Export-Import Bank of the United States Fiscal 1981 Annual Report Table of Contents Highlights of the Year 2 The Chairman's Statement 3 The World of Eximbank 5 Electric Power 5 Aircraft 7 Construction Equipment 9 Communications 11 Small Business 12 Review of Operations 13 Five-year Authorizations Summary 16 Financial Statements 18 Footnotes to Financial Statements 22 General Accounting Office Certificate of Audit 26 Activity by Market 27 Details of Credits Authorized 31 Directors and Officers 44 Financial Highlights ($ Millions) FY 1981 FY 1980 Loan Authorizations $ 5,430.9 $ 4,577.8 Guarantee Authorizations 1,513.2 2,509.7 Insurance Authorizations 5,910.0 5,521.7 Total Authorizations $12,854.1 $12,609.2 Export Sales Supported $18,598.2 $18,108.0 Loans Receivable $15,802.4 $13,765.1 Borrowings Payable 12,874.1 10,807.2 Capital and Reserves 3,199.5 3,187.4 Gross Revenue 1,195.4 989.3 Net Income 12.1 109.7 Worldwide Exposure 38,406.2 33,161.6 October 1980 • As the fiscal year opens, demand • The first Direct Credit under the for Direct Credits exceeds the new lending policies is approved Bank's expected lending authori­ for the $20 million sale of eight ty, and the increasing cost of the tug/supply vessels by Mangone Bank's borrowings above its Swiftships to a Norwegian ship­ lending rates impairs future ping company for use in the earnings. North Sea. November 1980 Eximbank approves its first loan August 1981 • The United States, France, West in the new nation of Zimbabwe, a Germany and the United King­ $33 million Direct Credit to dom establish common financing Wankie Colliery Company for the terms for aircraft exports, in­ purchase of $51 million in cluding a minimum interest rate American coal mining equipment of 12 percent, substantially from Bucyrus-Erie and other U.S. reducing aircraft financing sub­ suppliers. sidies. December 1980 • Eximbank adds entire FY 1980 • As part of the Administration's net income of $110 million to program to strengthen trade ties reserves and, for the first time in with the Caribbean Nations, many years, declares no divi­ Eximbank approves a line of dend. credit to the Bank of Jamaica to provide medium-term financing February 1981 The Bank's Board of Directors for $15 million in U.S. sales to imposes a moratorium on new the Jamaican agricultural and in­ long-term commitments until dustrial sectors. revised lending policies can be established by the new Board of September 1981 • The Bank approves an increase Directors to be appointed by in a Direct Credit authorized President Reagan. earlier in the year, resulting in the largest loan ever made by March 1981 • Eximbank approves its first the Bank, $1.1 billion to Air foreign currency guarantee Canada for the purchase of 24 under the medium-term Commer­ Boeing 767's. cial Bank Guarantee program. The guarantee covers a 4.6 • The Bank approves its first loans million Swiss franc line of credit to the People's Republic of China, from Equator Bank, Ltd., in coor­ two Direct Credits covering $76 dination with Hartford National million in sales of U.S. goods and Bank and Trust Company, to the services for the manufacture of Merchant Bank of Central Africa, electric power generation equip­ Ltd., Harare, Zimbabwe. ment. June 1981 • Eximbank borrows a billion • The fiscal year closes during dollars from the Federal Finan­ which Eximbank authorizes $12.9 cing Bank, paying 13.63 percent. billion in loans, guarantees and July 1981 • Following Senate confirmation of insurance, the highest level since his nomination, William H. the Bank's creation in 1934. Draper III becomes the Bank's Nearly 40 percent of the year's President and Chairman. authorizations are approved following announcement of new • The Board lifts the moratorium, lending policies in mid-July. targets the Bank's loans to the most competitive transactions, increases the standard interest rate from 8.75 percent to 10.75 percent, and establishes a two percent credit application fee. Pi The Chairman's Statement The last decade saw international trade become a raising our rates from 8% percent to 10% percent. Ef­ major force in our nation's economy. Exports are no fective November 16, 1981, other OECD countries longer a peripheral activity; they are part of the agreed to raise their minimum rates from IVi percent lifeblood of our country. In 1981, producers of to 10 percent. We then raised our rates to 12 percent manufactured goods for sale overseas supported five and expect that the other countries will follow with million American jobs, and the value of our total ex­ another major step toward full market rates. ports approached a quarter of a trillion dollars. In keeping with the Reagan Administration's drive We fully support the free trade policy of the to cut back the level of Federal Government involve­ Reagan Administration. We believe that export sales ment in private market activities, we determined that should be negotiated on the basis of traditional we could operate with reduced lending and guarantee market factors — price, service and quality — not on authorities and still remain competitive. We adopted the basis of credit subsidies. changes in our policies in order to utilize our limited In fact, the vast majority of the $233 billion in U.S. resources more effectively. We introduced a policy of exports in 1981 went forward without any govern­ targeting the Bank's long-term loans primarily to ment assistance at all. They were either sold for cash those transactions which face the most intense or were financed in the private market. This is as it foreign subsidized credit competition, where the need should be. But the Export-Import Bank is needed to is critical for official credit support to sustain help those export sales that are threatened by foreign American technology and employment. official export credit subsidies, and to support those The time is past when American companies can sales which the private sector is unwilling to finance limit their sales to the domestic market, and the time because of unacceptable political or commercial risk. may never come when they can rely on the private In FY 1981, Eximbank authorized nearly $12.9 sector to meet all of their needs for competitive ex­ billion in loans, guarantees and insurance to assist ex­ port financing. The Export-Impact Bank has pro­ port contracts concluded during the year. Shipments vided essential financing assistance to American ex­ of these exports began in 1981 and will continue for porters for nearly five decades. From its inception, several years to come, sustaining 360,000 American the Bank was given the flexibility to help American jobs. companies export during periods of prosperity and When I became President and Chairman in July recession, peace and war. Certainly for the foreseeable 1981, Eximbank was losing money. Projections future, we will continue to play a vital role. We will showed we would continue to lose heavily in the take those risks which are the legitimate responsibili­ years ahead. Our situation was critical. We had been ty of the government; and, until we achieve our ulti­ forced to adopt the wasteful subsidy policies of our mate objective of free trade, Eximbank will be ag­ competitors in Europe. France, for example, was lend­ gressive in those competitive situations where our in­ ing at IV* percent while it was paying 17 percent for volvement means winning an order for an American its borrowings. Eximbank was lending at 8% percent exporter and keeping American workers on the job. while borrowing at rates approaching 14 percent. We had to be competitive, but the negative interest William H. Draper III spread was threatening the long-term viability of the Bank. There was only one sensible solution: we had to reach an international agreement. Eximbank and the Treasury Department immediately intensified nego­ tiating efforts to bring about a reduction in export credit subsidies. In August, we succeeded in getting the principal members of the Airbus Consortium — France, West Germany and the United Kingdom — to join with us in the first international accord governing interest rates and other terms for official financing of commercial jet aircraft exports. In one stroke we cut out about half of the projected subsidy for aircraft, an industry which accounts for a major part of our loan activity. We also intensified negotiations within the Organ­ ization for Economic Cooperation and Development to reduce export credit subsidies on other products. We were successful. We led the way by independently Margaret W. Kahliff and William H. Draper III • The World of Eximbank Electric Power Power generation projects represent one of the most Solar Turbines competitive sectors in international trade today, and American suppliers rely on Eximbank support to win Eximbank's medium-term financing support through orders in the worldwide market. Foreign suppliers the Discount Loan program helped Solar Turbines, can provide power equipment and engineering ser­ Inc., San Diego, California, in its successful bid for a vices that are comparable in price and technology to $1.75 million sale of gas turbines and compressors to those available from the United States. Eximbank in­ Empresa Nacional de Gas, the Spanish utility com­ volvement is often essential to offset foreign financ­ pany. Eximbank's support allowed Solar Turbines to ing advantages and to ensure that American power offer financing terms that were competitive with the generation equipment manufacturers remain com­ subsidized official export financing available to the petitive. foreign suppliers that were also bidding on the sale. As a result, Solar Turbines was able to win the con­ In 1981, Eximbank provided $932 million in sup­ tract on the basis of the technological merits of its port for $1.3 billion in U.S.