Export
finance
opportunities
Connections
Light50 pt
in a changing world
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As the green and digital transitions gather pace and economies seek to reduce strategic dependency risks, export credit
agencies (ECAs) are expanding support beyond their traditional remit. This shift is injecting greater dynamism into theexport finance market, opening up new opportunities for corporates despite an evolving macroeconomic backdrop.
In the wake of myriad challenges, from supply chain disruption to climate
shocks, geopolitical tensions and economic competition, a new industrial
model is emerging that is reshaping trade — and revolutionizing theinternational export finance system.
Across the globe, nations are reassessing economic relations, dependencies
and vulnerabilities. This, in turn, is driving three pivotal shifts. The first is
a concerted effort to revive important industries, both to reduce relianceon distant and potentially disrupted suppliers as well as to encourage thereturn of jobs from overseas. In addition, a marked shift toward green anddigital technologies is underway, with strong emphasis being placed on theclean energy transition. Finally, to fuel this transformation, policymakers andbusiness leaders alike are setting their sights on ensuring a secure supply ofthe materials and components needed for the economy of the future.
As these shifts unfold, the role of ECAs is evolving from financiers to strategic
enablers. With new offerings aimed at boosting local production, fostering
innovative technologies, guaranteeing access to essential commodities, andmeeting the evolving needs of exporters amid an increasingly competitive
landscape, the range of transactions they are able to support is on the rise.

bank of america article“We’re seeing a real shift toward modernization in what has historically beena relatively static financing sector,” says Pat Gang, global head of export andagency finance at Bank of America. “Consequently, in terms of deal flow andactivity, this year is shaping up to be one of the most active years for export
finance in a long time.”

The rise of reindustrialization
In August 2022, U.S. President Joe Biden signed the Inflation Reduction
Act (IRA) and the Chips Act into law, aimed at making the U.S. less reliant
on overseas production. The two pieces of legislation mobilize historicinvestments into activities such as domestic semiconductor and electricvehicle (EV) manufacturing, as well as incentivizing energy efficiency andother green initiatives.
Other developed economies are following suit with similar measures. The
European Union’s answer to the IRA is its Green Deal Industrial Plan, whichaims to increase the technological development, manufacturing production
and installation of net-zero and clean energy products, thereby helping todecrease the bloc’s need for Russian fossil fuels.

This article was recently publishedin Global Trade Review.

“This year is shaping up
to be one of the mostactive years for export
finance in a long time.”
Pat Gang
Bank of America

export finance opportunities in a changing world“One of the most significant developments in the export financeindustry currently revolves around the issue of the IRA and thesubsequent responses from Europe and Asia. This has sparked awider theme: the reindustrialization of transformative sectors on
a global scale,” says Gang.

requirements are no longer the focus, with the amount offinancing available instead being based on the number of U.S.
jobs supported during construction and operations, enabling
support for project sponsors and corporations during the job
formation stage for years to come.

“Europe and the U.S., which for the last 15 years or so haveenjoyed robust capital markets, are now seeking export financesupport to meet demand for large-scale projects,” he adds.
“This shift in strategy is about fostering early investment rather
than waiting for products to hit the market. The emphasis
is clear: assist businesses from the get-go, from setting up
manufacturing plants and then initiating exports.”

The latest U.S. Census Bureau statistics indicate these measures
are having the desired effect: In June 2023, corporate spendingon the construction of factories and manufacturing facilities
was up by an eye-watering 80% compared to the same period
last year — and Bank of America’s Gang expects there to be
more to come.

Reversing the decades-long trend of offshoring manufacturing
capacity is no small feat. However, as a growing number of ECAs
whir into action to promote manufacturing competitiveness,
opportunities abound for corporates to clinch competitive
financing options to set up facilities closer to home.
“With some governments already ahead of the curve, ECAs
from countries such as the U.S., UK, Finland, Sweden, Germany
and Denmark have now followed suit with untied solutions
and domestic finance programs that have real potential toinfluence specific industries,” says Gang. “At a time when thecapital markets are still not back to 2019 levels, this has increased
client dialogue for alternative export and agency finance solutions,as we can provide advice about these new initiatives and — mostimportantly — help our clients to leverage them.”
In April last year, the U.S. Export-Import Bank (U.S. Exim)
introduced the Make More in America Initiative. Under thescheme, the agency’s existing loans, guarantees and insurance
offerings are for the first time being made available to domestic
manufacturing facilities and infrastructure projects.
While these projects must be export-oriented in nature,
the eligibility threshold for the percentage of production or
shipments for export starts at just 15%. In addition, U.S. content

2 | bank of america article“We commend the Make More in America program and areproactively seeking ways to optimize it. We already have apipeline of several deals that are on the brink of entering theapplication phase,” says Gang, who adds that the bank is also
supporting corporates to take advantage of other governmentbacked programs as part of a wider financing strategy.
“We are also in active collaboration with several clients on
the Department of Energy’s Advanced Technology Vehicles
Manufacturing (ATVM) loan program,” he says.
Originally set up in 2008 under the George W. Bushadministration, the direct loan scheme offers low-cost debt
capital for fuel-efficient vehicle and eligible component
manufacturing. In 2009, it provided facilities to automotive
giants Ford and Nissan as well as to the then-relatively unknown
EV startup Tesla, although by 2011, funding activity under theprogram had slowed.
The Biden administration’s passage of IRA revitalized the schemeand expanded the definition of ATVMs to include vehicles such as
boats, trains and trucks, increasing the number of companies thatcan qualify. So far, billions of dollars in ATVM loan commitments
have already been made, presenting yet another attractive
financing option for corporates as they weigh investments into
new technologies.

export finance opportunities in a changing world

Securing strategic supplies
For corporates, support in setting up production facilities is only
part of the puzzle. In recent years, supply chain disruption andgeopolitical volatility have constrained access to critical inputs,
from rare earth elements and minerals to components. This has
not only impacted production schedules for items ranging frommobile phones to LED lighting, but also threatens manufacturing
capacity for the batteries, turbines, solar panels and power cables
that will underpin the clean energy transition.
The ongoing semiconductor shortage has brought this issue
into sharp focus. With applications spanning from smartphones
to medical equipment, automotive and defense technologies,
ensuring a steady supply has become a matter of nationalurgency — driving ECAs to take swift action as a result.
“Several ECAs are exploring proactive ways to guarantee supply
contracts to ensure uninterrupted access to essential commodities,”says Gang. “We’re seeing a range of new, flexible measures tosupport clients, including the import guarantee scheme, which wasintroduced late last year by Sweden’s EKN, as well as the Hermes
UFK guarantee product, which was used to secure raw material for
German companies and provide energy security.”
The EV sector is another industry grappling with tough access tocomponents. As carmakers race to secure the entirety of their
supply chain, from raw materials to manufacturing hubs, thesheer magnitude of support required means export financiers
need to come up with creative solutions.
“This market segment has been bustling, encompassingeverything from lithium mining to individual components inthe vehicles and the development of gigafactories for battery
production,” says Gang. “We’re seeing huge, generational
investments, with debt transactions approaching multiple billionsof dollars. Given the scale and novel nature of some of theseventures, we’re bringing together blended finance, our robust
capital markets operations and export and development financeto get them over the line.”

Harnessing new possibilities
As aggressive rate hikes bring tougher borrowing conditions anduncertainty, the widening of ECA support for a range of sectors
and industries offers a valuable alternative to corporates. From
short-term working capital to medium and long-term capital
expenditure, ECA-backed solutions are fast becoming a priority
fundraising route for corporates — and all indications are that
this trend is here to stay.
“Our aim is to ensure our clients have access to the mostversatile and effective solutions, especially in today’s challenging
interest rate environment,” says Gang. “We’re continuously
seeking to introduce new deals and structures, as well as
advocating for the projects we believe ECAs and othergovernment agencies should be supporting. This is being met
with enormous and unprecedented receptiveness from agencies
to consider new ideas, demonstrating just how transformative
this period is for export finance.”“ Bank of America” and “BofA Securities” are the marketing names used by the Global Banking and Global Markets divisions of Bank of America Corporation. Lending, derivatives, other commercial banking activities, and trading in certain financial instruments are performed globally by banking affiliates ofBank of America Corporation, including Bank of America, N.A., Member FDIC. Trading in securities and financial instruments, and strategic advisory, and other investment banking activities, are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”),
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