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Includes how major projects are financed and gives examples where relevant. Explains activities of the multilateral development banks in and other aid-funded projects where procurement is open to U.S. bidders.
For large infrastructure projects, a number of financing instruments are available. Project consortiums often develop a finance mix between development banks, multilaterals, commercial banks, and national export credit agencies, such as the U.S. Export-Import Bank.
U.S. Export-Import Bank (http://www.exim.gov)
The Export-Import Bank of the United States (Ex-Im Bank), an independent agency of the federal government, offers various short-, medium- and long-term export finance and insurance programs. Of specific interest to U.S. exporters are the guarantees for medium-term loans to foreign buyers of capital equipment. Most loans are made by U.S. banks with Ex-Im Bank’s guarantee. More than 85 percent of Ex-Im’s transactions in recent years directly benefited small businesses.
Much of Ex-Im Bank’s activity is under so-called bundling facilities. A bundling facility is a large medium-term loan made to a Mexican bank by a U.S. bank with the guarantee of Ex-Im Bank. The Mexican bank then makes loans to Mexican companies for the purchase of American capital goods. There also are a number of U.S.-based banks that extend Ex-Im Bank credits in Mexico. The major Mexican commercial banks have signed agreements with Ex-Im Bank to grant lines of credit to Mexican firms that purchase U.S.-made products. Many major Mexican banks (Santander, BBVA-Bancomer, and others) have Master Guarantee Agreements. Such credits generally are available only to Mexican blue chip companies and to their suppliers with firm contracts.
EXIM Bank is a global leader supporting environmentally beneficial goods and services. Since 1992, EXIM Bank has fulfilled a congressional mandate to promote the use of its financing tools for U.S. exports that benefit the environment, including those related to the production of renewable sources of energy. ExIm Bank’s annual renewable energy authorizations in the past two years were: $121 million in the first three quarters of FY2015, $198 million in FY2014.[1]
In Fiscal Year 2015Ex-Im Bank’s total exposure in Mexico was $9.45 billion and guarantees authorizations were $1.7 billion. Mexico remains the largest market in Ex-Im Bank’s portfolio.
Overseas Private Investment Corporation (http://www.opic.gov)
OPIC is the U.S. Government’s development finance institution. It mobilizes private capital to help address critical development challenges and in doing so, advances U.S. foreign policy and national security priorities. Because OPIC works with the U.S. private sector, it helps U.S. businesses gain footholds in emerging markets, catalyzing revenues, jobs and growth opportunities both at home and abroad. OPIC achieves its mission by providing investors with financing, political risk insurance, and support for private equity investment funds, when funding cannot be obtained elsewhere.
OPIC generally requires that U.S. investment in a given project represent at least 25 percent of the total investment value in order to be eligible for financing. OPIC offers its full range of programs and services in Mexico and its current financing and insurance exposure in Mexico is over $700 million to 20 projects. In addition, OPIC has indirect exposure through six investment funds that have invested in Mexico with OPIC support.
U.S. Trade and Development Agency (http://www.ustda.gov)
The U.S. Trade and Development Agency (USTDA) provides grant funding for infrastructure project planning activities to help promote U.S. exports. By assisting U.S. firms to become involved in the early stages of project development, USTDA increases awareness of upcoming projects for the U.S. business community, growing the probability that U.S. exports will be used during the implementation stages. USTDA works closely with multilateral development banks, including the World Bank and the Inter-American Development Bank to help U.S. firms take advantage ofprojects financed by those banks. Additionally, USTDA organizes reverse trade missions to introduce Mexican project sponsors to U.S. technology and companies. USTDA has an active program in Mexico, funding projects in a wide range of sectors, including energy, transportation, telecommunications, and the environment. In 2015, USTDA hosted two definitional missions in the aviation and renewable energy sectors and one technical study in traffic control. In late 2014, USTDA published a comprehensive Resource Guide for U.S. companies on Priority Infrastructure Projects in Mexico: (http://www.ustda.gov/program/regions/lac/mexicoresourceguide.asp).
U.S. Small Business Administration (http://www.sba.gov)
The U.S. Small Business Administration (SBA) provides financial and business development assistance to encourage and help small businesses develop an export component to their businesses. The SBA assists businesses in obtaining the capital needed to explore, establish, or expand in international markets. SBA’s export loans are available under SBA’s guaranty program. Prospective applicants should tell their lenders to seek SBA participation, if the lender is unable or unwilling to make the loan directly.
SBA also offers an Export Revolving Line of Credit (ERLC) program that is designed to help small businesses obtain short-term financing to sell their products and services abroad. The program guarantees repayment to a lender in the event an exporter defaults. The ERLC protects only the lender from default by the exporter; it does not cover the exporter should a foreign buyer default on payment. Lenders and exporters must determine whether foreign receivables need credit risk protection.
Multilateral Development Banks (World Bank, Inter-American Development Bank)
The Commercial Service maintains Commercial Liaison Offices in each of the main Multilateral Development Banks, including the World Bank and the Inter-American Development Bank. These institutions lend billions of dollars in developing countries on projects aimed at accelerating economic growth and social development by reducing poverty and inequality, improving health and education, and advancing infrastructure development. The Commercial Liaison Offices help American businesses learn how to get involved in bank-funded projects, and advocate on behalf of American bidders. Learn more by contacting the Commercial Liaison Offices to the World Bank (http://export.gov/worldbank) and to the Inter-American Development Bank (http://export.gov/idb).
[1] Source: ExIm Annual Report, 2015