What's New November 2020

What's New!" is a periodic update to keep you informed of the latest on the ECA Watch website. What's New! features a wide range of materials related to the reform of Export Credit Agencies (ECAs) including NGO publications and releases, news articles, commentaries and announcements about the policies and practices of ECAs and ECA-financed projects world-wide.

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  • Public ECA money guarantees 'risky' fossil fuel projects: experts
  • Western governments suspend talks on new ECA rules
  • Only a fifth of climate finance goes to adaptation as share of loans grows
  • International Chamber of Commerce urges G20 to increase ECA support to safeguard small corporations
  • Mapping the impacts of ECAs active in Africa
  • Berne Union Yearbook 2020
  • JBIC to lend Nissan $2B for U.S. sales financing
  • Mexican ECA seals US$600mn credit facility for Covid-19 response
  • What you need to know about Nigeria’s $1.2bn export loan from Brazil
  • Bombardier cooperating with SFO corruption investigation

Public ECA money guarantees 'risky' fossil fuel projects: experts

(AFP, Paris 15 November 2020) Energy firms are undertaking financially risky natural gas extraction projects from the Arctic to Africa made feasible by government-backed loans and guarantees, jeopardising efforts to curb global warming, experts say. As pressure from the public and investors to green their portfolios grows, and the cost of renewable energy continues to fall, oil and gas majors are finding it harder to attract investment on new fossil fuel projects.  Eight export credit agencies awarded loans to French oil giant Total in July, when the company signed a US$14.9-billion financing agreement for a liquefied natural gas (LNG) project in Mozambique. The province where the sites are located, Cabo Delgado, has been grappling with a jihadist insurgency since 2017 that has killed more than 1,000 people. In a renewed effort to reduce climate obstacles and tackle other environmental issues, five African civil society groups have called on African governments to stop the acceptance of fossil fuel projects driven by European countries through their Export Credit Agencies (ECAs).


Western governments suspend talks on new ECA rules

(Reuters, Washington, 20 November 2020) Eleven of 18 governments trying to negotiate new export credit rules said on Thursday they were suspending technical talks because of widely divergent positions among members and troubles with transparency. But in a joint statement, the 11 Western governments including the United States, European Union and Japan said that they remain open to a high-level meeting in a year and to discussing proposals at the vice-ministerial level. The action halts eight years of talks launched in 2012 from a joint U.S.-China initiative to try to craft new international rules on the use of official export credit agencies, that would be followed by OECD countries as well as large emerging market countries including China, India and Brazil.

In 2019, China provided more than three times the amount of official medium- and long-term export credits than the next closest provider, according to the Ex-Im Bank's annual competitiveness report. The top 10 providers, in order, were: China ($33.5 billion), Italy ($11.1 billion), Germany ($10.5 billion), India ($7.0 billion), the United Kingdom ($6.6 billion), France ($6.2 billion), Korea ($5.8 billion), the United States ($5.3 billion), Finland ($4.1 billion), and Sweden ($4.0 billion).


Only a fifth of climate finance goes to adaptation as share of loans grows

(Climate Home News, Kent, 6 November 2020) Donor countries mobilised $78.9 billion of climate aid in 2018, but developing nations are expected to pay back nearly three quarters of the money. Financial support to help the most vulnerable countries adapt to intensifying climate impacts continues to fall short compared with money spent to cut emissions, according to a report by donor countries. Analysis of the latest climate finance data by the OECD - representing 36 of the world’s most developed countries – found that only 21% of climate finance mobilised in 2018 aimed to help communities adapt to climate change vs more than two-thirds of the money still going to carbon-cutting efforts, with 9% identified as serving both goals. The OECD report analysed progress made by developed countries to meet a 2009 commitment to mobilise $100 billion a year in climate finance by 2020 to help developing countries green their economies and cope with climate impacts. The data included finance from bilateral and multilateral finance, climate-related finance officially supported by export credit agencies and private finance mobilised through public finance interventions, with the vast majority of the money coming from public finance, with private funding accounting for 18.5% of 2018's $78.9 billion. Oxfam’s Climate Finance Shadow Report 2020 offers an assessment of progress towards the $100bn goal.


International Chamber of Commerce urges G20 to increase ECA support to safeguard small corporations

(International Chamber of Commerce, Paris, 9 November 2020) An advisory group to the International Chamber of Commerce (ICC) has issued a call for G20 leaders to take action to avert the risk of widespread insolvencies amongst small- and medium-sized enterprises (SMEs) globally, due to the Covid-19 pandemic, urging them to make coordinated interventions to increase the availability of trade-related finance to SMEs. Trade finance underpins somewhere between 80 – 90% of global trade and acts as a vital source of working capital for many SMEs. Recent signals suggest that [private] supply of trade credit to SMEs and emerging markets is at significant risk in response to growing corporate, sovereign and currency risks. ICC has further outlined additional measures that could be implemented by G20 governments to prime the supply of trade financing globally – including a scaling of publicly backed credit guarantee schemes, regulatory interventions and export credit insurance to incentivize the provision of trade credit by commercial banks. As noted in our May 2020 What's New, the ICC has said that as much as US$5 trillion of trade credit will be needed to return trade volumes back to 2019 levels in the wake of the Covid-19 crisis in order to enable volumes and demand return to the global economy.


Mapping the impacts of ECAs active in Africa

(Both Ends, Amsterdam, 11 November 2020) Many industrialised nations are switching to renewable energy at home. But while they commit to phasing out fossil fuel energy domestically, these commitments are abandoned outside their borders, where they continue to push dirty energy, thus contributing to climate change, human rights abuses and environmental destruction. This is happening in African countries, while they are already being hit particularly hard by the impacts of climate change. By supporting fossil fuel as well as large hydro dam-related energy projects in Africa, export credit agencies (ECAs) add to the many risks and threats. In addition, the ECA-supported investments in fossil fuels makes these countries economically dependent on energy sources that many countries in the world are committed to phase out, which poses serious economic debt risks, undermining their long-term resilience. Coming from a perspective of communities affected by ECA-supported energy projects, this report analyses the question what the best solution is for limiting global warming to 1.5C on the one hand, and facilitating universal energy access on the other hand. Furthermore, it analyses the question what the role of public financial institutions like ECAs could be in terms of promoting a green energy future in Africa.


Berne Union Yearbook 2020

(Berne Union, London, November 2020) Vinco David, Secretary General of the Berne Union (the International Union of Credit and Investment Insurers) notes in his introduction to this 179 page yearbook: "Now that news about the impact of and response to the COVID-19 pandemic is hitting the headlines so frequently, we could almost forget that there have also been several other noteworthy developments in the export credit and investment insurance industry. As the global trade association for the industry, the Berne Union is the organisation par excellence where all developments are shared and come together. Credit and investment insurers, and hence the Berne Union, are moving fast in a business environment that is also moving fast. This article will focus on how the Berne Union is changing in this environment. The following developments are highlighted:

  • The enhanced exchange of information between insurers/Berne Union members
  • Closer cooperation between the private market and ECAs
  • Cooperation with stakeholders in the wider industry
  • The growing importance of business data
  • Digitalisation
  • Regulation
  • And, of course, the COVID-19 pandemic"

JBIC to lend Nissan $2B for U.S. sales financing

(Automotive News Europe, Detroit, 26 November 2020) Japan's state-owned export credit agency has agreed to give Nissan up to $2 billion as part of a credit agreement to help it finance car sales in the U.S. The money should help Nissan to sell cars in the world's second-biggest auto market after China by allowing it to provide customers with loans that they can repay in monthly installments. JBIC has provided loans for overseas sales financing to other automakers, including a $78 million October agreement with Honda in Brazil, and one in September for Toyota in South Africa. The latest agreement with Nissan is more than three times as much as a $582 million loan extended by JBIC in July to help Nissan finance car sales in Mexico.


Mexican ECA seals US$600mn credit facility for Covid-19 response

Bancomext, a state-owned bank and export credit agency in Mexico, has obtained a US$600mn credit facility from a syndicate of international banks that will support its response to Covid-19. Law firm Norton Rose Fulbright represented Banco Santander, Citibank and Commerzbank, the three banks that took part in the syndicate. The facility is guaranteed by the Multilateral Investment Guarantee Agency (Miga), a member of the World Bank Group. The facility will support the bank’s funding strategy “amid a sharp contraction in export revenues, which account for nearly 40% of Mexico’s GDP. It will also provide working capital to companies across key exporting sectors of the Mexican economy, including the automotive, aeronautic, transport and logistics, tourism, manufacturing, construction and agriculture industries,” the firm said.


What you need to know about Nigeria’s $1.2bn export loan from Brazil

(Premium Times, Abuja, 9 November 2020) The Nigerian government has announced it plans to obtain a $1.2 billion (N459 billion) loan from Brazil. Funding for the programme will come from the Development Bank of Brazil and Deutsche Bank, with insurance provided by the Brazilian Guarantees and Fund Managements Agency and the Islamic Corporation for Insurance of Export Credit of the Islamic Development Bank, and will be coordinated by the Getúlio Vargas Foundation. The programme will import the completely knocked down parts of about 5,000 tractors and numerous implements (for local assembly) annually for a period of 10 years. The Minister said the Nigerian government would acquire 100,000 hectares of land in each state for food production, adding that link roads would be built in such locations to provide access for farmers to move farm produce to markets and reduce post-harvest losses. On another ECA note, the Nigerian Export-Import Bank (NEXIM) says it is positioning the economy for post crisis performance to be mindful of the fact that fiscal resources are urgently needed to contain the fallout of the COVID-19 outbreak and stimulate the economy. In that regard, the bank is proactively making interventions by way of investment in the manufacturing or production of exportable products – where Nigeria has comparative advantage – with the aim of providing buffer for the economy.


Bombardier cooperating with SFO corruption investigation

(Compliance Week, Boston, 6 November 2020) The U.K. Serious Fraud Office (SFO) on Thursday confirmed it is investigating plane maker Bombardier over suspected bribery and corruption in relation to contracts and orders from Indonesian airline carrier Garuda Indonesia. According to the allegations, Garuda's former CEO received US$3.2 million in bribery payments from consultants in exchange for securing maintenance and procurement contracts for Rolls-Royce, Airbus, Bombardier, and Avions de Transport Regional. The bribery payments were said to have originated from the commissions received by the consultant from each of these airline manufacturers. The U.K. Serious Fraud Office (SFO) on Thursday confirmed it is investigating plane maker Bombardier over suspected bribery and corruption in relation to contracts and orders from Indonesian airline carrier Garuda Indonesia. As Compliance Week previously reported, a March 2017 report by the Organized Crime and Corruption Reporting Project — a consortium of nonprofit investigative centers and media outlets around the globe — alleged Bombardier Transportation paid “millions of dollars in bribes to unidentified Azerbaijani officials through a shadowy company registered in the United Kingdom. Canada's Export Development Corporation (EDC) first initiated a review of Bombardier in August 2019, following leaked preliminary findings from a World Bank investigation into a 2013 contract Bombardier Transportation had with Azerbaijan Railways. In February 2020, (EDC, Canada’s export credit agency wholly owned by the Government of Canada, concluded in an independent review of Bombardier’s compliance policies and procedures that the company was progressing.