2011 508 accessible version - Export-Import Bank of the United States

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The competitive implication of t his shift in financing is that ECAs without direct loancapabilities are at a considerabl e disadvantage. Moreover, those ECAs offe ring directloans at the CIRR levels (e.g. Ex-Im Bank) were in a stronger co mpetitive position thanthose ECAs providing CIRR through IMU (b ecause the commercial banks h ad to putsurcharges on the CIRR to cover their new reserve requirements).In addition to the impact of Basel III, the Eurozone Crisis has led to a widedifferentiation of sovereign risk ratings among high-income OECD countries, primarilycountries in the Eu ropean Union. Countries whose sovereign risk ratings weredowngraded in 2011 have been put at a distinct competitive disadvantage.Ex-Im Bank’s Policy and PracticeEx-Im Bank’s fixed-rate direct loan program has been in effect since 1934. Except for theprovision of fixed int erest rates instead of fl oating interest rates, Ex-Im’s direct loanprogram offers the exact same coverage an d repayment terms as under the Bank’s purecover guarantee program. This fixed interest rate is set at the current OECD minimumofficial interest rate (CIRR) for the U. S. dollar. Given the macroeconom ic factorsdescribed in the previous section , over the past two years Ex-Im has experienced a shiftfrom pure cover transactions to direct loans.In 2011, Ex-Im dir ect loan activity had an all-time high of 15 transactions atapproximately $5.7 billion. However, none of this activity was fo r large commercial jetaircraft. Large aircr aft cases accounted fo r 86% of the $15.1 billion of long-termguarantees.However, even with the increase in direct loan activity, Ex-Im’s pure cover progra mremains the predominant form of mediu m- and long-term support in 2011. Ex-Imauthorized 161 transactions for approximately $15.4 billion ( as compared to 303transactions worth $10.6 billion in 2010), comprised of 79 long-term guara ntees worth$15.1 billion and 82 medium-term guarantees worth $320 million.The net result is an a lmost totally bifurcated long-term program, with most long-termnon-aircraft transactions using CIRR and a ll aircraft using guarantees. The reason forthe difference is that the imple mentation of the 2011 ASU sets CIRR roug hly 100 bpshigher than the non-aircraft CIRR, leaving di rect loans comparable only for the high estspread ECAs (not Ex-Im) (see Figure 8).27
Figure 8: ASU CIRR versus Non-Aircraft CIRR, 2007-20117.006.005.00Rate (%)4.003.002.001.000.00Non‐Air CIRRASU CIRRThe story is very different for medium term . All medium-term transactions were donewith guarantees and insurance, and spreads for 3-5 year terms were much higher (35-60bps for long-term versus 200 bps for medium-term). These differences reflect the higheroverhead costs relative to larger, long-term transactions.During 2011, Ex-Im did see a rise in spreads for long-term deals in both the aircraft andnon-aircraft sectors. As detailed in Figure 9 below, average spreads for long-term nonaircraftdeals rose by about 30 bps and nearly 50 bps for long-term aircraft deals. Thisrise largely reflects the move to Basel III liquidity requirements.Figure 9: Weighted Average of Ex-IQuarter of CY2011 (bps)Long-TermAircraftm Bank Spreads, First and FourthLong-Term Non-AircraftMedium-TermFirst Quarter 32 47 222Fourth Quarter 77 78 191Nonetheless, Ex-Im has been able to maintain lower spreads tha n its G-7 ( and OECD)counterparts as it has a 100% unconditional guarantee due to the ultimate safe haven ofthe U.S. dollar.G-7 ECAs’ Policies and PracticesFixed-rate financing at CIRR levels is offered for medium- and long-term transactionsby all but one of the G-7 ECAs (the United Kingdom). Four ECAs have direct lendin gcapabilities, with Japan and Canada offering the majority of their support via direct28
Page 3: FRED P. HOCHBERGCHAIRMAN AND PRESID
Page 6 and 7: Fourth, the Advisory Committee enco
Page 8: 2011 Competitiveness ReportTable of
Page 11 and 12: With respect to interest rates, the
Page 13 and 14: Chapter 1: IntroductionBackgroundIn
Page 15 and 16: from lenders and exporters. See App
Page 17 and 18: introductory Chapter 1, Chapter 2 f
Page 19 and 20: Export TrendsFigure 1 depicts the g
Page 21 and 22: Figure 3 illustrates that overall c
Page 23 and 24: Figure 5A illustrates the dra matic
Page 25 and 26: To support its core mission, Congre
Page 27 and 28: Non-sovereign risk taking is define
Page 29 and 30: programs are no longer a viable o p
Page 31: Consequently, ECA di rect loans bec
Page 35 and 36: Figure 11: CIRR and IMU Surcharges,
Page 37 and 38: Chapter 3: Core Business Policies a
Page 39 and 40: premium package will be very m uch
Page 41 and 42: Chapter 3: Core Business Policies a
Page 43 and 44: jets) that are made by, for example
Page 45 and 46: since the 2009 high water mark, ECA
Page 47 and 48: Figure 15: Percentage of Total Larg
Page 49 and 50: Chapter 4: Major Program Structures
Page 51 and 52: While those factors holding down th
Page 55 and 56: Ex-Im Bank & Co-Financing ECA Marke
Page 59 and 60: Africa. The Kusile project met the
Page 61 and 62: ECAs, may result in foreign buy ers
Page 63 and 64: payment. 3 While most hard currency
Page 65 and 66: Figure 21: G-7 ECA Foreign Currency
Page 69 and 70: amount of services supported annual
Page 71 and 72: Chapter 4:Major Program StructuresS
Page 73 and 74: Figure 24: Aid Credit Volume by Typ
Page 75 and 76: Korea was the third largest donor (
Page 77 and 78: Exporter and Lender Survey and Focu
Page 79 and 80: interests” of Italy. In 2011, SAC
Page 81 and 82: world, as noted in Chapter 8. Nonet
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Chapter 6: Public Policies - Stakeh
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excess demand as compared to expect
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Page 91 and 92:
Figure 34: Comparison of Content Po
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Figure 36: Recent Trends in Ex-Im B
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During 2011, MARAD granted 16 waive
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TrendsFigure 41 illustrates the fiv
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Chapter 8: Benchmarking the Export
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capital equipment) were competitive
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Figure 44: Summary of Lender & Buye
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particularly in Asia (e .g., Japan,
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U.S. exporters and their buyers fac
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Chapter 8Annex I EXPORT CREDIT LAND
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Figure 46: New Medium- and Lon2006
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Typically, the untied loan is used
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in the short-run, while gaining lon
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In effect, t his chapter constructs
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knowledgeable buyers. Ex-Im gathere
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Chapter 8Annex III Foreign Buyer qu
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Chapter 8Annex V Foreign Lender Int
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Appendix A: Calculation of Ex-Im Ba
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Appendix B: Purpose of Ex-Im Bank T
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Part 3:Part 4:Respondent ratings of
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Figure C3: Lender Experience Levels
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COFACE/France, and NEXI/Japan in a
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China Export and Credit Insurance C
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RussiaThe Bank for Developmen t and
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Dominican RepublicDominican Republi
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Mexico Large Aircraft $8,530,600 47
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governed by the He lsinki Disciplin
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However, traditional tied aid donor
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Indonesia in terms of volume ($3.6
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Ex-Im Bank issued one Tied Aid Lett
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In sum, U.S. exporter experience wi
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Appendix FAnnex II Key Tied Aid Eli
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Appendix FAnnex IV Projects General
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Appendix H: Equal Access for U.S. I
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As shown in Figure I1, highlights r
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2. Policy implementation: Ex-Im Ban
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Appendix K: Legal and Regulatory Re
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concurrent with the first 30 days o
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