Content provided in partnership with

Financial Services Industry

Ex-Im's mission: expand trade, create jobs

RMA Journal, The, Feb, 2005 by John A. McAdams

Since 1934, Ex-Im Bank has helped financial institutions and their customers in trade-finance activities. Decades of experience have given Ex-Im an edge on best practices in due diligence so it can successfully take on the risk in both established and emerging markets while creating jobs in the U.S.

P & S Supply Inc., a Hispanic-owned company in Houston, Texas, exports industrial cleaning and maintenance equipment to Mexico, Peru, and Colombia with the help of two partners--Frost National Bank in San Antonio, Texas, and the Export-Import Bank of the United States. Frost supplied a working capital loan, and Ex-Im Bank guaranteed it.

Most Popular Articles in Business: Research and Markets : Tesco Plc - SWOT Framework Analysis; Do Us a Flavor - Ben & Jerry's Issues a Call for Euphoric New Flavors; eBay made easy: ready to start an eBay business? These 5 simple steps will ...; Katrina's lawsuit surge: a legal battle to force insurers to pay for flood ...; Wal-Mart's newest distribution center opened last month near the southwest ...; More »

Benshaw Inc., a small, woman-owned manufacturer of electric industrial equipment in Glenshaw, Pennsylvania, uses Ex-Im's Bank's multibuyer, short-term insurance to guarantee payment from its sales to new customers in Mexico, China, and all over the Middle East. Ex-Im's insurance ensures that Benshaw will be paid for its shipments, and the risk mitigation enables the company to be much more aggressive in pursuing sales in higher-risk markets. Due in part to these expanded foreign sales, Benshaw is adding 40 new jobs this year--and 15 of them are directly related to their export business.

These U.S. companies exemplify why Ex-Im Bank exists--to help financial institutions assist their customers in their overseas expansion and, in so doing, create jobs for workers at home.

A key role of export credit agencies such as Ex-Im Bank is to fill financing gaps to keep trade flowing to emerging markets, where commercial financing often is unavailable or insufficient. Many commercial banks and insurers simply do not have a large enough appetite for placing emerging-market risk on their books. In recent years, net commercial bank lending to emerging markets actually has fallen significantly. Private financing could reverse this trend with a change in risk perception, but it is unlikely that private finance will fully supplant the role of export credit agencies in providing significant trade finance and risk mitigation for exports to higher-risk emerging markets in the foreseeable future.

Thus, while Ex-Im Bank's mission is to help U.S. exporters sell their goods and services in these higher-risk markets, there is no intention to compete with private-sector insurers and lenders. Indeed, the goal is to complement their efforts and help them expand their business in emerging markets.

Never has it been more important to support global trade and in particular U.S. exports. Today, exports worldwide total $8 trillion, a number that's doubled just since 1990--and the World Trade Organization forecasts that global trade could expand by up to 7.5% this year.

This growth has fueled the greatest aggregate wealth creation in history by spurring productive enterprise. U.S. exports have soared from about $42 billion to almost $1.1 trillion in the last 35 years. That represents an increase from about 4% of GDP to about 10%. Last year, U.S. exports again grew--by 4.6%. In an $11 trillion economy, this means that approximately one in 10 U.S. jobs is now dependent on exports. There are 240,000 American exporting companies. They have helped create millions of jobs and $100 trillion of new net worth in the U.S. over the last four decades.

Ex-Im Bank's trade-finance products and services--including export credit insurance, loan guarantees, working capital guarantees, and direct loans--have supported close to a half trillion dollars in U.S. exports, and millions of U.S. jobs, since the bank was founded in 1934. In fiscal year 2004 the bank authorized $13.3 billion in financing, up from $10.5 billion the previous year, to support approximately $17.8 billion in U.S. exports, a 25% jump from a year earlier. No transaction is too large or too small, and, on average, more than 80% of Ex-Im's transactions directly benefit U.S. small businesses.

Leveling the playing field.

In providing guarantees, insurance, and direct project finance products in areas where private capital alone cannot afford to take either the political or commercial risk, Ex-Im Bank helps U.S. exporters meet foreign competition supported by subsidies from their governments. Ex-Im is legally mandated to find that a "reasonable assurance of repayment" exists for every transaction authorized, but the bank also serves as catalyst for opening up and cultivating more difficult markets.

Exports to 90 markets. Ex-Im Bank is active in about 90 markets, supporting exports ranging from capital goods associated with large infrastructure projects, jet aircraft, medical equipment, and engineering and other services, right through to exports by thousands of small businesses, including consumer products and services. The bank is required to rigorously review environmentally sensitive projects.

Working Capital Guarantees

Ex-Im Bank's working capital guarantee helps small businesses by covering 90% of the principal and interest on working capital loans for pre-export costs. These costs can include purchase of raw materials or finished products, production of exports, and coverage of standby letters of credit serving as bid bonds, performance bonds, or advance payment guarantees.

Financial Services Industry

Ex-Im's mission: expand trade, create jobs

RMA Journal, The, Feb, 2005 by John A. McAdams

Find Research Guides for:

Find Featured Titles for: Arts

Most Popular Articles in Business

Most Popular Publications in Business