(Global Trade Review, London, 22 November 2023) Export finance banks are urging members of the OECD Arrangement on Officially Supported Export Credits to reinstate the rule reducing the down-payment threshold for emerging market borrowers to 5% amid escalating debt risks. On November 4, a temporary common line which had allowed export credit agencies (ECAs) to cover up to 95% of the total export contract value on sovereign transactions – involving category II (non high income) nations – came to an end. The common line was first introduced in late 2021 to counter reported constraints in the private insurance market, and was renewed last November for a further 12 months. The temporary rule has now been formally wound down and any new ECA deals involving sovereign borrowers must revert to financing 15% of the contract on commercial terms. In another development, negotiators secured a modernisation of the OECD Arrangement on Officially Supported Export Credits in March which saw maximum repayment terms for export credit agency (ECA)-supported, climate-friendly projects extended to 22 years, while the maximum tenor for all projects was upped from 10 to 15 years. Revised repayment terms under the OECD framework on export credits could be challenging for banks, prompting increased demand for alternative means of funding, according to industry experts. It will be challenging for certain banks, especially in the current macroeconomic climate. All the banks are struggling with much higher funding costs compared to two or three years ago,” said Nazli Konac Edgu, director of export and agency finance at Citi.
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New Chinese growth drivers sought to boost exports amid weak global demand
(China Daily, Beijing, 9 August 2023) China’s foreign trade grew steadily in the first seven months of the year but exports in July declined at a steeper-than-expected pace amid subdued global consumer demand, which highlights the need to roll out stronger policy steps to further boost the country’s foreign trade, experts said on Tuesday. Li Dawei, researcher at the Chinese Academy of Macroeconomic Research’s Institute for International Economy, said the authorities should offer services such as exchange rate hedging, process export tax rebates faster, expand the scale of export credit insurance services and enhance customs clearance to foster new drivers of export growth amid falling global demand for the country’s traditional export products such as electronic items, clothing and footwear.
EDC trying to reclaim $347 million insurance payout to Suncor linked to Libya unrest
(Bowen Island Undercurrent, BC, 2 August 2023) The federal government is trying to reclaim nearly $350 million in insurance paid to Suncor Energy Inc. by Export Development Canada in the wake of political unrest in Libya. The oil giant claimed $300 million in risk mitigation payments for losses linked to Libyan energy assets after fighting between rival political factions spread to the country’s oil crescent region in 2015, a Federal Court judge said in a ruling this week. The total — $347 million with interest — was determined by an arbitrator in 2019. But Export Development Canada, which insures against losses caused by political violence, argues that Suncor’s oil production facilities still deliver returns for the Calgary-based company. The insurance claim was paid under a policy underwritten by Export Development Canada for Petro-Canada in 2006, which Suncor then came into following their merger in 2009.
Cedar Rose reaffirms its longstanding partnership with Sinosure
(ZAWYA, Dubai, 11 July 2023) Cedar Rose, a Cyprus and Dubai based corporate data, credit, risk and compliance firm, has reaffirmed its longstanding partnership covering over 25 years of relationship with Sinosure, a prominent Chinese state-owned enterprise responsible for export credit insurance. Cedar Rose’s services play a crucial role in enabling comprehensive risk assessments for Sinosure. By leveraging Cedar Rose’s Company Credit Reports and analysis services, Sinosure gains access to a wealth of data, including company identification, structure, and financial information. These services are obtained through Cedar Rose’s API, with a particular focus on the Middle East and North Africa (MENA) region. Antoun Massaad, Co-Founder and CEO of Cedar Rose stressed that “The partnership between Cedar Rose and Sinosure has proven valuable in de-risking trading activities, supporting Sinosure’s risk management practices”.
India’s ECGC may permit Sri Lanka to repay debt over 12 years
(MINT, New Delhi, 6 July 2023) India plans to allow Sri Lanka up to 12 years to repay its debt to help ease the financial burden on the island-nation, India’s Export Credit Guarantee Corporation (ECGC) Ltd’s chairman-cum-managing director M.Senthilnathan said. Sri Lanka, facing its worst economic and political crisis in over seven decades, owes $7.1 billion to bilateral creditors— $3 billion owed to China, $2.4 billion to the Paris Club and $1.6 billion to India. Senthilnathan added that the National Export Insurance Account, managed by the ECGC, has received close to ₹4,500 crore worth of claims from exporters facing default in countries such as Sri Lanka, Zambia, Suriname and Ghana which faced extreme economic hardships after covid-19 and the Ukraine war. China has so far not joined the common platform of negotiators on Sri Lanka’s debt restructuring, though it has joined as an observer. In response to Sri Lanka’s request for long-term relief from major creditors like India, Japan, and China, the Chinese Exim Bank has agreed to grant Sri Lanka a two-year moratorium. It said it would support the country’s efforts to secure a $2.9 billion loan from the International Monetary Fund according to a report by Reuters.
EU in talks over export credit facility for ECAs, banks
(Global Trade Review, London, 19 June 2023) The EU is weighing the launch of an export credit facility that could reinsure member state export credit agencies (ECAs) and refinance commercial loans, as it seeks to arrest the relative decline in exports from the bloc to key overseas markets. The European Commission, parliament and member states are now in talks to devise a strategy on export credits following the publication last week of a feasibility study which recommended several steps the EU could take in the next three years. Policymakers are seeking to harness the financial might of ECAs and export-import banks across its 27 countries by aligning them to key EU strategies such as transitioning to green energy, overseas investment and competition with China and the US. The feasibility study, authored by independent consultants and launched by the Commission last year, lamented a 5% drop in the EU’s share of merchandise goods exports to high-risk third countries in the decade to 2020, and double-digit declines in the share of EU contractors in business in Africa, Asia and the Middle East. Exports to third countries prop up some 38 million EU jobs, according to the study. ECAs are widely used by contractors to insure and lower the cost of financing capital-intensive infrastructure projects in what are deemed to be high-risk markets for credit, which include major developing economies such as Turkey, Vietnam, South Africa, Nigeria and Pakistan.
Ukraine axes ban on ECA-backed loan repayments
(Global Trade Review, London, 19 June 2023) Ukraine’s central bank has lifted restrictions on domestic firms’ repayments on loans backed by foreign export credit agencies (ECAs), wagering that the move will help attract much-needed foreign investment and financing for imports. The National Bank of Ukraine slapped a wide-ranging ban on cross-border currency transfers and purchases of foreign currency last year, immediately after Russia’s invasion of the country. The prohibition included the repayment of principal and interest on loans extended by foreign lenders, a decision that contributed to most ECAs suspending coverage of Ukraine.
African sovereign debt poses challenges for ECA activity
(TFX News, London, 31 May 2023) The spectre of increasing sovereign debt has the potential to swamp future export finance deals and projects in several African jurisdictions. The changes to the OECD Arrangement on officially supported export credit financing put forward in March this year has been ‘music to the ears’ of all those in the industry calling for fundamental reform. We expect to hear more detail from the OECD in July, but from the provisional announcement it looks like tenors on certain transactions will be extended and repayment schedules relaxed for deals in certain sectors, giving greater impetus to deals and projects in the energy transition arena as well as providing a boost to social infrastructure transactions. Many African markets are seen as being challenging largely because of a range of serious risks – and the main ones are often cited as: the debt trap, coups, civil war, terrorism and political risk. In fact, at a recent TXF conference I learned that there are currently 68+ armed conflicts taking place across Africa – when I had originally estimated 40. This announcement has been strongly welcomed by those working in emerging markets, and particularly those active in African markets where so much basic infrastructural and social project work is required … and where ECA-backed finance will be key.
SINOSURE pulls out of Nigerian AKK pipeline funding
(Guardian.NG, Abuja, 19 April 2023) Financiers of the Abuja-Kaduna-Kano pipeline have pulled out of the project, citing an alleged 570% inflated contract sum, far above global threshold. Infrastructure and Commercial Bank of China (ICBC), Infrastructure Bank of China and China Export Credit Agency (SINOSURE) – were to provide 85% or $2.38 billion of the funding requirement. Their Nigerian counterparts, Oilserve and Oando, are to shoulder the balance 15% or $420 million. With this development, the project has been stalled, as there is no funding to cover cost of the second and third legs from Abuja to Kaduna and Kaduna to Kano. It was learnt that the Nigerian National Petroleum Corporation Limited (NNPCL), through the Nigeria Gas Transport Processing Company (NGTPC), had attempted to bridge the funding gap, but lacked the needed liquidity. Globally, the cost of high-pressure transmission gas pipelines is built at $800,000 per kilometre. In Nigeria, the Final Investment Decision (FID) for EPC was scheduled at $4,560,260 million, which is a 570% inflation above global standards.These examples clearly show that Nigeria has the highest cost of contract in the world. These companies cannot afford to go into cahoots with Nigerians because they would be easily caught when they submit their financial reports to their countries of origin.”
EXIM provided $600m to Lithuania to fight punative Chinese sanctions over relations with Taiwan
(Global Echo, Washington, 8 March 2023) In November 2021 the U.S. provided $600 million in an export credit agreement to help Lithuania withstand pressure from China and joined the EU’s WTO lawsuit in support of Vilnius. Days after the establishment in 2021 of the “Taipei Representative Office in Lithuania,” Taiwan’s de facto embassy, Beijing downgraded diplomatic relations and blocked most trade with Vilnius over what it calls a violation of the One China policy. The action prompted the European Union to sue China at the World Trade Organization over “discriminatory trade practices” against Lithuania that it said threatened the integrity of the EU single market. Beijing denies instructing Chinese companies to stop doing business with Lithuanian partners. In March 1990, Lithuania became the first republic to break away from the Soviet Union by declaring itself an independent state, a decision the White House applauded.
