US EXIM: ‘We have a new mandate to take China on around the world’
Kimberly Reed, the President and Chairman of the Board of Directors of the Export-Import Bank of the United States (EXIM), explains how Congress has given her institution the mandate to take on Chinese exporters on behalf of US businesses.
The US EXIM bank had been all but asleep for four years, after the Senate failed to renew it’s charter in 2012. It was finally restarted in 2016.
But in the intervening period, as Reed says, ‘we saw the world change’.
Trade competition between the US and China has become intense, and institutions like EXIM have become a weapon in the struggle for competitive advantage.
The Africa Report: You offer insurance and guarantees, do you also provide financing?
Kimberly Reed: We do offer direct loans available to foreign buyers of US goods and services.
The Export Import Bank approved back in September 2019 the largest direct loan in the history of the bank, a $5bn loan for Mozambique, focused on export of US goods and services to construct an LNG facility in Mozambique which will help transform the country.
How do you rate the continent in terms of promising markets for EXIM bank to look at globally, and where does Angola sit in your list of priorities?
Africa and Sub-Saharan Africa are an absolute priority for The Export Import Bank of the United States. In fact, we have a special congressional mandate to focus on Sub-Saharan Africa, and we have an EXIM Sub-Saharan Africa advisory committee to help us do that.
We know that Africa is a very young continent, and a huge marketplace; in 2018 the United States exported $26bn in merchandise to Africa.
Since I took office in May of 2019, our agency has authorized more than 40 deals in Sub-Saharan Africa, small ones and then large ones like the one I mentioned in Mozambique.
We are a demand-driven organization and so we want to be that special tool in the trade toolbox, and so as far as Angola goes we want to be helpful anywhere that has a need, and that we are open and able to do business.
Angola has a privatization program which it is slowly starting to be rolled out, which I imagine would provide some opportunities for US companies. Have you been approached by US companies who see this coming and say, “Could you give us a hand?”
Before I was confirmed with my fellow board members in May we were essentially shut to deals over $10m for about four years. And rest of the world has their own export credit agencies, and there are 113 of export credit agencies in the world today.
Because we were not Senate confirmed and the bank was not fully operational without us, for 4 years we saw the world change.
And so we’re very busy now telling the world and telling Africa, come back and take a look at our great US goods and services and use EXIM if the private sector can’t stand up or are unable or unwilling and you need us to help finance the export.
Obviously business certainly when it’s leveraging up it really does require predictability, do you think that 4 year period has damaged your ability to function as you would like?
Well, while we were closed we gathered $40bn in applications and so there is still strong interest and so we are now going through all of those. And as the new head it is my priority to ensure the world know and come back to the United States and take a look at us, and use us if you need us.
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As we mentioned the Trump administration has a whole of government approach called Prosper Africa to increase a two way trade investment and promote economic growth.
So while we were away and not in full capacity, countries and purchasers made decisions, I’m sure that it did not involve EXIM but now we want to be as helpful as possible.
We have the capacity at any one time to support $135bn in transactions and right now we’re at about $50bn, so we have a opportunity for growth and in support.
And I will say that the Mozambique transaction it took place before EXIM Bank was reopened, they were working with the Russians and the Chinese to get the financing and the purchase of goods and services from those two countries.
And then after our US EXIM was reopened the Mozambique-LNG project turned to the United States and chose us instead.
Infrastructure companies from France or the UK say one of the difficulties they have in competing with companies from Asia, mostly from China, for big deals on the continent is that when a Chinese contractor comes and tries to win a tender, they come with the financing as well as with the ability to build the bridge, the railway, whatever it might be. And that’s a very powerful package, the ability to say to an African country, “Not only will we build it, but we’ll pay for it, and then you’ll pay us back later.”
How are you coordinating within the Prosper Africa initiative to come up with some kind of creative way of echoing that kind of structure so that you can compete with Chinese companies?
It’s very on point for you to ask me this question. We reopened in May 2019 and then in our country several government programs faced difficulty in authorization from time to time, and EXIM was to expire or sunset under our charter at the end of 2019. And the Congress came back and reauthorized us, thanks to President Trump’s leadership for the longest tenure in the 86 year history of EXIM, we are now reauthorized through 2026.
And as part of that reauthorization which gives foreign countries and the financial services sector certainty about the United States when it comes to EXIM’s programs, but in addition to that the Congress gave us a new mandate and that new mandate is a program called China and transformational exports.
And that program instructs us to target 20% of our portfolio to take China directly on around the world and find those opportunities in countries in Africa where we can provide competitive financing to neutralize China’s terms, and advance the US comparative leadership in the world..
I hear regularly that the US makes fantastic products and different services and that the world likes to buy from America. But it’s hard to compete sometimes when you have China doing debt trap financing. And so our job is to support good transactions that protect the tax payer.
But now Congress has given us a new tool to engage with our African counterparts, so that they consider us and come to us. And so I’ve had some robust conversations and we will see — again this just happened in December, so we’re in the process of standing up this program and we welcome applicants, and we are happy to engage in discussions on this.
So it may be that you can offer some of the financing if not all of the financing.
The legislation says, “The bank shall establish a program on China and transformational exports to support the extension of loans, guarantees and insurance at rates and on terms and other conditions to the extent practicable that are fully competitive with the rates terms and other conditions established by the People’s Republic of China.”
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And then it also asks us to advance the comparative leadership of the United States with respect to China or support US innovation through direct exports in 10 key areas.
So when I meet with my foreign counterparts and I share these 10 areas, they are very keen on continuing discussions and thinking about this, and these areas include things such as biotechnology, agriculture, biomedical sciences, wireless communications equipment including 5G, renewable energy and water treatment and sanitation.
So those are some special focus areas that I know are important to Africa and important to our exports.