B-212857.2 February 28, 1984

B-212857.2 February 28, 1984

DIGEST

The Honorable Bill Patman House of Representatives

Dear Mr. Patman:

This is in response to your letter dated September 15, 1983, requesting us to answer two questions concerning financial assistance the Export-Import Bank of the United States (Eximbank) has approved for the Governments of Brazil and Mexico totaling $1.5 billion and $500 million respectively. /1/

Both questions related to a statutory provision in section 2(b)t3) of the &port-Import Bank Act of 1945, 12 U.S.C. Sec. 635(b)(3), which, until its recent amendment, prohibited the Eximbank from finally approving any "loan or financial guarantee or combination thereof" totaling $100 million or more unless the Eximbank had provided Congress with a "detailed statement" of the proposed transaction containing certain specified information at least 25 days prior thereto. Specifically, you asked whether the Eximbank statements submitted to Congress in connection with the proposed financial assistance to Brazil and Mexico contained sufficiently detailed information to satisfy this statutory requirement and, if not, whether the Eximbank could "legally approve" such assistance.

After we received your request, legislation was enacted which specifically authorizes the Eximbank to provide the assistance in question and which made certain clarifying amendments to the notification provision in 12 U.S.C. Sec. 635(b)(3). Although that legislation has mooted your specific questions, a brief explanation of the background of your request and the basis for our conclusion that the issue has been resolved legislatively is set forth hereafter.

By letter dated August 17, 1983, William H. Draper, III, President of the Eximbank and Chairman of its Board of Directors, notified the Senate and the House of Representatives of the Eximbank's proposal to extend guarantees and insurance (Facilities) to the Governments of Brazil and Mexico to facilitate the purchase of goods and services manufactured or originating in the United States. The establishment of these Facilities, which were approved by the Eximbank's Board of Directors on September 30, 1983, will enable banks in this country to provide lines

Of credit to Brazilian and Mexican financial institutions to finance specific exports farm. the United States. /2/

The Eximbank's reports of August 17, 1983, expressly stated that they were being furnished to Congress in accordance with the notification requirement contained in 12 U.S.C. Sec. 635(b)(3). Subsequently, however, the Eximbank took the position that the statutory notice requirement was not applicable to the type of financial assistance that was being proposed. In our view this question has also been resolved legislatively.

Any doubt that may have existed when the Eximbank first notified Congress of the proposed Facilities as to the applicability of the notice provision in 12 U.S.C. Sec. 635(b)(3), the adequacy of the notification that was furnished to the Congress, or the legal authority of the Eximbank to finally approve the Facilities was removed by the enactment of the Supplemental Appropriations Act for the 1984 fiscal year, Pub. L. NO. 98-181, November 30, 1983. Section 619(a) of that law amended the Export- Import Bank Act of 1945 by adding a new section that specifically authorized the Eximbank to establish these Facilities as follows:

"The Bank is authorized to establish general facilities consisting of guarantees and insurance in support of export transactions to Brazil in the aggregate amount of $1,500,000,000 and to Mexico in the aggregate amount of $500,000,000. No such guarantees may be made, or insurance issued after March 31, 1985."

In addition, section 619(b) of Pub. L. No. 98-181 amended the notice provision in 12 U.S.C. Sec. 635(b)(3) to expressly provide that it applied to any "general guarantee or insurance facility". Finally, section 619(c) also amended 12 U.S.C. Sec. 635(b)(3) to clarify the kind of less detailed information the Eximbank was required to provide Congress whenever it proposed to provide assistance in the form of a "general guarantee or insurance facility" as opposed to "a loan or financial guarantee".

Taken together, these amendments to the Export-Import Act make it clear that Congress intends for the notice requirements in 12 U.S.C. Sec. 635(b)(3) to apply to the type of financial assistance involved here, recognizes that the information in the required notification could not possibly be as detailed as would be expected in connection with other types of assistance provided by the Eximbank, and, most importantly, fully approves of the establishment of these Facilities for Brazil and Mexico in the amounts indicated. Also, in light of the legislative clarification, we do not believe that similar questions as to the applicability of the statutory notice provision or the type of information the Eximbank is required to furnish to the Congress thereunder are likely to arise in the future.

Sincerely yours,

Milton J. Socolar Comptroller General of the United States

1. Information relating to a third question you asked as to whether this financial assistance to Brazil and Mexico could pose "a threat to the financial stability of the Export-Import Bank" has been furnished to your Office separately by our audit staff on an informal basis.

2. For additional information as to how these Facilities will function, see the discussion in our opinion to Senator William Proxmire, B-212857, November 8, 1983 (copy enclosed), in which we concluded that the Eximbank could charge the full amount of the guarantees and insurance in question against its loan guarantee ceiling for the 1983 year. For the purpose of answering Senator Proximire's question, we assumed, without deciding, that the Eximbank was authorized to provide such assistance to Brazil and Mexico.