Index for December 2015

Volume 14, Issue 12

  • (Environmental Finance, London, 1 December 2015) The pledge of $100 billion by 2020 (from developed to developing countries) may be a nice round number for politicians to reference but it is, in fact, an arbitrary figure that is grounded in political, not scientific, analysis. And it is magnitudes below the actual need. So it is little wonder that the recent findings of the OECD study, Climate finance in 2013-14 and the $100 billion goal, were lampooned rather than lauded by many developing countries and civil society. The OECD study asserted that developed countries had mobilised $61.8 billion in 2014 and were on track to provide the $100 billion – both decidedly misleading claims. For the provision of finance to count as climate finance, money must remain in, and benefit, developing countries – governments, ordinary people, especially those who are marginalised, and local economies. Yet the majority of what the OECD study counted as climate finance ultimately benefits developed countries and their investors, banks, and corporations. The OECD counted [amongst other items] export credit financing. Export credits mean loans or loan guarantees, which again require repayment. In addition, export credit agencies are by design meant to benefit home country corporations – they are not driven by developing countries' climate priorities.

  • (The Examiner, 7 December 2015) Recently eleven banks including the World Bank, European Investment Bank and Credit Agricole, announced the launch of ‘Five Voluntary Principles for Mainstreaming Climate Actions Within Financial Institutions’. On Monday December 7, at the UNFCCC COP21 Climate Summit in Paris, France, BankTrack, Friends of the Earth France and Rainforest Action Network jointly issued a statement in response. The potential importance of this is that banks have a great deal of control over what our society chooses to do. How? It's the banks that decide which projects to underwrite, meaning that it doesn't matter how cool and wonderful a solar farm or wind farm is, the banks can block construction by refusing to loan the money necessary to fund the project.

  • (Both ENDS, Amsterdam, December 2015) In November 2013, Both ENDS published a study on Atradius DSB’s support for complex export transactions that were structured via tax havens, and thus its potential underwriting of aggressive tax avoidance positions that corrode the tax sovereignty of beneficiary countries. In that study it emerged that the possibility of money laundering being part of such complex transactions could also not be excluded. A new report, based on sustained and regular monitoring of transactions supported by Atradius DSB, firmly suggests that the practices previously criticized continue. We again challenge Atradius DSB to introduce effective screening to exclude export transactions that have a high probability of including tax evasion and money laundering from its insurance services.

  • (Both ENDS, Amsterdam, 17 December 2015) On 8 June 2015 Both ENDS – in conjunction with and on behalf of Associação Fórum Suape Espaço Socioambiental, Conectas Direitos Humanos and Colônia de Pescadores do Município do Cabo de Santo Agostinho – notified the Dutch National Contact Point of a specific instance concerning an alleged violation of the OECD Guidelines for Multinational Enterprises by Atradius Dutch State Business (ADSB) relating to the provision of export credit insurance on behalf of and for the account of the Dutch State with respect to dredging projects by the Dutch company Van Oord for the Suape Industrial Port Complex in Suape, Pernambuco, Brazil. Both ENDS’ notification states ‘In violation of its own corporate social responsibility, ADSB failed to ensure effective monitoring of the projects’ impacts. This behaviour, among other factors, resulted in a failure to consult with the affected people and communities, a loss of traditional ways of life, as well as severe damage to biodiversity and ecosystems." Local people were forcefully resettled without appropriate compensation, and several families now live in deep poverty due to the loss of their traditional livelihoods.

  • (World Grain, Kansas City, 15 December 2015) In a letter to the U.S. Department of Agriculture (USDA) and the Office of the U.S. Trade Representative, the American Soybean Association (ASA) led a coalition of agricultural organizations in urging the U.S. Agriculture Secretary to work toward positive outcomes for agriculture in this week’s WTO Ministerial in Nairobi. With regard to export competition, the letter strongly supports U.S. efforts to eliminate export subsidies (including by the E.U. and Canada), reform export credit programs, and eliminate state trading enterprises and single desk trading. At the same time they cautioned against weakening such rules in developing nations, specifically noting subsidies by Brazil and other emerging nations for transportation, handling and processing costs for exported commodities. The ASA has subsequently expressed its disappointment with the decision to allow the continued use of export subsidies by developing nations.

  • (Hindu Business Line, NewDelhi, 20 December 2015) The World Trade Organisation’s Ministerial in Nairobi failed to deliver anything concrete for India and other developing countries in the areas of food security and farmer protection. Worse, it has saddled them with the burden of doing away with all export subsidies in the next eight years, and all but ended the development framework of the Doha Round within which negotiations have been taking place. There was no breakthrough in areas of food, farmer security; as export subsidies are to be phased out by 2023.

  • (Wall Street Journal, Washington, 9 December 2015) Legislation signed by President Barack Obama on Friday resurrected the U.S. Export-Import Bank and ended a five-month lapse that revealed far stronger bipartisan backing for the agency than the pitched battle to shut it down suggested. The outcome now gives the bank a firm footing until September 2019, but the brawl over its existence this year left both economic and political scars. The New York Times however has reported that: Yet an obstacle remains: With three empty seats on its five-member board, the bank lacks a quorum. Until Mr. Obama nominates members, and the Republican-controlled Senate confirms them, Ex-Im Bank can only approve small export deals, not the big orders for aircraft, satellites and major manufacturing equipment the bank is best known for — leaving the likes of Boeing, General Electric and Caterpillar in limbo.

  • (Post News, Zambia, 18 December 2015) The Zambian government is under pressure to borrow over US$642 million to pay Chinese lenders as overdue down payment for loans worth US$3 billion. According to a Cabinet memorandum, Zambia has contracted US$3,012,466,199 in concessional and non-concessional export credit from China, but the government has failed to pay the required down payment of US$642,993,572 on all 12 loans due to fiscal constraints.

  • (Business Insider Australia, Sydney, 4 December 2015) Yesterday Gina Rinehart’s Roy Hill mine hit yet another snag. For a second time the first shipment of iron ore from Roy Hill was delayed following safety concerns. At a Sydney Mining Club function last night — held by Rinehart with the intention of celebrating the first shipment — Rinehart’s chief financial officer, Garry Korte, revealed how the mining magnate secured the $US10 billion funding package needed to keep the project afloat. According to Korte, Rinehart “personally” hosted a lunch in the outback, inviting around 80 bankers from around the world. “She talked to each guest individually,” he said, “which meant we secured virtually on the spot, billions of dollars of commercial bank support.” Her “personal touch” with the export credit agencies saved the project, said Korte. It is expected that this was in reference to the $7.2 billion in funding secured in March 2014 from a global consortium of banks including Australia’s majors and a group of national export-import finance banks. Korte also said Rinheart hosted a “famous” dinner with the “conservative” export credit agencies, who underpinned the finance, without which the project might not have happened. Korte also noted that: “The head of the lead export credit agency on the debt deal danced with the chairman, Mrs Rinehart, and it seemed to help his enthusiasm for the project substantially … quite unexpectedly, a few minutes later he announced at the dinner he was going to bring forward his board meeting to deal with our financing”.

  • (The Citizen, Johanesburg, 3 December 2015) Transnet and China Export Credit Insurance Corporation (Sinosure) on Wednesday agreed to a $2,5 billion funding guarantee in a ceremony attended by South African President Jacob Zuma and his Chinese counterpart Xi Jinping, who is on a State visit to South Africa. The news came in a flurry of deal-making on the eve of the first Forum for China-Africa Co-operation (Focac) summit in Africa, being held in Johannesburg this week. South Africa and China announced a number of other deals worth a total US$6 billion on Wednesday.Transnet announced that it would use the guarantee to finance procurement of mechanical, electrical products and equipment from Chinese enterprises. It would also cover funding for operation, maintenance and other services from Chinese enterprises in South Africa. The credit terms are not intended to exceed 15 years, in line with Transnet’s stated objective of matching its liabilities with the life of assets.

  • (This Day Live, Lagos, 19 December 2015) Given that oil remains the basis upon which Nigeria's national budget is benchmarked, the downturn opens the country up to harsh vulnerabilities. Since this reality was fairly foreseen and foretold by development analysts it rightly ought not to have met Nigeria unprepared, right? To be fair to government, specific proactive steps had long been taken by governments including mandating a development finance agency with the responsibility of designing and driving the vision to promote and grow the non-oil sectors of the economy. That obligation fell on the laps of the nation’s flagship development finance agency, the Nigerian Export-Import Bank, NEXIM.

  • (Sputnik News, Tehran, 23 December 2015) Russia plans to provide Iran with $2.2 billion in state export credit in 2016 as part of a $5 billion loan plan, Russia's First Deputy Prime Minister Igor Shuvalov said Thursday.

  • (Tehran Times, Tehran, 1 December 2015) Iran and Italy have agreed to open a $5-billion credit line, in a bid to pave the way for optimal banking and economic ties between the two countries once sanctions against the Islamic Republic are lifted. The credit line is projected to take effect one day after the implementation of the Joint Comprehensive Plan of Action (JCPA), a document drafted and signed by Iran and world major powers as a solution to Iran’s nuclear program.

  • (Ansamed, Rome, 11 December 2015) The Italian export credit agency SACE has announced five billion euros in operations being assessed to support Italian export and firms in Egypt, one of the most strategic markets for the country in the Mediterranean. SACE has in Egypt a portfolio of insured transactions worth 1.6 billion euros, mostly in the energy, petrochemicals and infrastructure and constructions sectors, including both large Italian companies and many SMES.

  • (India Times, New Delhi, 27 December 2015) The government has asked the Reserve Bank of India to reconsider its external commercial borrowing (ECB) norms to allow foreign currency debt to infrastructure sector for medium term also. Sources said Transport and Highways Secretary Chhibber has written that "many export credit agencies are required to follow OECD arrangements wherein a member is not permitted to extend export credit beyond a period of 10 years for all categories (except non nuclear power plants) for a category II country such as India, whereas the revised ECB framework allow Indian infrastructure companies to access long term foreign currency borrowings with a minimum average maturity of 10 years (under Track II)".

  • (Space News, Paris, 28 December 2015) The Bolivian Space Agency (ABE) said its Tupac Katari (TKSAT-1) telecommunications satellite is expected to generate $2 million in monthly revenue in 2016 and to reach a fill rate in the coming years that could justify a second satellite. ABE did not disclose the specific terms of its China Development Bank loan, but most export-credit agencies advance funds at low interest rates, with repayming starting well after the satellite is operational in orbit.

  • (Your Oil & Gas News, Aberdeen, 22 December 2015) Sovcomflot Group and Sberbank CIB  have signed a 14-year $340 million credit facility agreement to finance the construction of three Arctic shuttle tankers for the Novy Port project  (project operator: Gazprom Neft). Commenting on the transaction, Nikolay Kolesnikov, Chief Financial Officer of Sovcomflot, said: “With this new financing Sovcomflot will have raised a total of over USD 900 million of long-term debt finance from commercial banks and export credit agencies in the course of 2015.”

  • (Post News, Zambia, 15 December 2015) According to the Paris Club, representatives of the Group of Creditors of Cuba and of the Government of the Republic of Cuba met from December 10-12 and on Saturday came up with an arrangement to clear US$2.6 billion of debt in arrears due to the Group of Creditors of Cuba over an 18-year period. After striking the agreement, Paris Club said the Group of Creditors of Cuba’s export credit agencies that wish to do so will resume their export credit activities. The Group of Creditors of Cuba includes Australia, Austria, Belgium, Canada, Denmark, Finland, France, Italy, Japan, the Netherlands, Spain, Sweden, Switzerland and the United Kingdom.