INTRA-REGIONAL EXPORT FINANCING OF GOODS AND SERVICES

Medium-term Financing

Purpose

To facilitate the medium-term financing of intra-regional exports of capital goods and of services among the Latin American member countries of the Bank, with a view to promoting the integration and economic development of the region by expanding and diversifying its commerce.

Eligible Borrowers

Eligible to participate in the program, in their capacity as exporters, are those Latin American member countries of the Bank which have designated a national agency having the necessary legal and financial capacity to perform the pertinent functions in accordance with the following requirements.

The National Agencies shall be empowered to perform those of the following functions which the Bank determines are necessary to conduct the transactions: a) enter into agreements and loan contracts with the Bank for the purpose of executing the Program; b) discount credit documents deriving from exports included under the Program; c) issue credit documents in favor of the Bank resulting from the financing of exports eligible under the Program; d) rediscount with the Bank, with its full and unconditional guarantee or that of another institution satisfactory to the Bank, credit documents which it has acquired through the financing of exports eligible under the Program; e) verify that the exports financed under the Program are in keeping with its purposes, and the instructions issued by the Bank; f) issue or authenticate certificates as to the origin and the dates of shipment of the goods, as well as certify the fulfillment of the legal and other formalities pertaining to their exportation, and g) perform all other functions which are their responsibility to fulfill in the implementation of the Program.

General Evaluation Criteria

The Program is limited to financing: a) intra-regional exports of capital goods, which are understood to be those goods which either by their nature or their use are generally considered in international trade practice to be capital goods and which are normally subject to medium-term financing; b) those services which are normally financed at medium-term in international trade.

Origin of Goods and Services

The criteria for the origin of goods and services, as applied to this Program, are presented in the Procurement Policy GP-118-11, May 1992 and GP-118-20, September 1994.

List of Goods and Services

The Bank distributes to the national agencies a list of the goods and services whose export may be financed under the Program. The list may be revised when deemed appropriate by the Bank, particularly for the purpose of including new capital goods or services that the developing member countries may be in position to export.

Sources of Financing

The Program shall be financed with the Bank's own resources or those as the Bank may obtain in the capital markets--without committing its guarantee or that of the funds under its administration--by means of the sale of documents originating with operations financed under the Program. These resources may be used to grant global loans, establish lines of credit or conduct such other operations consistent with the nature and rules of the Program as the Bank may determine.

Percentage of Financing

The Bank normally finances up to 85% of the export credit financed by the national agency. This proportion may be increased to 100% in exceptional circumstances.

Interest Rate

The interest rate is determined from time to time by the Board of Executive Directors, taking into account the rates which the export-financing systems of other countries usually charge and the cost of money in the capital market.

Guarantees

The Bank may require the joint and several guarantee of the government of the exporting country or of a financial institution of such country acceptable to the Bank.

Exports not Financed

The Program does not finance: a) the export of goods which, in the judgement of the Bank, will not promote the economic development of the importing country; b) the export of used goods; or c) re-exportation, or export transactions which depart from normal commercial practice.

Approval Authority

The President of the Bank is empowered to authorize the use of funds available for the Program for the purpose of granting global loans, or concluding lines-of-credit agreements and effecting such other operations as he may deem appropriate; provided, however, that there shall be submitted for the prior approval of the Board of Executive Directors:

The authorization of any operation which may commit funds in an amount in excess of US$1 million.
Any authorization which may result in the commitment, in any one fiscal year of the Bank, of a total amount of over US$5 million to any national agency, in excess of authorization approved by the Board of Executive Directors.

Coordination

In order to attain the greatest possible coordination and uniformity in export-financing practices, the Bank maintains liaison with the organizations outside the region concerned with the subject and stimulates and facilitates contacts among the national agencies themselves.

Short-Term Financing

Purpose

To finance the export of manufactured and semi-manufactured goods and other items of non-traditional export that shall contribute directly to increasing production in the exporting country as well as in the importing country, thus contributing to the economic and social improvement of the developing member countries.

Eligible Countries

Allowed to participate in the Program, as exporters, shall be developing member countries of the Bank that have appointed a national agency, the powers and purposes whereof shall conform, in the opinion of the Bank, with the purposes of the Program and have the legal and financial capacity to execute the Program.

The national agencies shall be empowered to perform such of the following functions as the Bank shall deem necessary to conduct transactions pursuant to this policy: a) enter into agreements and loan contracts with the Bank for the purpose of executing the Program; b) discount or rediscount credit instruments originating in exports pursuant to the Program; c) discount or rediscount credit instruments originating in the pre-shipment financing of eligible exports under the Program; d) issue credit instruments in favor of the Bank resulting from the financing of exports eligible under the Program; e) verify that exports financed under the Program are in keeping with its purposes, the provisions of the Regulations, and the instructions issued by the Bank; f) issue or authenticate certificates of origin of the goods or services and the shipping dates thereof, and certify, as well, the performance of the formal legal and regulatory requirements associated with the exportation; and g) perform all other functions for which they are responsible in the execution of the Program.

Eligible Goods and Services

The Program shall be limited exclusively to the financing of:

1. Exports of capital goods and services that are eligible under the Medium-Term Financing Program whenever the respective export credit has been granted on a term of up to 180 days; and

2. Exports of all kinds of manufactured and semi-manufactured goods, except: a) used goods; b) any goods to be re-exported; c) such items of export as correspond to transactions that are outside usual commercial practice; d) basic products; e) exportation of basic products that are traditional items of export of the developing member countries of the Bank, even when such items have undergone an insignificant measure of transformation; and f) manufactured and semi-manufactured goods corresponding to traditional exports of the developing member countries of the Bank.

Origin of the Goods and Services

The criteria for the origin of goods and services, as applied to this Program, are presented in the Procurement Policy GP-118-11, May 1992 and GP-118-20, September 1994.

Financing Operation Forms

In executing this Program, the Bank may undertake lending operations by means of the following procedures: a) granting global loans to the national agencies; b) entering into agreements on lines of credit with such organizations, either for procurement of the credit instruments they issue or for discounting the credit instruments they issue or for discounting the credit instruments acquired by these organizations; and c) carrying out such other operations as the Bank may decide.

1. Global loan

Global loans shall be made in accordance with the following conditions: a) the Bank may charge a credit fee on undisbursed loan balances; b) the loan term shall suit the purposes of the Program; and c) the contract shall contain such provisions as may be necessary to ensure that the national agency shall use the funds in accordance with the purposes of the Program, the provisions of the regulations set forth herein, and the rules and practices of international trade.

2. Credit line agreements

Credit line agreements shall be made in accordance with the following provisions: a) the Bank may charge a credit fee on undisbursed balances of the original amounts obligated; b) the term for utilization of the credit line and the terms of amortization of credit instruments acquired by the Bank shall be suited to the purposes of the Program; c) the respective contract shall contain such provisions as may be necessary to ensure that the respective national agency shall use the funds in concordance with the purposes of the Program, the provisions of the policies set forth herein and the rules and practices of international trade.

Terms of Financing

The Program shall provide for financing on credit such exports as are considered to be short-term. In setting the terms, account shall be taken of the usual forms, terms and conditions of international financing available of the respective goods and services. As a general rule, such exporting operations of goods and services as are made with export credits on a term of up to 180 days shall be eligible. The Bank may set longer or shorter terms for certain goods, in accordance with conditions prevailing in international trade. To this end, it shall distribute among the national agencies lists of goods to which the special terms shall apply.

Normally, the terms shall apply from the date of shipment of the goods.

Bank Participation

The Bank may finance a part of the eligible export credits financed by the national agency. The proportion of Bank financing shall be established in concert with the national agencies. This share shall not exceed 50% for category A, 65% for category B, and 85% for categories C and D countries.

These shares may be increased to as much as 100% of the export credits financed by the national agency, whenever the exporting country has undertaken the political risks of export credit and, as a consequence of losses can no longer continue to finance eligible exports under the Program or under the Medium-Term Financing Program at a normal rate.

Requisite Conditions

An export operation, in order to be financed under the Program, shall require: a) that the terms of amortization applicable to the export credit be compatible with the practices of international competitive bidding with respect to export financing; b) that the interest rate charged to the exporter by the national agency or the intermediary agency shall not be less than that determined periodically by the Bank; c) that the importer's obligation be payable in dollars of the United States of America or in some other currency unit that the Bank considers acceptable; d) that the goods have been shipped together with the necessary documents supported by the insurance usually required in commercial practice; e) that, as regards exports which are to be effected in partial deliveries, the special provisions that the Bank has established have been met; and f) that all other conditions set by the Bank as applicable to the Program have been performed.

Credit Instruments

Such credit instruments as the Bank may acquire shall: a) be payable in dollars of the United States of America or in such other unit of currency as the Bank considers acceptable; b) be written in the manner prescribed and meet the requirements that the Bank has set for the purpose; c) specify payment of interest quarterly or semiannually; d) have been issued or guaranteed unconditionally, jointly and severally by the national agency of the exporting country or such other institution of the exporting country as the Bank shall approve; and e) be accompanied by such documents and evidence as the Bank may consider relevant.

Interest Rates and Guarantees

On operations financed under the Program, the Bank shall charge interest as determined by the Board of Executive Directors periodically, taking into account the interest charged by the export financing systems of other countries and the cost of money in the capital market; and it may require the joint and several guarantee of the government or of a financial organization, found acceptable by the Bank, of the particular country.

Pre-Shipment Financing

Global loans or lines of credit granted to the national agencies may also be used to partly finance, in the proportions noted under the heading "Bank Participation" in this section, such pre-shipment credits as have been financed by the respective national agency, provided they meet the following requirements: a) that the credits be intended to facilitate the production, preparation and/or storage of such goods for exportation as are eligible for financing under the respective loan; and b) that the pre-shipment financing machinery used by the national agency has been the object of credit regulations acceptable to the Bank.

Resources

The Program shall be financed with the Bank's own resources or those as the Bank may obtain in the capital markets--without committing its guarantee or that of the funds under its administration--by means of the sale of documents originating with operations financed under the Program.

Coordination

In order to optimize coordination and uniformity in export financing practices, the Bank shall maintain relations with non-regional organizations that are engaged in this activity and shall encourage as well as facilitate contacts between the national agencies.

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Prevailing Reference Documents:
GP-23-1, September 1974,
GP-33-3, October 1975,
GP-37-5, April, 1976.
 

* The operational policies of the Inter-American Development Bank are intended to provide operational guidance to staff in assisting the Bank's borrowing member countries. Over the course of the Bank's more than 40 years of operations, the approach to developing operational policies has taken various forms, ranging from the preparation of detailed guidelines to broad statements of principle and intent. Many policies have not been updated since they were originally issued, and a few reflect emphases and approaches of earlier years which have been superseded by specific mandates of the Bank's Governors, the most recent being the Eighth Replenishment mandates of 1994.

In accordance with the Bank's information disclosure policy, the Bank is making all of its operational policies available to the public through the Public Information Center. Users please note that the Bank's operational policies are under a process of continuous review. This review process includes preparation of best practice papers summarizing experience at the Bank and other similar institutions, and sector strategy papers.

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