Edgar Filing: FOREIGN TRADE BANK OF LATIN AMERICA, INC.

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

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

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2011

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

¨ 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.

(Translation of Registrant’s name into English)

REPUBLIC OF PANAMA

(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)

Christopher Schech

Chief Financial Officer

(507) 210-8500

Email address: cschech@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

Class E Common Stock

Name of each exchange on which registered

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 Stock
	2,531,926			Shares of Class B Common Stock
	28,257,827			Shares of Class E Common Stock
	0			Shares of Class F Common Stock
	37,131,942			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 S 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 S 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.

S Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

¨ Yes S 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

S 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:

S U.S. GAAP

¨ IFRS

¨ Other

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

¨ Item 17 S 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 S No

BANCO LATINOAMERICANO DE COMERCIO EXTERIOR, S.A.

TABLE OF CONTENTS

		Page

PART I		6

Item 1.	Identity of Directors, Senior Management and Advisers	6

Item 2.	Offer Statistics and Expected Timetable	6

Item 3.	Key Information	6
A.	Selected Financial Data	6
B.	Capitalization and Indebtedness	7
C.	Reasons for the Offer and Use of Proceeds	7
D.	Risk Factors	8

Item 4.	Information on the Company	12
A.	History and Development of the Company	12
B.	Business Overview	14
C.	Organizational Structure	33
D.	Property, Plant and Equipment	33

Item 4A.	Unresolved Staff Comments	33

Item 5.	Operating and Financial Review and Prospects	33
A.	Operating Results	34
B.	Liquidity and Capital Resources	57
C.	Research and Development, Patents and Licenses, etc.	67
D.	Trend Information	67
E.	Off-Balance Sheet Arrangements	69
F.	Contractual Obligations and Commercial Commitments	69

Item 6.	Directors, Executive Officers and Employees	70
A.	Directors and Executive Officers	70
B.	Compensation	75
C.	Board Practices	79
D.	Employees	84
E.	Share Ownership	85

Item 7.	Major Stockholders and Related Party Transactions	85
A.	Major Stockholders	85
B.	Related Party Transactions	87
C.	Interests of Experts and Counsel	88

Item 8.	Financial Information	88
A.	Consolidated Statements and Other Financial Information	88
B.	Significant Changes	89

Item 9.	The Offer and Listing	89
A.	Offer and Listing Details	89
B.	Plan of Distribution	89
C.	Markets	90
D.	Selling Stockholders	90
E.	Dilution	90

F.	Expenses of the Issue	90

Item 10.	Additional Information	90
A.	Share Capital	90
B.	Memorandum and Articles of Association	90
C.	Material Contracts	92
D.	Exchange Controls	93
E.	Taxation	93
F.	Dividends and Paying Agents	97
G.	Statement by Experts	98
H.	Documents on Display	98
I.	Subsidiary Information	98

Item 11.	Quantitative and Qualitative Disclosure About Market Risk	98

Item 12.	Description of Securities Other than Equity Securities	104

PART II		104

Item 13.	Defaults, Dividend Arrearages and Delinquencies	104

Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	104

Item 15.	Controls and Procedures	104

Item 16.	[Reserved]	107
Item 16A.	Audit and Compliance Committee Financial Expert	107
Item 16B.	Code of Ethics	107
Item 16C.	Principal Accountant Fees and Services	107
Item 16D.	Exemptions from the Listing Standards for Audit Committees	107
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	108
Item 16F.	Change in Registrant’s Certifying Accountant	108
Item 16G.	Corporate Governance	108

PART III.		108

Item 17.	Financial Statements	108

Item 18.	Financial Statements	108

Item 19.	Exhibits	109

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

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

Forward-Looking Statements

In addition to historical information, this Annual Report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking statements may appear throughout this Annual Report. The Bank uses words such as “believe,” “intend,” “expect,” “anticipate,” “plan,” “may,” “will,” “should,” “estimate,” “potential,” “project” and similar expressions to identify forward-looking statements. Such statements include, among others, those concerning the Bank’s expected financial performance and strategic and operational plans, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. Forward-looking statements involve risks and uncertainties, and actual results may differ materially from those discussed in any such statement. Factors that could cause actual results to differ materially from these forward-looking statements include the risks described in the section titled “Risk Factors.” Forward-looking statements include statements regarding:

the anticipated growth of the Bank’s credit portfolio, including its trade finance portfolio;

the Bank’s ability to increase the number of clients;

the Bank’s ability to maintain its investment-grade credit ratings and preferred creditor status;

the effects of changing interest rates, inflation, exchange rates and of an improving macroeconomic environment in Latin America and the Caribbean on the Bank’s financial condition;

the execution of the Bank’s strategies and initiatives, including its revenue diversification strategy;

anticipated operating income and return on equity in future periods;

the Bank’s level of capitalization and debt;

the implied volatility of the Bank’s Treasury and Asset Management trading revenues;

levels of defaults by borrowers and the adequacy of the Bank’s allowance and provisions for credit losses;

the availability and mix of future sources of funding for the Bank’s lending operations;

the adequacy of the Bank’s sources of liquidity to cover large deposit withdrawals;

management’s expectations and estimates concerning the Bank’s future financial performance, financing, plans and programs, and the effects of competition;

existing and future governmental banking and tax regulations, including the impact of complying with the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, on the Bank’s business, business practices, and costs of operation;

credit and other risks of lending and investment activities; and

the Bank’s ability to sustain or improve its operating performance.

In addition, the statements included under the headings “Strategy in 2012” and “Trend Information” are forward-looking statements. Given the risks and uncertainties surrounding forward-looking statements, undue reliance should not be placed on these statements. Many of these factors are beyond the Bank’s ability to control or predict. The Bank’s forward-looking statements speak only as of the date of this Annual Report. Other than as required by law, the Bank undertakes no obligation to update or revise forward-looking statements, whether as a result of new information, future events, or otherwise.

PART I

Item 1.

Identity of Directors, Senior Management and Advisers

Not required in this Annual Report.

Item 2.

Offer Statistics and Expected Timetable

Not required in this Annual Report.

Item 3.

Key Information

Selected Financial Data

The following table presents consolidated selected financial data for the Bank. The financial data presented below are at and for the years ended December 31, 2011, 2010, 2009, 2008, and 2007, and are derived from the Bank’s consolidated financial statements for the years indicated, which were prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP, and are stated in U.S. dollars. The consolidated financial statements for the years ended December 31, 2011, 2010, 2009, 2008 and 2007 were audited by the independent registered public accounting firm Deloitte, Inc. The consolidated financial statements of the Bank for each of the three years in the period ended December 31, 2011, or the Consolidated Financial Statements, are included in this Annual Report, together with the report of the independent registered public accounting firm Deloitte, Inc. The information below is qualified in its entirety by the detailed information included elsewhere herein and should be read in conjunction with Item 4, “Information on the Company,” Item 5, “Operating and Financial Review and Prospects,” and the Consolidated Financial Statements and notes thereto included in this Annual Report.

Consolidated Selected Financial Information

	As of and for the Year Ended December 31,
	2011			2010			2009			2008			2007
	(In $ thousand, except per share data and ratios)
Income Statement Data:
Net interest income	$	102,710		$	74,503		$	64,752		$	77,847		$	70,570
Fees and commissions, net		10,729			10,326			6,733			7,252			5,555
Reversal (provision) for credit losses ⁽¹⁾		(4,393	)		4,835			(14,830	)		1,544			1,475
Derivative financial instruments and hedging		2,923			(1,446	)		(2,534	)		9,956			(989	)
Recoveries, net of impairment of assets		(57	)		233			(120	)		(767	)		(500	)
Net gain (loss) from investment fund trading		20,314			(7,995	)		24,997			21,357			23,878
Net gain (loss) from trading securities		(6,494	)		(3,603	)		13,113			(20,998	)		(12	)
Net gain on sale of securities available-for-sale		3,413			2,346			546			67			9,119
Gain (loss) on foreign currency exchange		4,269			1,870			613			(1,596	)		115
Other income (expense), net		477			833			912			656			(6	)
Total operating expenses		(50,035	)		(42,081	)		(38,202	)		(39,990	)		(37,027	)
Net income		83,856			39,821			55,980			55,327			72,177
Net income (loss) attributable to the redeemable noncontrolling interest		676			(2,423	)		1,118			208			0
Net income attributable to Bladex		83,180			42,244			54,862			55,119			72,177
Balance Sheet Data:
Trading assets		20,436			50,412			50,277			44,939			0
Investment securities		442,836			386,431			456,984			636,328			468,360
Investment fund		120,425			167,291			197,575			150,695			81,846
Loans		4,959,573			4,064,332			2,779,262			2,618,643			3,731,838
Allowance for loan losses		88,547			78,615			73,789			54,648			69,643
Total assets		6,360,032			5,100,087			3,878,771			4,362,678			4,698,571
Total deposits		2,303,506			1,820,925			1,256,246			1,169,048			1,462,371
Trading liabilities		5,584			3,938			3,152			14,157			13
Securities sold under repurchase agreements and short-term borrowings		1,700,468			1,360,327			399,132			1,212,921			1,504,710
Borrowings and long-term debt		1,487,548			1,075,140			1,390,387			1,204,952			1,010,316
Total liabilities		5,595,203			4,384,087			3,168,234			3,783,665			4,086,320
Capital Stock		279,980			279,980			279,980			279,980			279,980
Total stockholders’ equity		759,282			697,050			675,637			574,324			612,251

	As of and for the Year Ended December 31,
	2011			2010			2009			2008			2007
	(In $ thousand, except per share data and ratios)
Weighted average basic shares		36,969			36,647			36,493			36,388			36,349
Weighted average diluted shares		37,145			36,814			36,571			36,440			36,414
Per Common Share Data:
Basic earnings per share		2.25			1.15			1.50			1.51			1.99
Diluted earnings per share		2.24			1.15			1.50			1.51			1.98
Book value per share (period end)		20.45			18.99			18.49			15.77			16.83
Regular cash dividends per share		0.85			0.67			0.60			0.88			0.88
Special cash dividends per share		0.00			0.00			0.00			0.00			0.00
Selected Financial Ratios:
Performance Ratios:
Return on average assets ⁽²⁾		1.46	%		0.97	%		1.38	%		1.09	%		1.76	%
Return on average stockholders’ equity ⁽³⁾		11.40	%		6.21	%		8.60	%		8.99	%		11.91	%
Net interest margin ⁽⁴⁾		1.81	%		1.70	%		1.62	%		1.55	%		1.73	%
Net interest spread ⁽⁴⁾		1.62	%		1.43	%		1.12	%		0.98	%		0.78	%
Total operating expenses to total average assets ⁽⁵⁾		0.88	%		0.97	%		0.96	%		0.79	%		0.90	%
Regular cash dividend payout ratio		37.78	%		58.12	%		39.91	%		58.09	%		44.32	%
Special cash dividend payout ratio		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%
Liquidity Ratios:
Liquid assets⁽⁶⁾ / total assets		12.36	%		8.25	%		10.36	%		18.92	%		8.43	%
Liquid assets⁽⁶⁾ / total deposits		34.11	%		23.10	%		32.00	%		70.62	%		27.08	%
Asset Quality Ratios:
Non-accrual loans to total loans ⁽⁷⁾		0.65	%		0.71	%		1.82	%		0.00	%		0.00	%
Impaired loans to total loans ⁽⁷⁾		0.65	%		0.71	%		1.29	%		0.00	%		0.00	%
Charged-off loans to total loans		0.02	%		0.13	%		0.00	%		0.00	%		0.00	%
Allowance for loan losses to total loans, net of unearned income and deferred commission		1.79	%		1.94	%		2.66	%		2.09	%		1.87	%
Allowance for losses on off-balance sheet credit risk to total contingencies		2.45	%		3.50	%		8.28	%		6.95	%		2.51	%
Capital Ratios:
Stockholders’ equity to total assets		11.94	%		13.67	%		17.42	%		13.16	%		13.03	%
Average stockholders’ equity to total average assets ⁽⁸⁾		12.83	%		15.62	%		16.06	%		12.11	%		14.75	%
Leverage ratio⁽⁹⁾		8.4	x		7.3	x		5.7	x		7.6	x		7.7	x
Tier 1 capital to risk-weighted assets⁽¹⁰⁾		18.6	%		20.5	%		25.8	%		20.4	%		21.2	%
Total capital to risk-weighted assets⁽¹¹⁾		19.9	%		21.8	%		27.0	%		21.6	%		22.5	%
Risk-weighted assets	$	4,090,333		$	3,416,782		$	2,633,482		$	3,143,971		$	2,917,393

⁽¹⁾

Includes reversal of (provision for) loan losses and for losses on off-balance sheet credit risks. For information regarding reversal of (provision for) credit losses, see Item 5, “Operating and Financial Review and Prospects/Operating Results.”

⁽²⁾

Average assets calculated on the basis of unaudited daily average balances.

⁽³⁾

Average stockholders’ equity calculated on the basis of unaudited daily average balances.

⁽⁴⁾

For information regarding calculation of the net interest margin and the net interest spread, see Item 5A, “Operating and Financial Review and Prospects/Operating Results/Net Interest Income and Margins.”

⁽⁵⁾

Total average assets calculated on the basis of unaudited daily average balances.

⁽⁶⁾

Liquid assets consist of investment-grade ‘A’ securities, and cash and due from banks, excluding pledged regulatory deposits. See Item 18, “Financial Statements” Note 3 to the Audited Financial Statements.

⁽⁷⁾

Non-accrual loans amounted $32 million in 2011, all of which corresponded to impaired loans, $29 million in 2010, all of which corresponded to impaired loans, and $51 million in 2009 of which $36 million corresponded to impaired loans in 2009. Impairment factors considered by the Bank’s Management include collection status, collateral value, the probability of collecting scheduled principal and interest payments when due, and economic conditions in the borrower’s country of residence.

⁽⁸⁾

Average stockholders’ equity and total average assets calculated on the basis of unaudited daily average balances.

⁽⁹⁾

Leverage ratio is the ratio of total assets to stockholders’ equity.

⁽¹⁰⁾

Tier 1 capital is calculated according to Basel I capital adequacy guidelines, and is equivalent to stockholders’ equity, excluding the Other Comprehensive Income account effect of the available-for-sale portfolio. The Tier 1 capital ratio is calculated as a percentage of risk-weighted assets. Risk-weighted assets are, in turn, also calculated based on Basel I capital adequacy guidelines.

⁽¹¹⁾

Total capital refers to Tier 1 capital plus Tier 2 capital, based on Basel I capital adequacy guidelines. Total capital refers to the total capital ratio as a percentage of risk-weighted assets.

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 the Bank’s Business

Bladex faces liquidity risk, and its failure to adequately manage this risk could result in a liquidity shortage, which could adversely affect its financial condition, results of operations and cash flows.

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

As of December 31, 2011, approximately 24% of the Bank’s funding represents short-term borrowings from international banks, the majority of which are European, North American and Asian institutions, which compete with the Bank in its credit extension activity and represent a source of business for the Bank. If these international banks cease to provide funding to the Bank, the Bank would have to seek funding from other sources, which may not be available, or if available, may be at a higher cost.

Financial turmoil in the international markets could negatively impact liquidity in the financial markets, reducing the Bank’s access to credit or increasing its cost of funding, which could lead to tighter lending standards. An example of this situation is the liquidity constraint experienced in the second half of 2007 in the international financial markets, which intensified during the third quarter of 2008, driven first by the subprime crisis in the United States and then followed by the credit crisis, and in the European sovereign debt crisis experienced in 2011. The reoccurrence of such unfavorable market conditions could have a material adverse effect on the Bank’s liquidity.

As of December 31, 2011, approximately 52% of the Bank’s total deposits represented deposits from state-owned banks, and 35% of the Bank’s total deposits represented deposits from central banks.

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

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

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

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

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 relevant issuer or its country of origin. Accordingly, depending on the instruments or activities impacted, market risks can have wide ranging, complex adverse effects on the Bank’s financial condition, results of operations, cash flows and business.

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

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

As a bank, Bladex faces interest rate risk because interest-bearing liabilities generally reprice at a different pace than interest-earning assets. Bladex’s exposure to instruments whose values vary with the level or volatility of interest rates contributes to its interest rate risk. Failure to adequately manage eventual mismatches may reduce the Bank’s net interest income during periods of fluctuating interest rates.

The Bank’s credit portfolio may decrease or may not continue to grow at the present or a similar rate. Additionally, growth in the Bank’s credit portfolio may expose the Bank to an increase in allowance for loan losses.

It is difficult to predict that the Bank’s credit portfolio, including the Bank’s foreign trade portfolio, will continue to grow in the future at historical rates. A reversal in the growth rate of the Region’s economy and trade volumes could adversely affect the growth rate of the Bank’s credit portfolio. Additionally, the future expansion of Bladex’s credit portfolio may expose the Bank to higher levels of potential or actual losses and require an increase in credit risk reserves, which could negatively impact the Bank’s operating results and financial position.

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

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

Over time, there has been substantial consolidation among companies in the financial services industry, and this trend continued accelerating in 2010 and 2011 as the credit crisis led to numerous mergers and asset acquisitions among industry participants and in certain cases reorganization, restructuring, or even bankruptcy. Merger activity in the financial services industry has produced companies that are capable of offering a wide array of financial products and services at competitive prices. In addition, whenever economic conditions and risk perception improve in the Region, competition from commercial banks, the securities markets and other new participants generally increases.

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

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, and any failure, interruption or breach in the security or operation of the Bank’s information technology systems could result in interruptions in such activities. Operational problems or errors may occur, and their occurrence may have a material adverse impact on the Bank’s business, financial condition, results of operations and cash flows.

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

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

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

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

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

On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or Dodd-Frank Act, was signed into law. The Dodd-Frank Act is intended primarily to overhaul the financial regulatory framework in the United States following the global financial crisis and may impact substantially all financial institutions including the Bank. The Dodd-Frank Act, among other things, imposes higher prudential standards, including more stringent risk-based capital, leverage, liquidity and risk-management requirements, establishes a Bureau of Consumer Financial Protection, establishes a systemic risk regulator, consolidates certain federal bank regulators, imposes additional requirements related to corporate governance and executive compensation and requires various U.S. federal agencies to adopt a broad range of new implementing rules and regulations, for which they are given broad discretion. While we are closely monitoring this rulemaking process, the exact impact of new rules on our business remains uncertain. At this time, we cannot predict the impact or possible additional costs to us, if any, related to the implementation of, or compliance with, the potential future requirements under the Doff-Frank act. While many of the provisions in the Dodd-Frank Act will affect institutions that engage in activities in which the Bank does not engage, it will likely increase the Bank’s regulatory compliance burden.

Risk Relating to the Region

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

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 currency devaluation. Global economic changes, including fluctuations in oil prices, commodities prices, U.S. dollar interest rates and 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, including Panama and the other countries where the Bank operates. 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 number of countries. Adverse changes affecting the economies in one or more of those countries 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. As of December 31, 2011, approximately 70% of the Bank’s credit portfolio was outstanding to borrowers in the following five countries: Brazil ($1,984 million, or 34%), Colombia ($839 million, or 14%), Mexico ($498 million, or 9%), Argentina ($390 million, or 7%), and Chile ($389 million, or 7%).

In addition, as of December 31, 2011, of the Bank’s total credit portfolio balances, 10% were to five borrowers in Brazil, 7% were to five borrowers in Colombia, 4% were to five borrowers in Mexico, 6% were to five borrowers in Argentina, and 6% were to five borrowers in Chile. 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.

Item 4. Information on the Company

A. History and Development of the Company

The Bank, a corporation (sociedad anónima, S.A.) organized under the laws of Panama and headquartered in Panama City, Panama, is a specialized supranational bank originally established by central banks of Latin American and Caribbean countries to promote trade finance in the Region.

The Bank was established pursuant to a May 1975 proposal of the XX Assembly of Governors of central banks in the Region, which recommended the creation of a supranational organization to increase the Region’s foreign trade financing capacity. The Bank was constituted in 1978 as a corporation pursuant to the laws of Panama and commenced operations on January 2, 1979. 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 Contract No. 103-78 signed between Panama and Bladex, the Bank was granted certain privileges by the government of Panama, including an exemption from payment of income taxes in Panama.

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

Bladex offers its services through its head office and subsidiaries in Panama City, its subsidiaries and offices in New York City, including its agency, or the New York Agency, and Bladex Asset Management Inc., or Bladex Asset Management, its subsidiaries in Brazil and the Cayman Islands, its international administrative office in Miami, or the Florida Administrative Office, and its representative offices in Buenos Aires, Argentina, in Mexico City, D.F. and Monterrey, Mexico, in Porto Alegre, Brazil, in Lima, Peru and in Bogotá, Colombia, as well as through a worldwide network of correspondent banks. The representative offices in Lima, Peru and Bogotá, Colombia started operations in 2011. Bladex’s shares of Class E common stock are listed on the New York Stock Exchange, or NYSE, under the symbol “BLX.”

Bladex Asset Management, Inc., or Bladex Asset Management, incorporated on May 24, 2006 under the laws of the State of Delaware, serves as investment manager for Bladex Offshore Feeder Fund, or the Feeder, and Bladex Capital Growth Fund, or the Fund, both of which are registered with the Cayman Island Monetary Authority, or CIMA, under the Mutual Funds Law of the Cayman Islands. The Feeder invests substantially all of its assets in the Fund. The objective of the Fund is to achieve capital appreciation by investing mainly in Latin American debt securities, stock indexes and currencies and trading derivative instruments. The Fund follows a macro strategy by trading a combination of products including foreign exchange, interest rate swaps, and derivative products to establish long and short positions, mainly in Latin American markets. Capital preservation is one of the Fund’s main objectives, and the Fund’s trading strategy emphasizes high liquidity, moderate volatility and lower leverage.

Bladex Holdings Inc., or Bladex Holdings, a wholly owned subsidiary of Bladex, incorporated under the laws of the State of Delaware on May 30, 2000, exercises control over Bladex Asset Management Inc. On September 8, 2009, Bladex Asset Management was registered as a foreign entity in the Republic of Panama, to permit the establishment of a branch in Panama, which is mainly engaged in providing administrative and operating services to Bladex Asset Management in the United States. On February 23, 2012 Bladex Asset Management was registered with the SEC as Investment Adviser.

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

Bladex Head Office is a member of BCG PA LLC, or BCG, a company incorporated under the laws of the State of Delaware, and owns a 50% interest BCG. BCG owns “Class C” shares of the Fund, entitling it to receive a performance allocation on third-party investments in the Feeder and in the Fund.

Bladex Investimentos Ltda. was incorporated under the laws of Brazil on May 3, 2011. Bladex Head Office owns 99% of Bladex Investimentos Ltda. and Bladex Holdings Inc. owns the remaining 1%. Bladex Investimentos Ltda. has invested substantially all its assets in Bladex Latam Fundo de Investimento Multimercado, or the Brazilian Fund, which was incorporated under the laws of Brazil on July 26, 2011.

The objective of the Brazilian Fund is to achieve capital gains by dealing in the interest, currency, securities, commodities and debt markets, and by trading instruments available in the spot and derivative markets. The Brazilian Fund is registered with the Brazilian Securities Commission, or CVM. This fund is a variable interest entity, or VIE, and has been consolidated in the consolidated financial statements of Bladex for the year ended December 31, 2011. As of December 31, 2011, Bladex Investimentos Ltda. holds 92% of the Brazilian Fund’s net asset value.

BLX Brazil Ltd. was incorporated under the laws of the Cayman Islands on October 5, 2010. Bladex Head Office owns 99.8% of BLX Brazil Ltd. In turn, BLX Brazil Ltd. owns 99% of Bladex Asset Management Brazil – Gestora de Recursos Ltda., and Bladex Asset Management owns the remaining 1%. Bladex Asset Management Brazil – Gestora de Recursos Ltda. was incorporated under the laws of Brazil on January 6, 2011 and provides investment advisory services to the Brazilian Fund.

Clavex LLC, a former subsidiary of Bladex Holdings, was dissolved on April 7, 2011, and its net assets were transferred to its controlling entity. Clavex S.A., a former subsidiary of Bladex Head Office, was dissolved on August 30, 2011, and its net assets were transferred to Bladex Head Office.

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

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

See Item 18, “Financial Statements,” notes 1 and 2(a).

Business Overview

Overview

The Bank’s mission is to provide seamless support to Latin America’s foreign trade, while creating value for its stockholders. The Bank is principally engaged in providing trade financing to selected commercial banks, middle-market companies and corporations in the Region. The Bank’s lending and investing activities are funded by interbank deposits, primarily from central banks and financial institutions in the Region, by borrowings from international commercial banks and, to a lesser extent, by sales of the Bank’s debt securities to financial institutions and investors in Asia, Europe, North America and the Region. The Bank does not provide retail banking services to the general public, such as retail savings accounts or checking accounts, and does not take retail deposits.

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

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

The Treasury Division is responsible for the Bank’s liquidity management and investment securities activities, including management of the Bank’s interest rate, liquidity, price and currency risks. The division controls deposits in banks and all of the Bank’s trading assets, securities available-for-sale and securities held-to-maturity.

The Asset Management Unit, which is based in New York City, New York and São Paulo, Brazil, is responsible for the Bank’s asset management activities, including investment advisory services for funds and managed accounts, and assets attributable to the Asset Management Unit comprise the balance of the Fund and the assets of the Brazilian Fund. The Fund follows a macro strategy by trading a combination of products including foreign exchange, interest rate swaps, and derivative products to establish long and short positions mainly in Latin American markets. The Brazilian Fund’s objective is to achieve capital gains by dealing in the interest, currency, securities, commodities and debt markets, and by trading instruments available in the spot and derivative markets. The Bank invested $7 million in the Brazilian Fund in 2011.

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

As of December 31, 2011, the Bank had 72 employees, or 35% of its total employees, across its offices responsible for marketing the Bank’s financial products and services to existing and potential customers.

Developments During 2011

The macroeconomic environment in the Region faced significant challenges in 2011, firstly from the risk of overheating of Latin American economies, driven by growing local demand, and, subsequently, from a highly volatile external environment given the deterioration of the economic situation in developed countries, including principally in the European Union, or EU. The Bank’s Management believes that these challenges were met reasonably well in the Region through various economic policies which were put in place even before the 2008-2009 crisis and which allowed for further consolidation of a strong financial position in the Region.

Despite weaker global economic growth, especially in large economies such as the EU, the U.S., and Japan, the Region continued to perform well, with exports growing 23% in 2011 while maintaining a trend towards greater diversification, supported by a steady inflow of foreign direct investment that grew 73% year-over-year. The Region also benefited from the sustained demand from China and other emerging countries for raw materials. Although GDP growth was more moderate in 2011 than in 2010, a year of recovery following the 2009 recession, in response to tighter monetary policies implemented in the second quarter of the year and a downward correction in global economic growth, the Region as a whole continued to improve its fiscal and solvency indicators, improving its global position in the face of greater international economic uncertainty.

These developments were reflected in the gradual improvement in the international ratings of some countries in the Region, such as Peru, Brazil, Colombia and Panama, with a generally higher investment grade in the Region. In this environment, Bladex has developed even further its capacity to support both international and inter-regional trade, which has resulted in its highest-ever geographic diversification of credit placements and a downward trend in systemic risk related to these placements throughout the period.

For the year 2011, net income attributable to Bladex was $83.2 million, a $40.9 million, or 97%, yearly increase when compared to $42.2 million in net income attributable to Bladex in 2010. Of total net income attributable to Bladex in 2011, the Commercial Division represented 64%, or $53.4 million, the Treasury Division represented 18%, or $14.7 million, and the Asset Management Unit represented $15.1 million, or 18%, of total net income, reflecting improved performance across all of the Bank’s business segments.

The Bank’s commercial portfolio grew by 20% during 2011, amounting to $5,354 million as of December 31, 2011, compared to $4,446 million as of December 31, 2010, as a result of higher growth and diversification from the Bank’s established client base of corporations (which grew by 8%), financial institutions (which grew by 26%), along with the continuing business expansion into the middle-market segment (which grew by 101%). The ratio of allowance for credit losses to the Bank’s commercial portfolio stood at 1.8% as of December 31, 2011 compared to 2.1% as of December 31, 2010.

Bladex’s Tier 1 capitalization ratio remained strong at 18.6% with a leverage ratio of 8.4 times as of December 31, 2011, compared to 20.5% and 7.3 times, respectively, as of December 31, 2010, attributable to the Bank’s continuous deployment of capital, as evidenced by portfolio growth.

The Bank’s efficiency ratio improved to 36% for the year 2011, compared to 55% in 2010, mainly as a result of a $62 million increase in net operating revenues across all business segments, which exceeded the Bank’s operating expenses growth of $8.0 million.

The Bank’s liquidity level stood at $786 million as of December 31, 2011, compared to $421 million as of December 31, 2010, as the Bank maintained prudent liquidity management by increasing its liquidity position in response to volatility in the markets.

On January 17, 2012, the Bank’s Board of Directors, or the Board, approved an increase in quarterly dividends distributed to holders of common shares from $0.20 to $0.25 per share pertaining to the fourth quarter of 2011. This increase in quarterly dividends reaffirmed the Bank’s commitment to a dividend payout that reflects the Bank’s growing core business.

The Superintendency of Banks of Panama, or the Superintendency, authorized Bladex to open a representative office in Lima, Peru on August 12, 2010 and on November 15, 2010, the Superintendency of Banks, Insurance & Private Administrators of Pension Funds of Peru gave the approval for such representative office. On March 1, 2011 the Bank commenced operations of the representative office located in Lima, Peru.

On January 20, 2011 Bladex received approval from the Superintendency to open a representative office in Bogotá, Colombia and obtained the approval from the Financial Superintendency of Colombia on April 19, 2011. In early May, 2011 the representative office in Bogotá, Colombia commenced operations.

See Item 5, “Operating and Financial Review and Prospects/Operating Results/Net Income” and Item 18, “Financial Statements,” note 25.

Strategies for 2012 and Subsequent Years

Further extend the Bank’s business in politically and economically stable, high-growth markets

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

Targeted growth in expanding and diversifying the Bank’s client base

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

Enhance current products and services providing relevant sector-specific solutions in the Region

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

Increase the range of products and services that the Bank offers

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

The Bank’s Management expects generally a positive business environment for trade finance in 2012, and believes the Bank is well positioned to capture the growth forecasted for the Region, to transfer such value to its shareholders, and to comply with the Bank’s mission to support foreign trade in Latin America.

Lending Policies

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

Due to the nature of trade finance, the Bank’s loans generally are unsecured. However, in certain instances, based upon the Bank’s credit review of the borrower and the economic and political situation and trends in the borrower’s home country, the Bank has determined that the level of risk involved may require that a loan be secured by pledged deposits and other collateral.

Country Credit Limits

The Bank maintains a continuous review of each country's risk profile evolution, supporting our analysis with various factors, both quantitative and qualitative, the main driving factors of which include: the evolution of macroeconomic policies (fiscal, monetary, and exchange rate policy), fiscal and external performance, price stability, level of liquidity in foreign currency, changes of legal and institutional framework, as well as material social and political events, among others, including industry analysis relevant to Bladex business activities.

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

The amounts of capital allocated to a transaction is based on customer type (sovereign, state-owned or private, middle-market companies, corporate or financial institution), the type of transaction (trade or non-trade), and the average remaining term of the transaction (from one 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, which accounted for 54% of such credit as of December 31, 2011. 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 “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 thirty percent limit as a percentage of capital and reserves for any one borrower and borrower group, in the case of financial institutions, and a twenty-five percent limit as a percentage of capital and reserves for any one borrower and borrower group, in the case of corporate, sovereign and middle-market companies. As of December 31, 2011, the legal lending limit prescribed by Panamanian law for corporations and sovereign borrowers amounted to $190 million, and for financial institutions and financial groups amounted to $228 million. Non-compliance with the legal lending limit prescribed by Panamanian Law, could result in the assessment of administrative sanctions by the Superintendency for such violations, taking into consideration the magnitude of the offense and any prior occurrences, and the magnitude of damages and prejudice caused to third parties. On a quarterly basis, the CPER reviews the impaired portfolio, if any, along with certain non-impaired credits. As of December 31, 2011, 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, which consists of the commercial portfolio and investment securities portfolio, increased to $5,814 million as of December 31, 2011, from $4,884 million as of December 31, 2010, and from $3,621 million as of December 31, 2009. The $930 million, or 19%, credit portfolio increase during 2011 was largely attributable to increased demand from the Bank’s established client base of middle-market companies ($229 million, or 101%), corporations ($171 million, or 7%) and financial institutions ($586 million, or 29%), as demand in the Region increased, and was partially offset by a $56 million, or 19%, decrease in sovereign clients mostly related to the sale of securities available-for-sale.

The year 2011 was defined by a strong economic recovery in Latin America, as the Region is becoming an essential and key supplier of much of the food, minerals, energy and, in some cases, manufactured goods that a changing world requires as emerging nations continue to develop and as developed economies transform themselves in order to be able to compete. This recovery increased trade flows that added significant scale and diversification to the Bank's business.

Commercial Portfolio

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

The Bank’s commercial portfolio increased to $5,354 million as of December 31, 2011, a 20% increase from $4,446 million as of December 31, 2010, and a 72% increase from $3,110 million as of December 31, 2009. The increase in 2011 was largely attributable to increased demand from the Bank’s established client base of financial institutions ($506 million, or 26%), middle-market companies ($229 million or 101%) and corporations ($172 million, or 8%).

As of December 31, 2011, 59% of the Bank’s commercial portfolio represented trade related credits, and the remaining balance consisted primarily of lending to banks and corporations. The corporate market segment represented 45% of the total commercial portfolio, of which 68% represented trade financing. The middle-market companies segment represented 8% of the total commercial portfolio, of which 68% represented trade financing.

The following table sets forth the distribution of the Bank’s commercial portfolio, by product category as of December 31 of each year:

	As of December 31,
	2011⁽¹⁾		%		2010⁽²⁾		%		2009⁽³⁾		%		2008		%		2007		%
	(in $ million, except percentages)
Loans	$	4,960		92.6	$	4,064		91.4	$	2,779		89.4	$	2,619		85.5	$	3,732		87.2
Selected deposits placed		30		0.6		0		0.0		0		0.0		0		0.0		0		0.0
Contingencies and other assets		364		6.8		382		8.6		331		10.6		444		14.5		550		12.8
Total	$	5,354		100.0	$	4,446		100.0	$	3,110		100.0	$	3,062		100.0	$	4,281		100.0

⁽¹⁾

Includes non-accrual loans for $32 million as of December 31, 2011.

⁽²⁾

Includes non-accrual loans for $29 million as of December 31, 2010.

⁽³⁾

Includes non-accrual loans for $51 million as of December 31, 2009.

Loan Portfolio

As of December 31, 2011, the Bank’s total loans amounted to $4,960 million, compared to $4,064 million as of December 31, 2010 and compared to $2,779 million as of December 31, 2009. As of December 31, 2011, 68% of the Bank’s loans were scheduled to mature within one year. For more detailed information, see Item 5, “Operating and Financial Review and Prospects/Operating Results/Changes in Financial Condition” and “Operating and Financial Review and Prospects/Operating Results/Asset Quality and Allowance for Credit Losses,” and Item 18, “Financial Statements,” note 7 and note 8.

For more detailed information about non-accrual loans, see Item 18 “Financial Statements,” note 7.

Loans by Country Risk

The following table sets forth the distribution of the Bank’s loans by country risk at the dates indicated:

	As of December 31,
	2011		% of Total Loans		2010		% of Total Loans		2009		% of Total Loans		2008		% of Total Loans		2007		% of Total Loans
	(in $ million, except percentages)
Argentina	$	390		7.9	$	237		5.8	$	73		2.6	$	151		5.8	$	264		7.1
Bolivia		0		0.0		0		0.0		0		0.0		0		0.0		5		0.1
Brazil ⁽¹⁾		1,852		37.3		1,583		38.9		1,335		48.0		1,289		49.2		1,379		37.0
Chile		376		7.6		328		8.1		258		9.3		8		0.3		10		0.3
Colombia		734		14.8		585		14.4		200		7.2		285		10.9		400		10.7
Costa Rica		109		2.2		88		2.2		83		3.0		55		2.1		77		2.1
Dominican Republic		118		2.4		135		3.3		31		1.1		48		1.8		29		0.8
Ecuador		22		0.4		18		0.4		23		0.8		36		1.4		61		1.6
El Salvador		21		0.4		39		1.0		41		1.5		76		2.9		47		1.2
Germany		5		0.1		0		0.0		0		0.0		0		0.0		0		0.0
Guatemala		161		3.2		92		2.3		74		2.7		61		2.3		96		2.6
Honduras		46		0.9		38		0.9		23		0.8		45		1.7		49		1.3
Jamaica		2		0.0		64		1.6		31		1.1		15		0.6		77		2.1
Mexico ⁽²⁾		416		8.4		404		9.9		302		10.9		380		14.5		410		11.0
Netherlands		20		0.4		0		0.0		0		0.0		0		0.0		0		0.0
Nicaragua		10		0.2		0		0.0		1		0.0		4		0.2		13		0.3
Panama		119		2.4		47		1.2		41		1.5		47		1.8		140		3.7
Paraguay		30		0.6		0		0.0		0		0.0		0		0.0		0		0.0
Peru		342		6.9		343		8.4		161		5.8		50		1.9		454		12.2
Spain		0		0.0		0		0.0		0		0.0		0		0.0		0		0.0
Trinidad & Tobago		76		1.5		63		1.6		72		2.6		23		0.9		88		2.3
Uruguay		110		2.2		0		0.0		30		1.1		45		1.7		0		0.0

	As of December 31,
	2011		% of Total Loans		2010		% of Total Loans		2009		% of Total Loans		2008		% of Total Loans		2007		% of Total Loans
	(in $ million, except percentages)
Venezuela		0		0.0		0		0.0		0		0.0		0		0.0		135		3.6
Total	$	4,960		100.0	$	4,064		100.0	$	2,779		100.0	$	2,619		100.0	$	3,732		100.0

⁽¹⁾

Includes non-accrual loans in Brazil of $1 million in 2010 and $7 million in 2009.

⁽²⁾

Includes non-accrual loans in Mexico of $32 million in 2011, $28 million in 2010 and $44 million in 2009.

As of December 31, 2011, the loans extended in European countries represented 0.5% of the Bank’s total loan portfolio and consisted of loans pertaining to Latin-America trade transactions extended to private corporations with solid reputations in the following countries: the Netherlands ($20 million, or 0.4% of the total loan portfolio), Germany ($5 million, or 0.1% of the total loan portfolio), and Spain ($0.3 million, or 0.0% of the total loan portfolio).

Loans by Type of Borrower

The following table sets forth the amounts of the Bank’s loans by type of borrower at the dates indicated:

	As of December 31,
	2011		% of Total Loans		2010		% of Total Loans		2009		% of Total Loans		2008		% of Total Loans		2007		% of Total Loans
	(in $ million, except percentages)
Private sector commercial banks and financial institutions	$	1,716		34.6	$	1,381		34.0	$	875		31.5	$	577		22.0	$	1,491		39.9
State-owned commercial banks		448		9.0		320		7.9		334		12.0		322		12.3		241		6.5
Central banks		0		0.0		0		0.0		0		0.0		25		1.0		0		0.0
Sovereign debt		27		0.5		54		1.3		96		3.4		67		2.6		113		3.0
State-owned exporting organizations		233		4.7		312		7.7		193		7.0		50		1.9		282		7.6
Private middle-market companies ⁽¹⁾		446		9.0		225		5.5		129		4.6		0		0.0		0		0.0
Private corporations ⁽²⁾		2,090		42.1		1,772		43.6		1,153		41.5		1,577		60.2		1,605		43.0
Total ⁽³⁾	$	4,960		100.0	$	4,064		100.0	$	2,779		100.0	$	2,619		100.0	$	3,732		100.0

⁽¹⁾

In 2011, 42% of loans to private middle-market companies correspond to the industrial sector, 29% of loans correspond to the agricultural sector, and 5% correspond to oil and petroleum and derived products.

⁽²⁾

In 2011, 36% of loans to private corporations correspond to the industrial sector, 29% of loans correspond to the agricultural sector, 20% of loans correspond to oil and petroleum derived products, and 2% of loans correspond to the mining sector.

⁽³⁾

Includes $32 million, $29 million and $51 million in non-accrual loans in 2011, 2010 and 2009, respectively.

As of December 31, 2011, the Bank did not have any exposure to European sovereign debt.

As of December 31, 2011, the Bank’s loan portfolio amounted to $4,960 million, an increase of $896 million, or 22%, from 2010 year-end balances. The increase resulted from improved conditions in the Latin American financial market and increased demand for the Bank’s lending products. As of December 31, 2011, 20% of the Bank’s $2,768 million loan exposure to private corporations, state-owned exporting organizations and private middle-market companies was concentrated in the oil & gas industry in countries such as Brazil, Chile, Argentina, Uruguay, the Dominican Republic, Trinidad & Tobago and the Netherlands.

Maturities and Sensitivities of the Loan Portfolio

The following table sets forth the remaining term of the maturity profile of the Bank’s loan portfolio as of December 31, 2011, by type of rate and type of borrower:

	As of December 31, 2011
	(in $ million)
	Due in one year or less		Due after one year through five years		Due after five years through ten years ⁽¹⁾		Total
FIXED RATE
Private sector commercial banks and financial institutions		814		0		0		814
State-owned commercial banks		414		0		0		414
Sovereign debt		17		3		0		20
State-owned exporting organizations		148		0		0		148
Private middle-market companies		250		21		0		271
Private corporations		642		52		0		693
Sub-total	$	2,284	$	76	$	0	$	2,360
FLOATING RATE
Private sector commercial banks and financial institutions		441		462		0		903
State-owned commercial banks		1		33		0		34
Sovereign debt		7		0		0		7
State-owned exporting organizations		75		10		0		85
Private middle-market companies		97		78		0		175
Private corporations		474		903		19		1,396
Sub-total	$	1,095	$	1,486	$	19	$	2,599
Total	$	3,379	$	1,562	$	19	$	4,960

⁽¹⁾

The Bank’s loan portfolio on private corporations matures no later than the year 2018.

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, customer liabilities under acceptances, and equity investment.

The Bank, on behalf of its client base, advises and confirms letters of credit to facilitate foreign trade transactions. The Bank also provides stand-by letters of credit, guarantees, and commitments to extend credit, which are binding 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. As of December 31, 2011, total contingencies and other assets in the commercial portfolio amounted to $364 million (7% of the total commercial portfolio), of which 79% corresponded to letters of credit, mainly in Ecuador.

As of December 31, 2010, total contingencies and other assets in the commercial portfolio amounted to $382 million (9% of the total commercial portfolio), of which 68% corresponded to letters of credit, mainly in Ecuador and Venezuela.

As of December 31, 2009, total contingencies and other assets in the commercial portfolio amounted to $331 million (11% of the total commercial portfolio).

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

	As of December 31,
	2011				2010				2009
	Amount		% of Total Contingencies and other assets		Amount		% of Total Contingencies and other assets		Amount		% of Total Contingencies and other assets
	(in $ million, except percentages)
Customers’ liabilities under acceptances	$	1		0.3	$	27		7.1	$	2		0.5
Contingencies
Bolivia		1		0.3		0		0.0		0		0.0
Brazil		41		11.3		67		17.4		22		6.8
Chile		12		3.4		0		0.0		0		0.0
Colombia		2		0.7		0		0.0		0		0.0
Costa Rica		12		3.2		32		8.4		24		7.3
Dominican Republic		2		0.4		0		0.0		0		0.0
Ecuador		215		59.1		121		31.7		112		33.5
El Salvador		2		0.6		0		0.0		2		0.5
Guatemala		1		0.1		1		0.4		1		0.3
Honduras		0		0.1		0		0.1		0		0.1
Jamaica		0		0.1		0		0.0		0		0.0
Mexico		16		4.4		53		13.8		60		18.0
Panama		2		0.5		1		0.3		0		0.0
Peru		2		0.7		0		0.0		0		0.0
Spain		10		2.7		0		0.0		0		0.0
Switzerland		1		0.1		1		0.1		0		0.0
Uruguay		0		0.0		0		0.0		16		4.8
United States		22		6.0		0		0.0		0		0.0
Venezuela		22		6.0		78		20.5		92		27.8
Total Contingencies	$	363		99.7	$	355		92.9	$	330		99.5
Total Contingencies and Other Assets	$	364		100.0	$	382		100.0	$	331		100.0

See Item 18, “Financial Statements,” note 18.

Investment Securities Portfolio

The Bank’s investment securities portfolio consists of debt securities available-for-sale, securities held-to-maturity and some trading assets.

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.

The following table sets forth information regarding the carrying value of the Bank’s investment securities portfolio at the dates indicated.

	As of December 31,
	2011		2010		2009
	(in $ millions)
Trading assets ⁽¹⁾		17		50		50
Securities available-for-sale		416		353		457
Securities held-to-maturity		27		33		0
Total investment securities	$	460	$	437	$	507

⁽¹⁾

The trading assets of $17 milion for the year ended December 31, 2011 does not include trading assets related to the Brazilian Fund ($3 million).

As of December 31, 2011, the Bank’s securities available-for-sale amounted to $416 million and consisted of investments with issuers in the Region, of which 79% corresponded to sovereign borrowers, and 21% corresponded to private corporations and banks. The $63 million increase in the securities available-for-sale portfolio during 2011 compared to 2010 reflects the net effect of: (i) $364.9 million on investment securities acquired during 2011, (ii) the sale of $264.9 million in book value ($243.6 million in nominal value) which generated net gains of $3.4 million during 2011, (iii) redemption of $19.4 million of investment securities, (iv) a $10.7 million variance of mark-to-market of the available for sale securities portfolio, and (v) a -$6.7 million decrease in amortization of premiums and discounts.

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

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

The held-to-maturity portfolio amounted to $27 million as of December 31, 2011, compared to $33 million as of December 31, 2010. As of December 31, 2009 the Bank had no securities held-to-maturity.

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

As of December 31, 2011, the Bank’s trading assets amounted to $17 million, compared to $50 million as of December 31, 2010, and compared to the same amount as of December 31, 2009. See Item 18, “Financial Statements”, notes 2(i) and 4.

Investment Fund

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

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

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 Fund’s asset value totaled $120 million as of December 31, 2011, compared to $167 million as of December 31, 2010, and compared to $198 million as of December 31, 2009, of which the minority interest in the investment fund amounted to $6 million, $19 million, and $35 million, respectively.

Bladex’s ownership of the Feeder was 95.84% as of December 31, 2011, 88.67% as of December 31, 2010, and 82.34% as of December 31, 2009, with the remaining balances owned by third party investors.

As part of the Bank’s decision to gradually reduce its exposure, the Bank redeemed $50 million during the year 2011.

See Item 18, “Financial Statements,” notes 1, 2(e), 2(k), 6, and 22.

Total Outstandings by Country

The following table sets forth the aggregate amount of the Bank’s cross-border outstandings, consisting of cash and due from banks, interest-earning deposits in other banks, trading assets, investment securities, loans, Investment Fund outstandings and accrued interest receivable, but not including contingencies as of December 31 of each year:

	As of December 31,
	2011				2010				2009
	Amount		% of Total Outstandings		Amount		% of Total Outstandings		Amount		% of Total Outstandings
	(in $ million, except percentages)
Argentina	$	392		6.1	$	239		4.7	$	74		1.9
Austria		0		0.0		0		0.0		0		0.0
Brazil		1,962		30.5		1,689		32.9		1,471		37.4
Chile		377		5.9		367		7.1		297		7.6
Colombia		843		13.1		711		13.8		345		8.8
Costa Rica		110		1.7		93		1.8		83		2.1
Dominican Republic		149		2.3		139		2.7		38		1.0
Ecuador		22		0.3		18		0.4		23		0.6
El Salvador		21		0.3		55		1.1		58		1.5
France		1		0.0		11		0.2		20		0.5
Germany		7		0.1		0		0.0		0		0.0
Guatemala		168		2.6		104		2.0		86		2.2
Honduras		46		0.7		38		0.7		23		0.6
Jamaica		2		0.0		65		1.3		31		0.8
Japan		11		0.2		62		1.2		100		2.5
Mexico		484		7.5		457		8.9		361		9.2
Panama		181		2.8		98		1.9		86		2.2
Peru		386		6.0		346		6.7		193		4.9
Switzerland		0		0.0		32		0.6		22		0.6
Trinidad & Tobago		77		1.2		63		1.2		72		1.8
United Kingdom		1		0.0		1		0.0		20		0.5
United States		779		12.1		297		5.8		239		6.1
Uruguay		110		1.7		0		0.0		30		0.8
Multilateral Organization		99		1.5		65		1.3		50		1.3
Other countries ⁽¹⁾		75		1.2		20		0.4		14		0.3
Sub-Total	$	6,304		98.1	$	4,969		96.7	$	3,737		95.0
Investment Fund ⁽²⁾		120		1.9		167		3.3		198		5.1
Total ⁽³⁾	$	6,425	$	100.0	$	5,136		100.0	$	3,934		100.0

⁽¹⁾

Other countries consists of cross-border outstandings to countries in which cross-border outstandings did not exceed 1% for any of the periods indicated. Other countries in the year 2011 was comprised of $31 million in Paraguay, $20 million in the Netherlands, $10 million in Nicaragua, $10 million in China, and $4 million in Spain. Other countries in the year 2010 was comprised of $20 million in Finland. Other Countries in the year 2009 was comprised of $10 million in Portugal, $1 million in Nicaragua and $3 million of cash and due from banks.

⁽²⁾

The balances in Investment Fund represent the participation of the Feeder in the net asset value of the Fund.

⁽³⁾

The outstandings by country does not include contingencies. See Item 4, “Business Overview/Contingencies and Other Assets.”

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

The composition of the outstandings per country portfolio has remained fairly stable over the 2009 to 2011 period. Some exposures in certain countries have been adjusted in accordance with the Bank’s risk perception.

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

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

	As of December 31,
	2011		2010		2009
			(in $ million)
Private sector commercial banks and financial institutions	$	1,823	$	1,560	$	1,177
State-owned commercial banks		505		403		355
Central banks		761		265		178
Sovereign debt		238		307		434
State-owned exporting organizations		383		355		246
Private middle-market companies		449		227		130
Private corporations		2,146		1,852		1,216
Sub-Total	$	6,304	$	4,969	$	3,737
Investment fund		120		167		198
Total	$	6,425	$	5,136	$	3,934

Net Revenues Per Country

The following table sets forth information regarding the Bank’s net revenues by country at the dates indicated, with net revenues calculated as the sum of net interest income, net fees and commissions, derivative financial instruments and hedging, net gain (loss) from investment fund trading, net gain (loss) from trading securities, net gain (loss) on sale of securities available-for-sale, net gain (loss) on foreign currency exchange, and other income (expense), net:

	For the year ended December 31,
	2011		2010		2009
	(in $ million)
Argentina	$	8.4	$	4.9	$	2.0
Brazil		37.5		28.6		25.9
Chile		3.5		2.9		1.9
Colombia		12.0		5.1		5.8
Costa Rica		1.9		2.0		4.2
Dominican Republic		2.8		1.3		0.7
Ecuador		5.8		4.1		3.0
El Salvador		0.5		0.8		5.4
Guatemala		0.8		1.4		8.8
Honduras		1.8		1.4		1.1

	For the year ended December 31,
	2011			2010			2009
	(in $ million)
Jamaica		1.4			1.1			0.6
Mexico		18.8			15.7			16.8
Panama		2.5			1.6			3.3
Paraguay		0.4			0.0			0.0
Peru		8.7			5.0			0.5
Trinidad and Tobago		1.7			1.3			1.0
Uruguay		1.3			0.5			1.2
Venezuela		2.6			4.6			2.5
Other countries⁽¹⁾		4.6			2.0			2.4
Asset Management Unit		21.1			(7.7	)		22.1
Total net revenues	$	138.3		$	76.8		$	109.1
Reversal (provision) for credit losses		(4.4	)		4.8			(14.8	)
Recoveries, net of impairment of assets		(0.1	)		0.2			(0.1	)
Operating expenses		(50.0	)		(42.1	)		(38.2	)
Net income	$	83.9		$	39.8		$	56.0
Net income (loss) attributable to the redeemable noncontrolling interest		0.7			(2.4	)		1.1
Net income attributable to Bladex	$	83.2		$	42.2		$	54.9

⁽¹⁾ Other countries consists of net revenues per country in which net revenues did not exceed $1 million for any of the periods indicated above.

The previous table provides a reconciliation of the net revenues (as defined previously) to the Bank’s net income. Net revenues do not include the effects of reversals (provisions) for credit losses, recoveries on assets, net of impairments and operating expenses. The objective of the aforementioned table is to show net revenues before operating expenses generated from the Bank’s Commercial Division, Treasury Division and Asset Management Unit, on a by-country basis. Given that the Bank’s business segments generate revenues not only from net interest income, but from other sources including fees and commissions, gains and losses on investments and derivative financial instruments, which form part of other income rather than net interest income, the Bank adds those amounts to net interest income to show net revenues earned before operating expenses. Reversals (provisions) for credit losses, and recoveries, net of impairment of assets, are not included as part of net revenues as the Bank believes such amounts, which are based on Management estimates, may distort trend analysis. Thus, the Bank believes excluding such amounts from, net revenues provides a more accurate and clear indicator of the Bank’s performance within its three segments for each country, and thus provides a better analysis of the efficiency of the Bank. The Bank also believes the presentation of net revenues helps facilitate comparisons of performance between periods. However, net revenues should not be considered a substitute for, or superior to, financial measures calculated differently on a U.S. GAAP basis. Furthermore, net revenues may be calculated differently by other companies in the financial industry.

Competition

The Bank operates in a highly competitive environment in most of its markets, and faces competition principally from regional and international banks, the majority of which are European or North American, in making loans and providing fee-generating services. The Bank competes in its lending and deposit-taking activities with other banks and international financial institutions, many of which have greater financial resources, enjoy access to less expensive funding and offer sophisticated banking services. Whenever economic conditions and risk perception improve in the 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 dependent 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.”

Regulation

General

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

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, or the OCC, the Federal Deposit Insurance Corporation and the Office of Thrift Supervision. In addition, the Statement of Cooperation between the United States and Panama promotes cooperation between U.S. and Panamanian banking regulators and demonstrates the commitment of the U.S. regulators and the Superintendency to the principles of comprehensive and consolidated supervision.

Panamanian Law

The Bank operates in Panama under a General Banking License issued by the National Banking Commission, predecessor of the Superintendency of Banks. Banks operating under a General Banking License, or General License Banks, 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.

All banking institutions in Panama are governed by Executive Decree 52 of April 30, 2008, or 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 a minimum total capital of 8% of their total risk-weighted assets, and primary equity capital must be equal to or greater than 4% of the bank’s assets and off-balance sheet operations that represent a contingency to the bank. The Superintendency is authorized to take into account market risks, operational risks and country risks, among others, to evaluate capital adequacy. In addition, the Superintendency is authorized to increase the minimum capital requirement percentage in Panama in the event that generally accepted international capitalization standards (the standards set by the Basel Committee on Banking Supervision) become more stringent.

General License Banks are required to maintain 30% of their global deposits in liquid assets (which include short-term loans to other banks and other liquid assets) of the type prescribed by the Superintendency. 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.

Pursuant to the Banking Law, banks cannot grant loans or issue guarantees or any other obligation, or Credit Facilities, to any one person or group of related persons in excess of 25% of the Bank’s total capital. This limitation also extends to Credit Facilities granted to parties related to the ultimate parent of the banking group. However, the Banking Law establishes 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 is 30% of the bank’s capital funds. As confirmed by the Superintendency, the Bank currently applies the limit of 30% of the Bank’s total capital with respect to the Bank’s credit facilities in favor of financial institutions and the limit of 25% of the Bank’s total capital with respect to the Bank’s credit facilities in favor of corporations, middle-market companies and sovereign borrowers.

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 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 subject to the following conditions: (1) the ownership of shares in the debtor bank–directly or indirectly–by the shared director or shared officer, may not exceed 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; (2) 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 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; (3) 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 (4) the loan or credit must strictly comply with customary standards of discretion set by the grantor bank’s credit policy. The Superintendency 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 requirements applicable to General License Banks, including (1) a requirement that a bank must notify the Superintendency before opening or closing a branch or office in Panama and obtain approval from the Superintendency before opening or closing a branch or subsidiary outside Panama, (2) a requirement that a bank obtain approval from the Superintendency 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 designate the certified public accounting firm that it wishes to contract to carry out the duty of external auditing for the new fiscal term, within the first three months of each fiscal term, and notify the Superintendency within 7 days of such designation, and (4) a requirement that a bank obtain prior approval from the Superintendency of the rating agency it wishes to hire to perform the risk rating of the bank, (5) a requirement that a bank must publish in a local newspaper the risk rating issued by the rating agency and any risk rating update, and (6) a requirement that a bank must provide written affirmation of the Bank’s audited financial statements signed by the Bank’s Chairman of the Board, the Chief Executive Officer and Chief Financial Officer. The subsidiaries of Panamanian banks established in foreign jurisdictions must observe the legal and regulatory provisions applicable in Panama regarding the sufficiency of capital, as prescribed under the Banking Law.

The Banking Law regulates banks and 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 banking groups in Panama are subject to inspection by the Superintendency, which must take place at least once every two years. The Superintendency 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 weekly, monthly, quarterly and annual information, including financial statements, an analysis of their credit facilities and any other information requested by the Superintendency. In addition, banks are required to make available for inspection any reports or documents that are necessary for the Superintendency to ensure compliance with Panamanian banking laws and regulations. Banks subject to supervision may be fined by the Superintendency for violations of Panamanian banking laws and regulations. The Superintendency last inspected the Bank during the months of February through April, 2010, and the results of this inspection were satisfactory. During 2011, the Superintendency inspected the Bank with respect to Anti-Money Laundering, IT Security and other security measures, and the results of this inspection were satisfactory.

Panamanian Anti-Money Laundering laws and regulations

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

United States Law

Bladex operates a New York state-licensed agency in New York, New York and maintains a direct wholly-owned non-banking subsidiary in Delaware, Bladex Holdings Inc., or Bladex Holdings, which is not engaged in activities other than owning one wholly owned subsidiary incorporated under the laws of the State of Delaware: Bladex Asset Management, incorporated on May 24, 2006. Another wholly-owned subsidiary, Clavex LLC, which was incorporated on June 15, 2006, was dissolved on April 7, 2011, and its net assets were transferred to its controlling entity. On October 30, 2006, the Bank established the Florida International Administrative Office in Miami, Florida. On April 16, 2008, Bladex incorporated a direct fifty percent (50%) owned subsidiary in Delaware with the name of BCG PA LLC, which receives the performance allocation of Bladex Capital Growth Fund.

Federal Law

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

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

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

The IBA also restricts the ability of a foreign bank with a branch or agency in the United States to engage in non-banking activities in the United States, to the same extent as a U.S. bank holding company. Bladex is subject to certain provisions of the Federal Bank Holding Company Act of 1956, or the BHCA, because it maintains an agency in the United States. Generally, any nonbanking activity engaged in by Bladex directly or through a subsidiary in the United States is subject to certain limitations under the BHCA. Under the Gramm-Leach-Bliley Financial Modernization Act of 1999, or GLB Act, a foreign bank with a branch or agency in the United States may engage in a broader range of non-banking financial activities, provided it is qualified and has filed a declaration with the U.S. Federal Reserve Board to be a “financial holding company”. The application with the U.S. Federal Reserve Board to obtain financial holding company status, filed by Bladex on January 29, 2008, has been withdrawn effective March 2, 2012, as Bladex no longer considers the financial holding company status to be a necessary requirement in order to achieve its long-term strategic goals and objectives. At present, Bladex has subsidiaries in the United States, Bladex Holdings, a wholly-owned company incorporated under Delaware law that is not engaged in any activity, other than owning Bladex Asset Management, a Delaware corporation and BCG PA LLC, a fifty percent (50%) owned subsidiary incorporated under the laws of Delaware.

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

Certain provisions of the Dodd-Frank Act also require regulatory agencies, including the SEC, to establish regulations for implementation of many of the provisions of the Dodd-Frank Act. While the Bank is closely monitoring this rulemaking process, the exact impact of new rules on its business remains uncertain. Bladex will continue to monitor all relevant developments and rulemaking initiatives, and expects to successfully implement any new applicable legislative and regulatory requirements. At this time, the Bank cannot predict the impact or possible additional costs to the Bank, if any, related to the implementation of, or compliance with, the potential future requirements under the Dodd-Frank Act.

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

New York State Law

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

The Superintendent is empowered by law to require any branch or agency of a foreign bank to maintain in New York specified assets equal to a percentage of the branch’s or agency’s liabilities, as the Superintendent may designate. Under the current requirement, the New York Agency is required to maintain a pledge of a minimum of $2 million with respect to its total third-party liabilities and such pledge may be up to 1% of the agency’s third party liabilities, or upon meeting eligibility criteria, up to a maximum amount of $100 million. As of December 31, 2011, the New York Agency maintained a pledge deposit with a carrying value of $3.0 million with the New York State Banking Department, 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.

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 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 the Florida Financial Institutions Codes, as well as the IBA and the regulations of the U.S. Federal Reserve Board, the Florida International Administrative Office is also permitted to function as a representative office of the Bank. In this capacity it may solicit new business for the Bank and conduct research. It may also act in a liaison capacity between the Bank and its customers.

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

The Feeder and the Fund, both incorporated in the Cayman Islands with limited liability on February 21, 2006, and BLX Brazil Ltd., incorporated in the Cayman Islands on October 5, 2010, are exempted companies pursuant to the Companies Law (2011 Revision) of the Cayman Islands, or the Companies Law. The registered office of these companies is c/o Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman KY1-1104, Cayman Islands. These companies have received an undertaking exempting them from taxation of all future profits until March 7, 2026 for the Feeder and the Fund, and until November 23, 2030 for BLX Brazil Ltd.

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 174 of the Companies Law does not permit the Feeder and the 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 Feeder and the 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 (2011 Revision) of the Cayman Islands impose reporting obligations on residents of the Cayman Islands who know or suspect, or have reasonable grounds for knowing or suspecting, the involvement of another person in criminal conduct or with terrorism or terrorist property and the information for that knowledge or suspicion came to their attention in the course of business in the regulated sector.

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

Organizational Structure

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

Property, Plant and Equipment

The Bank owns its headquarters office, with 6,161 square meters of office space, located at Calle 50 and Aquilino de la Guardia in Panama City, Panama. The Bank leases 11.2 square meters of computer equipment hosting, located at Gavilan Street Balboa in Panama City, Panama and 21.2 square meters of office space and internet access in case of a contingency, located at 75E Street San Francisco, in Panama City, Panama. The Bank also leases, as contingency, 10.37 square meters of computer equipment hosting, located at Cable & Wireless Howard IDC, Brujas Street (Perimetral Oeste), behind the International Business Park, Arraijan, Panama.

In addition, the Bank leases office space for its representative offices in Mexico City and Monterrey, Mexico, Buenos Aires, Argentina, Lima, Peru, Bogotá, Colombia, Bladex Representação Ltda. in São Paulo and Porto Alegre, Brazil, its New York Agency in New York City, New York, and the Florida International Administrative Office in Miami, Florida. Bladex Asset Management Unit leases office space in São Paulo, Brazil and New York City, New York. See Item 18, “Financial Statements,” notes 2(r), 9 and 19.

During the year 2012, the Bank is planning to move its offices to the Business Park - Tower V in Costa del Este, Panama. The move is planned for the second quarter of 2012. The total investment budget cost of the project is approximately $6.7 million, which is expected to be funded by the proceeds of the sale of the Bank’s current premises. The current headquarter premises are under contract to sell. The fulfillment of the contract is expected to occur in congruence with the planned move to the new offices.

Item 4A. Unresolved Staff Comments

None.

Item 5. Operating and Financial Review and Prospects

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

Nature of Earnings

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

Operating Results

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

	For the Year Ended December 31,
	2011			2010			2009
	(in $ thousand, except per share amounts and percentages)
Total interest income	$	157,427		$	119,478		$	141,964
Total interest expense		54,717			44,975			77,212
Net interest income		102,710			74,503			64,752
Provision for loan losses		(8,841	)		(9,091	)		(18,293	)
Net interest income, after provision for loan losses		93,869			65,412			46,459
Other income (expense):
Reversal of provision for losses on off-balance sheet credit risk		4,448			13,926			3,463
Fees and commissions, net		10,729			10,326			6,733
Derivative financial instruments and hedging		2,923			(1,446	)		(2,534	)
Recoveries, net of impairment of assets		(57	)		233			(120	)
Net gain (loss) from investment fund trading		20,314			(7,995	)		24,997
Net gain (loss) from trading securities		(6,494	)		(3,603	)		13,113
Net gain on sale of securities available-for-sale		3,413			2,346			546
Gain on foreign currency exchange		4,269			1,870			613
Other income , net		477			833			912
Net other income		40,022			16,490			47,723
Total operating expenses		(50,035	)		(42,081	)		(38,202	)
Net income		83,856			39,821			55,980
Net income (loss) attributable to the redeemable noncontrolling interest		676			(2,423	)		1,118
Net income attributable to Bladex	$	83,180		$	42,244		$	54,862
Basic earnings per share	$	2.25		$	1.15		$	1.50
Diluted earnings per share	$	2.24		$	1.15		$	1.50
Return on average assets		1.46	%		0.97	%		1.38	%
Return on average stockholders’ equity		11.40	%		6.21	%		8.60	%

Business Segment Analysis

In 2011, the Bank made the following changes in the measurement methods used to determine business segment profit or loss: the current period’s interest expenses allocation methodology reflects allocated funding on a matched-funded basis, net of risk-adjusted capital by business segment. The current period’s operating expenses allocation methodology allocates overhead expenses based on resource consumption by business segment. Prior periods’ presentation allocated interest expenses and overhead operating expenses based on the segments’ average portfolio. Comparative amounts for 2010 and 2009 have been reclassified to conform to the current period presentation.

The Bank determines net operating income by business segment in order to disclose the revenue and expense items related to its normal course of business, segregating from net operating income the impact of reversals (provisions) of reserves for loan losses and off-balance sheet credit risk and recoveries on assets. The following table summarizes net operating income of the Bank, both by business segment and on a consolidated basis for the periods indicated:

	For the Year Ended December 31,
	2011			2010			2009
	(in $ million, except percentages)

COMMERCIAL DIVISION:
Net interest income.	$	81.7		$	54.5		$	53.9
Non-interest operating income		11.0			10.3			6.9
Operating expenses		(34.8	)		(28.3	)		(21.8	)
Net operating income		57.9			36.5			39.0
Reversal (provision) for loan and off-balance sheet credit losses, net		(4.4	)		4.8			(14.8	)
Recoveries, net of impairment of assets		(0.1	)		(0.2	)		(0.1	)
NET INCOME ATTRIBUTABLE TO BLADEX	$	53.4		$	41.5		$	24.1

TREASURY DIVISION:
Net interest income	$	20.7		$	20.7		$	14.4
Non-interest operating income		4.2			(0.7	)		11.9
Operating expenses.		(10.2	)		(9.3	)		(9.6	)
Net operating income		14.7			10.7			16.7
NET INCOME ATTRIBUTABLE TO BLADEX	$	14.7		$	10.7		$	16.7

ASSET MANAGEMENT UNIT:
Net interest income .	$	0.3		$	(0.7	)	$	(3.5	)
Non-interest operating income		20.5			(7.2	)		25.5
Operating expenses		(5.0	)		(4.5	)		(6.8	)
Net operating income		15.8			(12.4	)		15.2
Net income		15.8			(12.4	)		15.2
Net income (loss) attributable to the redeemable noncontrolling interest.		0.7			(2.4	)		1.1
NET INCOME ATTRIBUTABLE TO BLADEX	$	15.1		$	(10.0	)	$	14.1

CONSOLIDATED:
Net interest income	$	102.7		$	74.5		$	64.8
Non-interest operating income		35.7			2.4			44.3
Operating expenses.		(50.0	)		(42.1	)		(38.2	)
Net operating income		88.4			34.8			70.9
Reversal (provision) for loan and off-balance sheet credit losses, net		(4.4	)		4.8			(14.8	)
Recoveries, net of impairment of assets.		(0.1	)		0.2			(0.1	)
Net income.		83.9			39.8			56.0
Net income (loss) attributable to the redeemable noncontrolling interest.		0.7			(2.4	)		1.1
NET INCOME ATTRIBUTABLE TO BLADEX	$	83.2		$	42.2		$	54.9

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

The Commercial Division

The Commercial Division is responsible for the Bank’s core business of financial intermediation and fee generation activities generated by the commercial portfolio. The division’s portfolio includes loan portfolio, selected deposits placed, equity investments and contingencies and other assets. The Commercial Division’s net income includes net interest income from loans, fees and commissions, allocated operating expenses, the reversal (provision) for credit losses, and recoveries, net of impairment of assets.

Year 2011 vs. Year 2010

The Commercial Division’s net income amounted to $53.4 million for the year ended December 31, 2011, compared to the $41.5 million for the year ended December 31, 2010. The $11.9 million, or 29%, increase during the year 2011 was mainly due to: (i) a $27.2 million, or 50%, increase in net interest income, which amounted to $81.7 million in 2011, reflective of higher average loan portfolio balances (an increase of $1,319 million, or 40%) and improved net interest margins (an increase of 11 bps) and (ii) a $0.7 million, or 7%, increase in non-interest operating income, mainly as a result of increased commission income from higher average volumes in the letter of credit business (+28%). The revenue increase was partly offset by (i) a $6.5 million increase in operating expenses, as the Commercial Division expanded its sales force and local presence in various markets in the Region, and (ii) $4.4 million in credit provision charges during the year 2011, related to higher portfolio balances and shift in the composition of the commercial portfolio, as compared to $4.8 million in reversals of provisions during 2010.

The Commercial Division’s portfolio balance amounted to $5,354 million as of December 31, 2011, compared to $4,446 million as of December 31, 2010, and compared to $3,110 million as of December 31, 2009. The 20% portfolio increase in 2011 compared to 2010 was attributable to increased demand from the Bank’s established client base of corporations (an increase of 8%) and financial institutions (an increase of 26%), in addition to the Bank’s continued business expansion into the middle-market segment (an increase of 101%) as the Bank’s regional expansion and segment penetration activities continues to have results. In 2011, the Bank disbursed $8.2 billion in new loans, an increase of $2.7 billion, or 49%, compared to the year 2010, driven by strong demand from the Bank’s established client base and benefitting from the Bank’s expansion of its cross border vendor finance business during 2011. Of these disbursements during 2011, $583 million in loans were made to the middle-market companies. The non-accrual portfolio amounted to $32 million as of December 31, 2011, compared to $29 million as of December 31, 2010, and compared to $51 million as of December 31, 2009. The $32 million in non-accrual portfolio as of December 31, 2011 represented 0.6% of the total loan portfolio balance.

Year 2010 vs. Year 2009

The Commercial Division’s net income amounted to $41.5 million for the year ended December 31, 2010, compared to $24.1 million for the year ended December 31, 2009. The $17.5 million, or 73%, net increase during the year was primarily due to (i) a $19.7 million positive variation in reversal (provisions) for credit losses, due to an increase in the loan portfolio which was partially mitigated by an improvement of the risk profile of the Region, (ii) a $3.7 million increase in commissions and fees from loan commitments and letters of credit, (iii) a $0.6 million increase in net interest income mostly attributable to the income effects of an increase in average loan portfolio balances of 27%, and (iv) a $6.5 million increase in operating expenses as the Commercial Division expanded its sales force and local presence in various markets.

The Treasury Division

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

Year 2011 vs. Year 2010

The Treasury Division reported net income of $14.7 million for the year ended December 31, 2011, compared to net income of $10.7 million for the year ended December 31, 2010. The $4.0 million, or 37%, increase during 2011 was due to the combined effects of a $4.9 million increase in non-interest operating income attributable to higher gains from sale of securities available-for-sale and the positive valuations of trading securities and their associated trading derivatives during the year, which was partially offset by increased operating expenses ($0.9 million).

Liquidity balance as of December 31, 2011 amounted to $786 million, compared to $421 million as of December 31, 2010, and compared to $402 million as of December 31, 2009. Liquid assets as of December 31, 2011 represented 12.4% of total assets and 34.1% of liability deposits, compared to 8.2% and 23.1%, respectively, as of December 31, 2010. Deposit balances increased $483 million, or 27%, to $2,304 million as of December 31, 2011 compared to $1,821 million as of December 31, 2010.

Funding costs continued to improve as weighted average funding cost for the year ended December 31, 2011 amounted to 1.12%, a decrease of 14 bps, or 11%, compared to 1.26% for the year ended December 31, 2010, as a result of lower average interbank market rates and improvement in funding costs of deposits. Borrowings and securities sold under repurchase agreements balances increased 31% during 2011 to $3,188 million as of December 31, 2011 compared to $2,435 million as of December 31, 2010.

Year 2010 vs. Year 2009

The Treasury Division reported net income of $10.7 million for the year ended December 31, 2010, compared to net income of $16.7 million for the year ended December 31, 2009. The 2010 results were mainly driven by a $3.6 million loss from trading securities, compared to a gain of $13.1 million in the year 2009. The $6.1 million decrease in 2010 compared to 2009 was primarily driven by trading portfolio valuations, as increases in securities valuations were more than offset by the diminished valuations of associated trading derivatives. This offset the $2.3 million gain on sale of securities available-for-sale during the year 2010 compared to a gain on sale of securities available-for-sale of $0.5 million in the year 2009.

The Asset Management Unit

The Asset Management Unit is responsible for the Bank’s asset management activities in the Investment Fund and assets of the Brazilian Fund (see Item 4.A “History and Development of the Company”). The Asset Management Unit’s net income attributable to Bladex includes net interest and fee income from the investment fund, gains from investment fund trading, related other income (loss), direct and allocated operating expenses, net of net income attributable to the redeemable non-controlling interest.

Year 2011 vs. Year 2010

During 2011, Bladex’s investment in the Fund contributed to net income of $15.1 million, compared to a net loss of $10.0 million in 2010. The $25.1 million year-over-year increase was due to the combined effects of: (i) a $27.7 million increase in non-interest operating income attributable to gains from investments in the Fund, (ii) a $1.0 million increase in net interest income, and was partially offset by a $0.5 million increase in operating expenses as a result of higher provisions for variable compensation tied to the performance of the Fund and a $3.1 million increase in net income attributable to the redeemable non-controlling interest.

The Asset Management Unit reviewed the Fund’s risk parameters in 2011 with a goal of mitigating volatility. With the same objective, the Bank decided to gradually reduce its exposure to the Fund. During the year 2011, the Bank redeemed $50.0 million from its investment in the Fund, contributing to a reduction in the Fund’s net asset value to $120 million as of December 31, 2011, compared to $167 million as of December 31, 2010. Third party participation in the Fund dropped to 4.2% as of December 31, 2011 from 11.3% as of December 31, 2010.

Year 2010 vs. Year 2009

During 2010, the Asset Management Unit reported a net loss of $10.0 million, compared to net income of $14.1 million in 2009. The $24.0 million year-over-year decrease was mainly due to the combined effects of: (i) a $32.8 million decrease in non-interest operating income attributable to the absence of the significant trading gains attained during 2009, and to the impact of trading losses experienced primarily during the second quarter of 2010, (ii) a $2.9 million positive variance in net interest income, and (iii) a $2.3 million decrease in operating expenses as a result of lower variable compensation tied to the performance of the Fund.

Third party participation in the Fund dropped to 11.3% as of December 31, 2010 from 17.6% as of December 31, 2009. During 2010, the Bank redeemed $6.0 million from its investment in the Fund. As of December 31, 2010, the Fund’s net assets totaled $167 million, compared to $198 million as of December 31, 2009.

Net Income attributable to Bladex

The 2011 results reflect the Bank’s solid positioning as a result of a well executed strategy focused on business growth, diversification of the Bank’s business activities, and the strengthening of the Bank’s position, supported by growing trade flows in Latin America, which resulted in net income attributable to Bladex of $83.2 million in 2011 compared to $42.2 million net income attributable to Bladex during 2010. The $40.9 million, or 97%, increase was mostly driven by $53.4 million in net income from the Commercial Division, $15.1 million in net income from the Asset Management Division and $14.7 million in net income from the Treasury Division.

For the year ended December 31, 2010, net income attributable to Bladex was $42.2 million, compared to $54.9 million in 2009. The 2010 results were mostly driven by $41.5 million in net income from the Commercial Division and $10.7 million in net income from the Treasury Division, which was offset by net losses of $10.0 million in the Asset Management Unit. The Bank’s 2010 results reflect the Bank’s capacity to leverage the trade flows that the Region has been recovering, to expand its operations and grow its core business through higher average credit volumes and higher fee income, strengthening even further its critical role in financial relations between Latin America and the international markets.

Net Interest Income and Margins

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

	For the Year Ended December 31,
	2011			2010			2009
	(in $ million, except percentages)
Net interest income
Commercial Division		81.7		$	54.5		$	53.9
Treasury Division		20.7			20.7			14.4
Asset Management Unit		0.3			(0.7	)		(3.5	)
Consolidated	$	102.7		$	74.5		$	64.8
Net interest margin		1.81	%		1.70	%		1.62	%
Net interest spread		1.62	%		1.43	%		1.12	%

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 balances:

	For the Year ended December 31,
	2011								2010								2009
Description	Average balance			Interest		Average yield/rate			Average balance			Interest		Average yield/rate			Average balance			Interest		Average yield/rate
	(in $ million, except percentages)
Interest-Earning Assets
Interest-earning deposits with banks	$	458		$	1		0.29	%	$	384		$	1		0.22	%	$	592		$	1		0.21	%
Loans, net of unearned income & deferred loan fees		4,576			138		2.97	%		3,243			102		3.09	%		2,569			113		4.36	%
Non-accrual loans ⁽¹⁾		29			2		8.03	%		44			3		7.55	%		17			1		4.92	%
Trading assets		30			2		5.79	%		51			3		6.11	%		102			7		6.95	%
Investment securities⁽²⁾		441			12		2.61	%		468			8		1.79	%		546			17		3.15	%
Investment fund		148			2		1.56	%		190			2		1.14	%		172			2		1.01	%
Total interest-earning assets	$	5,681		$	157		2.73	%	$	4,378		$	119		2.69	%	$	3,998		$	142		3.50	%
Non-interest-earning assets		71								42								46
Allowance for loan losses		(81	)							(75	)							(79	)
Other assets		16								12								9
Total Assets	$	5,687							$	4,357							$	3,975
Interest-Bearing Liabilities
Deposits	$	2,074		$	9		0.42	%	$	1,555		$	9		0.54	%	$	1,218		$	11		0.93	%
Trading liabilities		2			0		n.m. (*)			4			0		n.m.	(*)		9			0		n.m. (*)
Investment fund		0			0		n.m. (*)			0			1		n.m.	(*)		0			2		n.m. (*)
Securities sold under repurchase agreements		267			14		5.02	%		179			1		0.79	%		263			6		2.24	%
Short-term borrowings		1,102			2		0.18	%		545			7		1.19	%		501			18		3.50	%
Borrowings and long-term debt		1,392			30		2.12	%		1,241			27		2.18	%		1,208			40		3.24	%
Total interest-bearing liabilities	$	4,838		$	55		1.12	%	$	3,524		$	45		1.26	%	$	3,199		$	77		2.38	%
Non-interest bearing liabilities and other liabilities	$	111							$	119							$	122
Total Liabilities	$	4,949							$	3,643							$	3,321
Redeemable noncontrolling interest		8								34								16
Stockholders’ equity		730								681								638
Total Liabilities and Stockholders’ Equity	$	5,687							$	4,357							$	3,975
Net interest spread							1.62	%							1.43	%							1.12	%
Net interest income and net interest margin				$	103		1.81	%				$	75		1.70	%				$	65		1.62	%

^(*)“n.m.” means not meaningful.

⁽¹⁾

Interest received on non-accrual loans is only recorded as earned when collected.

⁽²⁾The average yield of the investment securities portfolio using cost-based average balances, would have been 2.65%, 2.02%, and 3.46%, for 2011, 2010, and 2009, respectively.

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 accrued 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 volume and changes in average interest rates for 2011 compared to 2010 and for 2010 compared to 2009. Volume and rate variances have been calculated based on daily movements in average balances over the period and changes in interest rates on average interest-earning assets and average interest-bearing liabilities.

	2011 vs. 2010									2010 vs. 2009
	*Volume^()**			*Rate^()**			Net Change			*Volume^()**			*Rate^()**			Net Change
	(in $ thousand)
Increase (decrease) in interest income
Interest-bearing deposits with banks	$	217		$	294		$	512		$	(453	)	$	32		$	(421	)
Loans, net		40,190			(3,749	)		36,441			21,017			(32,996	)		(11,979	)
Non-accrual loans		(1,168	)		209			(959	)		2,036			452			2,488
Trading assets		(1,212	)		(164	)		(1,375	)		(3,162	)		(863	)		(4,025	)
Investment securities		(721	)		3,908			3,188			(1,425	)		(7,559	)		(8,984	)
Investment fund		(655	)		799			144			201			234			435
Total increase (decrease)	$	36,652		$	1,297		$	37,949		$	18,214		$	(40,700	)	$	(22,486	)
Increase (decrease) in interest expense
Deposits		2,206			(1,918	)		288		$	1,853			(4,816	)		(2,963	)
Trading liabilities		0			0			0			0			0			0
Investment fund		(36	)		(604	)		(641	)		(7	)		(1,355	)		(1,362	)
S Securities sold under repurchase agreement and Short-term borrowings		7,355			227			7,581			(438	)		(12,936	)		(13,374	)
Borrowings and long-term debt		3,262			(748	)		2,513			714			(15,253	)		(14,539	)
Total increase (decrease)	$	12,786		$	(3,044	)	$	9,742		$	2,123			(34,359	)		(32,237	)
Increase (decrease) in net interest income	$	23,867		$	4,341		$	28,208		$	16,091		$	(6,340	)	$	9,751

^(*) Volume variation effect in net interest income is calculated by multiplying the difference in average volumes by the current year’s average yield. Rate variation effect in net interest income is calculated by multiplying the difference in average yield by the prior year’s average volume.

Net Interest Income and Net Interest Margin Variation

2011 vs. 2010

The $28.2 million, or 38%, increase in net interest income for the year ended December 31, 2011 compared to the year ended December 31, 2010 primarily reflects:

Higher average interest-earning assets balances, primarily in average loan portfolio balances, which increased from $3.3 billion in 2010 to $4.6 billion in 2011, a $1.3 billion, or 40%, increase during the year. The higher average balance in interest-earning assets during 2011 resulted in a $36.7 million overall increase in interest income, partially offset by a $12.8 million increase in interest expense associated with an increase of $1.3 billion, or 37%, in interest-bearing liability balances (deposits, securities sold under repurchase agreements, short term borrowings and borrowings and long term debt) from $3.5 billion in 2010 to $4.8 billion in 2011. Higher average volumes in interest-earning assets and interest-bearing liabilities resulted in a net effect of a $23.9 million net increase in net interest income.

ii.

A $4.3 million increase in net interest income during 2011 due to rate variances, as the average yield paid on interest-bearing liabilities decreased 14 bps to 1.12% in 2011 (from 1.26% in 2010), while the average yield on interest-earning assets increased 4 bps to 2.73% in 2011 (from 2.69% in 2010).

Net interest margin increased 11 bps to 1.81% in 2011 compared to 1.70% in 2010, mainly due to higher average loan portfolio balances and lending spreads as a result of greater market penetration, relative business growth and portfolio mix in the corporate and middle-market companies' segments, and in the financial institutions' segment, in a year characterized by liquidity constraints and volatility in the financial industry.

2010 vs. 2009

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

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

ii.

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

Net interest margin was 1.70% in 2010 compared to 1.62% in 2009 as the Bank (i) reduced its average liquidity balance throughout the year at a minimal return, and replaced it with more profitable lending balances, and (ii) increased its average deposit balances bearing lower cost of funds than that of its borrowings and debt, which average balances decreased for the year.

Reversal (Provision) for Loan Losses

	For the year ended December 31,
	2011			2010			2009
	(in $ million)
Net Brazil specific reserve reversals (provisions)		(0.7	)		2.1			(2.4	)
Net Mexico specific reserve reversals (provisions)		(3.6	)		0.8			(12.0	)
Total specific reserve reversals (provisions)		(4.3	)		2.9			(14.4	)
Generic reserve reversals (provisions) - due to changes in credit portfolio composition and risk levels		(4.5	)		(11.9	)		(3.9	)
Total generic reserve reversals (provisions)		(4.5	)		(11.9	)		(3.9	)
Total reversals (provisions) of allowance for loan losses	$	(8.8	)	$	(9.1	)	$	(18.3	)

As of December 31, 2011 and 2010, the Bank had $32.0 million and $29.0 million in non-accrual loans, respectively, all of which correspond to impaired loans for which specific reserves of $14.8 million and $11.5 million, respectively, have been allocated.

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

The $8.8 million provision for loan losses in 2011 was the result of: (i) $4.5 million in generic provision for loan losses driven by the combination of an increase in the Bank’s loan portfolio, attributable to increased demand from the Bank’s client base of corporations, financial institutions and middle-market clients, and an improvement in client-specific and country risk levels in the Region; and ii) $4.3 million in charges for specific loan loss reserves assigned to the impaired portfolio which totaled $32.0 million as of December 31, 2011.

During 2010, the Bank reversed $2.9 million in specific provisions assigned to the impaired portfolio.

The $11.9 million generic provision for loan losses in 2010 was primarily due to an increase in the loan portfolio which was partially mitigated by an improvement of the risk profile of the Region.

During 2009, there were no reversals of specific provisions for loan losses related to the impaired and restructured portfolio, as the Bank did not have any impaired or non-accrual loans during 2008. The Bank recorded $14.4 million in provision of specific reserves related to the non-accrual portfolio in 2009.

The $18.3 million provision for loan losses in 2009 was the result of: (i) a $14.4 million specific reserves provision assigned to non-accrual loans and (ii) a $3.9 million increase in generic provision for loan losses, as a reflection of higher loan balances.

The Bank’s loan loss reserve coverage was 1.8% as of December 31, 2011, a decrease from 1.9% as of December 31, 2010, and a decrease from 2.7% as December 31, 2009. The decrease in the loan loss reserve coverage reflects the impact of changes in the composition of the Bank’s loan portfolio and improvement of the risk profile of the portfolio on the Bank’s reserve model.

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 8.

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

Reversals (Provisions) for Losses on Off-Balance Sheet Credit Risk

The $4.4 million reversal of provision for losses on off-balance sheet credit risk in 2011 was primarily due to improved risk profile in the off-balance sheet exposures in the commercial portfolio, primarily in acceptances and contingencies, at the end of year 2011.

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

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

The off-balance sheet reserve coverage decreased to 2.5% as of December 31, 2011, compared to 3.5% as of December 31, 2010, and compared to 8.2% as of December 31, 2009.

Fees and Commissions, net

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

	For the Year Ended December 31,
	2011		2010		2009
			(in $ thousand)
Letters of credit	$	9,360	$	8,314	$	4,973
Guarantees		14		158		1,017
Loan Fees		1,109		1,195		224
Third party investors (Bladex Asset Management)		115		516		281
Other ⁽¹⁾		131		143		239
Fees and commissions, net	$	10,729	$	10,326	$	6,733

⁽¹⁾Net of commission expense.

The $0.4 million, or 4%, increase in fees and commissions during 2011 was mostly attributable to increased commission income from higher average volumes in the letter of credit business (which increased 28%), partially offset by lower loan and asset management fee income.

The $3.6 million, or 53%, increase in 2010 compared to 2009 mainly reflects increased commission income from the letter of credit business, as a result of higher volumes of letters of credit in a more favorable economic environment.

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

Derivative Financial Instruments and Hedging

In 2011, 2010, and 2009, the Bank recorded a net gain of $2.9 million, a net loss of $1.4 million, and a net loss of $2.5 million, respectively, in derivative financial instruments and hedging.

The 2011 results reflect the effect of recording the effectiveness on hedging relationships, which was offset by the discount of the Bank’s own credit risk when calculating the fair value of its cross currency swap portfolio that it contracts for hedging purposes.

The 2010 and 2009 results reflect the effect of recording the effectiveness (ineffectiveness) on hedging relationships and the discount of the Bank’s own credit risk when calculating the fair value of its cross currency swap portfolio that it contracts for hedging purposes, which had a liability balance as of December 31, 2010. The fair value of these cross currency swaps improved during 2010 and 2009 and, as a consequence, the credit risk discount decreased when valuing these derivative instruments.

For additional information, see Item 11, “Quantitative and Qualitative Disclosure about Market Risk,” and Item 18, “Financial Statements,” notes 2(v) and 20.

Net Gain (Loss) from Investment Fund Trading

The Bank recorded a net gain of $20.3 million from investment fund trading in 2011, compared to a net loss of $8.0 million in 2010, and compared to a net gain of $25.0 million in 2009, related to the performance of the trading activities of the Fund.

For additional information, see Item 18, “Financial Statements,” notes 6 and 22.

Net Gain (Loss) from Trading Securities

The Bank recorded a $6.5 million loss from trading securities in 2011, compared to a $3.6 million loss in 2010, and compared to a $13.1 million gain in 2009.

The $6.5 million loss in 2011 was due to diminished valuations of trading securities and valuations of financial instruments that do not qualify for hedge accounting.

The $3.6 million loss in 2010 was due to the increases in securities valuations which were more than offset by the diminished valuations of financial instruments that do not qualify for hedge accounting.

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

For additional information, see Item 18, “Financial Statements,” notes 4 and 12.

Net Gain on Sale of Securities Available-for-Sale

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

The Bank’s net gain on sale of securities available-for-sale in 2011 was $3.4 million, compared to $2.3 million in 2010, and compared to $0.5 million in 2009. Detail of the net gains is as follows:

	For the year ended December 31,
	2011			2010			2009
	(in $ millions)
Nominal amount	$	243.6		$	135.0		$	137.0
Amortized cost	$	(265.0	)	$	(151.3	)	$	(146.5	)
Proceeds		279.7			167.2			150.6
Net effect of unwinding hedging derivatives of the available for-sale securities portfolio		(11.3	)		(13.6	)		(3.6	)
Total net gain on sale of securities available-for-sale	$	3.4		$	2.3		$	0.5

For additional information, see Item 18, “Financial Statements,” notes 5.

Gain (Loss) on Foreign Currency Exchange

The Bank recorded a net gain of $4.3 million on foreign currency exchange during 2011, compared to a net gain of $1.8 million and $0.6 million on foreign currency exchange during 2010 and 2009, respectively. The $2.4 million increase during 2011 is mostly related to the effects of changes in assets and liabilities economically hedged with derivatives that do not qualify for hedge accounting.

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,
	2011		2010		2009
	(in $ thousand)
Salaries and other employee expenses	$	29,268	$	23,499	$	20,201
Depreciation and amortization of premises and equipment.		2,166		2,510		2,671
Professional services		4,882		4,945		3,262
Maintenance and repairs		1,639		1,616		1,125
Expenses from the investment fund		1,540		890		3,520
Other operating expenses		10,540		8,621		7,423
Total operating expenses	$	50,035	$	42,081	$	38,202

During 2011, operating expenses amounted to $50.0 million, compared to $42.1 million for the year 2010. The $8.0 million, or 19%, increase in operating expenses was primarily attributable to: (i) an increase in salary and other employee expenses associated with higher average headcount in support of expanding the Commercial Division as well as the risk management function, (ii) an increase in other operating expenses related higher rental costs associated with the new representative offices in Monterrey, Mexico, in Porto Alegre, Brazil, in Lima, Peru and in Bogotá, Colombia, established in support of the Commercial Division, as well as higher travel, communication and general expenses associated with increased average headcount and (iii) an increase in expenses from the Fund related to higher performance-related expenses.

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

Changes in Financial Condition

The following table presents components of the Bank’s balance sheet at the dates indicated:

	As of December 31,
	2011			2010			2009
	(in $ thousand)
Assets
Cash and due from banks	$	12,814		$	5,570		$	2,961
Interest-bearing deposits in banks		830,670			431,144			421,595
Trading assets		20,436			50,412			50,277
Securities available-for-sale		416,300			353,250			456,984
Securities held-to-maturity		26,536			33,181			0
Investment fund		120,425			167,291			197,575
Loans		4,959,573			4,064,332			2,779,262

Allowance for loan losses		(88,547	)		(78,615	)		(73,789	)
Unearned income and deferred fees		(6,697	)		(4,389	)		(3,989	)
Loans, net		4,864,329			3,981,328			2,701,484
Customers’ liabilities under acceptances		1,110			27,213			1,551
Accrued interest receivable		38,168			31,110			25,561
Premises and equipment, net		6,673			6,532			7,749
Derivative financial instruments used for hedging - receivable		4,159			2,103			828
Other assets		18,412			10,953			12,206
Total Assets	$	6,360,032		$	5,100,087		$	3,878,771
Liabilities and Stockholders’ Equity
Deposits	$	2,303,506		$	1,820,925		$	1,256,246
Trading liabilities		5,584			3,938			3,152
Securities sold under repurchase agreements		377,002			264,927			71,332
Short-term borrowings		1,323,466			1,095,400			327,800

	As of December 31,
	2011			2010			2009
	(in $ thousand)
Acceptances outstanding		1,110			27,213			1,551
Accrued interest payable		11,790			10,084			11,291
Borrowings and long-term debt		1,487,548			1,075,140			1,390,387
Derivative financial instruments used for hedging - payable		53,742			53,029			65,137
Reserve for losses on off-balance sheet credit risk		8,887			13,335			27,261
Other liabilities		22,568			20,096			14,077
Total Liabilities	$	5,595,203		$	4,384,087			3,168,234
Redeemable noncontrolling interest		5,547			18,950			34,900
Stockholders’ Equity
Common stock, no par value		279,980			279,980			279,980
Additional paid-in capital in excess of assigned value of common stock		130,177			133,815			134,820
Capital reserves		95,210			95,210			95,210
Retained earnings		372,644			320,153			301,389
Accumulated other comprehensive loss		(3,112	)		(6,441	)		(6,160	)
Treasury stock		(115,617	)		(125,667	)		(129,602	)
Total Stockholders’ Equity		759,282			697,050			675,637
Total Liabilities and Stockholders’ Equity	$	6,360,032		$	5,100,087		$	3,878,771

2011 vs. 2010

During 2011, total assets increased by $1,260 million, or 25%, strengthened by a 22%, or $896 million, increase in the Bank’s loan portfolio, as a result of strong growth in the three business segments of the loan portfolio. In addition, during the same period, cash and due from banks and interest-bearing deposits with banks collectively increased $406 million, or 93%, as a result of the market uncertainty experienced in 2011. As of December 31, 2011, the Bank’s loan portfolio amounted $4,960 million and had an average maturity term of 373 days, with 68% of the portfolio scheduled to mature within one year. 57% of the loan portfolio was trade-related in nature and 43% constituted non-trade loans mainly extended to financial institutions and corporations.

As of December 31, 2011, the Bank’s liquidity amounted to $786 million, compared to $421 million as of December 31, 2010, as the Bank maintained proactive liquidity management by increasing its liquidity position in response to volatility in the markets.

The increase in assets in 2011 was accompanied by a $1,211 million increase in liabilities, mainly from an increase in deposits (which increased by $483 million, or 27%), borrowings and long-term debt (which increased by $413 million, or 38%), short term borrowings (which increased by $228 million, or 21%), and securities sold under repurchase agreements (which increased by $112 million, or 42%), as a result of more demand for credit and more confidence from the Bank’s international correspondent banks.

2010 vs. 2009

During 2010, total assets increased by $1,221 million, or 31%, strengthened by a 46%, or $1,285 million, increase in the Bank’s loan portfolio during the same period as a result of solid growth in the commercial activity of the Bank as a result of strong recovery in the Latin American economy and increased trade flows in the Region. As of December 31, 2010, the Bank’s loan portfolio amounted to $4,064 million, and had an average maturity term of 389 days, with 70% of the portfolio scheduled to mature within one year. 56% of the loan portfolio was trade-related in nature and 44% constituted non-trade loans mainly extended to private banks and private corporations.

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

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

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

Asset Quality

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

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

Rating	Classification	Description
1 to 6	Normal	Clients with payment ability to satisfy their financial commitments.

7	Special Mention	Clients exposed to systemic risks specific to the country or the industry in which they are located, facing adverse situations in their operation or financial condition. At this level, access to new funding is uncertain.

8	Substandard	Clients whose primary source of payment (operating cash flow) is inadequate and who show evidence of deterioration in their working capital that does not allow them to satisfy payments on the agreed terms, endangering recovery of unpaid balances.

9	Doubtful	Clients whose operating cash flow continuously shows inability to service the debt on the originally agreed terms. Due to the fact that the debtor presents an impaired financial and economic situation, the likelihood of recovery is low.

10	Unrecoverable	Clients with operating cash flow that does not cover their costs, are in suspension of payments, or will likely have difficulties in fulfilling possible restructuring agreements, are in a state of insolvency, or have filed for bankruptcy, among others.

Impaired Assets and Contingencies

The Bank’s assets that are subject to impairment consist mainly of loans and securities. For more information on impaired loans, see Item 18, “Financial Statements”, Notes 2(m) and 7. For information on impaired securities, see Item 18, “Financial Statements,” notes 2(j) and 5. For more information on contingencies, see Item 18, “Financial Statements”, note 18, and see Item 5, “Operating and Financial Review and Prospects/Operating Results/Reversal (Provision) for Loan Losses.”

The Bank identifies as delinquent those loans where no principal and/or interest payment has been received for 30 days after such payments were due. The outstanding balance of a loan is considered past due when the total principal balance of a single balloon payment has not been received within 30 days after such payment was due, or when no agreed-upon periodic payment has been received for a period of 90 days after the agreed-upon date. Loans are placed on a non-accrual status when interest or principal is overdue for 90 days or more, or before if the Bank’s management believes there is uncertainty with respect to the ultimate collection of principal or interest.

A modified loan is considered a troubled debt restructuring when the debtor is experiencing financial difficulties and if the restructuring constitutes a concession to the debtor. A concession may include modification of terms such as an extension of maturity date, reduction in the stated interest rate, rescheduling of future cash flows, and reduction in the face amount of the debt or reduction of accrued interest, among others. Marketable securities received in exchange for loans under troubled debt restructurings are initially recorded at fair value, with any gain or loss recorded as a recovery or charge to the allowance, and are subsequently accounted for as securities available-for-sale.

A loan is considered impaired and placed on a non-accrual basis when, based on current information and events, it is probable that the Bank will be unable to collect all amounts due according to original contractual terms of the loan agreement. 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. These loans include modified loans considered to be troubled debt restructurings. 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.

The reserve for losses on impaired loans is determined considering all available evidence, including the present value of expected future cash flows discounted at the loan's original contractual interest rate and/or the fair value of the collateral, if applicable. If the loan’s repayment is dependent on the sale of the collateral, the fair value takes into account costs to sell.

The following table sets forth information regarding the Bank’s impaired assets and contingencies at the dates indicated:

	As of December 31,
	2011			2010			2009			2008			2007
	(in $ million, except percentages)
Impaired loans	$	32		$	29		$	36		$	0		$	0
Allocation from the allowance for loan losses		15			12			14			0			0
Impaired loans as a percentage of total loans, net of unearned income and deferred commission		0.6	%		0.7	%		1.3	%		0.0	%		0.0	%
Impaired contingencies	$	0		$	0		$	0		$	0		$	0
Allocation from the reserve for losses on off balance-sheet credit risks		0			0			0			0			0
Impaired contingencies as a percentage of total contingencies		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%
Impaired securities (par value)	$	0		$	0		$	0		$	0		$	0
Estimated fair value adjustments on options and impaired securities⁽¹⁾		0			0			0			0			0
Estimated fair value of impaired securities	$	0		$	0		$	0		$	0		$	0
Impaired securities as a percentage of total securities⁽²⁾		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%
Impaired assets and contingencies as a percentage of total credit portfolio⁽³⁾		0.6	%		0.6	%		1.0	%		0.0	%		0.0	%

⁽¹⁾

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

⁽²⁾

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

⁽³⁾

The total credit portfolio consists of loans net of unearned income, fair value of investment securities, securities purchased under agreements to resell and contingencies.

As of December 31, 2011 and 2010, there were no impaired loans without related allowance.

The following table summarizes information regarding non-accrual loans, and interest amounts on non-accrual loans:

	For the year ended December 31,
	2011			2010			2009
	(in $ thousands)
Loans in non-accrual status
Private corporations	$	32,000		$	28,000		$	39,000
Private middle-market companies		0			1,002			11,534
Total loans in non-accrual status	$	32,000		$	29,002		$	50,534

Foregone interest revenue at beginning of the year	$	996		$	928		$	0
Interest which would have been recorded if the loans had not been in a non-accrual status		2,325			3,403			1,775
Interest income collected on non-accrual loans		(2,375	)		(3,335	)		(847	)
Foregone interest revenue at end of the year	$	946		$	996		$	928

The Bank has not had any troubled debt restructurings for each of the five years ended December 31, 2011.

Allowance for Credit Losses

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

The allowance for 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. A specific allowance is established when the discounted cash flows (or observable market price of collateral) of the credit is lower than the carrying value of that credit. The formula-based component is applied to the Bank’s performing credit portfolio and is established based on 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, in view of the greater robustness of this external data for some cases. The loss given default is based on Bladex’s historical losses experience and best practices.

The reserve balances for estimating generic allowances is applicable to all classes of loans and off-balance sheet financial instruments of the Bank.

Reserves = S(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.

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

Loss Given Default (LGD) = a factor utilized, based on historical information and best practices in the banking industry. Management applies judgment for imprecision and uncertainty and historical loss experience.

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

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

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

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

	As of December 31,
	2011			2010			2009			2008			2007
	(in $ million, except percentages)
Components of the allowance for credit losses
Allowance for loan losses:
Balance at beginning of the year	$	79		$	74		$	55		$	70		$	51
Provision (reversal)		9			9			18			(19	)		12
Recoveries		2			1			1			4			6
Loans charged-off		(1	)		(5	)		0			0			0
Balance at the end of the year		89			79			74			55			70
Reserve for losses on off-balance sheet credit risk:
Balance at beginning of the year		13			27			31			14			27
Provision (reversal)		(4	)		(14	)		(3	)		17			(13	)
Balance at end of the year		9			13			27			31			14
Total allowance for credit losses	$	98		$	92		$	101		$	85		$	83
Allowance for credit losses to total commercial portfolio		1.83	%		2.07	%		3.25	%		2.79	%		1.95	%
Net charge offs to average loans outstanding		0.02	%		0.13	%		0.00	%		0.00	%		0.00	%

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

	As of December 31,
	2011				2010				2009
	Total		%		Total		%		Total		%
	(in $ million, except percentages)
Allowance for loan losses
Argentina	$	16		18.1	$	28		35.1	$	14		18.4
Brazil		11		13.0		13		15.9		17		23.5
Chile		2		2.0		1		1.1		2		2.2
Colombia		12		13.0		5		5.8		3		4.0
Costa Rica		3		3.3		2		3.0		4		4.8
Dominican Republic		6		6.9		5		6.9		2		2.7
Ecuador		3		3.1		2		2.7		4		5.1
El Salvador		1		0.6		1		1.3		2		2.3
Guatemala		4		4.8		1		1.4		1		1.9
Honduras		2		2.1		2		1.9		1		2.0
Jamaica		0		0.1		3		3.2		2		2.6

	As of December 31,
	2011				2010				2009
	Total		%		Total		%		Total		%
	(in $ million, except percentages)
Mexico		18		20.7		14		18.0		19		25.1
Peru		5		5.4		2		3.1		2		2.5
Uruguay		3		3.3		0		0.0		1		1.7
Other		3		3.4		0		0.6		1		1.1
Total Allowance for loan losses	$	89		100.0	$	79		100.0	$	74		100.0

Reserve for losses on off-balance sheet credit risk
Ecuador		7		82.7		10		72.5		21		75.8
Venezuela		1		7.0		2		18.0		4		15.3
Other		1		10.3		1		9.6		2		8.9
Total Reserve for losses on off-balance sheet credit risk	$	9		100.0	$	13		100.0	$	27		100.0

Allowance for credit losses
Argentina		16		16.5	$	28		30.0	$	14		13.4
Brazil		11		11.9		13		13.8		17		17.3
Chile		2		1.9		1		0.9		2		1.6
Colombia		12		11.9		5		5.0		3		2.9
Costa Rica		3		3.3		3		3.5		5		4.5
Dominican Republic		6		6.3		5		5.9		2		2.1
Ecuador		10		10.3		12		12.8		24		24.2
El Salvador		1		0.6		1		1.1		2		1.8
Guatemala		4		4.4		1		1.2		1		1.4
Honduras		2		2.0		2		1.7		2		1.5
Jamaica		0		0.1		3		2.7		2		1.9
Mexico		18		19.0		14		15.6		19		18.8
Peru		5		5.0		2		2.7		2		1.8
Uruguay		3		3.0		0		0.0		2		1.9
Venezuela		1		0.6		2		2.6		4		4.1
Other ⁽¹⁾		4		3.3		0		0.5		1		0.8
Total Allowance for credit losses		98		100.0	$	92		100.0	$	101		100.0

⁽¹⁾

Other consists of allowances for credit losses allocated to countries in which allowances for credit losses outstanding did not exceed $1 million for any of the periods.

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

	As of December 31,
	2011				2010				2009
	Total		%		Total		%		Total		%
	(in $ million, except percentages)
Private sector commercial banks and Financial Institutions	$	22		22.7	$	15		15.5	$	14		13.7
State-owned commercial banks		16		16.8		7		7.1		10		10.0
Central banks		0		0.1		9		9.9		20		20.3
Sovereign debt		0		0.3		0		0.4		1		1.1
State-owned exporting organization		3		3.3		5		5.7		5		5.0
Private middle - market companies		9		9.3		5		8.8		7		7.3
Private corporations		46		47.5		50		52.5		43		42.6
Total	$	98		100.0	$	92		100.0	$	101		100.0

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

	As of December 31,
	2011		%		2010		%		2009		%		2008		%		2007		%
	(in $ million, except percentages)

Brazil		1		100.0		2		40.5		0		0.0		0		0.0		0		0.0
Mexico		0		0.0		3		59.5		0		0.0		0		0.0		0		0.0
Total	$	1		100.0	$	5		100.0	$	0		0.0	$	0		0.0	$	0		0.0

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 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 use subjective judgment, 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.

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

Variable interest entities

Variable interest entities, or VIEs, are entities that have either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support, or whose equity investors lack the characteristics of a controlling financial interest.

Investors that finance a VIE through debt or equity interests or other counterparties that provide other forms of support, such as guarantees or certain types of derivative contracts, are variable interest holders in the entity.

A variable interest holder, if any, that has a controlling financial interest in a VIE is deemed to be the primary beneficiary and must consolidate the VIE. The Bank would be deemed to have a controlling financial interest and be the primary beneficiary if it has both of the following characteristics:

− the power to direct the activities of a VIE that most significantly impact the entity’s economic performance; and

− the obligation to absorb losses or the right to receive benefits, as the case may be, of the entity that could potentially be significant to the VIE.

Fair Value of Financial Instruments

The Bank determines the fair value of its financial instruments using the fair value hierarchy established in U.S. GAAP, which requires the Bank to maximize the use of observable inputs (those that reflect the assumptions that market participants would use in pricing the asset or liability developed based on market information obtained from sources independent of the reporting entity) and to minimize the use of unobservable inputs (those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances) when measuring fair value. Fair value is used on a recurring basis to measure assets and liabilities in which fair value is the primary basis of accounting. Additionally, fair value is used on a nonrecurring 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 various valuation techniques and assumptions when estimating fair value.

The Bank applied the following fair value hierarchy:

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

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 are measured based on the best available information, which might include some internally-developed data and considers risk premiums that a market participant would require.

When determining the fair value measurements for assets and liabilities that are required or permitted to be recorded at fair value, the Bank considers the principal or most advantageous market in which it would transact and considers the assumptions that market participants would use when pricing the asset or liability. When possible, the Bank uses active and observable markets to price identical assets or liabilities. When identical assets and liabilities are not traded in active markets, the Bank uses observable market information for similar assets and liabilities. However, certain assets and liabilities are not actively traded in observable markets and the Bank must use alternative valuation techniques to determine the fair value measurement. The frequency of transactions, the size of the bid-ask spread and the size of the investment are factors considered in determining the liquidity of markets and the relevance of observed prices in those markets. When there has been a significant decrease in the volume or level of activity for a financial asset or liability, the Bank uses the present value technique which considers market information to determine a representative fair value in usual market conditions.

Additionally, as of December 31, 2011, 7% of the Bank’s assets were accounted for at fair value using quoted market prices in an active market, and 2% of total assets were accounted for at fair value using internally developed models with significant observable market information.

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. 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.

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.

A description of the valuation methodologies used for assets and liabilities measured at fair value on a recurring basis, including the general classification of such assets and liabilities under the fair value hierarchy is presented below:

Trading assets and liabilities and securities available-for-sale

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

Investment fund

The Fund is not traded in an active market and, therefore, representative market quotes are not readily available. Its fair value is adjusted on a monthly basis based on its financial results, its operating performance, its liquidity and the fair value of its long and short investment portfolio that are quoted and traded in active markets. Such investment is classified within level 2 of the fair value hierarchy.

Derivative financial instruments

Derivative instruments are recorded at their nominal amount, or notional amount in memorandum accounts. 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.

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

For those derivative contracts without quoted market prices, fair value is based on internal valuation techniques using inputs that are readily observable and that can be validated by information available in the market. The principal technique used to value these instruments is the discounted cash flows model and the key inputs considered in this technique include interest rate yield curves and foreign exchange rates. These derivatives are classified within level 2 of the fair value hierarchy.

The fair value adjustments applied by the Bank to its derivative carrying values include credit valuation adjustments, or CVA, which are applied to over-the-counter derivative instruments, in which the base valuation generally discounts expected cash flows using the London Interbank Offered Rate, or LIBOR, interest rate curves. Because not all counterparties have the same credit risk as that implied by the relevant LIBOR curve, a CVA is necessary to incorporate the market view of both counterparty credit risk and the Company’s own credit risk in the valuation. Under U.S. GAAP the Bank is required to take into account its own credit risk when measuring the fair value of derivative positions as well as other liabilities for which it has elected fair value accounting. This is recognized on the balance sheet as a reduction in the associated liability to arrive at the fair value of the liability.

Own-credit and counterparty CVA is determined using a fair value curve consistent with the Bank’s or counterparty credit rating. The CVA adjustment is designed to incorporate a market view of the credit risk inherent in the derivative portfolio. However, most of the Bank’s 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 due to the anticipated termination of the transactions. See Item 18, “Financial Statements,” note 20.

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

Allowance for Credit Losses

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

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

Impairment of Investment Securities

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

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

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

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

Recently issued accounting standards

During 2011, new accounting standards, modifications, interpretations, and updates to standards (“ASU”), applicable to the Bank, have been issued and are not in effect. These standards establish the following:

ASU 2011-03 – Transfers and Servicing (Topic 860)

The main objective of this update is to improve the accounting for repurchase agreements. The modifications of these amendments remove from the assessment of effective control over the transferred assets, the criterion relating to the transferor’s ability to repurchase or redeem financial assets on substantially the agreed terms. Consequently, the amendments also eliminate the requirement to demonstrate that the transferor possesses adequate collateral to replace the transferred assets in the event of bankruptcy of the counterparty.

This update is effective for interim and annual financial statements beginning on or after December 15, 2011. Early adoption is not permitted. The Bank is evaluating the potential impact of this update in its consolidated financial statements.

ASU 2011-04 – Fair Value Measurement (Topic 820)

The objective of this update is to improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and International Financial Reporting Standards (IFRSs). The amendments in this update explain how to measure fair value and disclose related information.

This update is effective for interim and annual periods beginning after December 15, 2011. Early adoption is not permitted. The Bank is evaluating the potential impact of this update in its consolidated financial statements.

ASU 2011-05 – Comprehensive Income (Topic 220)

The objective of this update is to increase the prominence of items reported in other comprehensive income. This update provides two options for reporting other comprehensive income, where the entity should choose one and apply it consistently:

1. To present a single continuous financial statement. At the end of the income statement, the Bank shall present the components of comprehensive income in two sections, net income and other comprehensive income. If this option is elected, the name of the income statement changes to “statement of comprehensive income”.

2. To present comprehensive income in two separate but consecutive statements.

In addition, it is required to present, by component, the reclassification adjustments of items from the other comprehensive income that are reclassified to the net income on the financial statements where components of net income and components of other comprehensive income are presented.

This update is effective for interim and annual periods beginning on or after December 15, 2011, and should be applied retrospectively. The Bank is evaluating the potential impact of this update on presentation of OCI in its consolidated financial statements.

ASU 2011-11 – Balance Sheet (Topic 210)

This update requires an entity to disclose information about financial instruments and derivative instruments that are either offset in the balance sheet or subject to enforceable master netting arrangements or similar agreements, irrespective of whether they are offset. Entities are required to disclose both gross and net information about instruments and transactions eligible for offset and instruments and transactions subject to an agreement similar to a master netting arrangement.

This update is effective for interim and annual periods beginning on or after January 1, 2013. Entities should provide the disclosures required by this update retrospectively for all comparative periods presented. The Bank is evaluating the potential impact of these disclosures.

ASU 2011-12 – Comprehensive Income (Topic 220)

Under the amendments in ASU 2011-05, entities are required to present reclassification adjustments of items from the other comprehensive income that are reclassified to the net income on the financial statements where components of net income and components of other comprehensive income are presented.

The amendments of ASU 2011-12 defer indefinitely those paragraphs in ASU 2011-05 that pertain to how, when, and where reclassification adjustments are presented.

The amendments in this ASU are effective for interim and annual periods beginning on or after December 15, 2011.

Liquidity and Capital Resources

Liquidity

Liquidity refers to the Bank’s ability to maintain adequate cash flows to fund operatio