Index for May 2013

Volume 12, Issue 6

Volume 12, Issue 5

  • (AIN, New York, 20 May 2013) Boeing’s recent assertion of an increased appetite in capital markets to fund airliner orders is welcomed by manufacturers and their customers when other sources of funding seem under pressure. Export credit, now comes generally at higher interest rates and tougher equity requirements while such government-backed capital has become a hostage to global politics, according to Kostya Zolotusky of Boeing Capital. “There are no surprises [about export credit becoming harder to secure] because it continues to be political on all sides,” he said. Zolotusky predicted further rancor between Brazil and Canada over their long-running squabble about accusations that each country illegally subsidizes their national aerospace champions–Embraer and Bombardier, respectively. Also clouding the export credit environment is how January's new OECD administered Aircraft Sector Understanding, may resolve long-running disputes over issues like the “home market” rule under which Europe and the U.S. maintained a long-standing agreement to abstain from providing financing to airlines in their own or each other’s domestic markets. This prompted accusations from “home” carriers of alleged anti-competitive assistance for new rivals from other regions, such as the fast-growing Arabian Gulf airlines. Last month Delta Air Lines significantly elevated the issue when it filed a lawsuit against the U.S. Export-Import (Ex-Im) Bank.

  • (Reuters, Seattle, 22 May 2013) - Delta Air Lines Inc wants the U.S. Export-Import Bank to stop helping state-owned foreign airlines buy wide-body jets from Boeing Co , and would be willing to forgo such support for its own purchases if all such subsidies were eliminated, its chief executive said on Wednesday. "We would be perfectly willing, if we had a total moratorium on narrow-body and wide-body financing, to forego" export credit help on narrow-body jet purchases from Bombardier, said Delta CEO Richard Anderson. Delta's chief legal officer has noted: "We don’t think the US government should subsidize widebody sales to our solvent competitors. ExIm subsidizes them by providing US government guarantees, which lower their borrowing costs and gives them a competitive advantage over US airlines on international routes. This harms US airlines and our employees. The Bank’s subsidization of our foreign competitors has tripled since 2008, and now is about 60% of the dollar amount of the Bank’s financings."

  • (Premium Times, Lagos, 7 May 2013) The Nigerian Export Import Bank, NEXIM, and the Export Development Canada, EDC, are exploring the prospects of a partnership to provide short term financing to Nigeria’s aviation sector. This was one of several discussions between the Nigerian delegation led by Vice President, Namadi Sambo, and some Canadian investment promotion agencies at the Canada-Nigeria Investment Conference, CNIC, 2013, held in Toronto between May 2 and 4 on the theme: ‘Canada-Nigeria Synergy Vision 20:2020’.

  • (Globe and Mail, Ottawa, 2 May 2013) The Harper government has reached outside the Bank of Canada to choose its next governor, selecting an expert in trade and exports as the country’s new top economic steward. Stephen Poloz, the head of Canada’s export credit agency, was named the country’s lead central banker Thursday by Finance Minister Jim Flaherty, inheriting the job at a difficult time when the economy is losing momentum and interest rates are at historic lows. Mr. Poloz is well known to the Harper government: He and his team at Export Development Canada played a key role in the federal and Ontario governments’ $13-billion bailout of Chrysler and General Motors Corp. in 2008 and 2009.

  • (Reuters, Sydney, 9 May 2013) A unit of the Jeddah-based Islamic Development Bank, a multilateral lending institution, has launched an insurance product designed to boost the credit ratings of sukuk (Islamic bonds) for sovereign issuers. Governments would buy the product in order to enhance their credit profiles; they would contribute to a common pool of funds that would be used to indemnify investors in their sukuk in cases of default. Soua said the product was fundamentally different from credit default swaps (CDS), which are commonly used in conventional finance; in those, investors pay a premium to buy cover against default risk, and the instruments can be traded. The expectation is that ICIEC could insure $300 million in the first year and $600 million in the year after, although the figures are not binding, said Soua. "For larger issuance, we would seek reinsurance or insuring a tranche of the issue."

  • (Damocracy, 21 May 2013) Representatives of dam-affected communities and international organizations from South America, the Middle East, Europe, the US, and Africa, today blocked the entrance to the construction site of the Ilisu dam in southeast Turkey demanding an end to the controversial development that would sink an ancient city dating back to the Bronze Age. The Belo Monte dam in Brazil and the Ilisu dam in Turkey are the two most controversial mega-dam projects in the world today. Both dams are located in cultural and natural hotspots, inflicting devastating consequences and displacing over 75,000 people in Amazonia and Mesopotamia. In addition, the Ilisu dam, located a few kilometers from the Iraqi border, will affect the livelihood of Marsh Arabs living in the newly restored Basra Marshes. Turkey controls the Tigris and Euphrates headwaters, which dictates how much water flows downstream into Syria and Iraq. The official export credit agencies of Germany, Turkey and Austria withdrew from financing of the Ilisu dam in 2008 and German insurers and exporters are involved in the Belo Monte dam.

  • (Creditman, Southampton, 30 April 2013) Members of the Berne Union – International Union of Credit & Investment Insurers – saw the value of credit and investment insured in 2012 grow by 2.4 per cent, reaching in excess of US$ 1.8 trillion. This matches the 2.4 per cent growth in exports for 2012 according to the United Nations Statistics Division. Collectively, Berne Union members insured more than 10 per cent of international trade in 2012.

    Of the total business volume, about US$ 1.5 trillion represented short-term (ST) export credit insurance with credit terms up to one year, while medium and long-term (MLT) export credit insurance for periods in excess of one-year amounted to more than US$ 180 billion. New transactions covered in investment insurance (INV) reached a record US$ 94 billion. Claims paid in ST export credit insurance rose again in 2012, following a drop in 2011, largely due to higher insolvency rates in Europe. Claims paid in MLT export credit insurance stayed at the same, relatively high, but sustainable level experienced in 2011. The combined claims paid to exporters and investors in 2012 in all lines of business totalled US$ 4.7 billion.

    Since the beginning of the global financial crisis in 2008, credit and investment insurers have paid in excess of US$ 20 billion to their clients to compensate them for losses suffered due to defaults by buyers or other obligors.

  • (New Matilda, Paddington NSW Australia, 14 May 2013) Julia Gillard visited ExxonMobil's new gas project in PNG on Friday. It's the biggest development ever in the Pacific - and Australia is one of its main financers, writes Luke Fletcher of Jubilee Australia. On Friday the Prime Minister was invited to kick the tyres of the largest development in the history of the Pacific region – Papua New Guinea’s PNG LNG project. She visited the plant not just as Australia’s Prime Minister but also as one of the primary financers of the $19 billion ExxonMobil project. In 2009, through Australia’s export credit agency the Export Finance and Insurance Corporation (EFIC), the Federal Government stumped up most of the money for a loan of half a billion US dollars — this is a rarity in EFIC transactions, the vast majority of which occur without injection of direct taxpayer funds (although taxpayers effectively provide a guarantee to EFIC).

  • (USGAO, Washington, 23 May 2013) The U.S. Export-Import Bank's (Ex-Im) methodology to calculate the number of U.S. jobs associated with the exports it helps finance has four key steps. Ex-Im reports the number of jobs its financing supports and the methodology it uses but does not describe limitations of the methodology or fully detail its assumptions. Ex-Im provides loans, guarantees, and insurance to U.S. exporters. One of Ex-Im's primary missions is to support U.S. jobs through exports. In its 2012 annual report, Ex-Im stated that its financing helped support an estimated 255,000 export-related U.S. jobs.

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  • (Alawaba, Amman, 15 May 2013) Masdar, Abu Dhabi’s renewable-energy company, and the US Ex-Im Bank, have signed a Memorandum of Understanding in which they will explore opportunities to structure and deploy up to $2bn worth of Ex-Im Bank’s finance supporting U.S. exports to Masdar’s future projects. Under the MoU, the two entities will identify investment opportunities which may facilitate the procurement and deployment of U.S. technologies, products and services in Masdar’s  renewable-energy projects. Priority areas under the MoU include carbon capture, use and storage, utility-scale solar desalination, sustainable-city development and waste-to-energy projects.