(Globe and Mail, Toronto, 2 July 2019) A federal review of Export Development Canada has exposed serious shortcomings at the Crown corporation, noting its disclosure practices fall far short of other financial institutions, and that the agency is not legally obligated to consider the environmental or human-rights impact of the financial support it provides to exporters. The findings underscore concerns uncovered in a recent Globe and Mail investigation. The Globe reported that the EDC’s client roster includes companies that have faced allegations concerning corruption, human-rights violations and environmental abuses; the federal agency has demonstrated a tendency to continue supporting such companies after other financial institutions have sanctioned them or cut them loose. Critics have also raised concerns about transparency and federal oversight of the Crown corporation. “Ottawa must impose rules on this Crown corporation to make it transparent and accountable,” Lori Waller, spokesperson for Ottawa-based human rights group Above Ground, said in a statement. “Without strong oversight of its export credit agency, the government risks profiting from harmful and illegal business activities. The law should prohibit EDC from supporting companies involved in corruption, human rights abuse or environmental harm.”
ECAWatch Newsletter 18
U.S. Senate targets Ex-Im support for Saudi nuclear technology
(Foreign Policy, Washington, 30 July 2019) A bipartisan group of lawmakers is introducing new legislation aimed at restricting the transfer of nuclear technology to Saudi Arabia, the latest sign of growing congressional backlash to the Trump administration’s close relationship with the wealthy Gulf nation. The bill, put forward by Democratic Sen. Chris Van Hollen and Republican Sen. Lindsey Graham, would bar the U.S. Export-Import Bank from financing the transfer of nuclear technology and equipment to Saudi Arabia, absent nuclear cooperation agreements, and adopting restrictive international standards to safeguard against nuclear proliferation. The Export-Import Bank plays a key role in funding the export of U.S. nuclear energy equipment and technology abroad.
Foreign beer lovers get tanked with EXIM assistance
(Craft Brewing Business, Akron, 10 July 2019) Craft breweries are promoting Maine beers in international markets via the world’s largest mobile kegerator a 40-foot refrigerated shipping container which packs in 78 on tap beer tanks and carries local Maine beers to far-away destinations. Its maiden voyage was a trip to Iceland 3 years ago and traveled to Leeds, England last fall. All 4 participating breweries ended up with significant orders for their beer overseas. Traveling as one of many breweries on the Beer Box is one thing, but exporting tens of thousands dollars of beer overseas as an individual brewer can be challenging and exposes the company to risk and financing challenges. EXIM insurance policies allowed peace of mind to these small Maine companies regarding their greatest fear – not getting paid.”
U.S. lags in export financing arms race fueled by China: EXIM report
(Reuters, Washington, 28 June 2019) China provided as much as $130 billion in government export financing support in 2018, dwarfing every other country and fueling a new export lending arms race, the U.S. Export-Import Bank said in a report on Friday. In the last full year that EXIM had complete lending powers, fiscal 2014, the agency provided $20.5 billion in financing support for $27.5 billion worth of U.S. exports. During the fiscal year ended Sept. 30, 2018, EXIM authorized only $3.3 billion in financing, supporting $6.8 billion worth of U.S. exports, according to EXIM’s most recent annual report. EXIM has been a popular target for conservatives, who have branded it as a provider of “corporate welfare” and “crony capitalism.” The reinstatement of its lending powers is a boon for large U.S. manufacturers such as Boeing Co (BA.N), General Electric (GE.N) and Caterpillar Inc (CAT.N), which can once again offer U.S.-government-backed financing for overseas customers.
Kenyan court blocks Chinese ECA backed power plant on environment grounds
(Financial Times, London, 27 June 2019) A Kenyan court has halted construction of the country’s first coal-fired power station on environmental grounds in a blow for the $2bn project’s Chinese backers and the green credentials of China’s Belt and Road Initiative. Owned by the Kenya-based Amu Power and funded with export credit from the Industrial and Commercial Bank of China, the contentious project has sparked a heated debate in Kenya about the potential impact of coal-based power on the country’s ecosystem. Located on Kenya’s Indian Ocean coast approximately 14 miles north of Lamu town, a tourist destination and Unesco World Heritage site, environmentalists say the plant will pollute the air and destroy mangroves and the breeding grounds of endangered species.
See no evil: How EDC is bankrolling companies accused of bid-rigging, graft and human-rights violation
(Globe and Mail, Toronto, 4 June 2019) Export Development Canada once described itself as the country’s ‘secret trade weapon.’ But The Globe’s review of thousands of transactions reveals a pattern of secrecy and lax supervision. In Latin America, billions of dollars in Canadian government-backed loans have been funnelled to two of the region’s most notorious oil companies: the state-owned petroleum corporations of Mexico and Brazil, each riddled with frequent reports of bribery, bid-rigging and inflated contracts. In Africa, hundreds of millions of dollars in financing has been channelled to companies at the heart of South Africa’s worst postapartheid corruption scandal: the state-owned freight rail monopoly and the business empire of the infamous Gupta brothers, whose relationship with ex-president Jacob Zuma triggered a public inquiry into state corruption. And in Canada, billions of dollars in federal export loans have gone to support transactions that benefit Bombardier Inc. and SNC-Lavalin Group Inc., two companies that have been cited in corruption investigations in Asia, Africa and Europe. SNC-Lavalin’s head of compliance says the firm is still hoping to reach an out-of-court settlement on bribery, fraud charges. EDC has declared itself a leading defender of human rights, but workers groups and advocates say the Crown agency’s long-awaited new policy falls well short of what’s needed.
Waters backs down in Ex-Im fight after internal struggle
(Politico, Washington, 26 June 2019) House Financial Services Chairwoman Maxine Waters (D-CA) on Wednesday shelved a bipartisan Export-Import Bank bill that sparked a fierce backlash from her own caucus. The original compromise she drafted with Patrick McHenry (R-N.C.) ignited criticism from a wide swath of the Democrats on the committee — centrists and progressives alike, from the most senior members to newly elected freshmen, including Rep. Alexandria Ocasio-Cortez (D-N.Y.), who objected to new restrictions that would be imposed on the bank and big manufacturers such as Boeing, that benefit from its loan guarantees, as well as the lack of tougher environmental safeguards for energy projects financed abroad. Reps. Ocasio-Cortez and Rashida Tlaib (D-Mich.) were preparing to offer amendments that would impose new limits on the agency’s financing of fossil fuel power plants abroad with the political backing of dozens of environmental groups. Limits on sales to China were a must-have for McHenry, who argued that it was a way to curb what he saw as a subsidy for an economic competitor. The bank is only now returning to full operation after years of being hobbled by conservative Republican lawmakers who criticized the agency as engaging in “crony capitalism” and posing a risk to taxpayers, even though it returns money to the Treasury. McHenry had predicted a strong Republican vote in favor of the bill thanks to the compromises Waters agreed to, while disgruntled Democrats were frustrated that Waters negotiated the bill with the Republicans and expected Democrats to fall in line without more of their input.
Despite climate pledges, G20 coal subsidies rise
(Reuters, London, 24 June 2019) Despite promising a decade ago to phase out fossil fuel subsidies, the world’s leading economies more than doubled subsidies to coal-fired power plants over three years, putting climate goals at risk, energy researchers said Tuesday. Between 2014 and 2017, G20 governments more than halved direct support for coal mining, from $22 billion to about $10 billion on average each year, according to a report by the London-based Overseas Development Institute (ODI), a think tank. But over the same period they boosted backing for coal-fired power plants – particularly supporting construction of the plants in other, often poorer nations – from $17 billion to $47 billion a year. While spending from national budgets on coal fell, as did tax breaks for it, other forms of support – from development finance institutions, export-credit agencies and state-owned enterprises – soared. Four countries alone, the UK, France, Canada and Ireland have all formally recognised a climate crisis but analysis shows they give $27.5bn annually in support for coal, oil and gas, much of it via ECAs.
Chinese Banks and ECAs Court African Governments
(Peace FM Online, Accra, 25 June 2019) African Foreign Ministers attending the Forum for China-Africa Cooperation (FOCAC) Coordinators’ meeting in Beijing yesterday met Chinese financial institutions who introduced them to their array of financial products. This is in line with Chinese President Xi Jinping’s [2015 and then 2018] $60 billion pledge in financial support to African countries. The breakdown showed that $5 billion was free aid and interest-free loans, while $35 billion was for preferential loans and export credit on more favourable terms, and five billion dollars for additional capital for the China Africa development fund. Five billion dollars was also up for initial capital of special loans for the development of African small to medium enterprises each, and $10 billion for China-Africa production capacity cooperation fund.
Public and targeted consultations on EU short-term ECA rules
(Lexology, Brussels, 24 June 2019) In January 2019, the European Commission announced its intention to extend, for a period of two years, 7 sets of State aid rules, which were due to expire in 2020, [including the Communication on Short-Term Export Credit Insurance]. In this respect, the European Commission launched public and targeted consultations to assess the relevance, effectiveness and coherence of these sets of rules and to check whether they are still appropriate for the objective pursued. The Commission, as the guardian of competition under the Treaty, has always strongly condemned export aid for intra-Union trade and for exports outside the Union… to prevent Member States’ support for export-credit insurance from distorting competition
