GTR: Which US Exim programmes is BBVA involved in?
GS: BBVA works with US Ex-Im through its export and agency finance group with the global trade finance department.
BBVA USA (the result of the merger of five regional banks; Compass Bancshares, Valley Bank, Laredo National Bank, Texas State Bank and State National Bank) is focused on US Ex-Im’s working capital programme working together with American SMEs while the BBVA subsidiaries in Latin America are more focused on buyer credits originating transactions through the importers.
From our point of view, the US Ex-Im medical equipment initiative is a very innovative and successful approach in supporting the American medical industry, and followed by other ECAs such as Atradius. We have in place a revolving credit line with Philips medical systems export, consisting of buying and discounting Philips US Ex-Im insured facilities.
GTR: What have been the most significant reforms undertaken by US Exim over the last year?
GS: The most important reforms were recently announced: the increase of the local content, the launching of a new medium-term delegated authority programme and new due diligence guidelines.
GTR: Can you talk through how these reforms will affect your business?
GS: The new medium-term delegated authority programme for export credit guarantees means that the ECA will share risk with the lenders on a 90/10 basis, except small business transactions that shall benefit from a higher comprehensive risk coverage of 92%.
For a bank like BBVA with a huge client base, especially Latin America importers and borrowers, this is a very important and useful programme that will allow the bank to give a better service to our clients, expedite the closing of the financing and increase the number of transactions. Our affiliate banks in Texas are already using the working capital delegated authority programme very successfully.
At BBVA we feel very comfortable with the new US Ex-Im due diligence guidelines. We do not involve third parties in the origination of the transactions and we always do it through our clients. In the BBVA Group we have very strict ’know your customer’s guidelines and procedures to be sure that transactions are both creditworthy and legitimate.
Also, the increase in eligible local cost coverage from 15% to 30% of the US export contract that will help American exporters remain competitive with foreign companies that are supported by their respective export credit agencies.
GTR: What are the main challenges facing US Exim?
GS: There is competition from both OECD and non-OECD country ECAs.
Globalisation has broken down borders and redefined the supply of goods and services. It has stimulated ECAs to be more flexible, efficient and customer friendly.
ECAs face the choice of maintaining the ‘made in’s concept like US Ex-Im or following their national interests offshore by changing their content and business orientation to the ‘made by’, ‘made possible by…’s or the ‘conceived by…’s concept as is the case of some ECAs such as Sace, Nexi and EDC.
Another example is where ECAs have adapted the traditional foreign content and currency policies. This more flexible approach is important to offshore subsidiaries and allows some ECAs to support transactions that may not involve direct export from the home country. Also, a more versatile view allows ECAs to support companies that prefer to choose the currency they wish to finance its projects and acquisitions.
GTR: What were the main themes of this year’s US Exim conference?
GS: From my point of view, this year’s event was a success. It gave the attendees the opportunity to gain knowledge about the new US Ex-Im products and initiatives, network and change impressions about the current financial market situation and how it is affecting the export business.
GTR: Last year at the conference, there was much talk about opportunities for US exporters in Sub-Saharan Africa. How much development has there been in this region and what regions did this conference focus on?
GS: In this year’s conference, US Ex-Im set up special workshops about India, Middle East, Turkey and Europe and Central Asia.
As for Africa, they had a panel related to the electricity plans and projects in 10 African countries. So far BBVA has not closed any deals in Africa but is are very active in other areas as Asia and Middle East.
GTR: Can you highlight any major deals BBVA has worked on with US Exim over the past year?
GS: BBVA obtained a US$113mn mandate from Perforadora Central – Mexico to finance the acquisition of a mobile offshore oil and gas exploration and drilling rig backed by an US Ex-Im structured trade finance loan.
BBVA was able to identify the client financial needs and to propose a competitive financial structure to finance not only the export but also the construction of the rig.
At the end of the construction period, Perforadora Central anticipates entering into a lease agreement with Pemex, charging day rates for the services of the jack-up drilling rigs. The flexibility and innovation shown by the ECA has made possible to accommodate Pemex’s short-term leasing contracts with a long-term credit.
BBVA is also involved in the financing of the National Chevron Phillips (NCP) olefins project in Saudi Arabia where the US Ex-Im tranche has a predominant role.
We are also MLAs in the Peru LNG transaction where BBVA is working together with US Ex-Im and other ECAs and multilateral agencies, such as Korea Exim, Sace, IFC and the IADB in order to finance a project of more than US$3bn.
GTR: What are BBVA’s prospects for 2008-09 in terms of the activities of its export and agency finance division ?
GS: I believe that current financial market situation and globalisation is changing the role that export finance business is playing, and is going to play in the near future.
Recent changes in the financial markets and the lack of liquidity is making the ECAs gain importance in the international financial arena.
In some cases, it is the only available way of offering medium or long-term financing, and in others the ECAs collaborate with other development and multilateral institutions to be able to put together a total financing package. Such is the case of the Peru LNG transaction arranged by Société Générale and BBVA where US Ex-Im is involved with more than US$3bn together with Sace, Korea Exim, the IFC and the IADB.
BBVA is ‘open for business’s to follow and fulfil its client’s needs worldwide. BBVA is in a very favourable position to take advantage of its strong balance sheet to offer lending products, including export finance, to its clients. As a matter of fact, in the market turmoil in February 2008, Standard & Poor’s raised BBVA’s long-term counterparty credit ratings to ‘AA’s from ‘AA-’s , this means that BBVA was the only bank in the world to get in less than a year its credit ratings upgraded by the three leading rating agencies: Moody’s , Fitch and Standard & Poor’s.