Infrastructure demand will power the global economy out of its slowdown, according to US Export-Import Bank (US Exim) chairman and president Fred Hochberg.
Speaking to GTR, Hochberg notes: “The amount of infrastructure that’s being put into place globally is at a level we’ve never seen. It’s something that can really help power up this global recovery.”
Hochberg’s forecast comes as the US export credit agency (ECA) announced a record-breaking year for the bank.
US Exim financing topped US$32bn and supported around US$40.6bn-worth of US exports during the bank’s fiscal year 2011, which ran from October to September.
Infrastructure-related financing led much of the way for the ECA, and reached US$21bn.
This is a three-year rise of 130% for the bank’s infrastructure portfolio.
“The global economy will shift from the US consumer and will move to infrastructure,” says Hochberg.
“You look at Brazil, with US$860bn-worth of infrastructure [planned] between now and the Olympics. Colombia with US$55bn in the next five to 10 years. India is planning a trillion dollars in the next five years.
“Those infrastructure investments into airports, ports, power, have the potential to really power the global economy.”
This is expected to have a positive effect for increasing business at US Exim, as Hochberg adds: “I think that’s where ECAs play a unique role. Talking to clients, the financial crisis has made them sensitive to wanting to diversify their source of capital and therefore making ECAs part of the capital structure.”
The ECA managed to shrug off Standard and Poor’s downgrade of US credit and has been expanding its business lines throughout its financial year 2011.
New products were launched, most notably a supply chain finance programme and a streamlined process for sub-US$300,000 guarantees which aims to reach approval for applications in five days, instead of the 30-day wait that 80% of US Exim applicants must undergo.
So far, 125 companies have used the streamlined product, called Express Insurance.
Hochberg is sure that the bank’s 33% year-on-year increase in its portfolio isn’t just a one off.
“It would be far too premature to talk about any growth [figures for 2012]. But I do not see our fiscal year 2011 as an abhorrent blip. I see a continuing strong trend,” he says.
While the bank has posted rosy results for 2011, there is one potential challenge that faces the ECA in the coming fiscal year; the 2012 US presidential election.
President Obama has put exports on the front foot during his term, including launching the National Export Initiative in an attempt to double US exports over five years.
Potential GOP candidates for the 2012 presidency have different views on exports, particularly republican Ron Paul, who has called for the bank to be shut down.
However, the bank is a bi-partisan operation from the board level and Paul’s move would be an absolute worst case scenario for the US Exim.
“I believe [President Obama] is clearly the best candidate and is going to be re-elected,” says Hochberg.
“With President Obama, there has certainly been a launching and jump-start of US companies, individuals and a government focussed on exports. If there is a change [of president] I do not know whether the next Exim Bank chair will be as forward leaning, or trying to help as many companies as I do.
“When I travel, I continuously hear of opportunities for various companies that I know are in certain fields. If I’m with a [foreign] minister or company that is putting together a public-private initiative or a project, I contact US companies and tell them ‘if you’re not aware of this, then you should be.’”