Linda Conlin

Fourth Annual Latin American Leadership Forum
(program information)

"Financing: Making Your Infrastructure Project a Reality"

A presentation by

Linda Conlin
Board Member, Export-Import Bank of the United States

March 29, 2006
Hilton Hotel, New Orleans

I think this is the kind of conference that is really a cut above the typical conference where we just talk about the theoretical. This conference showcases actual projects in a wide variety of sectors, and it’s an opportunity to match projects with potential participants. The range of sectors include oil and gas, power generation, ports and logistics, urban mass transit, and water and waste water treatment, along with other significant areas.

As Norman mentioned, I am privileged to be a member of the Board of Directors of the Export-Import Bank of the United States. I’m here with two of my colleagues, Xiomara Creque, who is one of our senior International Business Development officers for Latin America, and Kristine Wood, a senior loan officer in our Project and Structured Finance Division. Xiomara and Kristine will be available to help answer your questions about Ex-Im Bank, and they’ve been participating in a number of meetings with many of you over the past two days.

As an Ex-Im Bank board member, I represent one of the key federal trade agencies on President Bush’s trade team. I welcome this opportunity to talk about what the Bush Administration and Ex-Im Bank are doing to advance mutually beneficial trade between the United States and Latin America, and particularly what our agency can do to help finance infrastructure projects.

Ex-Im Bank, is the official export credit agency of the United States. Ex-Im Bank is a strong supporter of U.S. exports to international markets, and historically, Latin America has been our strongest market.

Simply put, Ex-Im Bank’s mission is to help U.S. companies create and sustain U.S. jobs by helping to finance their exports around the globe. And in so doing, we help strengthen bilateral and commercial relationships with America’s trading partners around the world. In many ways, we serve as a catalyst to spur private sector investment in infrastructure projects.

This morning, I’ll begin with few remarks on the importance of Latin America as a market and mention some of the efforts of the Bush Administration to open up and advance trade between this region and the United States. I’ll talk about our financing products and how they work, and what we’ve been doing in Latin America. Finally, I will present cases studies of projects that Ex-Im Bank has financed in Latin America to give you a view of how our financing actually works.

Importance of Latin America/ Ex-Im Bank Support

The Bush Administration has worked to facilitate the growth of this trade through bilateral and regional free trade agreements. The United States now has a free trade agreement with Chile, has completed FTA negotiations with Colombia and Peru, and is beginning negotiations with Ecuador and Panama. And there’s the Central American Free Trade Agreement, known as CAFTA-DR, which is strengthening U.S. trade with six nations including the Dominican Republic.

CAFTA-DR follows upon the success of the North American Free Trade Agreement, from which we have seen tremendous economic growth and development over the past 10 years or so. NAFTA has been a powerful force for increasing the international competitiveness of all of three economies – the U.S., Canada and Mexico – and has attracted enormous investment and spurred productivity.

For example, Mexico is the second-largest single-country trading partner with the U.S. and since 1993 has been among the fastest growing major export markets for goods, with U.S. exports up 132 percent through 2003.

As a matter of fact, Mexico is actually the Number One market for U.S. goods and services supported by Ex-Im Bank financing. In fiscal year 2005, the top markets in the region for our financing were Mexico, Chile, Brazil, Peru and Colombia.

This slide provides a snapshot of our financing by sector for Latin America in fiscal year 2005. You’ll see that we were very active in the oil and gas industries, transportation, and manufacturing - related exports. Our numbers in Power were down last year. Power is typically a much bigger piece of the pie

The “Other” category consists of nearly $600 million that supported a wide range of activity and includes a variety of U.S. equipment and services exports that are adding to the day-to-day productivity of the region.

Ex-Im Bank Financing Products (Overview)

Ex-Im Bank is designed to finance U.S. exports to developing markets where commercial or political risks make private sources of financing too expensive or unavailable. We also help “level the playing field” for U.S. exporters facing foreign competition backed by official support from foreign governments.

We help project sponsors and exporters to manage risk in international trade, and we help to fill the gaps in commercial trade financing. There is no minimum or maximum size of projects that we will support. Our support is limited only by the amount of U.S. content in the transaction. For every transaction that we finance, we must find reasonable assurance of repayment.

In our 72-year history, Ex-Im Bank has supported more than $450 billion of U.S. exports to markets worldwide. In fiscal year 2005 alone, we supported an estimated $18 billion of U.S. exports, primarily to developing markets in Latin America, Asia, the Middle East, sub-Saharan Africa and the countries of the former Soviet Union.

Ex-Im Bank provides financing for U.S. exporters and their international buyers. We help U.S. exporters with pre-export financing by providing guarantees for working capital loans. We provide export credit insurance to cover commercial and political risks of foreign buyer default.

And we provide buyer financing through medium-term insurance, medium- and long-term loan guarantees and occasionally direct loans. We also provide project and structured finance, which I will discuss in more detail in a minute.

But first, I want to note that Ex-Im Bank has special initiatives to encourage U.S. exports in certain sectors. We offer enhanced financing terms to support the sales of U.S. medical equipment, equipment related to transportation security, and environmentally beneficial products and services. And I am pleased to see so many projects at this forum related to water and wastewater treatment as well as hydro – all covered under our enhanced environmental exports program.

This enhanced financing includes longer repayment terms and local cost coverage. We are talking about repayment terms of up to fifteen (15) years instead of the more typical one to five years.

I’d like to mention that my own portfolio at Ex-Im Bank includes working to promote and develop the Bank’s Environmental Exports Program. Just this past year, Ex-Im Bank worked with the Organization for Economic Cooperation and Development to allow the OECD export credit agencies to offer 15-year repayment terms for renewable energy, water and hydropower projects. These terms are available now during a two-year trial period.

Now I’d like to highlight Ex-Im Bank’s project and structured finance. Project financing is available to support U.S. exports to international projects where the borrower is a special purpose company, usually due to the size of the debt. In this case, there is no direct sovereign guarantee for the debt.

In the case of structured financing, an existing company borrows the money, but Ex-Im Bank gets additional credit comfort from some of the same type of security structures found in project financing. This would include, for example, off-shore debt service accounts, security in company assets, and coverage of contingent liabilities. We find that more clients are selecting structured financing , especially for smaller, $10million +, versus $100million+, projects that cannot support ancillary costs associated with limited recourse (project) financing. Simply put, Ex-Im Bank does what it can to get the deal done.

Case Studies

Now I will briefly highlight a few case studies of infrastructure projects that Ex-Im Bank has helped to finance in Latin America in recent years.

First, I will begin with an oil-and-gas case study – Pemex in Mexico. As you all know, Pemex is the single-largest corporate entity in Mexico and is estimated to be the world’s seventh-largest oil company in terms of reserves and third-largest petroleum producer. Pemex is a long-standing customer of Ex-Im Bank, and it is currently our largest borrower.

Our total Pemex exposure at present is approximately $4 billion through 27 different transactions. In 2005 alone, Ex-Im Bank approved three long-term loan guarantees totaling $1 billion to support U.S. exports of equipment and services to three large Pemex projects: Mexico’s Strategic Gas Program or PEG, the Cantarell Oil Field and the New Pidiregas [Pid-der-RAY-gahs] Projects.

Each of these transactions is expected to involve between 200 and 300 U.S. exporters and suppliers. There’s a reason we do so much business with Pemex – it supports a lot of U.S. jobs in the oil and gas industries, and U.S. equipment and services in these industries are unsurpassed in quality.

And while we anticipate applications for more financing from Pemex this year as well, I would like to emphasize that we do a great deal of oil and gas financing all over the world. So, bring us your oil-and-gas deals.

Now I would like to move on to a power project that Ex-Im Bank helped to finance – the Ibiritermo power plant in Brazil. Ibiritermo is a 226-megawatt combined-cycle power plant for which Ex-Im Bank financed $52 million of the total $217 million cost.

In 2003, Project Finance magazine named Ibiritermo the Latin Power Deal of the Year. The project overcame significant hurdles. Ex-Im Bank provided limited recourse financing using a direct loan. This project received significant support from Petrobras as a strong corporate sponsor.

The primary source of repayment is a 20-year energy conversion contract and the loan carries a 12-year repayment term. We lent alongside BNDES and SACE.

The next project I’d like to look at is in the transportation sector – the Quito Airport project in Ecuador. For this international airport project, Ex-Im Bank financed $60 million of the total $610 million cost, supporting U.S. exports from Caterpillar and other U.S. suppliers of equipment and services.

This project was arranged as a concession agreement, with the project company, Quiport, operating the existing airport and also designing, building and operating the new airport. Quiport is owned by several major sponsors, including Aecon Construction Group Inc. of Canada, AGC of Brazil and HAS Development Corporation in Texas.

The transaction was structured as limited recourse financing, with Ex-Im Bank providing a direct loan. Also participating as senior lenders on the project are EDC – Canada’s export credit agency, the Inter-American Development Bank and the U.S. Overseas Private Investment Corporation.

Exisiting airport operations are generating revenues that are being held in an off-shore account to fund the project and service the debt. These regulated revenues are collected in U.S. dollars. Prices are set by concession, and the lenders share in the volume risk.

Finally, I would like to highlight a water project in Latin America. I am pleased to see that there is an entire panel discussion at this conference dedicated to water and wastewater projects, and I want you to know that Ex-Im Bank is keenly interested in supporting these projects. As I mentioned, we now have available repayment terms up to 15 years for these kinds of projects, and these terms also apply to renewable energy and hydropower projects.

We provided nearly $84 million in financing to support U.S. exports for potable water systems for two municipalities in the DR – La Romana and San Cristobal [Cree-STOH-bahl]. These are both provincial capitals.

Prior to the implementation of this project, San Cristobal relied on untreated well and spring water extracted by the city, and La Romana relied upon municipally extracted well water and a small potable water treatment plant drawing water from the Chavon River.

The Dominican Republic contracted with Biwater USA to raise the quality of the water supply to acceptable levels and increase capacity to meet high population growth projections.

In a separate project, Ex-Im Bank authorized approximately $71 million in financing to support a potable water system for San Francisco de Macoris [San Frahn-CEES-co day Mah-CORE-rees]. Due to population growth within the city, the demand for potable water outstripped the capacity of existing sources, leaving consumers with undependable access to clean water. A consortium led by Biwater USA won the contract from the Dominican government to address the situation.

To sum up, I would like to reiterate that Ex-Im Bank provides financing for a wide range of infrastructure projects, including manufacturing and sectors beyond what I’ve covered here.

Conclusion

I began this morning by talking about free trade, and I would like to close with a comment that trade and economic development are inextricably linked. I would like to leave you with a quote from President Bush from his first visit to Brazil last November. He said and I quote:

“By working for free and fair trade across this hemisphere, we will bring all our people into the expanding circle of development. . . Most importantly, trade means jobs for people.” End quote. And I would add, trade means access to a better quality of life.
I think that’s why we’re all here at this conference. We know that trade supports the infrastructure development that creates the jobs that bring the prosperity that benefits all the nations of Latin America and the Western Hemisphere.

Ex-Im Bank wants to support your projects in Latin America. Ex-Im Bank offers export financing at every level – from working capital and short-term insurance to medium- and long-term buyer financing. And we welcome your interest in our financing. Bring us your projects. We’d love to partner with you to build your Latin American business and support important infrastructure growth in the region.

Thank you for your attention and the opportunity to speak to you today. I wish you a productive and successful forum.

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