U.S. Export-Import Bank:

Issues Raised by Recent Market Developments and Foreign Competition

T-NSIAD-99-23: Published: Oct 7, 1998. Publicly Released: Oct 7, 1998.

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Benjamin F. Nelson
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GAO discussed issues related to the U.S. Export-Import Bank (Eximbank), focusing on: (1) recent trends in the cost and composition of the Eximbank's financing; and (2) key similarities and differences in international export finance programs.

GAO noted that: (1) the deterioration of international market conditions has already had an impact on the Eximbank's operations, although the full effect has yet to be felt; (2) the Eximbank's preliminary estimates indicate that as of the end of September 1998, it may have to increase its loan loss reserves by about $2 billion to cover increased risks involving Asia, Latin America, and Russia; (3) any additional costs will be covered through permanent and indefinite budget authority, that is, they are not subject to the annual appropriations process; (4) a total of $6.6 billion, or just under 13 percent of the Eximbank's $52-billion portfolio, is being tracked on its internal watch list of deals that are judged to be most at risk; (5) some shifts in the composition of the Eximbank's financing began to appear in fiscal year 1998; (6) one noticeable change was the absence of any project finance transactions, which support large capital projects in developing market economies; (7) these had been a rapidly growing line of Eximbank financing; (8) another change has been the increase in short-term financing brought on by private banks' reluctance to extend credit for exports to Asian buyers; (9) while there was some stability in the top 10 country markets and corporate recipients of Eximbank financing, shifts did occur; (10) the Eximbank is one of over 70 export credit agencies operating throughout the world to provide export financing; (11) because of differences in how these agencies interact with the private sector and their budgetary and reporting standards, it is difficult to make meaningful comparisons among them; (11) however, they all help exporters compete for market share in developing countries; (12) despite increased pressure on many economies to use exports as a tool to facilitate economic growth, progress continues to be made in the Organization for Economic Cooperation and Development to reduce government subsidies for these export finance programs; and (13) the U.S. government's ultimate objective is to reduce and eliminate such export financing subsidies, thus assuring that exporters will compete on the basis of price, quality, and service rather than subsidized financing.

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