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COMPTROLLER GENERAL'S REPORT TO THE CONGRESS

DIGEST

WHY THE REVIEW WAS MADE

The principal Federal agency providing financial assistance to facilitate sales of U.S. products to buyers in other countries is the Export-Import Bank of the United States (Eximbank). This Government corporation offers a variety of export financing insurance and guarantees designed to support U.S. export sales and strengthen the U.S. trade balance.

The Export-Import Bank Act stipulates that Eximbank supplement and encourage, but not compete with, private capital. The Bank's policy guidelines emphasize this requirement. Implicit in these instructions is the need to determine that Eximbank financing does not compete with private capital and results in additional exports or offers opportunities for overseas market development. Increased exports, in turn, benefit the U.S. balance of payments and the domestic economy in terms of additional employment and profit.

The U.S. balance of payments gains immediate benefits from exports sold for cash or financed by importers from foreign sources. Eximbank can add to these benefits, if its financing results in exports that otherwise would not have been made, through collecting interest and installment receipts from its loans to borrowers abroad.

IMPROVED MANAGEMENT INFORMATION
SYSTEM NEEDED FOR
EXIMBANK'S CAPITAL LOAN PROGRAM
The Export-Import Bank
of the United States B-114823

Background

Eximbank capital loans are one of the principal means of providing dollar credits to foreign borrowers purchasing U.S. products requiring longer than 5 years for repayment. With program management as the central viewpoint, the General Accounting Office (GAO) examined the information available on judgments exercised by Eximbank in making these loans. (See p. 6.)

GAO sought answers to such questions

as:

--What guides Eximbank's loan policy?

--How does Eximbank decide whether

to participate in a transaction?

--Are market research studies made

to pinpoint countries and product areas needing financing ?

--How does it measure accomplish

ments in terms of the growth of the level of U.S. exports?

Japan was selected as a case study because, through fiscal year 1971, it had been one of the largest recipients of Eximbank loans. These loans have been concentrated in two areas: thermal and nuclear power plants and commercial jet aircraft, comprising $371.2 million, or 95 percent of the $386.9 million in capital loans authorized during fiscal

FEB. 12, 1973

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years 1969-71. Also, Japan's foreign exchange reserves rose from $1.5 billion in 1964 to $16.5 billion in 1972. (See pp. 6 and 7.

concerted effort to maximize private financing in these transactions. (See pp. 18 and 42 to 61.)

FINDINGS AND CONCLUSIONS

Eximbank needs to improve its management information system to aid it in making judgments crucial to its financing operations.

Such a system would assist the Bank's management in

Also, information obtained from Japanese borrowers and government officials and examination of records at the Embassy in Tokyo showed that the need for Eximbank participation in some export transactions was questionable. Information to resolve these questions was not available in Eximbank loan files. Specifically, Eximbank financing seemed unnecessary for four loans totaling $10.1 million. Prestige, patented materials, the compatibility of U.S. equipment, and a stated preference for U.S. products by borrowers suggested that purchases would have been made from the United States without Eximbank financing assistance. (See pp. 18 and 61 to 64.)

--determining whether its financial

assistance is essential to an export sale,

--selecting products most in need of

its financial assistance,

--documenting the basis of its

actions, and

--evaluating the effects of its

financing on exports.

Attempts to evaluate Eximbank efforts to maximize private sources of financing were hampered by lack of documentary evidence. The Bank's records showed that loan approvals were based primarily on economic viability. Little documentation was found of Eximbank assessments of other factors essential to a sale, such as price, delivery, competition, or the availability of private financing, and the effect that these factors could have on the need for Eximbank financing to secure the sale. Although Eximbank participa tion in financing export transactions may have been necessary to consummate a sale, GAO could not establish that Eximbank had made a

GAO believes that Eximbank's involvement in loans to Japanese borrowers facilitated exports but the question of whether all loans were necessary to insure U.S. sales was unresolved. The difficulty in measuring the effect on exports resulting from Eximbank's activities and the fact that Eximbank is a Federal Government entity accountable for its actions argue strongly for clear documentation of why loans were made and the reasons Eximbank participated to the extent it did. This documentation can be accomplished without creating a large administrative workload or unduly delaying loan applications. Moreover such management discipline would provide Eximbank with greater assurance that its assistance was being applied to those transactions most likely to benefit the United States.

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