Loan Guarantees: Export Credit Guarantee Programs' Long-Run Costs Are High
NSIAD-91-180
Published: Apr 19, 1991. Publicly Released: May 16, 1991.
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Highlights
Pursuant to a congressional request, GAO examined the Commodity Credit Corporation's (CCC) Export Credit Guarantee Program and the Intermediate Export Credit Guarantee Program, focusing on: (1) the programs' estimated long-run costs due to loan payment delinquencies; and (2) whether program regulations effectively prohibited foreign-owned, U.S.-based financial institutions from receiving credit guarantees for financing agricultural commodity sales to their owner countries.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Agriculture | The Secretary of Agriculture should direct the Administrator, Foreign Agricultural Service (FAS), to lessen long-run program costs by reducing the average risk of new guarantees. |
Closed – Not Implemented
USDA disagrees with the GAO methodology for estimating CCC long-run costs of its GSM-102/103 programs and, therefore, the GAO estimated cost itself. USDA has refined its country risk analysis, weighing quantitative factors more than qualitative. This should help in making better decisions for providing loan guarantees and should result in fewer defaults and less program cost.
|
| Department of Agriculture | The Secretary of Agriculture should direct the Administrator, FAS, to issue regulations specifying that financial institutions in the United States that are owned or controlled by a foreign country that also owns or controls the local bank issuing the letter of credit are ineligible to receive credit guarantees. |
Closed – Implemented
FAS issued a notice to exporters and other program participants, including financial institutions, stating that credit guarantees may not be assigned to financial institutions related in any way to the overseas bank issuing the letter of credit.
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Topics
Agricultural programsBanking regulationCommodity marketingCreditDelinquent loansFinancial institutionsForeign investments in USGovernment guaranteed loansInternational tradeLoan repayments