On Wednesday, the U.S Export-Import Bank (EXIM), the nation’s official trade finance agency, announced that its Board of Directors has approved three transactions worth a combined $450 million, which will support some 1,900 American jobs across 11 states through the export of U.S. energy-related goods and services.
Altogether, the transactions will support jobs across Arkansas, California, Colorado, Connecticut, Georgia, Illinois, Iowa, Louisiana, Minnesota, Mississippi, Oklahoma, Pennsylvania, and Texas.
Two of these deals involve the export of American products to Petroleos Mexicanos (Pemex). EXIM Bank’s Board approved a $335 million general facility and $65 million small business facility (SBF), the latter of which was increased from the $50 million initially requested by Pemex, to provide additional benefit to U.S. small business suppliers to Pemex.
Per EXIM’s estimates, the combined $400 million in financing facilities will support 1,700 jobs in California, Colorado, Connecticut, Georgia, Illinois, Iowa, Louisiana, Minnesota, Oklahoma, Pennsylvania, and Texas in the oilfield services industry, which has faced particular difficulties since the onset of the covid-19 pandemic.
According to EXIM’s announcement confirming the transactions, the four-year lapse in EXIM Bank’s Board quorum from 2015-2019 suspended the agency’s 76-year association with Pemex, Mexico’s state-owned oil company. During that time, China sought to step into the breach to expand its influence in the region and pursued closer ties with Pemex, which closed its first transaction with China’s Sinosure export credit agency last year.
EXIM Bank says these transactions will help to fill gaps in private sector financing, and provide certainty to a U.S. industry suffering because of the global pandemic, as well as provide a valuable alternative to Chinese offerings. EXIM financing under these transactions also will facilitate the purchase of U.S. oil and gas equipment and services provided to approximately 21 oil and gas field projects.
During the Board meeting, EXIM staff noted that Pemex has a long and excellent history of repayment to EXIM, and that “there is every expectation for this to continue, notwithstanding certain financial challenges which currently face the company.”
In the third transaction, the EXIM Bank Board voted unanimously to approve a 90 percent guarantee of a $50 million finance facility from U.K.-based working capital finance provider Greensill Capital to Freeport LNG Marketing, LLC in Houston, TX.
The loan facility, approved under EXIM’s Supply Chain Finance Guarantee Program, will support an estimated 200 American jobs, mostly in Texas, as well as in Arkansas, Louisiana, Mississippi, and Oklahoma, by allowing Freeport LNG to efficiently pay its U.S. suppliers.
The deal is Greensill’s first with EXIM, in what the U.S. agency called an “innovative transaction” to provide EXIM-guaranteed working capital financing for Freeport LNG, in response to increased demand for credit in the U.S. due to covid-related market disruptions. EXIM noted that Greensill has “a strong track record of working with sovereign-rated partners to provide the best possible risk cover for its clients and investors alike.”
“Last October, I traveled to the Port of Houston to meet with business leaders, and recently I visited virtually with the Greater Houston Partnership [economic development group] as well as the Petroleum Equipment & Services Association [trade group]. I have heard directly, loud and clear, about the importance of oil and gas services in supporting many jobs in Texas and around our country,” said EXIM President and Chairman of the Board Kimberly A. Reed. “We’ve worked hard the past year to review each transaction on its own merits with an eye toward helping American workers and that’s what we are doing here.”
“In addition, I’m thrilled and excited to support the Freeport LNG transaction, which will help so many small businesses and other U.S. employers,” Reed added. “With this vote, EXIM is supporting great jobs across Arkansas, Louisiana, Mississippi, Oklahoma, and especially Texas, in an industry that is working hard to rebound from the negative impact of covid-19.”
China Program: An Update
Also on Wednesday, EXIM convened the first public meeting of its 2020-2021 Advisory Committee, chaired by the Hon. Stevan Pearce, CEO of industrial group Trinity Industries, which included an update on its recently launched China and Transformational Exports Program.
The program will make available loans, guarantees and insurance to U.S. exporters on par (if possible) with those provided by the People’s Republic of China or other countries identified by the U.S. Secretary of the Treasury. By law, EXIM has a goal of reserving at least 20 percent of its total financing authority ($27 billion out of its $135 billion mandate) for support under the program.
In addition to “directly neutralizing” export subsidies provided by China and other covered countries, EXIM’s program will explicitly support exporters in ten areas identified as “Transformational Exports.”
These areas include artificial intelligence, biotechnology, biomedical sciences, wireless communications equipment (including 5G), quantum computing, renewably energy and storage, semiconductors, emerging financial technologies, water treatment and sanitation, high-performance computing, and any associated services for the aforementioned sectors.
Speaking at Tuesday’s event, Jonathan Baron, Principal at Washington D.C. consultancy Baron Public Affairs, offered his take on global competition and China’s international competitive strategy from a private-sector perspective.
“Real world evidence strongly indicates that addressing the massive degree to which the PRC government supports its exporters is only possible with a U.S.-government-supported response,” said Baron. “Chinese companies are de facto projects of Beijing – in theory, it’s a great idea that companies are entirely on their own, independent from government support, and subject to market forces. The reality is that U.S. exporters are not competing in a free market. American companies have been collateral damage in a broader geopolitical confrontation: nation-state to nation-state competition, not company-to-company competition. EXIM’s Program on China and Transformational Exports therefore addresses an urgent and practical challenge.”
His sentiments were echoed by David Trulio, who serves as Counselor to the Chairman and Senior Vice President for the Program on China and Transformational Exports. He previously served as Senior Advisor and Chief of Staff to the Undersecretary of Defense for Policy, occupying a leading role in the formulation of national security policy within the Department of Defense.
“It is our ultimate goal within the China Program that U.S. exporters, large and small, facing competition from Chinese state-backed entities achieve tangible results in the form of completed transactions that support U.S. jobs,” said Trulio. “While I would stress that a great deal of work needs to be done to develop, assess, and complete individual transactions – and a number may never be executed – we estimate that our current pipeline of deals competing with China, across different levels of maturity, adds up to well over one billion dollars.”