Front Matter

© 2005 International Monetary Fund

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Access to trade finance in times of crisis: conference proceedings/editors, Jian-Ye Wang, Marcio Ronci—Washington, D.C.: International Monetary Fund, 2005.

p. cm.

ISBN 9781589064041

1. Exports—Finance. 2. Export credit. 3. Financial crises. 4. Development banks. 5. World Trade Organization. I. Wang, Jian-Ye. II. Ronci, Marcio Valerio.

HG3753.A33 2005

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Contents

• Acknowledgments

• Foreword

• Overview

  Jian-Ye Wang and Helaway Tadesse

• Part I: Contraction of Trade Finance During Crises

  • Chapter 1. Trade Finance and Financial Crises

    William R. Cline

  • Chapter 2. Trade Finance and Trade Flows: Panel Data Evidence from 10 Crises

    Marcio Ronci

  • Chapter 3. Banks, Trade Finance, and Financial Distress

    Herman Mulder and Khalid Sheikh

• Part II: Addressing Trade Finance Shortfalls

  • Chapter 4. Indonesia’s Experience in Dealing with Trade Finance Shortfalls during Financial Crises

    Peter Jacobs

  • Chapter 5. Brazil’s Approach in the Face of Export Finance Constraints

    Helio Mori

  • Chapter 6. The U.S. Export-Import Bank and the Asian Crisis

    Piper Starr

  • Chapter 7. The JBIC Financing Facility for Indonesia

    Staff Team from the Japan Bank for International Cooperation

  • Chapter 8. Recent Argentine and Brazilian Crises and Effective Multilateral Development Bank Interventions

    Xavier A. Jordan

• Part III: Restoring Access to Trade Finance

  • Chapter 9. Trade Finance Support from Multilateral Development Banks During Crisis: New Tools and Priorities

    Martin Endelman

  • Chapter 10. Trade Credit for Crisis Countries: The Role of Export Credit Agencies

    Glen Hodgson

  • Chapter 11. Improving the Availability of Trade Financing: The Role of the World Trade Organization

    WTO Secretariat Staff Team

• Glossary of Terms

• Boxes

  • 1. Lessons from Past Initiatives

  • 3.1. Impact and Victims of Financial Crisis

  • 3.2. Selected Measures Taken by Countries to Safeguard Trade Finance

  • 6.1. U.S. Ex-Im Bank’s Korea Short-Term Facility During the Asian Crisis

  • 10.1. Guiding Principles for Sustainable Trade Credit

  • 11.1. Classification of Financial Services

• Tables

  • 1.1. Required Spread to Compensate for an Expected Capital Loss of 10 Percent

  • 2.1. Trade, External Short-Term Credit, and Real Exchange Rate in 10 Crises

  • 2.2. Summary of the Variables

  • 2.3. Unit Root Tests

  • 2.4. Export Volume Equations

  • 2.5. Import Volume Equations

  • 2.6. Summary of Trade Financing Effects on Trade

  • 3.1. GDP Losses from Banking and Currency Crises, 1980s and 1990s

  • 3.2. Global Integration: Change in the Ratio to GDP from 1981–85 to 1997–2001

  • 4.1. Indonesia: Trade Financing

  • 5.1. Brazil: Credit Line Interest Rates

  • 11.1. WTO Members with Full Commitment on Cross-Border Supply of Trade Finance

• Figures

  • 1. Trade Credits and Short-Term Credit Lines for Selected Countries

  • 1.1. Short-Term Outstanding External Debt During Crisis

  • 2.1. Outstanding External Short-Term Credit

  • 2.2. Real Effective Exchange Rates

  • 2.3. Real Outstanding External Short-Term Credit

  • 2.4. Export Volume Indexes

  • 2.5. Import Volume Indexes

  • 2.6. Export Relative Price Indexes

  • 2.7. Import Relative Price Indexes

  • 2.8. World Real GDP Index for Each Country at the Time of its Crisis

  • 2.9. Countries’ Real GDP Index

  • 3.1. Intra- and Interregional Trade by Region

  • 4.1. Indonesia: Non-oil and Gas Imports and Exports

  • 5.1. Brazil: Real Effective Exchange Rate

  • 5.2. Brazil: Bank-to-Bank Credit Lines

  • 5.3. Brazil: Import Credit Lines and Total Imports

  • 5.4. Brazil: Export Credit Lines and Total Exports

  • 5.5. Brazil: Total Exports and Export Financing

  • 5.6. Brazil: Credit Lines—Monthly Flow

  • 5.7. Brazil: Interest Rates on Credit Lines

  • 5.8. Brazil: Cash Flow of Export Credit Lines

  • 5.9. Brazil: Bank-to-Bank Credit Lines

  • 8.1. Brazil: Trade Finance Flows, 2001–02

  • 9.1. Partial Credit Guarantee (PCG) Support for Imports via Trade Finance Program (TFP)

  • 9.2. Cross-Border Support through the Public Sector via Exim Bank

• Appendix Figures

  • 7.1. JBIC: Total Outstanding Loans, Commitments, and Equities

  • 7.2. JBIC: New Commitments

  • 7.3. JBIC: New Commitments by Region in 2003 (IFO)

  • 7.4. JBIC: New Commitments by Region in 2003 (OECO)

Acknowledgments

This book would not have been possible without the contribution of many people within the Policy Development and Review Department (PDR) and International Capital Markets Department (ICM) of the International Monetary Fund. The seminar from which this book originated was devised by Timothy F. Geithner (former Director of PDR) and Martin Gilman (PDR) and supported by Gerd Häusler (Director of ICM). The seminar was organized by Martin Gilman, Jian-Ye Wang, and Marcio Ronci, with assistance of Ritha Khemani (PDR), Cheng Hoon Lim (ICM), Sulochana Kamaldini (PDR), and Helaway Tadesse (PDR).

The editors are grateful to Helaway Tadesse and Julie Kozack (both PDR) for organizing the various authors’ contributions; Siddhartha Choudhury (PDR) for the preparation of tables and charts; Sulochana Kamaldini, Lorna Campbell, and Esther George for secretarial assistance (all PDR); and Gail O. Berre and David Einhorn (External Relations Department) for editing the manuscript and coordinating production.

Foreword

Trade finance has long been an important component of international financial flows, as firms—particularly in emerging-market economies—rely heavily on bank-financed trade credits to support their export and import activities. Indeed, credits that facilitate international trade are so routine and taken for granted that their significant presence tends to be overlooked during times of normal economic activity. However, as recent experience has shown, trade finance can fall dramatically during episodes of financial crisis. Such a sharp contraction can prevent even creditworthy borrowers from securing adequate funds to finance their ordinary export and import activities. As a result, a country’s ability to recover from the crisis can be seriously compromised, as credit constraints faced by exporters hold back their ability to contribute to economic recovery and growth.

Despite the central role played by trade finance, there has been surprisingly limited analysis of its role in international capital flows, especially during periods of crisis. This volume of essays on trade finance in financial crisis attempts to address this gap. The collection of essays is largely based on a seminar held at the International Monetary Fund in May 2003 involving participants from both the private and public sector as well as experts in academia and research institutions.

The volume attempts to view the issue of trade finance from three perspectives. In Part I, several authors present perspectives on why and how much trade finance flows decline during periods of financial crisis. The specific experiences of several countries, including Indonesia, Brazil, Argentina, and Korea, are reviewed in Part II. Finally, Part III presents some options for mitigating declines in trade finance during financial crisis, both by reviewing responses taken in the past and by looking forward to potential tools that might be utilized in the future.

While recognizing that a comprehensive macroeconomic and structural reform program will remain essential to any effort to recover from a crisis, we aim to encourage further thinking on specific responses that countries may consider to forestall a decline in trade finance. We hope the dissemination of this collection of papers will serve this purpose.

Mark Allen

Director, IMF Policy Development and Review Department