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




ý  ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF


THE
SECURITIES EXCHANGE ACT OF 1934




For the
fiscal year ended December 31, 2008




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______________________




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
 Chief
Financial Officer
 (507)
210-8500
 Email
address:  jcelorio@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 class
              Name
      of each exchange on which registeredClass
      E Common Stock
              New
      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.




6,342,189
                          
                          Shares
      of Class A Common Stock2,617,784
                          
                          Shares
      of Class B Common Stock27,453,115
                          
                          Shares
      of Class E Common Stock36,413,088
                          
                          Total
      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    
ý   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    
ý   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.


ý
                    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 Filer
                  ý
                  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
                  U.S.
      GAAP
                   ̈
                  IFRS
                   ̈
                  Other
  Indicate
by check mark which financial statement item the Registrant has elected to
follow.
  ̈
                  Item
      17
                  ý
                  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).
  ̈
                Yes
                ý
                No





BANCO
LATINOAMERICANO DE COMERCIO EXTERIOR, S.A.




TABLE
OF CONTENTS




PagePART IItem 1.
                                                    Identity of Directors, Senior Management and
      Advisers
                                                    5Item 2.
                                                    Offer Statistics and Expected
      Timetable
                                                    5Item 3.
                                                    Key Information
                                                    5A.
                                                    
                                                    Selected Financial Data
                                                    5B.
                                                    
                                                    Capitalization and
    Indebtedness
                                                    6C.
                                                    
                                                    Reasons for the Offer and Use of
      Proceeds
                                                    6D.
                                                    
                                                    Risk Factors
                                                    6Item 4.
                                                    Information on the Company
                                                    9A.
                                                    
                                                    History and Development of the
      Company
                                                    9B.
                                                    
                                                    Business Overview
                                                    10C.
                                                    
                                                    Organizational Structure
                                                    23D.
                                                    
                                                    Property, Plant and
    Equipment
                                                    23Item 4A.
                                                    Unresolved Staff Comments
                                                    24Item 5.
                                                    Operating and Financial Review and
      Prospects
                                                    24A.
                                                    
                                                    Operating Results
                                                    24B.
                                                    
                                                    Liquidity and Capital
    Resources
                                                    39C.
                                                    
                                                    Research and Development, Patents and Licenses,
      etc.
                                                    44D.
                                                    
                                                    Trend Information
                                                    44E.
                                                    
                                                    Off-Balance Sheet
    Arrangements
                                                    45F.
                                                    
                                                    Contractual Obligations and Commercial
      Commitments
                                                    45Item 6.
                                                    Directors, Executive Officers and
      Employees
                                                    46A.
                                                    
                                                    Directors and Executive
      Officers
                                                    46B.
                                                    
                                                    Compensation
                                                    50C.
                                                    
                                                    Board Practices
                                                    54D.
                                                    
                                                    Employees
                                                    58E.
                                                    
                                                    Share Ownership
                                                    59Item 7.
                                                    Major Stockholders and Related Party
      Transactions
                                                    59A.
                                                    
                                                    Major Stockholders
                                                    59B.
                                                    
                                                    Related Party Transactions
                                                    60C.
                                                    
                                                    Interests of Experts and
      Counsel
                                                    60Item 8.
                                                    Financial Information
                                                    60A.
                                                    
                                                    Consolidated Statements and Other Financial
      Information
                                                    60B.
                                                    
                                                    Significant Changes
                                                    61Item 9.
                                                    The Offer and Listing
                                                    61A.
                                                    
                                                    Offer and Listing Details
                                                    61B.
                                                    
                                                    Plan of Distribution
                                                    61C.
                                                    
                                                    Markets
                                                    61D.
                                                    
                                                    Selling Stockholders
                                                    62E.
                                                    
                                                    Dilution
                                                    62




2





F.
                                                                    
                                                                    Expenses
      of the Issue
                                                                    62Item
      10.
                                                                    Additional
      Information
                                                                    62A.
                                                                    
                                                                    Share
      Capital
                                                                    62B.
                                                                    
                                                                    Memorandum
      and Articles of Association
                                                                    62C.
                                                                    
                                                                    Material
      Contracts
                                                                    62D.
                                                                    
                                                                    Exchange
      Controls
                                                                    62E.
                                                                    
                                                                    Taxation
                                                                    62F.
                                                                    
                                                                    Dividends
      and Paying Agents
                                                                    66G.
                                                                    
                                                                    Statement
      by Experts
                                                                    66H.
                                                                    
                                                                    Documents
      on Display
                                                                    66I.
                                                                    
                                                                    Subsidiary
      Information
                                                                    66Item
      11.
                                                                    Quantitative
      and Qualitative Disclosure About Market Risk
                                                                    66Item
      12.
                                                                    Description
      of Securities Other than Equity Securities
                                                                    69PART
      IIItem
      13.
                                                                    Defaults,
      Dividend Arrearages and Delinquencies
                                                                    69Item
      14.
                                                                    Material
      Modifications to the Rights of Security Holders and Use of
      Proceeds
                                                                    69Item
      15.
                                                                    Controls
      and Procedures
                                                                    69Item
      16.
                                                                    [Reserved]
                                                                    71Item
      16A.
                                                                    Audit
      and Compliance Committee Financial Expert
                                                                    71Item
      16B.
                                                                    Code
      of Ethics
                                                                    71Item
      16C.
                                                                    Principal
      Accountant Fees and Services
                                                                    71Item
      16D.
                                                                    Exemptions
      from the Listing Standards for Audit Committees
                                                                    72Item
      16E.
                                                                    Purchases
      of Equity Securities by the Issuer and Affiliated
    Purchasers
                                                                    72Item 16G.
                                                                    Corporate
      Governance
                                                                    72PART
      IIIItem
      17.
                                                                    Financial
      Statements
                                                                    73Item
      18.
                                                                    Financial
      Statements
                                                                    73Item
      19.
                                                                    Exhibits
                                                                    73




3




In this
Annual Report on Form 20-F (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”) and its subsidiaries.  References to “U.S. dollars” or “$”
are to United States dollars.  The Bank accepts deposits and raises
funds principally in United States dollars, grants loans mostly in United States
dollars and publishes its consolidated financial statements in United States
dollars.  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, 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. Celorio at 011 +
(507) 210-8630.  Written requests may also be faxed to Mr. Celorio at
011 + (507) 269-6333 or sent via e-mail to
jcelorio@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”), and
Section 21E of the Securities Exchange Act of 1934, as amended (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 and of an improving macroeconomic
      environment in Latin America (“the Region”) 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
      implied volatility of the Bank’s Treasury and Asset Management trading
      revenues;


·
              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 replace deposit
      withdrawals.




In
addition, the statements included under the headings “Strategy” and “Trends” 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.
            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, 2008, 2007, 2006, 2005, and 2004 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 (“U.S. GAAP”).  The consolidated financial
statements for the years ended December 31, 2008 and 2007
were  audited by the registered public accounting firm Deloitte,Inc. ,
and the consolidated financial statements of the Bank for the years ended
December 31, 2006, 2005, and 2004 were audited by the 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
“Consolidated Financial Statements”) are included in this Annual Report,
together with the reports of the registered public accounting firms 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




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
                
                
                $
                42,025Fees
      and commissions, net
                
                
                7,252
                
                
                
                5,555
                
                
                
                6,393
                
                
                
                5,826
                
                
                
                5,928Reversal
      of provision for credit losses 1
                
                
                1,544
                
                
                
                1,475
                
                
                
                13,045
                
                
                
                38,374
                
                
                
                112,271Derivative
      financial instruments and hedging
                
                
                9,956
                
                
                
                (989
                )
                
                
                (225
                )
                
                
                2,338
                
                
                
                48Recoveries
      on assets, net of impairments
                
                
                (767
                )
                
                
                (500
                )
                
                
                5,551
                
                
                
                10,206
                
                
                
                0Gain
      on early extinguishment of debt
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                6Net
      gain from investment fund trading
                
                
                21,357
                
                
                
                23,878
                
                
                
                1,091
                
                
                
                0
                
                
                
                0Net
      loss from trading securities
                
                
                (20,998
                )
                
                
                (12
                )
                
                
                (212
                )
                
                
                0
                
                
                
                0Net
      gain on sale on securities available-for-sale
                
                
                67
                
                
                
                9,119
                
                
                
                2,568
                
                
                
                206
                
                
                
                2,922Gain
      (loss) on foreign currency exchange
                
                
                (1,596
                )
                
                
                115
                
                
                
                (253
                )
                
                
                3
                
                
                
                (194
                )Other
      income (expense), net
                
                
                656
                
                
                
                (6
                )
                
                
                36
                
                
                
                3
                
                
                
                77Total
      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
                
                
                
                141,730Cumulative
      effect of accounting changes
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                2,583
                
                
                
                0Participation
      of the minority interest in gains of the investment fund
                
                
                (208
                )
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0Net
      income
                
                
                55,119
                
                
                
                72,177
                
                
                
                57,902
                
                
                
                80,101
                
                
                
                141,730Balance
      Sheet Data:Trading
      assets
                
                
                44,939
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0Investment
      securities
                
                
                636,328
                
                
                
                468,360
                
                
                
                471,351
                
                
                
                208,570
                
                
                
                192,856Investment
      fund
                
                
                150,695
                
                
                
                81,846
                
                
                
                105,199
                
                
                
                0
                
                
                
                0Loans
                
                
                2,618,643
                
                
                
                3,731,838
                
                
                
                2,980,772
                
                
                
                2,610,019
                
                
                
                2,441,686Allowance
      for loan losses
                
                
                54,648
                
                
                
                69,643
                
                
                
                51,266
                
                
                
                39,448
                
                
                
                106,352Total
      assets
                
                
                4,362,678
                
                
                
                4,698,571
                
                
                
                3,922,373
                
                
                
                3,159,231
                
                
                
                2,732,940Total
      deposits
                
                
                1,169,048
                
                
                
                1,462,371
                
                
                
                1,056,278
                
                
                
                1,046,618
                
                
                
                864,160Trading
      liabilities
                
                
                14,157
                
                
                
                13
                
                
                
                0
                
                
                
                0
                
                
                
                0




5





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
              
              
              
              704,718Borrowings
      and long-term debt
              
              
              1,204,952
              
              
              
              1,010,316
              
              
              
              558,860
              
              
              
              533,860
              
              
              
              403,621Total
      liabilities
              
              
              3,783,665
              
              
              
              4,086,320
              
              
              
              3,338,477
              
              
              
              2,542,449
              
              
              
              2,076,810Total
      stockholders’ equity
              
              
              574,324
              
              
              
              612,251
              
              
              
              583,896
              
              
              
              616,782
              
              
              
              656,130Average
      number of shares outstanding
              
              
              36,388
              
              
              
              36,349
              
              
              
              37,065
              
              
              
              38,550
              
              
              
              39,232Average
      number of diluted shares outstanding
              
              
              36,440
              
              
              
              36,414
              
              
              
              37,572
              
              
              
              38,860
              
              
              
              39,372Per
      Common Share Data:Basic
      earnings per share
              
              
              1.51
              
              
              
              1.99
              
              
              
              1.56
              
              
              
              2.01
              
              
              
              3.61Diluted
      earnings per share
              
              
              1.51
              
              
              
              1.98
              
              
              
              1.54
              
              
              
              1.99
              
              
              
              3.60Book
      value per share (period end)
              
              
              15.77
              
              
              
              16.83
              
              
              
              16.07
              
              
              
              16.19
              
              
              
              16.87Regular
      cash dividends per share
              
              
              0.88
              
              
              
              0.88
              
              
              
              0.75
              
              
              
              0.60
              
              
              
              0.50Special
      cash dividends per share
              
              
              0.00
              
              
              
              0.00
              
              
              
              1.00
              
              
              
              2.00
              
              
              
              1.00Selected
      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
 2
 3
 4
 5


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.




D.           Risk
Factors




Risks
Relating to Latin America (“the Region”)




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


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, 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 more of those countries encounters
economic difficulties.  At December 31, 2008, approximately 71% of the
Bank’s credit portfolio was outstanding to borrowers in the following four
countries: Brazil ($1,576 million, or 42%), Mexico ($477 million, or 13%),
Colombia ($453 million, or 12%), and Argentina ($151 million, or
4%).




In
addition, at December 31, 2008, of the Bank’s total credits, 11% were to five
borrowers in Brazil, 16% were to four borrowers from Mexico (6%), four borrowers
from Colombia (8%) and four borrowers from
Argentina  (3%).  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.




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.


7




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.


8




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
preventthe 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,
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 contract 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.




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 “New York
Agency”) and Bladex Asset Management, Inc. (“Bladex Asset Management” or “BAM”),
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.




Bladex
Asset Management, Inc., serves as investment manager for Bladex Offshore Feeder
Fund (the “Feeder”) and Bladex Capital Growth Fund (the “Fund”).  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.  On May 1, 2008, the Feeder began receiving third party
investments.




Bladex
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.


9




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




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 1.1




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 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.


10




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.




The Asset
Management Division, which is based in New York
and commenced operations in April 2006, provides investment advisory services to
funds and managed accounts, and conducts business through Bladex Asset
Management, which serves as investment manager for the Feeder and the Fund, both
incorporated in the Cayman Islands.  The Feeder invests substantially
all of its assets in the Fund.




Historically,
trade finance has been afforded favorable treatment under Latin American debt
restucturings. 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 trade finance orientation and its Class A shareholding
have been instrumental in obtaining some exceptions on U.S. dollars
convertibility and transfer limitations imposed on the servicing of
external obligations ("preferred creditor status"). While the Bank mantains both
its trade finance orientation and its Class A shareholding, it cannot guarantee
that such exceptions will be granted in all future debt
restructurings.




At
December 31, 2008, the Bank had 52 employees across its offices responsible for
marketing the Bank’s financial products and services to existing and potential
customers.




Developments
During 2008




Working
within a challenging financial environment in the last quarter of the year,
Bladex achieved solid results for the year, and maintained its strong
fundamentals.




2008 was
a unique year as the Commercial Division achieved its best performance during
the past five years, despite an unprecedented global financial crisis in the
last quarter.  Net income increased by 35%, from $43.6 million 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 million for the year 2008 compared to
$18.5 million in 2007.  The Division’s Investment Fund follows a Latin
America macro strategy, utilizing a combination of products (foreign exchange,
interest rate swaps, and credit derivative products) 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 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 with a strong liquidity position, of $826 million, which represented
23% of interest – bearing liabilities.


11




The 2008
net income results were affected by the accounting treatment related to certain
securities-based financing transactions (i.e. repurchase agreements, or repos),
which were recorded as sales in accordance with Financial Accounting Standards
Board (“FASB”) Statement No. 140 “Accounting for Transfers and Servicing 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.





See Item
5, “Operating and Financial Review and Prospects/Operating Results/Net Income”
and Item 18, “Financial Statements,” note 26.




Strategy
for 2009





The
Bank’s priorities in the short term are focused on two main goals: first, to
continue prudently pursuing its 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.




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.




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
organizations 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 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.




Due to
the nature of trade finance, the Bank’s loans generally are
unsecured.  However, in certain instances, based upon its credit
review of the borrower and the economic and political situation and trends in
the borrower’s home country, the Bank has determined that the level of risk
involved requires that a loan be secured by pledged deposits, 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”)
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
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, corporations or financial institutions), the
type of transaction (trade or non-trade), and the average remaining term of the
transaction (from 1 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.  Loan pricing is determined in accordance with prevailing
market conditions and the borrower’s creditworthiness.




For
existing borrowers, the Bank’s management 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—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 law prescribes certain concentration limits,
which are applicable and strictly adhered to by the Bank, including a 30% limit
as a percentage of capital and reserves for any one borrower and borrower group,
in the case of financial institutions, and a 25% limit as a percentage of
capital and reserves for any one borrower and borrower group, in the case of
corporate and sovereign borrowers.  As of December 31, 2008, the legal
lending limit prescribed by Panamanian law for corporations and sovereign
borrowers amounted to approximately $144 million, and for financial institutions
and financial groups amounted to approximately $172 million.  On a
quarterly basis, the CPER reviews the Bank’s impaired portfolio, if any, along
with certain non-impaired credits.




At
December 31, 2008, the Bank was in full compliance with all regulatory limits.
See Item 4, “Information on the Company/Business Overview/Regulation/Panamanian
Law.”




Credit
Portfolio




The
Bank’s credit portfolio consists of the commercial portfolio and the treasury
portfolio.




The
Bank’s credit portfolio at December 31, 2008 decreased 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.




Commercial
Portfolio




The
commercial portfolio includes the book value of loans, 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).




At
December 31, 2008, the commercial portfolio amounted to $3,062 million, compared
to $4,281 million at December 31, 2007 and to $3,634 million at December 31,
2006.




At
December 31, 2008, 66% of the Bank’s commercial portfolio represented trade
related credits.  The corporate market segment represented 60% of the
total commercial portfolio, of which 63% represented trade
financing.  The following table sets forth the distribution of the
commercial portfolio by product category at December 31 of each year (excluding
non-accruing credits for the years 2005 and 2004 of $42 million and $293
million, respectively):


13




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
              
              
              
              88.7Contingencies
      and other assets
              
              
              444
              
              
              
              14.5
              
              
              
              550
              
              
              
              12.8
              
              
              
              654
              
              
              
              18.0
              
              
              
              784
              
              
              
              23.3
              
              
              
              277
              
              
              
              11.3Total
              
              $
              3,062
              
              
              
              100.0
              
              
              $
              4,281
              
              
              
              100.0
              
              
              $
              3,634
              
              
              
              100.0
              
              
              $
              3,365
              
              
              
              100.0
              
              
              $
              2,463
              
              
              
              100.0




Loan
Portfolio




At
December 31, 2008, the Bank’s total loans amounted to $2,619 million,
compared to $3,732 million at December 31, 2007.  See Item 5,
“Operating and Financial Review and Prospects/Operating Results/Changes in
Financial Condition” and Item 18, “Financial Statements,” note 8.




Loans
by Country




The
following table sets forth the distribution of the Bank’s loans by country at
December 31 of each year:




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
              
              
              
              8.5Bolivia
              
              
              0
              
              
              
              0.0
              
              
              
              5
              
              
              
              0.1
              
              
              
              5
              
              
              
              0.2
              
              
              
              0
              
              
              
              0.0
              
              
              
              0
              
              
              
              0.0Brazil
              
              
              1,289
              
              
              
              49.2
              
              
              
              1,379
              
              
              
              37.0
              
              
              
              1,317
              
              
              
              44.2
              
              
              
              1,095
              
              
              
              42.0
              
              
              
              1,054
              
              
              
              43.2Chile
              
              
              8
              
              
              
              0.3
              
              
              
              10
              
              
              
              0.3
              
              
              
              175
              
              
              
              5.9
              
              
              
              283
              
              
              
              10.8
              
              
              
              322
              
              
              
              13.2Colombia
              
              
              285
              
              
              
              10.9
              
              
              
              400
              
              
              
              10.7
              
              
              
              163
              
              
              
              5.5
              
              
              
              249
              
              
              
              9.5
              
              
              
              148
              
              
              
              6.1Costa
      Rica
              
              
              55
              
              
              
              2.1
              
              
              
              77
              
              
              
              2.1
              
              
              
              85
              
              
              
              2.9
              
              
              
              54
              
              
              
              2.1
              
              
              
              38
              
              
              
              1.5Dominican
      Republic
              
              
              48
              
              
              
              1.8
              
              
              
              29
              
              
              
              0.8
              
              
              
              9
              
              
              
              0.3
              
              
              
              1
              
              
              
              0.0
              
              
              
              0
              
              
              
              0.0Ecuador
              
              
              36
              
              
              
              1.4
              
              
              
              61
              
              
              
              1.6
              
              
              
              43
              
              
              
              1.4
              
              
              
              25
              
              
              
              1.0
              
              
              
              51
              
              
              
              2.1El
      Salvador
              
              
              76
              
              
              
              2.9
              
              
              
              47
              
              
              
              1.2
              
              
              
              82
              
              
              
              2.8
              
              
              
              81
              
              
              
              3.1
              
              
              
              44
              
              
              
              1.8Guatemala
              
              
              61
              
              
              
              2.3
              
              
              
              96
              
              
              
              2.6
              
              
              
              89
              
              
              
              3.0
              
              
              
              41
              
              
              
              1.6
              
              
              
              38
              
              
              
              1.6Honduras
              
              
              45
              
              
              
              1.7
              
              
              
              49
              
              
              
              1.3
              
              
              
              36
              
              
              
              1.2
              
              
              
              26
              
              
              
              1.0
              
              
              
              6
              
              
              
              0.2Jamaica
              
              
              15
              
              
              
              0.6
              
              
              
              77
              
              
              
              2.1
              
              
              
              49
              
              
              
              1.6
              
              
              
              24
              
              
              
              0.9
              
              
              
              26
              
              
              
              1.1Mexico
              
              
              380
              
              
              
              14.5
              
              
              
              410
              
              
              
              11.0
              
              
              
              168
              
              
              
              5.6
              
              
              
              161
              
              
              
              6.1
              
              
              
              262
              
              
              
              10.7Nicaragua
              
              
              4
              
              
              
              0.2
              
              
              
              13
              
              
              
              0.3
              
              
              
              10
              
              
              
              0.3
              
              
              
              2
              
              
              
              0.1
              
              
              
              5
              
              
              
              0.2Panama
              
              
              47
              
              
              
              1.8
              
              
              
              140
              
              
              
              3.7
              
              
              
              180
              
              
              
              6.1
              
              
              
              156
              
              
              
              6.0
              
              
              
              89
              
              
              
              3.7Peru
              
              
              50
              
              
              
              1.9
              
              
              
              454
              
              
              
              12.2
              
              
              
              262
              
              
              
              8.8
              
              
              
              180
              
              
              
              7.0
              
              
              
              55
              
              
              
              2.2Trinidad
      & Tobago
              
              
              23
              
              
              
              0.9
              
              
              
              88
              
              
              
              2.3
              
              
              
              104
              
              
              
              3.5
              
              
              
              177
              
              
              
              6.8
              
              
              
              92
              
              
              
              3.8Uruguay
              
              
              45
              
              
              
              1.7
              
              
              
              0
              
              
              
              0.0
              
              
              
              0
              
              
              
              0.0
              
              
              
              4
              
              
              
              0.1
              
              
              
              0
              
              
              
              0.0Venezuela
              
              
              0
              
              
              
              0.0
              
              
              
              135
              
              
              
              3.6
              
              
              
              1
              
              
              
              0.0
              
              
              
              0
              
              
              
              0.0
              
              
              
              5
              
              
              
              0.2Total
              
              $
              2,619
              
              
              
              100.0
              
              
              $
              3,732
              
              
              
              100.0
              
              
              $
              2,981
              
              
              
              100.0
              
              
              $
              2,610
              
              
              
              100.0
              
              
              $
              2,442
              
              
              
              100.0




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:




At
      December 31,2008
              
              
              2007
              
              
              2006
              
              
              2005
              
              
              2004(in
      $ million)Private
      sector commercial banks
              
              $
              577
              
              
              $
              1,491
              
              
              $
              1,167
              
              
              $
              1,583
              
              
              $
              1,243State-owned
      commercial banks
              
              
              322
              
              
              
              241
              
              
              
              273
              
              
              
              118
              
              
              
              563Central
      banks
              
              
              25
              
              
              
              0
              
              
              
              0
              
              
              
              0
              
              
              
              13Sovereign
      debt
              
              
              67
              
              
              
              113
              
              
              
              123
              
              
              
              49
              
              
              
              58State-owned
      exporting organizations
              
              
              50
              
              
              
              282
              
              
              
              138
              
              
              
              402
              
              
              
              363Private
      corporations
              
              
              1,577
              
              
              
              1,605
              
              
              
              1,279
              
              
              
              458
              
              
              
              201Total
              
              $
              2,619
              
              
              $
              3,732
              
              
              $
              2,981
              
              
              $
              2,610
              
              
              $
              2,442





During
2008, the Bank reduced its loan portfolio by $1.1 billion, as liquidity was
strengthened and exposures of potential vulnerable sectors and/or concentrations
were reduced in response to deteriorating macroeconomic conditions.




14




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 Sensitivites of the Loan Portfolio




The
following table sets forth the remaining term of maturity profile of the Bank’s
loan portfolio at December 31, 2008, by type of rate and type of
borrower:




At
      December 31, 2008(in
      $ million)Due
      in one year or less
                    
                    
                    Due
      after one year
                        through
      five years
                    
                    
                    Due
      after five
                        years
                    
                    
                    TotalFIXED
      RATEPrivate
      sector commercial banks
                    
                    $
                    177
                    
                    
                    $
                    0
                    
                    
                    $
                    0
                    
                    
                    $
                    177State-owned
      commercial banks
                    
                    
                    185
                    
                    
                    
                    20
                    
                    
                    
                    0
                    
                    
                    
                    205Sovereign
      debt
                    
                    
                    25
                    
                    
                    
                    39
                    
                    
                    
                    0
                    
                    
                    
                    64State-owned
      exporting organizations
                    
                    
                    8
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    8Private
      corporations
                    
                    
                    455
                    
                    
                    
                    24
                    
                    
                    
                    0
                    
                    
                    
                    479Sub-total
                    
                    $
                    850
                    
                    
                    $
                    83
                    
                    
                    $
                    0
                    
                    
                    $
                    933FLOATING
      RATEPrivate
      sector commercial banks
                    
                    $
                    162
                    
                    
                    $
                    218
                    
                    
                    $
                    19
                    
                    
                    $
                    399State-owned
      commercial banks
                    
                    
                    80
                    
                    
                    
                    38
                    
                    
                    
                    0
                    
                    
                    
                    118Sovereign
      debt
                    
                    
                    1
                    
                    
                    
                    2
                    
                    
                    
                    0
                    
                    
                    
                    2Central
      banks
                    
                    
                    25
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    25State-owned
      exporting organizations
                    
                    
                    41
                    
                    
                    
                    1
                    
                    
                    0
                    
                    
                    
                    43Private
      corporations
                    
                    
                    438
                    
                    
                    
                    625
                    
                    
                    
                    35
                    
                    
                    
                    1,098Sub-total
                    
                    $
                    747
                    
                    
                    $
                    884
                    
                    
                    $
                    54
                    
                    
                    $
                    1,685Total
                    
                    $
                    1,597
                    
                    
                    $
                    968
                    
                    
                    $
                    54
                    
                    
                    $
                    2,619


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.




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 or 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.  At December 31, 2008, total
contingencies and other assets in the commercial portfolio amounted to $444
million, representing 14% of the total commercial portfolio.  See Item
18,  “Financial Statements,” note 19.




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




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




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.




At
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 banks and sovereign borrowers and 26% were corporations.  The
held-to-maturity portfolio amounted to $28 million at December 31,
2008.  For the year 2008, the Bank’s held-to-maturity portfolio had a
weighted average annual interest rate of 3.39%.




Trading
assets




At December 31, 2008, the Bank’s
trading assets amounted to $45 million.  See Item 18, “Financial
Statements,” notes 2(h) and 5.




Asset
Management Portfolio




The asset
management portfolio incorporates 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 combination of products
(foreign exchange, equity indexes, interest rate swaps, and credit derivative
products) to establish long and short positions mainly in Latin American
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 $151 million at December 31, 2008 and $128
million at December 31, 2007, which included $47 million in funds deposited with
the Bank.  See Item 18, “Financial Statements,” notes 1, 2(d), 7, and
23.




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-bearing deposits
in other banks, trading assets, investment securities, loans
and  investment fund , but not including contingencies and other
assets (collectively, “cross-border outstandings”) at December 31 of each
year:


16




2008
              
              
              2007
              
              
              2006Amount
              
              
              % of Total
                  Outstandings
              
              
              Amount
              
              
              % of Total
                  Outstandings
              
              
              Amount
              
              
              % of Total
                  Outstandings(in $ million, except percentages)Argentina
              
              $
              151
              
              
              
              3.5
              
              
              $
              283
              
              
              
              6.0
              
              
              $
              212
              
              
              
              5.5Austria
              
              
              0
              
              
              
              0.0
              
              
              
              45
              
              
              
              1.0
              
              
              
              0
              
              
              
              0.0Brazil
              
              
              1,424
              
              
              
              32.7
              
              
              
              1,508
              
              
              
              32.2
              
              
              
              1,449
              
              
              
              37.5Chile
              
              
              59
              
              
              
              1.4
              
              
              
              52
              
              
              
              1.1
              
              
              
              207
              
              
              
              5.4Colombia
              
              
              449
              
              
              
              10.3
              
              
              
              526
              
              
              
              11.2
              
              
              
              261
              
              
              
              6.8Costa
      Rica
              
              
              66
              
              
              
              1.5
              
              
              
              77
              
              
              
              1.6
              
              
              
              85
              
              
              
              2.2Dominican
      Republic
              
              
              55
              
              
              
              1.3
              
              
              
              42
              
              
              
              0.9
              
              
              
              9
              
              
              
              0.2Ecuador
              
              
              36
              
              
              
              0.8
              
              
              
              61
              
              
              
              1.3
              
              
              
              43
              
              
              
              1.1El
      Salvador
              
              
              95
              
              
              
              2.2
              
              
              
              57
              
              
              
              1.2
              
              
              
              87
              
              
              
              2.3France
              
              
              24
              
              
              
              0.5
              
              
              
              45
              
              
              
              1.0
              
              
              
              50
              
              
              
              1.3Germany
              
              
              20
              
              
              
              0.5
              
              
              
              60
              
              
              
              1.3
              
              
              
              0
              
              
              
              0.0Guatemala
              
              
              64
              
              
              
              1.5
              
              
              
              96
              
              
              
              2.0
              
              
              
              89
              
              
              
              2.3Honduras
              
              
              45
              
              
              
              1.0
              
              
              
              49
              
              
              
              1.0
              
              
              
              36
              
              
              
              0.9Jamaica
              
              
              15
              
              
              
              0.3
              
              
              
              77
              
              
              
              1.7
              
              
              
              49
              
              
              
              1.3Japan
              
              
              60
              
              
              
              1.4
              
              
              
              40
              
              
              
              0.9
              
              
              
              33
              
              
              
              0.9Mexico
              
              
              472
              
              
              
              10.9
              
              
              
              437
              
              
              
              9.3
              
              
              
              243
              
              
              
              6.3Panama
              
              
              133
              
              
              
              3.1
              
              
              
              212
              
              
              
              4.5
              
              
              
              200
              
              
              
              5.2Peru
              
              
              77
              
              
              
              1.8
              
              
              
              484
              
              
              
              10.3
              
              
              
              262
              
              
              
              6.8Spain
              
              
              40
              
              
              
              0.9
              
              
              
              48
              
              
              
              1.0
              
              
              
              73
              
              
              
              1.9Switzerland
              
              
              22
              
              
              
              0.5
              
              
              
              30
              
              
              
              0.6
              
              
              
              40
              
              
              
              1.0Trinidad
      & Tobago
              
              
              23
              
              
              
              0.5
              
              
              
              88
              
              
              
              1.9
              
              
              
              104
              
              
              
              2.7United
      Kingdom
              
              
              54
              
              
              
              1.2
              
              
              
              10
              
              
              
              0.2
              
              
              
              0
              
              
              
              0.0United
      States
              
              
              633
              
              
              
              14.5
              
              
              
              23
              
              
              
              0.5
              
              
              
              107
              
              
              
              2.8Uruguay
              
              
              45
              
              
              
              1.0
              
              
              
              0
              
              
              
              0.0
              
              
              
              0
              
              
              
              0.0Venezuela
              
              
              0
              
              
              
              0.0
              
              
              
              135
              
              
              
              2.9
              
              
              
              1
              
              
              
              0.0Other
      countries1
              
              
              139
              
              
              
              3.2
              
              
              
              118
              
              
              
              2.5
              
              
              
              116
              
              
              
              3.0Sub-Total
              
              $
              4,201
              
              
              
              96.5
              
              
              $
              4,602
              
              
              
              98.3
              
              
              $
              3,756
              
              
              
              97.3Investment
      fund2
              
              
              151
              
              
              
              3.5
              
              
              
              82
              
              
              
              1.7
              
              
              
              105
              
              
              
              2.7Total
              
              $
              4,351
              
              
              
              100.0
              
              
              $
              4,684
              
              
              
              100.0
              
              
              $
              3,861
              
              
              
              100.0








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.


2
              The
      balances in the investment fund represent the participation of the Feeder
      in the net asset value (NAV) of the
Fund.




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




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.”




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




2008
              
              
              2007
              
              
              2006(in $ million)Private
      sector commercial banks
              
              $
              1,235
              
              
              $
              1,868
              
              
              $
              1,567State-owned
      commercial banks
              
              
              362
              
              
              
              306
              
              
              
              324Central
      banks
              
              
              320
              
              
              
              0
              
              
              
              0Sovereign
      debt
              
              
              506
              
              
              
              389
              
              
              
              350State-owned
      exporting organizations
              
              
              132
              
              
              
              364
              
              
              
              219Private
      corporations
              
              
              1,645
              
              
              
              1,675
              
              
              
              1,295Sub-Total
              
              $
              4,201
              
              
              $
              4,602
              
              
              $
              3,756Investment
      fund
              
              
              151
              
              
              
              82
              
              
              
              105Total
              
              $
              4,351
              
              
              $
              4,684
              
              
              $
              3,861


17




Revenues
Per Country




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








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 reflect the net revenues derived 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, Treasury Portfolio and Asset
Management Portfolio” and Item 5, “Operating and Financial Review and
Prospects/Operating Results/Net Income.”




Competition




The
Bank operates in a highly competitive environment in most of its markets, and
faces competition principally from regional and international banks 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 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 dependant 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 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.




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”), 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 (“General
License 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-Law No. 2, which
is a revision and restatement of the Decree-Law No.9 of February 26, 1998 (the
“Old Banking Law”).  This new legislation came into effect on August 25,
2008.  Due to the issuance of Decree Law 2 of February 22 of 2008, the
Executive Branch elaborated a systematic order as a sole text of the Decree Law
9 of 1998 and all its amendments, which was approved by means of Executive
Decree 52 of April 30, 2008, hereinafter the “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  minimum capital
of 8% of their total risk-weighted assets, and primary 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
now take into account market risks, operational risks and country risks, among
others, to evaluate capital adequacy standards. The Superintendency of Banks is
authorized to increase the minimum capital requirement percentage in Panama in
the event that generally accepted international capitalization standards 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




Under the
Old Banking Law, banks could not grant loans or issue guarantees or any other
obligation (“Credit 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 this limitation with respect
to banks, and also extended this limitation to Credit Facilities granted to
parties related to the ultimate parent of the banking group.  However,
the Old Banking Law and the Banking Law establish 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 be
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 and sovereign borrowers.




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 on the following
conditions: (i) the ownership of shares in the debtor bank –directly or
indirectly–by the shared director or shared officer, may not exceed five percent
(5%) of the bank'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'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.  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 facilities issued by the bank.




In
addition to the foregoing requirements, there are certain other restrictions
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 entity it wishes to hire to perform the risk rating.  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.


20




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 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 March of 2008, 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.
(“Bladex Holdings”), that 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
“Florida International Administrative Office”).  On April 16, 2008,
Bladex incorporated a direct fifty percent (50%) owned subsidiary in Delaware
with the name of BCG, PA, Llc., which is used as an investment vehicle to
receive the performance allocation of Bladex Capital Growth
Fund.




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”)
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.  At December 31, 2008, the New York Agency
maintained a pledge of $5.5 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.


21




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”).




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 of 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.


22


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.  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
Offshore Feeder Fund and Bladex Capital Growth Fund are exempted companies that
were incorporated in the Cayman Islands with limited liability on February 21,
2006 under the Companies Law of the Cayman Islands. The registered office of
these companies is at 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 193 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 of
the Cayman Islands impose reporting obligations on residents of the Cayman
Islands who know or suspect the involvement of another person in money
laundering or terrorist activities.




C.
            Organizational
      Structure




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




D.
              Property,
      Plant and Equipment




The Bank
owns its main branch, with 6,161 square meters of office space, located at Calle
50 and Aquilino de la Guardia in Panama City.  The Bank leases 11.2
square meters of computer equipment hosting, located at Gavilan Street Balboa in
Panama City, and 21.2 square meters of office space and Internet access in case
of a contingency, located at 75E Street San Francisco in Panama
City.  In addition, the Bank leases office space for its
representative offices in Mexico, Buenos Aires, Bladex Representação Ltda. in
Brazil, its New York Agency, Bladex Asset Management in New York, and the
Florida International Administrative Office in Miami.  See Item 18,
“Financial Statements,” notes 2(o) and 20.




23




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.




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; 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.  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.




A.
              Operating
      Results




The
following table summarizes changes in components of the Bank’s net income and
performance at and for the periods indicated:




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
                          
                          
                          $
                          203,350Total
      interest expense
                          
                          
                          166,396
                          
                          
                          
                          194,299
                          
                          
                          
                          144,513Net
      interest income
                          
                          
                          77,847
                          
                          
                          
                          70,570
                          
                          
                          
                          58,837Reversal
      (provision) for loan losses
                          
                          
                          18,540
                          
                          
                          
                          (11,994
                          )
                          
                          
                          (11,846
                          )Net
      interest income after reversal (provision ) for loan
losses
                          
                          
                          96,387
                          
                          
                          
                          58,576
                          
                          
                          
                          46,991Other
      income (expense):Reversal
      (provision) for losses on off-balance sheet credit risk
                          
                          
                          (16,997
                          )
                          
                          
                          13,468
                          
                          
                          
                          24,891Fees
      and commissions, net
                          
                          
                          7,252
                          
                          
                          
                          5,555
                          
                          
                          
                          6,393Derivative
      financial instruments and hedging
                          
                          
                          9,956
                          
                          
                          
                          (989
                          )
                          
                          
                          (225
                          )Recoveries
      of assets, net of  impairments
                          
                          
                          (767
                          )
                          
                          
                          (500
                          )
                          
                          
                          5,551Net
      gain (loss) from investment fund trading
                          
                          
                          21,357
                          
                          
                          
                          23,878
                          
                          
                          
                          1,091Net
      gain (loss) from trading securities
                          
                          
                          (20,998
                          )
                          
                          
                          (12
                          )
                          
                          
                          (212
                          )Net
      gain on sale of securities available-for-sale
                          
                          
                          67
                          
                          
                          
                          9,119
                          
                          
                          
                          2,568Gain
      (loss) on foreign currency exchange
                          
                          
                          (1,596
                          )
                          
                          
                          115
                          
                          
                          
                          (253
                          )Other
      income (expense), net
                          
                          
                          656
                          
                          
                          
                          (6
                          )
                          
                          
                          36Net
      other income
                          
                          
                          (1,070
                          )
                          
                          
                          50,628
                          
                          
                          
                          39,840Total
      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
                          
                          
                          
                          57,902Participation
      of the minority interest in gains of the investment fund
                          
                          
                          (208
                          )
                          
                          
                          0
                          
                          
                          
                          0Net
      income
                          
                          $
                          55,119
                          
                          
                          $
                          72,177
                          
                          
                          $
                          57,902Basic
      earnings per share
                          
                          
                          1.51
                          
                          
                          
                          1.99
                          
                          
                          
                          1.56Diluted
      earnings per share
                          
                          
                          1.51
                          
                          
                          
                          1.98
                          
                          
                          
                          1.54Return
      on average assets
                          
                          
                          1.09
                          %
                          
                          
                          1.76
                          %
                          
                          
                          1.70
                          %Return
      on average stockholders’ equity
                          
                          
                          8.99
                          %
                          
                          
                          11.91
                          %
                          
                          
                          9.96
                          %




24




Net
Income




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 financial intermediation and
fee generation activities.  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) credit losses, amounted to $59 million in 2008,
compared to $44 million in 2007.  The $15 million increase was
primarily due to higher average loan balances of $352 million, or 10% during the
year, as well as higher weighted average lending spreads, which increased 57
basis points, or 56%, during the year.




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 income
(expense), such as net gain (loss) from trading, the sale of securities
available-for-sale, foreign currency exchange, derivative financial instruments
and hedging; and allocated operating expenses.  The Treasury Division
reported a net loss of $16 million for 2008, compared to net income of $10
million for 2007.  The Treasury Division’s 2008 results were affected
by the accounting treatment related to certain securities-based financing
transactions (repos), which were recorded as sales.  Based on the
application of FASB Statement No. 140 and related guidance, the higher haircuts
applied to the repos due to market conditions resulted in the Bank having to
recognize these transactions as outright securities sales, rather than as
secured borrowings (financing).  This accounting treatment resulted 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 Division is responsible for the Bank’s asset management
activities.  The Asset Management Division’s net income, which
includes net interest income on investment fund, gains (losses) from investment
fund trading, related other income (loss), and allocated operating expenses,
amounted to $12 million in 2008, compared to $18 million in 2007.  The
$6 million decrease was attributable principally to lower net gains from
investment fund trading and lower net interest income, resulting mainly from
decreased market interest rates.




The
Bank’s net income for 2007 was $72 million, compared to $58 million for 2006, a
$14 million, or 25%, increase.  This increase was mainly attributable
to a $12 million, or 20%, increase 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 million increase in net gain on sale
of securities available-for-sale by the Treasury Division, partly 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.




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 the Bank’s net interest income,
net interest margin (the net interest income divided by the average balance of
interest-earning assets), and 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 31,2008
                
                
                2007
                
                
                2006(in $ million, except percentages)Net
      interest incomeCommercial
      Division
                
                $
                78.1
                
                
                $
                64.5
                
                
                $
                50.7Treasury
      Division
                
                
                3.0
                
                
                
                5.9
                
                
                
                6.9Asset
      Management Division
                
                
                (3.2
                )
                
                
                0.1
                
                
                
                1.2Consolidated
                
                $
                77.9
                
                
                $
                70.5
                
                
                $
                58.8Net
      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:




Year ended December 31,2008
                  
                  
                  2007
                  
                  
                  2006Description
                  
                  Average
                      balance
                  
                  
                  Interest
                  
                  
                  Average
                      yield/rate
                  
                  
                  Average
                      balance
                  
                  
                  Interest
                  
                  
                  Average
                      yield/rate
                  
                  
                  Average
                      balance
                  
                  
                  Interest
                  
                  
                  Average
                      yield/rate(in $ million, except percentages)Interest-Earning
      AssetsInterest-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
                  %Trading
      assets
                  
                  
                  0
                  
                  
                  
                  1
                  
                  
                  n.m
                  (*)
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  n.m.
                  (*)
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  n.m.
                  (*)Investment
      securities
                  
                  
                  756
                  
                  
                  
                  32
                  
                  
                  
                  4.23
                  %
                  
                  
                  345
                  
                  
                  
                  21
                  
                  
                  
                  5.99
                  %
                  
                  
                  390
                  
                  
                  
                  23
                  
                  
                  
                  5.76
                  %Investment
      fund
                  
                  
                  138
                  
                  
                  
                  3
                  
                  
                  
                  2.49
                  %
                  
                  
                  113
                  
                  
                  
                  10
                  
                  
                  
                  8.40
                  %
                  
                  
                  69
                  
                  
                  
                  9
                  
                  
                  
                  12.47
                  %Total
      interest-earning assets
                  
                  $
                  5,025
                  
                  
                  $
                  244
                  
                  
                  
                  4.78
                  %
                  
                  $
                  4,072
                  
                  
                  $
                  265
                  
                  
                  
                  6.42
                  %
                  
                  $
                  3,300
                  
                  
                  $
                  203
                  
                  
                  
                  6.08
                  %Non-interest-earning
      assets
                  
                  
                  93
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  88
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  89Allowance
      for loan losses
                  
                  
                  (70
                  )
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (62
                  )
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (44
                  )Other
      assets
                  
                  
                  15
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  11
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  16Total
      Assets
                  
                  $
                  5,064
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  4,108
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  3,361Interest-Bearing
      LiabilitiesDeposits
                  
                  $
                  1,500
                  
                  
                  $
                  44
                  
                  
                  
                  2.91
                  %
                  
                  $
                  1,321
                  
                  
                  $
                  70
                  
                  
                  
                  5.26
                  %
                  
                  $
                  1,106
                  
                  
                  $
                  57
                  
                  
                  
                  5.05
                  %Investment
      Fund
                  
                  
                  0
                  
                  
                  
                  2
                  
                  
                  n.m
                  (*)
                  
                  
                  0
                  
                  
                  
                  4
                  
                  
                  n.m
                  (*)
                  
                  
                  0
                  
                  
                  
                  5
                  
                  
                  n.m.
                  (*)Securities
      sold under repurchase agreements
                  
                  
                  540
                  
                  
                  
                  17
                  
                  
                  
                  3.09
                  %
                  
                  
                  253
                  
                  
                  
                  14
                  
                  
                  
                  5.36
                  %
                  
                  
                  306
                  
                  
                  
                  16
                  
                  
                  
                  5.29
                  %Short-term
      borrowings
                  
                  
                  1,089
                  
                  
                  
                  46
                  
                  
                  
                  4.18
                  %
                  
                  
                  1,019
                  
                  
                  
                  57
                  
                  
                  
                  5.47
                  %
                  
                  
                  736
                  
                  
                  
                  39
                  
                  
                  
                  5.17
                  %Borrowings
      and long-term debt
                  
                  
                  1,182
                  
                  
                  
                  56
                  
                  
                  
                  4.70
                  %
                  
                  
                  809
                  
                  
                  
                  49
                  
                  
                  
                  6.02
                  %
                  
                  
                  500
                  
                  
                  
                  28
                  
                  
                  
                  5.57
                  %Total
      interest-bearing liabilities
                  
                  $
                  4,310
                  
                  
                  $
                  166
                  
                  
                  
                  3.80
                  %
                  
                  $
                  3,402
                  
                  
                  $
                  194
                  
                  
                  
                  5.63
                  %
                  
                  $
                  2,647
                  
                  
                  $
                  145
                  
                  
                  
                  5.38
                  %Non-interest
      bearing liabilities and other liabilities
                  
                  
                  137
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  100
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  132Total
      Liabilities
                  
                  $
                  4,448
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  3,502
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  2,779Minority
      interest in investment fund
                  
                  
                  3
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  0
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  0Stockholders’
      equity
                  
                  
                  613
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  606
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  581Total
      Liabilities and Stockholders’ Equity
                  
                  $
                  5,064
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  4,108
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  3,361Net
      Interest Spread
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  0.98
                  %
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  0.78
                  %
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  0.69
                  %Net
      Interest Income and Net Interest Margin
                  
                  
                  
                  
                  
                  $
                  78
                  
                  
                  
                  1.55
                  %
                  
                  
                  
                  
                  
                  $
                  71
                  
                  
                  
                  1.73
                  %
                  
                  
                  
                  
                  
                  $
                  59
                  
                  
                  
                  1.78
                  %




(*)
“n.m.” means not meaningful




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 paid 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) and changes in average interest rates for 2008 compared to
2007 and for 2007 compared to 2006.  Volume and rate variances have
been calculated based on 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.




2008 vs. 2007
                
                
                2007 vs. 2006Volume
                
                
                Rate
                
                
                Net Change
                
                
                Volume
                
                
                Rate
                
                
                Net
                    Change(in $ thousand)Increase
      (decrease) in interest incomeInterest-bearing
      deposits with banks
                
                $
                3,036
                
                
                $
                (8,192
                )
                
                $
                (5,155
                )
                
                $
                6,282
                
                
                $
                412
                
                
                $
                6,694Loans,
      net
                
                
                19,135
                
                
                
                (40,712
                )
                
                
                (21,576
                )
                
                
                42,863
                
                
                
                12,957
                
                
                
                55,819Trading
      assets
                
                
                0
                
                
                
                648
                
                
                
                648
                
                
                
                0
                
                
                
                0
                
                
                
                0Investment
      securities
                
                
                17,659
                
                
                
                (6,101
                )
                
                
                11,559
                
                
                
                (2,728
                )
                
                
                896
                
                
                
                (1,832
                )Investment
      fund
                
                
                637
                
                
                
                (6,739
                )
                
                
                (6,102
                )
                
                
                3,693
                
                
                
                (2,854
                )
                
                
                839Total
      increase (decrease)
                
                $
                40,468
                
                
                $
                (61,094
                )
                
                $
                (20,627
                )
                
                $
                50,109
                
                
                $
                11,411
                
                
                $
                61,519Increase
      (decrease) in interest expenseDeposits
                
                $
                5,325
                
                
                $
                (31,403
                )
                
                $
                (26,078
                )
                
                $
                11,502
                
                
                $
                2,330
                
                
                $
                13,832Investment
      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
                
                
                
                17,986Borrowings
      and long term debt
                
                
                17,853
                
                
                
                (10,720
                )
                
                
                7,133
                
                
                
                18,844
                
                
                
                2,257
                
                
                
                21,101Total
      increase (decrease)
                
                $
                35,195
                
                
                $
                (63,098
                )
                
                $
                (27,903
                )
                
                $
                43,198
                
                
                $
                6,588
                
                
                $
                49,786Increase
      (decrease) in net interest income
                
                $
                5,273
                
                
                $
                2,004
                
                
                $
                7,276
                
                
                $
                6,911
                
                
                $
                4,823
                
                
                $
                11,734




Net
interest income for 2008 increased $7 million compared to 2007 due to: (1)
increased average volumes, mainly in the loan 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.




The $12
million increase in net interest income for 2007 compared to 2006 was due to
increased interest rates, which resulted in a $5 million increase in net
interest income, reflecting higher average lending spreads over 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 and higher average liquidity
balances (interest-bearing deposits with banks), partially offset by an increase
in the Bank’s funding through higher average liability deposits and
borrowings.




Reversal
(Provision) for Loan Losses




During
2008 and 2007, there were no reversals of specific provisions for loan losses
related to the impaired and restructured portfolio, as the Bank reduced its
impaired portfolio to zero at December 31, 2006.  The impaired
portfolio reversals amounted to $11 million in 2006.





The
Bank’s $19 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 loan loss reserve
coverage from 1.9% at December 31, 2007 to 2.1% at December 31, 2008, reflecting
the impact on the Bank’s reserve model of increasing risk levels in the
Region.


27





The
Bank’s $12 million provision for loan losses in 2007 was mainly due to the net
effect of:


·
              a
      $18 million generic provision charge, resulting from increased loan
      exposure; and


·
            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.




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




The $17
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 off-balance sheet reserve coverage increased
to 6.9% at December 31, 2008, compared to 2.5% at December 31,
2007.




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.




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.




Fees
and Commissions, Net




The Bank
generates fee and commission income primarily from originating letters of credit
confirmation, 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 31,2008
              
              
              2007
              
              
              2006(in $ thousand)Letters
      of credit
              
              $
              4,725
              
              
              $
              2,842
              
              
              $
              4,121Guarantees
              
              
              1,108
              
              
              
              1,088
              
              
              
              1,419Loans
              
              
              584
              
              
              
              836
              
              
              
              556Other  (1)
              
              
              835
              
              
              
              789
              
              
              
              297Fees
      and commissions, net
              
              $
              7,252
              
              
              $
              5,555
              
              
              $
              6,393





(1)Net
of commission expense.




The $2
million increase in net fees and commissions for 2008 compared to 2007 mainly
reflected higher margins from the Commercial Division’s letters of credit
activity.




The
decrease of $1 million in net fees and commissions for 2007 compared to 2006 was
attributable to lower letter of credit and guarantee activity during the
beginning of 2007, partially offset by increased loan fees and other service
activities.


28





Derivative
Financial Instruments and Hedging




The Bank
recorded a gain of $10 million in derivative financial instruments and hedging
activity in 2008.  This gain mainly related to the application of FASB
Statement No. 157 to the Bank’s cross currency swaps that had been contracted
for hedging purposes.




The Bank
recorded losses of $1 million and $225 thousand in 2007 and 2006, respectively,
related  to hedging 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) and
21.




Recoveries
(Impairment), on Assets




The Bank
recorded $767 thousand in impairment on assets in 2008, compared to $500
thousand in 2007.  The 2008 amount was related to an equity investment
in a private investment fund with book value of $2 million at the end 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.




For
additional information, see Item 18, “Financial Statements,” notes 2(i) and
11.




Net
Gain (Loss) from Investment Fund Trading




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 million loss from trading securities in 2008, mainly due to the
mark-to-market effect of such securities, and related to the impact of
classifying certain securities financings (repos) as outright sales, as required
by the application of FASB Statement No. 140 and the changes in fair value of
financial instruments resulting from transfers of securities under repurchase
agreements.  For additional information, see Item 18, “Financial
Statements,” notes 5 and 13.





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 2008 was $67
thousand, which included a 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 for as sales at the transfer date of those securities, as
required by FASB Statement No. 140.




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.




For
additional information, see Item 18, “Financial Statements,” notes 6 and
13.


29




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 31,2008
              
              
              2007
              
              
              2006(in $ thousand)Salaries
      and other employee expenses
              
              $
              20,227
              
              
              $
              22,049
              
              
              $
              16,826Depreciation,
      amortization and impairment of premises and equipment.
              
              
              3,720
              
              
              
              2,555
              
              
              
              1,406Professional
      services
              
              
              3,765
              
              
              
              3,181
              
              
              
              2,671Maintenance
      and repairs
              
              
              1,357
              
              
              
              1,188
              
              
              
              1,000Expenses
      from the investment fund
              
              
              2,065
              
              
              
              381
              
              
              
              0Other
      operating expenses
              
              
              8,856
              
              
              
              7,673
              
              
              
              7,026Total
      Operating Expenses
              
              $
              39,990
              
              
              $
              37,027
              
              
              $
              28,929





The $3
million, or 8%, increase in operating expenses in 2008 compared to 2007 was
mainly due to:


·
            a
      $2 million cost of general growth and structure in the investment
      fund;


·
            a
      $1 million cost for the write-off of an information technology
      application;


·
            a
      $1 million increase in other operating expenses;
  and


·
            a
      $1 million increase 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 driven
      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 related to marketing and business
      travel.




30




Changes
in Financial Condition


The
following table presents components of the Bank’s balance sheet at December 31
of each year:


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





During 2008, total assets decreased
$336 million compared to 2007, principally driven by a $1 billion decrease in
the loan portfolio, as the Bank built liquidity, reduced vulnerable exposures,
and/or concentrations, and preserved its capitalization in response to
deteriorating macroeconomic conditions in the last quarter of
2008.   At December 31, 2008, the loan portfolio amounted to
$2,619 million, with an average maturity term of 480 days, with 61% of the
portfolio scheduled to mature within one year.  61% of the loan
portfolio was trade related in nature and 39% constituted 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 62% of the loan portfolio, and of this
corporate segment, 60% was trade related.  At December 31, 2008, the
Bank’s liquidity stood at $826 million compared to $396 million at December 31,
2007.





The
decrease in assets during 2008 was accompanied by a $303 million decrease in
liabilities, principally driven by a $293 million decrease in deposits 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 million 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 million in
total commitments among thirteen international financial
institutions.


31





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.




Impaired
Assets and Contingencies




The
Bank’s impaired assets consist of impaired loans and impaired
securities.  For more information on impaired loans, see Item 18,
“Financial Statements,” notes 2(k) and 8.  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.   For more information on contingencies, see Item 18,
“Financial Statements,” notes 2(k) and 19.








2008
                    
                    
                    2007
                    
                    
                    2006
                    
                    
                    2005
                    
                    
                    2004(in $ million, except percentages)Impaired
      loans
                    
                    $
                    0
                    
                    
                    $
                    0
                    
                    
                    $
                    0
                    
                    
                    $
                    29
                    
                    
                    $
                    256Allocation
      from the allowance for loan losses
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    11
                    
                    
                    
                    82Impaired
      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
                    
                    
                    $
                    32Allocation
      from the reserve for losses on off balance-sheet credit
    risks
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    9
                    
                    
                    
                    21Impaired
      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
                    
                    
                    $
                    5Estimated
      fair value adjustments on options and impaired securities1
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    4Estimated
      fair value of impaired securities
                    
                    $
                    0
                    
                    
                    $
                    0
                    
                    
                    $
                    0
                    
                    
                    $
                    0
                    
                    
                    $
                    1Impaired
      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
                    %







1Includes impairment losses on
securities, estimated unrealized gain (loss) on impaired securities, premiums
and discounts.


2Total securities consist of investment
securities considered part of the Bank’s credit portfolio.


3The 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 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”).  The asset-specific component relates to a
provision for losses on credits considered impaired and measured on a
case-by-case basis pursuant to FASB Statement No. 114, “Accounting by Creditors
for Impairment of a Loan” (“FASB Statement No. 114”).  For additional
information regarding allowance for credit losses, see Item 18, “Financial
Statements,” notes 2(l) and 9.




The
reserve balances for estimating generic allowances, for both on and off-balance
sheet credit exposures, are calculated applying the following
formula:




Reserves
      = S(E x PD x
      LGD)




where:




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




b)
            Probabilities
      of Default (PD) = one-year probability of default applied to the portfolio
      in each country.  Default rates are based on the Bank’s
      historical portfolio performance per rating category during a ten-year
      period, complemented by probabilities of default data from international
      credit rating agencies for high risk cases, in view of the greater
      robustness of credit rating agencies data for such
  cases.




c)
            Loss
      Given Default (LGD) = a factor of 45% is utilized, based on best practices
      in the banking industry.  This factor applies to all countries,
      except those classified as higher risk, in which case the Bank’s
      management applies historical loss experience on a case-by-case
      basis.








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


33




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.








2008
                
                
                2007
                
                
                2006Total
                
                
                %
                
                
                Total
                
                
                %
                
                
                Total
                
                
                %(in $ million, except percentages)Argentina
                
                $
                25
                
                
                
                29.7
                
                
                $
                32
                
                
                
                38.4
                
                
                $
                25
                
                
                
                32.4Brazil
                
                
                5
                
                
                
                6.2
                
                
                
                11
                
                
                
                13.2
                
                
                
                11
                
                
                
                14.3Colombia
                
                
                2
                
                
                
                2.7
                
                
                
                2
                
                
                
                2.7
                
                
                
                2
                
                
                
                2.2Dominican
      Republic
                
                
                0
                
                
                
                0.3
                
                
                
                0
                
                
                
                0.3
                
                
                
                3
                
                
                
                3.3Ecuador
                
                
                37
                
                
                
                43.8
                
                
                
                17
                
                
                
                20.2
                
                
                
                30
                
                
                
                38.3Jamaica
                
                
                1
                
                
                
                1.1
                
                
                
                4
                
                
                
                5.0
                
                
                
                2
                
                
                
                3.1Mexico
                
                
                4
                
                
                
                4.3
                
                
                
                3
                
                
                
                3.5
                
                
                
                1
                
                
                
                1.6Nicaragua
                
                
                1
                
                
                
                0.8
                
                
                
                1
                
                
                
                1.7
                
                
                
                0
                
                
                
                0.6Peru
                
                
                0
                
                
                
                0.1
                
                
                
                2
                
                
                
                2.9
                
                
                
                1
                
                
                
                0.8Venezuela
                
                
                4
                
                
                
                4.2
                
                
                
                7
                
                
                
                8.3
                
                
                
                0
                
                
                
                0.1Other1
                
                
                6
                
                
                
                6.8
                
                
                
                3
                
                
                
                3.7
                
                
                
                3
                
                
                
                3.4Total
      Allowance for Credit Losses
                
                $
                85
                
                
                
                100.0
                
                
                $
                83
                
                
                
                100.0
                
                
                $
                78
                
                
                
                100.0





1
              Other consists of allowance for
      credit losses allocated to countries in which allowance for credit losses
      outstanding did not exceed $1 million as of December 31,
      2008.








2008
                
                
                2007
                
                
                2006(in $ million)Private
      sector commercial banks
                
                $
                11
                
                
                $
                22
                
                
                $
                15State-owned
      commercial banks
                
                
                3
                
                
                
                2
                
                
                
                5Central
      banks
                
                
                27
                
                
                
                9
                
                
                
                21Sovereign
      debt
                
                
                1
                
                
                
                1
                
                
                
                1State-owned
      exporting organization
                
                
                1
                
                
                
                10
                
                
                
                2Private
      corporations
                
                
                43
                
                
                
                39
                
                
                
                35Total
                
                $
                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 at 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
                
                
                
                100.0Brazil
                
                
                0
                
                
                
                0.0
                
                
                
                0
                
                
                
                0.0
                
                
                
                0
                
                
                
                0.0
                
                
                
                4
                
                
                
                46.3
                
                
                
                0
                
                
                
                0.0Total
                
                $
                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:


34




For the year ended December 31,2008
                
                
                2007
                
                
                2006(in $ million)Argentine
      Specific Reserve Reversals
                
                $
                0.0
                
                
                $
                0.0
                
                
                $
                10.2Brazil
      Specific Reserve Reversals
                
                
                0.0
                
                
                
                0.0
                
                
                
                1.0Total
      Specific Reserve Reversals
                
                $
                0.0
                
                
                $
                0.0
                
                
                $
                11.2Generic
      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
                
                
                
                0.0Recoveries
      - Other credits
                
                
                2.0
                
                
                
                4.4
                
                
                
                0.0Total
      Recoveries
                
                $
                3.5
                
                
                $
                6.4
                
                
                $
                0.0Total
      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 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.  Some of the Bank’s accounting policies require
management to make subjective judgments, often as a result of the need to make
estimates of matters that are inherently uncertain.  The Bank’s
management 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
the 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.  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,
the Bank began to determine the fair value of its financial instruments using
the fair value hierarchy established in FASB Statement No. 157, “Fair Value
Measurements,” (“FASB 157”)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 FASB
Statement No. 157.  The Bank applies 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 as 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, the Bank generally uses quoted market prices
(composite prices) to determine fair value, and classifies such items within
Level 1 of the fair value hierarchy established under FASB Statement No.
157.  If quoted market prices are not available, fair value is based
upon internally developed valuation models that use, where possible, current
market-based or independently sourced market parameters, such as interest rates
and currency rates.  Where a model is internally developed 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 assets are not actively traded in observable markets
for which the Bank must use alternative valuation techniques to determine the
fair value measurement.




The
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 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. 157 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.  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.





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.




Derivatives
financial instruments




Derivative
instruments are recorded at their nominal amount ("notional 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 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.  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.


37





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 swapsare 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:




Credit
valuation adjustments (CVA) are applied to over-the-counter derivative
instruments, in which the base valuation generally discounts expected cash flows
using 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 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 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.




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.  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.




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


38




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.  These liquid assets are adequate to cover
24-hour deposits from customers, which theoretically could be withdrawn on the
same day.  At December 31, 2008, the Bank’s 24-hour deposits from
customers (overnight deposits, demand deposit accounts and call deposits)
amounted to $113 million, representing 10% of the Bank’s total
deposits.The liquidity
requirement resulting from these maturities is satisfied by (1) the Bank’s
liquid assets, which at December 31, 2008 were $826 million (representing 71% of
total deposits), and (2) average daily maturities of approximately $210
million.




As
established by the Bank’s liquidity policy, the Bank’s liquid assets are held in
the form of inter-bank deposits with reputable international banks that have A1,
P1, or F1 ratings from two of the major 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.  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 these 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 Bank updated its 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.








At December 31,2008
              
              
              2007
              
              
              2006(in $ million)Europe
              
              $
              135
              
              
              $
              298
              
              
              $
              264United
      States
              
              
              548
              
              
              
              17
              
              
              
              81Other
      O.E.C.D.
              
              
              142
              
              
              
              81
              
              
              
              54Total
              
              $
              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. At December 31, 2008, the average original term to maturity of the Bank’s
short-term loan portfolio was approximately 258 days.




Medium-term
assets (maturing beyond one year) totaled $1.6 billion as of December 31,
2008.  Of that amount, $593 million was comprised of liquid bonds held
primarily in the Bank’s trading assets and securities available-for-sale
portfolio.  The remaining $1.0 billion in medium-term assets
represented commercial loans.  These medium-term loans are funded by
medium-term borrowings (68%) and the Bank’s equity (32%).


39




Funding
Sources




The
Bank’s principal sources of funds are deposits, borrowed funds and floating- and
fixed-rate placements.  While these sources are expected to continue
to provide the majority of the funds needed 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
at December 31 of each year:




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.  At December 31, 2008, approximately 61% of the deposits held
by the Bank were deposits made by central banks of countries in the
Region.  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 at December 31, 2008
and 2007 was 31 days and 36 days, respectively.  The bulk of the
Bank’s other deposits is obtained primarily from commercial banks located in the
Region.   At December 31, 2008, deposits from the Bank’s five
largest depositors, of which three were central banks in the Region, represented
61% of the Bank’s total deposits.  See Item 18, “Financial
Statements,” note 12.




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




At
      December 31,2008
                
                
                2007
                
                
                2006(in
      $ million)Argentina
                
                $
                90
                
                
                $
                75
                
                
                $
                91Barbados
                
                
                14
                
                
                
                28
                
                
                
                5Brazil
                
                
                277
                
                
                
                322
                
                
                
                400Cayman
      Island
                
                
                14
                
                
                
                33
                
                
                
                27Colombia
                
                
                38
                
                
                
                154
                
                
                
                47Costa
      Rica
                
                
                0
                
                
                
                10
                
                
                
                7Dominican
      Republic
                
                
                5
                
                
                
                21
                
                
                
                27Ecuador
                
                
                205
                
                
                
                70
                
                
                
                99El
      Salvador
                
                
                28
                
                
                
                26
                
                
                
                27Finland
                
                
                0
                
                
                
                10
                
                
                
                10Guatemala
                
                
                0
                
                
                
                0
                
                
                
                1Haiti
                
                
                3
                
                
                
                3
                
                
                
                3Honduras
                
                
                56
                
                
                
                27
                
                
                
                14Jamaica
                
                
                2
                
                
                
                2
                
                
                
                2Mexico
                
                
                3
                
                
                
                332
                
                
                
                35The
      Netherlands
                
                
                26
                
                
                
                21
                
                
                
                18Nicaragua
                
                
                30
                
                
                
                11
                
                
                
                2Panama
                
                
                36
                
                
                
                80
                
                
                
                48Peru
                
                
                103
                
                
                
                41
                
                
                
                43Trinidad
      and Tobago
                
                
                20
                
                
                
                20
                
                
                
                10Uruguay
                
                
                1
                
                
                
                0
                
                
                
                0United
      Kingdom
                
                
                0
                
                
                
                40
                
                
                
                0United
      States
                
                
                0
                
                
                
                20
                
                
                
                19Venezuela
                
                
                219
                
                
                
                117
                
                
                
                121Total
                
                $
                1,169
                
                
                $
                1,462
                
                
                $
                1,056


40




Securities
Sold Under Repurchase Agreements and Short-Term Borrowings




The Bank
enters into repurchase agreements (“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. As of
December 31, 2008, repos amounted to $474 million, an increase of $191 million
from $283 million as of December 31, 2007.  See Item 18, “Financial
Statements,” notes 13 and 14.




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 5 Asian
banks provide these short-term borrowings to the Bank.  As of December
31, 2008, short-term borrowings amounted to $739 million, a decrease of $483
million from the amount as of December 31, 2007.  The decrease in
short-term borrowings was the result of reduced levels of liquidity in
international markets and reduced availability of credit.  The average
term remaining to maturity of short-term borrowings at December 31, 2008 was
approximately 86 days. See Item 18, “Financial Statements,” note
14.




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




At
      and for the Year Ended December 31,2008
                
                
                2007
                
                
                2006(in $
      million, except percentages)Short-term
      borrowings and securities sold under repurchase agreementsAdvances
      from banks
                
                $
                739
                
                
                $
                1,222
                
                
                $
                1,147Discounted
      acceptances
                
                
                0
                
                
                
                0
                
                
                
                10Securities
      sold under repurchase agreements
                
                
                474
                
                
                
                283
                
                
                
                438Total
      short-term borrowings and securities sold under repurchase
      agreements
                
                $
                1,213
                
                
                $
                1,505
                
                
                $
                1,596Maximum
      amount outstanding at any month-end
                
                $
                1,783
                
                
                $
                1,505
                
                
                $
                1,634Amount
      outstanding at year-end
                
                $
                1,213
                
                
                $
                1,505
                
                
                $
                1,596Average
      amount outstanding
                
                $
                1,629
                
                
                $
                1,272
                
                
                $
                1,042Weighted
      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 term and syndicated loans obtained from international
banks.  Debt instruments consist of notes issued under the EMTN
Program and a bond issuance in Latin America.




The
interest rates on long-term borrowings are adjusted quarterly or semi-annually
based on short-term LIBOR rates plus a credit spread, which is based on 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.  At December 31, 2008, the average term
remaining to maturity of the Bank’s medium and long-term debt was 2.3
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, the Bank finalized a $200 million five-year bilateral term loan facility
with the China Development Bank and contracted a $150 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 denominated in
Peruvian Nuevo Soles (PEN), may be issued in several series with different
maturities and interest rate structures, will be offered exclusively 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 finance the Bank’s credit portfolio and to cover its general long-term
financial needs.  The first placement of bonds under 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).





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.  See Item 18,
“Financial Statements,” notes 15, 21 and Item 11, “Quantitative and Qualitative
Disclosure About Market Risk.”




Cost
and Maturity Profile of Borrowed Funds and Floating- 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 December 31, 2008:




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




1  Represent fixed-rate interest-bearing
liabilities booked in local currency to fund fixed-rate interest-earning assets
in the same local currency.




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 all of the Bank’s assets
and most of its liabilities are denominated in dollars and, therefore, the Bank
has no material foreign exchange risk.  Non-dollar 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.


42




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 at December 31,
2008.  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:




Total
                
                
                0-30 Days
                
                
                31-90 Days
                
                
                91-180 Days
                
                
                181-365 Days
                
                
                More than
                    365Days
                
                
                Non-Interest
                    Sensitive(in $ million, except percentages)Interest-earning
      assetsCash
      and due from banks
                
                $
                536
                
                
                
                536
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0Interest-bearing
      deposits with banks
                
                
                365
                
                
                
                365
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0Trading
      assets
                
                
                45
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                45
                
                
                
                0Securities
      available-for-sale
                
                
                608
                
                
                
                35
                
                
                
                91
                
                
                
                15
                
                
                
                0
                
                
                
                467
                
                
                
                0Securities
      held-to-maturity
                
                
                28
                
                
                
                0
                
                
                
                28
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0Investment
      fund
                
                
                151
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                151Loans,
      net
                
                $
                2,559
                
                
                
                540
                
                
                
                1,189
                
                
                
                558
                
                
                
                197
                
                
                
                135
                
                
                
                (59
                )Total
      interest-earning assets
                
                
                4,292
                
                
                
                1,475
                
                
                
                1,308
                
                
                
                573
                
                
                
                197
                
                
                
                647
                
                
                
                91Non-interest
      earning assets
                
                
                63
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                63Other
      assets
                
                
                7
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                7Total
      assets
                
                $
                4,363
                
                
                $
                1,475
                
                
                $
                1,308
                
                
                $
                573
                
                
                $
                197
                
                
                $
                647
                
                
                $
                162Interest-bearing
      liabilitiesDepositsDemand
                
                
                113
                
                
                
                113
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0Time
                
                
                1,056
                
                
                
                766
                
                
                
                262
                
                
                
                27
                
                
                
                0
                
                
                
                0
                
                
                
                0Trading
      liabilities
                
                
                14
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                14
                
                
                
                0Securities
      sold under repurchase agreements
                
                
                474
                
                
                
                84
                
                
                
                292
                
                
                
                99
                
                
                
                0
                
                
                
                0
                
                
                
                0Short-term
      borrowings
                
                
                739
                
                
                
                187
                
                
                
                342
                
                
                
                125
                
                
                
                85
                
                
                
                0
                
                
                
                0Borrowings
      and long-term debt
                
                
                1,205
                
                
                
                190
                
                
                
                775
                
                
                
                65
                
                
                
                32
                
                
                
                143
                
                
                
                0Total
      interest-bearing liabilities
                
                
                3,601
                
                
                
                1,340
                
                
                
                1,671
                
                
                
                316
                
                
                
                117
                
                
                
                157
                
                
                
                0Non-interest-bearing
      liabilities
                
                
                183
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                183Total
      liabilities
                
                
                3,784
                
                
                
                1,340
                
                
                
                1,671
                
                
                
                316
                
                
                
                117
                
                
                
                157
                
                
                
                183Minority
      interest
                
                
                5
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                5Stockholders’
      equity
                
                
                574
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                574Total
      liabilities and stockholders’ equity
                
                $
                4,363
                
                
                $
                1,340
                
                
                $
                1,671
                
                
                $
                316
                
                
                $
                117
                
                
                $
                157
                
                
                
                762Interest
      rate sensitivity gap
                
                
                
                
                
                
                135
                
                
                
                (363
                )
                
                
                257
                
                
                
                81
                
                
                
                490
                
                
                
                (600
                )Cumulative
      interest rate sensitivity gap
                
                
                
                
                
                
                135
                
                
                
                (229
                )
                
                
                29
                
                
                
                109
                
                
                
                599Cumulative
      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
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 establishes 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.


43




Stockholders’
Equity




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




At December 31,2008
                  
                  
                  2007
                  
                  
                  2006(in $ thousand)Common
      stock
                  
                  $
                  279,980
                  
                  
                  $
                  279,980
                  
                  
                  $
                  279,980Capital
      surplus
                  
                  
                  135,577
                  
                  
                  
                  135,142
                  
                  
                  
                  134,945Capital
      reserves
                  
                  
                  95,210
                  
                  
                  
                  95,210
                  
                  
                  
                  95,210Retained
      earnings
                  
                  
                  268,435
                  
                  
                  
                  245,348
                  
                  
                  
                  205,200Accumulated
      other comprehensive income (loss)
                  
                  
                  (72,115
                  )
                  
                  
                  (9,641
                  )
                  
                  
                  3,328Treasury
      stock
                  
                  
                  (132,763
                  )
                  
                  
                  (133,788
                  )
                  
                  
                  (134,768
                  )Total
      stockholders’ equity
                  
                  $
                  574,324
                  
                  
                  $
                  612,251
                  
                  
                  $
                  583,896




The $38
million decrease in stockholder’s equity during 2008 was the net result
of:




·
            Deterioration
      in other comprehensive income by $62 million, mostly related to net
      unrealized losses from the investment securities portfolio due to
      mark-to-market; and


·
            Increased
      retained earnings due to the Bank’s net income of $55 million, partially
      offset by a total of $32 million in dividends paid to common
      stockholders.




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.  Capital
reserves are intended to strengthen the Bank’s capital
position.  Reductions of these reserves, including for 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.




At
December 31, 2008, 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, the Bank’s Tier 1 and total capital ratios
calculated according to these guidelines were 20.4% and 21.6%,
respectively.  The Banking Law (as defined under Item 4, “Information on
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 ratio of 8%.  At December 31, 2008, the Bank’s total capital to
risk-weighted asset ratio, calculated according to the guidelines of the Banking
Law, was 19%.  See Item 4, “Information on the Company/Business
Overview/Regulation/Panamanian Law.”




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




Not
applicable.




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 not to be indicative of the Bank’s future operating
results or financial condition:




·
            The
      effect of changes in global economic conditions, including 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, on the Bank’s capacity to grow its trade financing
      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.


·
            Risk
      perception in the Bank’s markets, 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.


·
            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.




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 or financial condition.




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.  At December 31, 2008, the Bank’s off-balance sheet
arrangements included 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. A reserve for losses on off-balance sheet
credit risk is recognized on the balance sheet, with the resulting loss recorded
in the income statement. See Item 18, “Financial Statements,” note
19.




Fees and
commissions from off-balance sheet arrangements amounted to $7 million in 2008,
compared to $6 million in 2007.  For additional information, see Item
5, “Operating and Financial Review and Prospects/Operating Results/Fees and
Commissions, 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,” 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:





Payments Due by PeriodContractual 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
                          
                          
                          $
                          0Trading
      liabilities
                          
                          
                          14
                          
                          
                          
                          14
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          0Securities
      sold under repurchase agreement
                          
                          
                          474
                          
                          
                          
                          474
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          0Short-term
      borrowings
                          
                          
                          739
                          
                          
                          
                          739
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          0Borrowings
      and long-term debt 1
                          
                          
                          1,205
                          
                          
                          
                          210
                          
                          
                          
                          498
                          
                          
                          
                          458
                          
                          
                          
                          39Accrued
      interest payable
                          
                          
                          33
                          
                          
                          
                          33
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          0Commitment
      to repurchase securities sold under repurchase agreements
                          
                          
                          138
                          
                          
                          
                          138
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          0Lease
      obligations
                          
                          
                          3
                          
                          
                          
                          1
                          
                          
                          
                          1
                          
                          
                          
                          1
                          
                          
                          
                          0Total
      contractual obligations
                          
                          $
                          3,775
                          
                          
                          $
                          2,778
                          
                          
                          $
                          499
                          
                          
                          $
                          458
                          
                          
                          $
                          39Amount of Commitment Expiration by
      PeriodOther
      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
                          
                          
                          $
                          0Stand-by
      letters of credit
                          
                          
                          41
                          
                          
                          
                          41
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          0Guarantees
                          
                          
                          179
                          
                          
                          
                          144
                          
                          
                          
                          35
                          
                          
                          
                          0
                          
                          
                          
                          0Credit
      derivative
                          
                          
                          3
                          
                          
                          
                          0
                          
                          
                          
                          3
                          
                          
                          
                          0
                          
                          
                          
                          0Other
      commercial commitments
                          
                          
                          84
                          
                          
                          
                          81
                          
                          
                          
                          2
                          
                          
                          
                          0
                          
                          
                          
                          1Total
      Commercial Commitments
                          
                          $
                          444
                          
                          
                          $
                          403
                          
                          
                          $
                          39
                          
                          
                          $
                          0
                          
                          
                          $
                          1




1Certain debt obligations
are subject to covenants that could accelerate the payment of these
obligations.


45




Item
6.                
  Directors, Executive Officers and Employees




A.           Directors
and Executive Officers




Directors




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




Name
                  
                  Position Held
                    with
                    The Bank
                  
                  Country of
                    Citizenship
                  
                  Year
                      TermExpires
                  
                  Director
                      Since
                  
                  AgeCLASS
      AJosé
      Maria Rabelo
                    Brazil
                  
                  Director
                  
                  Brazil
                  
                  2010
                  
                  2007
                  
                  53Guillermo
      Güémez García
                    Deputy
      Governor
                    Banco
      de Mexico, Mexico
                  
                  Director
                  
                  Mexico
                  
                  2011
                  
                  1997
                  
                  68Roberto
      Feletti
                    Vice
      President
                    Banco
      de la Nación Argentina, Argentina
                  
                  Director
                  
                  Argentina
                  
                  2011
                  
                  2008
                  
                  50CLASS
      EMario
      Covo
                    Chief
      Executive Officer
                    Finaccess
      International, Inc., U.S.A.
                  
                  Director
                  
                  U.S.A
                  
                  2011
                  
                  1999
                  
                  51Maria
      da Graça França
                    Brazil
                  
                  Director
                  
                  Brazil
                  
                  2010
                  
                  2004
                  
                  60Herminio
      Blanco
                    Chief
      Executive Officer
                    Soluciones
      Estratégicas Consultoría, Mexico
                  
                  Director
                  
                  Mexico
                  
                  2010
                  
                  2004
                  
                  58William
      D. Hayes
                    President
                    Wellstone
      Global Finance, LLC, U.S.A.
                  
                  Director
                  
                  U.S.A.
                  
                  2010
                  
                  2004
                  
                  65Will
      C. Wood
                    Principal
                    Kentwood
      Associates, U.S.A.
                  
                  Director
                  
                  U.S.A.
                  
                  2012
                  
                  1999
                  
                  69ALL
      CLASSES OF COMMON STOCKGonzalo
      Menéndez Duque
                    Director
                    Banco
      de Chile, Chile
                  
                  Chairman
      of the Board of Directors
                  
                  Chile
                  
                  2012
                  
                  1990
                  
                  60Jaime
      Rivera
                    Chief
      Executive Officer
                    Bladex,
      Panama
                  
                  Director
                  
                  Guatemala
                  
                  2012
                  
                  2004
                  
                  56




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.


46




José Maria Rabelo served as
Vice President of International and Wholesale Business of Banco do Brasil, from
July 2005 to May 2009.  He was employed by Banco do Brasil in various
capacities since 1975, holding the positions of Director of Foreign Trade from
2004 to 2005, General Manager of the Operational Assets Restructuring Unit from
2003 to 2004, Executive Superintendent of the Credit Unit from 1999 to 2000,
Executive Superintendent of the Sao Paulo Business Unit from 1998 to 1999,
Executive 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
employees 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
Economic 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 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.




Mario Covo is 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 founders of
Columbus Advisors, where he worked from 1995 to 1999.  Mr. Covo
was previously employed at Merrill Lynch, where he was Head of Emerging
Markets-Capital Markets from 1989 to 1995.  Prior to working at Merrill
Lynch, he was employed by Bankers Trust Company of New York 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. 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 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 Fargo in the International Banking Group and served as an
Executive Vice President from 1986 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 Crocker 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.




Herminio A.
Blanco  is the founder and since 2002 has served as Chief
Executive Officer of Soluciones Estratégicas Consultoría, Mexico City, and is a
founding partner and since 2005 has served as Chairman of IQOM.  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 US 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 and Connecticut, and Managing Director and
charter member of the Board of Directors and 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.




Maria da Graça França served
as Director of Internal Control of Banco do Brasil from 2006 to
2007.  She also was employed by Banco do Brasil in various other
capacities since 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.




Gonzalo 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,
Holdings Quiñenco since 1996, and Antofagasta PLC since 1985.  In
addition, he serves as President of the following Luksic group
companies:  Banchile Corredores de Bolsa, S.A. since 2007 and
Inversiones Vita since 2000.  He also has served 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, and Banchile
Administradora General de Fondos.





Jaime Rivera has served as a
director 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.
Rivera is member of the International Advisory Committee (IAC) to the Board of
Directors of the New York Stock Exchange (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.


48




Executive
Officers




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




Name
              
              Position
      Held with The Bank
              
              Country
      of Citizenship
              
              AgeJaime
      Rivera
              
              Chief
      Executive Officer
              
              Guatemala
              
              56Rubens
      V. Amaral Jr.
              
              Executive
      Vice President - Chief Commercial Officer
              
              Brazil
              
              50Gregory
      D. Testerman
              
              Executive
      Vice President - Senior Managing Director, Treasury & Capital
      Markets
              
              U.S.A.
              
              46Miguel
      Moreno
              
              Executive
      Vice President, Chief Operating Officer
              
              Colombia
              
              56Miguel
      A. Kerbes
              
              Senior
      Vice President, Chief Risk Officer
              
              Uruguay
              
              49Bismark
      E. Rodriguez
              
              Senior
      Vice President, Controller
              
              Venezuela
              
              41Jaime
      Celorio
              
              Senior
      Vice President, Chief Financial Officer
              
              Mexico
              
              37Ana
      Maria de Arias
              
              Senior
      Vice President, Organizational Performance and Development
              
              Panama
              
              45Manuel
      Mejía-Aoun
              
              Head
      of Asset Management
                (Bladex
      Asset Management)
              
              Panama
              
              50




Jaime Rivera has served as a
director 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.
Rivera is 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.




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 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. as Assistant Treasurer in Belgium in 1986,
and previously participated in the Corporate Controllers Development Program 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, 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. Rodríguezhas
served as the Bank’s Controller since July 2007.  Mr. Rodriguez
previously served as Vice President of the Internal Audit Department of the Bank
since 2004.  Mr. Rodriguez also served as Senior Manager at
PricewaterhouseCoopers in various capacities and countries from 1991 to
2003.  Mr. Rodriguez is a Certified Public Accountant (CPA), a
Certified Internal Auditor (CIA), a Certified Financial Services Auditor (CFSA),
and a Certified Control Self-Assessment Specialist (CCSA); all designations
granted by The Institute of Internal Auditors (IIA).




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 Management of Bladex Asset Management since November
2005.  Mr. Mejía-Aoun has over 19 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, to 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 of the Bank, 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.





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, the Bank awarded an aggregate of 172,106 stock options and
39,239 restricted stock units under the 2008 Plan to executive officers of the
Bank.  The Bank granted an additional aggregate of 52,930 stock
options and 12,065 restricted stock units under the 2008 Plan to other
non-executive employees of the Bank.  As of December 31, 2008, the
compensation cost charged against 2008 income in connection with these
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 (with vesting occurring on
each anniversary of the award date).  Finally, the Board also amended
the exercise price of outstanding 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, on each anniversary of the award
date.  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 these options was $201,944, and the remaining
$428,283 compensation cost for the options will be charged against income over a
period of the next 2.12 years.




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, the Bank charged to
salaries expense $240,594 with respect to the contribution plan.  As
of December 31, 2008, the accumulated liability payable under the contribution
plan amounted to $420,370.


51




2008
Chief Executive Officer Compensation




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




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 stockholders 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 stockholders meeting.  The
Chairman of the Board is eligible to receive an additional 50% for each such
additional Board, stockholders 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 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 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, to the directors of the Bank as a group for their services as
directors was $789,590.




The
aggregate number of shares of restricted stock awarded during the year ended
December 31, 2008, to non-employee directors of the Bank as a group under the
2008 Plan was 31,246 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, the compensation cost charged against 2008 income in
connection with the shares of restricted stock awarded under the 2008 Plan was
$43,981, and the remaining compensation cost for these shares of restricted
stock of $430,959 will be charged against income over a period of the next 4.54
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.


52





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, the Bank’s executive officers and directors and members of
the Advisory Council, as a group, owned an aggregate of 151,666 class E shares,
which was approximately 0.6% of all issued and outstanding class E
shares.




The
following tables set forth information regarding the number of shares, stock
options, deferred equity units, 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:





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)Jaime
      Rivera
                    Chief
      Executive Officer
                  
                  
                  1,400
                  
                  
                  
                  181,973
                  
                  
                  
                  26,495
                  
                  
                  
                  0
                  
                  
                  
                  13,319
                  
                  
                  
                  30,353
                  
                  
                  
                  137,129Rubens
      V. Amaral Jr.
                    Executive
      Vice President
                    Chief
      Commercial Officer
                  
                  
                  0
                  
                  
                  
                  118,012
                  
                  
                  
                  13,248
                  
                  
                  
                  0
                  
                  
                  
                  8,779
                  
                  
                  
                  29,138
                  
                  
                  
                  131,800Gregory
      D. Testerman
                    Executive
      Vice President
                    Senior
      Managing Director,
                    Treasury
      & Capital Markets
                  
                  
                  0
                  
                  
                  
                  38,996
                  
                  
                  
                  10,599
                  
                  
                  
                  0
                  
                  
                  
                  5,250
                  
                  
                  
                  30,110
                  
                  
                  
                  136,064Miguel
      Moreno
                    Executive
      Vice President,
                    Chief
      Operating Officer
                  
                  
                  5,724
                  
                  
                  
                  44,216
                  
                  
                  
                  5,299
                  
                  
                  
                  0
                  
                  
                  
                  3,819
                  
                  
                  
                  13,113
                  
                  
                  
                  59,115Miguel
      A. Kerbes
                    Senior
      Vice President,
                    Chief
      Risk Officer
                  
                  
                  31,840
                  
                  
                  
                  28,459
                  
                  
                  
                  11,698
                  
                  
                  
                  621
                  
                  
                  
                  3,020
                  
                  
                  
                  7,619
                  
                  
                  
                  34,318Bismark
      E. Rodriguez L.
                    Senior
      Vice President
                    Controller
                  
                  
                  0
                  
                  
                  
                  1,745
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  3,278
                  
                  
                  
                  14,778Jaime
      Celorio
                    Senior
      Vice President,
                    Chief
      Financial Officer
                  
                  
                  0
                  
                  
                  
                  588
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  904
                  
                  
                  
                  4,067Ana
      Maria de Arias
                    Senior
      Vice President,
                    Organizational
      Performance and Development
                  
                  
                  1,670
                  
                  
                  
                  27,170
                  
                  
                  
                  5,299
                  
                  
                  
                  0
                  
                  
                  
                  1,812
                  
                  
                  
                  7,163
                  
                  
                  
                  32,417Total
                  
                  
                  40,634
                  
                  
                  
                  441,159
                  
                  
                  
                  72,638
                  
                  
                  
                  621
                  
                  
                  
                  35,999
                  
                  
                  
                  121,678
                  
                  
                  
                  549,688







53




(1)
            The
      executive and non-executive employees 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.


(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:




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
                
                
                
                0Roberto
      Feletti (4)
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0José
      Maria Rabelo (5)
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0Will
      C. Wood
                
                
                10,480
                
                
                
                6,482
                
                
                
                1,061
                
                
                
                5,895
                
                
                
                536Mario
      Covo
                
                
                8,480
                
                
                
                6,482
                
                
                
                1,061
                
                
                
                5,895
                
                
                
                536Herminio
      Blanco
                
                
                28,005
                
                
                
                6,482
                
                
                
                1,061
                
                
                
                5,895
                
                
                
                536William
      Hayes
                
                
                20,275
                
                
                
                6,482
                
                
                
                1,061
                
                
                
                5,895
                
                
                
                536Maria
      da Graça França
                
                
                5,630
                
                
                
                0
                
                
                
                0
                
                
                
                5,162
                
                
                
                0Gonzalo
      Menéndez Duque
                
                
                12,722
                
                
                
                9,727
                
                
                
                1,591
                
                
                
                8,844
                
                
                
                803Total
                
                
                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)
            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.


(3)
            8,480
      class E shares corresponding to Mr. Güemez'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. Güemez 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.


(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.




C.
            Board
      Practices




Corporate
Governance




The Board
has decided not to establish a corporate governance committee.  Given
the importance that corporate governance has for the Bank, the Board 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.





Stockholders,
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
& Chairman of the Board of Directors


Calle 50
and Aquilino de la Guardia


P.O. Box
0819-08730


Panama
City, Republic of Panama




In
addition, the Bank has selected EthicsPoint, an on-line reporting system, to
provide stockholders, employees of the Bank, and other interested parties with
an alternative channel to report anonymously 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/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).





Name
            
            Country of Citizenship
            
            Position held by Dignatario
              with the Bank
            
            AgeGonzalo
      Menéndez Duque 1
              Director
              Banco
      de Chile, Chile
            
            Chile
            
            Chairman
      of the Board
            
            60Maria
      da Graça França
            
            Brazil
            
            Treasurer
            
            60Ricardo
      Manuel Arango
              Partner
              Arias,
      Fábrega & Fábrega
            
            Panama
            
            Secretary
            
            48









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 heldAudit
      and Compliance Committee
            
            4
            
            8Credit
      Policy and Risk Assessment Committee
            
            5
            
            5Assets
      and Liabilities Committee
            
            5
            
            8Business
      Committee
            
            5
            
            5Nomination
      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. Wood (Chairman), Gonzalo Menéndez
Duque, Maria da Graça França, and Roberto Feletti.


55





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 NYSE Rules, and
Agreement No. 04-2001 of the Superintendency of Banks.  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
process of internal and external audit, the Bank’s corporate governance,
compliance with legal and regulatory requirements and the Bank’s Code of
Ethics.




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 year ended December 31, 2008, the committee
met eight times.




The Audit
and Compliance Committee, in its capacity as a committee of the Board, is
directly responsible for the appointment, compensation, and oversight of the
Bank’s independent auditors, including the resolution of disagreements regarding
financial reporting between the Bank’s management 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.”




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, 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 García (Chairman), Gonzalo
Menéndez Duque, Will C. Wood, Herminio Blanco and José Maria
Rabelo.





The
Credit Policy and Risk Assessment Committee is in charge of 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 year ended December 31, 2008, 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.


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,
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,William Hayes and José
Maria Rabelo.




The
Assets and Liabilities Committee is responsible for reviewing and recommending
to the Board all policies and procedures related to the Bank’s management 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 year ended
December 31, 2008, the committee held eight meetings.




The
Assets and Liabilities Committee Charter may be found on the Bank’s website at
http://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 Hayes (Chairman), Gonzalo Menéndez Duque, Mario
Covo, Herminio Blanco and José Maria Rabelo.




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 be 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 year ended
December 31, 2008, the committee held five meetings.




Nomination
and Compensation Committee




The
Nomination and Compensation Committee is a standing committee of the
Board.  No member of the Nomination and Compensation Committee can be
an employee of the Bank.  The Board has determined that all members of
the Nomination and Compensation Committee are independent under the terms
defined by applicable laws and regulations, including rules promulgated by the
SEC under the Sarbanes-Oxley Act, Section 303A 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, William Hayes and Roberto Feletti.




The
Nomination and Compensation Committee meets at least four times per year. During
the year ended December 31, 2008, the committee held eleven
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; 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 consider qualified director
candidates recommended by stockholders.  All director candidates will
be evaluated in the same manner regardless of how they are recommended,
including recommendations by stockholders.  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.  Stockholders
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.




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.






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, of any other entity that has one or more of its
executive officers serving as a member of the 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 duties of Advisory Council members consist
primarily of providing 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 2008 amounted to
$10,000.  During the year ended December 31, 2008, 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
            
            AgeRoberto
      Teixeira da Costa
            
            Board
      Member
              Sul
      America, S.A.
            
            Brazil
            
            74Carlos
      Martabit
            
            General
      Manager, Finance Division
              Banco
      del Estado de Chile
            
            Chile
            
            55Alberto
      Motta, Jr
            
            President
              Inversiones
      Bahía Ltd.
            
            Panama
            
            62Enrique
      Cornejo
            
            Minister
      of Transportation and Communications, Peru
            
            Peru
            
            52Santiago
      Perdomo
            
            President
              Banco
      Colpatria – Red Multibanca Colpatria
            
            Colombia
            
            51




D.
            Employees




As of
December 31, 2008, 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.




58




E.
            Share
      Ownership




See Item
6, “Directors, Senior Management and Employees/Compensation/Beneficial
Ownership.”




Item
7.                    Major
Stockholders and Related Party Transactions




A.
            Major
      Stockholders




As of December 31, 2008, 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% 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 at December 31, 2008:




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




1
                Does not include an aggregate of
      3,289 class E shares corresponding to Mr. Roberto Feletti’s entitlement
      under the 2008 Stock Incentive Plan, that were issued to his employer,
      Banco de la Nación
Argentina.
 2
                Does
      not include an aggregate of 5,630 class E shares corresponding to Mr. José
      Maria Rabelo’s entitlement under the 2003 Restricted Stock Plan and the
      2008 Stock Incentive Plan, that were issued to his employer, Banco do
      Brasil.
 3
                Source:
      Schedule 13G filing with the U.S. Securities and Exchange Commission dated
      December 31, 2008.




59


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, while the Class A shares and Class
      B shares can only be transferred to qualified
  holders;


·
            The
      Class B shares may be converted into Class E
  shares;


·
            The
      holders of Class A shares and Class B shares benefit from pre-emptive
      rights, but the holders of Class E shares do not;
  and


·
            All
      classes vote separately for their respective
  directors.




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.  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 the institutions are
domiciled.




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




C.
            Interests
      of Experts and Counsel




Not
required in this Annual Report.




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.





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.  Dividends are declared at the Board’s
discretion.


60




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




Payment
      date
                
                Record
      date
                
                Dividend
      per shareMay
      7, 2009
                
                April
      27, 2009
                
                $
                0.15February
      9, 2009
                
                January
      29, 2009
                
                $
                0.22October
      31, 2008
                
                October
      22, 2008
                
                $
                0.22July
      31, 2008
                
                July
      21, 2008
                
                $
                0.22April
      4, 2008
                
                March
      25, 2008
                
                $
                0.22January
      17, 2008
                
                January
      7, 2008
                
                $
                0.22




The
following table shows information about preferred dividends paid on the dates
indicated:




Payment
      date
              
              Record
      date
              
              Dividend
      per shareMay
      15, 2006
              
              April
      28, 2006
              
              $
              2.22November
      15, 2005
              
              October
      31, 2005
              
              $
              2.18May
      16, 2005
              
              April
      29, 2005
              
              $
              2.15November
      15, 2004
              
              November
      8, 2004
              
              $
              1.90May
      17, 2004
              
              April
      30, 2004
              
              $
              0.40





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).




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
                
                
                Low2008
                
                
                20.74
                
                
                
                8.172007
                
                
                23.17
                
                
                
                15.522006
                
                
                18.70
                
                
                
                14.592005
                
                
                25.50
                
                
                
                15.342004
                
                
                20.00
                
                
                
                14.002009:May
                
                
                13.89
                
                
                
                11.92April
                
                
                12.94
                
                
                
                9.26March
                
                
                11.48
                
                
                
                6.83February
                
                
                11.38
                
                
                
                8.61January
                
                
                14.99
                
                
                
                8.782008:December
                
                
                14.89
                
                
                
                11.092009:First
      Quarter
                
                
                14.99
                
                
                
                6.832008:First
      Quarter
                
                
                16.53
                
                
                
                13.33Second
      Quarter
                
                
                19.46
                
                
                
                15.50Third
      Quarter
                
                
                20.74
                
                
                
                13.25Fourth
      Quarter
                
                
                14.89
                
                
                
                8.172007:First
      Quarter
                
                
                17.12
                
                
                
                15.52Second
      Quarter
                
                
                21.60
                
                
                
                16.50Third
      Quarter
                
                
                23.17
                
                
                
                16.53Fourth
      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% of the total shares of the Bank’s common stock
issued and outstanding at December 31, 2008.  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.




Item
10.                  Additional
Information




A.
            Share
      Capital




Not
required in this Annual Report.




B.
            Memorandum
      and Articles of Association




The
Amended and Restated Articles of Incorporation, 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 and Item 10.B of the Form 20-F for the fiscal year ended December 31,
2004 filed with the SEC on June 23, 2005 are referred to and incorporated by
reference into this Item 10.B.




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.




United
States Taxes




This
summary describes the principal 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”), 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.


62




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.




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.


63


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”) 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.




Passive
Foreign Investment Company Status




Under the
Code, certain rules apply to an entity classified as a “passive foreign
investment company” (“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
institutions in the active conduct of a banking business, provided the
institution is licensed to do business in the United States.  Under
proposed regulations, the exception is extended to a foreign corporation that is
not licensed to do 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
is not 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.




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 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.




64




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
referred to as a “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.




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”) 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.  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 furnished to the
IRS.




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




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.


65




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 Panamaian 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.




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.           Dividends
and Paying Agents




Not
required in this Annual Report.




G.          Statement
by Experts




Not
required in this Annual Report.




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, 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. Celorio at
country code + (507) 210-8630.  Written requests may also be faxed to
Mr. Celorio at country code + (507) 269-6333 or sent via e-mail to
jcelorio@bladex.com.  Information is also available on the Bank’s
website at: http://www.bladex.com.




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 management level, the Bank
has a Risk Management Department that measures and controls the credit and
market exposure of the Bank.


66


The
Bank’s businesses are subject to market risk.  The components of
market risk are interest rate risk inherent in the Bank’s balance sheet, 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 management
of interest rate risk, see Item 5, “Operating and Financial Review and
Prospects/Liquidity and Capital 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) and 21.  For information regarding investment
securities, see Item 4, “Information on the Company/Business Overview/Investment
Securities,” and Item 18, “Financial Statements,” note 6.




The table
below lists for each of the years 2009 to 2013 the notional amounts and weighted
interest rates, as of December 31, 2008, 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 date2009
                                
                                
                                2010
                                
                                
                                2011
                                
                                
                                2012
                                
                                
                                2013
                                
                                
                                There-
                                  after
                                
                                
                                Without
                                  maturity
                                
                                
                                Total 2008
                                
                                
                                Fair value
                                  2008($
      Equivalent in thousand)NON-TRADING
      ASSETSInvestment
      SecuritiesFixed
      rateU.S.
      Dollars
                                
                                
                                87,975
                                
                                
                                
                                30,000
                                
                                
                                
                                29,222
                                
                                
                                
                                50,000
                                
                                
                                
                                90,000
                                
                                
                                
                                233,000
                                
                                
                                
                                -
                                
                                
                                
                                520,197
                                
                                
                                
                                555,481Average
      fixed rate
                                
                                
                                5.19
                                %
                                
                                
                                7.46
                                %
                                
                                
                                8.90
                                %
                                
                                
                                9.69
                                %
                                
                                
                                9.83
                                %
                                
                                
                                8.21
                                %
                                
                                
                                -
                                
                                
                                
                                8.11
                                %Floating
      rateU.S.
      Dollars
                                
                                
                                -
                                
                                
                                
                                41,000
                                
                                
                                
                                -
                                
                                
                                
                                25,000
                                
                                
                                
                                -
                                
                                
                                
                                25,000
                                
                                
                                
                                -
                                
                                
                                
                                91,000
                                
                                
                                
                                80,581Average
      floating rate
                                
                                
                                -
                                
                                
                                
                                3.30
                                %
                                
                                
                                -
                                
                                
                                
                                2.82
                                %
                                
                                
                                -
                                
                                
                                
                                3.95
                                %
                                
                                
                                -
                                
                                
                                
                                3.34
                                %LoansFixed
      rateU.S.
      Dollars
                                
                                
                                823,126
                                
                                
                                
                                6,888
                                
                                
                                
                                24,643
                                
                                
                                
                                3,777
                                
                                
                                
                                1,479
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                859,913
                                
                                
                                
                                850,312Average
      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
                                
                                
                                
                                76,706Average
      fixed rate
                                
                                
                                10.29
                                %
                                
                                
                                10.27
                                %
                                
                                
                                9.72
                                %
                                
                                
                                11.69
                                %
                                
                                
                                12.07
                                %
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                10.27
                                %Floating
      rateU.S.
      Dollars
                                
                                
                                738,680
                                
                                
                                
                                305,905
                                
                                
                                
                                265,387
                                
                                
                                
                                221,802
                                
                                
                                
                                88,585
                                
                                
                                
                                53,998
                                
                                
                                
                                
                                
                                
                                
                                1,674,357
                                
                                
                                
                                1,536,705Average
      floating rate
                                
                                
                                4.79
                                %
                                
                                
                                4.53
                                %
                                
                                
                                4.12
                                %
                                
                                
                                3.52
                                %
                                
                                
                                4.43
                                %
                                
                                
                                5.01
                                %
                                
                                
                                
                                
                                
                                
                                4.46
                                %Mexican
      Peso
                                
                                
                                7,304
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                7,304
                                
                                
                                
                                7,257Average
      floating rate
                                
                                
                                11.78
                                %
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                11.78
                                %Euro
                                
                                
                                1,216
                                
                                
                                
                                1,574
                                
                                
                                
                                783
                                
                                
                                
                                175
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                3,748
                                
                                
                                
                                3,626Average
      floating rate
                                
                                
                                6.21
                                %
                                
                                
                                6.21
                                %
                                
                                
                                6.22
                                %
                                
                                
                                6.26
                                %
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                6.21
                                %LIABILITIESBorrowings
      and Placements(1)Fixed
      rateU.S.
      Dollars
                                
                                
                                1,138,394
                                
                                
                                
                                14,919
                                
                                
                                
                                4,852
                                
                                
                                
                                
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                1,158,165
                                
                                
                                
                                1,156,233Average
      fixed rate
                                
                                
                                3.75
                                %
                                
                                
                                3.95
                                %
                                
                                
                                2.76
                                %
                                
                                
                                
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                3.75
                                %Mexican
      Peso
                                
                                
                                27,726
                                
                                
                                
                                27,726
                                
                                
                                
                                10,710
                                
                                
                                
                                1,846
                                
                                
                                
                                1,087
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                69,095
                                
                                
                                
                                71,657Average
      fixed rate
                                
                                
                                8.38
                                %
                                
                                
                                8.38
                                %
                                
                                
                                8.42
                                %
                                
                                
                                9.36
                                %
                                
                                
                                9.59
                                %
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                8.43
                                %Euro
                                
                                
                                80,333
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                80,333
                                
                                
                                
                                80,453Average
      fixed rate
                                
                                
                                5.70
                                %
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                5.70
                                %Yen
                                
                                
                                44,114
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                44,114
                                
                                
                                
                                44,046Average
      fixed rate
                                
                                
                                1.79
                                %
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                1.79
                                %Peruvian
      Soles
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                39,135
                                
                                
                                
                                -
                                
                                
                                
                                39,135
                                
                                
                                
                                38,362Average
      fixed rate
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                6.50
                                %
                                
                                
                                -
                                
                                
                                
                                6.50
                                %Floating
      rateU.S.
      Dollars
                                
                                
                                132,634
                                
                                
                                
                                428,135
                                
                                
                                
                                11,405
                                
                                
                                
                                150,000
                                
                                
                                
                                200,00
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                922,174
                                
                                
                                
                                857,154Average
      floating rate
                                
                                
                                3.37
                                %
                                
                                
                                3.78
                                %
                                
                                
                                3.53
                                %
                                
                                
                                1.88
                                %
                                
                                
                                4.73
                                %
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                3.61
                                %Mexican
      Peso
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                104,857
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                104,857
                                
                                
                                
                                90,062Average
      floating rate
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                9.63
                                %
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                9.63
                                %Interest
      Rate SwapsU.S.
      Dollars floating to fixed
                                
                                
                                15,000
                                
                                
                                
                                30,000
                                
                                
                                
                                28,400
                                
                                
                                
                                70,000
                                
                                
                                
                                90,000
                                
                                
                                
                                233,000
                                
                                
                                
                                -
                                
                                
                                
                                466,400
                                
                                
                                
                                (48,557
                                )


67




Expected maturity date2009
                            
                            
                            2010
                            
                            
                            2011
                            
                            
                            2012
                            
                            
                            2013
                            
                            
                            There-
                              after
                            
                            
                            Without
                              maturity
                            
                            
                            Total 2008
                            
                            
                            Fair value
                              2008($
      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 SwapsReceive
      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
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            2,682Euro
      fixed rate
                            
                            
                            7.96
                            %
                            
                            
                            7.82
                            %
                            
                            
                            7.83
                            %
                            
                            
                            7.36
                            %
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            7.84
                            %Receive
      Mexican Peso
                            
                            
                            102
                            
                            
                            
                            116
                            
                            
                            
                            131
                            
                            
                            
                            148
                            
                            
                            
                            146,744
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            147,241Mexican
      peso fixed rate
                            
                            
                            16.10
                            %
                            
                            
                            16.10
                            %
                            
                            
                            16.10
                            %
                            
                            
                            16.10
                            %
                            
                            
                            9.63
                            %
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            9.65
                            %Receive
      Peruvian Soles
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            41,020
                            
                            
                            
                            -
                            
                            
                            
                            41,020Peruvian
      Soles fixed rate
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            6.50
                            %
                            
                            
                            
                            
                            
                            
                            6.50
                            %Forward
      Currency Exchange AgreementsReceive
      U.S. Dollars/Pay Mexican Pesos
                            
                            
                            11,723
                            
                            
                            
                            4,820
                            
                            
                            
                            1,236
                            
                            
                            
                            436
                            
                            
                            
                            350
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            18,565
                            
                            
                            
                            3,580Average
      exchange rate
                            
                            
                            11.25
                            
                            
                            
                            11.83
                            
                            
                            
                            11.96
                            
                            
                            
                            12.51
                            
                            
                            
                            13.13
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            11.52Pay
      U.S. Dollars/Receive Mexican Pesos
                            
                            
                            180
                            
                            
                            
                            11
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            191
                            
                            
                            
                            (4
                            )Average
      exchange rate
                            
                            
                            11.18
                            
                            
                            
                            11.75
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            11.21Pay
      U.S. Dollars/Receive Euro
                            
                            
                            84,673
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            84,673
                            
                            
                            
                            (2,176
                            )Average
      exchange rate
                            
                            
                            1.43
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            1.43Pay
      U.S. Dollars/Receive Yen
                            
                            
                            40,132
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            40,132
                            
                            
                            
                            4,201Average
      exchange rate
                            
                            
                            100.12
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            100.12TRADINGTrading
      AssetsDebt
      securities:Fixed
      rateU.S.
      Dollars
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            11,000
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            10,000
                            
                            
                            
                            -
                            
                            
                            
                            21,000
                            
                            
                            
                            21,965Average
      fixed rate
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            9.62
                            %
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            7.25
                            %
                            
                            
                            -
                            
                            
                            
                            8.49
                            %Forward
      repurchase agreementsU.S.
      Dollars
                            
                            
                            16,043
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            16,043
                            
                            
                            
                            16,087Average
      fixed rate
                            
                            
                            3.97
                            %
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            3.97
                            %Retained
      interest on repurchase agreements
                            
                            
                            6,886
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            6,886
                            
                            
                            
                            6,886U.S.
      Dollars
                            
                            
                            8.10
                            %
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            8.10
                            %Trading
      LiabilitiesInterest
      rate swaps:U.S.
      Dollars floating to fixed
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            59,527
                            
                            
                            
                            -
                            
                            
                            
                            90,700
                            
                            
                            
                            25,000
                            
                            
                            
                            -
                            
                            
                            
                            175,227
                            
                            
                            
                            14,065Average
      pay rate
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            9.00
                            %
                            
                            
                            -
                            
                            
                            
                            7.73
                            %
                            
                            
                            6.07
                            %
                            
                            
                            -
                            
                            
                            
                            7.92
                            %Average
      receive rate
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            8.17
                            %
                            
                            
                            -
                            
                            
                            
                            6.27
                            %
                            
                            
                            5.37
                            %
                            
                            
                            -
                            
                            
                            
                            6.79
                            %Credit
      derivative:U.S.
      Dollars
                            
                            
                            -
                            
                            
                            
                            3,000
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            3,000
                            
                            
                            
                            91Average
      fixed rate
                            
                            
                            -
                            
                            
                            
                            0.5
                            %
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            0.5
                            %




(1)
Borrowings and placements include securities sold under repurchase agreements
and short and long-term borrowings and debt.


68




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.  For information
regarding the fair value of trading assets and liabilities of the Fund, See Item
18, “Financial Statements,” notes 2(d) and 7.




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, 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.  At December
31, 2008, the Bank had an equivalent of $338 million of non-U.S. dollar
financial liabilities, which matched funded asset transactions in the same
currency.




Item
      12.
            Description
      of Securities Other than Equity
Securities




Not
applicable.




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’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, as appropriate to allow
timely decisions regarding required disclosure.




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


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).  With the participation and supervision of the Bank’s CEO
and CFO, its management has assessed the effectiveness of its internal control
over financial reporting as of December 31, 2008.





The assessment includes the
documentation and understanding of the Bank’s internal control over financial
reporting.  Management evaluated the design effectiveness and tested
the operational effectiveness of internal controls over financial reporting to
form its conclusion.





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





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.  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 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 management 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.





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 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,
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 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, 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 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
that 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





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, which is included in Item 18, “Financial Statements”,
for reference.





d)
Changes in Internal Controls




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.




Item
      16.
            [Reserved]




Item
      16A.
            Audit
      and Compliance Committee Financial
Expert




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.




Item
      16B.
            Code
      of Ethics




The Bank
has adopted a code of ethics that applies to the Bank’s principal executive
officers and principal financial and 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 is filed as Exhibit 14.1 to this Annual Report
on Form 20-F. Stockholders may request a
hard copy of the Bank’s Code of Ethics, free of charge, from 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.com




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, 2007 and 2008:


71





2008
                  
                  
                  2007Audit
      fees
                  
                  $
                  482,000
                  
                  
                  $
                  426,495Tax
      fees
                  
                  
                  0
                  
                  
                  
                  0All
      other fees
                  
                  
                  71,000
                  
                  
                  
                  39,509Total
                  
                  $
                  553,000
                  
                  
                  $
                  466,004




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.


·
            Tax
      fees include aggregate fees billed for professional services for tax
      compliance, tax advice and tax
  planning.


·
            All
      other fees include aggregate fees billed for products and services
      provided by Deloitte, Inc. to the Bank, other than the services described
      in the two preceding paragraphs.





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-related fees, tax fees and all other fees
described above were approved by the Audit and Compliance Comitte.





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
      16G.
            Corporate
      Governance




There are
two significant differences between the corporate governance practices of the
Bank and those required by the NYSE for domestic companies in the United
States.





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.


72





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 StatementsReports
      of Independent Registered Public Accounting Firms
                                  F-3Consolidated
      Balance Sheets at December 31, 2008 and 2007
                                  F-6Consolidated
      Statements of Income for the Years  Ended December 31, 2008,
      2007 and 2006
                                  F-7Consolidated
      Statements of Changes in Stockholders’ Equity for the Years Ended December
      31, 2008, 2007 and 2006
                                  F-8Consolidated
      Statements of Comprehensive Income for the Years Ended December 31, 2008,
      2007 and 2006
                                  F-9Consolidated
      Statements of Cash Flows for the Years Ended December 31, 2008, 2007 and
      2006
                                  F-10Notes
      to Consolidated Financial Statements
                                  F-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.


73


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 RIVERAJaime
      RiveraChief
      Executive Officer
 
 June 26,
2009




74


Banco
Latinoamericano
 de
Exportaciones, S. A.
 and
Subsidiaries
 
 With
Reports of Independent Registered
 Public
Accounting Firm
 
 Consolidated
Balance Sheets as of December 31, 2008 and 2007,
 and
Related Consolidated Statements of Income, Stockholders’
 Equity,
Comprehensive Income and Cash Flows for Each of the
 Three
Years in the Period Ended December 31, 2008
 
 Deloitte-Panamá
  F-1
 
 Banco
Latinoamericano de Exportaciones, S. A.
 and
Subsidiaries
 
 Independent
Auditors’ Report and
 Consolidated
Financial Statements 2008, 2007 and 2006
 
 Contents
                  
                  PagesReport
      of Independent Registered Public Accounting Firm - Consolidated Financial
      Statements
                  
                  
                  F-3Consolidated
      balance sheets
                  
                  
                  F-6Consolidated
      statements of income
                  
                  
                  F-7Consolidated
      statements of changes in stockholders’ equity
                  
                  
                  F-8Consolidated
      statements of comprehensive income (loss)
                  
                  
                  F-9Consolidated
      statements of cash flows
                  
                  
                  F-10Notes
      to consolidated financial statements
                  
                  
                  F-11Report
      of Independent Registered Public Accounting Firm – Internal Control Over
      Financial Reporting
                  
                  
                  F-62
  F-2
 Deloitte,
      Inc.Contadores
      Públicos AutorizadosApartado
      0816-01558Panamá, Rep. de
      PanamáTeléfono:
      (507) 303-4100Facsimile
      : (507) 269-2386infopanama@deloitte.comwww.deloitte.com/pa
  REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
  To the
Board of Directors and Stockholders of
 Banco
Latinoamericano de Exportaciones, S.A.
  We have
audited the accompanying consolidated balance sheets of Banco Latinoamericano de
Exportaciones, S.A. and subsidiaries (the “Bank”) as of December
31, 2008 and 2007, and the related consolidated statements of income, changes in
stockholders’
equity, comprehensive income and cash flows for the years then ended. 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, S.A.
and subsidiaries as of December 31, 2008 and 2007, and the results of their
operations and their cash flows for the years then ended, 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, based on the criteria established in Internal Control-Integrated
Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission and our report dated March 16, 2009 expressed an adverse
opinion on the Bank’s internal control over financial reporting because of a
material weakness.
  The
accompanying consolidated financial statements have been translated into English
for the convenience of readers outside of Panama.
  (Signed
by Deloitte)
  March 16,
2009
 Panama,
Republic of Panama
  F-4
 KPMG
                Teléfono: (507)
      208-0700Apartado
      Postal 816-1089
                Fax:     
          (507) 263-9852Panamá5, República de
      Panamá
                Internet:  
      www.kpmg.com
  Report of Independent
Registered Public Accounting Firm
  The Board
of Directors and StockholdersBanco 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.
 and
Subsidiaries
 
 Consolidated
balance sheets
 December
31, 2008 and 2007
 (in US$
thousand, except share amounts)
 
 Notes
                                
                                
                                2008
                                
                                
                                2007AssetsCash
      and due from banks
                                4,23
                                
                                
                                
                                11,474
                                
                                
                                
                                596Interest-bearing
      deposits in banks (including pledged deposits of $75,004 in 2008 and
      $5,500 in 2007)
                                4,23
                                
                                
                                
                                889,119
                                
                                
                                
                                400,932Trading
      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
                                
                                
                                
                                468,360Securities
      held-to-maturity (market value of $28,144 in 2008) (including pledged
      securities of $28,410 in 2008)
                                6,23
                                
                                
                                
                                28,410
                                
                                
                                
                                -Investment
      fund
                                7,23
                                
                                
                                
                                150,695
                                
                                
                                
                                81,846Loans
                                8,23
                                
                                
                                
                                2,618,643
                                
                                
                                
                                3,731,838Less:Allowance
      for loan losses
                                9,23
                                
                                
                                
                                54,648
                                
                                
                                
                                69,643Unearned
      income and deferred fees
                                
                                
                                
                                
                                4,689
                                
                                
                                
                                5,961Loans,
      net
                                
                                
                                
                                
                                2,559,306
                                
                                
                                
                                3,656,234Customers'
      liabilities under acceptances
                                23
                                
                                
                                
                                1,375
                                
                                
                                
                                9,104Premises
      and equipment (net of accumulated depreciation and  amortization
      of $11,594 in 2008 and $9,704 in 2007)
                                10
                                
                                
                                
                                7,970
                                
                                
                                
                                10,176Accrued
      interest receivable
                                23
                                
                                
                                
                                46,319
                                
                                
                                
                                62,375Derivative
      financial instruments used for hedging - receivable
                                21,23
                                
                                
                                
                                7,777
                                
                                
                                
                                122Other
      assets
                                11
                                
                                
                                
                                7,376
                                
                                
                                
                                8,826Total
      assets
                                3
                                
                                
                                
                                4,362,678
                                
                                
                                
                                4,698,571Liabilities
      and stockholders' equityDeposits:
                                12,23Noninterest-bearing
      - Demand
                                
                                
                                
                                
                                718
                                
                                
                                
                                890Interest-bearing
      - Demand
                                
                                
                                
                                
                                112,304
                                
                                
                                
                                110,606Time
                                
                                
                                
                                
                                1,056,026
                                
                                
                                
                                1,350,875Total
      deposits
                                
                                
                                
                                
                                1,169,048
                                
                                
                                
                                1,462,371Trading
      liabilities
                                5,23
                                
                                
                                
                                14,157
                                
                                
                                
                                13Securities
      sold under repurchase agreements
                                4,5,6,13,23
                                
                                
                                
                                474,174
                                
                                
                                
                                283,210Short-term
      borrowings
                                14,23
                                
                                
                                
                                738,747
                                
                                
                                
                                1,221,500Borrowings
      and long-term debt
                                15,23
                                
                                
                                
                                1,204,952
                                
                                
                                
                                1,010,316Acceptances
      outstanding
                                23
                                
                                
                                
                                1,375
                                
                                
                                
                                9,104Accrued
      interest payable
                                23
                                
                                
                                
                                32,956
                                
                                
                                
                                38,627Derivative
      financial instruments used for hedging - payable
                                21,23
                                
                                
                                
                                91,897
                                
                                
                                
                                16,899Reserve
      for losses on off-balance sheet  credit risk
                                9
                                
                                
                                
                                30,724
                                
                                
                                
                                13,727Other
      liabilities
                                
                                
                                
                                
                                25,635
                                
                                
                                
                                30,553Total
      liabilities
                                3
                                
                                
                                
                                3,783,665
                                
                                
                                
                                4,086,320Commitments
      and contingent liabilities
                                11,19,20,21,24Minority
      interest in the investment fund
                                
                                
                                
                                
                                4,689
                                
                                
                                
                                -Stockholders'
      equity:
                                16,17,18,22,25Class
      "A" common stock, no par value, assigned value of $6.67 (Authorized
      40,000,000; outstanding 6,342,189)
                                
                                
                                
                                
                                44,407
                                
                                
                                
                                44,407Class
      "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
                                
                                
                                
                                21,528Class
      "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
                                
                                
                                
                                214,045Additional
      paid-in capital in excess of assigned value of common
stock
                                
                                
                                
                                
                                135,577
                                
                                
                                
                                135,142Capital
      reserves
                                
                                
                                
                                
                                95,210
                                
                                
                                
                                95,210Retained
      earnings
                                
                                
                                
                                
                                268,435
                                
                                
                                
                                245,348Accumulated
      other comprehensive loss
                                6,22
                                
                                
                                
                                (72,115
                                )
                                
                                
                                (9,641
                                )Treasury
      stock
                                16
                                
                                
                                
                                (132,763
                                )
                                
                                
                                (133,788
                                )Total
      stockholders' equity
                                
                                
                                
                                
                                574,324
                                
                                
                                
                                612,251Total
      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.
 and
Subsidiaries
  Consolidated
statements of income
 Years
ended December 31, 2008, 2007 and 2006
 (in US$ thousand, except
per share amounts)
 Notes
                              
                              2008
                              
                              
                              2007
                              
                              
                              2006Interest
      income:Deposits
      with banks
                              
                              
                              
                              7,574
                              
                              
                              
                              12,729
                              
                              
                              
                              6,035Trading
      assets
                              
                              
                              
                              648
                              
                              
                              
                              -
                              
                              
                              
                              -Investment
      securities:Available-for-sale
                              
                              
                              
                              31,745
                              
                              
                              
                              19,595
                              
                              
                              
                              16,780Held-to-maturity
                              
                              
                              
                              746
                              
                              
                              
                              1,337
                              
                              
                              
                              5,985Investment
      fund
                              
                              
                              
                              3,485
                              
                              
                              
                              9,587
                              
                              
                              
                              8,748Loans
                              
                              
                              
                              200,045
                              
                              
                              
                              221,621
                              
                              
                              
                              165,802Total
      interest income
                              
                              
                              
                              244,243
                              
                              
                              
                              264,869
                              
                              
                              
                              203,350Interest
      expense:Deposits
                              
                              
                              
                              44,364
                              
                              
                              
                              70,443
                              
                              
                              
                              56,611Investment
      fund
                              
                              
                              
                              2,296
                              
                              
                              
                              4,197
                              
                              
                              
                              4,639Short-term
      borrowings
                              
                              
                              
                              63,239
                              
                              
                              
                              70,244
                              
                              
                              
                              55,000Borrowings
      and long-term debt
                              
                              
                              
                              56,497
                              
                              
                              
                              49,415
                              
                              
                              
                              28,263Total
      interest expense
                              
                              
                              
                              166,396
                              
                              
                              
                              194,299
                              
                              
                              
                              144,513Net
      interest income
                              
                              
                              
                              77,847
                              
                              
                              
                              70,570
                              
                              
                              
                              58,837Reversal
      (provision) for loan losses
                              9
                              
                              
                              18,540
                              
                              
                              
                              (11,994
                              )
                              
                              
                              (11,846
                              )Net
      interest income, after reversal (provision) for loan
losses
                              
                              
                              
                              96,387
                              
                              
                              
                              58,576
                              
                              
                              
                              46,991Other
      income (expense):Reversal
      (provision) for losses on off-balance sheet credit risk
                              9
                              
                              
                              (16,997
                              )
                              
                              
                              13,468
                              
                              
                              
                              24,891Fees
      and commissions, net
                              
                              
                              
                              7,252
                              
                              
                              
                              5,555
                              
                              
                              
                              6,393Derivative
      financial instruments and hedging
                              21
                              
                              
                              9,956
                              
                              
                              
                              (989
                              )
                              
                              
                              (225
                              )Recoveries
      on assets, net of impairments
                              6,11
                              
                              
                              (767
                              )
                              
                              
                              (500
                              )
                              
                              
                              5,551Net
      gain (loss) from investment fund trading
                              
                              
                              
                              21,357
                              
                              
                              
                              23,878
                              
                              
                              
                              1,091Net
      gain (loss) from trading securities
                              13
                              
                              
                              (20,998
                              )
                              
                              
                              (12
                              )
                              
                              
                              (212
                              )Net
      gain on sale of securities available-for-sale
                              6
                              
                              
                              67
                              
                              
                              
                              9,119
                              
                              
                              
                              2,568Gain
      (loss) on foreign currency exchange
                              
                              
                              
                              (1,596
                              )
                              
                              
                              115
                              
                              
                              
                              (253
                              )Other
      income (expense), net
                              
                              
                              
                              656
                              
                              
                              
                              (6
                              )
                              
                              
                              36Net
      other income (expense)
                              
                              
                              
                              (1,070
                              )
                              
                              
                              50,628
                              
                              
                              
                              39,840Operating
      expenses:Salaries
      and other employee expenses
                              
                              
                              
                              20,227
                              
                              
                              
                              22,049
                              
                              
                              
                              16,826Depreciation,
      amortization and impairment of premises and equipment
                              10
                              
                              
                              3,720
                              
                              
                              
                              2,555
                              
                              
                              
                              1,406Professional
      services
                              
                              
                              
                              3,765
                              
                              
                              
                              3,181
                              
                              
                              
                              2,671Maintenance
      and repairs
                              
                              
                              
                              1,357
                              
                              
                              
                              1,188
                              
                              
                              
                              1,000Expenses
      from the investment fund
                              
                              
                              
                              2,065
                              
                              
                              
                              381
                              
                              
                              
                              -Other
      operating expenses
                              
                              
                              
                              8,856
                              
                              
                              
                              7,673
                              
                              
                              
                              7,026Total
      operating expenses
                              
                              
                              
                              39,990
                              
                              
                              
                              37,027
                              
                              
                              
                              28,929Income
      before participation of the minority interest in gains of  the
      investment fund
                              
                              
                              
                              55,327
                              
                              
                              
                              72,177
                              
                              
                              
                              57,902Participation
      of the minority interest in gains of the investment fund
                              
                              
                              
                              (208
                              )
                              
                              
                              -
                              
                              
                              
                              -Net
      income
                              
                              
                              
                              55,119
                              
                              
                              
                              72,177
                              
                              
                              
                              57,902Basic
      earnings per share
                              
                              
                              
                              1.51
                              
                              
                              
                              1.99
                              
                              
                              
                              1.56Diluted
      earnings per share
                              
                              
                              
                              1.51
                              
                              
                              
                              1.98
                              
                              
                              
                              1.54Average
      basic shares
                              18
                              
                              
                              36,388
                              
                              
                              
                              36,349
                              
                              
                              
                              37,065Average
      diluted shares
                              18
                              
                              
                              36,440
                              
                              
                              
                              36,414
                              
                              
                              
                              37,572
 
 The
accompanying notes are part of these consolidated financial
statements.
  F-7
 
 Banco
Latinoamericano de Exportaciones, S. A.
 and
Subsidiaries
 
 Consolidated
statements of changes in stockholders' equity
 Years
ended December 31, 2008, 2007 and 2006
 (in US$
thousand)
 
 AccumulatedAdditional
                      
                      
                      
                      
                      
                      
                      
                      
                      other
                      
                      
                      
                      
                      
                      TotalCommon
                      
                      
                      paid-in
                      
                      
                      Capital
                      
                      
                      Retained
                      
                      
                      comprehensive
                      
                      
                      Treasury
                      
                      
                      stockholders’stock
                      
                      
                      capital
                      
                      
                      reserves
                      
                      
                      earnings
                      
                      
                      income (loss)
                      
                      
                      stock
                      
                      
                      equityBalances
      at January 1, 2006
                      
                      
                      279,979
                      
                      
                      
                      134,340
                      
                      
                      
                      95,210
                      
                      
                      
                      212,916
                      
                      
                      
                      619
                      
                      
                      
                      (106,282
                      )
                      
                      
                      616,782Net
      income
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      57,902
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      57,902Other
      comprehensive income
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      2,709
                      
                      
                      
                      -
                      
                      
                      
                      2,709Compensation
      cost - indexed stock option plan
                      
                      
                      -
                      
                      
                      
                      606
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      606Issuance
      of restricted stock
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (49
                      )
                      
                      
                      -
                      
                      
                      
                      144
                      
                      
                      
                      95Exercised
      stock options pursuant to compensation plan
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (14
                      )
                      
                      
                      -
                      
                      
                      
                      27
                      
                      
                      
                      13Repurchase
      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
                      )
                      
                      
                      583,895Net
      income
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      72,177
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      72,177Other
      comprehensive loss
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (12,969
                      )
                      
                      
                      -
                      
                      
                      
                      (12,969
                      )Compensation
      cost - indexed stock option plan
                      
                      
                      -
                      
                      
                      
                      1,130
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      1,130Issuance
      of restricted stock
                      
                      
                      -
                      
                      
                      
                      (644
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      531
                      
                      
                      
                      (113
                      )Exercised
      stock options pursuant to compensation plan
                      
                      
                      -
                      
                      
                      
                      (289
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      449
                      
                      
                      
                      160Dividends
      declared
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (32,029
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (32,029
                      )Balances
      at December 31, 2007
                      
                      
                      279,980
                      
                      
                      
                      135,142
                      
                      
                      
                      95,210
                      
                      
                      
                      245,348
                      
                      
                      
                      (9,641
                      )
                      
                      
                      (133,788
                      )
                      
                      
                      612,251Net
      income
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      55,119
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      55,119Other
      comprehensive loss
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (62,474
                      )
                      
                      
                      -
                      
                      
                      
                      (62,474
                      )Compensation
      cost - stock option  and restricted stock unit
    plans
                      
                      
                      -
                      
                      
                      
                      1,033
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      1,033Issuance
      of restricted stock
                      
                      
                      -
                      
                      
                      
                      (484
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      745
                      
                      
                      
                      261Exercised
      stock options pursuant to compensation plan
                      
                      
                      -
                      
                      
                      
                      (114
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      280
                      
                      
                      
                      166Dividends
      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, S. A.
 and
Subsidiaries
 
 Consolidated
statements of comprehensive income (loss)
 Years
ended December 31, 2008, 2007 and 2006
 (in US$
thousand)
 
 Notes
                            
                            
                            2008
                            
                            
                            2007
                            
                            
                            2006Net
      income:
                            
                            
                            
                            
                            55,119
                            
                            
                            
                            72,177
                            
                            
                            
                            57,902Other
      comprehensive income (loss):Unrealized
      gains (losses) on securities available-for-sale:Unrealized
      gains (losses) arising from the year
                            22
                            
                            
                            
                            (58,453
                            )
                            
                            
                            (1,912
                            )
                            
                            
                            5,349Less:  Reclassification
      adjustments for gains included in net income
                            6,22
                            
                            
                            
                            (67
                            )
                            
                            
                            (9,119
                            )
                            
                            
                            (2,568
                            )Net
      change in unrealized gains (losses) on securities
      available-for-sale
                            
                            
                            
                            
                            (58,520
                            )
                            
                            
                            (11,031
                            )
                            
                            
                            2,781Unrealized
      losses on derivative financial instruments:Unrealized
      losses arising from the year
                            22
                            
                            
                            
                            (2,433
                            )
                            
                            
                            (2,081
                            )
                            
                            
                            (72
                            )Less:
      Reclassification adjustments for net (gains) losses included in net
      income
                            22
                            
                            
                            
                            (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
                            )
                            
                            
                            2,709Comprehensive
      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
                    
                    
                    2006Cash
      flows from operating activities:Net
      income
                    
                    
                    55,119
                    
                    
                    
                    72,177
                    
                    
                    
                    57,902Adjustments
      to reconcile net income to net cash provided by (used in) operating
      activities:Activities
      of derivative financial instruments and hedging
                    
                    
                    30,198
                    
                    
                    
                    1,258
                    
                    
                    
                    312Depreciation
      and amortization of premises and equipment
                    
                    
                    3,720
                    
                    
                    
                    2,555
                    
                    
                    
                    1,406Provision
      (reversal) for loan losses
                    
                    
                    (18,540
                    )
                    
                    
                    11,994
                    
                    
                    
                    11,846Provision
      (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
                    
                    
                    
                    606Issuance
      of restricted stock
                    
                    
                    261
                    
                    
                    
                    (113
                    )
                    
                    
                    95Deferred
      compensation awards
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    13Exercised
      stock options pursuant to compensation plan
                    
                    
                    15
                    
                    
                    
                    -
                    
                    
                    
                    -Amortization
      of premiums and discounts on investments
                    
                    
                    12,115
                    
                    
                    
                    6,268
                    
                    
                    
                    4,748Net
      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
                    )
                    
                    
                    4,552Net
      increase (decrease) in operating liabilities:Trading
      liabilities
                    
                    
                    14,144
                    
                    
                    
                    13
                    
                    
                    
                    -Accrued
      interest payable
                    
                    
                    (5,671
                    )
                    
                    
                    11,332
                    
                    
                    
                    12,559Other
      liabilities
                    
                    
                    (6,088
                    )
                    
                    
                    3,631
                    
                    
                    
                    2,100Net
      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
                    
                    
                    
                    12,500Net
      acquisition of premises and equipment
                    
                    
                    (1,514
                    )
                    
                    
                    (1,595
                    )
                    
                    
                    (9,289
                    )Proceeds
      from the redemption of securities available-for-sale
                    
                    
                    58,074
                    
                    
                    
                    19,074
                    
                    
                    
                    20,000Proceeds
      from the maturity of securities held-to-maturity
                    
                    
                    -
                    
                    
                    
                    125,000
                    
                    
                    
                    9,000Proceeds
      from the sale of securities available-for-sale
                    
                    
                    229,877
                    
                    
                    
                    578,697
                    
                    
                    
                    129,731Purchases
      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
                    
                    
                    
                    9,659Net
      (decrease) increase in short-term borrowings  and securities
      sold under repurchase agreements
                    
                    
                    (291,789
                    )
                    
                    
                    (90,894
                    )
                    
                    
                    834,905Proceeds
      from borrowings and long-term debt
                    
                    
                    631,099
                    
                    
                    
                    613,126
                    
                    
                    
                    133,680Repayments
      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
                    
                    
                    
                    774,327Net
      increase in cash and cash equivalents
                    
                    
                    429,561
                    
                    
                    
                    97,701
                    
                    
                    
                    73,440Cash
      and cash equivalents at beginning of the year
                    
                    
                    396,028
                    
                    
                    
                    298,327
                    
                    
                    
                    224,887Cash
      and cash equivalents at end of the year
                    
                    
                    825,589
                    
                    
                    
                    396,028
                    
                    
                    
                    298,327Supplemental
      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, 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.
 
 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 Law Decree No. 9 of
February 1998, modified by 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.
 
 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”).
 
 ·
              Clavex
      LLC, incorporated on June 15, 2006, under the laws of the State of
      Delaware, USA, ceased operations in February
  2007.
 
 -
              The
      Feeder is an entity in which Bladex Head office owned 96.89% at December
      31, 2008, and 100% at December 31, 2007.  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 was also
      incorporated under the laws of the Cayman Islands.  The
      objective of the Fund is to achieve capital appreciation by investing in
      Latin American debt securities, stock securities, 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 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. 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 York Agency"), which
began operations on March 27, 1989.  The New York Agency is
principally engaged in financing transactions related to international trade,
primarily 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, and an international administrative
office in Miami, Florida, USA.
 
 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.
 
 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.
 
 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
 
 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 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 specialized 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.
 
 As
permitted by Emerging Issues Task Force (“EITF”) 85-12, “Retention of
Specialized Accounting for Investments in 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 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.  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 of demand deposits in banks and interest-bearing deposits in
banks with original maturities of three months or less, less deposits
pledged.
 
 g)
              Repurchase
      agreements
 
 Repurchase
agreements represent collateralized financing transactions used to increase
liquidity and are recorded at the amounts at which the securities will be
subsequently reacquired including accrued interest, as specified in the
respective agreements.  The Bank’s policy is to relinquish possession
of the securities sold under agreements to repurchase.  The market
value of securities to be repurchased is permanently monitored, and additional
collateral is obtained or provided where appropriate, to protect against credit
exposure.
 
 Transactions
similar to secured financing that do not meet certain criteria of Statement of
Financial Accounting Standards (“SFAS”) 140, “Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities”, to be
accounted 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 value 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, or on the present value of future expected cash flows using the
information related to credit losses, prepayment speeds, forward yield curves,
and discount rates commensurate with the risks involved.
 
 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.  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 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)
in the stockholders’ equity until they are realized. Realized gains and losses
from the sales 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-15
  Banco
Latinoamericano de Exportaciones, S. A.
 and
Subsidiaries
 
 Notes
to consolidated financial statements
 
 j)
              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.  Impairment of these investments is
evaluated periodically and declines that are determined to be
other-than-temporary are charged to earnings as impairment on
assets.
 
 k)
              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.  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.  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 is reversed and charged-off against current year’s
earnings.  Interest on non-accruing 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 current (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 debt restructurings are initially recorded
at fair value, with any gain or loss recorded as recovery or charge to the
allowance, and are subsequently accounted for as securities
available-for-sale.
  F-16
  Banco
Latinoamericano de Exportaciones, S. A.
 and
Subsidiaries
 
 Notes
to consolidated financial statements
 
 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.
 
 l)
              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 to 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
provision for losses on credits considered impaired and measured on a
case-by-case basis.  An allowance is established when the discounted
cash flows (or collateral value of observable market price) 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 such
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 (“S&P”) probabilities of default
      for high risk cases, 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, sames as based on best practices in the banking
      industry.  Management applies judgement and historical loss
      experience on a case-by-case basis.
 
 m)
              Fair
      value of guarantees including indirect indebtedness of
    others
 
 The Bank
recognizes 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)
              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)
              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 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 are amortized using
the straight-line method over their estimated useful lives, generally consisting
of five years.
  F-18
  Banco
Latinoamericano de Exportaciones, S. A.
 and
Subsidiaries
 
 Notes
to consolidated financial statements
 
 p)
              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)
              Cash
      and stock-based compensation plan
 
 The Bank
applies SFAS 123 (R) “Share-Based Payment” to account for compensation costs on
restricted stock and stock option plans.  Compensation cost is based
on the grant date fair value of both stocks 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. When options and stocks are exercised, the Bank’s policy is to reissue
shares from treasury stock.
 
 r)
              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 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 credit default swaps used for risk management
purposes that do not qualify for hedge accounting.  The fair value of
trading derivatives is reported as trading assets and 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 currency
swaps.  Derivative contracts designated and qualifying as fair value
hedge are reported as other assets and other liabilities 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.
 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 derivatives 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 hedge 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 income and recognized in the income statement when the hedged cash
flows affect earnings.  The ineffective portion is recognized in the
income statement as activities of derivative financial instruments and
hedging.  If the cash flow hedge relationship is terminated, related
amounts in other comprehensive income are reclassified into earnings when hedged
cash flows occur.
 
 s)
              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 translating monetary assets and liabilities into the U.S. dollar are
included in earnings.
 
 t)
              Income
      taxes
 
 ·
              Bladex
      Head Office is exempt from payment of income taxes in Panama in accordance
      with its Constitutive Law that grants special benefits, including the
      total exemption of income tax
payment.
 ·
              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. is subject to income taxes in Panama on profits from local
      operations.
 ·
              Bladex
      Representacao Ltd. 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 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)
              Minority
      interest in the investment fund
 
 The Bank
reports the 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.
  F-20
  Banco
Latinoamericano de Exportaciones, S. A.
 and
Subsidiaries
 
 Notes
to consolidated financial statements
 
 v)
              Earnings
      per share
 
 Basic
earnings per share is computed by dividing the income available to common
stockholders (the numerator) by the weighted average number of common shares
outstanding (the denominator) during the year.  Diluted earnings per
share measures performance incorporating the effect that potential common
shares, such as stock options 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)
              Recently
      issued accounting standards
 
 At the
end of 2007 and during 2008, the following new accounting standards,
modifications and interpretations to standards have been issued that are not in
effect as of the date of the consolidated balance sheet, and thus have not been
applied in the preparation of these consolidated financial
statements:
 
 SFAS 141 (R) – Business
Combinations
 
 SFAS 141
(R) modifies the accounting for business combinations and requires, with limited
exceptions, the acquirer in a business combination to recognize all assets
acquired, liabilities assumed, and any noncontrolling interest in the acquiree
at the acquisition date fair value.  This statement is effective for
financial statements issued for fiscal years and interim periods beginning on or
after December 15, 2008.  With respect to the effect of income taxes,
for business combinations in which the acquisition date was before 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.
 
 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, 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
                    )
                    
                    
                    25,838Net
      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
                    )
                    
                    
                    27,970Net
      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(In
      thousands of US$)Cash
      and due from banks
                    
                    
                    11,474
                    
                    
                    
                    596Interest
      bearing deposits in banks
                    
                    
                    889,119
                    
                    
                    
                    400,932Total
                    
                    
                    900,593
                    
                    
                    
                    401,528Less:Pledged
      deposits
                    
                    
                    75,004
                    
                    
                    
                    5,500825,589
                    
                    
                    
                    396,028
 
 On
December 31, 2008 and 2007, the Agency of New York had a pledged deposit with a
carrying value of $5.5 million, with the State of New York Banking Department,
as required by law since March 1994.  As of December 31, 2008 the Bank
has pledged deposits of $69.5 million to secure securities sold under repurchase
agreements and derivative financial instruments.
 
 5.
              Trading
      assets and liabilities
 
 The fair
value of trading assets and liabilities is as follows:
 
 December
      31,2008
                      
                      
                      2007(In
      thousands of US$)Trading
      assets:Sovereign
      bonds
                      
                      
                      21,965
                      
                      
                      
                      -Forward
      repurchase agreements
                      
                      
                      16,088
                      
                      
                      
                      -Retained
      interest on repurchase agreements
                      
                      
                      6,886
                      
                      
                      
                      -Total
                      
                      
                      44,939
                      
                      
                      
                      -Trading
      liabilities:Interest
      rate swaps
                      
                      
                      14,066
                      
                      
                      
                      -Credit
      default swap
                      
                      
                      91
                      
                      
                      
                      13Total
                      
                      
                      14,157
                      
                      
                      
                      13
 
 Forward
repurchase agreements correspond to derivative financial instruments from
transactions of securities sold under repurchase agreements accounted for as
sales based on SFAS 140 (see Notes 2(g) and 13).
 
 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-25
  Banco
Latinoamericano de Exportaciones, S. A.
 and
Subsidiaries
 
 Notes
to consolidated financial statements
 
 
 Trading
liabilities include interest rate swaps in U.S. dollars that hedged securities
available-for-sale that were subsequently transferred under repurchase
agreements.  The Bank discontinued hedge accounting prospectively at
the transfer date of these investments, and reports these interest rate swaps as
trading derivatives (see Note 13).
 
 6.
              Investment
      securities
 
 Securities
available-for-sale
 
 The
amortized cost, related unrealized gross gain (loss) and fair value of
securities available-for-sale, are as follows:
 December 31, 2008(In thousands of US$)
                        
                        Amortized
                          Cost
                        
                        
                        Unrealized
                          Gross Gain
                        
                        
                        Unrealized
                          Gross Loss
                        
                        
                        Fair
                          ValueCorporate
      debt:Brazil
                        
                        
                        27,245
                        
                        
                        
                        -
                        
                        
                        
                        4,644
                        
                        
                        
                        22,601Chile
                        
                        
                        42,140
                        
                        
                        
                        64
                        
                        
                        
                        1,397
                        
                        
                        
                        40,807Panama
                        
                        
                        20,015
                        
                        
                        
                        885
                        
                        
                        
                        -
                        
                        
                        
                        20,900United
      States of America
                        
                        
                        9,725
                        
                        
                        
                        -
                        
                        
                        
                        17
                        
                        
                        
                        9,708Venezuela
                        
                        
                        14,973
                        
                        
                        
                        252
                        
                        
                        
                        -
                        
                        
                        
                        15,225114,098
                        
                        
                        
                        1,201
                        
                        
                        
                        6,058
                        
                        
                        
                        109,241Government
      debt:Brazil
                        
                        
                        105,735
                        
                        
                        
                        2,620
                        
                        
                        
                        -
                        
                        
                        
                        108,355Colombia
                        
                        
                        169,026
                        
                        
                        
                        401
                        
                        
                        
                        6,690
                        
                        
                        
                        162,737Costa
      Rica
                        
                        
                        10,905
                        
                        
                        
                        -
                        
                        
                        
                        790
                        
                        
                        
                        10,115Dominican
      Republic
                        
                        
                        9,677
                        
                        
                        
                        -
                        
                        
                        
                        2,299
                        
                        
                        
                        7,378El
      Salvador
                        
                        
                        16,158
                        
                        
                        
                        -
                        
                        
                        
                        1,571
                        
                        
                        
                        14,587Mexico
                        
                        
                        97,839
                        
                        
                        
                        -
                        
                        
                        
                        5,883
                        
                        
                        
                        91,956Panama
                        
                        
                        43,281
                        
                        
                        
                        -
                        
                        
                        
                        1,681
                        
                        
                        
                        41,600Peru
                        
                        
                        28,881
                        
                        
                        
                        -
                        
                        
                        
                        1,943
                        
                        
                        
                        26,938Sweden
                        
                        
                        10,041
                        
                        
                        
                        -
                        
                        
                        
                        30
                        
                        
                        
                        10,011United
      States of America
                        
                        
                        24,999
                        
                        
                        
                        1
                        
                        
                        
                        -
                        
                        
                        
                        25,000516,542
                        
                        
                        
                        3,022
                        
                        
                        
                        20,887
                        
                        
                        
                        498,677Total
                        
                        
                        630,640
                        
                        
                        
                        4,223
                        
                        
                        
                        26,945
                        
                        
                        
                        607,918
 
 December 31, 2007(In thousands of US$)
                      
                      Amortized
                        Cost
                      
                      
                      UnrealizedGrossGain
                      
                      
                      UnrealizedGrossLoss
                      
                      
                      Fair
                        ValueCorporate
      debt:Brazil
                      
                      
                      67,971
                      
                      
                      
                      78
                      
                      
                      
                      660
                      
                      
                      
                      67,389Chile
                      
                      
                      42,849
                      
                      
                      
                      -
                      
                      
                      
                      549
                      
                      
                      
                      42,300Panama
                      
                      
                      20,019
                      
                      
                      
                      669
                      
                      
                      
                      -
                      
                      
                      
                      20,688130,839
                      
                      
                      
                      747
                      
                      
                      
                      1,209
                      
                      
                      
                      130,377Government
      debt:Argentina
                      
                      
                      19,546
                      
                      
                      
                      22
                      
                      
                      
                      28
                      
                      
                      
                      19,540Brazil
                      
                      
                      59,464
                      
                      
                      
                      1,897
                      
                      
                      
                      18
                      
                      
                      
                      61,343Colombia
                      
                      
                      123,084
                      
                      
                      
                      2,797
                      
                      
                      
                      206
                      
                      
                      
                      125,675Dominican
      Republic
                      
                      
                      13,093
                      
                      
                      
                      -
                      
                      
                      
                      182
                      
                      
                      
                      12,911El
      Salvador
                      
                      
                      10,984
                      
                      
                      
                      -
                      
                      
                      
                      84
                      
                      
                      
                      10,900Mexico
                      
                      
                      27,045
                      
                      
                      
                      -
                      
                      
                      
                      89
                      
                      
                      
                      26,956Panama
                      
                      
                      50,008
                      
                      
                      
                      1,462
                      
                      
                      
                      112
                      
                      
                      
                      51,358Peru
                      
                      
                      29,291
                      
                      
                      
                      24
                      
                      
                      
                      15
                      
                      
                      
                      29,300332,515
                      
                      
                      
                      6,202
                      
                      
                      
                      734
                      
                      
                      
                      337,983Total
                      
                      
                      463,354
                      
                      
                      
                      6,949
                      
                      
                      
                      1,943
                      
                      
                      
                      468,360
  F-26
 Banco
Latinoamericano de Exportaciones, S. A.
 and
Subsidiaries
 
 Notes
to consolidated financial statements
  At
December 31, 2008 and 2007, securities available-for-sale with a carrying value
of $480 million and $323 million, respectively, were pledged to secure
repurchase transactions accounted for as secured financings.
 
 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(In thousands of US$)
                      
                      Less than 12 months
                      
                      
                      12 months or longer
                      
                      
                      TotalFair
                        Value
                      
                      
                      Unrealized
                        Gross
                        Losses
                      
                      
                      Fair
                        Value
                      
                      
                      Unrealized
                        Gross
                        Losses
                      
                      
                      Fair
                        Value
                      
                      
                      Unrealized
                        Gross
                        LossesCorporate
      debt
                      
                      
                      52,905
                      
                      
                      
                      5,767
                      
                      
                      
                      5,024
                      
                      
                      
                      291
                      
                      
                      
                      57,929
                      
                      
                      
                      6,058Government
      debt
                      
                      
                      270,757
                      
                      
                      
                      18,588
                      
                      
                      
                      7,377
                      
                      
                      
                      2,299
                      
                      
                      
                      278,134
                      
                      
                      
                      20,887323,662
                      
                      
                      
                      24,355
                      
                      
                      
                      12,401
                      
                      
                      
                      2,590
                      
                      
                      
                      336,063
                      
                      
                      
                      26,945
 
 December 31, 2007(In thousands of US$)
                    
                    Less than 12 months
                    
                    
                    12 months or longer
                    
                    
                    TotalFair
                      Value
                    
                    
                    Unrealized
                      Gross
                      Losses
                    
                    
                    Fair
                      Value
                    
                    
                    Unrealized
                      Gross
                      Losses
                    
                    
                    Fair
                      Value
                    
                    
                    Unrealized
                      Gross
                      LossesCorporate
      debt
                    
                    
                    68,244
                    
                    
                    
                    1,107
                    
                    
                    
                    30,495
                    
                    
                    
                    102
                    
                    
                    
                    98,739
                    
                    
                    
                    1,209Government
      debt
                    
                    
                    113,093
                    
                    
                    
                    706
                    
                    
                    
                    15,962
                    
                    
                    
                    28
                    
                    
                    
                    129,055
                    
                    
                    
                    734181,337
                    
                    
                    
                    1,813
                    
                    
                    
                    46,457
                    
                    
                    
                    130
                    
                    
                    
                    227,794
                    
                    
                    
                    1,943
 
 Gross
unrealized losses are related mainly to an overall increase in market interest
rates and market credit spreads 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
government
debt that has shown price declines for over 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.  The price of the bonds in question has seen a significant
recovery after December 31, 2008.  As a result, the Bank does not
consider this exposure to be other-than-temporarily
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 31,2008
                    
                    
                    2007
                    
                    
                    2006Gains
                    
                    
                    2,173
                    
                    
                    
                    9,550
                    
                    
                    
                    2,568Losses
                    
                    
                    (2,106
                    )
                    
                    
                    (431
                    )
                    
                    
                    -Net
                    
                    
                    67
                    
                    
                    
                    9,119
                    
                    
                    
                    2,568
 
 Losses on
securities available-for-sale during 2008 are 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).
 
 An
analysis of realized losses is described below:
 
 Year
      ended December 31,(In
      thousands of US$)
                      
                      2008
                      
                      
                      2007
                      
                      
                      2006Realized
      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
                      )
                      
                      
                      -
 
 The
amortized cost and fair value of securities available-for-sale by contractual
maturity at December 31, 2008, are shown in the following table:
 
 (In
      thousands of US$)
                  
                  Amortized
                    Cost
                  
                  
                  Fair
                    ValueDue
      within 1 year
                  
                  
                  59,889
                  
                  
                  
                  59,906After
      1 year but within 5 years
                  
                  
                  285,855
                  
                  
                  
                  276,023After
      5 years but within 10 years
                  
                  
                  284,896
                  
                  
                  
                  271,989630,640
                  
                  
                  
                  607,918
  F-28
  Banco
Latinoamericano de Exportaciones, S. A.
 and
Subsidiaries
 
 Notes
to consolidated financial statements
 
 
 Securities
held-to-maturity
 
 The
amortized cost, related unrealized gross gain (loss) and fair value of
securities held-to-maturity are as follows:
 
 December 31, 2008(In thousands of US$)
                    
                    Amortized
                      Cost
                    
                    
                    Unrealized
                      Gross Gain
                    
                    
                    Unrealized
                      Gross Loss
                    
                    
                    Fair
                      ValueCorporate
      debt:United
      States of America
                    
                    
                    28,410
                    
                    
                    
                    -
                    
                    
                    
                    266
                    
                    
                    
                    28,144Total
                    
                    
                    28,410
                    
                    
                    
                    -
                    
                    
                    
                    266
                    
                    
                    
                    28,144
 
 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
significant gross unrealized losses for more than 12 months.At December 31, 2008,
securities held-to-maturity with a carrying value of $28.4 million secured
repurchase agreements accounted for as secured borrowings.
 
 7.
              Investment
      fund
 
 The
balance in the investment fund of $150.7 million in 2008 and $81.8 million in
2007 represents the participation of the Feeder in the net asset value (NAV) of
the Fund.
 
 At
December 31, 2008, the Feeder owns 98.83% of the Fund with a total of 137,811.6
shares issued, divided in 4,320 “Class A” shares and 133,491.6 “Class B”
shares.  At December 31, 2007, the Feeder was the only investor of the
Fund.
 
 The Fund
has issued “Class A”, “Class B”, “Class C” and “Class D” shares and
administrative shares.  “Class A” and “Class B” shares are
participating shares in 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 net gains (losses) of the Fund; they are only
entitled to the performance allocation.  The Bank owns the Fund’s
administrative shares.
  F-29
  Banco
Latinoamericano de Exportaciones, S. A.
 and
Subsidiaries
 
 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
                    
                    
                    2007Assets:Cash
      (including pledged deposits of $7,994 in 2008 and $53,808 in
      2007)
                    
                    
                    148,501
                    
                    
                    
                    76,051Deposits
      with related parties
                    
                    
                    -
                    
                    
                    
                    50,273Bonds
                    
                    
                    21,705
                    
                    
                    
                    16,097Shares
      in indexed funds
                    
                    
                    1,745
                    
                    
                    
                    36,315Derivative
      financial instruments
                    
                    
                    3,481
                    
                    
                    
                    185Other
      assets (including interest receivable for $83 with related parties in
      2007)
                    
                    
                    2,200
                    
                    
                    
                    45,242Total
      assets
                    
                    
                    177,632
                    
                    
                    
                    224,163Liabilities:Bonds
      sold short
                    
                    
                    11,990
                    
                    
                    
                    31,734Shares
      in indexed funds sold short
                    
                    
                    2,420
                    
                    
                    
                    57,863Derivative
      financial instruments
                    
                    
                    696
                    
                    
                    
                    1,155Fees
      payable to related parties
                    
                    
                    -
                    
                    
                    
                    3,225Other
      liabilities (including $495 with related parties in 2007)
                    
                    
                    11,831
                    
                    
                    
                    1,704Total
      liabilities
                    
                    
                    26,937
                    
                    
                    
                    95,681150,695
                    
                    
                    
                    128,482Less:
      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
                    
                    
                    2007Net
      capital paid-in on shares of capital stock
                    
                    
                    137,992
                    
                    
                    
                    100,000Distributable
      earnings
                    
                    
                    12,703
                    
                    
                    
                    28,482Net
      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
                    
                    
                    2006Increase
      (decrease) in net assets from operations:Net
      investment income (loss)
                    
                    
                    (3,629
                    )
                    
                    
                    438
                    
                    
                    
                    3,075Net
      realized gain (loss) on investments
                    
                    
                    20,964
                    
                    
                    
                    32,803
                    
                    
                    
                    (4,235
                    )Net
      change in unrealized gain (loss) on investments
                    
                    
                    393
                    
                    
                    
                    (8,925
                    )
                    
                    
                    5,326Net
      increase in net assets resulting from operations
                    
                    
                    17,728
                    
                    
                    
                    24,316
                    
                    
                    
                    4,166Capital
      contributions
                    
                    
                    6,000
                    
                    
                    
                    -
                    
                    
                    
                    100,000Capital
      redemptions
                    
                    
                    (1,515
                    )
                    
                    
                    -
                    
                    
                    
                    -Total
      increase
                    
                    
                    22,213
                    
                    
                    
                    24,316
                    
                    
                    
                    104,166Net
      assetsBeginning
      of year
                    
                    
                    128,482
                    
                    
                    
                    104,166
                    
                    
                    
                    -End
      of year
                    
                    
                    150,695
                    
                    
                    
                    128,482
                    
                    
                    
                    104,166
 
 8.
                Loans
 
 The
following table set forth details of the Bank’s loan portfolio:
 
 (In
      thousands of US$)
                    
                    December
      31,2008
                    
                    
                    2007Corporate
                    
                    
                    1,627,721
                    
                    
                    
                    1,886,580Banks:Private
                    
                    
                    571,665
                    
                    
                    
                    1,485,313State-owned
                    
                    
                    347,403
                    
                    
                    
                    241,322Other
                    
                    
                    71,854
                    
                    
                    
                    118,623Total
                    
                    
                    2,618,643
                    
                    
                    
                    3,731,838
 
 The
composition of the loan portfolio by industry is as follows:
 
 (In
      thousands of US$)
                    
                    December
      31,2008
                    
                    
                    2007Industrial
                    
                    
                    1,020,015
                    
                    
                    
                    1,333,426Banking
      and financing
                    
                    
                    924,286
                    
                    
                    
                    1,731,961Agricultural
                    
                    
                    332,582
                    
                    
                    
                    271,931Services
                    
                    
                    111,531
                    
                    
                    
                    96,795Other
                    
                    
                    230,229
                    
                    
                    
                    297,725Total
                    
                    
                    2,618,643
                    
                    
                    
                    3,731,838
  F-31
 Banco
Latinoamericano de Exportaciones, S. A.
 and
Subsidiaries
 
 Notes
to consolidated financial statements
  Loan
maturities are summarized as follows:
 
 (In
      thousands of US$)
                      
                      December
      31,2008
                      
                      
                      2007Maturities:Up
      to 1 month
                      
                      
                      236,679
                      
                      
                      
                      667,612From
      1 month to 3 months
                      
                      
                      488,471
                      
                      
                      
                      667,393From
      3 months to 6 months
                      
                      
                      315,200
                      
                      
                      
                      572,597From
      6 months to 1 year
                      
                      
                      556,744
                      
                      
                      
                      617,482From
      1 year to 2 years
                      
                      
                      345,471
                      
                      
                      
                      399,655From
      2 years to 5 years
                      
                      
                      622,080
                      
                      
                      
                      729,786More
      than 5 years
                      
                      
                      53,998
                      
                      
                      
                      77,3132,618,643
                      
                      
                      
                      3,731,838
 
 The
following table provides a breakdown of loans by country risk:
 
 (In
      thousands of US$)
                    
                    December
      31,2008
                    
                    
                    2007Country:Argentina
                    
                    
                    150,988
                    
                    
                    
                    263,814Bolivia
                    
                    
                    -
                    
                    
                    
                    5,000Brazil
                    
                    
                    1,289,424
                    
                    
                    
                    1,379,394Chile
                    
                    
                    8,333
                    
                    
                    
                    10,000Colombia
                    
                    
                    284,901
                    
                    
                    
                    400,458Costa
      Rica
                    
                    
                    54,855
                    
                    
                    
                    76,506Dominican
      Republic
                    
                    
                    48,025
                    
                    
                    
                    28,770Ecuador
                    
                    
                    36,364
                    
                    
                    
                    60,529El
      Salvador
                    
                    
                    75,857
                    
                    
                    
                    46,563Guatemala
                    
                    
                    60,784
                    
                    
                    
                    95,902Honduras
                    
                    
                    44,925
                    
                    
                    
                    48,631Jamaica
                    
                    
                    14,678
                    
                    
                    
                    77,401Mexico
                    
                    
                    380,209
                    
                    
                    
                    410,164Nicaragua
                    
                    
                    3,993
                    
                    
                    
                    12,616Panama
                    
                    
                    47,495
                    
                    
                    
                    139,720Peru
                    
                    
                    49,812
                    
                    
                    
                    454,226Trinidad
      and Tobago
                    
                    
                    23,000
                    
                    
                    
                    87,565Uruguay
                    
                    
                    45,000
                    
                    
                    
                    -Venezuela
                    
                    
                    -
                    
                    
                    
                    134,5792,618,643
                    
                    
                    
                    3,731,838
 
 The fixed
and floating interest rate distribution of the loan portfolio is as
follows:
 
 (In
      thousands of US$)
                    
                    December
      31,2008
                    
                    
                    2007Fixed
      interest rates
                    
                    
                    933,234
                    
                    
                    
                    1,855,540Floating
      interest rates
                    
                    
                    1,685,409
                    
                    
                    
                    1,876,2982,618,643
                    
                    
                    
                    3,731,838
  F-32
  Banco
Latinoamericano de Exportaciones, S. A.
 and
Subsidiaries
 
 Notes
to consolidated financial statements
 
 At
December 31, 2008 and 2007, 78% and 84%, 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:
  (In
      thousands of US$)
                      
                      December 31,2008
                      
                      
                      2007
                      
                      
                      2006Interest
      income collected on non-accruing loans
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      2,721
 
 The
following is a summary of information pertaining to impaired loans:
 
 (In thousands of US$)
                        
                        December 31,2008
                        
                        
                        2007
                        
                        
                        2006Average
      balance of impaired loans during the year
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        18,168Interest
      income collected on impaired loans
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        2,721
 
 At
December 31, 2008 and 2007, the Bank has credit transactions in the normal
course of business with 20% and 18%, respectively, of its Class “A” and “B”
stockholders (see Note 16).  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.  At December 31, 2008 and 2007, approximately 16% and 22%,
respectively, of the outstanding loan portfolio is placed with the Bank’s Class
“A” and “B” stockholders and their related parties.  At December 31,
2008, 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, the Bank sold
loans with a book value of $25.6 million, with a net gain of $54
thousand.
  F-33
  Banco
Latinoamericano de Exportaciones, S. A.
 and
Subsidiaries
 
 Notes
to consolidated financial statements
 
 9.
                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 31,2008
                      
                      
                      2007
                      
                      
                      2006Balance
      at beginning of the year
                      
                      
                      69,643
                      
                      
                      
                      51,266
                      
                      
                      
                      39,448Provision
      (reversal) for loan losses
                      
                      
                      (18,540
                      )
                      
                      
                      11,994
                      
                      
                      
                      11,846Loan
      recoveries
                      
                      
                      3,545
                      
                      
                      
                      6,434
                      
                      
                      
                      3Loans
      written-off against the allowance for loan losses
                      
                      
                      -
                      
                      
                      
                      (51
                      )
                      
                      
                      (31
                      )Balance
      at end of the year
                      
                      
                      54,648
                      
                      
                      
                      69,643
                      
                      
                      
                      51,266
 
 Provision
      (reversal) of provision for 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.
 
 b)   Reserve
for losses on off-balance sheet credit risk:
 
 (In
      thousands of US$)
                        
                        December
      31,2008
                        
                        
                        2007
                        
                        
                        2006Balance
      at beginning of the year
                        
                        
                        13,727
                        
                        
                        
                        27,195
                        
                        
                        
                        52,086Provision
      (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
 
 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.
              Premises
      and equipment
 
 A
breakdown of cost and accumulated depreciation and amortization for premises and
equipment as of December 31, 2008 and 2007 is as follows:
 
 (In
      thousands of US$)
                      
                      December
      31,2008
                      
                      
                      2007Land
                      
                      
                      462
                      
                      
                      
                      462Building
      and improvements
                      
                      
                      4,958
                      
                      
                      
                      5,163Furniture
      and equipment
                      
                      
                      14,144
                      
                      
                      
                      14,25519,564
                      
                      
                      
                      19,880Less:
      accumulated depreciation and amortization
                      
                      
                      11,594
                      
                      
                      
                      9,7047,970
                      
                      
                      
                      10,176
  F-34
  Banco
Latinoamericano de Exportaciones, 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 is included in the depreciation, amortization and impairment
of premises and equipment expense line.
 11.
              Other
      assets
 
 At December 31, 2008 and 2007, other
assets include an equity investment in a private investment fund with a carrying
value of$1.5 million and $2.4 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, the Bank recorded an
impairment of $767 thousand on this investment.  At December 31, 2008,
the Bank is committed to invest $1.4 million 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.
              Deposits
 
 The
      maturity profile of the Bank’s deposits is as
  follows:
 
 (In
      thousands of US$)
                    
                    December
      31,2008
                    
                    
                    2007Demand
                    
                    
                    113,022
                    
                    
                    
                    111,496Up
      to 1 month
                    
                    
                    766,268
                    
                    
                    
                    1,060,706From
      1 month to 3 months
                    
                    
                    262,443
                    
                    
                    
                    206,889From
      3 months to 6 months
                    
                    
                    27,315
                    
                    
                    
                    73,280From
      6 months to 1 year
                    
                    
                    -
                    
                    
                    
                    10,0001,169,048
                    
                    
                    
                    1,462,371
 
 The
following table presents additional information about deposits:
 
 (In
      thousands of US$)
                    
                    December
      31,2008
                    
                    
                    2007Aggregate
      amounts of time deposits of $100,000 or more
                    
                    
                    1,056,026
                    
                    
                    
                    1,350,875Aggregate
      amounts of deposits in offices outside Panama
                    
                    
                    380,765
                    
                    
                    
                    290,501Interest
      expense paid to deposits in offices outside Panama
                    
                    
                    11,428
                    
                    
                    
                    22,636
 
 13.
              Securities
      sold under repurchase agreements
 
 The
Bank’s financing transactions under repurchase agreements amounted to $474.2
million and $283.2 million as of December 31, 2008 and 2007,
respectively.
  F-35
  Banco
Latinoamericano de Exportaciones, S. A.
 and
Subsidiaries
 
 Notes
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 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 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.  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 a liquidity and credit crisis
in the financial markets near the end of 2008.  These are short-term
repurchase agreements with anticipated maturity dates within the first quarter
of 2009, transacted with counterparties of high repute, for which reason the
Bank does not believe any difficulty exists with respect to reacquiring the
securities that guaranteed these transactions.  At the trade date of
these agreements, the Bank transferred available-for-sale securities and
received cash and rights to repurchase transferred securities at the maturity of
the repurchase agreement.  A summary of the repurchase agreements and
their effect in the results of year 2008 is presented below:
 
 (In
      thousands of US$)
                          
                          2008Cash
      received from counterparties
                          
                          
                          147,301Amortized
      cost of securities at the transfer dates
                          
                          
                          (192,907
                          )Fair
      value of forward repurchase agreements
                          
                          
                          36,451Retained
      interest on securities transferred under repurchase
    agreements
                          
                          
                          7,128Recognized
      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 are reported in 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.  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$)
                      
                      2008Changes
      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$)
                      
                      2008Loss
      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-37
  Banco
Latinoamericano de Exportaciones, S. A.
 and
Subsidiaries
 
 Notes
to consolidated financial statements
 
 14.
              Short-term
      borrowings
 
 The
breakdown of short-term borrowings due to banks and other creditors is as
follows:
 
 (In
      thousands of US$)
                        
                        December
      31,2008
                        
                        
                        2007At
      fixed interest rates:Advances
      from corporations
                        
                        
                        30,000
                        
                        
                        
                        25,000Advances
      from banks
                        
                        
                        708,747
                        
                        
                        
                        1,181,500738,747
                        
                        
                        
                        1,206,500At
      floating interest rates:Advances
      from banks
                        
                        
                        -
                        
                        
                        
                        15,000Total
      short-term borrowings
                        
                        
                        738,747
                        
                        
                        
                        1,221,500Average
      outstanding balance during the year
                        
                        
                        1,088,947
                        
                        
                        
                        1,272,986Maximum
      balance at any month-end
                        
                        
                        1,254,050
                        
                        
                        
                        1,221,500Range
      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
 
 Notes
to consolidated financial statements
 
 15.
              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) is as follows:
 
 (In
      thousands of US$)
                        
                        December 31,2008
                        
                        
                        2007Borrowings:At
      fixed interest rates with due dates from January 2009 to September
      2013
                        
                        
                        138,786
                        
                        
                        
                        235,578At
      floating interest rates with due dates from June 2009 to July
      2013
                        
                        
                        1,022,032
                        
                        
                        
                        708,690Total
      borrowings
                        
                        
                        1,160,818
                        
                        
                        
                        944,268Debt:At
      fixed interest rates with due dates in November 2014
                        
                        
                        39,134
                        
                        
                        
                        41,048At
      floating interest rates with due dates in October 2010
                        
                        
                        5,000
                        
                        
                        
                        25,000Total
      debt
                        
                        
                        44,134
                        
                        
                        
                        66,048Total
      borrowings and long-term debt outstanding
                        
                        
                        1,204,952
                        
                        
                        
                        1,010,316Average
      outstanding balance during the year
                        
                        
                        1,182,065
                        
                        
                        
                        808,890Maximum
      outstanding balance at any month-end
                        
                        
                        1,330,422
                        
                        
                        
                        1,059,224Range
      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
                        %
 
 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.  At December 31, 2008, the Bank was in compliance with all
covenants.
 
 The
future maturities of long-term debt and borrowings outstanding at December 31,
2008, are as follows:
 
 (In
      thousands of US$)Due in:
                    
                    Outstanding2009
                    
                    
                    210,2802010
                    
                    
                    470,7812011
                    
                    
                    26,9662012
                    
                    
                    151,8462013
                    
                    
                    305,9442014
                    
                    
                    39,1351,204,952
 
 16.
              Common
      stock
 
 The
      Bank’s common stock is divided into three
  categories:
 
 1)
              Class
      “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”; shares may only be issued to banks or financial
      institutions.
 3)
              Class
      “E”; shares may be issued to any person whether a natural person or a
      legal entity.
 
 The
holders of Class “B” shares have the right to convert or exchange their Class
“B” shares, at any time, and without restriction, for 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:
 
 (Share
      units)
                        
                        Class “A”
                        
                        
                        Class “B”
                        
                        
                        Class “E”
                        
                        
                        TotalAuthorized
                        
                        
                        40,000,000
                        
                        
                        
                        40,000,000
                        
                        
                        
                        100,000,000
                        
                        
                        
                        180,000,000Outstanding
      at January 1, 2006
                        
                        
                        6,342,189
                        
                        
                        
                        3,214,344
                        
                        
                        
                        28,540,242
                        
                        
                        
                        38,096,775Conversions
                        
                        
                        -
                        
                        
                        
                        (488,954
                        )
                        
                        
                        488,954
                        
                        
                        
                        -Restricted
      stock issued
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        5,967
                        
                        
                        
                        5,967Repurchased
      stock
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (1,774,818
                        )
                        
                        
                        (1,774,818
                        )Exercised
      stock options - compensation plans
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        1,150
                        
                        
                        
                        1,150Outstanding
      at December 31, 2006
                        
                        
                        6,342,189
                        
                        
                        
                        2,725,390
                        
                        
                        
                        27,261,495
                        
                        
                        
                        36,329,074Conversions
                        
                        
                        -
                        
                        
                        
                        (64,540
                        )
                        
                        
                        64,540
                        
                        
                        
                        -Accumulated
      difference in fractional shares in conversion of common
    stock
                        
                        
                        -
                        
                        
                        
                        (3
                        )
                        
                        
                        -
                        
                        
                        
                        (3
                        )Restricted
      stock issued
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        22,240
                        
                        
                        
                        22,240Exercised
      stock options - compensation plans
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        18,838
                        
                        
                        
                        18,838Outstanding
      at December 31, 2007
                        
                        
                        6,342,189
                        
                        
                        
                        2,660,847
                        
                        
                        
                        27,367,113
                        
                        
                        
                        36,370,149Conversions
                        
                        
                        -
                        
                        
                        
                        (43,063
                        )
                        
                        
                        43,063
                        
                        
                        
                        -Restricted
      stock issued
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        31,246
                        
                        
                        
                        31,246Exercised
      stock options - compensation plans
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        11,693
                        
                        
                        
                        11,693Outstanding
      at December 31, 2008
                        
                        
                        6,342,189
                        
                        
                        
                        2,617,784
                        
                        
                        
                        27,453,115
                        
                        
                        
                        36,413,088
 
 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”
                      
                      
                      TotalShares
                      
                      
                      Amount
                      
                      
                      Shares
                      
                      
                      Amount
                      
                      
                      Shares
                      
                      
                      Amount
                      
                      
                      Shares
                      
                      
                      AmountOutstanding
      at January 1, 2006
                      
                      
                      318,140
                      
                      
                      
                      10,708
                      
                      
                      
                      568,010
                      
                      
                      
                      15,655
                      
                      
                      
                      2,996,920
                      
                      
                      
                      79,919
                      
                      
                      
                      3,883,070
                      
                      
                      
                      106,282Repurchased
      during 2006
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      1,774,818
                      
                      
                      
                      28,657
                      
                      
                      
                      1,774,818
                      
                      
                      
                      28,657Restricted 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
                      
                      
                      
                      134,768Restricted 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
                      
                      
                      
                      133,788Restricted 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-41
 Banco
Latinoamericano de Exportaciones, S. A.
 and
Subsidiaries
 
 Notes
to consolidated financial statements
  17.
                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.
 
 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” 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 award 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
2008, the Board of Directors granted restricted stocks to Directors and stock
options and restricted stock units to certain Executives of the Bank, as
follows:
 
 Restricted stocks –
Directors
 
 In July
2008, the Board of Directors granted 31,246 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”
shares on July 11, 2008.  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, of which $44 thousand were charged against income during
2008.  The remaining cost pending amortization of $431 will be
amortized over 4.54 years.
 
 A summary
at December 31, 2008 of the restricted stock granted to Directors during the
year 2008 is presented below:
 
 2008Shares
                            
                            
                            Weighted
                              AverageGrant
                              Date Fair ValueOutstanding
      at January 1, 2008
                            
                            
                            -
                            
                            
                            
                            -Granted
                            
                            
                            31,246
                            
                            
                            $
                            15.20Vested
                            
                            
                            -
                            
                            
                            
                            -Outstanding
      at December 31, 2008
                            
                            
                            31,246
                            
                            
                            $
                            15.20Expected
      to vest
                            
                            
                            31,246
                            
                            
                            $
                            15.20
  F-42
  Banco
Latinoamericano de Exportaciones, S. A.
 and
Subsidiaries
 
 Notes
to consolidated financial statements
  Restricted Stock Units and
Stock Purchase Options granted to certain Executives
 
 In
February 2008, the Board of Directors granted stock purchase options and
restricted stock units to certain Executives of the Bank with a grant date fair
value of $1.6 million, where $818 thousand were granted in restricted stock
units, and $818 thousand in stock purchase options.
 
 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 2008 due to the
amortization of this grant totaled $178 thousand.  The remaining
compensation cost pending amortization of $628 thousand will be amortized over
3.12 years.
 
 A summary
as of December 31, 2008 of the status of the restricted stocks units granted to
certain Executives and changes during the year 2008 are presented
below:
 
 Stock Units
                        
                        
                        Weighted
                          Average Grant
                          Date Fair
                          Value
                        
                        
                        Weighted
                          Average
                          Remaining
                          Contractual
                          TermOutstanding
      at January 1, 2008
                        
                        
                        -
                        
                        
                        
                        -Granted
                        
                        
                        52,982
                        
                        
                        $
                        15.43Forfeited
                        
                        
                        (756
                        )
                        
                        
                        15.43Vested
                        
                        
                        -
                        
                        
                        
                        -Outstanding
      at December 31, 2008
                        
                        
                        52,226
                        
                        
                        $
                        15.43
                        
                        
                        3.12
      yearsExpected
      to vest
                        
                        
                        51,304
                        
                        
                        $
                        15.43
                        
                        
                        3.12
      years
 
 Stock purchase
options:
 
 The fair
value of stock purchase options granted to certain Executives during 2008 was
estimated using the Black-Scholes option-pricing model, based on the following
factors:
 
 2008Weighted
      average fair value option
                            
                            $
                            3.52Weighted
      average expected terms, in years
                            
                            
                            5.50Expected
      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
 
 These
options expire seven years after the grant date and were exercisable beginning
on the fourth anniversary 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 2008 as a result of the amortization of this
plan amounted to $178 thousand.  The remaining compensation cost
pending amortization of $628 thousand will be amortized over a period of 3.12
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
                        
                        
                        $
                        15.43Forfeited
                        
                        
                        (3,318
                        )
                        
                        
                        15.43Outstanding
      at December 31, 2008
                        
                        
                        229,085
                        
                        
                        $
                        15.43
                        
                        
                        6.12
      years
                        
                        
                        $
                        -Expected
      to vest
                        
                        
                        225,036
                        
                        
                        $
                        15.43
                        
                        
                        6.12
      years
                        
                        
                        $
                        -
 
 B.  Restricted Stock –
Directors
 
 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, 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.  The restricted stock had a cliff vesting period of
five years after 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 of 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 costs
charged against income totaled $217 thousand, $118 thousand and $65 thousand in
2008, 2007 and 2006, respectively.  At December 31, 2008, the Bank had
unrecognized compensation costs for $371 thousand related to this plan that will
be amortized over 3.26 years.
 
 A summary
as of December 31, 2008 of restricted stocks granted to Directors under this
plan and changes during 2006, 2007 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
                          ValueNon
      vested at January 1, 2006
                        
                        
                        21,109
                        
                        
                        $
                        13.49Granted
                        
                        
                        5,967
                        
                        
                        
                        15.90Vested
                        
                        
                        -
                        
                        
                        
                        -Non
      vested at December 31, 2006
                        
                        
                        27,076
                        
                        
                        
                        14.02Granted
                        
                        
                        22,240
                        
                        
                        
                        21.35Vested
                        
                        
                        (4,860
                        )
                        
                        
                        12.34Non
      vested at December 31, 2007
                        
                        
                        44,456
                        
                        
                        
                        17.87Granted
                        
                        
                        -
                        
                        
                        
                        -Vested
                        
                        
                        (23,037
                        )
                        
                        
                        15.83Non
      vested at December 31, 2008
                        
                        
                        21,419
                        
                        
                        $
                        20.07Expected
      to vest
                        
                        
                        21,419
                        
                        
                        $
                        20.07
 
 The total
fair value of vested stocks during the years ended December 31, 2008 and 2007
was $365 thousand and $60 thousand, respectively.
 
 C.  Stock Option Plan 2006 –
Directors and Executives
 
 On
December 12, 2006, the Bank’s Board of Directors adopted the 2006 Stock Option
Plan that was terminated in 2008.  The options granted under this plan
expire seven years after the grant date and were exercisable beginning on the
fourth anniversary 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.
 
 Related
cost charged against income as a result of the amortization of options granted
under this compensation plan amounted to $236 thousand in 2008 and $302 thousand
in 2007.  The compensation cost pending amortization at December 31,
2008 for $468 thousand 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:
 
 2007Weighted
      average fair value option
                      
                      $
                      4.72Weighted
      average expected terms, in years
                      
                      
                      5.50Expected
      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
 
 A summary
as of December 31, 2008 of the status of the share options granted to Directors
and certain Executives and changes during 2007 and 2008 is presented
below:
 
 Options
                        
                        
                        Weighted
                          Average
                          Exercise Price
                        
                        
                        Weighted
                          Average
                          Remaining
                          Contractual
                          Term
                        
                        
                        Aggregate
                          Intrinsic
                          Value
                          (Thousands)Outstanding
      at January 1, 2007
                        
                        
                        -
                        
                        
                        
                        -Granted
                        
                        
                        208,765
                        
                        
                        $
                        16.34Forfeited
                        
                        
                        -
                        
                        
                        
                        -Outstanding
      at December 31, 2007
                        
                        
                        208,765
                        
                        
                        
                        16.34Forfeited
                        
                        
                        (1,059
                        )
                        
                        
                        16.34Outstanding
      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
                        
                        
                        $
                        -
 
 D.  Indexed Stock Option
Plan
 
 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 expired in seven years with
a cliff-vesting period of four years.  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 remaining compensation
costs 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.  Related costs charged against income amounted to $440
thousand, $828 thousand 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:
 
 2006Weighted
      average fair value option
                          
                          $
                          4.67Weighted
      average expected term, in years
                          
                          
                          7.00Expected
      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, 2008 and changes during the years 2006, 2007 and 2008 of the
indexed stock purchase options is presented below:
 Options
                                  
                                  
                                  Weighted
                                    Average
                                    Exercise Price
                                  
                                  
                                  Weighted
                                    Average
                                    Remaining
                                    Contractual
                                    Term
                                  
                                  
                                  Aggregate
                                    Intrinsic
                                    Value
                                    (Thousands)Outstanding
      at January 1, 2006
                                  
                                  
                                  307,013
                                  
                                  
                                  $
                                  12.42Granted
                                  
                                  
                                  216,710
                                  
                                  
                                  
                                  16.00Forfeited
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Outstanding
      at December 31, 2006
                                  
                                  
                                  523,723
                                  
                                  
                                  
                                  14.53Forfeited
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Exercised
                                  
                                  
                                  (18,838
                                  )
                                  
                                  
                                  8.50Outstanding
      at December 31, 2007
                                  
                                  
                                  504,885
                                  
                                  
                                  
                                  14.47Forfeited
                                  
                                  
                                  (26,574
                                  )
                                  
                                  
                                  -Exercised
                                  
                                  
                                  (10,662
                                  )
                                  
                                  
                                  14.19Outstanding
      at December 31, 2008
                                  
                                  
                                  467,649
                                  
                                  
                                  $
                                  12.93
                                  
                                  
                                  5.90
      years
                                  
                                  
                                  $
                                  668Exercisable
      at December 31, 2008
                                  
                                  
                                  325,113
                                  
                                  
                                  $
                                  12.41
                                  
                                  
                                  5.75
      years
                                  
                                  
                                  $
                                  634Expected
      to be exercisable
                                  
                                  
                                  142,536
                                  
                                  
                                  $
                                  14.12
                                  
                                  
                                  6.25
      years
                                  
                                  
                                  $
                                  34
 
 The
intrinsic value of options exercised during the years ended December 31, 2008
and 2007 was $41 thousand and $228 thousand, respectively.  During the
years ended December 31, 2008 and 2007, the Bank received $151 thousand and $160
thousand, respectively, from exercised options.  During the year 2006,
no indexed stock options were exercised.
 
 E.  Stock Option Plans -
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; therefore, no
additional stock options have been granted.
  F-47
  Banco
Latinoamericano de Exportaciones, S. A.
 and
Subsidiaries
 
 Notes
to consolidated financial statements
  A summary
of the status as of December 31, 2008 of the stock options granted and changes
during 2008 of these option plans is presented below:
 Options
                              
                              
                              Weighted
                                Average
                                Exercise Price
                              
                              
                              Weighted
                                Average
                                Remaining
                                Contractual
                                Term
                              
                              
                              Aggregate
                                Intrinsic
                                Value
                                (Thousands)Outstanding
      at January 1, 2008
                              
                              
                              38,163
                              
                              
                              $
                              31.46Forfeited
                              
                              
                              (15,163
                              )
                              
                              
                              27.63Expired
                              
                              
                              (8,650
                              )
                              
                              
                              42.56Outstanding
      at December 31, 2008
                              
                              
                              14,350
                              
                              
                              $
                              28.81
                              
                              
                              1.54
      years
                              
                              
                              $
                              -Exercisable
      at December 31, 2008
                              
                              
                              14,350
                              
                              
                              $
                              28.81
                              
                              
                              1.54
      years
                              
                              
                              $
                              -Expected
      to be exercised
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
 
 F.  Other employee
plans
 
 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 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.
 
 18.
              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
                            
                            
                            2006Net
      income available to common stockholders for both, basic and diluted
      EPS
                            
                            
                            55,119
                            
                            
                            
                            72,177
                            
                            
                            
                            57,902Weighted
      average common shares outstanding - applicable to basic
EPS
                            
                            
                            36,388
                            
                            
                            
                            36,349
                            
                            
                            
                            37,065Basic
      earnings per share
                            
                            
                            1.51
                            
                            
                            
                            1.99
                            
                            
                            
                            1.56Weighted
      average common shares outstanding applicable to diluted
EPS
                            
                            
                            36,388
                            
                            
                            
                            36,349
                            
                            
                            
                            37,065Effect
      of dilutive securities (1):Stock
      option and restricted stock unit plans
                            
                            
                            52
                            
                            
                            
                            65
                            
                            
                            
                            507Adjusted
      weighted average common shares outstandingApplicable
      to diluted EPS
                            
                            
                            36,440
                            
                            
                            
                            36,414
                            
                            
                            
                            37,572Diluted
      earnings per share
                            
                            
                            1.51
                            
                            
                            
                            1.98
                            
                            
                            
                            1.54Basic
      earnings per share
                            
                            
                            1.51
                            
                            
                            
                            1.99
                            
                            
                            
                            1.56Diluted
      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.
  F-48
  Banco
Latinoamericano de Exportaciones, S. A.
 and
Subsidiaries
 
 Notes
to consolidated financial statements
 
 19.
              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.  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
      31,2008
                        
                        
                        2007Confirmed
      letters of credit
                        
                        
                        136,539
                        
                        
                        
                        97,211Stand-by
      letters of credit and guarantees:Country
      risk
                        
                        
                        40,000
                        
                        
                        
                        113,924Commercial
      risk
                        
                        
                        180,237
                        
                        
                        
                        197,528Credit
      derivative
                        
                        
                        3,000
                        
                        
                        
                        3,000223,237
                        
                        
                        
                        314,452Credit
      commitments
                        
                        
                        84,019
                        
                        
                        
                        129,378443,795
                        
                        
                        
                        541,041
 
 As of
December 31, 2008, the maturity profile of the Bank’s outstanding financial
instruments with off-balance sheet credit risk is as follows:
 
 (In
      thousands of US$)Maturities
                      
                      AmountWithin
      1 year
                      
                      
                      403,203From
      1 to 2 years
                      
                      
                      38,041From
      2 to 5 years
                      
                      
                      1,188After
      5 years
                      
                      
                      1,363443,795
  F-49
  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:
 
 (In
      thousands of US$)2008
                        
                        
                        2007Country:Argentina
                        
                        
                        -
                        
                        
                        
                        4,057Brazil
                        
                        
                        150,967
                        
                        
                        
                        220,281Chile
                        
                        
                        83,200
                        
                        
                        
                        590Colombia
                        
                        
                        4,225
                        
                        
                        
                        4,225Costa
      Rica
                        
                        
                        19,553
                        
                        
                        
                        71,871Dominican
      Republic
                        
                        
                        13,923
                        
                        
                        
                        60,601Ecuador
                        
                        
                        86,363
                        
                        
                        
                        81,379El
      Salvador
                        
                        
                        476
                        
                        
                        
                        1,675Guatemala
                        
                        
                        4,578
                        
                        
                        
                        6,293Honduras
                        
                        
                        350
                        
                        
                        
                        400Jamaica
                        
                        
                        -
                        
                        
                        
                        15,615Mexico
                        
                        
                        2,979
                        
                        
                        
                        11,750Panama
                        
                        
                        15,239
                        
                        
                        
                        10,565Peru
                        
                        
                        -
                        
                        
                        
                        10Trinidad
      and Tobago
                        
                        
                        -
                        
                        
                        
                        5,000United
      States
                        
                        
                        -
                        
                        
                        
                        18,616Venezuela
                        
                        
                        61,792
                        
                        
                        
                        27,963Other
                        
                        
                        150
                        
                        
                        
                        150443,795
                        
                        
                        
                        541,041
 
 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.
 
 Credit
commitments
 Commitments
to extend credit are a combination of either non-binding or legal agreements to
lend to a customer.  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.
  F-50
  Banco
Latinoamericano de Exportaciones, S. A.
 and
Subsidiaries
 
 Notes
to consolidated financial statements
 Credit
derivative
 Credit
derivative represents a guarantee issued by the Bank to the buyer of the
derivative instrument, where the Bank guarantees the payment of principal if the
underlying financial instrument is impaired and its original issuer does not
comply with principal payments; therefore, the impairment risk is assumed by the
Bank, which receives commission income during the term of this
derivative.  The credit derivative matures in July 2010.  As
of December 31, 2008 and 2007, the fair value of this derivative instrument was
$91 thousand and $13 thousand, respectively, and reported in trading liabilities
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.
              Lease
      and other commitments
 
 Lease
      commitments
 
 At
December 31, 2008, a summary of lease commitments is as follows:
 
 (In thousands of
                        US$)Year
                      
                      Future Rental
                        Commitments2009
                      
                      
                      5522010
                      
                      
                      5632011
                      
                      
                      5152012
                      
                      
                      2612013
                      
                      
                      243Thereafter
                      
                      
                      4462,580
 
 Occupancy
expense for years ended December 31, 2008, 2007 and 2006, amounted to $809
thousand, $593 thousand, and $637 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).
  F-51
  Banco
Latinoamericano de Exportaciones, S. A.
 and
Subsidiaries
 
 Notes
to consolidated financial statements
  21.
              Derivative
      financial instruments
 
 At
December 31, 2008 and 2007, quantitative information on derivative financial
instruments held for hedging purposes is as follows:
  2008
                          
                          
                          2007(In
      thousands of US$)
                          
                          Nominal
                          
                          
                          Fair
      Value
                          
                          
                          Nominal
                          
                          
                          Fair
      ValueAmount
                          
                          
                          Asset
                          
                          
                          Liability
                          
                          
                          Amount
                          
                          
                          Asset
                          
                          
                          LiabilityFair
      value hedges:Interest
      rate swaps
                          
                          
                          446,400
                          
                          
                          
                          -
                          
                          
                          
                          46,379
                          
                          
                          
                          372,996
                          
                          
                          
                          122
                          
                          
                          
                          13,408Cross-currency
      interest rate swaps
                          
                          
                          149,924
                          
                          
                          
                          -
                          
                          
                          
                          34,383
                          
                          
                          
                          4,435
                          
                          
                          
                          -
                          
                          
                          
                          622Cash
      flow hedges:Interest
      rate swaps
                          
                          
                          20,000
                          
                          
                          
                          -
                          
                          
                          
                          2,178
                          
                          
                          
                          20,000
                          
                          
                          
                          -
                          
                          
                          
                          1,129Cross-currency
      interest rate swaps
                          
                          
                          41,020
                          
                          
                          
                          -
                          
                          
                          
                          6,781
                          
                          
                          
                          41,020
                          
                          
                          
                          -
                          
                          
                          
                          857Forward
      foreign exchange
                          
                          
                          143,179
                          
                          
                          
                          7,777
                          
                          
                          
                          2,176
                          
                          
                          
                          26,282
                          
                          
                          
                          -
                          
                          
                          
                          883Total
                          
                          
                          800,523
                          
                          
                          
                          7,777
                          
                          
                          
                          91,897
                          
                          
                          
                          464,733
                          
                          
                          
                          122
                          
                          
                          
                          16,899Net
      gain (loss) on the ineffective portion of hedging
    activities
                          
                          
                          
                          
                          
                          
                          9,956
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          (989
                          )
 
 For
control purposes, derivative instruments are recorded at their nominal amount
("notional 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 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.  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 six
years.
 
 The Bank
estimates that approximately $190 thousand of gains reported in other
comprehensive income (loss) at December 31, 2008, 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 were expected to be reclassified into interest income as an
adjustment to yield of hedged loans during the twelve-month period ending
December 31, 2009.
  F-52
  Banco
Latinoamericano de Exportaciones, S. A.
 and
Subsidiaries
 
 Notes
to consolidated financial statements
  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 has
designated a portion of these derivative instruments as fair value hedges and a
portion as cash flow hedges.  Cross currency interest rate swapsare 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 financial instruments
as fair value hedges.
 
 22.
              Accumulated
      other comprehensive income (loss)
 
 As
      of December 31, 2008, 2007 and 2006 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$)
                  
                  Investment
                    Securities
                  
                  
                  Derivative
                    Financial
                    Instruments
                  
                  
                  TotalBalance
      as of January 1, 2006
                  
                  
                  619
                  
                  
                  
                  -
                  
                  
                  
                  619Net
      unrealized gains (losses) arising from the year
                  
                  
                  5,349
                  
                  
                  
                  (72
                  )
                  
                  
                  5,277Reclassification adjustment for
      gains included in net income (1)
                  
                  
                  (2,568
                  )
                  
                  
                  -
                  
                  
                  
                  (2,568
                  )Balance
      as of December 31, 2006
                  
                  
                  3,400
                  
                  
                  
                  (72
                  )
                  
                  
                  3,328Net
      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 in this and previous
      years.
 F-53
  Banco
Latinoamericano de Exportaciones, S. A.
 and
Subsidiaries
 
 Notes
to consolidated financial statements
 
 23.    Fair
value of financial instruments
 
 Beginning 2008, the Bank
determines the fair value of its financial instruments using the fair value
hierarchy established in SFAS 157, “Fair Value Measurements”,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.  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.
 
 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.
 
 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:
  F-54
  Banco
Latinoamericano de Exportaciones, S. A.
 and
Subsidiaries
 
 Notes
to consolidated financial statements
 
 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 and quoted prices of
      securities with similar characteristics.  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 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
 
 Exchange-traded
      derivatives that are valued using quoted prices are classified within
      level 1 of the fair value hierarchy.  However, for those
      derivative contracts without quoted market prices, fair value is based on
      internally developed models using assumptions that are readily observable
      and that can be validated by information available in the
      market.  These derivatives are classified within level 2 of the
      fair value hierarchy.
 
 Adjustments
      for credit risk of the counterparty is applied to all derivative financial
      instruments where its valuation uses parameters based on interest curves
      based on the London Interbank Offered Rate (“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's credit risk when
      measuring all liabilities at fair value, according to the requirements of
      SFAS 157. The methodology is consistent with the adjustments applied to
      generate the counterparty credit
risk.
  F-55
 Banco
Latinoamericano de Exportaciones, S. A.
 and
Subsidiaries
 
 Notes
to consolidated financial statements
 
 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:
 
 (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 sheetsAssetsTrading
      assets
                              
                              
                              21,965
                              
                              
                              
                              22,974
                              
                              
                              
                              -
                              
                              
                              
                              44,939Securities
      available–for-sale
                              
                              
                              561,278
                              
                              
                              
                              46,640
                              
                              
                              
                              -
                              
                              
                              
                              607,918Investment
      fund
                              
                              
                              -
                              
                              
                              
                              150,695
                              
                              
                              
                              -
                              
                              
                              
                              150,695Derivative
      financial instruments - receivable
                              
                              
                              -
                              
                              
                              
                              7,777
                              
                              
                              
                              -
                              
                              
                              
                              7,777Total
      assets at fair value
                              
                              
                              583,243
                              
                              
                              
                              228,086
                              
                              
                              
                              -
                              
                              
                              
                              811,329LiabilitiesTrading
      liabilities
                              
                              
                              -
                              
                              
                              
                              14,157
                              
                              
                              
                              -
                              
                              
                              
                              14,157Derivative
      financial instruments - payable
                              
                              
                              -
                              
                              
                              
                              91,897
                              
                              
                              
                              -
                              
                              
                              
                              91,897Total
      liabilities at fair value
                              
                              
                              -
                              
                              
                              
                              106,054
                              
                              
                              
                              -
                              
                              
                              
                              106,054
 
 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.
 
 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 to 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 to 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.
  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
                                    
                                    
                                    2007Carrying
                                    
                                    
                                    Fair
                                    
                                    
                                    Carrying
                                    
                                    
                                    FairValue
                                    
                                    
                                    Value
                                    
                                    
                                    Value
                                    
                                    
                                    ValueFinancial
      assets:Instruments
      with carrying value equal to fair value
                                    
                                    
                                    984,288
                                    
                                    
                                    
                                    984,288
                                    
                                    
                                    
                                    473,007
                                    
                                    
                                    
                                    473,007Securities
      held-to-maturity
                                    
                                    
                                    28,
      410
                                    
                                    
                                    
                                    28,144
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Loans,
      net of allowance
                                    
                                    
                                    2,559,306
                                    
                                    
                                    
                                    2,474,606
                                    
                                    
                                    
                                    3,656,234
                                    
                                    
                                    
                                    3,674,978Financial
      liabilities:Instruments
      with carrying value equal to fair value
                                    
                                    
                                    1,677,553
                                    
                                    
                                    
                                    1,677,553
                                    
                                    
                                    
                                    1,793,311
                                    
                                    
                                    
                                    1,793,311Short-term
      borrowings
                                    
                                    
                                    738,747
                                    
                                    
                                    
                                    737,414
                                    
                                    
                                    
                                    1,221,500
                                    
                                    
                                    
                                    1,221,500Borrowings
      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
 
 Notes
to consolidated financial statements
  24.
              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 material adverse effect on its business, financial condition or
      results of operations.
  25.
              Capital
      adequacy
 
 The
      Banking Law in the Republic of Panama requires banks with general licenses
      to maintain capital funds equivalent to, at least, 8% of total assets and
      off-balance sheet contingency transactions, weighted according to their
      risk; and primary capital equivalent to no less than 4% of its assets and
      off-balance sheet contingency transactions, weighted according to their
      risk.  As of December 31, 2008, the Bank’s capital adequacy
      ratio is 19% which is in compliance with the capital adequacy ratios
      required by the Banking Law in the Republic of
  Panama.
  26.
              Business
      segment information
 
 The
Bank’s activities are operated and managed by 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”.  The segment results are determined based on
the Bank’s management accounting process, which assigns consolidated balance
sheets, revenue and expense items to each reportable division on a systematic
basis.
 
 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'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 excludes 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 distorted 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
Subsidiaries
 
 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, 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.  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 securities
available-for-sale and held-to-maturity.  Operating income from the
Treasury Segment includes net interest income from deposits with banks and
securities available-for-sale and held-to-maturity, derivative and hedging
activities, gain and losses on sale of securities available-for-sale, gain and
losses on foreign exchange, and allocated operating expenses.
 
 Asset
Management incorporates all of the Fund’s deposits and trading assets
attributable to the investment fund.  Operating income from the Asset
Management Segment includes net interest income from deposits with brokers,
trading assets, derivative instruments for trading, gains and losses on trading,
and allocated operating expenses.
 
 The
following table provides certain information regarding the Bank’s continuing
operations by segment:
 
 Business
Segment Analysis (1)
 
 (In millions of US$)
                                                
                                                2008
                                                
                                                
                                                2007
                                                
                                                
                                                2006COMMERCIALInterest
      income
                                                
                                                
                                                200.1
                                                
                                                
                                                
                                                221.6
                                                
                                                
                                                
                                                165.8Interest
      expense
                                                
                                                
                                                (122.0
                                                )
                                                
                                                
                                                (157.1
                                                )
                                                
                                                
                                                (115.1
                                                )Net
      interest income
                                                
                                                
                                                78.1
                                                
                                                
                                                
                                                64.5
                                                
                                                
                                                
                                                50.7Net
      other income (2)
                                                
                                                
                                                7.8
                                                
                                                
                                                
                                                5.3
                                                
                                                
                                                
                                                6.3Operating
      expenses
                                                
                                                
                                                (27.5
                                                )
                                                
                                                
                                                (27.2
                                                )
                                                
                                                
                                                (23.6
                                                )Net
      operating income (3)
                                                
                                                
                                                58.4
                                                
                                                
                                                
                                                42.6
                                                
                                                
                                                
                                                33.4Reversals
      for loans and off-balance sheet credit losses
                                                
                                                
                                                1.5
                                                
                                                
                                                
                                                1.5
                                                
                                                
                                                
                                                13.0Impairment
      on assets
                                                
                                                
                                                (0.8
                                                )
                                                
                                                
                                                (0.5
                                                )
                                                
                                                
                                                0.0Net
      income
                                                
                                                
                                                59.1
                                                
                                                
                                                
                                                43.6
                                                
                                                
                                                
                                                46.5Commercial
      assets and contingencies (end of period balances):Interest-earning
      assets (4)
                                                
                                                
                                                2,614.0
                                                
                                                
                                                
                                                3,725.9
                                                
                                                
                                                
                                                2,976.3Other
      assets and contingencies (5)
                                                
                                                
                                                443.6
                                                
                                                
                                                
                                                549.5
                                                
                                                
                                                
                                                653.7Total Interest-Earning Assets, Other Assets and
      Contingencies
                                                
                                                
                                                3,057.6
                                                
                                                
                                                
                                                4,275.4
                                                
                                                
                                                
                                                3,630.0TREASURYInterest
      income
                                                
                                                
                                                40.7
                                                
                                                
                                                
                                                33.6
                                                
                                                
                                                
                                                28.8Interest
      expense
                                                
                                                
                                                (37.7
                                                )
                                                
                                                
                                                (27.7
                                                )
                                                
                                                
                                                (21.9
                                                )Net
      interest income
                                                
                                                
                                                3.0
                                                
                                                
                                                
                                                5.9
                                                
                                                
                                                
                                                6.9Net
      other income (2)
                                                
                                                
                                                (12.4
                                                )
                                                
                                                
                                                8.5
                                                
                                                
                                                
                                                2.2Operating
      expenses
                                                
                                                
                                                (6.9
                                                )
                                                
                                                
                                                (4.4
                                                )
                                                
                                                
                                                (3.4
                                                )Net
      operating income (3)
                                                
                                                
                                                (16.3
                                                )
                                                
                                                
                                                10.0
                                                
                                                
                                                
                                                5.7Recoveries
      on assets
                                                
                                                
                                                0.0
                                                
                                                
                                                
                                                0.0
                                                
                                                
                                                
                                                5.5Net
      income
                                                
                                                
                                                (16.3
                                                )
                                                
                                                
                                                10.0
                                                
                                                
                                                
                                                11.2Treasury
      assets and contingencies (end of period of balances):Interest-earning
      assets (6)
                                                
                                                
                                                1,581.9
                                                
                                                
                                                
                                                869.9
                                                
                                                
                                                
                                                775.2Other
      assets and contingencies (5)
                                                
                                                
                                                3.0
                                                
                                                
                                                
                                                3.0
                                                
                                                
                                                
                                                -Total Interest-earning assets, other assets and
      contingencies
                                                
                                                
                                                1,584.9
                                                
                                                
                                                
                                                872.9
                                                
                                                
                                                
                                                775.2
  F-59
  Banco
Latinoamericano de Exportaciones, S. A.
 and
Subsidiaries
 
 Notes
to consolidated financial statements
  2008
                                                    
                                                    
                                                    2007
                                                    
                                                    
                                                    2006(In
      US$ millions)ASSET
      MANAGEMENTInterest
      income
                                                    
                                                    
                                                    3.5
                                                    
                                                    
                                                    
                                                    9.6
                                                    
                                                    
                                                    
                                                    8.8Interest
      expense
                                                    
                                                    
                                                    (6.7
                                                    )
                                                    
                                                    
                                                    (9.5
                                                    )
                                                    
                                                    
                                                    (7.6
                                                    )Net
      interest income
                                                    
                                                    
                                                    (3.2
                                                    )
                                                    
                                                    
                                                    0.1
                                                    
                                                    
                                                    
                                                    1.2Net
      other income (2)
                                                    
                                                    
                                                    21.3
                                                    
                                                    
                                                    
                                                    23.9
                                                    
                                                    
                                                    
                                                    0.9Operating
      expenses
                                                    
                                                    
                                                    (5.6
                                                    )
                                                    
                                                    
                                                    (5.5
                                                    )
                                                    
                                                    
                                                    (1.9
                                                    )Net
      operating income (3)
                                                    
                                                    
                                                    12.5
                                                    
                                                    
                                                    
                                                    18.5
                                                    
                                                    
                                                    
                                                    0.2Participation
      of the minority interest in gains of the investment fund
                                                    
                                                    
                                                    (0.2
                                                    )
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -Net
      income
                                                    
                                                    
                                                    12.3
                                                    
                                                    
                                                    
                                                    18.5
                                                    
                                                    
                                                    
                                                    0.2Fund’s
      assets and contingencies (end of period of balances):Interest-earning
      assets (6)
                                                    
                                                    
                                                    150.7
                                                    
                                                    
                                                    
                                                    81.8
                                                    
                                                    
                                                    
                                                    105.2Non-interest-earning
      assets
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -Total interest-earning assets, other assets and
      contingencies
                                                    
                                                    
                                                    150.7
                                                    
                                                    
                                                    
                                                    81.8
                                                    
                                                    
                                                    
                                                    105.2TOTALInterest
      income
                                                    
                                                    
                                                    244.3
                                                    
                                                    
                                                    
                                                    264.8
                                                    
                                                    
                                                    
                                                    203.4Interest
      expense
                                                    
                                                    
                                                    (166.4
                                                    )
                                                    
                                                    
                                                    (194.3
                                                    )
                                                    
                                                    
                                                    (144.6
                                                    )Net
      interest income
                                                    
                                                    
                                                    77.9
                                                    
                                                    
                                                    
                                                    70.5
                                                    
                                                    
                                                    
                                                    58.8Net
      other income (2)
                                                    
                                                    
                                                    16.7
                                                    
                                                    
                                                    
                                                    37.7
                                                    
                                                    
                                                    
                                                    9.4Operating
      expenses
                                                    
                                                    
                                                    (40.0
                                                    )
                                                    
                                                    
                                                    (37.0
                                                    )
                                                    
                                                    
                                                    (28.9
                                                    )Net
      operating income (3)
                                                    
                                                    
                                                    54.6
                                                    
                                                    
                                                    
                                                    71.2
                                                    
                                                    
                                                    
                                                    39.3Reversals
      for loans and off-balance sheet credit losses
                                                    
                                                    
                                                    1.5
                                                    
                                                    
                                                    
                                                    1.5
                                                    
                                                    
                                                    
                                                    13.0Recoveries
      (impairment) on assets
                                                    
                                                    
                                                    (0.8
                                                    )
                                                    
                                                    
                                                    (0.5
                                                    )
                                                    
                                                    
                                                    5.6Participation
      of the minority interest in gains of the investment fund
                                                    
                                                    
                                                    (0.2
                                                    )
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -Net
      income
                                                    
                                                    
                                                    55.1
                                                    
                                                    
                                                    
                                                    72.2
                                                    
                                                    
                                                    
                                                    57.9Total
      assets and contingencies (end of period balances):Interest-earning assets(4 &
      6)
                                                    
                                                    
                                                    4,346.6
                                                    
                                                    
                                                    
                                                    4,677.6
                                                    
                                                    
                                                    
                                                    3,856.7Other
      assets and contingencies (5)
                                                    
                                                    
                                                    446.6
                                                    
                                                    
                                                    
                                                    552.5
                                                    
                                                    
                                                    
                                                    653.7Total Interest-Earning Assets, Other Assets and
      Contingencies
                                                    
                                                    
                                                    4,793.2
                                                    
                                                    
                                                    
                                                    5,230.1
                                                    
                                                    
                                                    
                                                    4,510.4
 
 (1)
                The
      numbers set out in these tables have been rounded and accordingly may not
      total exactly.
 (2)
              The
      net other income excludes reversals (provisions) for loans and off-balance
      sheet credit losses, and recoveries on
assets.
 (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
                                    
                                    
                                    
                                    9.4Reversal
      (provision) for losses on off-balance sheet credit risk
                                    
                                    
                                    (17.0
                                    )
                                    
                                    
                                    13.4
                                    
                                    
                                    
                                    24.9Recoveries
      on assets, net of impairments
                                    
                                    
                                    (0.8
                                    )
                                    
                                    
                                    (0.5
                                    )
                                    
                                    
                                    5.6Net
      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 and trading
      securities.
  F-60
  Banco
Latinoamericano de Exportaciones, S. A.
 and
Subsidiaries
 
 Notes
to consolidated financial statements
 
 Geographic
information is as follows:
  2008(In thousands of US$)
                    
                    Panama
                    
                    
                    United
                      States of
                      America
                    
                    
                    Cayman
                      Islands
                    
                    
                    TotalInterest
      income
                    
                    
                    221,
      351
                    
                    
                    
                    19,407
                    
                    
                    
                    3,485
                    
                    
                    
                    244,243Interest
      expense
                    
                    
                    (152,665
                    )
                    
                    
                    (11,435
                    )
                    
                    
                    (2,296
                    )
                    
                    
                    (166,396
                    )Net
      interest revenue
                    
                    
                    68,686
                    
                    
                    
                    7,972
                    
                    
                    
                    1,189
                    
                    
                    
                    77,847Long-lived
      assets:Premises
      and equipment, net
                    
                    
                    7,156
                    
                    
                    
                    814
                    
                    
                    
                    -
                    
                    
                    
                    7,970
 
 2007(In thousands of US$)
                    
                    Panama
                    
                    
                    United
                      States of
                      America
                    
                    
                    Cayman
                      Islands
                    
                    
                    TotalInterest
      income
                    
                    
                    226,218
                    
                    
                    
                    29,064
                    
                    
                    
                    9,587
                    
                    
                    
                    264,869Interest
      expense
                    
                    
                    (167,448
                    )
                    
                    
                    (22,654
                    )
                    
                    
                    (4,197
                    )
                    
                    
                    (194,299
                    )Net
      interest revenue
                    
                    
                    58,770
                    
                    
                    
                    6,410
                    
                    
                    
                    5,390
                    
                    
                    
                    70,570Long-lived
      assets:Premises
      and equipment, net
                    
                    
                    9,242
                    
                    
                    
                    934
                    
                    
                    
                    -
                    
                    
                    
                    10,176
 
 2006(In
      thousands of US$)
                      
                      Panama
                      
                      
                      United
                        States
      of
                        America
                      
                      
                      Cayman
                        Islands
                      
                      
                      TotalInterest
      income
                      
                      
                      170,359
                      
                      
                      
                      24,243
                      
                      
                      
                      8,748
                      
                      
                      
                      203,350Interest
      expense
                      
                      
                      (119,868
                      )
                      
                      
                      (20,005
                      )
                      
                      
                      (4,640
                      )
                      
                      
                      (144,513
                      )Net
      interest revenue
                      
                      
                      50,491
                      
                      
                      
                      4,238
                      
                      
                      
                      4,108
                      
                      
                      
                      58,837Long-lived
      assets:Premises
      and equipment, net
                      
                      
                      10,381
                      
                      
                      
                      755
                      
                      
                      
                      -
                      
                      
                      
                      11,136
 
 ******
 F-61
 Deloitte,
      Inc.Contadores Públicos AutorizadosApartado 0816-01558Panamá, Rep. de PanamáTeléfono: (507)303-4100Facsimile : (507)
      269-2386infopanama@deloitte.comwww.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
Frameworkissued 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-62
  
  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 SFAS140 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 InternalControl - Integrated
Frameworkissued 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
Incorporation




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


75