World Trade - September 2008 - (Page 30) COVER STORY Trade Finance Holds its Own But risk is being re-priced and deals more selective as customers feel the pinch. BY RICHARD BAROVICK Amidst the Credit Crunch F or the trade finance fraternity, the Export-Import Bank’s annual Washington conference is a welcome networking opportunity, a rare chance for over a thousand professionals to catch up, swap yarns, share market intelligence. At the April 2008 gathering, Ex-Im’s own news was limited. But, this year more than ever, participants listened intently to the luncheon speaker: Lawrence Lindsey, an economist and former White House official, prognosticated on the course of the mounting credit crunch. His forecast: the end was probably in sight for the crisis in mortgage lending, but others would follow, in auto loans and credit cards. And that led to a buzz around the room: how would trade finance fare in this increasingly hazardous financial environment? The consensus, readily gathered, was clear: so far, so good, no serious problems had yet emerged. Since then, however, a growing perception is that the enduring crunch has been joined by a rising arc of oil prices, along with other raw materials costs. It’s now, therefore, seen as a double whammy: exporters and importers—or many of them—are living with both a 2008 squeeze on their financial liquidity and mounting costs of doing business. What, then, has been the impact on trade finance? Two answers can be found out there: the short version and the long version. The short version The short version is that trade finance has weathered the storm without substantial damage, but has not escaped it. Lenders and credit insurers have revised their perception of risk, and, accordingly, have increased the price of their services, while becoming more selective in approvals. Exporters and importers, meanwhile, are tugging at one another to negotiate favorable payment terms and bolster liquidity. Some foreign buyers are pushing for longer payment periods, or just plain paying slowly. The more damaging side is that several sectors— residential building, construction materials, automotive, plastics-based production—have lost some or a lot of their access to financing in the U.S. and abroad. And, some smaller exporters have experienced a loss of access they had earlier enjoyed. The bottom line: there’s been 30 WORLD TRADE SEPTEMBER
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