> EXPORT-IMPORT BANK
>
> ANNUAL CONFERENCE
>
> Thursday, May 2, 2002
>
> Omni Shoreham Hotel
>
> Washington, D.C.
>
> \[TRANSCRIPT PREPARED FROM A TAPE RECORDING.\]
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> Comments 3
>
> Welcome Remarks - Ex-Im Vice Chairman Eduardo
>
> Aguirre, Jr. - \[Not on tape.\]
>
> Speaker: Congressman John LaFalce (D-NY) 7
>
> Speaker: Noreen Doyle, First Vice President,
>
> European Bank for Reconstruction and Development 26
>
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> MS. : Ninety-six percent of the world\'s market exists beyond our
> shore.
>
> MR. : The fact is that our consumer market here in the United States
> has, to a considerable extent, maximized, and now what you have to do
> is you have to go to where the customers are. And what\'s important is
> you don\'t have to do it alone.
>
> MR. : We\'re going to make sure we are really a resource and an added
> value to the exporters of the United States to make sure that they
> look upon as somebody who\'s really going to help them make that
> export happen.
>
> MR. : It\'s a great opportunity for small businesses to take advantage
> of the untapped global marketplace. They can double and triple their
> sales without much effort if they would just look for some foreign
> buyers.
>
> MS. : Export-Import Bank provides financing for U.S. exports so that
> U.S. companies can ship to primarily emerging markets.
>
> MR. : Trade finance has global responsibility. We see primarily
> capital equipment exports, but also we see and we will support
> services.
>
> MS. : Within the Structured and Finance Group, project finance is
> probably the majority of our business. Our participation could be
> anywhere from fifty to several hundred million dollars. Ultimately,
> the lenders are relying on nothing more than the cash flows from the
> new entity that will be built for repayment of their debt.
>
> MR. : We play a role in emerging markets where the market conditions
> tend to be dynamic and less stable than in more developed economies.
>
> MS. : We\'re at their side providing the security they need to move
> into emerging markets.
>
> MR. : For the first time, the exporter is intended to be simple,
> straightforward, and definitely not complex.
>
> MR. : Working capital program is an asset-based lending program where
> we issue a guarantee to a commercial bank, who will then advance to a
> small business against receivables and inventory.
>
> MS. : Export credit insurance is a financing tool that provides
> assurance to a lender or an exporter that they will get repaid in the
> event that the foreign buyer defaults for either political or
> commercial reasons.
>
> MR. : I would say Ex-Im Bank is the only bet for the very small
> exporter for export credit insurance. Because of the profitability
> aspects of doing business on very small transactions, the private
> sector will not do this type of business. So we are the only bet, and
> we think we do it very, very well.
>
> MS. : We travel around the country holding seminars and conferences,
> trying to let small businesses know about us and know that we provide
> the financing that they need.
>
> MR. : With respect to environmentally beneficial goods and services
> that can be exported, we\'ve tried to sweeten the pot a little bit for
> the foreign buyers. We can offer extended repayment periods, sometimes
> as long as ten years.
>
> MR. : There were two pieces to encouraging trade in Sub-Saharan
> Africa. The first piece has been to inform the Africans themselves
> that the bank is here to be helpful and to finance transactions. Now
> the challenge is to convince more U.S. companies that they should be
> aggressive in the market.
>
> MR. : We want to make sure we interface not only in the United States
> with our exporters and the financing community, but we want to make
> sure we\'re also interfacing with the foreign countries, the foreign
> governments, and the foreign buyers to understand what are the things
> that are more important to them. And that\'s how we try and stay ahead
> of the game in this global environment.
>
> MR. : They\'re always concerned. What\'s the number one question they
> ask? How am I going to get paid?
>
> MR. : The bottom line is that exports provide sustained, good-paying
> American jobs.
>
> MR. : A job that\'s affiliated with exports pays on average 15 percent
> more to the worker. So is it important to us in the United States? You
> bet your life it is.
>
> MR. : It\'s really important to us at Ex-Im Bank to help the smaller
> businesses, because that\'s where you can see a lot of job growth.
>
> MR. : That\'s exactly right. Jobs is what we\'re all about.
>
> MR. : Ladies and gentlemen, please welcome the Vice Chairman of the
> Export-Import Bank of the United States, Eduardo Aguirre.
>
> \[Applause.\]
>
> \[Blank spot on tape.\]
>
> \[Applause.\]
>
> MR. LaFALCE: We just cut a deal. We couldn\'t decide whether we\'d get
> together for an Italian dinner or a Cuban dinner. We decided both.
>
> \[Laughter.\]
>
> MR. LaFALCE: You can come, too.
>
> It\'s a pleasure for me to be here today amongst many old friends, or
> I should say long-time friend, for I have been a long-time advocate of
> the important work of Ex-Im Bank. And for 28 years as a Member of
> Congress, I\'ve enjoyed working with the leadership of Ex-Im. I go
> back a few years, and there have been a few chairmen and members.
>
> You can leave.
>
> \[Pause.\]
>
> MR. LaFALCE: My pager better not go off now. A little embarrassing.
>
> When it was necessary to re-establish or reauthorize the Ex-Im Bank,
> it gave me an opportunity to re-establish relationships with the
> leadership of the Ex-Im Bank, and one of the greatest thrills I had
> was re-establishing my relationship with John Robson. I had worked
> closely with John when he was Deputy Secretary of the Treasury. John
> had testified before me often. He had been to my office often. I had
> been to his office often. And when you are Deputy Secretary of the
> Treasury, if it\'s a tax issue, it\'s yours. If it\'s a banking issue,
> it\'s yours. If it\'s a domestic policy issue, it\'s yours. If it\'s
> an international policy issue, it\'s yours.
>
> So he and I established a great, great relationship at that time, and
> I so looked forward to renewing the personal and professional
> relationship. And one of the first things I did was say, well, all
> right, let\'s you and I get together again, which we did. But then let
> me bring you together at least with all the Democrats on the Financial
> Services Committee that serve along with me. And we came over and had
> a great breakfast, and I felt so good that Ex-Im had such strong,
> principled, aggressive, and visionary leadership. And I was very
> saddened by John\'s passing personally, and the Ex-Im Bank lost his
> tremendous leadership.
>
> But I also knew that John had tremendous confidence and respect for
> all his members, and I have come to have that same confidence and
> respect. And Eduardo and Dan Renberg and Vanessa Weaver, whose dad I
> worked with so many years ago when he was the Administrator of the
> SBA. It\'s always great to see one of your children grow up and be
> even better than you ever were. That\'s how I feel about my son, and
> I\'m sure that\'s how Vernon feels about Vanessa. And I had such a
> pleasurable time when Joe Gramerso (ph) came over to my office and we
> were able to talk a little teeny bit about Ex-Im Bank and then an
> awful lot about politics in the State of New Hampshire, Presidential
> primaries over the years, because he goes back just about as far as I
> do. So I look forward to working very closely with all of you.
>
> Now, let me say a few words about the twists and the turns of H.R.
> 2871, the Export-Import Bank Reauthorization Act of 2001, which won
> approval in the House yesterday, which is 2002. The more alert amongst
> you might note that the title of the bill reflects a more optimistic
> timeline for congressional action than what actually transpired.
> We\'re now five months into 2002 and eight months past the expiration
> of the previous Ex-Im authorization. But we finally won passage in the
> House yesterday, and we did it by voice vote, which shows what you can
> do when you work collegially, when you work in a bipartisan fashion,
> when you work primarily with the centrists of both parties, as opposed
> to attempting to placate either the extremists of the right in the
> Republican Party or the left in the Democratic Party.
>
> And that\'s not without some frustrations, though, and I had a lot of
> frustrations over the past month. A lot of my frustration had to do
> with the unwillingness of the leadership in the Republican Party in
> the House to move the bill prior to this week. And I think they were
> trying primarily to placate the administration with some of the
> administration\'s concerns.
>
> But, in any event, I don\'t want to dwell on that. We now have a bill
> that passed the Senate and a bill that passed the House, and they\'re
> very similar, though there are some differences, but there are
> differences that we ought to be able to resolve in a day. You know, we
> ought to be able to get together and sit down and come either to a
> compromise or to use the best method that I\'ve discovered in 28 years
> of resolving differences\--a flip of the coin\--but we ought to pass
> the bill.
>
> And with Paul Sarbanes as chairman of the Senate Banking Committee, I
> think that\'s going to be a pretty easy task. Paul is a great
> intellect, he has great knowledge, and I really hold him in the very,
> very highest esteem.
>
> Let me say a few words about the core strengths in the House-passed
> bill. I worked very closely with the chairman of the subcommittee that
> was responsible for this, Congressman Doug Bereuter, and he, too, is
> an individual for whom I have the greatest respect. A little bit of
> envy, too, because he looks so young and yet he and I were born on the
> same day in the same year. We, too, have become good friends, and we,
> too, have very similar thoughts on these issues.
>
> First, the bill places particular emphasis on the need to expand
> outreach to small businesses. You know, I\'ve got a lot of big
> businesses in my district. They really don\'t need all that much help.
> They\'re pretty sophisticated. When we\'re dealing with Eastman-Kodak,
> when we\'re dealing with Xerox or Bausch & Lomb, they\'re set up. But
> I\'ve got thousands of small businesses, and they really don\'t feel
> that comfortable trying to export to Spain or trying to export to
> Thailand, or wherever it might be abroad. They have difficulties with
> the language, with understanding the laws, et cetera. And yet they do
> have products, especially, sometimes services, that they would love to
> export.
>
> And so in drafting the legislation, we spent some good time assessing
> the barriers to assistance for small businesses. I have long been
> convinced that technology enhancements would be critical to any
> meaningful effort to expand services for small businesses nationwide.
>
> I\'ve often thought that if a small business has a computer and
> Internet access, that small business could do as good a job as the
> Fortune 500 in reaching potential markets and clients and customers
> abroad.
>
> But for small businesses, working with Ex-Im Bank could be a daunting
> prospect. And so we drafted the legislation convinced that Ex-Im can
> go a long way toward bringing in new small businesses and serving them
> better by expanding the use of technology throughout the transaction
> process. As a result, our legislation expands the budget authority for
> technology upgrades and provides guidance to Ex-Im on the
> implementation of new technologies.
>
> We, in drafting the legislation, also took very seriously concerns
> about the condition of the United States steel industry and Ex-Im
> activities that may have exacerbated problems in that industry. This
> is a highly controversial issue. It\'s contentious. It\'s contentious
> within the Congress. The administration has done some things that have
> created some inherent conflicts within the administration. We have
> some difficulties with our trading partners and competitors,
> especially within the European Union.
>
> So what we attempted to do is establish some standards to ensure that
> Ex-Im would not support transactions that would contradict existing
> countervailing duty or antidumping orders. And the bill also raises
> the bar of scrutiny for transactions that might have the effect of
> contributing to a material injury of a U.S. industry.
>
> We also did something I\'m sure Ex-Im likes very much. We increased
> authorization for the bank\'s administrative expenses and for the
> allotment ceiling on the total amount of lending and credit the bank
> is authorized to have outstanding.
>
> As we require the bank to expand its assistance and outreach to small
> businesses, we must in turn provide more funding for the
> administrative expenses that inevitably come with this effort. You
> have to go together.
>
> In raising the ceiling for the value of the bank\'s lending portfolio,
> we are sending a clear signal that the bank should be doing more
> rather than less in the years ahead.
>
> A key element of Ex-Im\'s mission is to support exports in sectors and
> geographic markets that are underserved by private creditors\--hence,
> a strong emphasis at the bank on small business exports and expanding
> export markets in regions such as Sub-Saharan Africa. Both are areas
> in which private sector support falls well short of demand, and
> Ex-Im\'s charge to go into underserved markets is particularly
> relevant today when economic engagement with other countries is an
> essential element of foreign policy and national security.
>
> In the aftermath of the terrorist attacks, many of us recognize the
> heightened importance of engaging with the world on many different
> levels, and one of the most important is economic engagement. Few
> people made this case more eloquently than the World Bank Chairman Jim
> Wolfensohn. Last October I met with Chairman\--or President
> Wolfensohn, as I did with John Robson, and I brought all the Democrats
> on my committee with me. We discussed the mission of the World Bank in
> a post-9/11 world. And his message was clear: The terrorist attacks
> shattered the illusion that a wall exists between the world of the
> rich and the world of the poor.
>
> For many years, we lived in comfort behind this imaginary wall, far
> too indifferent to what was going on outside our borders. But in the
> months since last September, we\'ve had to move very quickly to
> determine how best to reach out to other countries and other people
> who were previously of too little interest to the United States and
> other of the industrialized, more wealthy countries.
>
> Now, certainly much has been achieved already in the war on terrorism
> by high-level engagement between the Bush administration and foreign
> leaders. But top-level diplomacy will ultimately fail if it is not
> supported by bottom-up engagement in the political, the social, and
> the economic spheres. And here is where institutions like the Ex-Im
> Bank can have a critical role to play.
>
> With each export transaction supported by the Bank, we can make a new
> connection and develop a new familiarity with a market, with a people,
> and with a country that had previously been slightly more foreign to
> us. And with thousands of these transactions, we can take a thousand
> steps forward toward a world of interdependence and prosperity, a
> world in which terrorism would find it much more difficult to exist.
>
> Now, I also want to offer a few broader comments on United States
> trade policy, and in here I have a slightly different perspective than
> the one articulated by Eduardo a few minutes ago.
>
> I have been disappointed by this administration\'s approach to trade
> policy. In my view, they\'ve placed far too much emphasis and expended
> far too much political capital on passing fast-track legislation on
> their own terms. They have consistently promoted the view that nothing
> can be achieved on the trade front without fast track and, in
> particular, that nothing can be achieved without a fast-track
> authority that pays, at best, cursory attention to labor and
> environmental standards.
>
> Yet the United States-Jordan Free Trade Agreement belies both of these
> claims. In the Jordan agreement, we were able to negotiate and
> conclude a significant expression of trade without the benefit of
> fast-track authority, and the agreement includes a reasonable
> framework for labor and environmental standards.
>
> I suspect that many of you will not share my view on the role of labor
> standards in trade negotiations, in trade agreements, especially free
> trade agreements. But, for me, there is a very clear principle of
> consistent treatment at issue, and I want to explain it. I mean, I was
> a very, very strong promoter of the U.S.-Canada Free Trade Agreement,
> more so perhaps than any other Member of Congress, which is why we had
> a conference in my district immediately after, 3,000 people and Carla
> Hills came, et cetera. I had difficulties with the NAFTA, though. I
> strongly supported the WTO and I strongly supported PNTR.
>
> But when it comes to fast-track authority, let me explain to you what
> is being requested by Democratic Presidents and Republican Presidents
> alike. It is not authority for them to go forward. They have plenary
> authority. What they are asking Congress to do is give up Congress\'
> constitutional authority. That\'s what they\'re asking for. They
> don\'t need authority to go forward. They just want Congress to say
> that Congress will not exercise the authority that Congress has to
> offer amendments to legislation that would implement their
> negotiations.
>
> This is a relatively new phenomenon within the history of the United
> States. It\'s not something that we had from 1776 until about\--well,
> I think it was the Nixon administration that got this first forfeiture
> of congressional authority during the, some refer to, imperial
> presidency and all Presidents then carried it on, at least with
> respect to trade.
>
> You must understand what Democratic Presidents and Republican
> Presidents are attempting to do. For the purpose of trade, they are
> trying to, in effect, convert a representative system of democracy
> into a parliamentary system, where the President for the purpose of
> trade is prime minister and the Congress becomes a parliament, and the
> vote then is simply yes or no. And it is not on the merits of the bill
> anymore; it is really a vote of confidence in the President or not.
>
> So for the purposes of trade, that really is what they\'re trying to
> do, whether they realize it or not. But, also, a great fraud is being
> perpetrated. And what is the fraud?
>
> Well, the fraud is this: It is\--any legislation that Congress passes
> that would purport to forfeit the right to offer amendments is
> constitutionally unenforceable. The Congress has the right to offer
> amendments under the Constitution of the United States. No legislation
> could impair that right. And so we are passing legislation that on its
> face is constitutionally unenforceable. It just creates an illusion.
>
> We deceive ourselves, though, because most Members of Congress don\'t
> know that. But most Members of Congress also don\'t know\--and I
> suspect that neither President Bush nor President Clinton knew until I
> told President Clinton\--that in every single fast-track bill ever
> submitted to the Congress or passed, or trade promotion authority,
> there has always been a provision and there remains a provision that
> says Congress shall not offer an amendment to the bill unless Congress
> wishes to offer an amendment to the bill.
>
> And that\'s in there, and nobody knows it. Our trading partners don\'t
> know it. Presidents don\'t know it. Most Members of Congress don\'t.
> But it\'s in there because the drafters of it realize that, without
> it, it would be flagrantly unconstitutional. So with that escape
> clause\--so the language really is just hortatory and it\'s not
> necessary.
>
> Now, that goes to one issue. The other issue is what should be in our
> agreements. Well, there\'s a lot of different forms of capital, and
> here is where you have difference in perspectives between our parties.
> I am of the opinion that it takes financial capital, it takes
> intellectual capital to make a product or a service. But I\'m also of
> the opinion that it takes human capital to make a product or a
> service. And I defy any one of you to explain to me how there can be a
> product or a service without human capital.
>
> And so in order to have trade, you have to have products or services.
> In order to have products or services, you must have this combination
> of capital, including human capital\--i.e., labor\--and, therefore, if
> you are to enter into an agreement with another country, why just deal
> with certain aspects of capital? Why not deal with all aspects of
> capital? I\'m not saying you can mandate what other countries pay
> their people or something like that. But you can establish certain
> core principles\--principles, for example, of a just wage, just
> working conditions, et cetera, and then work on from there.
>
> I go into this just not to convince you, because I doubt that I will,
> but simply to have you understand a little bit better the perspective
> of some of us who can be your strongest advocates and proponents, who
> can be the strongest advocates and proponents of trade, and who can
> also say but we ought to do it right. Either we are going to help
> bring the other peoples of the world up, or surely as I\'m standing
> here, they will bring us down.
>
> I want the job of the President and the Congress and the Ex-Im Bank to
> bring all the people of the world up.
>
> I thank you very, very much.
>
> \[Applause.\]
>
> MR. : Ladies and gentlemen, please welcome Vanessa Weaver, member of
> the Board of Directors of the Export-Import Bank of the United States.
>
> \[Applause.\]
>
> MS. WEAVER: Thank you very much. I wanted to thank Congressman LaFalce
> for his remarkable words. It\'s an honor for us to have today, and I
> wanted to thank him very, very much for all the diligent work he\'s
> done on the floor and on Capitol Hill. I don\'t think we\'d all be
> standing here today if it weren\'t for Congressman LaFalce.
>
> It\'s my pleasure now to introduce Noreen Doyle, the First Vice
> President of the European Bank for Reconstruction and Development.
> She\'s come all the way across the Pond to be here today, and we\'re
> delighted she\'s here.
>
> Ms. Doyle became the bank\'s top-ranking banker last year. She chairs
> EBRD\'s Operations Committee, which reviews and recommends all debt
> and equity investments and shapes the bank\'s policy.
>
> She\'s been with EBRD since 1992, a year after the London-based
> institution was established. She helps use the tools of investment to
> build market economies and democracies in 27 countries, from Central
> Europe to Central Asia.
>
> EBRD is owned by about 60 countries, including the United States.
> It\'s the largest single investor in that region. It works to mobilize
> private sector investment in most of its projects, and it\'s a
> worldwide leader in the area.
>
> The bank has a 12.2 billion euro portfolio at the end of 2000 and has
> a 1.5 billion euro in disbursements this year.
>
> Before joining the EBRD, Ms. Doyle spent 18 years with Bankers Trust
> in London, New York, and Houston. She holds an MBA from the Amos Tuck
> School of Business Administration at Dartmouth College. Please welcome
> Noreen Doyle.
>
> \[Applause.\]
>
> MS. DOYLE: Ladies and gentlemen, first I would like to thank Ex-Im
> Bank for the honor to be present at this conference. And, second, I\'d
> like to thank Congressman LaFalce, who introduced the bill where the
> United States contributed its capital to the EBRD. So I want to
> personally thank him for doing that in 1991.
>
> I\'m very pleased to be here, and I\'m very pleased to have had the
> introduction explain that the United States is the largest shareholder
> in the European Bank. So although we\'re called the European Bank, we
> are very keen to support United States companies doing business in
> Central and Eastern Europe and the former Soviet Union.
>
> It\'s always a pleasure to have an opportunity to talk about what the
> EBRD is doing to help market economy take root in the countries of
> Central and Eastern Europe and the former Soviet Union. As I am
> addressing an American audience, I\'d like to start by focusing on a
> deal that brings what we do close to home.
>
> In just over four months, a new assembly line beside the mighty Volga
> River will roll out the first model of a four-wheel-drive vehicle
> built by Russians and Americans, the Chevy Neva (ph). We at the EBRD
> are proud of the role the bank played to make this deal possible,
> bringing together General Motors and their Russian partners, AvtoVAZ.
>
> It was not an easy transaction. I have to admit that the first
> negotiating session in London was, in the words of one participant,
> \"the meeting from hell.\" All sides were very far apart.
>
> That\'s nothing new for bankers, but it did take a lot of work to
> bring together the Russians, the Americans, with project financing.
> And inevitably getting an agreement involved concessions and a lot of
> compromises by all sides.
>
> When we finally signed the deal last year, General Motors said it
> would not have come off but for the EBRD. Those are the kind of words
> any banker prides himself on.
>
> But if I had to put my finger on what really helped to bridge the gulf
> between the Americans and the Russians, the bankers, the borrowers,
> and the lenders, I\'d have to say it was counterparties who, apart
> from everything else, understood the country they were dealing with
> and were familiar with their partners\' mentality.
>
> The General Motors team was led by a man who was knowledgeable, first,
> about the Soviet Union from his earlier days, and then about Russia in
> the last decade, and he was deeply respected by his partners at
> AvtoVAZ. That factor was to count quite a lot in the difficult times
> during the deal.
>
> There\'s always some part in the deal when the going gets tough and
> you must be able to trust your partners to overcome the difficulties.
> If you don\'t know anything about the country you\'re dealing with and
> don\'t understand your partner\'s thinking, building up trust is an
> uphill task\--not to say an impossible one. And I do think when the
> EBRD was started in 1991, the shareholders\--the Americans, Europeans,
> other countries\--had an impression that if we could explain
> democratic principles and explain the market economy, it wouldn\'t
> really take much time for those principles and that kind of economics
> to be embraced. But explaining and understanding are quite different
> \-- \[tape ends\].
>
> \-- are there to bridge the gap between local businesses and foreign
> investors.
>
> We at the bank have built up a huge amount of experience in doing
> business in what is a difficult environment. Some of our experience
> was acquired with great pain, as during the Russian crisis of 1998. We
> had 25 percent of the bank\'s portfolio in Russia, so we learned by
> experience. We learned with our friends at Ex-Im to go through the
> bankruptcy process in Russia, and I have to say we and they went
> through successfully and recovered all of our money. But we felt we
> have the obligation to test the system, to show that we can proceed
> through the judicial process to receive what is owed to us.
>
> Our deep knowledge of the area and experience there is something
> unique that the EBRD has to offer. But I want to return to the GM deal
> briefly to highlight another factor.
>
> The EBRD not only provided a \$100 million loan to the joint venture,
> but also took a 17 percent stake in the equity of the joint venture.
> The EBRD\'s presence in the capital of the company provides political
> comfort to foreign investors, but it also sends out the message that
> we are prepared to share the risk.
>
> The Board of General Motors was quoted, after they approved this
> transactions, as saying it was \"approved only if the EBRD would take
> part as a shareholder.\" And why? With the exception of the large oil
> companies, the EBRD is the single largest investor in Russia, and the
> Russian Government is a shareholder of the EBRD, and the Russians,
> like the United States, have permanent members on our Board of
> Directors and know and support each project. So we have the political
> access and leverage to help American companies working in the region
> to sort out difficulties.
>
> But the bank does not just focus on large companies and large deals.
> Part of our discussions with General Motors was to encourage them to
> bring in to Russia, to Eastern Europe, their suppliers, which we are
> prepared to support with financing, and we think that that will
> contribute more opportunities for American companies.
>
> Let me turn from the transaction to our role in the region more
> generally. We continue to expand our activities across the 27
> countries through investment projects which are based on our trinity
> of rules. One is it must advance transition. It must contribute to the
> change towards market economies. The second is it must respect sound
> banking principles. And the third is it must not crowd out the private
> sector.
>
> That\'s a difficult tightrope to walk, sound banking but not crowding
> the private sector out. So why wouldn\'t the private sector come in if
> it\'s sound banking? And the reason is we\'re operating in difficult
> political environments.
>
> So our objective is to bring the private sector with us to encourage
> them to take some risk by taking more risk than they will take.
>
> We did have a very strong performance in 2001 with significant growth
> in our portfolio, which increased by nearly 20 percent. And we also
> clearly increased the money in the region by disbursing more than 2.4
> billion euros, approximately \$2 billion, into the region.
>
> We achieved record levels of activity in all of our geographic and
> business segments. We maintained a very strong presence in what we
> call the advanced transition countries, the countries of Central
> Europe and the Baltics, which, in our portfolio of countries, are
> low-risk countries; but for many American investors and exporters,
> they\'re still high-risk countries. We\'re talking about Hungary,
> Poland, the Czech Republic, Slovakia, Lithuania, Latvia, Estonia,
> Slovenia.
>
> These countries are expected to be\--these eight countries are
> expected to be members of the European Union in 2004 and we think
> provide very good opportunities for investors as well as exporters.
>
> At the same time, we achieved record business volume in what we call
> the early and intermediate transition countries. These are the
> countries of the Caucasus, of Southeastern Europe and the Balkan
> Region, and of Central Asia.
>
> The EBRD maintains a very strong focus on SME development. During
> 2001, loan disbursements were made for over 65,000 business loans,
> including our very successful Russian small business program, but also
> new activities in Belarus, Bulgaria, Ukraine, Uzbekistan, and the
> former Republic of Yugoslavia.
>
> Just to digress a moment on Yugoslavia, Yugoslavia is the most recent
> member of the EBRD and became a member on January of 2001, after the
> fall of the Milosevic regime, which kept that country behind a barrier
> for the past decade. In the first year of its membership, EBRD
> contributed 200 million in loans and equity investments to Yugoslavia,
> including a microfinance bank, which was set up in April of 2001, and
> by the end of the year had made more than 600 loans in Yugoslavia. I
> think we will see that country make very significant progress during
> the next few years.
>
> Against the background of a very difficult external environment, the
> economies of Central and Eastern Europe and the Commonwealth of
> Independent States, the CIS, are proving remarkably resilient. In
> 2001, real GDP growth for the region as a whole was 4.4 percent, the
> second-best performance since the transition began in 1990. In most
> countries, including Russia, private domestic demand was the main
> engine of growth. Foreign direct investment into Central and Eastern
> Europe in 2001 held up well, as investors reassessed the risk-return
> profile of the region against other emerging market regions, although
> in totality the foreign direct investment in our region remains a
> fraction of what it is in Asia and Latin America.
>
> In Central and Eastern Europe particularly, growth fell to 2.6 percent
> from 4 percent in 2000, but was still ahead of the Western European
> growth. The largest economy in Central Europe and the Baltics, Poland,
> saw growth fall to 1 percent.
>
> In Southeastern Europe, growth was significantly higher in 2001 than
> 2000, driven by a very strong recovery on Romania, which saw its
> growth rate jump to 5.3 percent from 1.8 percent the year before.
>
> In the Commonwealth of Independent States, the weighted average growth
> declined to 6 percent from nearly 8 percent in 2000, but apart from
> Russia, Azerbaijan, Turkmenistan, Uzbekistan, all the rest of the CIS
> countries actually increased their growth rates in 2000.
>
> We believe that this year we are likely to see a continuation of last
> year\'s patterns, although at a slower pace. For Central Europe and
> the Baltics and for Southeastern Europe economies, much will depend on
> how quickly the European Union recovers. And the signs are ambiguous
> so far. Some of the European recovery depends on the U.S. recovery,
> and I believe we are seeing good signs of that so that the European
> economies will follow.
>
> In the CIS, there is wide agreement about a continuing slowdown in the
> growth of Russia, which is already evident in industrial production
> patterns in early 2002. We are expecting growth between 3 and 4
> percent for this year, and we expect that the rest of the CIS will
> mirror this slowdown.
>
> I spoke already about the former Republic of Yugoslavia in its first
> year of transition. It does demonstrate that rapid reform is both
> feasible and brings rewards. Nevertheless, the foundations for
> sustainable high growth in Yugoslavia are not yet in place and will
> require that the current momentum is retained.
>
> For countries in Central Europe and the Baltics, the prospect of EU
> accession has had a significant influence on the extent of reforms in
> recent years, while the stabilization and association process, which
> is not a step for immediate accession into Europe as the eight
> countries I mentioned have taken, but a secondary step for association
> with Europe, has been a spur to reforms in Southeastern Europe,
> particularly in Romania and Bulgaria.
>
> In the CIS, one of the key short-term priorities for many countries,
> including Russia, including Kazakhstan, is to gain membership in the
> World Trade Organization, and, again, this is a spur for those
> countries to undertake reforms.
>
> If we look ahead, the bank will continue to be active in all of its
> countries of operation. In the most advanced countries, such as the
> Czech Republic, Hungary, and Slovenia, we will focus on restructuring
> and supporting continued privatizations, particularly in the energy
> industries, and focus on providing capital to help these countries
> comply with environmental standards that are set as part of their
> acceding to the European Union. We can also consider and will also
> consider greenfield foreign direct investment.
>
> In the financial sector, the bank works with local banks which have
> developed over the past decade to provide credit lines directed
> specifically at small- and medium-sized enterprises, and we expect
> over the next years to help develop more sources of venture capital,
> equity financing, and other forms of non-bank financing, such as
> leasing companies. And these provide opportunities for foreign
> investors to work in the countries. I\'ll use as an example an
> interesting transaction we closed recently in Russia with Caterpillar.
>
> We have been striving since the mid-1990s to see if we can establish
> leasing companies in Russia, but the legislation wasn\'t ever there.
> And I can recall in 1996 our colleagues spent days, if not months, in
> the central bank of Russia trying to identify which part of the
> central bank was in charge of leasing companies and finally gave up,
> realizing that they didn\'t know what leasing companies are. And we
> know how important leasing companies can be as a source of financing
> for small businesses and a source of financing for exporters into
> countries.
>
> So Russia has recently passed that legislation, and we set up a
> tripartite arrangement with Caterpillar, the EBRD, and a small leasing
> company in Moscow established by an Austrian bank where we have
> designed a specific risk sharing where each of the parties takes
> one-third of the risk. So it helps Caterpillar to export mining
> equipment and road-building equipment into Russia, and it helps
> provide reasonable cost financing to the small companies that are
> purchasing that equipment.
>
> The EBRD intends to continue to expand its activities eastward,
> especially in the less developed countries of Central Asia and the
> Caucasus. This is a significant challenge for the bank, which is
> primarily involved in the private sector, and where many of these
> countries have built up considerable sovereign debt, so they are
> unable to borrow at the government level in significant amounts.
>
> We are constrained from doing business with the private sector because
> the foreign direct investment in the Caucasus and in Central Asia is
> limited. We do work very directly with the governments, both central
> governments and local governments, to improve the investment climate
> so that we can encourage foreign investors to make investments in even
> the most difficult countries. And it is heartening to report that even
> in a small and poor country like Moldova, a Spanish utility came in
> and invested in the privatization process in the energy business and
> has quite remarkably turned it around from a loss-making entity with
> very low collections to a high-collection, profitable industry. And it
> demonstrates what the private sector involvement can do because it has
> a different mentality.
>
> We will continue to expand our activities in Russia. We expect during
> 2002 to do approximately a billion dollars of new business. The
> project pipeline includes projects in the natural resource sector. In
> banking\--and here particularly the Russian Government post-crisis has
> finally recognized the need to address the banking system, which is
> not functioning as a banking system should in a large and market
> economy, and we are working with the government towards the
> privatization of Vanestorg (?) Bank, which is the second largest state
> bank.
>
> We also work in the corporate sector and have transactions in process
> with a white-goods manufacturer and other small, medium, and large
> corporations who are investing in Russia.
>
> In developing the pipeline for Russia for 2002 and beyond, the bank
> seeks to select clients that are demonstrating\--Russian clients,
> because we work not only with foreign investors but Russian domestic
> companies. but we are seeking to support clients that demonstrate
> adherence to the recently passed Russian corporate governance code.
> And I think this is a remarkable step in the first decade to
> recognize\--and the crisis prompted this recognition\--that corporate
> governance and good corporate behavior are fundamental to accessing
> international capital.
>
> Where appropriate, the bank will require clients to adopt the code of
> governance as part of the conditionality, and I tell the audience that
> it\'s very interesting, this was a purely Russian project to develop
> this code, supported by technical cooperation, some from the United
> States, some from the European Union, some through the EBRD, but they
> developed a code appropriate to Russian business, but mirroring the
> standards of corporate governance that we would see in the United
> States.
>
> To give you an example of a transaction recently done in Russia, we
> have just signed a deal with Michelin Tires, which brings me back to
> the themes at the beginning of the speech. Our \$20 million investment
> for a 49 percent stake in the first Russian production plant to be set
> up by an international tire maker once again demonstrates the EBRD\'s
> willingness to take risks with its partners. But it also illustrates
> what the benefits of a major strategic deal such as the General Motors
> deal can spin off.
>
> There\'s little doubt in my mind that if General Motors had not
> decided to start producing the Chevy Neva in Russia, if Ford had not
> set up a Russian assembly plant, it would have made much less sense
> for Michelin to start local tire production in Russia.
>
> And the benefits of the auto industry\'s revival are not only being
> felt by multinationals. Last month the EBRD announced that under its
> DIF, its Direct Investment Facility, which is equity investments as
> small as \$200,000 in local companies, last month we took a stake in a
> small Russian firm that produces dies and press forms used by vehicle
> manufacturers and automobile suppliers for the production of body
> parts. This firm, in fact, was introduced to us by Ford\'s Russian
> operations, and we hope that the EBRD investment in this company will
> help it compete for major export orders from international automakers.
>
> There\'s an obvious role for the EBRD to play in working together with
> the U.S. Ex-Im Bank in our countries. We can share our experience,
> good experiences and bad, and we can help find the right partners for
> American companies. But I\'d like to return to the Russian theme once
> more and focus on something that EBRD and the Ex-Im Bank have in
> common.
>
> Amongst export credit agencies, U.S. Ex-Im Bank is a pioneer in
> financing municipalities. The EBRD, on the other hand, is the only one
> of the international financial institutions to finance municipal
> programs directly. The EBRD has started to tap and to develop the
> Russian local debt markets to make ruble financing available to
> municipalities that desperately need to renew their outdated
> infrastructure, but cannot take the currency risk where their revenue
> stream is in rubles.
>
> Again, as an aside, if you look at Russia as a large market and only
> moving towards market economy in ten years, one of the incredible
> distortions in that market is that they have a stock market that is
> more liquid than their money market or bond market. And businesses in
> Russia with excess liquidity invest that liquidity in the stock
> market, something that as a banker for the last 30 years is absolutely
> horrifying. But there is no local bond capital markets, and we are
> trying, with others, to issue short-term\--we\'re doing
> something\--and we\'ve told our Board this, and they have endorsed it.
> We\'re doing something we tell banks not to do. We are issuing
> commercial paper in rubles and lending long term to Russian
> corporates, not a strategy we would advise any bank to do, but a
> strategy that is necessary to kick-start a local bond market, a local
> commercial paper market, post-crisis, when the government defaulted on
> its local debt, which no government had ever done before. The fear in
> the markets is to take government paper, something which in every
> other country is viewed as the safest investment. So we are working on
> that front to provide domestic capital markets in Russia.
>
> But getting back to the municipalities, it makes it very important to
> strengthen the creditworthiness of the local authorities, and our
> loans in the municipal sector are, in fact, usually accompanied by
> programs aimed at the financial management skills of the local
> authorities. And the first work of this nature we did in 1996 in St.
> Petersburg.
>
> Things are finally beginning to move on the municipal front in terms
> of the government\'s attention to this part of the economy. The
> government has made a priority of municipal and housing sector reform.
> The possibility of private sector involvement in the provision of
> municipal services is being discussed for the first time since the
> 1917 revolution. It was very encouraging to hear President Putin in
> his State of the Nation address last month emphasizing the importance
> of letting residents decide for themselves which firms offered the
> best value for money.
>
> So I close by noting that U.S. Ex-Im Bank has just financed its first
> municipal deal in Russia to improve the lighting to 450 schools in the
> city of St. Petersburg. So let me end by saying that whether it\'s a
> question of making classrooms brighter or helping some of the greatest
> companies in American industry to set up local production, the EBRD
> can also be a partner for U.S. Ex-Im and for you.
>
> Thank you.
>
> \[Applause.\]
>
> MR. : Thank you, Noreen, for those great remarks. I\'m looking forward
> to see Ex-Im Bank and the EBRD working together, not only in Russia
> but elsewhere, and I feel gratified to know that EBRD is in great
> hands with you there.
>
> I can\'t help but to think back to Congressman LaFalce\'s comments,
> and I think it\'s a great country when reasonable people like he and I
> can agree to disagree without being disagreeable. I really enjoyed his
> comments.
>
> We\'re going to conclude our session for this morning right now, and
> we\'re going to have a brief coffee break, and workshops are going to
> begin at 10:50. We will see you back here at noon for lunch, and I
> want to make sure you know, because it\'s not noted in your program,
> that for lunch tomorrow we have Secretary Don Evans from Commerce
> coming to join us. So I think that\'s going to be a special treat.
>
> We\'ll see you later. Thank you.
>
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