Exim Bank Breaks Ranks with OECD in Ivory Coast Deal

In a move which even the president of the U.S. Export-Import Bank, William Draper, termed "ornery," the United States has pushed through a change in international agreements concerning export credit and subsidies provided by industrialized countries for exports to developing nations.

The agreements, drawn up by the Organization of Economic Cooperation and Development (OECD), set standard interest levels and maturities for export-import bank loans. This is a means of avoiding an "export credit war," wherein countries would battle each other to provide the best financing for exports of goods and services from their countries to markets in other nations.

At an OECD meeting in Paris during the first week of October, the U.S. lobbied for an increase of at least three percentage points in the interest rates, to bring these concessionary loans , more in line with market financing terms. The OECD nations , agreed to a 2.5% increase-from 7.5% to 10% for poor countries, 8% to 10.5-11 % for intermediate countries, and 8.5 to 11-11.25% for rich countries.

Only one week before the meeting, Exim had undercut the existing agreements by offering a $95.3 million loan to the Ivory Coast for the purchase of engineering and consulting services from the San Francisco-based firm Kaiser Engineers. Instead of the normal 10-year financing for such a loan consistent with OECD agreements, the Exim loan provides for a 20-year maturity.

As a result of the financing package, the Ivory Coast awarded Kaiser the engineering contract even though the French state-owned firm Electricite de France (EDF) had conducted preliminary studies several years ago for the same project, the Soubre hydroelectric complex on the Sassandre River.

At the time, "money held up the project," said Jean Batigne of the Ivory Coast Embassy in Washington, "It was put on the back burner when priorities changed."

But when the Ivory Coast government decided earlier this year to reactivate the project, Exim's favorable loan offer tipped the balance in favor of an American firm, Batigne said. "They (Exim) made such very advantageous conditions, it's one of those things you just can't resist," he explained. "Twenty years-you don't find that grace period under every horse's hoof."

OECD nations "expressed an unfavorable opinion" when, as per the regulations, they were notified ahead of time that the U.S. intended to "derogate," or depart from standard practice on the Ivory Coast loan, according to Exim loan officer John Lentz.

Exim president Draper was quoted recently in the Journal of Commerce as threatening to offer extra-long maturities in other transactions as well, if France or other nations proved uncooperative over the U.S. proposal to increase allowable interest charges.