It is a Regional Financing Arrangement (RFA) established in 1978 (originally the Andean Reserve Fund, FAR) in response to the needs of Bolivia, Colombia, Ecuador, Peru, and Venezuela to rely on their own financial institution that could help address issues derived from external sector imbalances of their economies and ease the process of regional integration. It became the world’s second regional financing arrangement. In 1989, building on the solid foundations of an institution in full operation, the FAR was transformed into the Latin American Reserve Fund (FLAR), following an initiative by the Andean countries to expand its scope across Latin America.

Costa Rica authorized its membership in FLAR through Law No. 8008, dated August 03, 2000. The BCCR made an initial contribution of USD 125 million to the FLAR. On June 17, 2002, an increase in Costa Rica’s capital of USD 109.375 million was approved. Subsequently, additional contributions have been authorized, increasing the Fund’s capital and bringing Costa Rica’s participation to a level comparable to that of a large member country. These increases have been paid in periodic installments since 2002, financed through a combination of own resources and the capitalization of the Fund’s annual income.

FLAR may extend credit to the BCCR to help correct or prevent structural imbalances in the balance of payments and to address temporary liquidity difficulties under the following modalities:

• Liquidity credit.
• Contingent financing.
• Balance-of-payments support loan.
• External public debt restructuring support credit.

The current status of the arrangement and Costa Rica’s relationship with the International Monetary Fund are available at the FLAR website.