USDA offers export-credit program: information provided by the U.S. Agricultural Trade Office in Mexico.
Export credit guarantee programs for commercial financing of U.S. agricultural exports help exporters reach buyers in Mexico where credit is necessary to maintain or increase sales of agricultural products but where financing may not otherwise be available. Almost all U.S. agricultural and food products are eligible for these credit guarantee programs.
The Export Credit Guarantee Program (GSM-102) underwrites credit extended by the private banking sector in the United States (or, less commonly, by the U.S. exporter) to approved foreign banks using dollar-denominated, irrevocable letters of credit to pay for food and agricultural products sold to foreign buyers. The credit covers terms up to 3 years.
Under this program, the CCC does not provide financing but guarantees payments due from foreign banks. Typically, 98% of principal and a portion of interest at an adjustable rate are covered. Because payment is guaranteed, financial institutions in the United States can offer competitive credit terms to the foreign banks, usually with interest rates based on the London Inter-Bank Offered Rate.
Under the Supplier Credit Guarantee program (SCGP), CCC guarantees a portion of payments due from importers under short-term financing (up to 180 days) that exporters have extended directly to the importers for the purchase of U.S. agricultural commodities and products. These direct credits must be secured by promissory notes signed by the importers. CCC does not provide financing but guarantees payment due from the importer. Currently 65% of the value of the exports is guaranteed under the SCGP.
The GSM-102 and Supplier Credit Guarantee Program have a long and successful history in Mexico. The GSM-102 program, designed to protect against bank defaults on loans, has been used in the market since 1981. Use of the GSM-102 program by value is declining in Mexico. In 1999 Mexico used US$1.2 billion or 40% of all guarantees provided worldwide; and by contrast, in 2003 only US$177 million in credit coverage or about 7% of all credit guarantees under GSM-102 were provided for exports to Mexico.
The SCGP has been used in Mexico since 1997 and has grown more than 200 percent over the last 5 years to almost US$400 million in coverage in 2003. The program is particularly useful for new-to-market exporters who have not yet established a long-term relationship with an importer, as the program provides protection against an importer who defaults on payment. By value, Mexico used 60% of all supplier credit guarantees provided worldwide in 2003. Use continues to climb, as for the first three months of 2004, Mexico used by value 70% of all guarantees worldwide.
Based on general knowledge of the market and banking system, interviews with bankers in Mexico and suppliers using the program, these are the factors that have contributed to the growth of SCGP and the decrease of use of GSM-102.
For a complete list of those eligible commodities, step-by-step instructions on how to apply for and use the programs and other details, see the following web site for more information:
For any in-country inquiries, please contact the Agricultural. Trade Offices in Mexico:
U.S.Agricultural Trade Office, Mexico City, Mexico
Bruce Zanin, Director
Jaime Balmes No. 8-201
Col. Los Morales Polanco
Tel: (01 1-5255) 5280-5291
Fax: (01 1-5255) 5281-6093
U.S. Agricultural Trade Office, Monterrey
Dan Martinez, Director
Oficinas en el Parque Torrell
Blvd. Diaz Ordaz No. 140, Piso 7
Col. Santa Maria
64650 Monterrey, N.L.
Tel: (011-5281) 8333-5289
Fax: (011-5281) 8333-1248
RELATED ARTICLE: Why SCGP Use Is Increasing in Mexico
Knowledge of program continues to expand through ATO outreach and word of mouth among U.S. exporters and Mexican importers
Ease of use of the program, including low costs, limited administrative work and efficient program management
Growing expectations among Mexican importers that short-term credit should be extended for purchases
Desire among exporters to explore relationships with multiple importers in Mexico as they expand exports outside of one region
Increasing overall agricultural exports to the market
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|Title Annotation:||U.S. TRADE NOTICE; United States Department of Agriculture|
|Date:||Apr 1, 2004|
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