This is a financial institution whose purpose is to provide balance of payments assistance to the Member Countries by granting credits or guaranteeing loans to third parties. It also helps harmonize the countries' exchange, monetary and financial policies, and improves the terms of investments of international reserves made by the Andean countries.

The FLAR was born as an extension of the Andean Reserve Fund (FAR), a financial institution that subsequently modified its Charter to permit the accession of third countries. The new agreement was signed in Lima, Peru on June 10, 1988 and entered force on March 12, 1991.