Export Credit Agencies

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Export Credit Agencies and Investment Insurance Agencies, commonly known as ECAs, are institutions which act as finance companies for private domestic entities who conduct business abroad. ECAs provide government-backed loans, guarantees and insurance covering both commercial and political risk. Most industrialized nations have at least one ECA, which is usually a national, public or publicly-mandated agency that usually supports companies from their home country.

Most countries of the Organization for Economic Co-operation and Development (OECD) have at least one ECA, which is an official or quasi-official branch of their government (with private capital but acting on behalf or with the mandate of the national government, e.g. COFACE in France). The officially supported export credits provided by these agencies are distinct from private export credit financing, which is not discussed here.

The Berne Union, or officially, the International Union of Credit & Investment Insurers, is the leading international organisation and community for the export credit and investment insurance industry. The Berne Union and Prague Club combined have more than 70 member companies spanning the globe.

Participants to the Arrangement on Officially Supported Export Credits have been working since 1978 to reach agreement on common guidelines for minimum standards in payment terms and credit periods (OECD Consensus). Although negotiations are facilitated by the OECD, not all OECD member countries are participants; the Participants are Australia, Canada, the European Community, Japan, Korea, New Zealand, Norway, Switzerland and the United States (as of December 2005). Since 1999, country risk categories have also been harmonized by the Arrangement and minimum premium rates allocated to the various risk categories. This is intended to ensure that competition takes place via pricing and the quality of the goods exported, and not in terms of how much support a state provides for its exporters. The Arrangement does not extend to exports of agricultural commodities or military equipment.

For instance, a transnational corporation, or investor, will seek insurance cover from an ECA when selling goods or services to, or investing money in, a foreign country. The premium charged by the ECA depends on the political and economic stability of the foreign country, the buyer's credit profile and the credit terms, among other factors.

ECAs are now the world’s biggest group of public International Financial Institutions, collectively exceeding the World Bank Group in size.

ECAs currently finance or underwrite about $430 billion of business activity abroad - about $55 billion of which goes towards project finance in developing countries - and provide $14 billion of insurance for new foreign direct investment, dwarfing all other official sources combined (such as the World Bank and Regional Development Banks, bilateral and multilateral aid, etc.). As a result of the claims against developing countries that have resulted from ECA transactions, ECAs hold over 25% of these developing countries' US$2.2 trillion debt.

At EU level, the European Commission, in particular DG Trade, plays a role in the harmonization of Export Credit Agencies and the co-ordination of policy statements and negotiation positions.

The activities of ECAs are considered by some, such as Noam Chomsky, to be a type of welfare for large corporations. ECAs are also criticised for insuring companies against political actions which aim to protect workers' rights, other human rights or the natural environment in the countries where the investment is being made.

ECAs see themselves as facilitators of export and/or investment to both developed and emerging markets. By engaging in these activities, ECAs often act in cooperation with other international financial institutions involved in supporting the successful development of worldwide trade.