Ex-Im Bank On Track to Double Latin America Financing This Year

By Matthew Schewel
April 28, 2010

Originally published in the Dialogue's daily Latin America Advisor

WASHINGTON—The Export-Import Bank of the United States is on track to double its financing of U.S. exports to Latin America this year as part of President Barack Obama's ambitious plan to increase the country's exports twofold by 2015, the bank's head said Tuesday.

In the first six months of fiscal year 2009, the bank's authorization of loans, guarantees and export-credit insurance to support U.S. exports to Latin America totaled $1.06 billion, up from $405 million during the same period a year ago, according to Fred Hochberg, the bank's chairman and president.

"Latin America, in terms of growth, … is one of the leading areas," Hochberg told the Advisor in an interview. Last year, the government-owned Ex-Im Bank, which is entirely self-funded, authorized $2.6 billion in financing for U.S. exports to the region, while its global lending totaled approximately $21 billion.

Hochberg said Brazil, Colombia and Mexico are "some of the most fertile places in the world for American exporters," adding he'd like to see Latin America overtake Asia for the largest share of the bank's business. He noted that his first trip abroad as chairman was to Brazil to preside over the signing of a $2 billion preliminary commitment with state oil company Petrobras. Hochberg said he would consider expanding the Ex-Im Bank's commitment to Petrobras given the company's five-year $174 billion investment plan. "I believe there is a lot of upside potential and I'm hopeful ... that they'll tap into this facility, use it, and seeing that financial conditions warrant it, we'd extend it," he said.

Hochberg described the mood at last month's World Economic Forum on Latin America in Cartagena as optimistic, but said countries in the region are looking to move beyond their traditional roles as commodity exporters, which will require significant investments in infrastructure. Currently, the best opportunities for U.S. exporters are in the energy, aircraft and medical technology sectors, Hochberg said.

Obama's recently unveiled National Export Initiative, which combines increased export financing, better trade promotion and more assistance for U.S. exporters, aims to double American exports in five years. That could be a daunting task, given it took nearly 15 years for exports to double to 2009 levels. But Hochberg said the United States is already on the right track; during the first two months of this year, exports grew at an average of 14.8 percent, precisely the rate necessary to reach the five-year goal.

Meanwhile, Obama has been less clear on the role of pending free trade agreements with Colombia, Panama and South Korea in his trade policy, although in his State of the Union address in January, he referred to these countries as "key partners." Hochberg said that while the final passage of the FTAs is "in the hands of Congress," Panama and Colombia nonetheless remain strong markets for U.S. exports. "I think [the FTAs are] important, but I think it'd be a mistake for people to sort of say let's sit on our hands until we get a free trade agreement," he said.

The Ex-Im Bank's lending in Latin America has long been focused on the energy sector. The bank recently signed a $1 billion preliminary commitment with Colombian state oil company Ecopetrol, and Mexico's Pemex is its largest client worldwide. Hochberg called Pemex a "very strong company" and said he's confident its management can put in place the necessary technology to stem production declines. "I think they're an important client, and they have a management team that's determined to sort of put in the new technologies," Hochberg said. "And hopefully American companies can provide that technology so they can actually increase the productivity of Pemex."

Hochberg said the Ex-Im bank is trying to boost its support for clean energy worldwide and in Latin America specifically. Recent measures included the rollout of a $250 million facility to help finance the export of renewable technologies and a $80.66 million loan that helped California's Clipper Windpower Inc. sell 27 turbines to a wind farm operator in Mexico. "I'd like to see more in the area of renewable energy, and I think that's an area that in Latin America isn't quite as embraced as some of the other parts of the world," Hochberg said.