Table Of ContentThe Political Economy of Trade
Finance
Export Credit Agencies provide insurance and guarantees to domes-
tic firms in the event that payment is not received from an importer.
Thus, ECAs reduce uncertainties domestic firms face in exporting their
goods. Most countries have ECAs that operate as official or quasi-
official branches of their governments and they therefore represent an
important part of government strategies to facilitate trade, promote
domestic industry and distribute foreign aid.
The Political Economy of Trade Finance provides a detailed
analysis as to how firms use the medium and longer-term financing
provided by ECAs to export goods to developing countries. It also
explains how ECA arrears have contributed to the debt of developing
countries and illustrates how the commercial interests of ECA activity
are evident in decisions about IMF arrangements and related to Paris
Club debt rescheduling agreements. Finally, the book documents how
the medium and longer-term export credit insurance support provided
by the G-7 ECAs was a central component in mitigating steep declines
in international trade during the 2008 Global Financial Crisis. This
book is of great interest to both academics and students in the field of
political economy, finance and politics of international trade. It is also
of importance to policy makers.
Pamela Blackmon is Associate Professor at the Department of Political
Science, Pennsylvania State University, Altoona, USA. Her research
focuses on policies of the international financial institutions, and she
is currently examining the role of ECAs in international trade and
finance.
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Export Credit Agencies, the Paris Club and the IMF
Pamela Blackmon
The Political Economy of
Trade Finance
Export Credit Agencies, the Paris
Club and the IMF
Pamela Blackmon
First published 2017
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2017 Pamela Blackmon
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ISBN: 978-1-138-78056-9 (hbk)
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Brief contents
Detailed contents vi
List of figures ix
List of tables x
Abbreviations xi
Acknowledgments xiii
Introduction 1
1 Insuring and financing trade 15
2 Exporting goods to developing countries 27
3 Paris Club debt rescheduling and the
HIPC Initiative 41
4 The cyclical process: the IMF, debt rescheduling
and export credits 59
5 Increasing trade during the crisis 87
Conclusion 101
References 109
Index 121
Detailed contents
List of figures ix
List of tables x
Abbreviations xi
Acknowledgments xiii
Introduction 1
1 Insuring and financing trade 15
Export Credit Agencies (ECAs) are necessary in order to facilitate
international trade. The two primary institutions involved in export
credit activity, the International Union of Credit and Investment
Insurers, or Berne Union and the Organization for Economic
Cooperation and Development (OECD) Export Credits Division
will also be discussed. While the latter monitors the export credit
activity of its member states, the former primarily serves as an asso-
ciation of public and private ECAs which share information on
activities and procedures concerning export credit and investment
insurance.
2 Exporting goods to developing countries 27
Businesses need a way to mitigate the risks associated with the
export of their goods in order to succeed in global markets. ECAs
offer trade financing mechanisms to assist global companies with
their exports to developing countries that might not otherwise
occur due to the risk of non-payment. However, much of the bilat-
eral debt of developing countries is held by ECAs, debt that is often
rescheduled through Paris Club negotiations. The purpose of this
chapter is to examine how global companies’ exports are facilitated
Detailed contents vii
by ECAs and to show how this financing is contributing to the
debt of developing countries.
3 Paris Club debt rescheduling and the HIPC Initiative 41
This chapter details how the ECA debt is rescheduled through
the Paris Club and examines the high percentages of developing
country debt owed to governmental ECAs. The HIPC Initiative
(developed by the IMF and World Bank) is also a factor in the
Paris Club rescheduli ng because developing countries are able
to qualify for irrevocable debt relief from creditors including the
Paris Club creditors, if they reach the completion point under
the HIPC. Case studies of Ghana, Cameroon and Honduras as
lower-middle income economies illustrate the processes of Paris
Club rescheduling of debt, following the HIPC Initiative under
which debt is forgiven, and then how these countries subsequently
received export credit facilities from governmental ECAs.
4 The cyclical process: the IMF, debt rescheduling
and export credits 59
This chapter will show how the economic motives of the creditor
count ry governments, as seen by loans and guarantees provided
by their ECAs, are an important factor in the Paris Club debt
rescheduling proc ess. I developed an original data set of 47 coun-
tries that received debt rescheduling following an IMF arrangement
using data from the ECAs of the US, the UK, Canada and Japan
from 2000–2012. The find ings show that after debt was resched-
uled by the US, Canada and the UK for Ghana, Kenya, Nigeria,
Pakistan, Indonesia, the Dominican Republic and Ecuador that
those countries received future export credits or loans from those
same creditor countries. These economic interests provide an addi-
tional explanation as to why the IMF also continues its process of
repeated structural adjustment loans to the same countries because
an IMF agreement is required before the Paris Club rescheduling
process begins.
5 Increasing trade during the crisis 87
The OECD states and especially the G-7, would turn to their
public ECAs to provide medium and longer-term export credit
insurance support to increase international trade during the 2008
Global Financial Crisis. Trade declined as a result of decreases in
trade finance and export credit insurance. These are common trade
viii Detailed contents
mechanisms, although little research on the aspects of increased
state involvement in providing export credit insurance has been
conducted in the political economy literature.
Conclusion 101
References 109
Index 121
Figures
1.1 Officially supported export credits: new commitments 24
3.1 The E-HIPC process 45
3.2 Debt of lower-middle income countries 49
5.1 World exports of goods, 2000–2010 92
5.2 Total G-7 world merchandise exports, 2000–2010 93
5.3 New medium- and long-term export credit volumes,
total G-7, 2000–2010 93
5.4 Number of PF loans from OECD ECAs, 2002–2010 95
5.5 Amount of PF loans by originator, 2005–2010 96
5.6 Net external capital flows into emerging markets,
2002–2010 97
5.7 Medium- and long-term new exports covered,
2005–2010 98
Description:Export Credit Agencies provide insurance and guarantees to domestic firms in the event that payment is not received from an importer. Thus, ECAs reduce uncertainties domestic firms face in exporting their goods. Most countries have ECAs that operate as official or quasi-official branches of their go
