United States General Accounting Office

GAO Testimony

Before the Subcommittee on International Economic

Policy and Trade, Committee on International Relations,

House of Representatives

For Release on Delivery

Expected at

1:30 p.m., EDT

Wednesday,

October 7, 1998

U.S. EXPORT-IMPORT

BANK

Issues Raised by Recent

Market Developments and

Foreign Competition

Statement of JayEtta Z. Hecker, Associate Director,

National Security and International Affairs Division

GAO/T-NSIAD-99-23

Madam Chairman and Members of the Subcommittee:

We are pleased to be here today to discuss issues related to the U.S.

Export-Import Bank (Eximbank), particularly in light of the recent

downturn in the global economy. Despite this downturn, the United States

remains the world’s largest exporter of goods and services and is the

leader in key sectors ranging from aerospace to telecommunications.

However, questions continue to be raised about the cost and role of U.S.

export promotion programs, such as those of the Eximbank, and how they

help exporters meet the foreign competition in emerging market

economies.

As you requested, our statement today will

• review recent trends in the cost and composition of the Eximbank’s

financing and

• highlight key similarities and differences in international export finance

programs.

Our comments are based on past GAO reports and testimonies, including a

recent review of how the Eximbank was responding to increasing risks

associated with the economic conditions in Asia. A list of our recent

reports is attached.

Summary 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. 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. Any additional costs will be covered through permanent and

indefinite budget authority, that is, they are not subject to the annual

appropriations process. 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.

Some shifts in the composition of the Eximbank’s financing began to

appear in fiscal year 1998. One noticeable change was the absence of any

project finance transactions, which support large capital projects in

developing market economies. These had been a rapidly growing line of

Eximbank financing. Another change has been the increase in short-term

financing brought on by private banks’ reluctance to extend credit for

Page 1 GAO/T-NSIAD-99-23 Export-Import Bank
exports to Asian buyers. Finally, while there was some stability in the top

10 country markets and corporate recipients of Eximbank financing, shifts

did occur. For example, Indonesia dropped off the top 10 list in fiscal 

year 1998, while Russia and Uzbekistan rose on the list.

The Eximbank is one of over 70 export credit agencies (ECA) operating

throughout the world to provide export financing. 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. However, they all help exporters compete for market share

in developing countries. 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

(OECD)1

 to reduce government subsidies for these export finance

programs. 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.

The significant changes in the environment in which the Eximbank is

operating raise the following issues:

1. Whether the Eximbank will be able to continue to operate in higher risk

markets while respecting its statutory mandate to support exports only

where there is a reasonable assurance of repayment.

2. Whether there are opportunities to expand the available information on

the operating results of foreign competitors within the context of ongoing

multilateral negotiations to assure that U.S. exporters are not being

disadvantaged by their foreign counterparts.

Background Eximbank financing programs include (1) loans to foreign buyers of U.S.

exports, (2) loan guarantees to commercial lenders, (3) export credit

insurance to U.S. exporters and lenders, and (4) working capital

guarantees for pre-export production. The Eximbank is required to

1

The OECD, created in 1960, is a forum for monitoring economic trends and coordinating economic

policy among 29 countries, including the United States, and serves as the arena for negotiating

limitations on government export credit subsidies and developing guidelines for export-financing

assistance programs. The OECD’s “Arrangement on Guidelines for Officially Supported Export

Credits,” which was established in 1978, sets forth the terms and conditions for providing official

export credits. Although the OECD lacks authority to enforce compliance with its agreements,

member states generally take upon themselves responsibility for monitoring compliance.

Page 2 GAO/T-NSIAD-99-23 Export-Import Bank
• supplement and encourage, but not compete with, private sources of

capital;

• provide loans only in circumstances in which there is a reasonable

assurance of repayment;

• provide financing at rates and on terms that are “fully competitive” with

those of other foreign government-supported export credit agencies; and

• seek to reach international agreements to reduce government-subsidized

export financing.2

The Eximbank is subject to the Federal Credit Reform Act of 1990

(P.L. 101-508, Nov. 5, 1990), which requires government agencies to

estimate and budget for the total long-term costs of their credit programs

on a net present value basis.3

 Congress funds the Eximbank’s estimated

credit subsidy costs (hereafter referred to as “subsidy costs”) through the

annual appropriations process. Subsidy costs arise when the estimated

program disbursements by the government exceed the estimated

payments to the government, on a net present value basis. Administrative

expenses receive separate appropriations and are reported separately in

the budget. Any costs associated with re-estimates of existing exposure

are funded by permanent and indefinite budget authority and are not

subject to the annual appropriations process.

The market environment in which the Eximbank and other ECAs operate

has changed. The downturn in the global economy, which began in major

Asian markets in mid-1997, has tempered the demand for some types of

Eximbank financing (such as project finance). The international

consequences of the global economic downturn, which have included

large drops in developing country exchange rates and commodity and

equity prices, were recently characterized by the International Monetary

Fund (IMF) as “probably the most far-reaching of the postwar period.” The

IMF estimates that world economic growth is likely to be about one-third

less than projected earlier this year (2 percent rather than 3.1 percent). For

Russia, the IMF projects that the output of goods and services could shrink

by about 6 percent this year and in 1999.

Although trade accounted for over 30 percent of the growth of the U.S.

economy during 1996 and 1997, trade has acted to slow the economy in

1998. The “National Export Strategy,” released by the interagency Trade

Promotion Coordinating Committee last week, reported that during the

first half of 1998, U.S. exports to Asia fell at an annual rate of 30 percent.

2

12 U.S.C. sec. 635 (b)(1)(A),(B).

3

Present value analysis calculates the value today of a future stream of income or expenses.

Page 3 GAO/T-NSIAD-99-23 Export-Import Bank
Moreover, exports to some historically high growth markets fell even more

precipitously—down 46 percent to Korea and 53 percent to Indonesia.

Recent Trends in the

Cost and Composition

of Eximbank

Financing

In fiscal year 1998, the program costs of the Eximbank’s portfolio

increased as a result of a downgrade in the quality of the portfolio. At the

same time, the composition of the portfolio changed due to a significant

decline in the Eximbank’s project financing, an increase in short-term

financing, and several changes in top country markets and company users.

Overall, Eximbank programs cost on average about $859 million annually

between fiscal year 1994 and 1998 (see app. I). The Eximbank provided an

annual average of about $12.2 billion in export financing commitments

(loans, loan guarantees, and insurance) during this period. In fiscal 

year 1998, the Eximbank provided about $10.5 billion of export finance

support, down from $12.2 billion in the prior fiscal year, and the lowest

level in the last 5 fiscal years.

Changes in the Eximbank’s

Existing Financial

Exposure

The financial instability in Asia, Latin America, and Russia already has had

an impact on the Eximbank. Portions of the Eximbank’s existing portfolio

have been downgraded, and specific deals are being tracked for possible

changes in repayment status. The downgrading is done through the

Interagency Country Risk Assessment System (ICRAS). The ICRAS process

was established in 1991 for the executive branch to uniformly evaluate for

the U.S. government the country risk contained in foreign loans and

guarantees. The Office of Management and Budget chairs the ICRAS

process, and the Eximbank serves as the Secretariat. ICRAS ratings have

been adjusted to reflect the financial turmoil being experienced by some

of the Eximbank’s sovereign (government) clients and the assessment that

they are seen as more likely to experience difficulties in meeting the terms

and conditions of their original financing agreements. In addition to

increasing the subsidy cost of the Eximbank’s existing portfolio, the recent

downgrading of ICRAS ratings project greater subsidy costs of new

Eximbank business.

The Eximbank’s total portfolio exposure to sovereign and private

borrowers was $52 billion as of August 31, 1998. In August 1998, the

sovereign risk rating of six nations was placed in a higher risk category.

The Eximbank’s total sovereign debt exposure with these six nations was

$3.8 billion, which the Eximbank estimates will require an addition to its

loan loss reserve of $410 million. The Eximbank also downgraded the

Page 4 GAO/T-NSIAD-99-23 Export-Import Bank
credit risk of 82 private obligors (borrowers) in Asia, Latin America, and

the newly independent states (NIS) of the former Soviet Union with total

exposure of about $11.4 billion (about 22 percent of its total portfolio).

According to preliminary Eximbank estimates, the increased risk of these

private obligors may require an addition to its loan loss reserve of about

$1.6 billion to cover potential losses associated with these transactions. In

sum, the Eximbank estimates that it will have to increase its loan loss

reserves by about $2 billion to cover potential sovereign and private losses

in Asia, Latin America, and Russia. These additional costs will be covered

through permanent and indefinite budget authority, that is, they are not

subject to the annual appropriations process.

We would now like to provide some information on the status of certain

nonsovereign transactions being tracked in specific nations. As previously

noted, the Eximbank’s global financial exposure totaled just over 

$52 billion at the end of August 1998. A total of $6.6 billion, or just under

13 percent of this exposure, is being tracked in the Eximbank’s most

recent internal portfolio report’s “watch” list under the categories of

“workout,” “heavy concern,” and “moderate concern.” According to the

same report, just under $2 billion (22 percent) of the Eximbank’s total

exposure of $9.1 billion in Korea, the Philippines, Thailand, and Indonesia

is in what is described as “workout,” that is, Eximbank staff has been

actively working to restructure agreements with borrowers currently

experiencing financial difficulties. An additional $982 million of the

Eximbank’s exposure is classified as of “heavy concern,” nearly all of

which are project finance deals. The Eximbank’s third watch category,

“moderate concern,” covers an additional $3.6 billion and includes about

$1.4 billion of the Eximbank’s $2.4 billion in Russian financial exposure.

Project Finance Declines A significant shift in the Eximbank’s operations occurred in fiscal 

year 1998 when no project finance transactions were approved—a sharp

contrast to the large program growth that occurred between fiscal year

1993 and 1997. Project finance transactions, which depend on the cash

flows of a project to service debt, generally require a relatively stable legal

and commercial environment in the host country in order for risk

mitigation of the project to be possible.4

 While project finance transactions

accounted for only about 3 percent of Eximbank’s medium- and long-term

transactions in fiscal year 1993, by 1997 that figure had risen to 22 percent.

Over the 1993 to 1997 period, the Eximbank provided close to $7 billion in

4

Because these project finance transactions tend to be large, the Eximbank often shares project risk

with other ECAs, the Overseas Private Investment Corporation (OPIC), or with multilateral institutions

such as the International Finance Corporation.

Page 5 GAO/T-NSIAD-99-23 Export-Import Bank
project finance support, including $2.6 billion in fiscal year 1997. Many of

these transactions were in Asia, and these typically used a small amount of

the Eximbank’s subsidy budget (table II.1 shows the nations where ECAs

were supporting project finance activity in 1997). Eximbank officials

attribute the lack of new project finance transactions to market concerns

about the stability of some emerging market economies.

Short-term Financing

Changes

Another shift in the Eximbank’s operations occurred with the increase of

short-term insurance from $2.3 billion in fiscal year 1997 to about

$3.2 billion in fiscal year 1998. An early manifestation of the economic

crisis was a credit crunch in several Asian markets that led to a surge in

demand for short-term financing to cover exporters’ growing concerns

about receiving payments for their shipments. Previously, there had been

little demand for Eximbank short-term financing for exports to Asia, but

the crisis has made private banks reluctant to extend credit in the region,

thereby increasing the demand.

The Eximbank has been involved in several initiatives in Asia designed to

respond to the economic crisis facing those nations. These initiatives

include a $3 billion short- and medium-term export credit insurance and

loan program for Korea, $750 million of which has been used this fiscal

year. Similar programs for Thailand ($1 billion) and Indonesia ($1 billion)

have been approved but are not yet operative, according to Eximbank

officials. The Eximbank has worked with its foreign counterparts in the

G-7 and OECD nations to encourage these agencies to keep programs

operational in the Asian region.

Changes in Country and

Company Users

Over the past 3 fiscal years, there have been some changes in the markets

receiving Eximbank financing authorizations. As seen in table 1, China and

Mexico have been the top two country recipients of Eximbank financing

for those fiscal years. Indonesia, the third leading recipient of Eximbank

financing authorizations in fiscal year 1996 and the fourth in fiscal 

year 1997, had support of only $7.25 million in fiscal year 1998 and

dropped off the top 10 list of country markets. At the same time,

authorizations for two NIS nations—Russia and Uzbekistan—grew to a

combined total of over $1 billion in fiscal year 1998.

Page 6 GAO/T-NSIAD-99-23 Export-Import Bank
Table 1: Top 10 Country Recipients of Eximbank Financing Authorizations, Fiscal Years 1996-98

Fiscal year 1996 Fiscal year 1997 Fiscal year 1998

Dollars in millions

Rank Country

Financing

authorized Country

Financing

authorized Country

Financing

authorized

1 China $1,297 China $1,330 Mexico $1,671

2 Mexico $1,226 Mexico $1,192 China $1,354

3 Indonesia $873 Korea $755 Russia $637

4 Trinidad and

Tobago

$632 Indonesia $626 United States $382

5 Brazil $502 Brazil $564 Uzbekistan $379

6 Argentina $494 Philippines $564 Turkey $376

7 Pakistan $484 Qatar $525 Brazil $353

8 Ghana $411 Russia $474 Chile $198

9 United States $366 United States $443 India $188

10 Russia $351 Venezuela $349 Venezuela $133

Note: These figures do not include short-term insurance authorizations because of limitations in

the way the data are collected. Figures for the United States include working capital guarantees

for pre-export production.

Source: Eximbank.

Despite the many changes occurring in the composition of the Eximbank’s

programs, Boeing Co., remains its largest customer. Table 2 presents data

on the companies that used the Eximbank’s financing over the same

1996-98 fiscal year period. These data do not capture the full range of U.S.

companies associated with Eximbank-financed deals such as

subcontractors and other suppliers. As seen in the table, Boeing was the

top user each year, with total authorizations rising from just over

$1.2 billion in fiscal year 1996 to about $2.6 billion in fiscal year 1998.

Other users that appeared in the top 10 in 2 of the last 3 fiscal years are

ABB Asea Brown Boveri Ltd., Bechtel Group Inc., Caterpillar Inc., General

Electric, and Halliburton. Companies’ use of the Eximbank’s financing

varies by fiscal year, depending on the number and size of transactions. It

should also be pointed out that the largest users in terms of authorizations

are not necessarily the largest consumers of the Eximbank’s program

subsidy.5

5

For example, the subsidy rate (projected subsidy usage as a percentage of financing) for the

Eximbank’s transactions with Boeing Co., were 0.3, 3.1, and 2 percent, respectively, from fiscal 

year 1996 to 1998. Over the same period, the average subsidy rate for all Eximbank transactions was

7.8, 6.9, and 6.9 percent, respectively.

Page 7 GAO/T-NSIAD-99-23 Export-Import Bank
Table 2: Top 10 Corporate Recipients of Eximbank Financing Authorizations, Fiscal Years 1996-98

Dollars in millions

Rank Company

Financing

authorized Company

Financing

authorized Company

Financing

authorized

1 Boeing Co. $1,155 Boeing Co. $1,779 Boeing Co. $2,553

2 General Electric $571 Bechtel $782 Stewart and

Stevenson

$395

3 Bechtel $439 Foster Wheeler

Corp

$621 Caterpillar $390

4 ABB Asea Brown

Boveri

$398 Mobil $525 Cooper

Cameron Corp.

$381

5 Continental Eng.

and Construction

$357 Caterpillar $448 ABB Asea

Brown Boveri

$215

6 Deere and Co. $270 McDonnell

Douglas

$341 Westing-house

Electric

$197

7 Dresser

Industries

$240 AT&T $307 Marubeni Corp. $186

8 Fluor Corp. $234 BCE, Inc. $292 Case Corp. $180

9 Lockheed Martin

Corp.

$214 General Electric $257 Halliburton $150

10 Motorola, Inc. $194 Halliburton $239 General Motors $138

Source: Eximbank.

New Eximbank Responses

to the Global Crisis

In addition to closely monitoring its current portfolio and developing

initiatives to support short- and medium-term export transactions in

several Asian markets, the Eximbank is considering other responses to the

global economic downturn, including seeking out new deals and assisting

what the President termed “specific economic development projects.”6

Depending on how such initiatives might develop, they may indicate a shift

from the Eximbank’s current policy in two ways. First, the Eximbank has

generally been demand driven rather than taking a proactive role in

seeking out new business. Second, while the Eximbank has sought to

encourage U.S. exports in transactions with a reasonable risk of

repayment, this initiative may suggest the Eximbank is taking on more of

an economic development role. Eximbank officials emphasized that they

can accommodate the President’s initiative in a manner consistent with

their current mandates.

6

September 14, 1998, speech of President Clinton before the Council on Foreign Relations.

Page 8 GAO/T-NSIAD-99-23 Export-Import Bank
Similarities and

Differences in Foreign

Competitors’ Export

Finance Programs

Our past work7 assessed the export finance programs of six G-7

countries—Canada, France, Germany, Italy, Japan, and the United

Kingdom. All of these countries have ECAs, each with different roles and

structures (see table III.1). It has recently been reported that a total of 73

ECAs now exist worldwide.8 The proliferation of ECAs raises two related

issues:

(1) Whether the subsidization of export finance potentially distorts trade

flows.

(2) Whether subsidization can create an unlevel playing field for individual

exporters who may be disadvantaged by more generous financing

provided to competitors.

Because of the potential significance of such effects on trade flows and

individual exporters, the Eximbank has specific mandates to both stay

apprised of and be “fully competitive” with other major exporting nations

to reduce and eventually eliminate the subsidization of exports through

preferential financial terms. In light of these issues, I now turn to what we

know about foreign competitors’ export finance programs, highlighting

some similarities and differences.

In 1996, the Eximbank supported 2 percent of total U.S. exports (the latest

year for which comparative data are available). In contrast, Japan’s ECAs

supported 37 percent of its country’s exports in that year. France was

second, with 16 percent. The support provided by Canada, Germany, the

United Kingdom, and Italy ranged from 8 to 1 percent. Another

comparison sometimes focuses on the share of financing commitments

extended by ECAs (in 1995, the Eximbank ranked fourth with 5 percent,

compared to Japan with 56 percent, France with 20 percent, and Germany

with 9 percent).

Although these broad comparisons show that the Eximbank falls near the

bottom of export finance support provided by other G-7 nations, it is

difficult to make direct comparisons of these programs and determine

which of the ECAs provide the most assistance, for a number of reasons:

• Unlike the Eximbank, other ECAs appear to compete to varying degrees

with private sources of export financing. They do not aim to function

7

See Export-Import Bank: Key Factors in Considering Eximbank Reauthorization

(GAO/T-NSIAD-97-215, July 17, 1997).

8

Euromoney publishes an annual survey of world export credit agencies.

Page 9 GAO/T-NSIAD-99-23 Export-Import Bank
exclusively as “lenders of last resort,” as does the Eximbank. For example,

the Japanese government’s export insurance provider is Japan’s only

export insurer. Similarly, Canada’s Export Development Corporation (EDC)

does not function as a lender of last resort.

• ECAs use different budgetary and reporting standards, thus making it

difficult to directly compare the Eximbank’s program costs. As previously

explained, the 1990 Federal Credit Reform Act requires the Eximbank to

estimate and budget annually for the total long-term costs of its credit

programs on a net present value basis, which makes it easier to identify

the subsidy cost of the Eximbank’s operations. Other nations operate on a

cash basis9

 and are not subject to similar budget constraints; thus, there is

no comparable transparency of their subsidy costs.

• ECA costs reported may not always represent total expenses to the

government. For example, Canada’s EDC uses a separate national interest

account (“Canada Account”) to support some export finance activity. The

costs of this support are accounted for separately in its year-end reports.

• Finally, each nation has structured its export financing differently—there

is no single export finance model. ECAs in the six nations we studied

function as independent government agencies, sections of ministries, or

private institutions operating under an agreement with the government.

Tables in appendix III provide a summary of the principal differences and

costs between the Eximbank and the six ECAs we studied.

Although direct cost comparisons between Eximbank and other national

programs are difficult to make, a 1998 Eximbank study reported data from

the Berne Union, which indicate that ECAs had recently returned to

“profitability” after being in deficit since the Latin debt crisis.10 According

to the Berne Union, its members’ combined results showed a surplus of

$2 billion in 1996 and $5 billion in 1997. Although 1998 data will not be

available for some time, in light of deteriorating global economic

conditions this profitability may be short lived.

The Eximbank’s July 1998 report11 to Congress discussed how the

Eximbank’s programs compare with competitor nations and noted that its

programs were generally competitive with major foreign export credit

9

Under cash-based budgeting, receipts are recorded when received and expenditures are recorded

when paid regardless of the accounting period in which the receipts are earned or the costs incurred.

10The Berne Union is an association of 43 export credit insurance agencies that includes the G-7

nations’ ECAs.

11Report to the U.S. Congress on Export Credit Competition and the Export-Import Bank of the United

States (Washington, D.C.: Eximbank, July 1998).

Page 10 GAO/T-NSIAD-99-23 Export-Import Bank
agencies. For example, the report noted that the Eximbank provides what

it terms a better “cover” policy in three out of four major ECA markets, that

is, it does not impose restrictions on the type and nature of its financing in

these markets. Other nations’ ECAs generally provide unrestricted cover for

only select markets in which they do business, according to the report.

However, the report described the Eximbank’s foreign content policy12 as

“more complex and administratively burdensome than that of the

Europeans and it is much less liberal than the Canadian and Japanese

content policies.” The report also stated that the export community

regards the Eximbank’s project finance policy as less competitive because

the administrative requirements for complying with foreign content

requirements are burdensome. The export community also expressed

concerns about the time and costs associated with working with financial

advisors to complete project finance transactions.13

As noted, the Eximbank is statutorily required to seek international

agreements to reduce government-subsidized export financing. The

Eximbank, under the leadership of the U.S. Department of the Treasury,

does so through its participation in ongoing OECD negotiations to minimize

export financing competition and reduce government export credit

subsidies. The OECD nations have made gradual progress since the late

1970s in negotiating reductions in officially supported export subsidies,

including a June 1997 agreement that requires ECAs to establish minimum

fees based on country risk ratings. However, the available data will still

not show whether competitor ECAs are covering long-term operating

costs—a key negotiating objective—through these fee increases. The

Eximbank and several other nations agreed to begin implementing these

new fee schedules as of October 1, 1998 (other OECD nations that signed

this agreement have agreed to begin implementing it on April 1, 1999).

These new rules should help eliminate some of the trade distorting effects

of subsidized export financing and may allow the Eximbank to reduce the

taxpayer costs of its programs.

Conclusion The global financial turmoil that has occurred since mid-1997 has already

had a significant impact on the Eximbank’s operations. Some of the

12The Eximbank’s foreign content policy allows for it to support U.S. exports containing the lesser of

85 percent of the total contract price or 100 percent of the U.S. content of each item-of-supply

provided that the foreign content of the item (the cost of foreign components incorporated into the

item in the United States) constitutes no more than 50 percent of the total cost of producing the item

and the foreign content of an item-of-supply is incorporated in and shipped from the United States.

13Under the project finance program, many of the administrative costs that the Eximbank traditionally

incurs in evaluating a project’s financial, legal, and technical risks are to be borne by the private sector

rather than the Eximbank.

Page 11 GAO/T-NSIAD-99-23 Export-Import Bank
Eximbank’s existing financial exposure has been downgraded because

sovereign and private risk has risen, which has significant cost

implications. The Eximbank must simultaneously minimize the potential

loss of taxpayer funds while serving risky foreign markets. The Eximbank

and other OECD nations continue to work toward the long-run objective of

eliminating subsidized export financing. However, in the short term, the

Eximbank and other ECAs have worked to maintain export financing

support to several Asian nations.

In light of the significant changes in the international environment, two

issues are emerging regarding the Eximbank’s operations:

1. Will the Eximbank be able to continue to operate in higher risk markets

while respecting its statutory mandate to support exports only where there

is a reasonable assurance of repayment?

2. Whether there are opportunities to expand the available information on

the operating results of foreign competitors within the context of ongoing

multilateral negotiations to assure that U.S. exporters are not being

disadvantaged by their foreign counterparts.

Madam Chairman and Members of the Subcommittee, that concludes our

prepared statement. We will be happy to answer any questions you or

other Members of the Subcommittee may have.

Page 12 GAO/T-NSIAD-99-23 Export-Import Bank
Page 13 GAO/T-NSIAD-99-23 Export-Import Bank
Appendix I 

The U.S. Export-Import Bank’s (Eximbank)

Financing Commitments and Program

Costs, 1994-98

Fiscal year

Dollars in millions

1994 1995 1996 1997 1998a

Value of export

financing commitments

$14,886.4 $11,864.9 $11,517.7 $12,158.8 $10,526.0

Administrative

costs

42.6 41.4 40.8 46.6 48.6

Subsidy costs 936.7 674.8 894.1 840.8 728.3

Total costsb $979.3 $716.2 $934.9 $887.4 $776.9

Note: Under the Federal Credit Reform Act of 1990 (P.L. 101-508, Nov. 5, 1990), the Eximbank is

required to estimate and budget for the total long-term costs of its credit programs on a net

present value basis. Present value analysis calculates the value today of a future stream of

income or expenses. Congress funds the Eximbank’s estimated credit subsidy costs through the

annual appropriations process. Subsidy costs arise when the estimated program disbursements

or payments by the government exceed the estimated payments to the government on a net

present value basis over the entire term of the credit. Administrative expenses receive a separate

appropriation and are reported separately in the budget on a cash basis.

aPreliminary figures.

b“Total costs” are defined as the Eximbank’s subsidy costs and administrative costs.

Source: Eximbank.

Page 14 GAO/T-NSIAD-99-23 Export-Import Bank
Appendix II 

Infrastructure Projects in Emerging Markets

Utilizing Export Credit Agency Financing,

1997

Emerging market

Countries with ECAs Turkey Thailand China Indonesia India Argentina Brazil Mexico

Japan N/A

United States N/A

Germany N/A N/A

United Kingdom N/A N/A N/A

France N/A N/A N/A N/A

Austria N/A N/A N/A N/A N/A N/A

Italy N/A N/A N/A N/A

Belgium N/A N/A N/A N/A N/A N/A

Spain N/A N/A N/A N/A N/A N/A

Netherlands N/A N/A N/A N/A N/A N/A N/A

Switzerland N/A N/A N/A N/A N/A N/A N/A

Sweden N/A N/A N/A N/A N/A N/A N/A

Norway N/A N/A N/A N/A N/A N/A N/A

Canada N/A N/A N/A N/A N/A N/A N/A

Brazil N/A N/A N/A N/A N/A N/A

Korea N/A N/A N/A N/A N/A N/A N/A

Legend

N/A = Not applicable because no projects reported.

 At least one completed project with the export credit agency (ECA) financing.

 Proposed project(s) with ECA financing.

Source: Compiled from U.S. government information and foreign data.

Page 15 GAO/T-NSIAD-99-23 Export-Import Bank
Appendix III 

Comparison of G-7 Nations’ Export Credit

Agency Structures and Roles

Table III.1: G-7 Nations’ Export Credit Agency Organization and Roles

Country Export credit agency Public or private Role

United States Eximbank Public, independent government

agency.

—Statutory mandate to

supplement and encourage, but

not compete with, private sources

of capital.

—Receives a credit subsidy

appropriation each year from the

U.S. Congress.

Canada Export Development Corporation

(EDC)

Public, independent government

agency.

-Some competition with private

sector.

-Aims to be financially

self-sustaining.

France COFACE provides export finance

insurance and guarantees.

BFCE provides interest-rate

support on commercial bank

loans

Private. Both COFACE and BFCE

have recently been privatized.

Government covers deficits

incurred on state account

activities.

— COFACE exercises a dual role

by administering export-financing

support on behalf of the French

government and offering export

finance assistance through its

own programs.

Germany Hermes, C&L Deutsche Revision,

and KfW

Private consortium. Hermes and

C&L Deutsche Revision jointly

administer German export finance

program on behalf of the state.

KfW offers export loans to

German exporters. Government

covers deficits on state account

activities.

—Hermes and C&L exercise a

dual role by operating the

government’s export finance

programs and offering export

finance assistance privately.

Italy Special Section for Export Credit

Insurance (SACE) and Central

Institute for Medium Term Credits

(Mediocredito Centrale)

Public agencies. —Some competition with private

sector as Mediocredito Centrale

also functions as commercial

bank.

Japan Export-Import Bank of Japan

(JEXIM) provides financing.

Export Insurance Division-Ministry

of International Trade and

Industry (EID-MITI) provides

insurance

Public. JEXIM is an independent

government agency. EID-MITI is

housed in Japan’s Ministry of

International Trade and Industry.

— JEXIM aims to supplement and

encourage commercial bank

financing but not compete with it.

—EID-MITI competes with private

sector providers.

United Kingdom Export Credits Guarantee

Department (ECGD)

Public, independent government

department.

—Short-term business was

privatized. 

—Has a specific mandate to

break even financially.

Legend

COFACE=Compagnie Francaise d’Assurance Pour Le Commerce Exterieur

BFCE=Banque Francaise du Commerce Exterieur

KfW= Kreditanstalt fur Wiederaufbau

Source: GAO analysis of ECA data.

Page 16 GAO/T-NSIAD-99-23 Export-Import Bank
Appendix III 

Comparison of G-7 Nations’ Export Credit

Agency Structures and Roles

Table III.2: Reported Financial Results of Government-Supported Export-Financing Programs in the United States and Six

Competitor Countries, 1994-96

U.S. dollars in millions

Country ECA 1994 1995 1996

United Statesa Eximbank ($979) ($716) ($934)

Canadab EDC N/A N/A N/A

France COFACE and

BFCE

($503) $7 $1,151

Germanyc Hermes/C&L and

Deutsche Revision

($1,985) $38 $605

Italy SACE and

Mediocredito Centrale

($1,501) ($1,821) ($822)

Japand JEXIM and

EID-MITI

($80) ($113) N/A

United Kingdome ECGD $29 $362 N/A

N/A= Not available.

Note 1: There are several caveats with regard to how the numbers in this table should be

interpreted. The type and nature of each nation’s ECA business varies in ways that ultimately

influence its costs. In the case of Japan’s Export-Import Bank, 44 percent of its fiscal year 1995

commitments were for loans not “tied” to Japanese exports, 37 percent were for overseas

investment loans, and 8 percent for import loans. Only 11 percent of JEXIM’s total financing in

that year was reported to have been used for export loans. Where there are two ECAs, we have

combined financial results.

Note 2: Negative amounts indicate a cost.ate amounts indicate a surplus.

aThe figures for the Eximbank represent obligations for the fiscal year.

bCanada’s EDC reported net income of $171 million, $44 million, and $112 million in 1994, 1995,

and 1996, respectively. However, these amounts do not include the support separately provided

through the Canadian national interest account ($200 million in 1996 but not available for 1994

and 1995). EDC conducts a significant (42 percent) level of business with Organization for

Economic Cooperation and Development (OECD) nations, which influences its profitability.

cThe totals for Germany include interest revenues from debt reschedulings.

dThe Japanese fiscal year ends March 31. The figures for Japan’s EID-MITI include direct

transfers from the Ministry of Finance for Paris Club debt writeoff of $272 million in fiscal 

year 1994 and $233 million in 1995.

eThe U.K. fiscal year ends March 31. ECGD figures include amounts spent on foreign exchange

insurance and interest rate subsidies.

Source: GAO analysis of ECA data.

Page 17 GAO/T-NSIAD-99-23 Export-Import Bank
Page 18 GAO/T-NSIAD-99-23 Export-Import Bank
Page 19 GAO/T-NSIAD-99-23 Export-Import Bank
Related GAO Products

U.S. Export-Import Bank’s Asian Financial Exposure (GAO/NSIAD-98-150R,

Apr. 17, 1998).

Export Promotion: Issues for Assessing the Governmentwide Strategy

(GAO/T-NSIAD-98-105, Feb. 26, 1998).

Export-Import Bank: Key Factors in Considering Eximbank

Reauthorization (GAO/T-NSIAD-97-215, July 17, 1997).

Export Finance: Federal Efforts to Support Working Capital Needs of

Small Business (GAO/NSIAD-97-20, Feb. 13, 1997).

Export-Import Bank: Options for Achieving Possible Budget Reductions

(GAO/NSIAD-97-7, Dec. 20, 1996).

Export Finance: Comparative Analysis of U.S. and European Union Export

Credit Agencies (GAO/GGD-96-1, Oct. 24, 1995).

Export Promotion: Rationales for and Against Government Programs and

Expenditures (GAO/T-GGD-95-169, May 23, 1995).

International Trade: U.S. Efforts to Counter Competitors’ Tied Aid

Practices (GAO/T-GGD-95-128, Mar. 28, 1995).

(711390) Page 20 GAO/T-NSIAD-99-23 Export-Import Bank
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