Speech

Eduardo Aguirre
Vice Chairman, Export-Import Bank of the United States
Bankers' Association for Finance and Trade
Chicago, October 11, 2002, 9 a.m.

I'd like to thank Marshall Bouton (president, Chicago Council on Foreign Relations) for his kind introduction. It's a pleasure to be with you in Chicago for your 12th Annual Conference on Foreign Trade. As someone who spent several years on BAFT's board of directors and your executive committee, I'm delighted to be among many old friends. 

I would also like to recognize Ex-Im Bank's Chicago regional office staff for their great work in serving this part of our nation. Could I ask those who are here today to stand for a moment - Mike Howard, Barry Bint, Ursula Wegrzynowicz, and Holly Kirking.

The last few months have brought significant developments for both of our organizations, and I'd like to bring you up to date about Ex-Im Bank's recent developments. BAFT also has undergone change by affiliating with the American Bankers Association this past July. Also, this summer, President Bush signed a five-year reauthorization bill for Ex-Im Bank that had strong bipartisan support in Congress. Then, last month, we announced a significant reorganization of the Bank. And just last week, President Bush nominated Philip Merrill to be the new chairman of Ex-Im Bank. I'd like to spend most of my time this morning talking about these developments and what they will mean for you. 

Before I get into discussing our reorganization, I would like to say a few words about Ex-Im Bank and its critical role in supporting U.S. trade.

Some people have called the Export-Import Bank the best-kept secret in the U.S. Government. Ex-Im Bank is the official export credit agency of the United States. We are mandated by Congress to carry out one mission - to aid in the financing of U.S. exports and, in so doing, to help maintain or increase U.S. jobs. 

Ex-Im Bank is a key player on the Administration's trade, foreign and economic policy teams, and as part of these teams we remain true to our mission of supporting U.S. exports. Expanding global trade is a top priority of the Bush Administration. Trade promotes American leadership, economic growth, and U.S. jobs, and trade is a cornerstone of our relations with other nations. The two major trade agreements of the 1990s - NAFTA and the Uruguay Round - have resulted in annual benefits of $1,300 to $2,000 for the average American family of four. That's why this Administration strongly supports the new round of global trade talks proposed at Doha last year.

As President Bush said in unveiling this year's National Export Strategy:

"The advancement of trade around the world is one of the highest priorities of [his] Presidency. Trade is critical to our economic growth and prosperity, and to the ability of developing countries to lift themselves out of poverty."

So, where does Ex-Im Bank come in? We fill a critical trade finance gap by supporting exports to developing markets where commercial bank financing is unavailable or insufficient. This is important because developing markets represent nearly 90 percent of the world's people, and they are likely to be a major source of economic growth in the 21st century. All told, Ex-Im Bank can finance U.S. exports to private and public sector buyers in more than 150 countries. Ex-Im Bank also levels the playing field to keep U.S. companies competitive in the global marketplace by matching the government support provided to foreign competitors.

In fiscal year 2002, we authorized more than $10 billion in financing to support approximately $13 billion in U.S. exports. Eighty-five percent of our more than 2,500 transactions in the just completed fiscal year involved small businesses.

We have several major products. 

We offer export credit insurance to protect U.S. exporters and banks against the political and commercial risks of a foreign buyer defaulting on payment. This program is especially helpful to small businesses. This program is more important than ever now that our charter requires us to make available at least 20 percent of our financing to small businesses.

We make loan guarantees and direct loans that provide foreign buyers with competitive financing to purchase U.S. goods and services.

We offer working capital guarantees to cover 90 percent of the principal and interest on commercial working capital loans to small and medium-sized U.S. companies that need money to buy or produce exports. These guarantees also cover standby letters of credit serving as bid bonds, performance bonds and advance payment guarantees.

Ex-Im Bank's project financing helps finance U.S. exports to large infrastructure projects in developing countries. In limited recourse project finance, repayment is based on revenues from the project rather than on a guarantee of the debt by the host country government. This financing helps developing countries to limit their government debt, and helps U.S. exporters to compete for projects. 

And we help finance U.S. exports of environmentally beneficial goods and services. Ex-Im Bank has a special Environmental Exports Program that provides enhanced support for a broad range of environmental exports, and we have put a new emphasis on supporting renewable energy.

Ex-Im Bank works in tandem with the U.S. government's other export-promotion agencies. A principal vehicle for this is the Trade Promotion Coordinating Committee. It is a 14-agency group of which I am vice chairman, and the Bush Administration intends to make the TPCC process work. 

Given this commitment to the TPCC process, I'd like to take a minute to talk about Ex-Im Bank efforts in connection with the TPCC. In addition to good information-sharing and good relationships among the heads of our agencies, we are looking at a number of initiatives, including the following: 1) We will continue to cooperate to identify projects in the early stages of development in six key emerging markets -- Mexico, China, Russia, Brazil, South Africa and Turkey; 2) Ex-Im Bank will benchmark many of its finance processes against the practices of commercial banks and other export credit agencies; and 3) Ex-Im Bank will work with the Commerce and Treasury Departments to commission a study on the impact of market windows on U.S. exporters. 

There has been a perception by some in the business community that there is a lack of financing available for small and medium-sized enterprises that export. Because of this perception, we worked with Sid Ross and BAFT, as well as other financial and business associations, to sponsor a small-business financing meeting with members of the House Small Business Committee. The goal of this discussion was to identify why this perception exists, possible reasons for it, and ways to identify more financial avenues for small business exporting. I want to thank BAFT and its leadership for being involved in this.

After a yearlong effort involving the Bush Administration, the Congress, and the exporting community, we were extremely pleased in June when President Bush signed legislation extending our authorization until September 30, 2006. This came just days after the House passed our reauthorization by an overwhelming 344 to 78 margin, and the Senate agreed by unanimous consent. 

With this reauthorization, Ex-Im Bank can move forward and continue helping U.S. exporters succeed in highly competitive international markets. Among other aspects, the reauthorization reinforces Ex-Im Bank's efforts to promote the export of goods and services related to renewable energy sources. On this score, we had already created a Renewable Energy Advisory Committee earlier this summer, and the Bank just sponsored two sold-out environmental conferences in Budapest and Mexico City last month. The interest we've seen in these conferences demonstrates the strong interest in renewable energy export financing.

The reauthorization also enhances our ability to address market windows and untied aid practices, and clarifies the operation of the Tied Aid Credit Fund. 

Provisions in the reauthorization also require us to must commit at least 20 percent of our aggregate financing to small business. 

In addition, the reauthorization codified changes in the Bank's economic impact procedures that have been underway since September 2001. The period for public comment on changes in our economic impact procedures just closed yesterday (October 10), and we are looking forward now to reading and reviewing the comments we've received.

Let me now turn to our recently announced reorganization. These organizational changes are part of our continuing efforts to better leverage the strengths of our products and our staff, enhance service to our customers, and learn from the successful best practices of other financial and export credit institutions. The goal is for us to become more customer-driven and market-focused, and at the same time to enhance risk management.

I'd like to share with you some of the thinking behind our reorganization before I tell you what it looks like. 

Our customers have wanted us to be more streamlined and efficient. Many of them find our current product-based structure unnecessarily complex and confusing for both transaction management and underwriting. They would like to see a reduced transaction cycle time. 

Our customers also would like consistency in our credit culture and underwriting standards. They value our regional expertise, and would like to see it strengthened and concentrated. In addition, they would like timely, accurate, and consistent information on our products and initiatives presented to meet their needs.

The first change is in how we manage and structure our core business process -- our transactions with our customers. Our current structure is product-oriented. As a customer, if you want insurance, you go to one part of our organization; if you want a loan or guarantee, you go to a different part, and so on. 

Our organization should be designed from our customers' point of view, not from our products' point of view. This is the citizen-centric principle that President Bush has talked about, and the user-friendly Ex-Im Bank that I envision.

As a result, we have established a single export finance group devoted exclusively to -- and accountable for -- managing our transaction relationships with our exporters, lenders, and foreign buyers. This group has the breadth of resources to deliver all our products globally -- pre-export finance, short-term, medium and long-term loans and guarantees, and all our insurance products. In addition, it will lead both our domestic and international business development.

This business group will manage deal flow through the pipeline from development through disbursement. Within the group, our loan officer and business development groups will be organized geographically to provide regional centers of expertise to increase market access for our exporters. 

This new group has been designed especially to meet our commitments to small business and enhance our responsiveness to their needs. Its breadth of resources offers "one-stop shopping" for loans, guarantees, financing, and insurance -- with clear and consistent underwriting and faster processing time, and regional expertise to improve small business access to foreign markets.

Jeff Miller has been named to lead this new export finance group, which will include the following functions:

1. All domestic and international business development. Domestic business development will include our regional offices. International business development will be organized geographically.
2. A new unit devoted to small and medium-sized enterprises that will bring together both our pre-export finance and short-term insurance products and sharpen our focus on meeting all the needs of smaller exporters. 
3. A new unit encompassing both our medium-term insurance and our guarantee products, also organized geographically, with a special emphasis on small and medium-sized enterprises.
4. The transportation unit. 
5. The structured finance unit. (and)
6. An operations group.

The second and complementary change is to our risk management structure and process. As Ex-Im Bank focuses on increasing its volume of transactions and closing deals more quickly, especially for small business, we must also strengthen our risk assessment - on both a transaction and portfolio basis. We will continue to ensure that we have reasonable assurance of repayment and are prudently using the full faith and credit of the U.S. Government. 

Therefore, we have created a new Office of the Credit and Risk Management that will provide stewardship for risk management, including credit standards and underwriting, credit review and compliance, country risk and economic analysis, and engineering and environmental analysis. It will establish a single credit culture and standards for all of the Bank's transactions.

This new office will include the existing units for engineering and environment, as well as country risk. It will also include a new credit-underwriting unit, which, like the export finance group, will be aligned with our regional markets. It will bring together the Bank's credit and underwriting expertise and provide a single credit culture and standards for all of the Bank's transactions.

The third and final change concerns our external information and marketing abilities. To sharpen these functions, we have created an Office of Communications that will include our current public affairs and marketing functions. 

These developments at Ex-Im Bank come at a time when a new chairman for Ex-Im Bank has been named. We were extremely pleased that President Bush nominated Philip Merrill last week as chairman, and I'm personally looking forward to his coming on board. On Tuesday, the Senate Banking Committee approved his nomination and sent it forward to the full Senate. If approved by Congress, he would serve the remainder of the term of our late chairman, John Robson, who died this past spring. Mr. Merrill is an accomplished businessman who has also served in a number of past administrations, including as assistant secretary-general of NATO under President George H.W. Bush. 

The timing is right for all of these developments - in our reauthorization, our reorganization, and new leadership. They will enable Ex-Im Bank to achieve its mission in an increasingly complex and competitive global environment

By making Ex-Im Bank a more effective institution, these developments will enhance U.S. exporters' competitive position. But making something better isn't good enough. That's why we're always looking to our customers and partners to find how we can most profitably work together. 

Looking ahead, the global economy presents many challenges - but also many opportunities. Ex-Im Bank is definitely up for it. Our institution is changing, and we intend to be even more responsive to the market and to our customers so that we can continue doing what we do best - helping to sustain U.S. jobs and positioning U.S. businesses for success on the world stage. 

Thank you. Now, I'd be happy to answer a few questions.