Risk impedes financing for Miami exporters to Argentina, Venezuela
By Paola Iuspa
While some financial institutions have stopped financing Argentine-bound exports, others are being creative to provide financing for Venezuelan-bound products.
Making loans to US exporters doing business with Argentina and Venezuela is being considered too risky because of those countries' continued economic and political turmoil during the past two years.
Argentina fell out of grace more than a year ago when it defaulted its foreign debt amidst a fiscal crisis that sent more than half of its population to below-poverty levels and government instability. Governed by a populist president, Venezuela's economy has been a victim of a series of national strikes, government opposition and new currency regulations limiting the access of US dollars to the country.
Carlos Milian, president and CEO of ImportCard Financial, a subsidiary of Hemisphere National Bank in Miami, said his firm three months ago stopped export-loan programs for Venezuelan customers.
"We were lucky," he said. "All of our Venezuelan customers paid us. We did not incur any loss."
His company was not so lucky in Argentina, he said, where at least three clients defaulted on loans.
"The climate there became worse," said Mr. Milian. "We had to pull out in 2001."
With about 95 exporters as customers, ImportCard provides 60-day credit lines to assist small- and mid-size companies.
Mr. Milian said the Export-Import Bank of the United States, or Ex-Im Bank, guarantees many of the loan programs available for other Latin American countries. But the Ex-Im bank is no longer operating in Argentina and Venezuela, reeling from double-digit negative growth, according to the bank.
"We are monitoring the situation in Argentina and Venezuela," said Jeffrey Miller, senior vice president for Ex-Im Bank's Export Finance division. "As soon as we see some changes, we will restart our programs."
While the Ex-Im Bank is closed for routine trade finance transactions, it will consider structured finance arrangements such as Ex-Im Bank's project finance program, asset-based aircraft leases and other financing that offers a reasonable assurance of repayment, including reliable access to adequate foreign exchange, Mr. Miller told a group of Miami entrepreneurs this year.
Ex-Im Bank's job is to finance exports, even in difficult times and difficult markets, to enable creditworthy national governments, municipalities and private-sector borrowers in emerging markets to buy goods and services from US exporters, according to the bank. Ex-Im Bank last year authorized more than $3 billion in financing for Latin America and the Caribbean last year.
Mr. Miller said last year Mexico was his bank's No. 1 market in the world, with $1.6 billion in authorizations. The federal agency guaranties private banks' export loans reducing the risk factor for the lending institutions.
Despite Ex-Im Bank's ceasing commercial-export loans to two South American nations, some banks are still providing financing for export transactions to Venezuela, but only when the loans are backed with private insurance. Those banks are lending money without government guarantees.
Alberto Valdes, heading The International Bank of Miami, said his firm still does business with Venezuela but analyzes each export transaction carefully before approving any export loans. He said customers with a long-standing relationship with his bank and able to provide private guarantees often get credits.
On the other hand, his bank has temporarily discontinued lending programs to Argentina-bound exports, said Mr. Valdes, also president of the Florida International Bankers Association, an industry advocate.
"Many banks are facing the same challenge," he said.
David Konfino, president of Union Planters Bank International, said his bank has open lines of credit for Argentina-bound exports, but only when exporters provide cash collateral or private insurance.
"In countries like Argentina and Venezuela we need to be more creative," he said. "We work with structured transactions. We look at each transaction and find a financing solution unique to each situation."
Mr. Miller said the outlook for the rest of Latin America is brighter.
Despite last year's depreciation of Brazil's currency, the economy grew by about 1% in 2002, a sharp contrast to the 13% and 10% declines for Argentina and Venezuela.
And in Central America, economists expect Mexico's gross domestic product to grow about 3.5%.
The Dominican Republic's economic growth is also expected to pick up after last year's global slowdown. Ex-Im Bank has supported efforts by the Mejia government to improve infrastructure, including housing, according to the federal bank.
"I hear many financial institutions are moving away from the international trade finance world," said John Zdanowicz, a professor of finance at Florida International University's College of Business Administration. "Some banks are refocusing away from Latin American trade financing. But it won't be like this forever."