trade finance press abstracts

Trade FinancePress Abstracts

International Trade Centre

Trade FinanceNo. 3 & 4/2002

U N C T A D / W T O

ContentsFeature articles:

1. One year later: The impact of the euro on developing countries’ trade 3

2. Financing women entrepreneurs: The conceptual framework for countries in transition 7

Acronyms and abbreviations 10

Trends and recent developments 11

News from the regions 25

-Middle East and Asia 25

-Eastern and Western Europe 28

-Africa 30

-Central and Latin America 32

OECD Export Credit Rates 34

News on ITC’s Trade Finance Programme 35

Sources for Press Abstracts 36

International Trade Centre UNCTAD/WTO Trade Finance ProgrammePress Abstracts n° 3 & 4 /2002

ITC AND THE PRESS ABSTRACTS

The mission of the International Trade Centre UNCTAD/WTO is to support developing and transition economies - and in particular their business sectors - in their efforts to realise their full potential for developing exports and improving import operations, with the ultimate goal of achieving sustainable development. Furthermore, as an executive agency of the United Nations Development Programme (UNDP), ITC directly implements UNDP-financed projects related to trade promotion in developing countries and economies in transition. The ITC trade promotion programmes cover six key areas: Product and Market Development; Development of Trade Support Services; Trade Information; Human Resource Development; International Purchasing and Supply Management; and Needs Assessment and Programme Design for Trade Promotion. The Trade Finance Press Abstracts are compiled quarterly by ITC’s Trade Finance Programme in an effort to provide news and specialised information concerning international trade credit and credit insurance to entrepreneurs, bankers and financial experts in developing countries. Although its content may vary from issue to issue, it is usually structured around a general section, covering trends and new products, and regional sections, made up of news from individual agencies. Events and news from ITC’s Trade Finance team complement the bulletin.

ITC’s TRADE FINANCE PROGRAMME

What is it? A programme aimed at facilitating access to finance for SMEs in developing and transition countries. How? The programme provides assistance to developing countries and economies in transition via the strengthening of the existing structure of their financial institutions, mechanisms, and schemes - both at public and private sector levels - in order to facilitate the exporting community’s access to finance. It also contributes to building up enterprise capability in the financial field in order to enable these countries and economies to become competitive in international markets whilst reducing their export risks. Who is it for? The Programme is targeted at enterprises and public and private financial institutions in developing and transition countries, with a particular emphasis on LDCs.

This issue covers the period from July to December 2002. For further information, please visit ITC’s website at http://www.intracen.org/tfs/

or contact

Mr. Carlo F. Cattani Senior Adviser on Trade Finance BAS/DTSS

Telephone: (+41) 22 730 0308, Fax: (+41) 22 730 0576 E-mail: [email protected]


FEATURE ARTICLES 1. One Year Later: The impact of the euro on developing countries’ trade Stage three of the European Monetary Union (EMU) began on 1 January 1999. Three years later on, the introduction of euro notes and coins has successfully taken place. As of 1 January 2002, the euro has been part of the daily life of all EU citizens. Since 2001, the global economy has been in a recession and world trade growth has stagnated. As the euro area is highly integrated into the global economy and very dependent on trade, these developments have had a strong negative impact on the EU (European Union) member countries. The euro area is gradually recovering from this downturn; but inflation in retail prices after the euro cash changeover has lowered consumer spending interest. This development might have some impact on trade between developing countries and the euro area. The channels through which the euro affects the economy of other given countries are different and varied. The weight of influence of the euro on a single country is still contingent upon the intensity of a country’s trade and financial relations with the euro zone, its role in international capital markets, and the exchange rate policy of its state institutions. The aim of the following article is to provide an overview of the last developments concerning trade between the euro zone and developing countries. It will analyse the countries of Latin America and the Caribbean, the Middle East, and North and Sub-Saharan Africa. It will also provide a closer look at trends in capital markets, private portfolio holdings and the international role of the euro. The use of the euro in capital markets Since the start of the EMU was announced, issues of international money market instruments have taken on increasing importance as the benefits of issuing corporate bonds have increased. In the bond and equity markets, the importance of the euro has

expanded greatly. Given that the economies in the euro zone are more and more closely entangled as time goes by, cross-border financial interconnections have become increasingly important. This development has helped to catalyse greater integration within the euro area. Higher efficiency in financial markets due to increased competition will facilitate borrowing and investing for residents and non-residents of the euro area. The European bond markets have grown to become the second largest in the world, meaning that debt securities of unprecedented size can be issued. The consequence of this has been a wave of mergers and acquisitions in the corporate sector of the euro area, leading to better investment possibilities. A similar development towards further integration can be found in the stock market of the euro zone. The new large and open market place makes a sizeable number of investors available for issuers across the euro zone, and so young and innovative firms can therefore obtain financial aid through their listing in the stock market. The use of the euro in private portfolio holdings The size of the euro area, the elimination of exchange rate risks, a single monetary policy, new cross-border payment systems like TARGET and the harmonisation of procedures and market conventions are the driving factors for the establishment of fully integrated, deep, broad and liquid markets in euro. Due to slow growth and a possible imminent conflict between the United States and Iraq, the demand for financial assets denominated in euro is rising. International investors are attracted by the fact that the policy of the ECB (European Central Bank) is oriented towards stability. On the other hand, EU domestic investors try to diversify their risk by shifting some of their assets into other regions. Investment from outside the euro area in euro-denominated assets is in general dependent on


confidence that the purchasing power of the invested money will be preserved. The use of the euro as a vehicle, pricing and quotation currency In foreign exchange markets the theory of economies of scale is also applicable. The reduction of transaction costs is one of the main determinants of the use of a currency as a vehicle currency. In private international transactions, the dollar is the main unit of account. In the case of trade in manufactured goods between industrial and developing countries, the currency used for invoicing is most usually that of the industrial country or that of a third nation. Trade between developing countries is often priced in the currency of a third country, and that currency, used for invoicing, is most likely to be the US Dollar. The role of the euro is comparable with the role of the Deutsche Mark prior to EMU, and so the US dollar continues to be the most important vehicle currency. The euro accounts for a fifth of the global foreign exchange market turnover. Compared with the US dollar, the role of the euro as a quotation currency is negligible. The situation of the respective currencies for the pricing of commodities is alike, with one exception: shares listed on the European stock exchanges, where the euro is dominant. The euro as an anchor, reserve and intervention currency Outside the euro area, 55 countries peg their currency to the euro, include the euro in their currency boards or use it as a legal tender. This can be interpreted as a sign of international confidence in the stability of the euro. Since close trade and financial linkages are the main reasons to choose the euro as a reference for exchange rate policy, countries using the euro as an anchor can all be found in the so-called euro-time-zone. As a reserve currency, the US dollar is predominant. The euro’s share of total world foreign reserves is, however, analogous to the

total share of the euro legacy currencies prior to the introduction of the euro. The relationship between the euro as an anchor currency and as a means of intervention is closely related. Euro-denominated intervention has taken place in EU accession countries such as Poland, Hungary, Bulgaria, and Estonia. In spite of this, countries that are not pegging their currency to the euro may also use it for intervention purposes, particularly in the context of the G7. Trading with the euro zone - implications for SMEs in developing countries The introduction of the euro has been followed by a greater price transparency, which broadens the opportunities for business trading with the EMU. However, this effect changes risks, as other market players try to benefit from the new market opportunities. Latin American and the Caribbean Countries The heterogeneity of the Latin American and Caribbean Countries (LAC) is the reason for the varied degrees of impact of the introduction of the euro throughout this region. Countries with a strong trade relationship with the EU (e.g. Mexico and the Central American countries) are likely to be more affected than others. Though the trade openness of the EU is computed on the basis of the average of merchandise exports and imports as a share of GDP, and is quite high, the introduction of the euro is generally not having a strong influence on trade between the EU and LAC. The reduction in transaction costs through invoicing in a single currency when trading with different EU-countries is moderate. Of greater importance could be the increase in efficiency and competition in the EU. As a consequence of a rise in import demand in the euro area, exports from LAC would also increase. On the other hand, the opposite effect is also possible: the elimination of exchange-rate risks and the reduction of transaction costs in the euro zone could lead to a trade diversion effect. This would mean that a rise in intra-


European trade could decrease import flows from third countries. Financial deepening in Europe may lead to an increase in growth in the EU and therefore have a small positive effect on exports from the LAC region. In terms of debt-management policies, the share of the international debt that is held in euros could increase due to a rise in the total foreign trade share with Europe. The euro and an enlargement of the European capital market will not significantly change access to capital for the LAC region. Looking at reserve management, the euro has the potential to cause a shift from the Dollar to the euro for reserve holdings, especially in the LAC region, where the dominance of the United States is currently strong. Sub-Saharan Africa The differences in the openness of trade throughout Sub-Saharan Africa are significant. Exports from this region to the EU are almost exclusively focused on primary commodities. Growth as a consequence of the introduction of the euro could have spillover effects for Sub-Saharan Africa; but these effects are only applicable if market integration has taken place between a Sub-Saharan country and the EU. Any increase in exports from Sub-Saharan Africa will, however, be limited. The opposite effect is quite unlikely, because export goods of Sub-Saharan African countries are not in direct competition with goods produced in Europe. Substantial changes can only be expected through a change in the EU Common Agricultural Policies. Another transmission channel through which the euro affects Sub-Saharan countries is the real exchange rate. The effects of changes in the real exchange rate for one of these countries are determined by the exchange rate regime in each country, and by geographical patterns. Countries pegging their currency to the euro will lose competitiveness in the case of an appreciation of the euro, whilst countries using a basket of currencies of their main

trading partners will not be as susceptible to fluctuations in the euro. Middle East and North African countries The introduction of the euro is having negative effects on the development of industry in Middle Eastern and North African (MENA) countries. The relatively high degree of sharing of the manufacturing sector with the euro zone, and a high share of trade, are the reasons; but the effect depends on the specific country's production structure and export orientation. The MENA region in general will be affected in two directions by the introduction of the euro. High value-added industries (e.g. agriculture) will benefit, and low value-added industries (e.g. basic manufacturing product industry) will suffer. Possible disadvantages for non-European companies trading with the EU Companies in a close trading relationship with the euro zone can be hit by several drawbacks. On the one hand, price fluctuations could occur, caused by exchange rate variability and losses due to inflation differences between the euro zone and the home country. On the other hand, production structures and export performance might be affected through the exchange rate volatility of the intra-euro zone. It is also possible that euro zone companies might change the composition of their supply chain with the objective of excluding non-resident partners, in order to avoid currency conversion problems. Finally, goods may be quoted in euros instead of dollars, thus necessitating adjustments in corporate processes. Possible adjustments of corporate strategy and business processes Preserving competitive advantage should be the main aim of a non-European company trading with the EU. It is therefore necessary that such a company should keep informed about market developments within the EU. In addition, exchange rate risk needs to be lowered. Possible approaches could include floating exchange rates (as in Mexico and Peru); capital controls (as in China and Malaysia); currency boards (as in Argentina


and Hong Kong); or perhaps even abolition of national currencies and adoption of the dollar or euro for domestic transactions. Purchasing arrangements for product sales within the EU should be modified by switching to euro zone suppliers. If intra-European demand is substantial, the establishment of subsidiaries in the EU and the possibility of increasing production capacity should be considered. Suppliers to EU companies should take into account the fulfilment of payments in euros. Furthermore, when initiating trade with the euro zone, the possible necessity of software adjustments and changes in processes should be considered. Conclusion The major findings of this article are that more competitive financial markets in the EU will lead to higher efficiency and therefore facilitate borrowing and investing for residents and non-residents of the euro zone. Another outcome could be a rise in import demand from the EU. Furthermore, the conclusion can be drawn that the dollar is still the most important vehicle currency and the most important reserve currency: only as an anchor currency has the importance of the euro truly risen. The impact of the euro on different regions differs: it is possible that countries with a high share of trade with the EU might be the only ones affected. The type and direction of the effect is, however, dependent on country-specific industries. The international use of the euro will be dependent on the liquidity, broadness and depth of the euro area capital market providing lower transaction costs. Other important factors are the stability of the currency itself, and the minimising of portfolio risks through diversification. It is still much too early for any definitive assessment of the long-term place of the euro in the international monetary system. For the purposes of sustainable development, developing countries’ access to the European market needs to be simplified. A reduction of tariffs and a diminishment of quotas are

therefore essential. In particular, certain sectors - the sectors of interest for a developing country, like agriculture, or certain products such as textiles - should be loosened up. This could foster the exports of developing countries and, as a result, encourage their growth. References:

Bekx, Peter (1998). The Implications of the Introduction of the Euro for non-EU countries.

Cohen, Daniel, Kristensen, Nicolai, Verner & Dorte (1999). Will the Euro create a Bonanza for Africa?

ECB (2001) Review of the International Role of the Euro.

IMF (2002). IMF Executive Board Discusses the Monetary and Exchange Rate Policies of the Euro Area and the Trade Policies of the European Union, Public Information Notice (PIN), No. 02/122.

Köhler Horst & Wes Marina, EBRD (1999). Implications of the Euro for the integration process of the transition economies in Central and Eastern Europe.

Krugman, Paul R. & Obstfeld, Maurice (2000). International Economics.

Pollard, Patricia S. (2001). The creation of the Euro and the Role of the Dollar in International Markets, Federal Reserve Bank of St. Louis.

RiskTrak. Addressing EMU/Euro Transition Risk. http://www.risktrak.com/euro, 10/15/2002.

Ruhashyankiko, Jean-Francois (1999). The Euro and the Production Structure and Export Performance of Middle East and North African Countries. IMF Working Paper.

Solans, Eugenio D. (2002). European financial integration and the international role of the euro. Speech delivered at the Global Economic Summit IV.

Verner, Dorte (2000). The Impact of the Euro in Latin America. World Bank Latin American and Caribbean Studies.


2. Financing Women Entrepreneurs: The conceptual framework for countries in transition

The ways in which transition countries are tied by trade to the world economy have changed radically with the move from a centrally-planned economy to a free market. Trade liberalisation has resulted in an increase in international trade, its reorientation towards western countries, and a fast growth in the number and size of women-owned businesses. Statistics show that women in advanced market economies own more than 25% of all businesses. 20-25% of entrepreneurs in transition countries are women. Entrepreneurship is an important entry point for women into a modernising economy. UNECE (2002) classified the development of entrepreneurship in the countries of transition (CITs) into three major groups: 1. Countries making rapid progress These

countries include the “Visegrád group” – the Czech Republic, Hungary, Poland and Slovakia – which, with the exception of Slovakia, are now OECD countries. Estonia and Slovenia are also making rapid progress.

2. Countries at an intermediate stage of transition like Bulgaria, Croatia, Latvia, Lithuania, Romania, Kyrgyzstan and Uzbekistan.

3. Countries making slow progress with less commitment from their governments towards SME sector development. This group includes Albania, The Former Yugoslav Republic of Macedonia and the majority of the CIS countries.

In this context, women business owners are key agents of change in countries where the state no longer assumes primary responsibility for direct investment in production, and where the role of women entrepreneurs makes a significant contribution to the economy. The problem, however, is that SMEs - and women entrepreneurs in particular - operate in an unfavourable regulatory environment and regularly face difficulties obtaining finance. OECD (2000) revealed a number of possible explanations of the extent to which women-owned businesses perceive these difficulties as

more serious constraints than male-owned businesses do. This is due to a combination of factors rooted in the structure of the enterprise (e.g. size, sector), the entrepreneur’s business competencies and the legal and economic environment. In addition to this, there is an argument to be made that gender characteristics may go some way towards explaining the difficulties women face in obtaining finance. Some such characteristics are listed below. Unconventional thinking. Women

entrepreneurs may, when compared to men, have unconventional ways of thinking and doing business. Financial intermediaries may not have the skills and experience necessary to evaluate innovative business ideas for which there are no benchmark values for credit assessment. Cultural and social values. Because of

deep-seated social values instilled by upbringing and education, women may lack confidence when dealing with authorities and financial institutions in some countries, and may therefore find it difficult convincingly to convey their business proposals. For the same reasons, financial intermediaries may also view women entrepreneurs as less capable. Family responsibilities. Women typically

combine running a business with running a family. This double responsibility may lead to strong risk aversion, which in turn makes these women more likely to ask for small loans. Family responsibilities and the implicit issue of multiple priorities may also disfavour women entrepreneurs in the eyes of creditors. Lack of management skills. In several

industrialised countries, women entrepreneurs often have a higher level of education than their male counterparts, but tend to have little entrepreneurial or management experience. This may place them at a disadvantage in obtaining finance.


The possession of smaller amounts of personal capital which could be used for start-ups or collateral. Possible explanations for this phenomenon include lower wage earnings for women, and smaller inheritances for daughters than for sons. Despite these characteristics, which are strongly rooted in traditional gender roles, women entrepreneurship should not be treated as a ‘special’ case. Two best practices have been chosen in order to propose a conceptual framework for the governments of the transition economies to use when dealing with SMEs. The Italian industrial model presented by UNIDO (1997) has been chosen in order to create a stable regulatory environment in which the competitiveness of SMEs is fostered. The model of new lending solutions developed and used by SMEloan Hong Kong limited, introduced in the 2002 Expert Meeting of UNCTAD, is also incorporated as a component of the conceptual framework. The Italian industrial model is known world-wide as a successful example of endogenous development based on SME networks and clusters which are strongly rooted in their communities. The main idea of sustainable, long-term development is a bottom-up growth approach. Bottom-up growth based on small firms is considered a way of increasing societal employment - including self-employment - and a way of incorporating actors traditionally excluded from economic development, such as women and young people. The tendency for specialisation by women-owned SMEs may be increased by the fact that women entrepreneurs very often concentrate their activities in the women branches of the economy. Specialisation becomes a key factor in creating small-firms networks and clusters - in other words, “SME clusters”. The competitive advantages of SMEs grouped in clusters are based on three key issues: specialization, cooperation and flexibility. Italian SMEs are “governed” by institutions on the level of the European Union, the Italian government (national), regional government and local institutions. Since SMEs tend to be

very rooted in their local context, the focus of the framework is to show governance on the regional and local levels. A new lending approach to SMEs was presented at the UNCTAD Expert Meeting in 2002. The approach was developed and used by SMEloan Hong Kong Limited. SMEloan is a specialised Hong Kong finance company which operates with the American venture capital company Whitney & Co. The company leverages the power of the Internet in order to deliver debt and equity financing solutions focused exclusively on SMEs. The main aim of this lending approach is to seek new sources of information beyond financial statements, and to focus on cash flow projections and business plans. The Internet provides and captures on-going business information from SME borrowers on a timely basis, and builds a dynamic risk management and loan-servicing model for SME lending. The SME loan lending model focuses on quantitative data in order to achieve credit evaluation by analysing the triangular relationship between cash flows, sales and accounts receivable. It manages higher-risk SME borrowers instead of all borrowers, and shows which SME borrowers are having problems. In this model, the Internet is the means by which to obtain information from SME borrowers and the tool to empower them to borrow more when they want to. SMEloan's target segment of the market is loans of US$50,000 - US$600,000. The SMEloan model only provides finance for SMEs if their businesses are attempting to grow. SMEloan itself achieved scalability and consistency in the credit evaluation by focusing only on those borrowers that are showing exceptions. They were able to reduce credit losses because the internet-based SMEloan system “knows” the business performance of borrowers on a real-time basis. These two models, the Italian model and the SMEloan model, appear to have enough positive effects and influence to be used for the development of a conceptual framework for countries in transition.


(1) Macro level: Government and Public Institutions serve at the national level and create policy and strategy, which influence trade performance at other levels of the system.

(2) Meso level: Support Agencies refer to

industrial bodies, which provide incentives and facilities for potential and present traders.

(3) Micro level: The Firm and Management

represent the last level or component of the system and include all the so-called SMEs. Common to the three components in the system is that, in unison, they can help to create a stable regulatory environment and boost the competitiveness of SMEs by improving policy and SME access to development practitioners. Through these activities the ultimate aim of promoting trade strategy is achieved.

Trade promotion strategy should be based on key strategies, pursued by SMEs on their own: The innovation strategy, which is based on

the generation of new ideas, such as a new product or service creation

The cluster strategy, which focuses on networks of firms which are linked to each other in order to access new ideas and knowledge

The foreign direct investment strategy, which bestows upon the firm such advantages as know-how and know-why.

The framework above shows synchronicity and interconnectedness within the system, and is designed to improve policy and SME access to finance. The model proposed by SMEloan Hong Kong Limited is a potential solution for the creation of this kind of institution in the transition economies. This should help eliminate the most specific barrier faced by women entrepreneurs: finance.

References: P. Bianchi, Lee M. Miller & S. Bertini (UNIDO) (1997). The Italian SME Experience And Possible Lessons For Emerging Countries. SMEloan: http://www.smeloan.com/en/press/news2000.html UNCTAD (2002). Improving the Competitiveness Of SMEs Through Enhancing Productive Capacity: Financing Technology. Expert Meeting. 28-30 October 2002, Geneva.


ACRONYMS AND ABBREVIATIONS Unless otherwise specified, all references to dollars ($) are to United States dollars. The following acronyms and abbreviations are used: CIRR Commercial Interest Reference Rate

COFACE Compagnie Française d’Assurance pour le Commerce Extérieur

ECA(s) Export Credit Agency (Agencies)

ECGC Export Credit Guarantee Corporation, India

ECGD Export Credit Guarantee Department, United Kingdom

FDI Foreign Direct Investment

GTF Global Trade Finance

HIPC(s) Heavily Indebted Poor Country (Countries)

L/C Letter of Credit

LDC(s) Least Developed Country (Countries)

MIGA Multilateral Investment Guarantee Agency

NCM Nederlandsche Credietverzekering Maatschappij, Netherlands

S&P Standard & Poor’s (ComStock Inc., USA)

IT Information Technology

TF Trade Facilitation

In this Issue: AFESD Arab Fund for Economic and Social Development ART Alternative Risk Transfer ATI African Trade Insurance Agency BOOT Buy Own Operate Transfer CCB Czechoslovak Commercial Bank EEHC Egyptian Electricity Holding Company EFIC Export Finance Insurance Corporation ECG Export Credit Group, OECD FSA Financial Services Agency IDA International Development Agency IDB Islamic Development Bank IMF International Monetary Fund KNCU Kilimanjaro Native Corporation Scheme, Tanzania SACE Sezione Speciale per l’Assicurazione del Credito all’Esportazione, Italy SURF Settlement Utility for Risk and Finance VEB Vneshconom Bank, Russia VTB Vneshtotg Bank of Russia


TRENDS AND RECENT DEVELOPMENTS CREDIT INSURANCE ♦ Japanese insurers hit by downgrades

Eight Japanese non-life insurers have been downgraded by Moody’s Investors Service, the credit rating agency, which cited as its reasons slowing industry growth and poor investment returns due to continued weakness in the broader economy.

The agency downgraded the insurance financial strength ratings of seven insurers by one notch. Tokio Marine fell to Aa2; Nichido Fire to Aa3; Sompo Japan to Aa3; Mitsui Sumitomo Insurance to A2; Toa Reinsurance to A2; and Nissay Dowa to A3. Aioi Insurance suffered a two-notch downgrade to A3 due to damaged consumer confidence and declining capital following losses through reinsurance contracts with Fortress Re, the US reinsurance company.♦

(Financial Times, July 2002)

♦ Munich Re faces ratings cut after bailout of US arm Standard & Poor’s warned that it might cut Munich Re’s triple-A credit ratings. This comes after the world’s largest reinsurer said it would inject a further $2 billion (€2 billion) into American Re, its troubled US subsidiary, and raised its estimate of losses from the September 11 attacks by a further $500 million.

S&P said its decision reflected heightened concerns about American Re’s earnings and capital adequacy and their impact on the group as a whole. Munich Re executives insisted it was the final injection of funds into the ailing US unit, which required a $1 billion bailout last year after heavy third-quarter losses. But analysts said the size of the cash injection pointed to continuing problems at the US company, acquired five years ago for about $2.5 billion.♦

(Financial Times, July 2002)

♦ The US Department of Agriculture’s Commodity Credit Corporation allocates US$ 120 million of export credit guarantees Total credit guarantees for the export of US agricultural commodities to Turkey available under GSM-102, the Department’s export credit guarantee programme, now amount to US$ 465 million. ♦

(International Trade Finance, July 2002)

♦ OECD consensus: medium- and long-term premium categories are raised for several countries Belize moves to category six for political risks, from category five (on a one to seven scale, where one is equal to lowest risk). Colombia also moves to six (previously five). Kenya is now seven (six), St. Kitts and Nevis five (four), St. Vincent and the Grenadines five (four), Uruguay five (three) and Venezuela five (four). ♦


♦ Turkey: Export Risk Guarantee Agency removes Pamukbank from its list The removal from the list of banks for which cover of commercial risk is available is due to deterioration of the bank’s rating. ERG is able to provide cover for ten local Turkish commercial banks, including Akbank; Finansbank; Kocbank; Turkiye Garanti Bankasi; and Yapi ve Kredi Bankasi. ♦


♦ Venezuela: South African credit insurer Credit Guarantee Insurance Corporation of Africa is no longer able to insure Venezuela


CGIC says that the suspension of cover comes as a result of a shrinking economy, civil unrest and a banking sector that has all but broken down. Unrestricted cover has been unavailable for some time, but the latest downgrade means that even letters of credit from local banks are regarded as unacceptable security. ♦


♦Yugoslavia: ERG reclassifies Raiffeisebank Jugoslavia The Swiss ECA now accepts the bank’s cover for short-term commercial risk and its status as guarantor for credit guarantee transactions.♦


♦ Stormy business climate could ferment new reinsurance products As the reinsurance industry comes fully to terms with a disastrous 2001, some observers are predicting that the market’s navel-gazing will eventually help to spawn a new set of products for clients. Some optimistic brokers forecast that the reinsurance market will continue to support the existing needs of the primary credit and political risk market, and will also develop to support the changing needs of primary players. This will lead to more efficient use of capital by the primary players and more efficiency in the market, which will reduce pressure on pricing. According to this point of view, the key to revamping reinsurance models is technology that enables primary players better to understand individual and overall portfolio risks. This is being developed in-house in many cases, although it is sometimes outsourced from information providers in which credit insurers have often taken stakes.

Among the latter category is Company Watch, in which Gerling NCM has increased an original 10% investment to 23%. Presently able to provide evaluations of the financial health of every company in the UK, it plans to provide a service to clients for all the world’s quoted companies by the end of 2002. This service uses more than 20 analytical models to explain where

a company is strong or weak, making clients able to fine-tune predictions by adding their own data. Elsewhere, credit information providers such as Dun and Bradstreet are providing management and analysis products, through which credit insurers can track, in real time, each adjustment to an individual receivables file or any tuning of debt failure probability. The speed at which such models spawn new reinsurance products remains to be seen. ♦


♦ Argentina crisis: a test of the relevance of many of the new private market political risk players Export and trade finance teams at major European Banks are warning that the readiness of new private market political risk underwriters to pay out on Argentinian claims will be seen as a key test of the insurers’ relevance to banking needs. This is because of the changed nature of emerging country crises: now economic activity is much more market-based, and governments are much less often the financiers or guarantors of purchases and projects.

Argentina has exhibited a series of piecemeal failures rather than any state-imposed national moratorium on all payments. Bankers at the IBC conference warned openly that underwriters who seek to exploit this fact to draw a particular narrow definition of political risk and avoid paying claims are likely to see their new business dry up.♦


♦ Hermes: New license in Japan Hermes - the subsidiary of German credit insurer group Euler & Hermes (Allianz) – has obtained a license to distribute its forces credit assurance to Japan. It will work on domestic credit assurance; credit assurance export activities will remain in the hands of the governmental agency Nipponese Export and Investment Insurance (NEXI).♦

(Le Moci, May 2002)


♦ Hannover Re set for top year

Hannover Re, the world’s fifth-largest reinsurer, said it was on course for one of its best years after it reported a 32 per cent increase in first-half earnings. Strong premium income in its property and casualty reinsurance division lifted Hannover’s earnings before interest and tax to €284.3 million ($287.1 million). Net income for the first half rose 23 per cent to €146.3 million.♦

(Financial Times, August 2002)

♦ Swiss Re rating under review

Standard & Poor’s placed the triple–A credit rating of Swiss Re under review with negative implication. The rating agency said it was concerned Swiss Re’s capital adequacy declined this year to a level inconsistent with its current top rating. This reduction was driven mainly by unrealised investment losses of SFr 2.4 billion and a lower net income than in 2001. ♦


♦ Credit Guarantee (South Africa): winning new customers in unfamiliar markets The number of business failures after 11

September has had a distinct impact on the claims ratios of credit insurers, making for much more difficult underwriting conditions. Mike Truter, Credit Guarantee’s new managing director, is not unduly pessimistic about the future. What Credit Guarantee has to do, he said, is continue providing good services to clients and pay claims quickly when they arise. South African businesses, he added, should be capitalising on the opportunities that are now presenting themselves, even though to some exporters this may entail venturing into unfamiliar markets and dealing with strange customers. Credit Guarantee can play a valuable role in vetting these risks, helping exporters to identify good quality clients and to concentrate all their energies on developing the market with these. If something goes wrong for some reason, he finally argued, Credit Guarantee will step in and assist the exporter in collecting their

money through its international connections, or indemnify them if the customer does eventually default. ♦

(Credit Notes, June 2002)

♦ French insurers move to reassure investors

Axa and AGF, the French insurers, have moved to reassure nervous investors about their solvency ratios – which measure their abilities to meet obligations – following damaging stock market falls in recent months. Reporting first-half results, both companies produced figures showing that they have room for manoeuvre on solvency thresholds. They also said that declining income from capital gains has been offset by improved operating profits as a result of charging customers higher premiums.

Axa, the largest French insurer, said it had set aside an extra €89 million ($89.4 million) to provide for costs arising from the World Trade Centre terrorist attack; this is in addition to the €561 million put aside last year. Axa also set aside a further €225 million to cover falls in equity prices, taking its total charge to €1 billion. AGF, a subsidiary of Germany’s Allianz, set aside €212 million in the first half of this year to cover capital losses on equity holdings attributable to shareholders.

Because at present each insurance group applies different rules, the French insurance regulator has begun negotiations to introduce a common standard on provisions for equity depreciation.♦

(Financial Times, September 2002)

♦ Marsh/Benfield talks break down

The plans for a takeover of the UK-based Benfield Group by Marsh, the world’s giant in insurance brokerage, have been shelved; but talks point out Marsh’s continued eagerness to enlarge the company’s portfolio in the direction of insurance broking business, especially with regard to an increase in insurance and reinsurance premiums.♦



♦ Russia offers insurance against its own officials The Russian government and the World Bank have initialised a program in the Russian Federal Centre for Project Finance that provides investors with a “non-commercial risk” insurance against “government performance and force majeure”. The aim of this initiative is to enhance foreign direct investment and to put an end to disagreements between politicians and officials. Projects in the coal and timber industries will be the first to be backed up with such insurance; and large-scale guarantees in the oil, gas and diamond sectors may follow. The annual premium charged for this insurance is around 1.5 per cent of the total loan value.♦

(Financial Times, September 2002) ♦ MIGA: so far an almost unknown

instrument of guarantee The Multilateral Investment Guarantee Agency (MIGA) is a subsidiary of the Worldbank that was created in 1988. It offers long term guarantees (15 to 20 years) covering four non-commercial risks associated with foreign direct investment (FDI): the lack of foreign exchange and transfer restrictions; breaches of contracts; expropriation; and armed conflicts and civil disorders, including terrorism. Moreover, MIGA offers technical assistance to the recipient country and, co-operating with other private and public insurance companies, issues guarantees under its name in 155 countries. Since its creation, MIGA has signed around 70 guarantees for projects in Africa, facilitating FDI in the range of $4 billion. Africa accounts for 13.5 per cent of MIGA’s portfolio.♦

(Marchés Tropicaux, July 2002)

♦ Euler & Hermes enter China The French-German Euler & Hermes group is the first foreign credit insurance company to obtain a license to open a representation office in China. In two years’ time, the company may be allowed to ask for a

license to pursue credit insurance business.♦

(Le Moci, September 2002)

♦ Gipac launches coverage of political risk Gipac (une assurance crédit des entreprises agroalimentaires) has chosen Sial (Salon international de l’agroalimentaire) as the stage on which to launch its first credit insurance for political risk. This is a totally new product, but indispensable for preserving the big accounts. Gipac is guaranteeing more than €15 billion of transactions; of that, 40 per cent is for exports.♦

(Le Moci, October 2002)

♦ Credit assurance in times of credit crunch Confronted with a strong increase in damage credit since the second semester of 2001, insurance companies have reviewed the tariffs of their policies. Furthermore, the agreement on guarantees and the procedure for credit allocations has become more selective and restrictive. Less lucrative contracts have even been terminated, or not renewed, due to difficult conditions.♦

(Le Moci, October 2002) ♦ Ukraine: Swedish ECA EKN resumes

cover for medium-term business An EKN statement has confirmed that “we are open, with a very restricted policy, for medium term guarantees (risk period not exceeding five years)”. EKN is only dealing with private buyers financed with an international financial institution such as the European Bank for Reconstruction & Development. EKN’s policy for short-term guarantees is unchanged at premium class four plus 100 per cent.♦

(International Trade Finance, September 2002)


♦ Kenya: telecoms operator taps OND-guaranteed local debt

In a notable use of Kenya’s capital markets, mobile telephone company Safaricom has raised a five-year Ksh205bn ($33m) loan from six local banks to support the expansion of its network. The loan was syndicated to six banks in Kenya, which also arranged a Ksh4bn floating rate bond facility and a €25m loan, raised by Safaricom in 2001 for the project’s first phase. The market is now awaiting one of the largest-ever sectoral deals in Africa, a $455m-equivalent project financing being jointly arranged by Citibank and Standard Bank London for Nigerian mobile operator MTN Nigeria. Bank meetings in this area are scheduled for late September and early October.♦


♦ IFC boosts Brazilian trade finance sector

with $600m package

The International Finance Corporation has decided to provide new liquidity for Brazil's tight markets by extending trade credit lines worth $600m to two of Brazil’s largest private sector banks, Banko Itau and Unibanco, for on-lending to Brazilian exporters. IFC executives believe the new package will encourage international lenders to keep credit lines open to Brazilian financial institutions.♦

(International Trade Finance, October 2002)

♦ EDC creates Warsaw office for growing eastern European markets

Export Development Canada (EDC), Canada’s official export credit agency, has established a permanent representative in Warsaw to market its services to potential clients in eastern European markets. Poland is the fourth country where EDC has established foreign representatives - the other three being China, Brazil and Mexico. EDC's approach contrasts with the business development policy at, for example, UK’s Export Credits Guarantee Department (ECGD). The ECGD has undertaken so-called “destination marketing”, whereby, rather than establishing representative offices, ECGD sends underwriters and senior officials on visits to a range of emerging market countries.

In both cases, however, the aim is the same - to target potential foreign buyers and borrowers in the markets concerned, and to strengthen contacts with national exporters with an on-the-ground presence.♦


♦ Credit Guarantee: underwriting profit despite “brutal” insurance climate

Against the backdrop of what CEO Mike Truter calls a “brutal underwriting climate” for credit insurers around the world, Credit Guarantee has produced surprisingly good results for the past financial year. The company achieved an underwriting result of some R7.1 million on a total insured turnover of R75.8 billion for the year ending June 2002. This was despite having paid claims of more than R400 million and incurring underwriting losses of more than R40 million from reinsurance-inwards on credit risks elsewhere in the world.♦

(Credit Notes, October 2002)

♦ Trade Finance takes political risk in its stride

While financial markets in the developed world have been gripped this past year by the newly-realised phenomenon of accountancy risk, emerging markets specialists have been struggling with a more familiar, if more intractable, problem – that of political risk.

James Cunningham, associate director at Marsh Credit & Political Risks Europe, had this to say: “ the events of September 11 did not have a direct impact on the political and credit insurance markets in the Middle East”. Trade finance has always been regarded as the most resilient of financial products, able to continue when all other capital markets are effectively closed. The performance of the trade and export finance markets in the Middle East over the year since September 11 has proved this point again.♦

(Global Trade Review, September/October 2002)


♦ ECGD backs Mozal smelter expansion

The UK’s Export Credits Guarantee Department (ECGD) is the latest export credit agency to support Mozambique’s expanding Mozal aluminium smelter – the country’s biggest target of foreign investment in 27 years of independence. The country remains one of the world’s poorest, but it has a strong track record of economic and political reform and efforts to combat poverty. Mozal helps to diversify the export base away from a reliance on farm products, such as cashew nuts, and electricity sales to South Africa from the Cahora Bassa dam. Institutions supporting Mozal include COFACE and other major export credit agencies, the Development Bank of Southern Africa, the International Finance Corporation and CDC Capital Partners (the former Commonwealth Development Corporation).♦

(International Trade Finance, February 2002)

BANKING SECTOR ♦ SocGen moves away from francophone-

oriented past Like other large Paris banks, Societe Generale has broadened the geographical spread of its client base amongst capital goods and project companies. Now they are active in 17 programmes in exporting countries. Amongst non-OECD countries, great confidence is placed in Turkey and Iran. This confidence reflects real factors. In fact, Iran’s efforts to honour the settlements of trade payment obligations rescheduled at a moment of crisis in the 1990s have paid dividends. With the Islamic Republic now in a much stronger financial position, European Banks have hurried to get massive export credit lines in place. Turkey has also been careful to ensure it meets its debt payment obligations. This means that SocGen is still maintaining country risk capacity for new Turkish deals.♦


♦ Gerling NCM pushes ahead with integration Final rebranding and integration of NCM and Gerling Credit products and services in the UK goes ahead from this month, as management presses on with the detailed implementation of the merger approved by the European Union competition regulators at the end of last year. Among the services offered, Serv@Net, the rebranded NCM Orbis, allows clients and brokers to have a direct online link through which to report debts and payment delays, trigger collection services and make loss claims where necessary. The merger has also cut the German exposure that now accounts for less than 20 per cent of group premium income and exposure; but Gerling NCM continues to expand in emerging markets. A joint venture has been set up in Tunisia, and a co-operation agreement signed for Latvia. In addition, a new office in Curacao will service trade through the Netherlands Antilles, an important centre for oil trade, business services and offshore finance.


♦ Mistrust in the banking system The proportion of respondents to a survey launched to find out who had recently asked its bank for trade finance advice was just 30.5 per cent, a fall from 34 per cent in 2001. Some nine per cent claim never to consult their banks. More than half of all exporters are dissatisfied with credit and country risk cover provided by their banks. All these findings tend to suggest that many small companies remain amateurish in their export dealings, rarely seeking expert advice and shielding themselves from the impact of exchange rate movements or insuring their receivables. ♦



♦ Proponix: reaching critical mass Proponix, the web-based trade services provider formed in 2000 by its three client banks - Bank of Montreal, Barclays and ANZ - and the American Management system, is looking to pull in new banking clients to attain the critical mass seen as the key to building a 21st century trade finance-related system. After the US, Canadian and Australian markets, Proponix has carved a niche in the Asian market, opening a Hong Kong service centre. The centre offers L/C reinsurance services, as well as the facilities for bank clients to bring in exporting documents - again, such as L/Cs - to be catalogued, scanned, imaged and moved onto the Proponix online platform. This is supported by the web-enabled Object TradeLine (OTL) back office engine. Documents are then processed electronically at the processing centres in Melbourne or Toronto. The second phase of the expansion plans is the targeting of the OTL platform at the European market.♦


♦ Tunisia: Amen Bank obtains a credit limit from ADB Amen Bank, second private bank of Tunisia, has obtained a credit limit of 26 million dinars (€20 million) from the African Development Bank (ADB). This is the first time that ABD has granted a credit limit to a private bank without the guarantee of the bank’s host country. This credit limit will allow Amen Bank to grant 10 year loans to its customers for the financing of projects in the sectors of manufacturing industries, transport, tourism or the services.♦

(Marchés Tropicaux, June 2002)

♦ Croatia: The Croatian Bank for Reconstruction and Development (HBOR) signs a one-stop shop co-operation agreement with the UK’s ECGD for export guarantees and insurance

The agreement will assist exporters from both countries involved in joint projects in third countries. HBOR and the ECGD have also entered into an agreement for the exchange of know-how. ♦


♦ EX-IM India/Africa: The Export-Import

Bank of India signs a five-year, $10 million line of credit with the Eastern and Southern African Trade and Development Bank (PTA Bank) Under the credit line, importers based in PTA Bank’s 16 members countries will make advance payments of 10 per cent of contract value, with Ex-Im Bank providing the remaining 90 per cent of contract value to PTA Bank. Ex-Im Bank will reimburse Indian exporters on shipment of goods. ♦


♦ Russia: Norilsk Nickel secures a $75

million structured copper pre-export finance facility arranged by Deutsche Bank and SG The facility is built around a medium-term export contract between Norimet, a Norilsk subsidiary, and the Hamburg-based Norddeutsche Affinerie. Deutsche Bank’s Amsterdam branch acted as the sole mandated arranger and offshore agent, with SG’s Paris operation as senior arranger, whilst Deutsche Bank Ltd, Moscow, acted as onshore agent and passport bank. A limited syndication of the facility on a club basis is planned. ♦


♦ Malaysia: Standard & Poors (S&P)

raises the country’s sovereign rates one notch S&P accepted as positive a succession plan for the transfer of the country’s premiership, which has reduced the near-term uncertainty in the policy environment. The outlook remains stable. The long-term


local currency and the local currency senior unsecured debt ratings are now A+, while the long-term foreign currency and foreign currency senior unsecured debt ratings are BBB+. The short-term foreign currency sovereign rating is A2. ♦


♦ South Africa: The Export-Import Bank

India and the Industrial Development Corporation of South Africa sign a memorandum The aim of the memorandum is to promote two-way investment and trade relations between South Africa and India, and to develop business opportunities. ♦


♦ IMF’s plan for bankruptcy gaining

favour The International Monetary Fund (IMF) international bankruptcy procedure for sovereign governments is supported by the Group of Seven shareholder countries. The IMF’s new course of action in the case of sovereign bankruptcy is to persuade the governments of emerging markets to add special clauses to government bonds in order to aid restructuring.♦


♦ Tunisian-Kuwaiti Development Bank invests in leasing

The Tunisian-Kuwaiti Development Bank (BKTD) has decided to reinforce investment in leasing. As a result, the Tunisian-Emirates Investment Bank has completed the purchase of 25,000 shares from the International Arab Leasing Society. The BKTD is one of the rare development banks specialising in new project financing techniques.♦

(Marchés Tropicaux, July 2002)

♦ Tunisia: Afreximbank opens a subsidiary in Tunis

Following decisions by the African Development Bank, the African Export-Import Bank (Afreximbank) has opened a subsidiary office in Tunis. The office provides a full range of financial activities and an agency to ensure follow-up of the projects that it co-finances in the countries where the bank is active.♦

(Marchés Tropicaux, August 2002)

♦ Algeria: Creation of two new private banks The monetary and credit council of Banque d’Algérie has authorised the creation of two new private banks, the Algerian Gulf Bank and the Arcobank. In addition, the council is willing to bring three further bank institutions into the market.♦

(Marchés Tropicaux, September 2002) ♦ EDI and the security of international

payments The International Chamber of Commerce has started to draw up a supplement to the Uniform Customs and Practice for Documentary Credits (UCP 500), called e-UCP. This new publication concerns bilateral relations between clients and banks and the file presentation and digital data that they exchange via EDI (Electronic Data Interchange).♦


♦ Algeria: Saudi credit of $10 million for two banks The Saudi fund for development has agreed to a credit of $10 million for two Algerian banks. The purpose of this credit is to finance 100 per cent of the import into Algeria of goods and non-petroleum products of Saudi origin.♦

(Marchés Tropicaux, September 2002)


♦ BNP Paribas: Co-operation with Dresdner ceases

The agreement between BNP Paribas and Dresdner has been closed due to changes in market conditions and development strategies.♦


♦ Syria: Toward the first private bank

The Syrian banking sector is totally nationalised. Nevertheless, the authorities have announced the possible authorisation of private banks in the forthcoming year.♦


♦ ECGD mulls over risk transfer to private sector, and carries out less business

The ECGD, the UK’s export credit agency, will be considering offers from reinsurers and investment banks over the next few weeks for the transfer of its existing risk portfolio into the private sector. By transferring some of its portfolio into the private sector, ECGD can free up capacity, within its risk limits, for new export business. ECGD is willing to take Turkish and Brazilian risk, within limits, and also did a rare sub-Saharan deal in backing a slice of the Mozal project in Mozambique.♦


♦ Russia: The EBRD agrees a $10m loan

and equity option with Russia Standard Bank in the multilateral’s first Russian consumer finance deal

This 3.5-year loan will help develop consumer finance and encourage a broader range of products in the Russian banking sector. Russia Standard Bank has pioneered the availability of consumer credit in Russia, which will aid the development of the economy and help develop retail chains.♦


♦ Turkey receives US Ex-Im fillip

The US Ex-Im Bank is providing a loan guarantee supporting US$4.1m worth of exports for a new thermal spring tourist resort being built in Turkey. The exporters are World Brands Inc, Caterpillar Inc, and numerous US suppliers of furniture and a diesel power generator.

Turkey is one of US Ex-Im Bank’s largest markets; the Bank’s Turkey portfolio exceeds US$115m in financing to support US exports of equipment and services to Turkey for a broad range of sectors including power, transportation, textiles, housing and tourism.♦


♦ Nigeria: The African Development Bank

approves a $50m loan to finance a credit line to Citibank Nigeria

This credit line will be used for on-lending medium-term funds to corporate clients. The majority of funds will be directed towards companies with export-oriented operations in the power, telecommunications, textiles manufacturing, petroleum service, tourism, and marine transportation sectors. The companies are expected to use the funds to facilitate rehabilitation, modernisation and expansion of production facilities.♦


♦ Japanese: deal for TradeCard

TradeCard Inc, the financial supply chain company that enables buyers and sellers to initiate, conduct and settle their trade transactions securely over the Internet, has announced an agreement with Mizuho Corporate Bank to start a joint initiative introducing the TradeCard Platform to Japanese corporate customers. Mizuho will introduce the TradeCard Platform to its customers in Japan and will assist in the development of various aspects of the platform's functionality. The goal is the ability to carry out export finance, import finance and settlement on TradeCard.♦



♦ ING in talks to extend German banking interests

ING, the Dutch banking and insurance group, is close to acquiring Banca Capitalia’s German direct banking business in a deal that could intensify competition in the country’s overcrowded banking market. The two groups are in “exclusive talks”, bankers said, with observers valuing the business at around €500m. The two parties are expected to conclude a deal “within the next few weeks”, although differences over price could hold up an agreement.♦

(Financial Times, January 2003) ♦IFC helps out Tanzania Ex-Im

The International Finance Corporation (IFC) is investing up to US$3.5m in the Export-Import Bank of Tanzania. The financing package includes a senior loan of up to US$1m. “Besides providing clients with long-term financing, Tanzania Ex-Im Bank will gain from the IFC's global expertise in training employees with the latest technology in international banking”, says SMJ Mwambenja, managing director of Tanzania Ex-Im. Tanzania Ex-Im is a mid-sized Tanzanian bank specialising in pre-export crop financing as well as trade and financial services to SMEs.♦


♦ Turkey: the final pangs of

modernisation.

As Soli Ozel, professor of international relations and political sciences at Istanbul Bilgi University, points out, “the most critical aspect of any reformist policy in Turkey, the restructuring of the banking sector, was not tackled early enough”. Ultimately, the Turkish banking sector has been restructured at massive cost to the industry and to taxpayers.

Under the restructuring, Turkish public sector banks gained their autonomy and some 22 private banks were taken under the Savings Deposit Insurance Fund (SDIF), at a cost of US$12 billion. The losses of the public sector banks were estimated to total

around US$16-20 billion. Recently, a showdown between the Banking Supervision and Regulation Agency (BSRA) and a powerful, politically protected corporation resulted in Pamukbank, a small bank run by the corporation, being taken under the SDIF. The chairman of the corporation was subsequently banned from the banking industry.

Such events as these are good indicators of the distances travelled in the depoliticisation of the Turkish banking industry and the boosting of the power of autonomous regulatory bodies.♦


♦ Citibank wins go-ahead for China deal

Citibank, the US financial giant, has won Chinese government approval to buy its first minority stake in a Chinese mainland bank, providing a platform for the US bank to sell more products to China's growing middle class. Under the planned deal, Citibank is set to buy 8.26 per cent of the Shangai Pudong Development Bank for $112m, cementing a strategic partnership that may allow Citibank to use Pudong’s network of 272 branches in 30 Chinese cities. Citibank will use the network to promote credit cards and other products, Chinese sources said yesterday.♦

(Financial Times, December 2002) ♦ Morocco: BMCE Bank registers good

results in the first semester

The Moroccan BMCE Bank has seen increases in its most important index of activity. Its only first-quarter loss was in the net result (191.2m Dirham against the 202.7 million of the first semester of 2002). Its net product had climbed 4% at the end of June 2002 to 1.06 billion Dirhams (€101.4m). BMCE Bank has pursued the development of banking and credit insurance products and services as well as those linked to foreign trade.♦

(Marchés Tropicaux, November 2002)


♦ Libyan bank ABDT opens in Senegal A new bank with Libyan capital, the African Bank for Development and Trade (ABDT), has opened in Senegal. The bank, created following a decision by the Community of Sahel Saharian States, started its activities at the beginning of 2003. ABDT’s ambition is to open agencies in every member state of the Community of Sahel Saharian States, an organisation of economic and political co-operation. The Bank will focus its activities on medium-term credit for the private sector. The Bank is a non-profit organisation and will therefore offer rates of credit lower than those of its competitors.♦


♦ South Africa: Stanbic changes name The shareholders of South’s Africa Standard Bank (Stanbic) approved the bank’s name change. As of June 3rd 2002, the bank's name has been changed to Standard Bank Group Limited. The older name, now defunct, was Standard Investment Corporation Ltd.♦


♦ Zambia: privatisation of 51% of Zanaco’s capital The government of Zambia will give away 51% of the capital of Zambia’s National Commercial Bank, Zanaco, to the private sector. The financial condition of Zanaco, the country's most important retail bank with almost 43 agencies and 1440 employees, is no longer favourable. The bank has a large deficit.♦


♦ World Bank: urgent need for global trade reform The World Bank has renewed its call for fresh efforts to liberalise trade and open up new opportunities for exporters from the developing world. Private foreign investment in infrastructure is down by a quarter on 1997 levels. “Investors are becoming averse to long- term projects; accounting scandals in industrial countries have driven from the market major players such as Enron and Worldcom; and

slower growth in East Asia, Russia and Brazil has reduced investment demand,” the Bank noted.♦

(International Trade Finance, December 2002)

♦ BBVA sells Brazilian assets to Bradesco BBVA, the Spanish financial group, yesterday sold all its assets in Brazil to Bradesco, the country's number one private bank, in a deal worth R$2.63bn (US$797m). BBVA will receive R$2bn in cash and a 4.5 per cent stake in Bradesco in exchange for BBV Banco, its local unit. It will also gain one of eight seats on Bradesco’s board. The deal is the latest in a series of buy-outs of foreign banks by Brazilian groups and shows the difficulty many such banks have faced in expanding in Brazil’s competitive banking sector.♦

(Financial Times, December 2002) SMEs ♦ Croatia: HBOR signs a five-year

syndicated loan The Croatian Bank for Reconstruction & Development announced that the € 82.5 million loan would be used mainly to finance local firms’ exports and investment projects. ♦


♦ Kyrgyz Republic: EBRD launches a US$ 15.3 million facility to support SMEs This facility, co-financed by the Swiss government, the US government and the IFC, will provide credit lines of US$ 50 to US$ 50,000 for on-lending to local entrepreneurs. The credit lines are twinned with technical assistance funds provided by the EU and USAID to help partner banks to develop efficient lending programmes. ♦



♦ Mexico: the WB approves a US$ 64.6 million loan to strengthen the country’s non-bank financial intermediaries, and to expand financial services to the poor Technical assistance provided by the World Bank will include the institutional strengthening of saving and credit institutions (SCIs), the modernisation of their information systems, and training for their management and staff in the areas of finance, accounting, risk management, credit analysis and governance. At the community level, the poorer segment of the population will be trained in the basic principles of household finance and financial transactions. ♦


♦ French co-operation: Launching an official program of “ industrial coaching” in Africa and the Mediterranean The Entreprises et Dévelopement Network (French Ministry of Foreign Affairs, UNIDO and the Centre for Industrial Development in Brussels) has launched a 3-year programme of “industrial coaching” in Africa and the Mediterranean. The programme is financed by the Priority Solidarity Programme of the French Government to the amount of € 680,000. The Enterprises et Dévelopement Network seeks to create pools of SMEs in the same sector, and provides them with common services. The new programme seeks to use these pools to identify partners in both developing and industrialised countries, create a “binome” (a partnership between two SMEs, one from either type of country), and helps the industrialised SME to support and coach a similar partner in Africa or the Mediterranean.♦

(Le Moci, July 2002)

♦ Algeria: French support of SMEs Algeria and France signed a financing convention regarding priority mutual aid funds (a financial instrument of French co-operation). This will launch a project to aid the development of private Algerian SMEs. With up to 3 million euro distributed over 3

years, this project is a "great first" in the co-operation between Algeria and France, according to Colin de Verdiere, French ambassador in Algiers. The project priorities relate to the reform of the legal framework of quality and standards, the creation of an accreditation centre in conformity with international standards, assistance with ISO 9000 certification and the appointment of fifty persons in charge of quality.♦

(Marchés Tropicaux, June 2002)

♦ Cambodia: The ADB announces plans to extend $286 million in loans as part of an updated country strategy and programme update for the three-year (2003-2005) rolling plan The programme will focus on development of the rural economy, human resources, and the private sector.♦


♦ MIF: The Inter-American Development

Bank-administered Multilateral Investment Fund approves grants totalling $6.2 million for regulation of SMEs and the banking sector A US $914,000 grant to Bolivia will help Fundacion para el Desarrollo Empresarial to facilitate the transition of SMEs and micro-enterprises from the informal economy to the formal economy. A $1.24 million grant to Nicaragua will help central bank Superintendencia de Bancos y Otras Instituciones Financieras to strengthen its organisational structure and enhance its capacity to supervise financial institutions.♦


♦ Vietnam: The ADB announces plans to

extend $280 million in loans as part of an updated country strategy and programme update for the three-year (2003-2005) rolling plan


The programme will support sustainable growth reforms in the financial and agriculture sectors, as well as private sector development. ♦


♦ Tunisia: BTS announces a drop in its

micro-credits The Banque Tunisienne de Solidarité (BTS) has announced a 15 per cent drop in its micro-credits between 2000 and 2001. The BTS is a semi-public institution with a financial gearing of €23 million intended for the financing of micro-projects.♦


♦ Export recovery is primarily a network question The average delay of payments for exports is often more than 250 days; and the average amount of a financial claim for recovery - a minimum of 5000 to 6000 euro - is three or four times higher in exports than in domestic markets. Export recovery companies generally favour out-of-court recoveries, which avoid litigation costs and help preserve the trading relationship between buyer and debtor. Empathy and knowledge about the relevant sectors are therefore useful to such companies.♦

(Le Moci, October 2002) ♦ Mali: The BMS opens its doors in

Bamako The BMS (Banque Malienne de Solidarité) has opened a subsidiary in Bamako. The principle mission of the bank is to finance and to accompany the different promoters of SMEs that do not often benefit from credits of the classic banking system.♦


♦ Tunisia: $5 million for the Amen Bank The Tunisian Amen Bank has received a credit line of $5 million from the Saudi

Fund. This credit grants financing to enterprises for the import of a large range of Saudi goods over a period of 7 years, with better conditions than on the market.♦


♦ Bulgaria: European Bank for

Reconstruction and Development takes a 15 per cent stake in Unionbank Since July 2000, EBRD regional programmes have provided funding for Unionbank’s programmes to support trade and small business. The EBRD said this latest investment would consolidate Unionbank’s position as a leader in banking for SMEs. The bank will implement EBRD Environmental Procedures for Local Banks, maintaining health, safety, environmental standards and public requirements among its borrowers.♦


♦ FMM chief urges SMIs to merge Small and medium-sized industries (SMIs) should merge rather than “slaughter” each other in a small market, Datuk Mustafa Mansur, president of Malaysian Manufacturers (FMM), recently pointed out during a press conference. “The time has come for some of these companies to merge. If they continue to compete with each other, they will find that some of their resources will be wasted”, he told reporters. Mustafa said the FMM is willing to “matchmake” these companies if its help is needed. He said that under the Asian Free Trade Area (AFTA) regime, there will soon be an onslaught of competitors from other countries, especially Indonesia and Thailand.♦

(Business Times, January 2003)

♦ Uzbekistan: European Bank for Reconstruction & Development and the Japanese government are investing in a $20m program to support micro and small enterprises

This programme will extend loans to local commercial banks for on-lending to micro and small enterprises, building on a pilot scheme that has already provided nearly 1,000 such loans. The Japan-Europe Co-operation Fund will provide $5m in technical assistance for the


local banking sector, whilst German consultants LFS Financial System will advise and train partner banks and their personnel to establish streamlined lending operations.♦


♦ Uganda: coffee receives multilateral boost

The African Development Bank (AfDB) has approved a loan of US$2.5m to finance the Kaweri Coffee Plantation Ltd. (KCPL) plantation project in Uganda. Assistance to the project is in line with the bank’s vision of developing the private sector in its regional member countries, and follows its policy of supporting the agribusiness sector. The loan involves the establishment of an integrated and sustainable coffee production system, including plantation, processing and commercialisation. KPCL will develop a 2,000 hectare nucleus coffee farm in the Mubende district of Uganda and establish a facility for wet and dry processing, in order to produce washed robusta coffee for the export market.♦


♦ LTP expands trade finance auction system

LTP Trade, the electronic marketplace provider, has revealed LTP Trade Edge, a new web-based trade finance sourcing application. According to the UK-based provider, the new product represents an evolution of the manner in which trading companies can source finance and/or risk cover for their international trade business. It will provide clients with access to LTP’s membership roster of nearly 170 branches of banks and financial institutions. Clients can now source competitive pricing and other trade finance terms from these institutions for some or all of their trade finance, using the bidding system employed on the LTP site - a method which may, in time, eclipse phone and fax as the market’s main working methods.♦

(International Trade Finance, November 2002)


NEWS FROM THE REGIONS

Middle-East and Asia ♦ Iran: Ducroire/Delcredere relaxes its

guarantee requirements and increases its coverage capacity The Belgian ECA Ducroire/Delcredere will give cover on open account in Iran for short-term credit transactions, though a supplementary premium will be charged for commercial risk insurance. Coverage capacity has been raised to €600m ($590m) for medium- to long-term transactions. Ducroire/Delcredere will not require bank guarantees for medium to long-term transactions of under €10m.♦


♦ South Korea: trade financiers impressed

by economic rebound

South’s Korea recovery from Asia’s catastrophic economic contraction of 1997-1998 has transformed it into an environment in which risks for overseas trade financiers and credit insurers are perceived to be declining, market watchers told ITF. Positive banking and underwriting sentiment has been buoyed by figures such as South Korea’s 5.7 per cent year on year expansion in growth for the first quarter of 2002. Pricing in the trade finance market has moved accordingly, decreasing significantly in 2002 to what were described by Enrico Canova, an Asian specialist in WestLB’s forfaiting team, as “all time lows, much lower the 1997 crisis levels”.♦


♦ Japanese banks move to shore up

capital UFJ and Sumitomo Mitsui Financial Group, two of Japan’s biggest banks, have moved to shore up their capital in the latest effort by

financial institutions to confront their bad loan problems in a more aggressive fashion. “We are aggressively seeking ways to increase our capital,” said Takeshi Sugihara, president of UFJ Holdings. Sumitomo Mitsui, Japan's second largest bank, said it would merge two subsidiaries to create an accounting surplus of about Y2,000bn that will be used to write off unrealised losses on shareholdings.♦

(Financial Times, December 2002)

♦ Jakarta offers bankers amnesty

The Indonesian government has unveiled a presidential decree that could allow dozens of former bank owners tied to collapses during the Asian financial crisis to avoid criminal charges for their misdeeds.

The decree allows the “release and discharge” of the owners – many of whom have strong links to the Suharto regime – if they repay their portion of the Rp140,000bn ($15.7bn) in liquidity aid that was paid out to keep banks afloat during the crisis and which, according to state audits, was widely misused.

The idea of the “release and discharge” decree was born in 1998, when 35 bank owners signed an agreement with IBRA to repay the liquidity support given to them by the state.♦

(Financial Times, December 2002)

♦ Hong Kong: freighting first for Bolero.net In conjunction with Grattan plc, part of Otto Versand (the world’s largest mail order group and second largest on-line retailer after amazon.com), international e-business network bolero.net has completed the first live airfreight shipment through the Bolero system. Bolero.net was created by the world’s financial and logistics industries with the aim of giving businesses a better and more efficient way of administering cross-border trade. Once a sale has been agreed, bolero.net allows all


contractual and fulfilment details to be administered online, over a secure system which is underpinned by a unique legal framework. In addition to greater levels of security and lower administrative costs, a major benefit for companies that use Bolero is a drastic reduction in the time taken to process each shipment.♦


♦ Export factoring: focus swinging to Far

East, says FCI East Asia is poised to become the most important regional market for traditional export factoring services, according to Factors Chain International (FCI), the global network of factoring companies which incorporates 163 members in 53 countries. Data from FCI shows that export factoring from European countries accounted for the lion’s share of the world’s total cross-border factoring volumes in 2001. According to Jeroen Kohnstamm, secretary-general of FCI, however, such are the strides made by the product in East Asia - where the FCI has 14 member companies - that this balance is set to change.♦


♦ Indonesia pins hopes on Danamon sales Selling Bank Danamon is becoming an important test for Indonesia, a country struggling to establish its economic recovery. Trailing higher profile sales and privatisations, the 51 per cent stake on offer - which the Indonesian Bank Restructuring Agency (IBRA) hopes to sell for some $400m - is unlikely to draw as much interest as other deals. As a result of the bail-out of banks, IBRA now holds 99 per cent of Danamon’s equity, and wants to unload 71 per cent this year. The agency would like 51 per cent of that to go to a strategic investor and the remaining 20 per cent to be offered to other investors. The reason for the hurry is that the government wants to avoid having to enter a new deal with the International Monetary Fund after its current $4.8bn programme runs out at the end of this year. ♦

(Financial Times, February 2003) ♦ Philippines: payments and delays

One Philippine importer in six is required to pay in advance; one in three makes purchases on open account; and an equal proportion covers imports with L/Cs. Buyers are late paying locally, up to nearly a month on average, with bank delays accounting for an additional two-month delay before transmitting foreign exchange.♦


♦ Vietnam: payments and delays There are three types of Vietnamese importers: those who pay in advance; those who provide L/Cs; and those who enjoy open account privileges. Importers are prompt to pay locally, often in advance of due date. Banks, however, take up to two months to process exchange transfers.♦


♦ Mauritius circulates cheques with

magnetic ink The Mauritius Bankers Association has started to circulate a new generation of cheques. They are based on the Magnetic Ink Character Recognition (MICR) system, which contains a code printed in the magnetic ink. This code contains all relevant transaction data, such as the serial number of the cheque, the bank code, the account number, and so on. Every bank institution will provide an extra terminal able to process these cheques. The system works completely automatically, and is therefore faster.♦

(Marchés Tropicaux, May 2002)

♦ India: Banks look at retail lending India’s finance market is way behind the rest of the region. Retail financing is quite unpopular in India in comparison to other East Asian regions. This is due to a hostile credit culture in the country.♦



♦ Optimism over Turkey despite political and banking upheavals Turkish business continues to secure credit support despite political uncertainties caused by this November’s parliamentary election, which overturned the stability of Turkey’s financial markets. Financial problems emerged at the Cukorova group and its two banking affiliates Pamuk and Yapih, which has led trade financiers and insurers to review their approach. These organisations lost as much as $2 billion. These difficulties are therefore obviously seen by the trade finance market as essentially specific to the businesses concerned, rather than a general indicator of Turkish risk. The situation is also a reflection of competition from international banks, which remain keen to do Turkish L/C business at relatively cheap rate – cheap because of a medium-term commitment, such as stage payments over three years, with a lesser risk than a short-term obligation. Premium rates are cheaper, at 1.5-2.5 per cent per annum, than those offered for oil-rich and financially strong Iran. There are major Turkish banks that are regarded as good payment risks, and this provides a sufficient range of counterparties to sustain such activity.♦


♦ Pakistan rice exporters rue higher rupee

Pakistan’s economy depends on the agricultural sector for almost a quarter of its gross domestic product. Last year, Pakistan produced 3.8 million tonnes of rice and exported 1.5 million tonnes. This year, Pakistan’s rice dealers expect output to be higher, because of recent rainfall, which has broken a three-year drought. Regarding rice exports, however, Pakistan may be at a disadvantage, for two main

reasons. Firstly, their main competitors, such as India, will offer more attractive prices, and secondly, the rupee’s appreciation is partly triggered by a sharp rise in remittances. The last financial year showed remittances of about U$2.4 billion - twice as high as the previous year. Pakistan does have some advantages, such as Basmati rice, well-known for its fine aroma.♦


♦ Bad loans, a stagnant economy, deflation: can Heizo Takenaka get to grips with Japan’s rotten banks? Mr. Heizo Takenaka, the chief of the Japanese Financial Services Agency, is fighting against problems in Japan’s banking system, where the total amount of bad loans has reached Y43,000 billion ($350 billion), or 8 per cent of gross domestic product. The economy is suffering because banks have been lending to the weakest companies and neglecting young, promising ones. The problem has been exacerbated by the fact that the Bank of Japan has lost the means, or the will, to summon up the inflation necessary to float the economy off the rocks. As a result, the Bank of Japan might need action to recapitalise ailing institutions that investors have demanded for years. In this regard, Mr. Takenaka has leant towards ideas such as cash injections into the Japan’s banking system, which needs some Y50,000 billion of capital. Banks have recently been inspected with the aim of classifying loans according to stricter criteria. Focus has been put on the scope of the activities of the Resolution and Collection Corporation (RCC) in buying bad loans from financial institutions at prices the banks consider acceptable. Finally, banks should be nationalised.♦

(Financial Times, October 2002)


Eastern and Western Europe

♦ Italy/IADB: Italy and the IADB agree to establish a €5m Italian Trust Fund for Microenterprise Development

This trust fund will support entrepreneurship and microenterprise in Latin America and the Caribbean, assisting IADB projects such as the Social Entrepreneurship Programme. IADB will administer the fund, making finance available through specialised NGOs and microfinance or microenterprise institutions.♦


♦ Investment: banking gain limited in French merger Credit Agricole’s €19.5bn (20.3$bn) bid for Crédit Lyonnais, its smaller French banking rival, could be delayed by more than two weeks unless regulators hold an unscheduled special meeting to approve it. Both banks have strong asset-based financing arms and are among the top project finance lenders. Combined, they expect to be the world’s largest aircraft and maritime financier, according to the merger prospectus. The prospectus also says that the combined lenders will be the top equity research house and mid-cap brokers for French companies, and the second biggest broker in Asian equities.♦

(Financial Times, January 2003)

♦ Russia: EBRD signs an agreement to provide $286m in short-term working finance to Radobank’s agrifinance programme

This loan doubles last year's commitment by the EBRD to the programme to $100m for 2002-2003. Funding will largely support soft commodity traders and food-processing industries in Russia’s main agricultural centres, and develop the Russian agribusiness sector. By the end of 2002, Radobank forecast having provided finance to 12 EBRD projects, worth a total $300m, in Russia, Ukraine and Kazhakstan.

The banks are collaborating on a scheme whereby harvested commodities will be bought by Radobank and stored and insured for later re-purchase by the seller, using the commodities as collateral to raise much-needed working capital.♦


♦ Russian exporters develop new finance techniques News of a new financing deal for Russia’s largest engineering group may herald a trend towards greater use of the commercial trade credit market by east European capital goods and project companies seeking to enhance their export competitiveness.♦


♦ Turkish: bank reforms under threat Just as Turkey’s bold banking reforms are being hailed as the greatest achievement of the IMF-backed economic restructuring measures in that country, a court decision threatens to unravel the victory. The Council of State, Turkey’s top court for such disputes, on Friday suspended the banking authorities’ seizure of Pamukbank, the country’s sixth-largest bank. Regulators had said its $2bn capital shortfall posed a threat to the banking system. “If the Court, for reasons that are not economic, backtracks on a case like this, it is undermining the credibility of regulators and, potentially, the reform process itself”, said Phil Pool, emerging markets economist at ING.♦

(Financial Times, January 2003) UK: COFACE is to provide duty deferment guarantees to UK importers

Under this new service, importers can delay payment of duty by up to 45 days by opening a deferment account with HM Customs, which is guaranteed by COFACE UK against the risk of importer insolvency and non-payments.♦



♦ RUSSIA: Bashkreditbank signs a US$ 20 million framework loan agreement with BHF

A local company will use the funds to import German goods. German ECA Hermes will guarantee the loan.♦


♦ Payments and delays

In Bulgaria, three out five importers make purchases on open account; others are required to pay in advance. Buyers deposit payments locally within three weeks. In Croatia, three out of five shipments are on open account. One in five is paid in advance, and one in five is covered with an L/C. Importers pay promptly. In the Czech Republic, only one in five is required to pay in advance, whilst all other importers make purchases on open account and make payments locally within 3 weeks. In all these countries, banks process exchange transfer within two months.♦

(International Trade Finance, July 2002) ♦ Romania: the Ex-Im Bank of India

provides a US$ 10 million credit line to Banca Comerciala Romana to support sales of Indian exports

Local importers will make advance payment of 10% of contract value, with the remaining 90% provided by Ex-Im Bank. Ex-Im Bank will reimburse exporters on shipment of goods. Funds extended under the facility will have a maximum credit period of one year.♦


♦ Russia: the Ex-Im Bank of India signs a US$ 25 million line of credit with Vneshtorgbank to support the sale of Indian exports

Local importers will make advance payment of 10% of contract value, with the remaining 90% provided to Vneshtorbank by Ex-Im Bank. Ex-Im Bank will reimburse exporters on shipment of goods. Industrial manufactures and consumer durables may have maximum credit of up two years. ♦


♦ Fitch downgrade takes some shine off

Rabobank

The triple A rating of Netherlands-based Rabobank has decreased. The bank still remains one of the most sound non-government related banks. With a co-operative structure including about 360 member banks, it focuses on financial services related to trade in food and agricultural products.♦

(Financial Times, September 2002) ♦ Russian bank to source online trade

finance via LTP system

Russia’s MDM Financial Group is to use the online auction system provided by the UK-based LTP Trade company. The agreement between the two parties was signed on 8 August. The first auction was launched in September, and the process will be extended to cover letters of credit by using the LTP client base to secure the cheapest price confirmation. In adopting this solution, MDM was looking to widen its relationships with foreign banking counterparties, with the aim of creating “new sources of liquidity across the global banking community”, as well of providing its financial partners with a fully transparent environment built on best practice.♦



Africa

♦ Egypt: AfDB approves an $80m loan to the Export Development Bank of Egypt (EBDE) and a $140m loan to the National Bank of Egypt (NBE) The EBDE loan will support export-oriented projects in the service, tourism and industry sectors – including agro-based industries – with an emphasis on SMEs. The NBE loan will help medium- and long-term lending in industry and service areas, and will help develop local entrepreneurship and technical skills, again with the emphasis on SMEs.♦


♦ Algeria: medium-term initiatives signal new receptiveness amongst financiers

Algeria’s first limited financing is moving ever closer to reality, following the receipt of bids for lead arranging roles for the country’s flagship independent water and power project (IWPP) at Arzew. Banks and insurers canvassed by ITF were near unanimous in acknowledging an improvement in overseas perceptions of Algeria under the regime of President Abdelaziz Bouteflika, who emerged as clear-cut winner of the May 2002 elections. Evidence that Algeria is becoming more acceptable to international lenders has also been discernible in the telecommunications market, where Orascom Telecom (OT) is assembling a seven-year, €253m loan for its GSM mobile network. A 15-year license was awarded for the network in 2001. Another partially dinar-denominated deal undergoing protracted negotiations is a €156m financing package for Orascom’s Algerian Cement Company project, due to be guaranteed by Denmark’s EKF export credit agency (ECA) and the International Finance Corporation (IFC). The deal is being arranged by Citigroup.♦


♦ Ghana: payments and delays Two thirds of shipments are on open account. The rest are usually covered with draft acceptance. Importers are slow to pay locally, usually as much as two months past due date, a delay that becomes four months by the time banks complete hard currency transfer.♦


♦ Nigeria: payments and delays One in three importers make purchase on open account. The remainder are required either to pay in advance or to provide L/Cs. Shippers can expect to receive foreign exchange within an average of three months from due date.♦

(International Trade Finance, July 2002) ♦ Central African Republic: payments and

delays

Virtually all shipments are made on open account. However, importers are slow to deposit payments locally, averaging nearly two months past due date. Banks take an additional three months to transmit foreign exchange. ♦

♦ Zimbabwe: payments and delays

Two out of three importers enjoy open account terms with their suppliers, whilst one in three is required to pay in advance. Importers usually pay two months past due date and banks take an additional month to process exchange transfers. ♦


♦ Mozambique: Italy cancels $ 524 million of debt Italy has cancelled the $524 million bilateral debt of Mozambique. This took place at the summit of the Food and Agriculture Organization of the United Nations (FAO), in which President


Chissano of Mozambique took part. Italy’s Prime Minister, Mr. Berlusconi, confirmed to the Mozambican president “the priority given by Italy to co-operation and development with Mozambique".♦

(Marchés Tropicaux, June 2002) ♦ Cote d’Ivoire: Berlin reduces its € 110

million debt

Germany and the Cote d’Ivoire have signed their ninth agreement to reschedule debt. It is now possible for the African country to reduce its debt of almost € 110 million. This new bilateral agreement represents a reduction of more than 80% of the Cote d’Ivoire’s debt to Germany. This follows the application in Cote d’Ivoire of a programme of economic reforms and policies supported by the IMF, and instituted in a multilateral agreement concluded with the Paris Club on April 10 2002.♦

(Marchés Tropicaux, June 2002) ♦ Algeria: payments and delays

All importers are required to pay for purchases in advance or provide letters of credit. Shippers can expect to wait up to three months before receiving foreign exchange bank transfers.♦

(International Trade Finance, Sept. 2002)

♦ Morocco: payments and delays

Two out of five importers make purchases on open account, one in four pays in advance, and one in eight provides a L/C. Importers deposit dirham within three weeks of due date, but banks take an additional two months to execute foreign exchange transfers.♦


♦ Uganda: payments and delays.

Almost all shipments are covered with L/Cs. Nevertheless, it will be three months before shippers can expect to receive foreign exchange transfers.♦


♦ Afreximbank boosts lending in difficult

year Afreximbank, the African Export-Import Bank, has maintained its push to support African trade finance activity. After the tragic events of 11 September 2001, Afreximbank has agreed to a new strategic approach. The main strands of this approach are: (1) an increase in the use of dual resource facilities (such as products and rediscounting facilities); (2) the introduction and support of its programmes for countries with peculiar economic difficulties; and (3) a credit programme for entities with a maximum turnover of $10 million. Amongst other things, the bank has expanded activity in its investment banking programme, which provides advisory and underwriting support to clients.♦



Central and Latin America

♦ IFC eyes second Argentinean pre-export deal

At a time when working capital has dried up for Argentinean companies, the International Finance Corporation is looking at a second pre-export loan for the country’s agricultural sector. The Corporation recently announced a US$ 60 million pre-export facility for oilseeds exporter Aceitera General Deheza (AGD), secured by AGD’s export contracts and renewed annually for a period of three years. ♦


♦ Brazil: using official credit is cheaper

A nervous market has made for more expensive private market funding and insurance cover for companies exporting to Brazil or involved in projects there, especially around the time of the October elections. In these circumstances, official export credit, for which capacity and prices tend to hold steady, could prove a useful alternative option for foreign exporters. Structured finance could also be helpful and would remain a viable option. ♦


♦ Payments and delays

In Argentina, three out five shipments are on open account and the remainder are divided between importers who cover purchases with L/Cs and those utilising dated drafts. In Brazil, the ratio of shipment on open account is three-quarters, and one in 12 is covered with dated drafts. Only a small percentage pays in advance. In Chile, three out five importers enjoy open account terms with their suppliers, and one in five covers imports with dated drafts. Only one in ten pays in advance. In each of these three countries, the real payments from banks are made with up to three months delay.♦


♦ Mercosur: IMF to the rescue

Measures are underway to stop the Argentinean crisis from spreading to other, neighbour countries, especially Brazil. To avoid any further crises, the IMF has announced its intention to provide Brazil with a loan of $30 billion over 15 months. In addition, the United States government has announced a $1.5 billion emergency help package for Uruguay to avoid a banking crisis. Lastly, the IMF has announced a $200 million loan for Paraguay, which is suffering from a severe economic and financial crisis.♦


♦ Argentina: three out of five importers are on open account. One in four is required to pay in advance; one in eight covers purchases with dated drafts. Peso payments by importers are four months late on average, with banks requiring an additional three months before transmitting foreign exchange.♦


♦ Brazil: Three-quarters of importers are on

open account. The rest cover purchases with either sight drafts or dated drafts. Importers make real payments promptly, but banks delay executing foreign exchange transfers by up to three months.♦


♦ Venezuela’s debt: woes add to gloomy

trade finance outlook The trade finance community has closed down most avenues of exposure to Venezuela, as the country lurches further into political and economic trouble. International ratings agencies have slashed their grades for the country over the last month or so in response to the stream of bad news.


Most credit insurers are equally wary, although cover is occasionally available for leading clients. London based Euler Trade Indemnity, for example, began to reduce its Venezuelan exposure in the first quarter of 2002.♦

(International Trade Finance, February 2002)

♦ Guatemala: Three out of four shipments

are on open account. One in ten is paid for in advance, whilst one in six is covered with dated drafts. Buyers pay locally within two weeks of due date. Banks take up to an additional three months before processing exchange payments. ♦


♦ Mexico: Nearly all importers enjoy open

account terms, whilst a small percentage utilise dated drafts. Buyers are prompt to make peso payments locally, but banks take as long as three months to transfer foreign exchange.♦


♦ Paraguay: Three out of five imports are on

open account. Two out of five are covered by L/Cs. Buyers deposit payments locally within two weeks; banks execute exchange transfers within two months.♦



OECD EXPORT CREDIT RATES For up-to-date information on ITC’s programme and related events, please consult the Trade Finance sub-site at http://www.intracen.org.

Minimum interest rates for officially supported export credits (%)

(For latest applicable interest rates, please refer to OECD’s website at http://www.oecd.org/ech/index_4.htm).

These rates are published monthly by OECD, normally around the middle of each month. A premium of 0.2 per cent is to be added to the credit rates when fixing at bid. Interest rates may not be fixed for longer than 120 days. A CIRR (Commercial Interest Reference Rate) is fixed for each currency, including the Euro, that is used by participants in the Consensus (Australia, Austria, Belgium, Canada, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States). CIRRs are subject to change on the 15th of each month.


NEWS ON ITC’S TRADE FINANCE PROGRAMME

ALGERIA – At the end of October 2002 an ITC mission, financed by the UNDP office in

Algiers, visited Algeria to start work on the local adaptation of the ITC How to Approach Banks guide. The trip also took place in order to launch Algeria's capacity-building programme at bank level. The aim of the mission was to present the status of the trade finance sector in Uganda to the authorities, banks and local trade promotion organisations, and to review findings with them in order to identify specific areas for improving financial services in support of the country’s current export drive.

ALGERIA – In January 2003 a further Algerian mission took place to run Algeria's first

course on Credit Evaluation and Scoring. The course was organised by UNDP Algiers with the help of ITC, and was held in French. 25 bankers from private and public banks attended the course, which focused mainly on capacity-building exercises and was financed by the Mediterranean 2000 project.

UGANDA – In early December 2002 an ITC mission, organised by the Uganda Bankers

Association with the help of ITC, visited Uganda to run Uganda's first course on Credit Evaluation and Scoring. The course was attended by 16 bankers from private and public banks. During the course, attention was concentrated on capacity-building exercises, again financed by the Mediterranean 2000 project.

TANZANIA – In January 2003 an ITC mission took place to run a two-day training event

entitled "Access to Finance", organised by the Centre for International Business Development Services (CIBDS) of Dar es Salaam. The course is designed for bankers and entrepreneurs and is meant to improve their skills with the techniques and tools of credit risk management in the field of international trade finance.

ITC PUBLICATIONS ON TRADE FINANCE The ITC offers several publications on trade finance. These are free in limited numbers for institutions and firms in developing countries and economies in transition. A complete list of these publications is published once a year in the first issue of the Trade Finance Press Abstract. Alternatively, it is available on the ITC trade finance website at http://www.intracen.org/tfs. MAIN EXPORT CREDIT AGENCIES OF THE WORLD This list, covering funding and insurance agencies (both officially supported and private sector organisations) is published once a year in the first issue of the Trade Finance Press Abstract. Alternatively, it is available on the ITC trade finance website at http://www.intracen.org/tfs.


SOURCES FOR THE PRESS ABSTRACTS Project Finance Nestor House Playhouse Yard London EC4V 5EX United Kingdom Tel.: +44 171 779 8995 Fax: +44 171 779 8846 www.projecttradefinance.com

Marchés Tropicaux 98, boulevard Malesherbes 75017 Paris France Tel.: +31 1 43188700 Fax: +31 1 43188701

Credit Notes Credit Guarantee Insurance Corp. of Africa Ltd. POB 125 Randburg, 2125 Tel.: 011 889 7467 Fax: 011 889 7473 [email protected]

Society for Worldwide Interbank Financial Services Avenue Adele 1 B-1310 La Hulpe Belgium Tel.: +32 2 6553111 Fax: +32 2 6553226

The Economist 111, West 57th Street New York, NY 10019 U.S. Tel.: +1 212 541 0500 Fax: +1 212 541 9378 http://www.economist.com

ECGD Press Release PO Box 2200 2 Exchange Tower Harbour Exchange Square London E14 9GS United Kingdom Tel.: +171 512 7000 Fax: +171 512 7649 Telex: 290350 ECGD HQG

International Trade Finance Maple House 149, Tottenham Court Road London W1P 9LL United Kingdom Tel.: +44 1424 719 248 Fax: +44 1424 442 913

Financial Times 1, Southwark Bridge London SE1 9HL United Kingdom Tel.: +44 171 873 3000 Fax: +44 171 407 5700 http://www.ft.com

NCM N.V. Keizersgracht 281 1016 ED Amsterdam (P.O. Box 473 1000 AL Amsterdam) The Netherlands Tel.: + 31 020 553 9111 Fax: + 31 020 553 2811 [email protected]

Le Moci 10, Avenue d’Iéna 75116 Paris France Tel.: +32 1 40 73 3000 Fax: +32 1 40 73 3585 [email protected]

Africa Confidential 73, Farringdon Road London EC1M 3JQ United Kingdom Tel.: +44 20 7831 3511 Fax: +44 20 7831 6778 http://www.africa-confidential.com

ITC: Your Partner in Trade Development

International Trade CentreU N C T A D / W T O

ITC: Your partner in trade development

For more information:Street address: ITC, 54–56, rue de Montbrillant,1202 Geneva, Switzerland.Postal address: ITC, Palais des Nations, 1211 Geneva 10, Switzerland.Telephone: +41 22 730 0111 fax: +41 22 733 4439 e-mail: [email protected] Internet: http://www.intracen.org

The International Trade Centre (ITC) is the technical cooperation agency of theUnited Nations Conference on Trade and Development (UNCTAD) and theWorld Trade Organization (WTO) for operational, enterprise-oriented aspectsof trade development.

ITC supports developing and transition economies, and particularly their businesssectors, in their efforts to realize their full potential for developing exports andimproving import operations.

ITC works in six areas:� Product and market development� Development of trade support services� Trade information� Human resource development� International purchasing and supply management� Needs assessment, programme design for trade promotion

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