Printer Friendly

USDA offers export-credit program: information provided by the U.S. Agricultural Trade Office in Mexico.

If you are an exporter or importer of U.S. agricultural and food products, these United States Department of Agriculture programs may help to grow your business 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.

LATEST TRENDS

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:

www.fas.usda.gov

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

Mexico, D.F.

Tel: (01 1-5255) 5280-5291

Fax: (01 1-5255) 5281-6093

E-mail: atomexico@usda.gov

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
COPYRIGHT 2004 American Chamber of Commerce of Mexico A.C.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2004, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:U.S. TRADE NOTICE; United States Department of Agriculture
Publication:Business Mexico
Geographic Code:1USA
Date:Apr 1, 2004
Words:699
Previous Article:Infected by science: international attention focuses on Oaxaca after GM corn found in all-natural fields.
Next Article:Modernizing the tax system: Chamber seminar illuminates process of making Mexico a more efficient fiscal animal.
Topics:


Related Articles
FOREIGN FLAIR.
World Trade or trade-off? (Washington Perspectives).
Living off the land, barely: extended decline in campo hits traditional, communal farmers hardest, but several markets show international promise.

Terms of use | Privacy policy | Copyright © 2020 Farlex, Inc. | Feedback | For webmasters