(Zdnet, York PA, 26 December 2019) Huawei Technologies has lashed out at a Wall Street Journal report that suggests the tech giant’s success is fuelled by billions of dollars in financial support from the Chinese government, arguing that its ties are no different from any other “private company” that operates in China. The WSJ article noted that besides subsidies, Huawei since 1998 has received an estimated $16 billion in loans, export credits, and other forms of financing from Chinese banks for itself or its customers. But the WSJ also notes that Huawei’s largest American competitor, Cisco Systems, received $44.5 billion in state and federal subsidies, loans, guarantees, grants and other U.S. assistance since 2000. Further, it notes that Swedish export authorities provided some $10 billion in credit assistance for Sweden’s tech-and-telecom sector as of 2018 and that Finland authorized $30 billion in annual export credit guarantees economywide from 2017. A 2005 study by the UK Secretary of State for Trade and Industry showed that the “opportunity cost” of UK export credits, i.e. government “subsidies”, was around US$271 million per annum. This dispute highlights the well known fact that Chinese and official OECD member export credit agency budgets are subsidies which violate the WTO’s Agreement on Subsidies and Countervailing Measures. The OECD ECA Arrangement creates a WTO loop-hole for OECD ECA subsidies if they meet the OECD’s poorly monitored and largely secretive OECD ECA self-monitoring. The Arrangement is a self-professed “Gentlemen’s Agreement” designed to restrict a race to the bottom in export subsidies, but is flawed by a lack of transparency. So yes, the Chinese subsidize Huawei just as OECD ECAs subsidize their own exporters. The difference is the US claim of internet security concerns wrt Huawei in their efforts to retain economic superiority in global markets. Google and Facebook’s violations of internet privacy and security don’t seem to rate the same US concerns.
ECAWatch Newsletter 12
JBIC joins $1.3 billion financing for Bangladesh urea industries
(The Daily Star, Dhaka, 2 December 2019) The Hongkong and Shanghai Banking Corporation (HSBC) has arranged USD1.3 billion financing for Bangladesh Chemical Industries Corporation (BCIC) to set up its Ghorasal Potash Urea Fertilizer Project (GPUFP). This is the largest financing backed by an Export Credit Agency ever completed in Bangladesh. BCIC has signed loan agreement for $1.3 billion with Japan Bank for International Cooperation (JBIC), Bank of Tokyo-Mitsubishi UFJ Ltd (MUFG) and HSBC. Of the total credit HSBC will provide $300 million and rest $1 billion will be arranged by JBIC and MUFG.
Insurers drop coal in droves to “avoid climate breakdown”
(Unfriend Coal, London, 2 December 2019) The number of insurers withdrawing cover for coal has more than doubled in 2019 as the industry’s retreat from the sector accelerates and spreads beyond Europe, the Unfriend Coal campaign reveals today in its third annual scorecard on insurance, coal and climate change. Coal exit policies have been announced by 17 of the world’s biggest insurers controlling 46% of the reinsurance market and 9.5% of the primary insurance market. Most refuse to insure new mines and power plants, while industry leaders have ended cover for existing coal projects and the companies that operate them, and adopted similar policies for tar sands. Action has escalated since international NGOs launched the Unfriend Coal campaign in 2017. Insurers have also divested coal from roughly $8.9 trillion of investments – over one-third (37%) of the industry’s global assets. Insuring Coal No More: The 2019 Scorecard on Insurance, Coal and Climate Change is published by 13 civil society organisations from 10 countries. It was launched to an industry audience at the Insurance and Climate Risk conference in London, as the UN Climate Summit commences in Madrid. As of November 2019, at least 111 globally significant financial institutions – including commercial banks, development financiers, insurers, export credit agencies and central banks – had divested from coal or reduced their exposure to the sector in other ways. Yet in July 2019, 2,459 coal plants with a combined capacity of 2,027 gigawatts were in operation, and another 980 with a combined capacity of 925 gigawatts were planned or under construction.
US Ex-Im Bank gets seven-year extension
(Space News, Washington, 21 December 2019) The year-end spending package President Trump signed into law late December 20 includes a 7 year re-authorization for EXIM, a lending agency that has been largely sidelined as a source of cheap financing for U.S. satellite deals since Congress let Ex-Im’s charter lapse in 2015. The $1.37 trillion omnibus bill, which funds the U.S. government through Sept. 30, 2020, provides Ex-Im its longest authorization period ever, though still shorter than what some lawmakers had sought. The enacted legislation also enables the bank to keep lending in the absence of a full board of directors by allowing other government officials to temporarily fill vacancies in order to maintain a quorum. New rules for Ex-Im Bank state that if the bank lacks a quorum for 120 consecutive days during a president’s term, a temporary board will form consisting of the treasury and commerce secretaries, the U.S. trade representative and the bank’s confirmed board members. That temporary board would remain until at least three board members are confirmed or until the U.S. president’s term expires… Proponents of Ex-Im Bank have in recent years sought to use the export-credit agency as a soft power tool to counter Chinese export credit and, by extension, Chinese influence globally. The legislation directs the bank “to focus on the important economic and national security challenges posed by China,” Kimberly Reed, Ex-Im’s president and chairman, said in a statement on Dec. 20. The board of directors of the Export-Import Bank of the United States (EXIM), included Nicaragua in its Country Limitation Schedule (CLS) Program, which, as of December 23, will stop working with Nicaragua. With this decision, Nicaragua joins the “undesirables club of the EXIM,” which also includes Afghanistan, Bolivia, North Korea, Cuba, Eritrea, Haiti, Iran, Libya, Nauru, Central African Republic, Somalia, Sudan, South Sudan, Syria, Tajikistan, Venezuela and Yemen.
Sweden proposes climate and export strategy which includes ban on ECA support for fossil fuel exploration and extraction
(ECA Watch, Ottawa, 30 December 2019) The Swedish government has presented a climate policy action plan with 132 measures to the Riksdag “taking a holistic approach to how emissions will be reduced throughout Swedish society.” We have been unable to find an outline of these measures but have been informed that the also recently updated trade and investment strategy includes a ban on export credits for fossil fuel exploration and extraction by 2022 (at latest) including for example, mining and construction machinery, trucks, dump trucks and wheel loaders, drilling equipment, excavators, where the purpose is to use these for the extraction of coal and oil or gas. It also includes fire protection equipment for oil drilling platforms. We hope to be able to provide further information in our next issue.
Saudi Arabia looks for ECA finance to reduce deficits
(Bloomberg, Riyadh, 11 December 2019) Saudi Arabia may tap international debt markets as early as next month as it seeks funding to help bridge its widening budget deficit. In addition to selling bonds the debt office is also looking at alternative options including export credit agency financing. Fahad Al-Saif, head of the Finance Ministry’s debt management office, said “We are now engaged in ECA financing that actually makes sense to be plugged into the portfolio. Also infrastructure finance, project finance — it depends. There are certain governmental projects that we could finance away from the debt capital markets.”
European Parliament asks Member states to end ECA support for fossil fuel projects
(European Parliament, Brussels, 28 November 2019) The European Parliament resolution of 28 November 2019 on the 2019 UN Climate Change Conference in Madrid stresses that the EU’s budget should be consistent with its international commitments on sustainable development and its mid- and long-term climate and energy targets. Article 54 welcomes the decision taken by the EIB to end financing for most fossil fuel energy projects from the end of 2021 and specifically asks “the Member States to apply the same principle when it comes to export credit guarantees.”
Brazil Freezes ECA Credit After Defaults From Cuba & Venezuela
(Folha de Sao Paulo, Brasilia, 26 December 2018) After Mozambique, Venezuela, and Cuba defaulting, the Brazilian government froze credit lines for new exports, a measure that will affect mostly small and medium-sized businesses. The Brazilian Treasury Department will spend US$ 6 million (R$ 23,4 million) to reimburse BNDES (National Bank For Economic and Social Development) for Cuba’s default. Following Venezuela and Mozambique, the Cuban government defaulted on its payments to BNDES, in a credit line insured by the Treasury in the case of nonpayment. The amount is from an installment due in July, which Cuba paid partially. The Cubans paid US$ 4 million (RS 15.6 million) from the US$ 10 million (R$ 39 million) that were due. During the Lula and Rousseff administrations, the countries mentioned above hired large Brazilian contractors for infrastructure works such as the modernization of the Mariel Port in Cuba, performed by Odebrecht. The foreign governments also bought buses, industrial goods and foodstuffs using the credit line.
Mexico’s Pemex Targets Bank, ECA-Backed Financing in 2019
(US News, New York, 18 December 2018) Mexican energy producer Petróleos Mexicanos (Pemex) will look to banks and export credit agencies (ECAs) to finance part of its deficit next year, as the company enters 2019 under a new government and uncertain conditions in the international capital markets. State-owned Pemex, which is expected to raise approximately $8 billion in external debt next year, is also facing a bearish investor base concerned that Mexico’s new administration will hinder the company’s fiscal situation. Pemex has a $1.5 billion bank-led revolving credit facility maturing in the second half of 2019 and is on course to raise between $1 billion and $1.5 billion in ECA-backed finance next year, according to three sources familiar with the company’s plans. The company has conducted talks with trade agencies such as Export Development Canada and the Netherlands’ Atradius over ECA-backed loans and in November Pemex received a $250 million 10-year facility from BNP Paribas and HSBC that was 80 percent guaranteed by Italy’s SACE.
TDB rolls out SME programme for women-led businesses in six African countries
(ZDK-Solutions, Luxembourg, 11 December 2018) The Eastern and Southern African Trade and Development Bank (TDB) is rolling out a credit programme in six African countries to support women-led export-oriented SMEs. Among the first to benefit are Ethiopian businesses, following an agreement between TDB and Ethiopia’s Enat Bank. Under a memorandum of understanding, the two have agreed to set up a credit enhancement facility and work together to build a pipeline of SMEs which qualify for export credit support. Focusing on women-owned and managed businesses, the parties will run the programme in partnership with the Ethiopian Women Exporters Association.
