John McAdams, former Vice President and CEO of the U. S. Export-Import Bank, visited Denver this week as a guest of state Rep.Tracy Kraft-Tharp, D-Arvada. Part marketing junket and part tutorial, McAdams explained how the EX-IM bank could assist Colorado businesses and manufacturers in marketing their goods and services to an expanding global market. Some of his numbers were astonishing. The U. S. economy represents only 5 percent of the global market today. Of the remaining 95 percent, emerging and small country markets recently passed the developed economies to grab 53 percent of total world production. In other words, if you ignore the Uzbekistans of the world you may be ignoring half or more of your potential customers.
Created in 1934, the Export-Import Bank has provided financial support to American manufacturers by issuing loan guarantees and transaction insurance, backed by the full faith and credit of the U. S. government. Their $125 billion loan capacity supports a quarter of a million American jobs and range from five thousand to five billion dollar deals. Although behemoths like Boeing, Caterpillar and General Motors, as well as the booming petroleum industry, have relied on the EX-IM Bank for decades, somewhat tarnishing its reputation with the charge of corporate subsidy, 19 percent of its contracts are executed with small businesses, includ-ing individual agricultural producers. Accessing these moneys can prove a bureaucratic nightmare, however.
Colorado firms, located far from Washington and our nation’s financial centers, have woefully underutilized this opportunity. McAdams explained that loans are available both to build up product inventory for export customers, and to guarantee purchaser agreements, often in the form of a letter of credit. The EX-IM Bank is currently returning about a billion dollars each year to the U. S. Treasury in earnings and will ask for an expansion of its revolving loan authority to $140 billion in 2014. If there is a purchaser for your product, no deal is too bizarre. EX-IM exports chicken legs to China after American fast food outlets harvest the white meat, and Colorado ranchers have exported breeding bulls to Mexico. The Bank’s mission is to export credit, not American jobs.
If a Colorado business prefers to work with its local bank, EX-IM can step in and assist that local banker in securing federal guarantees. McAdams recently departed EX-IM after 15 years to lead EXWORKS, a consulting firm that can help small firms navigate the federal approval process. In some cases, if an exporter prefers, they will actually purchase products directly and assume responsibility for their resale. The Colorado Office of Economic Development raised the possibility of opening a branch in Denver, something that EX-IM has done in Atlanta, Chicago and other regional centers. McAdams wasn’t encouraging, but pointed out these are political decisions driven by pressure from governors and congressional delegations.
Because of the increasing liquidity requirements placed on commercial banks subsequent to BASEL3 negotiations and the financial crash of 2008, EX-IM’s share of financing for American export loans has grown from 10 percent to nearly 75 percent of the market. As an agency of the U. S. government the U. S. Treasury intrinsically assures its loans. With Colorado’s entrepreneurial sector rapidly expanding, a regional presence sounds like more than just a good idea.