E XPORT -IMPORT B ANK OF THE U NITED S T A TES Supporting Exports... Sustaining Jobs... S trengthening Communities... 1997 ANNUAL R EPORT CHAIRMAN’S LETTER AS THE 18TH PRESIDENT and Chairman of the Export-Import Bank of the United States (Ex-Im Bank), I am pleased to pre- sent the 1997 Annual Report to our “stockhold­ ers” — the taxpayers of the United States. The Ex-Im Bank is in a sound financial condition, with ample reserves and an excellent record of financial results. Furthermore, Congress has granted Ex-Im Bank a four-year reauthorization through the end of Fiscal Year 2001 to continue our work in support of U.S. exports and jobs. Our dedicated and talented staff has achieved James A. Harmon President & Chairman notable success in the past year, especially in implementing new ways to bring the Bank’s pro- grams closer to our customers — U.S. compa­ nies, small and large, that seek to export their products and services to developing markets around the globe. “Jobs through Exports” is not just a slogan: it is a mission that we carry out every day. We help businesses across the country to enter new and rapidly growing markets, where private sources of financing are very limited or nonexistent. For many people, Ex-Im Bank’s daily work of leveling the playing field for U.S. companies may seem as remote as the countries to which U.S. goods and services are being shipped. However, American workers — whether they are building commercial aircraft, telecommunications equipment, power generation facilities, or water purification systems to provide safe drinking water in developing nations — have higher quality, better paying jobs, thanks to Ex-Im Bank’s financing. 2 / 1 9 9 7 A N N U A L R E P O R T EXPORT -IMPORT BANK OF THE UNITED STA TES The narrative of this report features several recent During 1997, Congress conducted an extensive Ex-Im Bank transactions and shows the broad review of Ex-Im Bank’s policies and programs in effect on subcontractors and subsuppliers around order to determine whether to reauthorize the the country. Too often, we view “exporters” in nar­ agency. Ex-Im Bank’s previous reauthorization rowly defined terms, thinking only of traditional was in 1992 for a five-year period. contract holders, missing myriad unseen compa­ nies that, in fact, are the contract “fulfillers.” It is Within 30 days of my swearing-in, I testified estimated that Ex-Im Bank supports more than before the Senate Banking Committee on behalf 200,000 jobs directly each year among primary of Ex-Im Bank’s reauthorization. It was an unusu­ contractors and an additional one million jobs indi­ al initiation for me, but upon reflection, I believe rectly among subcontractors and subsuppliers. it was a healthy and important process. The Bank’s staff and leadership met with many mem­ FISCAL 1997 - IMPORT bers of Congress, testified in numerous hearings, RT B O A P N and listened to their concerns. I was delighted IN REVIEW X K E Ex-Im Bank completed that the Senate voted unanimously and the MCMXXIV 2,348 transactions with a O House of Representatives by a margin of 378 to 38 S F E total export authorization T T to reauthorize this agency through FY 2001. H A E S T of $12.2 billion, supporting U N I T E D U.S. exports valued at more Ex-Im Bank achieved a number of other signifi­ than $15 billion. The bulk of our financing is for cant milestones this past year. Our Project exports to the Big Emerging Markets, where com­ Finance Division, formed just three years ago to mercial financing is insufficient or unavailable. meet the growing global demand for limited recourse project financing, completed its 22nd I believe that Ex-Im Bank, when considered by transaction, bringing aggregate Ex-Im Bank sup- any set of objective economic criteria, is an port for this type of financing to $6 billion. excellent value for the U.S. taxpayer. Assuming that pre-tax margins are 10% to 15% on the $15 Ex-Im Bank’s Working Capital Guarantee billion in exports, income tax receipts for the Program, an important source of export financing federal government directly related to these spe­ for small and medium-sized businesses, authorized cific exports would approximate the $843 million loans of $443.3 million in FY 1997 — a new program budget of Ex-Im Bank in FY 1997. In record. The Bank continues to take very seriously other words, the net cost of Ex-Im Bank pro- our mandate to reach out to small business, and we grams to the taxpayer is very modest. are working closely with our 34 City/State partners and 80 Delegated Authority lenders to find new venues to enhance participation in our prog r a m s . W O R K I N G T O W A R D A Si g n i f i c a n t l y , 357 small businesses that rec e i v e d S T R O N G F U T U R E Ex-Im Bank’s assistance during the year had not I believe that it is important that Ex-Im Bank pr eviously participated in Bank prog r a m s . anticipate changes in the marketplace and the “We can not create needs of the Bank’s customers, and develop enough good jobs and In FY 1997, the growing world economy generat­ a p p ropriate policies and pro g r a m s . increase wages if we don’t ed considerable demand for U.S. capital good s and equipment. In the aircraft sector, demand for Attaining the next level of achievement means expand trade. There’s a financing grew among developing country air- im p r oving Ex-Im Bank’s responsiveness to our cus­ simple reason why. lines seeking to mod e rnize their fleets. Ex-Im tomers and creating new and innovative pro- Indeed, about a third of B a n k ’s Aircraft Finance Division supported $2.1 grams. It means expanding the number of small the economic growth that billion in exports. businesses using Ex-Im financing to enter the has produced 13 million global market, reestablishing the leadership role of new jobs over the past four As the official export credit agency of the our Project Finance Division, increasing the num­ and a half years has come United States, Ex-Im Bank continues to lead ber of delegated authority banks, and expanding U.S. government eff o rts in international negoti­ from selling more American our City/State Program. In this balanced-budget ations to level the playing field for American products overseas.” era, Ex-Im Bank must manage both financial and business. Ex-Im Bank has been working for the human res o u r ces more effi c i e n t l y . Simply put, we past several years within the Organization for must maximize the value for the taxpayer. – President Bill Clinton Economic Cooperation and Development (OECD) to reach agreement on several key It is important to note that Ex-Im Bank began FY issues that directly affect the ability of U.S. firm s 1998 with a significant backlog in demand for to export. In June 1997, the Bank supported a financing, but we are closely monitoring rec e n t new agreement by the OECD’s Export Cre d i t developments in Asia and Russia with a view A rrangement group to set minimum pre m i u m to w a r d the impact of any economic decline on the rates (also called exposure fees) for country and demand for U.S. products and services. The explo­ s o v e reign risk. This agreement is an import a n t sive growth of emerging markets around the world step toward increasing fair competition in the will not continue in a straight line — there will be world marketplace. bumps along the way. I believe that management 4 / 1 9 9 7 A N N U A L R E P O R T EXPORT -IMPORT BANK OF THE UNITED STA TES at the Bank is well pre- • Reduction of trade-distorting practices: We pared to meet the chal­ will continue our efforts in multilateral negoti­ lenges of the future ations to reach new agreements that would and to continue build­ reduce export finance subsidies and related ing. In this regard, we practices that distort trade and unfairly disad­ are focusing on the fol­ vantage U.S. exports. lowing opportunities: Ex-Im Bank’s impact is felt in thousands of cities • Partnership with the private sector: We will and towns across the country where American work to expand the availability of financing workers create the goods and provide the services for U.S. exports by pioneering joint ventures that are the export engines of growth in the U.S. with the private sector to leverage con- economy. After almost four decades in the pri­ strained budget resources. vate sector as an investment banker, I am proud to serve with the employees of Ex-Im Bank to • More small business support: We will develop meet the challenges ahead. new financing programs to enhance support for small and medium-sized businesses. As President and Chairman of Ex-Im Bank, I am mindful of the many who proceeded me and the • Intergovernmental coordination: We will many who will follow. I am grateful to my three work to integrate our programs and activities immediate predecessors who were helpful to me with other export assistance programs of the in preparation for this assignment.