by | Jun 30, 2010 | Exports, Imports

Bank’s denial of loan guarantees sinks export deal, draws fire

Just last week we noted the U.S. Export-Import Bank’s role in boosting U.S. exports, which have been growing fast enough to achieve the Obama administration’s goal of doubling overseas sales in five years. This week, the Ex-Im Bank is in the news for a decision in which the administration’s green policy seems to have trumped its export promotion policy. Briefly, the bank denied loan guarantees to Reliance Power Ltd., an Indian utility building a coal-fired power plant, with the explanation that the power plant project did not meet administration climate-change policy objectives. The guarantees would have been used to purchase US$600 million in mining equipment from Bucyrus International Inc., a South Milwaukee-based manufacturer. Reliance cancelled the order Monday. Now political pressure to reverse the bank’s decision – perhaps with President Obama’s intervention – is mounting.  All of which begs the question: How many government policy initiatives can (or should) the bank advance in extending trade credit?

Update: The Ex-Im Bank agreed today to reconsider its decision to deny financing to the Reliance project, which is to be resubmitted with new information and assurance of Reliance’s commitment to invest in the renewable energy sector. This report from BizTimes.com includes the text of the letter from the bank to Reliance.

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