Accounting
The Bank defers the cost of internal-use software that has a useful life in excess of one year in accordance with ASC Topic 350-40 - Intangibles – Goodwill and Other – Internal-Use Software.  These costs consist of payments made to third parties related to the use of licenses and installation of both, software and hardware.  Subsequent additions, modifications or upgrades to internal-use software are capitalized only to the extent that they allow the software to perform a task it previously did not perform.  Software maintenance and training costs are expensed in the period in which they are incurred.  Capitalized internal use software costs are amortized using the straight-line method over their estimated useful lives, generally consisting of 5 years.

r)Borrowings and debt

Short and long-term borrowings and debt are accounted for the Costs of Computer Software Developed or Obtained for Internal Use”.  These costs consist of payments made to third parties related to the use of licenses and installation of both, software and hardware.  Subsequent additions, modifications or upgrades to internal-use software are capitalized only to the extent that they allow the software to perform a task it previously did not perform.  Software maintenance and training costs are expensed in the period in which they are incurred.  Capitalized internal use software costs areat amortized using the straight-line method over their estimated useful lives, generally consisting of five years.cost.


 
F-18
 

Banco Latinoamericano de Exportaciones,Comercio Exterior, S. A.
and Subsidiaries

Notes to consolidated financial statements

 p)s)Capital reserves

Capital reserves are established as a segregation of retained earnings and are, as such, a form of retained earnings.  Even though the constitution of capital reserves is not required by the SBP, their reductions require the approval of the Bank’s Board of Directors and the SBP.

 q)t)CashStock-based compensation and stock-based compensation planstock options plans

The Bank applies SFAS 123 (R) “Share-Based Payment”ASC Topic 718 – Compensation - Stock Compensation to account for compensation costs on restricted stock and stock option plans.  Compensation cost is based on the grant date fair value of both stocksstock and options and is recognized over the requisite service period of the employee.  The fair value of each option is estimated at the grant date using the Black-Scholes option-pricing model.  The options’ expected term is calculated using the simplified weighted average method because the Bank does not have sufficient historical exercise data to provide for a reasonable basis to estimate expected term.

When options and stocksstock are exercised, the Bank’s policy is to reissue shares from treasury stock.

 r)u)Derivative financial instruments and hedge accounting

The Bank uses derivative financial instruments for its management of interest rate and foreign exchange risks, which represent the majority of the Bank’s derivatives, as well as for trading purposes.
The Bank uses derivative financial instruments for its management of interest rate and foreign exchange risks.  Interest rate swap contracts and cross-currency swap contracts have been used to manage interest rate and foreign exchange risks associated with debt securities and borrowings with fixed rates, and loans and borrowings in foreign currency.  The accounting for changes in value of a derivative depends on whether the contract is for trading purposes or has been designated and qualifies for hedge accounting.

Derivatives held for trading purposes include interest rate swap, credit default swapsswap and cross-currency swap contracts used for risk management purposes that do not qualify for hedge accounting.  The fair value of trading derivatives is reported as trading assets andor trading liabilities, as applicable.  Changes in realized and unrealized gains and losses and interest flows from these trading instruments are included in net gain (loss) from trading securities.

Derivatives for hedging purposes primarily include forward foreign exchange contracts and interest rate swap contracts in U.S. dollars and cross currencycross-currency swaps.  Derivative contracts designated and qualifying as fair valuefor hedge accounting are reported in the balance sheet as other assetsderivative financial instruments used for hedging - receivable and other liabilitiespayable, as applicable, and hedge accounting is applied.  In order to qualify for hedge accounting, a derivative must be considered highly effective at reducing the risk associated with the exposure being hedged.  Each derivative must be designated as a hedge, with documentation of the risk management objective and strategy, including identification of the hedging instrument, the hedged item and the risk exposure, as well as how effectiveness will be assessed prospectively and retrospectively.  The extent to which a hedging instrument is effective at achieving offsetting changes in fair value or cash flows must be assessed at least quarterly.  Any ineffectiveness must be reported in current-period earnings.  The Bank discontinues hedge accounting prospectively in the following situations:

 1.It is determined that the derivative is no longer effective in offsetting changes in the fair value or cash flows of a hedged item.
 2.The derivative expires or is sold, terminated or exercised.

F-19

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
Notes to consolidated financial statements

 3.The Bank otherwise determines that designation of the derivative as a hedging instrument is no longer appropriate.
F-19

Banco Latinoamericano de Exportaciones, S. A.
   and Subsidiaries

Notes to consolidated financial statements

The Bank carries all derivativesderivative financial instruments in the consolidated balance sheet at fair value.  For qualifying fair value hedges, all changes in the fair value of the derivative and the fair value of the item for the risk being hedged are recognized in earnings.  If the hedge relationship is terminated, then the fair value adjustment to the hedgehedged item continues to be reported as part of the basis of the item and is amortized to earnings as a yield adjustment.  For qualifying cash flow hedges, the effective portion of the change in the fair value of the derivative is recorded in other comprehensive incomeOCI and recognized in the income statement when the hedged cash flows affect earnings.  The ineffective portion is recognized in the consolidated statement of income statement as activities of derivative financial instruments and hedging.  If the cash flow hedge relationship is terminated, related amounts in other comprehensive incomeOCI are reclassified into earnings when hedged cash flows occur.

 s)v)Foreign currency transactions

Assets and liabilities denominated in foreign currencies are translated into U.S. dollar equivalents using period-end spot foreign exchange rates.  The effects of translatingtranslation of monetary assets and liabilities into the U.S. dollar are included in earnings.

 t)w)Income taxes

 ·Bladex Head Office is exemptexempted from payment of income taxes in Panama in accordance with its Constitutive Law that grants special benefits, including the total exemptioncontract signed between the Republic of income tax payment.Panama and Bladex.
 ·The Feeder and the Fund are not subject to income taxes in accordance with the laws of the Cayman Islands.  The Feeder and the Fund received an undertaking exempting them from taxation of all future profits until March 7, 2026.
 ·Clavex, S.A.S. A. is subject to income taxes in Panama on profits from local operations.
 ·Bladex Representacao Ltd.Ltda. is subject to income taxes in Brazil.
 ·The New York Agency and Bladex’s subsidiaries incorporated in the USA are subject to USA federal and local taxation in USA based on the portion of income that is effectively connected with its operations in that country.

Such amounts of income taxes have been immaterial to date.

 u)x)MinorityRedeemable noncontrolling interest in the investment fund

The Bank reports theredeemable noncontrolling interest in the Feeder between liabilities and stockholders’ equity.  The minority interest in the Feeder represents the participation of other investors in the net assets of the Feeder.

ASC Topic 810 - Consolidation requires that a noncontrolling interest, previously referred to as a minority interest, in a consolidated subsidiary be reported as a separate component of equity and the amount of consolidated net income specifically attributable to the noncontrolling interest be presented separately, below net income in the consolidated statement of income.

 
F-20
 

Banco Latinoamericano de Exportaciones,Comercio Exterior, S. A.
and Subsidiaries

Notes to consolidated financial statements

Furthermore, in accordance with ASC 480-10-S99, equity securities that are redeemable at the option of the holder and not solely within the control of the issuer must be classified outside of equity. The terms of third party investments in the Feeder contain a redemption clause which allows the holders the option to redeem their investment at fair value.  Accordingly, the Bank retains its presentation of the noncontrolling interest in the investment fund between liabilities and stockholders’ equity in the consolidated balance sheets. Additionally, net assets of the Feeder are measured and presented at fair value, given the nature of its net assets (i.e. represented mainly by cash and investments in securities).  Therefore, when calculating the value of the redeemable noncontrolling interest under ASC Topic 810, such amount is already recorded at its fair value and no further adjustments under ASC 480-10-S99 are necessary.

 v)y)Earnings per share

Basic earnings per share is computed by dividing the net income availableattributable to common stockholdersBladex (the numerator) by the weighted average number of common shares outstanding (the denominator) during the year.  Diluted earnings per share measuresmeasure performance incorporating the effect that potential common shares, such as stock options and restricted stock units outstanding during the same period, would have on net earnings per share.  The computation of diluted earnings per share is similar to the computation of basic earnings per share, except for the denominator, which is increased to include the number of additional common shares that would have been issued if the beneficiaries of stock purchase options and other stock plans could exercise their options.  The number of potential common shares that would be issued is determined using the treasury stock method.

 w)z)Recently issued accounting standards

At the end of 2007 and during 2008, the followingDuring 2010, new accounting standards, modifications, interpretations, and interpretationsupdates to standards (“ASU”), applicable to the Bank, have been issued thatand are not in effect as of the date ofeffect; or if effective, have not had an impact on the consolidated balance sheet, and thus have not been applied infinancial statements.  These standards establish the preparation of these consolidated financial statements:following:

SFAS 141 (R)ASU 2010-10 – Business CombinationsConsolidation (Topic 810)

SFAS 141 (R) modifiesThe objective of this update is to defer the accountingapplication of FAS 167 (ASU 2009-17 - Consolidations) for business combinations and requires, with limited exceptions, the acquirer in a business combinationcertain investment companies that have attributes subject to recognize all assets acquired, liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date fair value.  Topic 946 – Financial Services – Investment Companies.

This statementupdate is effective for financial statements issuedbeginning after November 15, 2009.  This update has not had an impact on the Bank’s consolidated financial statements.

ASU 2010-20 – Receivables (Topic 310)

This update requires that entities disclose information for fiscal yearsfinancial receivables at disaggregated levels,  roll-forward schedules of the allowance for credit losses and interiminformation regarding the credit quality of receivables, its aging, and disclosures about troubled debt restructurings.

The disclosures related to the credit quality of receivables are in effect as of December 31, 2010, and are included in Notes 7 and 8.  The disclosures about the activity of the allowance for credit losses are effective for annual periods beginning on or after December 15, 2008.  With respect to2010.  The Bank is evaluating the effectpotential impact of income taxes,the disclosures for business combinations in which the acquisition date was beforeallowance for credit losses.  Disclosure requirements about troubled debt restructurings have been temporarily delayed as prescribed by ASU 2011-01 “Deferral of the effective date of this statement, the acquirer shall apply the requirements of SFAS 109, “Accounting for Income Taxes”, as amended by this statement, except for (i) changes in the valuation allowance for acquired deferred taxes by the acquiror and (ii) changes in acquired income tax positions in accordance with FASB Interpretation No. 48.  Early adoption is prohibited.  The Bank is currently evaluating the potential impact on its consolidated financial statements of adopting this standard.disclosures about troubled debt restructurings”.

SFAS 160 – Noncontrolling Interests in Consolidated Financial Statements

SFAS 160 amends Accounting Research Bulletin (“ARB”) 51, “Consolidated Financial Statements”, to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary.  The objective of this statement is to improve the relevance, comparability, and transparency of the financial information that an entity provides in its consolidated financial statements.  It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as stockholders’ equity.  This statement is effective for financial statements issued for fiscal years and interim periods beginning on or after December 15, 2008.  Its early adoption is prohibited; however, the presentation and disclosure requirements shall be applied retrospectively for all periods presented.  The Bank is currently evaluating the potential impact on its consolidated financial statements of adopting this standard.

 
F-21
 

Banco Latinoamericano de Exportaciones,Comercio Exterior, S. A.
and Subsidiaries

Notes to consolidated financial statements

SFAS 161 – Disclosures about Derivative Instruments and Hedging Activities

SFAS 161 amends and expands the disclosure requirements of SFAS 133, “Accounting for Derivative Instruments and Hedging Activities”, with the intention to provide users of financial statements a better understanding of derivative instruments and how those instruments affect the financial position, performance and cash flows of the Bank.  In order to meet those objectives, SFAS 161 requires qualitative disclosures about objectives and strategies for using derivatives instruments; quantitative disclosures about fair value of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features related to derivative agreements. This statement is effective for financial statements issued for fiscal years and interim periods beginning on or after November 15, 2008.  The Bank is currently evaluating the potential impact on its consolidated financial statements of adopting this standard.

FASB Staff Position (“FSP”) FAS 157-2 – Effective Date of FASB Statement No. 157

This FSP delays the effective date of SFAS 157, “Fair Value Measurements”, for nonfinancial assets and liabilities. The delay is intended to allow the Board and constituents additional time to consider the effect of various implementation issues that have arisen, or that may arise, from the application of SFAS 157.  This FSP defers the effective date of SFAS 157 to fiscal years beginning after November 15, 2008.  The Bank is currently evaluating the potential impact on its consolidated financial statements of adopting this standard.

FSP FAS 140-3 – Accounting for Transfers of Financial Assets and Repurchase Financing Transactions

The objective of this FSP is to provide guidance on accounting for a transfer of a financial asset and a repurchase financing. This FSP presumes that an initial transfer of a financial asset and a repurchase financing are considered part of the same arrangement (linked transaction) under SFAS 140. However, if certain criteria are met, the initial transfer and repurchase financing shall not be evaluated as a linked transaction and shall be evaluated separately under SFAS 140.  This FSP is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. Earlier application is not permitted.  The Bank is currently evaluating the potential impact on its consolidated financial statements of adopting this standard.

FSP FAS 142-3 – Determination of the Useful Life of Intangible Assets

This FSP applies to all assets accounted for in accordance with SFAS 142, “Goodwill and Other Intangible Assets”.  The objective of this FSP is to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS 141, “Business Combinations”, and other generally accepted accounting principles.  This FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008.  The Bank is currently evaluating the potential impact on its consolidated financial statements of adopting this standard.

F-22

Banco Latinoamericano de Exportaciones, S. A.
   and Subsidiaries

Notes to consolidated financial statements

FSP APB 14-1 – Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)

This FSP clarifies that convertible debt instruments that may be settled in cash upon conversion, including partial cash settlement, are not addressed by paragraph 12 of Accounting Principles Board Opinion (“APB”) 14, “Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants”.  Additionally, this FSP specifies that issuers of such instruments should separately account for the liability and equity components in a manner that will reflect the entity’s non-convertible debt borrowing rate when interest cost is recognized in subsequent periods.  This FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008.  The Bank is currently evaluating the potential impact on its consolidated financial statements of adopting this standard.

FSP EITF 03-6-1 – Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities

The guidance in this FSP applies to the calculation of earnings per share under SFAS 128, “Earnings per Share”, for share-based payment awards with rights to dividends or dividend equivalents.  This guidance addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share.  Unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents shall be included in the computation of EPS.  This FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008.  Early application is not permitted; however, all prior-period EPS data presented shall be adjusted retrospectively to conform with the provisions of this FSP.  The Bank is currently evaluating the potential impact on its consolidated financial statements of adopting this standard.

3.Change in the reporting entity

As discussed in Note 2d, beginning May 1, 2008, the Feeder is classified as an investment company, for which it accounts for its investment in the Fund using the specialized accounting as required by the Guide, which resulted in a change in reporting entity. Amounts reported in the consolidated balance sheet as of December 31, 2007, and income and expense amounts in the consolidated statements of income, and consolidated cash flows statements for the years ended December 31, 2007 and 2006 have been adjusted to include the effects of applying the Guide retrospectively, in accordance with SFAS 154, “Accounting Changes and Error Corrections”.  The Bank believes that the adoption of this accounting change with respect to the manner the Feeder presents its consolidation of the Fund is consistent with industry practice, resulting in a more appropriate presentation for investors.  This presentation results in financial statements focused on the net assets of investment companies, which present the fair value of underlying investment instruments.  This change improves the relevance, comparability and transparency of the financial information provided in the consolidated financial statements related to the Bank and Feeder business operations.

F-23
Banco Latinoamericano de Exportaciones, S. A.
   and Subsidiaries

Notes to consolidated financial statements

In the years 2007 and 2006, the Feeder consolidated, line by line, all assets and liabilities of the Fund.  The change, effective May 2008, results in the Feeder accounting for its investment in the Fund in a single line item in the balance sheet, which corresponds to its share in the net assets of the Fund, regardless of the level of the Feeder’s interest in the Fund.

The adjustments had no impact in the net income or earnings per share reported in the years 2007 and 2006, although the presentation of income and expenses related to the Fund have been reclassified to conform to the presentation of 2008.  Following totals of assets and liabilities in the consolidated balance sheet and totals in the consolidated statements of cash flows for the years 2007 and 2006 have been adjusted to apply the Guide retrospectively:

 
Balance Sheet – 2007
 
As Originally
Reported
  
As Adjusted
  
Effect of
Change
 
  (In thousands of US$) 
    
Total assets  4,790,532   4,698,571   (91,961)
Total liabilities  4,178,281   4,086,320   (91,961)

Statement of Cash Flows – Year 2007 
As Originally
Reported
  As Adjusted  
Effect of
Change
 
  (In thousands of US$) 
Net cash provided by operating activities  146,754   99,041   (47,713)
Net cash used in investing activities  (764,281)  (738,443)  25,838 
             
Net increase in cash and cash equivalents  119,576   97,701   (21,875)
Cash and cash equivalents at beginning of the year  298,695   298,327   (368)
Cash and cash equivalents at end of the year  418,271   396,028   (22,243)

Statement of Cash Flows – Year 2006 
As Originally
Reported
  As Adjusted  
Effect of
Change
 
  (In thousands of US$) 
Net cash provided by (used in) operating activities  (30,415)  (58,753)  (28,338)
Net cash used in investing activities  (670,104)  (642,134)  27,970 
             
Net increase in cash and cash equivalents  73,808   73,440   (368)
Cash and cash equivalents at beginning of the year  224,887   224,887   - 
Cash and cash equivalents at end of the year  298,695   298,327   (368)

F-24

Banco Latinoamericano de Exportaciones, S. A.
   and Subsidiaries

Notes to consolidated financial statements

4.Cash and cash equivalents

Cash and cash equivalents are as follows:

 December 31, 
 2008  2007  December 31, 
(In thousands of US$)       2010  2009 
            
Cash and due from banks  11,474   596   5,570   2,961 
Interest bearing deposits in banks  889,119   400,932 
Interest-bearing deposits in banks  431,144   421,595 
Total  900,593   401,528   436,714   424,556 
Less:                
Pledged deposits  75,004   5,500   16,075   22,582 
  825,589   396,028   420,639   401,974 

On December 31, 20082010 and 2007,2009, the Agency of New York Agency had a pledged deposit with a carrying value of $3 million and $5.5 million, respectively, with the State of New York State Banking Department, as required by law since March 1994.  As of December 31, 20082010, the Bank has pledged deposits of $69.5$13.1 million to secure securities sold under repurchase agreements and derivative financial instruments.instruments transactions and repurchase agreements.

As of December 31, 2009 the Bank had pledged deposits of $17.1 million to secure derivative financial instruments transactions.

5.4.Trading assets and liabilities

The fair value of trading assets and liabilities is as follows:

 December 31,  December 31, 
 2008  2007  2010  2009 
(In thousands of US$)            
            
Trading assets:            
Sovereign bonds  21,965   -   45,058   44,875 
Forward repurchase agreements  16,088   - 
Retained interest on repurchase agreements  6,886   - 
Corporate bonds  5,354   5,400 
Credit default swap  -   2 
Total  44,939   -   50,412   50,277 
                
Trading liabilities:                
Interest rate swaps  14,066   -   3,031   2,514 
Credit default swap  91   13 
Cross-currency interest rate swaps  907   638 
Total  14,157   13   3,938   3,152 

Forward repurchase agreements correspond to derivative financial instruments from transactionsSovereign and corporate bonds outstanding as of securities sold underDecember 31, 2010, have generated gains of $0.1 million and $3.3 million during 2010 and 2009, respectively, which have been recorded in earnings.

As of December 31, 2010, bonds with a carrying value of $34.2 million secured repurchase agreements accounted for as sales based on SFAS 140 (see Notes 2(g) and 13).secured borrowings.

During 2008, the Bank transferred sovereign bonds through repurchase agreements accounted for as sales.  The Bank reacquired those bonds at the maturity date of those agreements and included them in the trading assets portfolio.  As of December 31, 2008, sovereign bonds with a fair value of $10.3 million secured securities under repurchase agreements that qualify as secured financing.

 
F-25F-22
 

Banco Latinoamericano de Exportaciones,Comercio Exterior, S. A.
and Subsidiaries

Notes to consolidated financial statements
During 2010 and 2009, the Bank recognized the following gains and losses related to trading derivative financial instruments:

Trading
  December 31, 
  2010  2009 
(In thousands of US$)   
       
Forward repurchase agreements  -   2,570 
Interest rate swaps  (2,091)  (551)
Cross-currency interest rate swaps  (1,662)  (638)
Credit default swap  13   110 
Total  (3,740)  1,491 

These gains (losses) are reported within the net gain (loss) from trading securities line in the consolidated statements of income.

In addition to the trading derivative financial instruments, the Bank has hedging derivative financial instruments that are disclosed in Note 20.

As of December 31, 2010 and 2009, trading derivative liabilities include interest rate swaps in U.S. dollarsswap and cross-currency interest rate swap contracts that hedgedwere previously designated as fair value hedges of securities available-for-sale and foreign-currency loans, respectively, that were subsequently transferred under repurchase agreements.  The Bank discontinuedno longer qualify for hedge accounting prospectively ataccounting.

As of December 31, 2010 and 2009, information on the transfer datenominal amounts of these investments, derivative financial instruments held for trading purposes is as follows:

  2010  2009 
(In thousands of US$) Nominal  Fair Value  Nominal  Fair Value 
  Amount  Asset  Liability  Amount  Asset  Liability 
                   
Interest rate swaps  46,800   -   3,031   46,800   -   2,514 
Cross-currency interest rate swaps  8,179   -   907   15,496   -   638 
Credit default swap  -   -   -   3,000   2   - 
                         
Total  54,979   -   3,938   65,296   2   3,152 
F-23

Banco Latinoamericano de Comercio Exterior, S. A.
and reports these interest rate swaps as trading derivatives (see Note 13).Subsidiaries
Notes to consolidated financial statements

6.5.Investment securities

Securities available-for-sale

The amortized cost, related unrealized gross gain (loss) and fair value of securities available-for-sale by country risk and type of debt, are as follows:
  December 31, 2008 
 
(In thousands of US$)
 
Amortized
Cost
  
Unrealized
Gross Gain
  
Unrealized
Gross Loss
  
Fair
Value
 
    
Corporate debt:            
Brazil  27,245   -   4,644   22,601 
Chile  42,140   64   1,397   40,807 
Panama  20,015   885   -   20,900 
United States of America  9,725   -   17   9,708 
Venezuela  14,973   252   -   15,225 
   114,098   1,201   6,058   109,241 
Government debt:                
Brazil  105,735   2,620   -   108,355 
Colombia  169,026   401   6,690   162,737 
Costa Rica  10,905   -   790   10,115 
Dominican Republic  9,677   -   2,299   7,378 
El Salvador  16,158   -   1,571   14,587 
Mexico  97,839   -   5,883   91,956 
Panama  43,281   -   1,681   41,600 
Peru  28,881   -   1,943   26,938 
Sweden  10,041   -   30   10,011 
United States of America  24,999   1   -   25,000 
   516,542   3,022   20,887   498,677 
                 
Total  630,640   4,223   26,945   607,918 

  December 31, 2010 
(In thousands of US$) 
Amortized
Cost
  
Unrealized
Gross Gain
  
Unrealized
Gross Loss
  
Fair
Value
 
Corporate debt:            
Brazil  39,600   995   290   40,305 
Chile  26,493   1,090   -   27,583 
   66,093   2,085   290   67,888 
Sovereign debt:                
Brazil  42,259   5,253   -   47,512 
Colombia  101,222   5,634   355   106,501 
Dominican Republic  3,118   79   -   3,197 
El Salvador  15,299   292   -   15,591 
Mexico  45,796   2,057   8   47,845 
Panama  36,605   2,269   79   38,795 
Venezuela  25,100   1,050   229   25,921 
   269,399   16,634   671   285,362 
                 
Total  335,492   18,719   961   353,250 
  December 31, 2007 
 
(In thousands of US$)
 
Amortized
Cost
  
Unrealized
Gross Gain
  
Unrealized
Gross Loss
  
Fair
Value
 
    
Corporate debt:            
   Brazil  67,971   78   660   67,389 
   Chile  42,849   -   549   42,300 
   Panama  20,019   669   -   20,688 
   130,839   747   1,209   130,377 
Government debt:                
   Argentina  19,546   22   28   19,540 
   Brazil  59,464   1,897   18   61,343 
   Colombia  123,084   2,797   206   125,675 
   Dominican Republic  13,093   -   182   12,911 
   El Salvador  10,984   -   84   10,900 
   Mexico  27,045   -   89   26,956 
   Panama  50,008   1,462   112   51,358 
   Peru  29,291   24   15   29,300 
   332,515   6,202   734   337,983 
                 
Total  463,354   6,949   1,943   468,360 
F-26
Banco Latinoamericano de Exportaciones, S. A.
   and Subsidiaries
  December 31, 2009 
(In thousands of US$) 
Amortized
Cost
  
Unrealized
Gross Gain
  
Unrealized
Gross Loss
  
Fair
Value
 
Corporate debt:            
Brazil  26,428   1,044   -   27,472 
Chile  26,763   1,308   -   28,071 
Panama  20,008   912   -   20,920 
   73,199   3,264   -   76,463 
Sovereign debt:                
Brazil  86,583   6,817   -   93,400 
Colombia  131,852   8,210   892   139,170 
Dominican Republic  6,347   93   -   6,440 
El Salvador  15,755   174   -   15,929 
Mexico  56,194   1,236   550   56,880 
Panama  21,057   1,649   -   22,706 
Peru  28,441   1,746   -   30,187 
Venezuela  14,979   830   -   15,809 
   361,208   20,755   1,442   380,521 
                 
Total  434,407   24,019   1,442   456,984 

Notes to consolidated financial statements
AtAs of December 31, 20082010 and 2007,2009, securities available-for-sale with a carrying value of $480$235.6 million and $323$78.5 million, respectively, were pledged to secure repurchase transactions accounted for as secured financings.

F-24

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
Notes to consolidated financial statements

The following table discloses those securities that have had unrealized losses for less than 12 months and for 12 months or longer:

 December 31, 2008  December 31, 2010 
(In thousands of US$) Less than 12 months  12 months or longer  Total  Less than 12 months  12 months or longer  Total 
 
Fair 
Value
  
Unrealized
Gross
Losses
  
Fair 
Value
  
Unrealized
Gross
Losses
  
Fair 
Value
  
Unrealized
Gross
Losses
  
Fair
Value
  
Unrealized
Gross
Losses
  
Fair
Value
  
Unrealized
Gross
Losses
  
Fair
Value
  
Unrealized
Gross
Losses
 
                                    
Corporate debt  52,905   5,767   5,024   291   57,929   6,058   13,756   290   -   -   13,756   290 
Government debt  270,757   18,588   7,377   2,299   278,134   20,887 
Sovereign debt  35,737   464   10,063   207   45,800   671 
  323,662   24,355   12,401   2,590   336,063   26,945   49,493   754   10,063   207   59,556   961 

  December 31, 2007 
(In thousands of US$) Less than 12 months  12 months or longer  Total 
  
Fair 
Value
  
Unrealized
Gross
Losses
  
Fair 
Value
  
Unrealized
Gross
Losses
  
Fair 
Value
  
Unrealized
Gross
Losses
 
                   
Corporate debt  68,244   1,107   30,495   102   98,739   1,209 
Government debt  113,093   706   15,962   28   129,055   734 
   181,337   1,813   46,457   130   227,794   1,943 
  December 31, 2009 
(In thousands of US$) Less than 12 months  12 months or longer  Total 
  
Fair
Value
  
Unrealized
Gross
Losses
  
Fair
Value
  
Unrealized
Gross
Losses
  
Fair
Value
  
Unrealized
Gross
Losses
 
                   
Sovereign debt  24,138   550   24,720   892   48,858   1,442 

Gross unrealized losses are related mainly to an overall increasechanges in market interest rates and other market credit spreadsfactors and not due to underlying credit concerns by the Bank about the issuers.  The Bank has the intent, capacity and ability to hold these securities for a period of time sufficient to allow recovery of their market value.  In order to do so, Bladex has built a liquidity and capital position strong enough to comply with its future disbursement requirements without having to dispose of its portfolio of investments available-for-sale.  At December 31, 2008, the Bank believes that none of the securities in its investment portfolio are other-than-temporarily impaired.   A governmentsovereign debt that has shown price declinesshows an unrealized gross loss for overmore than twelve months relates to a counterparty whose payment performance is and continues to be sound.  The Government has engaged in debt restructurings in the past on its external debt, but on terms that were voluntarily agreed with its creditors.strong.  The price of the bonds in question has seen a significant recovery afterduring 2010.  Historically, this counterparty has not failed to perform on its obligations.  As of December 31, 2008.2010 the Bank does not intent to sell and will not be required to sell the security available-for-sale showing a gross unrealized loss before the recovery of its amortized cost. As a result, the Bank does not consider this exposure to be other-than-temporarilyother-than temporary impaired.

During 2006 the Bank collected impaired securities for $5.6 million which had been charged to earnings in prior years.  These recoveries were recorded in earnings as recoveries on assets.

F-27

Banco Latinoamericano de Exportaciones, S. A.
   and Subsidiaries

Notes to consolidated financial statements

The following table presents the realized gains and losses on securities available-for-sale:

(In thousands of US$) Year ended December 31,  Year ended December 31,
 2008  2007  2006   
2010
   
2009
   
2008
 
                     
Gains  2,173   9,550   2,568   2,346   1,276   2,173 
Losses  (2,106)  (431)  -   -   (730)  (2,106) 
Net  67   9,119   2,568   2,346   546   67 

Losses on securities available-for-sale during 2008 arewere mainly the result of transactions of securities sold under repurchase agreements accounted for as sales at the transfer date of those securities (see Note 13)12).

An analysis of realized losses is described below:

  Year ended December 31, 
(In thousands of US$) 2010  2009  2008 
          
Realized losses on sale of securities available-for-sale  -   (730)  (79)
Realized losses for transfers of securities under repurchase agreements accounted for as sales (see Note 12)   -    -   (2,027)
Total realized loss  -   (730)  (2,106)
F-25
  Year ended December 31, 
(In thousands of US$) 2008  2007  2006 
          
Realized losses on sale of securities available-for-sale  (79)  (431)  - 
Realized losses for transfers of securities under repurchase agreements accounted for as sales (see Note 13)  (2,027)  -   - 
Total realized loss  (2,106)  (431)  - 
Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries

Notes to consolidated financial statements

The amortized cost and fair value of securities available-for-sale by contractual maturity atas of December 31, 2008,2010, are shown in the following table:

 
(In thousands of US$)
 
Amortized
Cost
  
Fair
Value
 
       
Due within 1 year  59,889   59,906 
After 1 year but within 5 years  285,855   276,023 
After 5 years but within 10 years  284,896   271,989 
   630,640   607,918 

F-28

Banco Latinoamericano de Exportaciones, S. A.
   and Subsidiaries

Notes to consolidated financial statements

(In thousands of US$) 
Amortized
Cost
  
Fair
Value
 
       
Due within 1 year  18,417   18,788 
After 1 year but within 5 years  306,960   324,576 
After 5 years but within 10 years  10,115   9,886 
   335,492   353,250 
Securities held-to-maturity

The amortized cost, related unrealized gross gain (loss) and fair value of securities held-to-maturity by country risk and type of debt are as follows:

 December 31, 2008  December 31, 2010 
(In thousands of US$)
 
Amortized
Cost
  
Unrealized
Gross Gain
  
Unrealized
Gross Loss
  
Fair 
Value
  
Amortized 
Cost
  
Unrealized
Gross Gain
  
Unrealized
Gross Loss
  
Fair 
Value
 
                        
Corporate debt:                        
United States of America  28,410   -   266   28,144 
Panama  8,500   -   -   8,500 
                
Sovereign debt:                
Colombia  13,018   64   -   13,082 
Costa Rica  5,025   -   12   5,013 
Honduras  4,638   -   27   4,611 
Panama  2,000   -   -   2,000 
  24,681   64   39   24,706 
                
Total  28,410   -   266   28,144   33,181   64   39   33,206 

At December 31, 2008, the contractual maturity of the securities held-to-maturity was within one year and none of the securities in this portfolio was considered other-than-temporarily impaired since such securities did not maintain significantSecurities that show gross unrealized losses have had losses for moreless than 12 months. Atmonths; and therefore, such losses are considered temporary.

The amortized cost of securities held-to-maturity by contractual maturity as of December 31, 2008,2010, are shown in the following table:

(In thousands of US$)
Amortized
Cost
Due within 1 year13,525
After 2 years but within 5 years19,656
33,181

As of December 31, 2010, securities held-to-maturity with a carrying value of $28.4$13 million, securedwere pledged to secure repurchase agreements accounted for as secured borrowings.financings.

7.6.Investment fund

The balance in the investment fund of $150.7for $167.3 million in 20082010 and $81.8$197.6 million in 20072009 represents the participation of the Feeder in the net asset value (NAV) of the Fund.

At
F-26

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries

Notes to consolidated financial statements

The Fund’s net assets are mainly composed by cash, investments in equity and debt instruments, and derivative financial instruments that are quoted and traded in active markets.

As of December 31, 2008,2010, the Feeder owns 98.83%97.56% of the Fund with a total of 137,811.6146,134.7 shares issued, divided in 4,3209,090.9 “Class A” shares, 7,968.5 “Class A1” shares, 128,367.2 “Class B” shares and 708.1 “Class E1” shares.

As of December 31, 2009, the Feeder owned 98.42% of the Fund with a total of 164,925.2 shares issued, divided in 30,725.5 “Class A” shares, 133,491.6 “Class B” shares and 708.1 “Class E1” shares.  At December 31, 2007, the Feeder was the only investor of the Fund.

The Fund has issued “Class A”, “Class A1”, “Class B”, “Class C”, “Class D”, “Class E” and “Class D”E1” shares and administrative shares.  “Class A”, “Class A1” and “Class B” shares are participating shares in the net gains (losses) of the Fund, and only differ in relation to certain administrative fees.  “Class C” and “Class D” shares do not participate in the net gains (losses) of the Fund; they are only entitled to the performance allocation from “Class A”, “Class A1” and “Class B” shares.  The “Class E” and “Class E1” shares are not subject to either administrative fees or performance allocation.  The Bank owns the Feeder’s and the Fund’s administrative shares.

F-29

Banco Latinoamericano de Exportaciones, S. A.
“Class A”, “Class A1” and Subsidiaries“Class E” shares can be redeemed monthly by investors with 30 day’s notice.  $100 million of the “Class B” shares cannot be redeemed until December, 2011.

Notes to consolidated financial statements

The statement of assets and liabilities of the Fund as of December 31, 2008 and 2007 is as follows:

(In thousands of US$) December 31, 
  2008  2007 
Assets:      
Cash (including pledged deposits of $7,994 in 2008 and $53,808 in 2007)  148,501   76,051 
Deposits with related parties  -   50,273 
Bonds  21,705   16,097 
Shares in indexed funds  1,745   36,315 
Derivative financial instruments  3,481   185 
Other assets (including interest receivable for $83 with related parties in 2007)  2,200   45,242 
Total assets  177,632   224,163 
         
Liabilities:        
Bonds sold short  11,990   31,734 
Shares in indexed funds sold short  2,420   57,863 
Derivative financial instruments  696   1,155 
Fees payable to related parties  -   3,225 
Other liabilities (including $495 with related parties in 2007)  11,831   1,704 
Total liabilities  26,937   95,681 
         
   150,695   128,482 
Less: net assets with related parties  -   (46,636)
         
Net assets  150,695   81,846 

The analysis of net assets is as follows:

(In thousands of US$, except per share amounts) December 31, 
  2008  2007 
Net capital paid-in on shares of capital stock  137,992   100,000 
Distributable earnings  12,703   28,482 
Net assets (equivalent to $1,085 for “Class A” shares based on 4,320 shares, and $1,094 for “Class B” shares based on 133,492 shares in 2008; and $1.285 based on 100,000,000 ordinary shares in 2007)  150,695   128,482 

F-30
Banco Latinoamericano de Exportaciones, S. A.
   and Subsidiaries

Notes to consolidated financial statements

The statement of changes in net assets for 2008, 2007 and 2006 is as follows:

  Year ended December 31, 
(In thousands of US$) 2008  2007  2006 
          
Increase (decrease) in net assets from operations:         
Net investment income (loss)  (3,629)  438   3,075 
Net realized gain (loss) on investments  20,964   32,803   (4,235)
Net change in unrealized gain (loss) on investments  393   (8,925)  5,326 
Net increase in net assets resulting from operations  17,728   24,316   4,166 
Capital contributions  6,000   -   100,000 
Capital redemptions  (1,515)  -   - 
Total increase  22,213   24,316   104,166 
Net assets            
Beginning of year  128,482   104,166   - 
End of year  150,695   128,482   104,166 

8.7.Loans

The following table set forth details of the Bank’s loan portfolio:

(In thousands of US$) December 31, 
  2010  2009 
       
Corporations:      
Private  1,772,232   1,152,834 
State-owned  312,154   193,486 
Banking and financial institutions:        
Private  1,381,266   874,884 
State-owned  319,796   333,574 
Middle-market companies:        
Private  224,758   128,710 
Sovereign  54,126   95,774 
Total  4,064,332   2,779,262 

F-27
(In thousands of US$) December 31, 
  2008  2007 
       
Corporate  1,627,721   1,886,580 
Banks:        
Private  571,665   1,485,313 
State-owned  347,403   241,322 
Other  71,854   118,623 
         
Total  2,618,643   3,731,838 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries

Notes to consolidated financial statements

The composition of the loan portfolio by industry is as follows:

(In thousands of US$) December 31, 
  2010  2009 
       
Banking and financial institutions  1,701,062   1,208,458 
Industrial  894,355   712,931 
Oil and petroleum derived products  616,708   318,850 
Agricultural  548,894   230,674 
Mining  111,639   71,383 
Services  61,587   70,968 
Sovereign  54,126   95,774 
Others  75,961   70,224 
Total  4,064,332   2,779,262 
(In thousands of US$) December 31, 
  2008  2007 
       
Industrial  1,020,015   1,333,426 
Banking and financing  924,286   1,731,961 
Agricultural  332,582   271,931 
Services  111,531   96,795 
Other  230,229   297,725 
         
Total  2,618,643   3,731,838 

F-31
 
Banco Latinoamericano de Exportaciones, S. A.
   and SubsidiariesAs of December 31, 2010, loans classified by credit quality indicators are as follows:

Notes to consolidated financial statements
(In thousands of US$)               
Rating (1)
 Corporations  
Banking and financial
institutions
  
Middle-market
companies
  Sovereign  Total 
  Private  State-owned  Private  State-owned  Private       
1-6  1,744,232   312,154   1,381,266   319,796   223,756   54,126   4,035,330 
7  -   -   -   -   -   -   - 
8  28,000   -   -   -   1,002   -   29,002 
9  -   -   -   -   -   -   - 
10  -   -   -   -   -   -   - 
Total  1,772,232   312,154   1,381,266   319,796   224,758   54,126   4,064,332 

Loan
(1)Current ratings as of December 31, 2010.

The remaining loan maturities are summarized as follows:

(In thousands of US$) December 31, 
  2010  2009 
Current(1):
      
Up to 1 month  473,836   252,792 
From 1 month to 3 months  705,147   490,757 
From 3 months to 6 months  942,989   559,640 
From 6 months to 1 year  718,649   526,385 
From 1 year to 2 years  463,969   422,796 
From 2 years to 5 years  703,397   458,327 
More than 5 years  27,343   28,335 
   4,035,330   2,739,032 
         
Delinquent  -   4,480 
         
Impaired:        
Current balances with impairment  28,000   30,000 
Past due balances with impairment  1,002   5,750 
   29,002   35,750 
Total  4,064,332   2,779,262 

(1)December 31, 2009’s current loans include unimpaired loans on non-accrual status for $14,784 thousand.

F-28
(In thousands of US$) December 31, 
  2008  2007 
Maturities:      
Up to 1 month  236,679   667,612 
From 1 month to 3 months  488,471   667,393 
From 3 months to 6 months  315,200   572,597 
From 6 months to 1 year  556,744   617,482 
From 1 year to 2 years  345,471   399,655 
From 2 years to 5 years  622,080   729,786 
More than 5 years  53,998   77,313 
   2,618,643   3,731,838 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries

Notes to consolidated financial statements

The following table provides a breakdown of loans by country risk:

(In thousands of US$) December 31,  December 31, 
 2008  2007  2010  2009 
Country:            
Argentina  150,988   263,814   237,062   72,746 
Bolivia  -   5,000 
Brazil  1,289,424   1,379,394   1,582,761   1,334,905 
Chile  8,333   10,000   328,447   258,257 
Colombia  284,901   400,458   584,549   200,490 
Costa Rica  54,855   76,506   87,537   82,906 
Dominican Republic  48,025   28,770   135,291   31,364 
Ecuador  36,364   60,529   18,121   23,097 
El Salvador  75,857   46,563   39,036   40,650 
Guatemala  60,784   95,902   92,104   73,809 
Honduras  44,925   48,631   37,518   22,984 
Jamaica  14,678   77,401   64,457   31,297 
Mexico  380,209   410,164   403,829   301,929 
Nicaragua  3,993   12,616   -   700 
Panama  47,495   139,720   47,485   41,492 
Peru  49,812   454,226   343,135   161,047 
Trinidad and Tobago  23,000   87,565   63,000   71,589 
Uruguay  45,000   -   -   30,000 
Venezuela  -   134,579 
  2,618,643   3,731,838   4,064,332   2,779,262 

The fixed and floating interest rate distribution of the loan portfolio is as follows:

(In thousands of US$) December 31, 
  2008  2007 
       
Fixed interest rates  933,234   1,855,540 
Floating interest rates  1,685,409   1,876,298 
   2,618,643   3,731,838 

F-32

Banco Latinoamericano de Exportaciones, S. A.
   and Subsidiaries
(In thousands of US$) December 31, 
  2010  2009 
       
Fixed interest rates  2,003,631   1,310,754 
Floating interest rates  2,060,701   1,468,508 
   4,064,332   2,779,262 

Notes to consolidated financial statements

AtAs of December 31, 20082010 and 2007, 78%2009, 88% and 84%80%, respectively, of the loan portfolio at fixed interest rates has remaining maturities of less than 180 days.

The following is a summary of information on non-accruing loans, and interest amounts on non-accruing loans:
 
F-29
(In thousands of US$) December 31, 
  2008  2007  2006 
          
Interest income collected on non-accruing loans  -   -   2,721 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries

Notes to consolidated financial statements

The following is a summary of information pertaining toin non-accruing loans, and interest amounts on non-accruing loans:

(In thousands of US$) December 31, 
  2010  2009  2008 
          
Loans in non-accrual status         
Private corporations  28,000   39,000   - 
Private middle-market companies  1,002   11,534   - 
Total loans in non-accrual status  29,002   50,534   - 
             
Foregone interest revenue at beginning of the year  928   -   - 
Interest which would have been recorded if the loans had not been in a non-accrual status  3,403   1,775   - 
Interest income collected on non-accruing loans  (3,335)  (847)  - 
Foregone interest revenue at end of the year  996   928   - 

An analysis of non-accruing loans with impaired loans:balances as of December 31, 2010 and 2009 is detailed as follows:
(In thousands of US$)            
  
Unpaid principal
balance
  
Related 
allowance
  
Average balance
of loan
  
Interest income
recognized
 
2010            
With an allowance recorded            
Private corporations  28,000   11,200   29,151   2,492 
Private middle-market companies  1,002   300   887   - 
Total  29,002   11,500   30,038   2,492 
(In thousands of US$)            
  
Unpaid principal
balance
  
Related 
allowance
  
Average balance
of loan
  
Interest income
recognized
 
2009            
With an allowance recorded            
Private corporations  30,000   12,000   15,123   712 
Private middle-market companies  5,750   2,357   1,465   - 
Total  35,750   14,357   16,588   712 

The following table presents an aging analysis of the loan portfolio:

(In thousands of US$) 
91-120
days
  
121-150
days
  
151-180
days
  
Greater
than 180
days
  
Total
Past Due
  Delinquent  Current  
Total
Loans
 
2010                        
Corporations  -   -   -   -   -   -   2,084,386   2,084,386 
Banking and financial institutions  -   -   -   -   -   -   1,701,062   1,701,062 
Middle-market companies  -   -   -   1,002   1,002   -   223,756   224,758 
Sovereign  -   -   -   -   -   -   54,126   54,126 
Total  -   -   -   1,002   1,002   -   4,063,330   4,064,332 

F-30
(In thousands of US$) December 31, 
  2008  2007  2006 
          
Average balance of impaired loans during the year  -   -   18,168 
             
Interest income collected on impaired loans  -   -   2,721 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries

AtNotes to consolidated financial statements

(In thousands of US$) 
91-120
days
  
121-150
days
  
151-180
days
  
Greater
than 180
days
  
Total
Past Due
  Delinquent  Current  
Total
Loans
 
2009                        
Corporations  -   -   -   -   -   -   1,346,320   1,346,320 
Banking and financial institutions  -   -   -   -   -   -   1,208,458   1,208,458 
Middle-market companies  -   5,750   -   -   5,750   4,480   118,480   128,710 
Sovereign  -   -   -   -   -   -   95,774   95,774 
Total  -   5,750   -   -   5,750   4,480   2,769,032   2,779,262 

As of December 31, 20082010 and 2007,2009, the Bank has credit transactions in the normal course of business with 20%25% and 18%, respectively, of its Class “A” and “B” stockholders (see Note 16)15).  All transactions are made based on arm’s-length terms and subject to prevailing commercial criteria and market rates and are subject to all of the Bank’s corporate governance and control procedures.  AtAs of December 31, 20082010 and 2007,2009, approximately 16%15% and 22%20%, respectively, of the outstanding loan portfolio is placed with the Bank’s Class “A” and “B” stockholders and their related parties.  AtAs of December 31, 2008,2010, the Bank was not directly or indirectly owned or controlled by another corporation or any foreign government, and no Class “A” or “B” shareholder was the registered owner of more than 3.5% of the total outstanding shares of the voting capital stock of the Bank.

As of the date of the preparation of the consolidated financial statements as of December 31, 2008, the Bank, as part of its review procedures had not identified conditions of impairment regarding its loan portfolio. However, as a result of the current international financial crisis, the Bank is constantly performing evaluations of the impact in the levels of risk in the region.

During the year 2008,2010, the Bank sold loans with a book value of $25.6$20 million, with a net gain of $54$201 thousand.

F-33

Banco Latinoamericano de Exportaciones, S. A.
   and Subsidiaries There were no loan sales during 2009.

Notes to consolidated financial statements

9.8.Allowance for credit losses

The Bank classifies the allowance for credit losses into two components:

 a)Allowance for loan losses:

(In thousands of US$) December 31, 
  2010  2009  2008 
          
Balance at beginning of the year  73,789   54,648   69,643 
             
Provision (reversal of provision) for loan losses  9,091   18,293   (18,540)
Loan recoveries  996   866   3,545 
Loans written-off against the allowance for loan losses  (5,261)  (18)  - 
Balance at end of the year  78,615   73,789   54,648 
Components:
            
Generic allowance  67,115   59,432   54,648 
Specific allowance  11,500   14,357   - 
Total allowance for loan losses  78,615   73,789   54,648 

F-31
(In thousands of US$) December 31, 
  2008  2007  2006 
          
Balance at beginning of the year  69,643   51,266   39,448 
             
Provision (reversal) for loan losses  (18,540)  11,994   11,846 
Loan recoveries  3,545   6,434   3 
Loans written-off against the allowance for loan losses  -   (51)  (31)
Balance at end of the year  54,648   69,643   51,266 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries

Notes to consolidated financial statements

Provision (reversal of provision) of generic allowance for credit losses are mostly related to changes in volume and composition of the credit portfolio.  The increase in the generic allowance for loan losses in 2010 was primarily due to an increase in the loan portfolio mitigated by an improvement of the risk profile of the Region and a prudent portfolio management.

Following is a summary as of December 31, 2010 of loan balances and reserves for loan losses:

(In thousands of US$)               
  Corporations  
Banking and
financial institutions
  
Middle-market
companies
  Sovereign  Total 
Allowance for loan losses               
Specific allowance  11,200   -   300   -   11,500 
Generic allowance  42,960   18,790   4,965   400   67,115 
Total of allowance for loan losses  54,160   18,790   5,265   400   78,615 
Loans                    
Loans with specific allowance  28,000   -   1,002   -   29,002 
Loans with generic allowance  2,056,386   1,701,062   223,756   54,126   4,035,330 
Total loans  2,084,386   1,701,062   224,758   54,126   4,064,332 

 Provision (reversal) of provisionb)Reserve for losses on off-balance sheet credit losses is mostly related to changes in volume and composition of the credit portfolio.  Loan recoveries relate to the Bank’s non-accruing portfolio in Argentina and Brazil, which have been collected during the last three years.risk:

b)   Reserve
(In thousands of US$) December 31, 
  2010  2009  2008 
          
Balance at beginning of the year  27,261   30,724   13,727 
             
Provision (reversal of provision) for losses on off-balance sheet credit risk  (13,926)  (3,463)  16,997 
Balance at end of the year  13,335   27,261   30,724 

The reserve for losses on off-balance sheet credit risk:

(In thousands of US$) December 31, 
  2008  2007  2006 
          
Balance at beginning of the year  13,727   27,195   52,086 
             
Provision (reversal) for losses on off-balance sheet credit risk  16,997   (13,468)  (24,891)
Balance at end of the year  30,724   13,727   27,195 
risk reflects the Bank’s management estimate of probable losses on off-balance sheet credit risk items such as: confirmed letters of credit, stand-by letters of credit, guarantees and credit commitments (see Note 18).  The 2010’s decrease in the reserve for losses on off-balance sheet credit risk was primarily due to changes in volume, composition, and improvement of the risk profile of the portfolio, together with the purchase of international insurance to mitigate exposures on the off-balance sheet credit risk portfolio.

The reserve for losses on off-balance sheet credit risk reflects the Bank’s management estimate of probable losses on off-balance sheet credit risk items such as: confirmed letters of credit, stand-by letters of credit, guarantees and credit commitments (see Note 19).

10.9.Premises and equipment

A breakdown of cost and accumulated depreciation and amortization for premises and equipment as of December 31, 20082010 and 20072009 is as follows:

(In thousands of US$) December 31, 
  2010  2009 
       
Land  462   462 
Building and improvements  5,365   5,254 
Furniture and equipment  17,345   16,323 
   23,172   22,039 
Less: accumulated depreciation and amortization  16,640   14,290 
   6,532   7,749 
(In thousands of US$) December 31, 
  2008  2007 
       
Land  462   462 
Building and improvements  4,958   5,163 
Furniture and equipment  14,144   14,255 
   19,564   19,880 
Less: accumulated depreciation and amortization  11,594   9,704 
   7,970   10,176 


 
F-34F-32
 

Banco Latinoamericano de Exportaciones,Comercio Exterior, S. A.
and Subsidiaries

Notes to consolidated financial statements

In 2008, the Bank recorded impairment on a portion of a financial information system for $968 thousand that iswas included in the depreciation, amortization and impairment of premises and equipment expense line.

11.10.Other assets

As of DecemberAt December 31, 20082010 and 2007,2009, other assets include an equity investment in a private investment fund with a carrying value of $1.51.7 million and $2.4$1.9 million, respectively.  The main objective of this fund is to generate capital gains in the long-term through the purchase of shares and convertible debt, mainly from Mexican manufacturing corporations or foreign corporations looking for establishing or expanding their operations in Mexico.  During the year 2008,2010, the Bank recorded an impairment of $767 thousand on this investment.  At December 31, 2008, the Bank is committed to invest $1.4 milliondid not increase its participation in this fund.

During 2007, the Bank wrote-off $500 thousand related to an equity investment in a company specialized in digital solutions as its impairment was considered other-than-temporary.

12.11.Deposits

The remaining maturity profile of the Bank’s deposits is as follows:

(In thousands of US$) December 31, 
  2010  2009 
       
Demand  100,352   51,375 
Up to 1 month  1,173,415   586,949 
From 1 month to 3 months  286,806   324,702 
From 3 months to 6 months  143,352   273,220 
From 6 months to 1 year  117,000   20,000 
   1,820,925   1,256,246 
(In thousands of US$) December 31, 
  2008  2007 
       
Demand  113,022   111,496 
Up to 1 month  766,268   1,060,706 
From 1 month to 3 months  262,443   206,889 
From 3 months to 6 months  27,315   73,280 
From 6 months to 1 year  -   10,000 
   1,169,048   1,462,371 

The following table presents additional information about deposits:

(In thousands of US$) December 31,  December 31, 
 2008  2007  2010  2009 
            
Aggregate amounts of time deposits of $100,000 or more  1,056,026   1,350,875   1,720,106   1,204,657 
Aggregate amounts of deposits in offices outside Panama  380,765   290,501   221,185   418,157 
Interest expense paid to deposits in offices outside Panama  11,428   22,636   2,746   5,821 

13.12.Securities sold under repurchase agreements

The Bank’s financing transactions under repurchase agreements amounted to $474.2$264.9 million and $283.2$71.3 million as of December 31, 20082010 and 2007,2009, respectively.

F-35

Banco Latinoamericano de Exportaciones, S. A.
   and Subsidiaries

NotesAs of December 31, 2010, 2009 and 2008, interest expense related to consolidated financial statements

The Bank enters into financing transactions under repurchase agreements in order to keep its liquidity at adequate levels required to finance its operations.  Through these transactions, the Bank receives cashtotaled $1.5 million, $5.9 million, and transfers securities to and/or places cash with counterparties as a guarantee for those financing transactions.  Repurchase agreements should be accounted for$16.9 million, respectively, were recorded.  These expenses are presented in the financialconsolidated statements eitherof income as salesinterest expense –borrowings.

As of securities orDecember 31, 2010 and 2009, all financing transactions under repurchase agreements qualified as secured financings.  SFAS 140 and related supporting literature emphasizes accounting for the form, rather than the substance of these transactions, which causes the application of SFAS 140 to become especially complex in periods of high volatility as has been observed in the financial markets recently.

Despite the transfer of assets in repurchase agreements, they qualify as secured financings if and only if the following conditions are met: the assets to be repurchased are the same or substantially the same as those transferred; the transferor is able to repurchase them with the collateral received, keeping substantially the agreed terms, even in the event of default of the transferee; the agreement is to repurchase or redeem them before maturity, at a fixed and determinable price; the agreement is entered into concurrently at the transfer date.  In order to be able to repurchase assets on substantially the agreed terms, even in the case of default from the counterparty, the transferor must at all times, during the contract term, have obtained cash or other collateral sufficient to fund substantially all the cost of purchasing the transferred assets from the counterparties.

During 2008, the Bank entered into repurchase agreements that qualified as sales under SFAS 140.ASC Topic 860 - Transfers and Servicing.  These transactions specifically referred to repurchase agreements on which the Bank was required to take larger discounts or “haircuts” than in the past, as a result of the outbreak of athe liquidity and credit crisis in the financial markets near the end of 2008.  These arewere short-term repurchase agreements with anticipated maturity dates within the first quarter of 2009, transacted with counterparties of high repute, for which reason therepute.  The Bank does not believe any difficulty exists with respect to reacquiringreacquired all the securities that guaranteed these transactions.  At the trade date of these agreements, the Bank transferred available-for-sale securities

F-33

Banco Latinoamericano de Comercio Exterior, S. A.
and received cash and rightsSubsidiaries

Notes to repurchase transferred securities at the maturity of the repurchase agreement.  consolidated financial statements

A summary of the repurchase agreements and their effect in the results of year 2008 is presented below:

(In thousands of US$) 2008 
    
Cash received from counterparties  147,301 
Amortized cost of securities at the transfer dates  (192,907)
Fair value of forward repurchase agreements  36,451 
Retained interest on securities transferred under repurchase agreements  7,128
 
Recognized loss in transfers of securities under repurchase agreements accounted for as sales  (2,027)

F-36

Banco Latinoamericano de Exportaciones, S. A.
   and Subsidiaries

Notes to consolidated financial statements

Changes in fair value of derivative financial instruments resulting from transfers of securities under repurchase agreements arewere reported in current year’s earnings2008 in the net gain (loss) from trading securities line item.  Changes in fair value of sovereign bonds reacquired in repurchase transactions, that arewhich were included in the trading portfolio, are alsowere reported in the net gain (loss) from trading securities line item.  The Bank discontinued hedge accounting for interest rate swaps that hedged securities transferred under these agreements and reportsreported them as trading derivatives.  Changes in fair value of these interest rate swaps arewere recorded in the net gain (loss) from trading securities line item.  
A summary of the effect of these financial instruments in net income of year ended December 31, 2008 is presented below:

(In thousands of US$) 2008 
    
Changes in fair value of forward repurchase agreements  (8,133)
Changes in fair value of sovereign bonds  (1,583)
Changes in fair value of interest rate swaps that hedged transferred securities  (11,219)
Total changes in fair value of financial instruments resulting from transfers of securities under repurchase agreements  (20,935)

The effects in the statement of income for the year ended December 31, 2008 of transfers of securities under repurchase agreements is summarized below:

(In thousands of US$) 2008 
    
Loss in sale transactions under repurchase agreements  (2,027)
Changes in fair value of financial instruments resulting from transfers of securities under repurchase agreements  (20,935)
Total loss in transfers of securities under repurchase agreements  (22,962)

 
F-37F-34
 

Banco Latinoamericano de Exportaciones,Comercio Exterior, S. A.
and Subsidiaries

Notes to consolidated financial statements

14.13.Short-term borrowings

The breakdown of short-term borrowings due to banks and other creditorsfinancial institutions, together with contractual interest rates, is as follows:

(In thousands of US$) December 31, 
  2008  2007 
At fixed interest rates:      
Advances from corporations  30,000   25,000 
Advances from banks  708,747   1,181,500 
   738,747   1,206,500 
At floating interest rates:        
Advances from banks  -   15,000 
         
Total short-term borrowings  738,747   1,221,500 
         
Average outstanding balance during the year  1,088,947   1,272,986 
         
Maximum balance at any month-end  1,254,050   1,221,500 
         
Range on fixed interest rates on borrowings in U.S. dollars 2.77% to 6.10%  4.65% to 5.82% 
         
Floating interest rate on borrowings in U.S. dollars  -   5.17%
         
Range on fixed interest rates on borrowing in Euros 5.68% to 5.73%   - 
         
Floating interest rate on borrowings in Yen  1.79%  - 
         
Weighted average interest rate at end of the year  3.92%  5.31%
         
Weighted average interest rate during the year  4.21%  5.48%

F-38

Banco Latinoamericano de Exportaciones, S. A.
   and Subsidiaries
  December 31, 
(In thousands of US$) 2010  2009 
       
Advances from financial institutions:      
At fixed interest rates  1,000,400   317,800 
At floating interest rates  95,000   10,000 
Total short-term borrowings  1,095,400   327,800 
         
Average outstanding balance during the year  541,978   498,751 
         
Maximum balance at any month-end  1,095,400   693,900 
         
Range of fixed interest rates on borrowings in U.S. dollars 0.69% to 1.65%  0.85% to 2.70% 
         
Range of floating interest rates on borrowings in U.S. dollars 0.85% to 1.29%   2.66%
         
Weighted average interest rate at end of the year  1.13%  1.62%
         
Weighted average interest rate during the year  1.20%  3.34%

NotesThe Bank has at its favor an unused commitment for short-term financing for $50 million bearing a 0.25% annual fee, maturing in October 2011. In the event this commitment is used, a rate of LIBOR 6 months plus a margin according to consolidated financial statements
prevailing market conditions would be applied.

15.14.Borrowings and long-term debt

Borrowings consist of long-term and syndicated loans obtained from international banks.  Debt instruments consist of Euro-Notes and another issuance in Latin America.  The breakdown of borrowings and long-term debt (original maturity of more than one year)year), together with contractual interest rates, is as follows:

  December 31, 
(In thousands of US$) 2010  2009 
       
Borrowings:      
At fixed interest rates with due dates from January 2011 to September 2013  26,892   83,334 
At floating interest rates with due dates from March 2011  to July 2013   1,004,421    1,259,478 
Total borrowings  1,031,313   1,342,812 
         
Debt:        
At fixed interest rates with due dates in November 2014  43,827   42,575 
At floating interest rates  -   5,000 
Total debt  43,827   47,575 
         
Total borrowings and long-term debt outstanding  1,075,140   1,390,387 

F-35
(In thousands of US$) December 31, 
  2008  2007 
Borrowings:      
At fixed interest rates with due dates from January 2009 to September 2013  138,786   235,578 
At floating interest rates with due dates from June 2009 to July 2013   1,022,032    708,690 
Total borrowings  1,160,818   944,268 
Debt:        
At fixed interest rates with due dates in November 2014  39,134   41,048 
At floating interest rates with due dates in October 2010  5,000   25,000 
Total debt  44,134   66,048 
         
Total borrowings and long-term debt outstanding  1,204,952   1,010,316 
         
Average outstanding balance during the year  1,182,065   808,890 
         
Maximum outstanding balance at any month-end  1,330,422   1,059,224 
         
Range on fixed interest rates on borrowings and debt in U.S. dollars 
2.53% to 5.14%
  
4.20% to 5.55%
 
         
Range on floating interest rates on borrowings and debt in U.S. dollars 
1.88% to 4.75%
  
4.91% to 6.19%
 
         
Range on fixed interest rates on borrowings and debt in Mexican pesos 
8.20% to 9.90%
  
8.20% to 8.42%
 
         
Range on floating interest rates on borrowings and debt in Mexican pesos 
9.58% to 9.66%
    - 
         
Fixed interest rate on debt in Peruvian soles  6.50%  6.50%
         
Weighted average interest rate at the end of the year  4.58%  5.75%
         
Weighted average interest rate during the year  4.65%  5.94%

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries

Notes to consolidated financial statements

  December 31, 
(In thousands of US$) 2010  2009 
       
Average outstanding balance during the year  1,240,750   1,208,007 
         
Maximum outstanding balance at any month-end  1,400,307   1,390,387 
         
Range of fixed interest rates on borrowings and debt in U.S. dollars 2.53% to 3.10%  2.25% to 4.64%
         
Range of floating interest rates on borrowings and debt in U.S. dollars 0.53% to 2.52%  0.55% to 2.78%
         
Range of fixed interest rates on borrowings in Mexican pesos 7.50% to 9.90%  8.20% to 9.90% 
         
Range of floating interest rates on borrowings in Mexican pesos 5.76% to 5.80%  5.93% to 5.96%
         
Fixed interest rate on debt in Peruvian soles  6.50%  6.50%
         
Weighted average interest rate at the end of the year  2.10%  2.07%
         
Weighted average interest rate during the year  2.07%  3.07%

The Bank's funding activities include a Euro-Note program, which may be used to issue notes for up to $2.3 billion, with maturities from 90 days up to a maximum of 30 years, at fixed or floating interest rates, or at discount, and in various currencies.

F-39
Banco Latinoamericano de Exportaciones, S. A.
   and Subsidiaries

Notes to consolidated financial statements
During 2007 the Bank issued long-term debt for a total of 123 million Peruvian soles with maturity in November 2014.  This issuance is hedged with cross currency swaps at fixed interest rate.

The notes are generally sold in bearer or registered form through one or more authorized financial institutions.

Some borrowing agreements include various events of default and covenants related to minimum capital adequacy ratios, incurrence of additional liens, and asset sales, as well as other customary covenants, representations and warranties.  AtAs of December 31, 2008,2010, the Bank was in compliance with all covenants.

The future remaining maturities of long-term debt and borrowings outstanding atas of December 31, 2008,2010, are as follows:
(In thousands of US$)   
Due in: Outstanding 
    
2011  388,775 
2012  298,196 
2013  344,342 
2014  43,827 
   1,075,140 

F-36
(In thousands of US$)   
Due in: Outstanding 
    
2009  210,280 
2010  470,781 
2011  26,966 
2012  151,846 
2013  305,944 
2014  39,135 
   1,204,952 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries

16. Common stock
Notes to consolidated financial statements

15.     Common stock

The Bank’s common stock is divided into four categories:

 The Bank’s common stock is divided into three categories:

1)“Class “A”A”; shares may only be issued to Latin American Central Banks or banks in which the state or other government agency is the majority shareholder.
2)“Class “B”B”; shares may only be issued to banks or financial institutions.
3)“Class “E”E”; shares may be issued to any person whether a natural person or a legal entity.
4)“Class F”; can only be issued to state entities and agencies of non-Latin American countries, including, among others, central banks and majority state-owned banks in those countries, and multilateral financial institutions either international or regional institutions.

The holders of Class “B”“Class B” shares have the right to convert or exchange their Class “B”“Class B” shares, at any time, and without restriction, for Class “E”“Class E” shares, at a rate of one to one.  On August 3, 2004, the Board of Directors authorized a three-year stock repurchase program under which Bladex may, from time to time, repurchase up to an aggregate of $50 million of its Class “E” shares of common stock, in the open market at the prevailing market price.  In July 2006, this stock repurchase program was completed at an average price of $16.43 per share.

F-40
Banco Latinoamericano de Exportaciones, S. A.
   and Subsidiaries

Notes to consolidated financial statements
The following table provides detailed information on the Bank’s common stock activity per class for each of the years in the three-year period ended December 31, 2008:2010:

(Share units) Class “A”  Class “B”  Class “E”  Total  “Class A”  “Class B”  “Class E”  “Class F”  Total 
                           
Authorized  40,000,000   40,000,000   100,000,000   180,000,000   40,000,000   40,000,000   100,000,000   100,000,000   280,000,000 
                                    
Outstanding at January 1, 2006  6,342,189   3,214,344   28,540,242   38,096,775 
Conversions  -   (488,954)  488,954   - 
Restricted stock issued  -   -   5,967   5,967 
Repurchased stock  -   -   (1,774,818)  (1,774,818)
Exercised stock options - compensation plans  -   -   1,150   1,150 
Outstanding at December 31, 2006  6,342,189   2,725,390   27,261,495   36,329,074 
Conversions  -   (64,540)  64,540   - 
Accumulated difference in fractional shares in conversion of common stock  -   (3)  -   (3)
Restricted stock issued  -   -   22,240   22,240 
Exercised stock options - compensation plans  -   -   18,838   18,838 
Outstanding at December 31, 2007  6,342,189   2,660,847   27,367,113   36,370,149 
Outstanding at January 1, 2008  6,342,189   2,660,847   27,367,113   -   36,370,149 
Conversions  -   (43,063)  43,063   -   -   (43,063)  43,063   -   - 
Restricted stock issued  -   -   31,246   31,246   -   -   31,246   -   31,246 
Exercised stock options - compensation plans  -   -   11,693   11,693   -   -   11,693   -   11,693 
Outstanding at December 31, 2008  6,342,189   2,617,784   27,453,115   36,413,088   6,342,189   2,617,784   27,453,115   -   36,413,088 
Conversions  -   (32,902)  32,901   -   (1)
Restricted stock issued  -   -   37,934   -   37,934 
Exercised stock options - compensation plans  -   -   82,180   -   82,180 
Restricted stock units - vested  -   -   12,415   -   12,415 
Outstanding at December 31, 2009  6,342,189   2,584,882   27,618,545   -   36,545,616 
Conversions  -   (42,861)  42,860   -   (1)
Repurchase of common stock  -   -   (200)  -   (200)
Restricted stock issued  -   -   38,115   -   38,115 
Exercised stock options - compensation plans  -   -   82,106   -   82,106 
Restricted stock units - vested  -   -   44,904   -   44,904 
Outstanding at December 31, 2010  6,342,189   2,542,021   27,826,330   -   36,710,540 

The following table presents information regarding shares repurchased but not retired by the Bank and accordingly classified as treasury stock:

(In thousands, except for share data) “Class A”  “Class B”  “Class E”  Total 
  Shares  Amount  Shares  Amount  Shares  Amount  Shares  Amount 
                                 
Outstanding at January 1, 2008  318,140   10,708   568,010   15,655   4,723,543   107,425    5,609,693    133,788 
Restricted stock issued
  -   -   -   -   (31,246)  (745)  (31,246)  (745)
Exercised stock options – compensation plans  -   -   -   -   (11,693)  (280)  (11,693)  (280)
Outstanding at December 31, 2008  318,140   10,708   568,010   15,655   4,680,604   106,400   5,566,754   132,763 
Restricted stock issued
  -   -   -   -   (37,934)  (905)  (37,934)  (905)
Exercised stock options – compensation plans  -   -   -   -   (82,180)  (1,960)  (82,180)  (1,960)
Restricted stock units - vested  -   -   -   -   (12,415)  (296)  (12,415)  (296)
Outstanding at December 31, 2009  318,140   10,708   568,010   15,655   4,548,075   103,239   5,434,225   129,602 
Repurchase of common stock  -   -   -   -   200   3   200   3 
Restricted stock issued
  -   -   -   -   (38,115)  (909)  (38,115)  (909)
Exercised stock options – compensation plans  -   -   -   -   (82,106)  (1,958)  (82,106)  (1,958)
Restricted stock units - vested  -   -   -   -   (44,904)  (1,071)  (44,904)  (1,071)
Outstanding at December 31, 2010  318,140   10,708   568,010   15,655   4,383,150   99,304   5,269,300   125,667 
(In thousands, except for share data) 
Class “A”
  
Class “B”
  
Class “E”
  
Total
 
             
  
Shares
  
Amount
  
Shares
  
Amount
  
Shares
  
Amount
  
Shares
  
Amount
 
                         
Outstanding at January 1, 2006  318,140   10,708   568,010   15,655   2,996,920   79,919    3,883,070    106,282 
Repurchased during 2006  -   -   -   -   1,774,818   28,657    1,774,818    28,657 
Restricted stock issued
  -   -   -   -   (5,967)  (144)  (5,967)  (144)
Exercised stock options – compensation plans  -   -   -   -   (1,150)  (27)  (1,150)  (27)
Outstanding at December 31, 2006  318,140   10,708   568,010   15,655   4,764,621   108,405    5,650,771    134,768 
Restricted stock issued
  -   -   -   -   (22,240)  (531)  (22,240)  (531)
Exercised stock options – compensation plans  -   -   -   -   (18,838)  (449)  (18,838)  (449)
Outstanding at December 31, 2007  318,140   10,708   568,010   15,655   4,723,543   107,425    5,609,693    133,788 
Restricted stock issued
  -   -   -   -   (31,246)  (745)  (31,246)  (745)
Exercised stock options – compensation plans  -   -   -   -   (11,693)  (280)  (11,693)  (280)
Outstanding at December 31, 2008  318,140   10,708   568,010   15,655   4,680,604   106,400    5,566,754    132,763 


 
F-41F-37
 

Banco Latinoamericano de Exportaciones,Comercio Exterior, S. A.
and Subsidiaries

Notes to consolidated financial statements

17.16.Cash and stock-based compensation plans

The Bank established equity compensation plans under which it administers restricted stock and stock purchase option plans to attract, retain and motivate Directors and top employees and compensate them for their contributions to the growth and profitability of the Bank.  Vesting conditions for each of the Bank’s plans are only comprised of specified requisite service periods.
The Bank established equity compensation plans under which it administers restricted stock, restricted stock units and stock purchase option plans to attract, retain and motivate Directors and top employees and compensate them for their contributions to the growth and profitability of the Bank.  Vesting conditions for each of the Bank’s plans are only comprised of specified requisite service periods.

A. 2008 Stock Incentive Plan – Directors and Executives

In February 2008, the Board of Directors of the Bank approved an incentive plan for Directors and Executives allowing the Bank to grant restricted stock, restricted stock units, stock purchase options, and/or other similar compensation instruments.  The maximum aggregate number of shares which may be issued under this plan is two million Class “E”“Class E” common shares.  The 2008 Stock Incentive Plan is administered by the Board of Directors which has the authority in its discretion to select the Directors and Executives to whom the awardAward may be granted; to determine whether and to what extent awards are granted, and to amend the terms of any outstanding award under this plan.

During 2010, 2009 and 2008, the Board of Directors grantedapproved the grant of restricted stocksstock to Directors and stock options and restricted stock units to certain Executives of the Bank, as follows:

Restricted stocksstock – Directors

In July 2010, 2009 and 2008, the Board of Directors granted 38,115, 37,934 and 31,246, Class “E”respectively,   “Class E” common shares worth $50 thousand for each Director and $75 thousand to the Chairman of the Board.  The fair value of restricted stock granted was based on the stock closing price in the New York Stock Exchange (“NYSE”) of the Class “E”“Class E” shares on July 9, 2010, July 10, 2009 and July 11, 2008.2008, respectively.  The restricted stock vests in five years at a rate of 20% each year, beginning the year following the grant date. The fair value of restricted stock granted totaled $475 thousand in 2010, 2009 and 2008, of which $270 thousand, $139 thousand and $44 thousand were charged against income during 2008.2010, 2009 and 2008, respectively.  The remaining cost pending amortization of $431$972 thousand will be amortized over 4.543.73 years.

A summary atas of December 31, 20082010 of the restricted stock granted to Directors during the yearyears 2010, 2009 and 2008 is presented below:

  Shares  
Weighted average
grant date fair 
value
 
Outstanding at January 1, 2008  -   - 
Granted  31,246  $15.20 
Vested  -   - 
Outstanding at December 31, 2008  31,246   15.20 
Granted  37,934   12.52 
Vested  (6,242)  15.20 
Outstanding at December 31, 2009  62,938   13.58 
Granted  38,115   12.46 
Vested  (13,026)  13.80 
Outstanding at December 31, 2010  88,027  $13.07 
Expected to vest  88,027  $13.07 
  2008 
  
Shares
  
Weighted
Average Grant
Date Fair Value
 
Outstanding at January 1, 2008  -   - 
Granted  31,246  $15.20 
Vested  -   - 
Outstanding at December 31, 2008  31,246  $15.20 
Expected to vest  31,246  $15.20 
The fair value of vested stock during the years 2010 and 2009 was $180 thousand and $95 thousand, respectively.

 
F-42F-38
 

Banco Latinoamericano de Exportaciones,Comercio Exterior, S. A.
and Subsidiaries

Notes to consolidated financial statements

Restricted Stock Units and Stock Purchase Options granted to certain Executives

In February 2008, theThe Board of Directors grantedapproved the grant of stock purchase options and restricted stock units to certain Executives of the Bank with a grant date fair value of $2.4 million in 2010, $2.3 million in 2009 and $1.6 million in 2008, where $818 thousand50% were granted in restricted stock units, and $818 thousand50% in stock purchase options.

The Bank grants one “Class E” share per each exercised option or vested restricted stock unit.

Restricted stock units:

The fair value of the stock units granted to certain Executives was based on the “Class E” stock closing price in the New York Stock Exchange (“NYSE”) on the grant date.  These stock units had a cliff vesting of four years after the grant date.  In November 2008, the Board of Directors approved the modification of the vesting terms of these restricted stock units, which now vest 25% each year on the grant date’s anniversary.  This modification did not represent any additional compensation cost.

Compensation costs of these restricted stock units are amortized during the period of restriction.  Costs charged against income during 2010, 2009 and 2008 due to the amortization of this grantthese grants totaled $742 thousand, $436 thousand and $178 thousand.thousand, respectively.  The remaining compensation cost pending amortization of $628$1,752 thousand will be amortized over 3.122.53 years.

A summary as of December 31, 2010, 2009 and 2008 of the status of the restricted stocksstock units granted to certain Executives and changes during the yearyears 2010, 2009 and 2008 are presented below:

  Stock units  
Weighted
average grant
date fair 
value
 
Weighted
average
remaining
contractual
term
 
Aggregate
intrinsic value
(thousands)
 
Outstanding at January 1, 2008  -   -     
Granted  52,982  $15.43     
Forfeited  (756)  15.43     
Outstanding at December 31, 2008  52,226   15.43     
Granted  132,020   8.67     
Forfeited  (5,713)  11.44     
Vested  (12,415)  15.43     
Outstanding at December 31, 2009  166,118   10.20     
Granted  101,496   12.04     
Forfeited  -   -     
Vested  (44,904)  10.59   $162 
Outstanding at December 31, 2010  222,710  $10.96 2.53 years $1,671 
Expected to vest  222,710  $10.96   $1,671 

F-39
  Stock Units  
Weighted
Average Grant
Date Fair
Value
  
Weighted
Average
Remaining
Contractual
Term
 
Outstanding at January 1, 2008  -   -     
Granted  52,982  $15.43     
Forfeited  (756)  15.43     
Vested  -   -     
Outstanding at December 31, 2008  52,226  $15.43  3.12 years 
Expected to vest  51,304  $15.43  3.12 years 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries

Notes to consolidated financial statements

The fair value of vested stock during the years 2010 and 2009 was $476 thousand and $192 thousand, respectively.

Stock purchase options:

The fair value of stock purchase options granted to certain Executives during 2010, 2009 and 2008 was estimated using the Black-Scholes“Black-Scholes” option-pricing model, based on the following factors:

  2008 
Weighted average fair value option $3.52 
Weighted average expected terms, in years  5.50 
Expected volatility  37%
Risk-free rate  2.72%
Expected dividend  4.84%

F-43
Banco Latinoamericano de Exportaciones, S. A.
   and Subsidiaries

Notes to consolidated financial statements
  2010  2009  2008 
Weighted average fair value per option $2.91  $1.90  $3.52 
Weighted average expected term, in years  4.75   4.75   5.50 
Expected volatility  37%  37%  37%
Risk-free rate  2.32%  1.79%  2.72%
Expected dividend  5.00%  6.00%  4.84%

These options expire seven years after the grant date and wereare exercisable beginning on the fourth anniversaryat a rate of the grant date.  In November 2008, the Board of Directors approved the modification of the vesting terms of outstanding options granted under this plan, which vest 25% each year on the grant date’s anniversary.  This modification did not represent any additional compensation cost.

Related cost charged against income during 2010, 2009 and 2008 as a result of the amortization of this planthese plans amounted to $742 thousand, $436 thousand and $178 thousand.thousand, respectively.  The remaining compensation cost pending amortization of $628$1,752 thousand in 2010 will be amortized over a period of 3.122.53 years.  A summary of stock options granted is presented below:

  Options  
Weighted
average
exercise price
 
Weighted
average
remaining
contractual
term
 
Aggregate
intrinsic
value
(thousands)
 
Outstanding at January 1, 2008  -   -     
Granted  232,403  $15.43     
Forfeited  (3,318)  15.43     
Outstanding at December 31, 2008  229,085   15.43     
Granted  601,985   10.15     
Forfeited  (27,076)  12.43     
Outstanding at December 31, 2009  803,994  $11.58     
Granted  420,777   13.52     
Forfeited  (646)  15.43     
Exercised  (82,106)  10.15     
Outstanding at December 31, 2010  1,142,019  $12.39 5.29 years $6,928 
Exercisable  172,898  $13.46 4.12 years $865 
Expected to vest  969,121  $12.20 5.44 years $6,063 

The intrinsic value of exercised options during the year ended December 31, 2010 was $383 thousand. During the year ended December 31, 2010 the Bank received $834 thousand from exercised options.

F-40
  Options  
Weighted
Average
Exercise Price
  
Weighted
Average
Remaining
Contractual
Term
  
Aggregate
Intrinsic
Value
(Thousands)
 
Outstanding at January 1, 2008  -   -         
Granted  232,403  $15.43         
Forfeited  (3,318)  15.43         
Outstanding at December 31, 2008  229,085  $15.43  6.12 years  $- 
Expected to vest  225,036  $15.43  6.12 years  $- 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries

Notes to consolidated financial statements

B.  Restricted Stock – Directors (Discontinued)

During 2003, the Board of Directors approved a restricted stock award plan for Directors of the Bank that was amended in 2007 and subsequently terminated in 2008.  Until 2006,No grants were made after the Board of Directors may grant “Class E” shares to each Director worth $10 thousand, and to the Chairman of the Board worth $15 thousand.  Following the amendment of this award plan, starting in 2007, the Board may grant on an annual basis Class “E” shares for each Director worth $50 thousand, and to the Chairman of the Board worth $75 thousand, per year.  The fair value of each award granted was based on the stock closing price in the New York Stock Exchange (“NYSE”) of the Class “E” shares at the grant date.2007’s grant. The restricted stock hadvests at a cliff vesting periodrate of five years after20% each year on the grant date.  During 2007 and 2006 the Bank issued under this plan 22,240 and 5,967 Class “E” common shares, respectively with a grant date fair value of $21.35 in 2007 and $15.90 in 2006.  In November 2008, the Board of Directors approved the modification of the vesting terms ofdate’s anniversary.

Related costs to outstanding restricted shares at the modification date, which now vest as follows: 36% in 2008, 20% in 2009, 17% in 2010, 15% in 2011, and 12% in 2012.  This modification did not represent any additional compensation cost.

The fair value of restricted stock granted for $475 thousand in 2007 and $95 thousand in 2006 are amortized during the restriction period.  Related costswere charged against income totaled $108 thousand, $123 thousand and $217 thousand $118 thousandin 2010, 2009 and $65 thousand in 2008, 2007 and 2006, respectively.  AtAs of December 31, 2008,2010, the Bank had unrecognized compensation costs for $371of $139 thousand related to this plan that will be amortized over 3.261.49 years.

A summary as of December 31, 20082010 of restricted stocksstock granted to Directors under this plan and changes during 2006, 20072010, 2009 and 2008 is presented below:

F-44
Banco Latinoamericano de Exportaciones, S. A.
   and Subsidiaries

Notes to consolidated financial statements
 Shares  
Weighted
Average Grant
Date Fair
Value
  Shares  
Weighted average
grant date fair 
value
 
Non vested at January 1, 2006  21,109  $13.49 
Granted  5,967   15.90 
Vested  -   - 
Non vested at December 31, 2006  27,076   14.02 
Granted  22,240   21.35 
Vested  (4,860)  12.34 
Non vested at December 31, 2007  44,456   17.87 
Non vested at January 1, 2008  44,456  $17.87 
Granted  -   -   -   - 
Vested  (23,037)  15.83   (23,037)  15.83 
Non vested at December 31, 2008  21,419  $20.07   21,419   20.07 
Granted  -   - 
Vested  (6,746)  19.25 
Non vested at December 31, 2009  14,673   20.45 
Granted  -   - 
Vested  (5,756)  19.95 
Non vested at December 31, 2010  8,917  $20.77 
Expected to vest  21,419  $20.07   8,917  $20.77 

The total fair value of vested stocksstock during the years ended December 31, 2010, 2009 and 2008 and 2007 was $365$115 thousand, $130 thousand and $60$365 thousand, respectively.

C.  Stock Option Plan 2006 – Directors and Executives (Discontinued)

On December 12, 2006, the Bank’s Board of Directors adopted theThe 2006 Stock Option Plan that was terminated in 2008.  The options granted under this plan expire seven years after the grant date and wereare exercisable beginning on the fourth anniversaryat a rate of the grant date.

During 2007, the Board of Directors granted $95 thousand (grant date fair value) in stock options to members of the Board of Directors, and $890 thousand (grant date fair value) in stock options to certain executives of the Bank.  No grants were made during 2008.

In November 2008, the Board of Directors approved the modification of the vesting terms of outstanding options at the modification date granted under this plan, which 25% vested in November 2008, and 25% will vest on each year on the grant date’s anniversary.  This modification did not represent any additional compensation cost.No grants were made after the 2007’s grant.

Related cost charged against income as a result of the amortization of options granted under this compensation plan amounted to $221 thousand in 2010 and 2009, and $236 thousand in 2008 and $302 thousand in 2007.  The2008.  As of December 31, 2010, unrecognized compensation cost pending amortization at December 31, 2008 for $468of $25 thousand related to this plan will be amortized over 2.12 years.  The fair value of each option granted is estimated at the grant date using the Black-Scholes option-pricing model, based on the following factors:

  2007 
    
Weighted average fair value option $4.72 
Weighted average expected terms, in years  5.50 
Expected volatility  36%
Risk-free rate  4.81%
Expected dividend  3.54%

F-45
Banco Latinoamericano de Exportaciones, S. A.
   and Subsidiaries

Notes to consolidated financial statements
1.4 months.

A summary as of December 31, 2008 of the status2010 of the share options granted to Directors and certain Executives and changes during 20072008, 2009 and 20082010 is presented below:

F-41
  Options  
Weighted
Average
Exercise Price
  
Weighted
Average
Remaining
Contractual
Term
  
Aggregate
Intrinsic
Value
(Thousands)
 
Outstanding at January 1, 2007  -   -         
Granted  208,765  $16.34         
Forfeited  -   -         
Outstanding at December 31, 2007  208,765   16.34         
Forfeited  (1,059)  16.34         
Outstanding at December 31, 2008  207,706  $16.34  5.12 years  $- 
Exercisable at December 31, 2008  46,884  $16.34  5.12 years  $- 
Expected to vest  160,822  $16.34  5.12 years  $- 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries

Notes to consolidated financial statements

  Options  
Weighted average
exercise price
 
Weighted
average
remaining
contractual
term
 
Aggregate
intrinsic value
(thousands)
 
Outstanding at January 1, 2008  208,765  $16.34     
Forfeited  (1,059)  16.34     
Outstanding at December 31, 2008  207,706   16.34     
Forfeited  -    -     
Outstanding at December 31, 2009  207,706   16.34     
Forfeited  -   -     
Outstanding at December 31, 2010  207,706  $16.34 3.12 years $440 
Exercisable at December 31, 2010  140,652  $16.34 3.12 years $298 
Expected to vest  67,054  $16.34 3.12 years $142 
D.  Indexed Stock Option Plan (Discontinued)

During 2004, the Board of Directors approved an indexed stock purchase option plan for Directors and certain executives of the Bank, which was subsequently terminated in April 2006.  The indexed stock options expiredexpire in seventen years withand are vested at a cliff-vesting periodrate of four years.25% each year on the grant date’s anniversary.  The exercise price is adjusted based on the change in a customized Latin American general market index.  As of December 31, 2008, the Bank had remaining2010, there was no compensation costscost pending amortization of $258 thousand related to non-vested options granted under the plan.  This cost will be recognized over a period of 1.08 years.amortization.  Related costs charged against income amounted to $17 thousand, $241 thousand and $440 thousand $828 thousandin 2010, 2009 and $635 thousand in 2008, 2007 and 2006, respectively.

In November 2008, the Board of Directors approved modifications to the indexed stock option plan; mainly updating the index used to determine the exercise price of these options, to extend their maturity dates to three more years, and to modify the terms to exercise the outstanding options at the date of the modification.  As a result of this modification, the Bank recognized additional compensation costs for $61 thousand in the year ended December 31, 2008.

The weighted average of the fair value at the grant date of indexed stock purchase options granted during the year ended December 31, 2006 was estimated using the Black-Scholes option-pricing model, based on the following factors:

  2006 
    
Weighted average fair value option $4.67 
Weighted average expected term, in years  7.00 
Expected volatility  51.4%
Risk-free rate  3%
Expected dividend  6.7%

F-46
Banco Latinoamericano de Exportaciones, S. A.
   and Subsidiaries

Notes to consolidated financial statements
A summary as of December 31, 20082010 and changes during the years 2006, 20072008, 2009 and 20082010 of the indexed stock purchase options is presented below:

 Options  
Weighted
Average
Exercise Price
  
Weighted
Average
Remaining
Contractual
Term
  
Aggregate
Intrinsic
Value
(Thousands)
  Options  
Weighted average
exercise price
  
Weighted
average
remaining
contractual
term
  
Aggregate
intrinsic value
(thousands)
 
            
Outstanding at January 1, 2006  307,013  $12.42         
Granted  216,710   16.00         
Forfeited  -   -         
Outstanding at December 31, 2006  523,723   14.53         
Forfeited  -   -         
Exercised  (18,838)  8.50         
Outstanding at December 31, 2007  504,885   14.47         
Outstanding at January 1, 2008  504,885  $14.47         
Forfeited  (26,574)  -           (26,574)            
Exercised  (10,662)  14.19           (10,662)  14.19         
Outstanding at December 31, 2008  467,649  $12.93  5.90 years  $668   467,649   12.93         
               
Exercisable at December 31, 2008  325,113  $12.41  
5.75 years
  $634 
Expected to be exercisable  142,536  $14.12  6.25 years  $34 
Forfeited  -   -         
Exercised  (82,180)  9.84         
Outstanding at December 31, 2009  385,469   17.46         
Forfeited  -   -         
Exercised  -   -         
Outstanding at December 31, 2010  385,469  $17.98   4.45 years  $348 
Exercisable at December 31, 2010  385,469  $17.98   4.45 years  $348 

The intrinsic value of options exercised during the years ended December 31, 2009 and 2008 and 2007 was $41$252 thousand and $228$41 thousand, respectively.  During the years ended December 31, 20082009 and 2007,2008, the Bank received $151$808 thousand and $160$151 thousand, respectively, from exercised options.  During the year 2006, no indexed stockAll options were exercised.are available to be exercised as of December 31, 2010.

E.  1995 and 1999’s Stock Option Plans - DiscontinuedPlan (Discontinued)

During 2000, the Board of Directors approved a stock option plan for Directors and employees of the Bank.  The exercise price of each option must equal 100% of the market value of the stock at the grant date and becomes 100% exercisable one year after the grant date and expires on the fifth year after the grant date.  In addition, during 1995 and 1999, the Board of Directors approved two stock option plans for employees.  Under these stock option plans, stock options were granted at a purchase price equal to the average market value of the common stock at the grant date.  One third of the options may be exercised on each successive year after the grant date and expire on the tenth anniversary after the grant date.  On July 19, 2003, the Board of Directors approved discontinuing these plans;These plans were discontinued in 2003; therefore, no additional stock options have been granted.

 
F-47F-42
 

Banco Latinoamericano de Exportaciones,Comercio Exterior, S. A.
and Subsidiaries

Notes to consolidated financial statements


A summary of the status as of December 31, 20082010 of the stock options granted and changes during 2010, 2009 and 2008 of these option plans is presented below:

 Options  
Weighted average
exercise price
 
Weighted
average
remaining
contractual
term
 
Aggregate
intrinsic value
(thousands)
 
 Options  
Weighted
Average
Exercise Price
  
Weighted
Average
Remaining
Contractual
Term
  
Aggregate
Intrinsic
Value
(Thousands)
           
Outstanding at January 1, 2008  38,163  $31.46           38,163  $31.46     
Forfeited  (15,163)  27.63           (15,163)  27.63     
Expired  (8,650)  42.56           (8,650)  42.56     
Outstanding at December 31, 2008  14,350  $28.81  1.54 years  $-   14,350   28.81     
               
Exercisable at December 31, 2008   14,350  $28.81  
1.54 years
  $- 
Expected to be exercised  -   -   -     
Forfeited  (533)  27.72     
Expired  (2,082)  23.03     
Outstanding at December 31, 2009  11,735   29.89     
Forfeited  -   -     
Expired  (3,615)  23.16     
Outstanding at December 31, 2010  8,120  $32.88 0.10 years $0 
Exercisable at December 31, 2010  8,120  $32.88 0.10 years $0 

All options are available to be exercised as of December 31, 2010.

F.  Deferred Compensation Plan (the “DC Plan”)

In 1999, the Board of Directors approved the DC Plan, which was subsequently terminated in 2003.  The Bank could grant a number of deferred equity units (“DEU”).  Eligible employees would vest the DEU after three years of service, and distributions were made on the later of (i) the date the vested DEU were credited to the employee’s account, and (ii) ten years the employee was first credited with DEU.  Participating employees received dividends with respect to their unvested deferred equity units.  
A summary on changes is presented below:

  2010  2009  2008 
Outstanding at beginning of year  18,755   19,609   22,182 
Exercised  (1,009)  (854)  (2,573)
Outstanding at end of year  17,746   18,755   19,609 

Related cost charged against income related to this plan amounted to $11 thousand in 2010 and 2009, and $18 thousand in 2008.

G.  Other employee plans - Expatriate Officer Plan

 Expatriate Officer Plan:The Bank sponsors a defined contribution plan for its expatriate top executives based in Panama, which are not eligible to participate in the Panamanian social security system.  The Bank’s contributions are determined as a percentage of the annual salaries of top executives eligible for the plan, each contributing an additional amount withheld from their salary.  Contributions to this plan are managed by a fund manager through a trust.  The executives are entitled to the Bank’s contributions after completing at least three years of service in the Bank.  During the years 2010, 2009 and 2008, the Bank charged to salaries expense $117 thousand, $116 thousand and $241 thousand, respectively, that correspond to the Bank’s contributions to this plan.  As of December 31, 2010 and 2009, the accumulated liability payable amounted to $307 thousand and $386 thousand, respectively.

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Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries

The Bank sponsors a defined contribution plan for its expatriate top executives based in Panama, which are not eligibleNotes to participate in the Panamanian social security system.  The Bank’s contributions are determined as a percentage of the annual salaries of top executives eligible for the plan, each contributing an additional amount withheld from their salary.  Contributions to this plan were transferred to a fund manager who manages the Plan through a trust.  The executives are entitled to the Bank’s contributions after completing at least three years of service in the Bank.  During the years 2008, 2007 and 2006, the Bank charged to salaries expense, $241 thousand, $175 thousand, and $261 thousand, respectively that correspond to the Bank’s contributions to this plan.  As of December 31, 2008, 2007 and 2006, the accumulated liability payable amounted to $420 thousand, $382 thousand and $745 thousand, respectively.consolidated financial statements

18.17.Earnings per share

 The following table presents a reconciliation of the income and share data used in the basic and diluted earnings per share (“EPS”) computations for the dates indicated:

(In thousands of US$, except per share amounts) Year ended December 31, 
  2008  2007  2006 
Net income available to common stockholders for both, basic and diluted EPS  55,119   72,177   57,902 
             
Weighted average common shares outstanding - applicable to basic EPS  36,388   36,349   37,065 
Basic earnings per share  1.51   1.99   1.56 
             
Weighted average common shares outstanding applicable to diluted EPS  36,388   36,349   37,065 
Effect of dilutive securities (1):            
Stock option and restricted stock unit plans  52   65   507 
Adjusted weighted average common shares outstanding Applicable to diluted EPS  36,440   36,414   37,572 
             
Diluted earnings per share  1.51   1.98   1.54 
             
Basic earnings per share  1.51   1.99   1.56 
             
Diluted earnings per share  1.51   1.98   1.54 

(1) At December 31, 2008, 2007, 2006, weighted average options of 943,051, 38,467, and 53,177, respectively, were excluded from the computation of diluted earnings per share because the option’s exercise price was greater than the average quoted market price of the Bank’s common stock.

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Banco Latinoamericano de Exportaciones, S. A.
   and Subsidiaries

Notes to consolidated financial statements
(In thousands of US$, except per share amounts) Year ended December 31, 
  2010  2009  2008 
          
Net income attributable to Bladex for both basic and diluted EPS  42,244   54,862   55,119 
             
Weighted average common shares outstanding - applicable to basic EPS  36,647   36,493   36,388 
Basic earnings per share  1.15   1.50   1.51 
             
Weighted average common shares outstanding            
applicable to diluted EPS  36,647   36,493   36,388 
Effect of dilutive securities (1):
            
Stock options and restricted stock units plans  167   78   52 
Adjusted weighted average common shares outstanding applicable to diluted EPS  36,814   36,571   36,440 
Diluted earnings per share  1.15   1.50   1.51 

19. (1)As of December 31, 2010, 2009 and 2008, weighted average options of 760,284, 769,790 and 943,051, respectively, were excluded from the computation of diluted earnings per share because the option’s exercise price was greater than the average quoted market price of the Bank’s common stock.

18.Financial instruments with off-balance sheet credit risk

 In the normal course of business, to meet the financing needs of its customers, the Bank is party to financial instruments with off-balance sheet credit risk.  These financial instruments involve, to varying degrees, elements of credit and market risk in excess of the amount recognized in the consolidated balance sheets.sheet.  Credit risk represents the possibility of loss resulting from the failure of a customer to perform in accordance with the terms of a contract.

The Bank’s outstanding financial instruments with off-balance sheet credit risk were as follows:

(In thousands of US$) December 31, 
  2010  2009 
       
Confirmed letters of credit  196,287   206,953 
Stand-by letters of credit and guarantees:        
Country risk  -   10,000 
Commercial risk  38,410   40,651 
Credit derivative  -   3,000 
   38,410   53,651 
Credit commitments  118,863   70,181 
   353,560   330,785 
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(In thousands of US$) December 31, 
  2008  2007 
       
Confirmed letters of credit  136,539   97,211 
Stand-by letters of credit and guarantees:        
Country risk  40,000   113,924 
Commercial risk  180,237   197,528 
Credit derivative  3,000   3,000 
   223,237   314,452 
         
Credit commitments  84,019   129,378 
         
   443,795   541,041 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries

Notes to consolidated financial statements

As of December 31, 2008,2010, the remaining maturity profile of the Bank’s outstanding financial instruments with off-balance sheet credit risk is as follows:

(In thousands of US$)   
Maturities Amount 
    
Within 1 year  403,203326,597 
From 1 to 2 years  38,04126,185 
From 2 to 5 years  1,188- 
After 5 years  1,363778 
   443,795353,560 
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Banco Latinoamericano de Exportaciones, S. A.
   and Subsidiaries

Notes to consolidated financial statements

As of December 31, 2008 and 2007 the breakdown of the Bank’s off-balance sheet exposure by country risk is as follows:

As of December 31, 2010 and 2009 the breakdown of the Bank’s off-balance sheet exposure by country risk is as follows:
(In thousands of US$)      
 2008  2007 
Country:       2010  2009 
Argentina  -   4,057 
Brazil  150,967   220,281   66,700   22,500 
Chile  83,200   590 
Colombia  4,225   4,225   -   3,000 
Costa Rica  19,553   71,871   32,160   24,278 
Dominican Republic  13,923   60,601   86   130 
Ecuador  86,363   81,379   121,245   112,039 
El Salvador  476   1,675   25   1,770 
Guatemala  4,578   6,293   1,475   975 
Honduras  350   400   430   430 
Jamaica  -   15,615   125   - 
Mexico  2,979   11,750   50,964   57,682 
Panama  15,239   10,565   1,200   - 
Peru  -   10   39   - 
Trinidad and Tobago  -   5,000 
United States  -   18,616 
Switzerland  500   - 
Uruguay  170   15,788 
Venezuela  61,792   27,963   78,441   92,193 
Other  150   150 
  443,795   541,041   353,560   330,785 

Letters of credit and guarantees
 The Bank, on behalf of its client base, advises and confirms letters of credit to facilitate foreign trade transactions.  When confirming letters of credit, the Bank adds its own unqualified assurance that the issuing bank will pay and that if the issuing bank does not honor drafts drawn on the credit, the Bank will.  The Bank provides stand-by letters of credit and guarantees, including country risk guarantees, which are issued on behalf of institutional customers in connection with financing between its customers and third parties.  The Bank applies the same credit policies used in its lending process, and once issued the commitment is irrevocable and remains valid until its expiration.  Credit risk arises from the Bank's obligation to make payment in the event of a customer’s contractual default to a third party.  Risks associated with stand-by letters of credit and guarantees are included in the evaluation of the Bank’s overall credit risk. The Bank issues stand-by letters and guarantees to provide coverage for country risk arising from the risk of convertibility and transferability of local currency of countries in the Region into hard currency, and to provide coverage for country risk arising from political risks, such as expropriation, nationalization, war and/or civil disturbances.

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Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries

Notes to consolidated financial statements

Credit commitments
Commitments to extend credit are a combination of either non-binding orbinding legal agreements to lend to a customer.customers.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee to the Bank.  As some commitments expire without being drawn down, the total commitment amounts do not necessarily represent future cash requirements.

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Banco Latinoamericano de Exportaciones, S. A.
   and Subsidiaries

Notes to consolidated financial statements
Credit derivative
Credit derivative representsrepresented a guarantee issued by the Bank to the buyer of the derivative instrument, where the Bank guaranteesguaranteed the payment of principal if the underlying financial instrument iswas impaired and its original issuer doeswould have not complycomplied with principal payments; therefore, the impairment risk is assumedwas taken by the Bank, which receivesreceived commission income during the term of this derivative.  The credit derivative maturesmatured in July 2010.  As of December 31, 2008 and 2007,2009, the fair value of this derivative instrument was $91$2 thousand, and $13 thousand, respectively, and reported in trading liabilitiesassets, in the consolidated balance sheet.  The maximum potential amount of future payments the Bank could be required to make under this credit derivative is $3 million.

20. 19.Lease and otherLeasehold commitments

Lease commitments

AtAs of December 31, 2008,2010, a summary of leaseleasehold commitments is as follows:

(In thousands of US$)(In thousands of US$) 
 
(In thousands of
US$)
    
Year
 
Future Rental
Commitments
    
   
2009  552 
2010  563 
2011  515   561 
2012  261   261 
2013  243   243 
Thereafter  446 
2014  243 
2015  203 
  2,580   1,511 

Occupancy expense for years ended December 31, 2008, 20072010, 2009 and 2006,2008, amounted to $809$875 thousand, $593$770 thousand, and $637$809 thousand, respectively.

Other commitments

Commitments to repurchase securities sold under repurchase agreements
Repurchase agreements for $138.2 million as of December 31, 2008 represent the amounts the Bank is committed to pay to counterparties at the maturity date of the financing contracts under repurchase agreements that have been accounted for as sales.  At the maturity date of such contracts, the Bank makes a payment in exchange of the financial instrument it has repurchased (see Note 13).

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Banco Latinoamericano de Exportaciones, S. A.
   and Subsidiaries

Notes to consolidated financial statements

21.20.Derivative financial instruments for hedging purposes

AtAs of December 31, 20082010 and 2007,2009, quantitative information on derivative financial instruments held for hedging purposes is as follows:
 
   2010  2009 
(In thousands of US$) Nominal  
Fair Value (1)
  Nominal  
Fair Value (1)
 
  Amount  Asset  Liability  Amount  Asset  Liability 
Fair value hedges:                  
Interest rate swaps  267,800   591   25,737   353,600   -   30,756 
Cross-currency interest rate swaps  148,570   24   25,631   150,118   -   31,975 
Cash flow hedges:                        
Interest rate swaps  20,000   -   1,499   20,000   -   1,956 
Cross-currency interest rate swaps  42,633   1,407   150   47,141   -   450 
Forward foreign exchange  2,108   81   12   6,832   828   - 
                         
Total  481,111   2,103   53,029   577,691   828   65,137 
                         
Net gain (loss) on the ineffective portion of hedging activities (2)
  (1,446)          (2,534)        

(1)The fair value of assets and liabilities is reported within the derivative financial instruments used for hedging - receivable and payable lines in the consolidated balance sheets, respectively.
(2)Gains and losses resulting from ineffectiveness and credit risk in hedging activities are reported within the derivative financial instruments and hedging line in the consolidated statements of income.
  2008  2007 
(In thousands of US$) Nominal  
Fair Value
  Nominal  
Fair Value
 
  
Amount
  
Asset
  
Liability
  
Amount
  
Asset
  
Liability
 
Fair value hedges:                  
Interest rate swaps  446,400   -   46,379   372,996   122   13,408 
Cross-currency interest rate swaps  149,924   -   34,383   4,435   -   622 
Cash flow hedges:                        
Interest rate swaps  20,000   -   2,178   20,000   -   1,129 
Cross-currency interest rate swaps  41,020   -   6,781   41,020   -   857 
Forward foreign exchange  143,179   7,777   2,176   26,282   -   883 
                         
Total  800,523   7,777   91,897   464,733   122   16,899 
                         
Net gain (loss) on the ineffective portion of hedging activities      9,956           (989)    
 
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Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries

Notes to consolidated financial statements
The gains and losses resulting from activities of derivative financial instruments and hedging recognized in the consolidated statements of income are presented below:

2010 
(In thousands of US$) 
Gain (loss)
recognized in OCI
(effective portion)
 
Classification of gain 
(loss)
 
Gain (loss) reclassified from
accumulated OCI to the
statements of income
(effective portion)
  
Gain (loss)
recognized on
derivatives
(ineffective portion)
 
Derivatives – cash flow hedge          
Interest rate swaps  460        
            
Cross-currency interest rate swaps  1,690 Gain (loss) on foreign currency exchange  1,171   - 
Forward foreign exchange  (759)Interest income - loans  (477)  - 
     Gain (loss) on foreign currency exchange  478   - 
Total  1,391    1,172   - 
2009 
(In thousands of US$) 
Gain (loss)
recognized in OCI
(effective portion)
 
Classification of gain
(loss) 
 
Gain (loss) reclassified from
accumulated OCI to the
statements of income
(effective portion)
  
Gain (loss)
recognized on
derivatives
(ineffective portion)
 
Derivatives – cash flow hedge          
Interest rate swaps  513        
            
Cross-currency interest rate swaps  6,231 Gain (loss) on foreign currency exchange  (3,430)  - 
     Derivative financial instruments and hedging  -   (3)
              
Forward foreign exchange  (4,773)Interest expense – borrowings  336   - 
     Interest income - loans  313   - 
     Gain (loss) on foreign currency exchange  3,861   - 
Total  1,971    1,080   (3)

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Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries

Notes to consolidated financial statements

The Bank recognized in earnings the gain (loss) on derivative financial instruments and the gain (loss) of the hedged asset or liability related to qualifying fair value hedges, as follows:

2010 
(In thousands of US$) 
Classification in statements of
income
 
Gain (loss) on 
derivatives
  
Gain (loss) on 
hedged item
  
Net gain 
(loss)
 
Derivatives -  fair value hedge           
Interest rate swaps Interest income – available-for-sale  (14,760)  22,000   7,240 
  Derivative financial instruments and hedging (ineffectiveness)  419   -   419 
               
Cross-currency interest rate swaps Derivative financial instruments and hedging (ineffectiveness)  (1,865)  -   (1,865)
  Interest  income – loans  (45)  89   44 
  Interest expense – borrowings  3,812   (7,046)  (3,234)
  Gain (loss) on foreign currency exchange  7,922   (7,994)  (72)
     (4,517)  7,049   2,532 

2009 
(In thousands of US$) 
Classification in statements of
income
 
Gain (loss) on
derivatives
  
Gain (loss) on
hedged item
  
Net gain
(loss)
 
Derivatives -  fair value hedge           
Interest rate swaps Interest income –available-for-sale  (11,959)  27,477   15,518 
               
Cross-currency interest rate swaps Derivative financial instruments and hedging (ineffectiveness)  (2,531)  -   (2,531)
  Interest  income – loans  (62)  619   557 
  Interest expense – borrowings  3,480   (8,098)  (4,618)
  Gain (loss) on foreign currency exchange  591   (5,681)  (5,090)
     (10,481)  14,317   3,836 

For control purposes, derivative instruments are recorded at their nominal amount ("(“notional amount"amount”) in memorandum accounts.  Interest rate swaps are made either in a single currency or cross currency for a prescribed period to exchange a series of interest rate flows, which involve fixed for floating interest payments.  The Bank also engages in somecertain foreign exchange trades to serve customers’ transaction needs and to manage the foreign currency risk.  All such positions are hedged with an offsetting contract for the same currency.  The Bank manages and controls the risks on these foreign exchange trades by establishing counterparty credit limits by customer and by adopting policies that do not allow for open positions in the credit and investment portfolio.  Derivative and foreign exchange instruments negotiated by the Bank are executed mainly over-the-counter (OTC).  These contracts are executed between two counterparties that negotiate specific agreement terms, including notional amount, exercise price and maturity.

The maximum length of time over which the Bank has hedged its exposure to the variability in future cash flows on forecasted transactions is six3.9 years.

The Bank estimates that approximately $190$169 thousand of gainslosses reported in other comprehensive income (loss) atOCI as of December 31, 2008,2010 related to forward foreign exchange contracts were expected to be reclassified into interest expense as an adjustment to yield of hedged liabilities during the twelve-month period ending December 31, 2009.

The Bank estimates that approximately $258 thousand of losses reported in other comprehensive income (loss) at December 31, 2008 related to forward foreign exchange contracts wereare expected to be reclassified into interest income as an adjustment to yield of hedged loans during the twelve-month period ending December 31, 2009.

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Banco Latinoamericano de Exportaciones, S. A.
   and Subsidiaries2011.

Notes to consolidated financial statements

Types of DerivativeDerivatives and Foreign Exchange Instruments
Interest rate swaps are contracts in which a series of interest rate flows in a single currency are exchanged over a prescribed period.  The Bank has designated a portion of these derivative instruments as fair value hedges and a portion as cash flow hedges.  Cross currency interest rate swaps are contracts that generally involve the exchange of both interest and principal amounts in two different currencies.  The Bank has designated a portion of these derivative instruments as fair value hedges and a portion as cash flow hedges.  Forward foreign exchange contracts represent an agreement to purchase or sell foreign currency at a future date at agreed-upon terms.  The Bank has designated these derivative instruments as cash flow hedges.

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Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries

Notes to consolidated financial statements

In addition to hedging derivative financial instruments, as fair value hedges.the Bank has derivative financial instruments held for trading purposes that have been disclosed in Note 4.

22.21.Accumulated other comprehensive income (loss)

 As of December 31, 2008, 20072010, 2009 and 20062008 the breakdown of accumulated other comprehensive income (loss) related to investment securities available-for-sale and derivative financial instruments is as follows:

(In thousands of US$) 
Securities
Available-
for-Sale
  
Derivative
Financial
Instruments
  Total 
          
Balance as of January 1, 2008  (7,631)  (2,010)  (9,641)
Net unrealized gains (losses) arising from the year  (58,453)  (2,433)  (60,886)
Reclassification adjustment for (gains) losses included in net income (1)
  (67)  (1,521)  (1,588)
Balance as of December 31, 2008  (66,151)  (5,964)  (72,115)
Net unrealized gains (losses) arising from the year  63,556   1,971   65,527 
Reclassification adjustment for (gains) losses included in net income (1)
  (649)  1,077   428 
Balance as of December 31, 2009  (3,244)  (2,916)  (6,160)
Net unrealized gains (losses) arising from the year  2,325   1,391   3,716 
Reclassification adjustment for (gains) losses included in net income (1)
  (2,825)  (1,172)  (3,997)
Balance as of December 31, 2010  (3,744)  (2,697)  (6,441)
(In thousands of US$) 
Investment
Securities
  
Derivative
Financial
Instruments
  Total 
          
Balance as of January 1, 2006  619   -   619 
Net unrealized gains (losses) arising from the year  5,349   (72)  5,277 
Reclassification adjustment for gains included in net income (1)
  (2,568)  -   (2,568)
Balance as of December 31, 2006  3,400   (72)  3,328 
Net unrealized gains (losses) arising from the year  (1,912)  (2,081)  (3,993)
Reclassification adjustment for (gains) losses included in net income (1)
  (9,119)  143   (8,976)
Balance as of December 31, 2007  (7,631)  (2,010)  (9,641)
Net unrealized gains (losses) arising from the year  (58,453)  (2,433)  (60,886)
Reclassification adjustment for (gains) losses included in net income (1)
  (67)  (1,521)  (1,588)
Balance as of December 31, 2008  (66,151)  (5,964)  (72,115)

(1)
Reclassification adjustments include amounts recognized in net income during the current year that had been part of other comprehensive income (loss) in this and previous years.
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Banco Latinoamericano de Exportaciones, S. A.
   and Subsidiaries

Notes to consolidated financial statements

23.    
22.Fair value of financial instruments

Beginning 2008, theThe Bank determines the fair value of its financial instruments using the fair value hierarchy established in SFAS 157, “FairASC Topic 820 - Fair Value Measurements”,Measurements and Disclosure, which requires the Bank to maximize the use of observable inputs (those that reflect the assumptions that market participants would use in pricing the asset or liability developed based on market information obtained from sources independent of the reporting entity) and to minimize the use of unobservable inputs (those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances) when measuring fair value. Fair value is used on a recurring basis to measure assets and liabilities in which fair value is the primary basis of accounting. Additionally, fair value is used on a non-recurring basis to evaluate assets and liabilities for impairment or for disclosure purposes.  Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  Depending on the nature of the asset or liability, the Bank uses some valuation techniques and assumptions when estimating fair value, which are in accordance with SFAS 157.value.  The Bank applied the following fair value hierarchy:

 Level 1 – Assets or liabilities for which an identical instrument is traded in an active market, such as publicly-traded instruments or futures contracts.

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Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries

Notes to consolidated financial statements

 Level 2 – Assets or liabilities valued based on observable market data for similar instruments, quoted prices in markets that are not active; or other observable inputs that can be corroborated by observable market data for substantially the full term of the asset or liability.

Level 3 – Assets or liabilities for which significant valuation assumptions are not readily observable in the market; instruments measured based on the best available information, which might include some internally-developed data, and considers risk premiums that a market participant would require.

When determining the fair value measurements for assets and liabilities that are required or permitted to be recorded at fair value, the Bank considers the principal or most advantageous market in which it would transact and considers the assumptions that market participants would use when pricing the asset or liability. When possible, the Bank uses active and observable markets to price identical assets or liabilities. When identical assets and liabilities are not traded in active markets, the Bank uses observable market information for similar assets and liabilities. However, certain assets and liabilities are not actively traded in observable markets and the Bank must use alternative valuation techniques to determine the fair value measurement. The frequency of transactions, the size of the bid-ask spread and the size of the investment are factors considered in determining the liquidity of markets and the relevance of observed prices in those markets.

A description of the valuation methodologies used for instruments measured at fair value on a recurring basis, including the general classification of such instruments under the fair value hierarchy is presented below:

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Banco Latinoamericano de Exportaciones, S. A.
   and SubsidiariesWhen there has been a significant decrease in the volume or level of activity for a financial asset or liability, the Bank uses the present value technique which considers market information to determine a representative fair value in usual market conditions.

Notes to consolidated financial statements
A description of the valuation methodologies used for assets and liabilities measured at fair value on a recurring basis, including the general classification of such assets and liabilities under the fair value hierarchy is presented below:

Trading assets and liabilities and securities available-for-sale

 When quoted prices are available in an active market, available-for-sale securities and trading assets and liabilities are classified in level 1 of the fair value hierarchy.  If quoted market prices are not available or they are available in markets that are not active, then fair values are estimated by using pricing models andbased upon quoted prices of securities with similar characteristics.instruments, or where these are not available, by using internal valuation techniques, principally discounted cash flows models.  Such securities are classified within level 2 of the fair value hierarchy.
  
 Investment fund

 The Fund is not traded in an active market and, therefore, representative market quotes are not readily available.  Its fair value is adjusted on a monthly basis based on its financial results, its operating performance, its liquidity and the fair value of its long and short investment portfolio that are quoted and traded in active markets.  Such investment is classified within level 2 of the fair value hierarchy.

 Derivative financial instruments

 The valuation techniques and inputs depend on the type of derivative and the nature of the underlying instrument.  Exchange-traded derivatives that are valued using quoted prices are classified within level 1 of the fair value hierarchy.  However, for

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Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries

Notes to consolidated financial statements

For those derivative contracts without quoted market prices, fair value is based on internally developed modelsinternal valuation techniques using assumptionsinputs that are readily observable and that can be validated by information available in the market.  The principal technique used to value these instruments is the discounted cash flows model and the key inputs considered in this technique include interest rate yield curves and foreign exchange rates.  These derivatives are classified within level 2 of the fair value hierarchy.

 Adjustments for credit risk of the counterparty isare applied to allthose derivative financial instruments where its valuation uses parameters based on interest curves based onthe internal credit risk rating of said counterparties deviates substantially from the credit risk implied by the London Interbank Offered Raterate (“LIBOR”).  Not all counterparties have the same credit rating that is implicit in the LIBOR curve; therefore, it is necessary to take into account the current credit rating of the counterparty for the purpose of obtaining the true fair value of a particular instrument.  In addition, adjustments to bilateral or own risk are adjusted to reflect the bank'sbank’s credit risk when measuring all liabilities at fair value, according to the requirements of SFAS 157.value. The methodology is consistent with the adjustments applied to generate the counterparty credit risk.

Financial instruments measured at fair value on a recurring basis by caption on the consolidated balance sheets using the fair value hierarchy are described below:

   2010 
(In thousands of US$)  
Quoted market
prices in an active
market
(Level 1)
  
Internally developed
models with
significant
observable market
information
(Level 2)
  
Internally
developed models
with significant
unobservable
market
information
(Level 3)
  
Total carrying
value in the
consolidated
balance sheets
 
Assets            
Trading assets            
Sovereign bonds  45,058   -   -   45,058 
Corporate bonds  5,354   -   -   5,354 
Total trading assets  50,412   -   -   50,412 
Securities available –for-sale                
Corporate debt  67,888   -   -   67,888 
Sovereign debt  285,362   -   -   285,362 
Total securities available-for-sale  353,250   -   -   353,250 
Investment fund  -   167,291   -   167,291 
Derivative financial instruments - receivable                
Interest rate swaps  -   591   -   591 
Cross-currency interest rate swaps  -   1,431   -   1,431 
Forward foreign exchange  -   81   -   81 
Total derivative financial instruments - receivable  -   2,103   -  ��2,103 
Total assets at fair value  403,662   169,394   -   573,056 
                 
Liabilities                
Trading liabilities                
Interest rate swaps  -   3,031   -   3,031 
Cross-currency interest rate swaps  -   907   -   907 
Total trading liabilities  -   3,938   -   3,938 
Derivative financial instruments - payable                
Interest rate swaps  -   27,236   -   27,236 
Cross-currency interest rate swaps  -   25,781   -   25,781 
Forward foreign exchange  -   12   -   12 
Total derivative financial instruments - payable  -   53,029   -   53,029 
Total liabilities at fair value  -   56,967   -   56,967 
 
 
F-55F-51
 

Banco Latinoamericano de Exportaciones,Comercio Exterior, S. A.
and Subsidiaries

Notes to consolidated financial statements

   2009 
(In thousands of US$) 
Quoted market
prices in an active
market
(Level 1)
  
Internally developed
models with
significant
observable market
information
(Level 2)
  
Internally
developed models
with significant
unobservable
market
information
(Level 3)
  
Total carrying
value in the
consolidated
balance sheets
 
             
Assets            
Trading assets            
Sovereign bonds  44,875   -   -   44,875 
Corporate bonds  5,400   -   -   5,400 
Credit default swap  -   2   -   2 
Total trading assets  50,275   2   -   50,277 
Securities available –for-sale                
Corporate debt  55,543   20,920   -   76,463 
Sovereign debt  380,521   -   -   380,521 
Total securities available-for-sale  436,064   20,920   -   456,984 
Investment fund  -   197,575   -   197,575 
Derivative financial instruments - receivable                
Forward foreign exchange  -   828   -   828 
Total derivative financial instruments - receivable  -   828   -   828 
Total assets at fair value  486,339   219,325   -   705,664 
                 
Liabilities                
Trading liabilities                
Interest rate swaps  -   2,514   -   2,514 
Cross-currency interest rate swaps  -   638   -   638 
Total trading liabilities  -   3,152   -   3,152 
Derivative financial instruments - payable                
Interest rate swaps  -   32,712   -   32,712 
Cross-currency interest rate swaps  -   32,425   -   32,425 
Total derivative financial instruments - payable  -   65,137   -   65,137 
Total liabilities at fair value  -   68,289   -   68,289 

As of December 31, 2008, financial instruments measured at fair value on a recurring basis by caption on the consolidated balance sheets using the fair value hierarchy are described below:
ASC Topic 825 - Financial Instruments requires disclosure of fair value of financial instruments including those assets and liabilities for which the Bank did not elect the fair value option.  Bank’s management uses its best judgment in estimating the fair value of the Bank’s financial instruments; however, there are limitations in any estimation technique.  The estimated fair value amounts have been measured as of their respective year-ends, and have not been re-expressed or updated subsequent to the dates of these consolidated financial statements.  As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each year-end.

F-52

Banco Latinoamericano de Comercio Exterior, S. A.
(In thousands of US$) 
 
 
 
Quoted market
prices in an
active market 
(Level 1)
  
Internally
developed
models with
significant
observable
market
information
(Level 2)
  
Internally
developed
models with
significant
unobservable
market
information
(Level 3)
  
Total carrying
value in the
consolidated
balance sheets
 
             
Assets            
Trading assets  21,965   22,974   -   44,939 
Securities available–for-sale  561,278   46,640   -   607,918 
Investment fund  -   150,695   -   150,695 
Derivative financial instruments - receivable    -     7,777     -     7,777 
Total assets at fair value  583,243   228,086   -   811,329 
                 
Liabilities                
                 
Trading liabilities  -   14,157   -   14,157 
Derivative financial instruments - payable    -     91,897     -     91,897 
Total liabilities at fair value  -   106,054   -   106,054 
and Subsidiaries

SFAS 107, “Disclosures about Fair Value of Financial Instruments”, requires disclosure of fair value of financial instruments including those financial instruments for which the Bank did not elect the fair value option.  Bank’s management uses its best judgment in estimating the fair value of the Bank’s financial instruments; however, there are limitations in any estimation technique.  Therefore, for substantially all financial instruments whose fair value is not measured on a recurring basis, the fair value estimates herein are not necessarily an indicative of the amounts the Bank could have realized in a sale transaction on the dates indicated.  The estimated fair value amounts have been measured as of their respective year-ends, and have not been re-expressed or updated subsequent to the dates of these consolidated financial statements.  As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each year-end.Notes to consolidated financial statements

The following information should not be interpreted as an estimate of the fair value of the Bank.  Fair value calculations are only provided for a limited portion of the Bank’s financial assets and liabilities.  Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparison of fair value information of the Bank and other companies may not be meaningful for comparative analysis.

F-56

Banco Latinoamericano de Exportaciones, S. A.
   and Subsidiaries

Notes to consolidated financial statements

The following methods and assumptions were used by the Bank’s management in estimating the fair values of financial instruments whose fair value are not measured on a recurring basis:

Financial instruments with carrying value equal tothat approximates fair value

The carrying value of certain financial assets, including cash and due from banks, interest-bearing deposits in banks, customers’ liabilities under acceptances, accrued interest receivable and certain financial liabilities including customer’s demand and time deposits, securities sold under repurchase agreements, accrued interest payable, and acceptances outstanding, as a result of their short-term nature, are considered to be equal toapproximate fair value.

Securities held-to-maturity

The fair value has been based upon current market quotations, where available.  If quoted market prices are not available, fair value has been estimated based upon quoted price of similar instruments, or where these are not available, on discounted expected cash flows using market rates commensurate with the credit quality and maturity of the security.

Loans

The fair value of the loan portfolio has been determined principally based upon discounted cash flow models that consider the market’s credit margins on comparable debt instruments.

Borrowings and short and long-term debt

The fair value of short-term and long-term debt and borrowings is estimated using discounted cash flow analysis based on the current incremental borrowing rates for similar types of borrowing arrangements, taking into account the changes in the Bank’s credit margin.

Commitments to extend credit, stand-by letters of credit, and financial guarantees written

The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of guarantees and letters of credit is based on fees currently charged for similar agreements which consider the counterparty risks.

F-53

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries

Notes to consolidated financial statements

The following table provides information on the carrying value and estimated fair value of the Bank’s financial instruments that are not measured on a recurring basis:
   December 31, 
(In thousands of US$) 2008  2007 
  Carrying  Fair  Carrying  Fair 
  Value  Value  Value  Value 
Financial assets:            
Instruments with carrying value equal to fair value  984,288   984,288   473,007   473,007 
Securities held-to-maturity  28, 410   28,144   -   - 
Loans, net of allowance  2,559,306   2,474,606   3,656,234   3,674,978 
                 
Financial liabilities:                
Instruments with carrying value equal to fair value  1,677,553   1,677,553   1,793,311   1,793,311 
Short-term borrowings  738,747   737,414   1,221,500   1,221,500 
Borrowings and long-term debt  1,204,952   1,126,379   1,010,316   1,023,413 
F-57
Banco Latinoamericano de Exportaciones, S. A.
   and Subsidiaries

  December 31, 
(In thousands of US$) 2010  2009 
  Carrying  Fair  Carrying  Fair 
  Value  Value  Value  Value 
Financial assets:            
Instruments with carrying value that approximates fair value  495,037   495,037   451,668   451,668 
Securities held-to-maturity  33,181   33,206   -   - 
Loans, net of allowance  3,981,328   4,010,363   2,701,484   2,746,175 
                 
Financial liabilities:                
Instruments with carrying value that approximates fair value  2,123,149   2,123,149   1,340,420   1,340,420 
Short-term borrowings  1,095,400   1,092,265   327,800   327,877 
Borrowings and long-term debt  1,075,140   1,047,031   1,390,387   1,381,022 
Commitments to extend credit, standby letters of credit, and financial guarantees written  12,162   11,761   29,011   28,113 
Notes to consolidated financial statements


24.23.Litigation

 Bladex is not engaged in any litigation that is material to the Bank’s business or, to the best of the knowledge of the Bank’s management that is likely to have a materialan adverse effect on its business, financial condition or results of operations.

25.24.Capital adequacy

 The Banking Law in the Republic of Panama requires banks with general licensesbanking license to maintain a total capital funds equivalent to, at least,adequacy index that shall not be lower than 8% of total assets and off-balance sheet irrevocable contingency transactions, weighted according to their risk; and primary capital equivalent to nothat shall not be less than 4% of its assets and off-balance sheet irrevocable contingency transactions, weighted according to their risk.  As of December 31, 2008,2010, the Bank’s capital adequacy ratio is 19%16% which is in compliance with the capital adequacy ratios required by the Banking Law in the Republic of Panama.

26.25.Business segment information

The Bank’s activities are operated and managed byin three segments, Commercial, Treasury and Asset Management.  The segment information reflects this operational and management structure, in a manner consistent with the requirements outlined in SFAS 131, “Disclosures about Segments of an Enterprise and Related Information”.ASC Topic 280 - Segment Reporting.  The segment results are determined based on the Bank’s managementmanagerial accounting process, which assigns consolidated balance sheets, revenue and expense items to each reportable division on a systematic basis.

F-54

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries

Notes to consolidated financial statements

The Bank incorporates net operating income(3) by business segment in order to disclose the revenue and expense items related to its normal course of business, segregating from the net income, the impact of reversals of reserves for loan losses and off-balance sheet credit risk, and recoveries on assets.  In addition, the Bank'sBank’s net interest income represents the main driver of net operating income; therefore, the Bank presents its interest-earning assets by business segment, to give an indication of the size of business generating net interest income.  Interest-earning assets also generate gains and losses on sales, such as for securities available-for-sale and trading assets and liabilities, which are included in net other income, in the Treasury and Asset Management segments.  The Bank also discloses its other assets and contingencies by business segment, to give an indication of the size of business that generates net fees and commissions, also included in net other income, in the Commercial Segment.

The Bank believes that the presentation of net operating income provides important supplementary information to investors regarding financial and business trends relating to the Bank’s financial condition and results of operations.  This measure excludesThese measures exclude the impact of reversals (provisions) for loan losses and reversals (provisions) for losses on off-balance sheet credit risk (together referred to as “reversal (provision) for credit losses”) which for the year 2006, included significant amounts of credit provision reversals related to assets and contingencies classified as non-accruing in previous years, and which were fully collected and/or classified as accruing during 2006.  During that year, the $11.8 million in provision for loan losses included a reversal of specific reserves of $11.2 million and a generic provision charge of $23 million. In the same year, the $24.9 million in reversal for losses on off-balance sheet credit risk included a reversal of specific reserves of $9.9 million and a generic provision of $15 million.  The Bank’s management considered that these credit provision reversals distortedconsiders distort trend analysis and, therefore, excluded the reversal (provision) for credit losses in the “net operating income (expense)” line.  For 2007 and 2008, the Bank maintained this presentation for comparative purposes.

F-58
Banco Latinoamericano de Exportaciones, S. A.
   and Subsidiariesanalysis.

Notes to consolidated financial statements
Net operating income disclosed by the Bank should not be considered a substitute for, or superior to, financial measures calculated differently from similar measures used by other companies.  This measure,These measures, therefore, may not be comparable to similar measurements used by other companies.

Commercial incorporates all of the Bank’s financial intermediation and fee generation activities.fees generated by the commercial portfolio.  The commercial portfolio includes book value of loans, acceptances and contingencies.  Operating income from the Commercial Segment includes net interest income from loans, fee income and allocated operating expenses.

Treasury incorporates deposits in banks and all of the Bank’s trading assets, securities available-for-sale and held-to-maturity.  Operating income from the Treasury Segment includes net interest income from deposits with banks, trading securities and securities available-for-sale and held-to-maturity, derivative and hedging activities, gaingains and losses from trading securities, gains and losses on sale of securities available-for-sale, gain and losses on foreign currency exchange, and allocated income and operating expenses.

Asset Management incorporates allthe balance of the Fund’s deposits and trading assets attributable to the investment fund.  Operating income from the Asset Management Segment includes net interest incomemargin related to the Feeder’s participation in the net interest margin of the Fund, net gains from deposits with brokers,the investment fund trading, assets, derivative instruments for trading, gains and losses on trading,fee income, and allocated operating expenses.

F-55

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries

Notes to consolidated financial statements

The following table provides certain information regarding the Bank’s continuing operations by segment:

Business Segment Analysis (1)

(In millions of US$) 2008  2007  2006  2010  2009  2008 
                  
COMMERCIAL                  
Interest income  200.1   221.6   165.8   104.8   114.3   200.1 
Interest expense  (122.0)  (157.1)  (115.1)  (33.2)  (48.1)  (122.0)
Net interest income  78.1   64.5   50.7   71.6   66.2   78.1 
Net other income (2)
  7.8   5.3   6.3   10.1   6.9   7.8 
Operating expenses  (27.5)  (27.2)  (23.6)  (29.9)  (23.4)  (27.5)
Net operating income (3)
  58.4   42.6   33.4   51.8   49.7   58.4 
Reversals for loans and off-balance sheet credit losses  1.5   1.5   13.0 
Impairment on assets  (0.8)  (0.5)  0.0 
Net income  59.1   43.6   46.5 
(Provision) reversals for loans and off-balance sheet credit losses  4.8   (14.8)  1.5 
Recoveries, net of impairment on assets  0.2   (0.1)  (0.8)
Net income attributable to Bladex  56.8   34.8   59.1 
Commercial assets and contingencies (end of period balances):                        
Interest-earning assets (4)
  2,614.0   3,725.9   2,976.3   4,060.0   2,775.3   2,614.0 
Other assets and contingencies (5)
  443.6   549.5   653.7   382.4   331.2   443.6 
Total Interest-Earning Assets, Other Assets and Contingencies  3,057.6   4,275.4   3,630.0 
            
TREASURY            
Interest income  40.7   33.6   28.8 
Interest expense  (37.7)  (27.7)  (21.9)
Net interest income  3.0   5.9   6.9 
Net other income (2)
  (12.4)  8.5   2.2 
Operating expenses  (6.9)  (4.4)   (3.4)
Net operating income (3)
  (16.3)  10.0   5.7 
Recoveries on assets  0.0   0.0   5.5 
Net income  (16.3)  10.0   11.2 
            
Treasury assets and contingencies (end of period of balances):            
Interest-earning assets (6)
  1,581.9   869.9   775.2 
Other assets and contingencies (5)
  3.0   3.0   - 
Total Interest-earning assets, other assets and contingencies  1,584.9   872.9   775.2 
Total interest-earning assets, other assets and contingencies  4,442.4   3,106.5   3,057.6 

 
F-59F-56
 

Banco Latinoamericano de Exportaciones,Comercio Exterior, S. A.
and Subsidiaries

Notes to consolidated financial statements

(In millions of US$) 2010  2009  2008 
 2008  2007  2006          
(In US$ millions)         
TREASURY         
Interest income  12.4   25.9   40.7 
Interest expense  (9.2)  (23.9)  (37.7)
Net interest income  3.2   2.0   3.0 
Net other income (2)
  (0.4)  12.0   (12.4)
Operating expenses  (7.7)  (7.9)  (6.9)
Net operating income (3)
  (4.9)  6.1   (16.3)
Net income (loss) attributable to Bladex  (4.9)  6.1   (16.3)
            
Treasury assets and contingencies (end of period balances):            
Interest-earning assets (6)
  873.6   931.8   1,581.9 
Other assets and contingencies (5)
  -   3.0   3.0 
Total interest-earning assets, other assets and contingencies  873.6   934.8   1,584.9 
                     
ASSET MANAGEMENT                     
Interest income  3.5   9.6   8.8   2.3   1.8   3.5 
Interest expense  (6.7)  (9.5)  (7.6)  (2.6)  (5.2)  (6.7)
Net interest income  (3.2)  0.1   1.2   (0.3)  (3.4)  (3.2)
Net other income (2)
  21.3   23.9   0.9   (7.3)  25.4   21.3 
Operating expenses  (5.6)  (5.5)  (1.9)  (4.5)  (6.8)  (5.6)
Net operating income (3)
  12.5   18.5   0.2   (12.1)  15.2   12.5 
Participation of the minority interest in gains of the investment fund  (0.2)  -   - 
Net income  12.3   18.5   0.2 
Net income (loss)  (12.1)  15.2   12.5 
Net income (loss) attributable to the redeemable noncontrolling interest  (2.4)  1.1   0.2 
Net income (loss) attributable to Bladex  (9.7)  14.1   12.3 
                        
Fund’s assets and contingencies (end of period of balances):            
Fund’s assets and contingencies (end of period balances):            
Interest-earning assets (6)
  150.7   81.8   105.2   167.3   197.6   150.7 
Non-interest-earning assets  -   -   -   -   0.1   - 
Total interest-earning assets, other assets and contingencies  150.7   81.8   105.2   167.3   197.7   150.7 
            
TOTAL                        
Interest income  244.3   264.8   203.4   119.5   142.0   244.3 
Interest expense  (166.4)  (194.3)  (144.6)  (45.0)  (77.2)  (166.4)
Net interest income  77.9   70.5   58.8   74.5   64.8   77.9 
Net other income (2)
  16.7   37.7   9.4   2.4   44.3   16.7 
Operating expenses  (40.0)  (37.0)  (28.9)  (42.1)  (38.2)  (40.0)
Net operating income (3)
  54.6   71.2   39.3   34.8   70.9   54.6 
Reversals for loans and off-balance sheet credit losses  1.5   1.5   13.0 
Recoveries (impairment) on assets  (0.8)  (0.5)  5.6 
Participation of the minority interest in gains of the investment fund  (0.2)  -   - 
(Provision) reversals for loans and off-balance sheet credit losses  4.8   (14.8)  1.5 
Recoveries, net of impairment on assets  0.2   (0.1)  (0.8)
Net income  55.1   72.2   57.9   39.8   56.0   55.3 
Net income (loss) attributable to the redeemable noncontrolling interest  (2.4)  1.1   0.2 
Net income attributable to Bladex  42.2   54.9   55.1 
                        
Total assets and contingencies (end of period balances):                        
Interest-earning assets (4 & 6)
  4,346.6   4,677.6   3,856.7   5,100.9   3,904.7   4,346.6 
Other assets and contingencies (5)
  446.6   552.5   653.7   382.4   334.3   446.6 
Total Interest-Earning Assets, Other Assets and Contingencies  4,793.2   5,230.1   4,510.4 
Total interest-earning assets, other assets and contingencies  5,483.3   4,239.0   4,793.2 

(1)
The numbers set out in these tables have been rounded and accordingly may not total exactly.
(2)
The netNet other income excludes reversals (provisions) for loans and off-balance sheet credit losses, and recoveries on assets.

Reconciliation of Net other income:         
Net other income – business segment  2.4   44.3   16.7 
Reversal (provision) for losses on off-balance sheet credit risk  13.9   3.5   (17.0)
Recoveries, net of impairment on assets  0.2   (0.1)  (0.8)
Net other income  – consolidated financial statements  16.5   47.7   (1.1)
(3)
Net operating income refers to net income excluding reversals (provisions) for loans and off-balance sheet credit losses and recoveries on assets included within net other income (expense).

Reconciliation of: Net other income (expense):
         
Net other income – business segment  16.7   37.7   9.4 
Reversal (provision) for losses on off-balance sheet credit risk  (17.0)  13.4   24.9 
Recoveries on assets, net of impairments  (0.8)  (0.5)  5.6 
Net other income (expense) – consolidated financial statements  (1.1)  50.6   39.9 

(4)
Includes loans, net of unearned income and deferred loan fees.
(5)
Includes customers’ liabilities under acceptances, letters of credit and guarantees covering commercial and country risk, and credit commitments and equity investments recorded as other assets.
(6)Includes cash and due from banks, interest-bearing deposits with banks, securities available for sale and held to maturity, trading securities and trading securities.the balance of the  Investment Fund.
Reconciliation of Total assets:         
Interest-earning assets – business segment  5,100.9   3,904.7   4,346.6 
Allowance for loan losses  (78.6)  (73.8)  (54.6)
Customers’ liabilities under acceptances  27.2   1.6   1.3 
Premises and equipment  6.5   7.7   8.0 
Accrued interest receivable  31.1   25.6   46.3 
Derivative financial instruments used for hedging - receivable  2.1   0.8   7.8 
Other assets  10.9   12.2   7.3 
Total assets  – consolidated financial statements  5,100.1   3,878.8   4,362.7 
 
 
F-60F-57
 

Banco Latinoamericano de Exportaciones,Comercio Exterior, S. A.
and Subsidiaries

Notes to consolidated financial statements

Geographic information is as follows:

 2008  2010 
(In thousands of US$) 
 
Panama
  
United
States of
America
  
Cayman
Islands
  
 
Total
  Panama  
United
States of
America
  
Cayman
Islands
  Total 
                        
Interest income  221, 351   19,407   3,485   244,243   106,673   10,607   2,198   119,478 
Interest expense  (152,665)  (11,435)  (2,296)  (166,396)  (41,266)  (2,746)  (963)  (44,975)
Net interest revenue  68,686   7,972   1,189   77,847 
Net interest income  65,407   7,861   1,235   74,503 
                                
Long-lived assets:                                
Premises and equipment, net  7,156   814   -   7,970   6,039   493   -   6,532 

 2007  2009 
(In thousands of US$) 
 
Panama
  
United
States of
America
  
Cayman
Islands
  
 
Total
  Panama  
United
States of
America
  
Cayman
Islands
  Total 
                        
Interest income  226,218   29,064   9,587   264,869   122,731   17,470   1,763   141,964 
Interest expense  (167,448)  (22,654)  (4,197)  (194,299)  (69,066)  (5,821)  (2,325)  (77,212)
Net interest revenue  58,770   6,410   5,390   70,570 
Net interest income  53,665   11,649   (562)  64,752 
                                
Long-lived assets:                                
Premises and equipment, net  9,242   934   -   10,176   7,096   653   -   7,749 

  2008 
(In thousands of US$) Panama  
United
States of
America
  
Cayman
Islands
  Total 
             
Interest income  221,351   19,407   3,485   244,243 
Interest expense  (152,665)  (11,435)  (2,296)  (166,396)
Net interest income  68,686   7,972   1,189   77,847 
                 
Long-lived assets:                
Premises and equipment, net  7,156   814   -   7,970 
  2006 
(In thousands of US$) 
 
Panama
  
United
States of
America
  
Cayman
Islands
  
 
Total
 
             
Interest income  170,359   24,243   8,748   203,350 
Interest expense  (119,868)  (20,005)  (4,640)  (144,513)
Net interest revenue  50,491   4,238   4,108   58,837 
                 
Long-lived assets:                
Premises and equipment, net  10,381   755   -   11,136 

******
 
F-61F-58
Item 19.Exhibits
List of Exhibits
Exhibit 1.1.Amended and Restated Articles of Incorporation*
Exhibit 1.2.By-Laws**
Exhibit 8.1.List of Subsidiaries**
Exhibit 11.1.Code of Ethics**
Exhibit 12.1.Rule 13a-14(a) Certification of Principal Executive Officer
Exhibit 12.2.Rule 13a-14(a) Certification of Principal Financial Officer
Exhibit 13.1.Rule 13a-14(b) Certification of Principal Executive Officer
Exhibit 13.2.Rule 13a-14(b) Certification of Principal Financial Officer

*Filed as an exhibit to the Form 20-F for the fiscal year ended December 31, 2008 filed with the SEC on June 26, 2009.
**Filed as an exhibit to the Form 20-F for the fiscal year ended December 31, 2009 filed with the SEC on June 11, 2010.

100
 

SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.
BANCO LATINOAMERICANO DE COMERCIO EXTERIOR, S.A.

/s/ JAIME RIVERA		Deloitte, Inc.
Contadores Públicos AutorizadosJaime Rivera
Apartado 0816-01558Chief Executive Officer
Panamá, Rep. de Panamá
 
Teléfono: (507)303-4100
Facsimile : (507) 269-2386May 24, 2011
infopanama@deloitte.com
www.deloitte.com/pa
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Banco Latinoamericano de Exportaciones, S.A, and Subsidiaries
We have audited the internal control over financial reporting of Banco Latinoamericano de Exportaciones and subsidiaries (the “Bank”) as of December 31, 2008, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Bank’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on the Assessment of Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Bank’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on that risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under (the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Auditoría . Impuestos . Consultoría . Asesoría Financiera.
A member firm of
Deloitte Touche Tohmatsu
F-62101

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weakness has been identified and included in management’s assessment:
Policies, procedures and controls established to assess the risks over financial information related to: a) recognition as sales of securities of certain repurchase agreements in accordance with Statement of Financial Accounting Standards (“SFAS”) 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”, and b) the fair value measurement of financial liabilities that resulted from certain hedging derivative contracts (forward contracts) due to the adoption of SFAS SI57 “Fair Value Measurements”, did not identify effectively if (i) the escalating credit and liquidity crisis of international markets in late 2008 as it relates to the application of SFAS 140 and (ii) the implementation of the new accounting standard SFAS 157, impacted the effectiveness of existing policies, procedures and controls over financial information, or required changes in their design. As a result, the Bank’s policies, procedures and financial controls related to the two items discussed above were not modified in response to the rapid deterioration of liquidity in the market regarding repurchase agreements with respect to SFAS 140 or designed appropriately with respect to the fair value of financial liabilities under certain hedging derivative contracts under SFAS 157, and thus were ineffective at December 31, 2008. This material weakness resulted in an audit adjustment to recognize a net charge to results in the fourth quarter of 2008 in the amount of $12.8 million.
This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements as of and for the year ended December 31, 2008 of the Bank, and this report does not affect our report on such financial statements.
In our opinion, because of the effect of the material weakness identified above on the achievement of the objectives of the control criteria, the Bank has not maintained effective internal control over financial reporting as of December 31, 2008, based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2008 of the Bank, and our report dated March 16, 2009 expressed an unqualified opinion on those financial statements and included an explanatory paragraph regarding a change in reporting entity.
March 16, 2009
Panama, Republic of Panama
F-63

EXHIBIT INDEX
 
Exhibit
 
Exhibit   1.1.Amended and Restated Articles of IncorporationIncorporation*
Exhibit   1.2.By-Laws**
Exhibit   8.1.List of Subsidiaries**
Exhibit 11.1.Code of Ethics**
 
Exhibit 12.1.Rule 13a-14(a) Certification of Principal Executive Officer
 
Exhibit 12.2.Rule 13a-14(a) Certification of Principal Financial Officer
 
Exhibit 13.1.Rule 13a-14(b) Certification of Principal Executive Officer
 
Exhibit 13.2.Rule 13a-14(b) Certification of Principal Financial Officer
 
*Filed as an exhibit to the Form 20-F for the fiscal year ended December 31, 2008 filed with the SEC on  June 26, 2009.
Exhibit 14.1.**Code of EthicsFiled as an exhibit to the Form 20-F for the fiscal year ended December 31, 2009 filed with the SEC on June 11, 2010.

 
75102