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Export-Import Bank Sub-Saharan Africa Advisory Committee

Fred P. Hochberg, Chairman and President

Sep 19, 2012 – Washington, D.C.

On behalf of the Bank's senior management I want to welcome you to this meeting.

Some of you are new to this advisory committee - so welcome aboard.To the veterans, thank you for sticking with us.And to Chairman Mans, thank you for your leadership.

I know it's not easy to take time from your busy schedules, so we'll make every minute count.

Next week, we close the books on the Ex-Im Bank's 2012 fiscal year.While the final numbers aren't in yet, all signs are for another record year - about $3 billion more in authorizations than last year's $32.7 billion total.

Included in this year's total are several noteworthy transactions:

$2 billion to help build the first nuclear power plant on the Arabian Peninsula - nearly $3 billion for the Australia Pacific LNG project - and $1 billion to Pemex, the Mexican oil company, to modernize its operations.

These and hundreds more authorizations helped us make our export economy a real star in our economic recovery - and to support tens of thousands of new jobs here.

To keep this momentum going, it's very important to learn from stakeholders like you - and that's why we want a two-way, free-flowing conversation.That is especially important as we seek to expand our involvement in Sub-Saharan Africa.

I'll get to the point.

The Bank is still in business - despite some anxious moments earlier this year when vocal opponents tried hard to defeat our reauthorization and end our program.

Thanks to many of you - who set the record straight with Congress - a strong bipartisan majority prevailed to extend the life of the Ex-Im Bank for another two years - and we increased our exposure cap from the current $100 billion to $140 billion.

Then last week, we avoided a shutdown when Congress passed a continuing resolution to fund the federal government for six more months at current levels.

We were relieved, but the current budget level for Ex-Im Bank is inadequate for the new initiatives we've taken on.With barely 400 people, our staff is stretched far too thin.

So we welcome the continued funding, but regret that Congress postponed the opportunity to expand our resources for another six months.

You can see that we have challenges to address at this meeting, and my colleagues will describe them - along with solutions.As I said, we value your insights.

Africa has never been more important to Ex-Im Bank than it is today.

Seven of the world's 10 fastest-growing countries are in sub-Saharan Africa - Ethiopia, Mozambique, Tanzania, Democratic Republic of the Congo, Ghana, Zambia and Nigeria.

That translates into dramatic growth of the middle class in Africa - a surging demand for quality consumer goods and services - and enormous infrastructure needs like reliable energy, railroads, airports, seaports, highways and other sectors that play to America's manufacturing strengths.

U.S. exports increased along with that growth.U.S. exports to sub-Saharan Africa increased by 24 percent last year - up from $17 billion in 2010 to $21.3 billion in 20111.

To that end, Ex-Im Banks authorizations for FY2011 in sub-Saharan Africa were a record $1.4 billion, nearly twice the previous year's $812 million.

We've already surpassed that in FY2012 with $1.5 billion in authorizations.We expect even higher annual totals after then.

Moreover, we have an outsize impact on U.S. exports to Sub-Saharan Africa. The Ex-Im Bank finances seven percent of U.S. exports there - more than triple our worldwide percentage of about two percent.

For example, we loaned $805.6 million to Eskom, the South African electric utility, to build a huge new power plant to help ease serious shortages in that country.We made another transaction to finance South Africa's purchase of 100 GE locomotives.

At the other end of the scale, our financing enabled helped Cast Industries of Springfield, Illinois, to export its high-quality fishing lures to tackle shops in South Africa.Sports fishing is a big and growing part of the tourism industry there.

I've made three visits to Africa as Chairman, the latest a month ago with Vice Chair Felton - when we saw firsthand both its dynamic growth and strong interest in U.S. exports financed by us.

Actually, my first visit was at the tender age of 15 - when I sailed on a freighter on a school trip visiting several African ports, just long enough to load and unload.The sights and sounds were unforgettable.It was rare and marvelous learning experience.

So I was fully prepared for President Obama's Presidential Policy Directive this year called U.S. Strategy Toward Sub-Saharan Africa.The President's goal is to bring together all agencies that touch Africa.

The strategy focuses on four main areas - all closely related:

·Strengthening democratic institution;

·Advancing peace and security;

·Spurring economic growth, trade and investment; and

·Promoting opportunity and development.

The Ex-Im Bank's role focuses on the last two areas - growth and opportunity - building on our close relationship with U.S. exporters.

We are working with other agencies to boost private sector participation - most notably the Commerce Department's Doing Business in Africa campaign.

For our part, we've expanded our road show presentations around the country to raise awareness of the terrific export opportunities there are in Africa.

Not only that, we've opened four new regional centers with Ex-Im staff in Seattle, Atlanta, Detroit and Minneapolis.

These efforts will be especially helpful to reach our target that 20 percent of Ex-Im financing goes to small businesses.

We are very fortunate that Johnnie Carson, Assistant Secretary of State for Africa, will be with us to share his insights.

Clearly, Africa is on path to a much brighter future - and we intend to be a full partner - bringing with us the best in innovation, quality, affordability and reliability.

But we have a lot of competition.Brazil, India and, of course, China are competing like never before in Africa.So are Canada, Germany, France and other members of the European Union.

They are investing in African infrastructure and providing concessional financing and tied aid throughout Sub-Saharan Africa.

They aim not only to gain access to energy and mineral resources.They also see the opportunity to develop major new markets for their goods and services.

China certainly gets the headlines.It's now Africa's biggest trading partner - and growing fast.

We got a huge wakeup call this summer when China announced that it would provide $20 billion in loans to African countries in the next three years.

These loans include the unspoken understanding that Chinese businesses will get preferential trade terms and investment opportunities.

In contrast, when Ex-Im provides financing, it's for a specific sale of U.S. exports - and meets uniform OECD requirements that apply to everyone.We keep it simple, direct and transparent.

But when countries operate outside these rules, they usually do it to promote broad national interests such as access to energy resources, future inbound investment, and selected national champion businesses or industries.

The problem isn't just China, either.

We saw it when Canada's export credit agency loaned $100 million to Colombia's Ecopetrol - with the understanding that Canadian companies get a first look at future investment and procurement deals.

Or when Japan's export credit agency gave $200 million in financing for clean energy projects in India - with the expectation of future sales of a broad range of Japanese technology.

Such approaches can be subtle - a wink and a nod - but the intent is the same - finance now for future benefits.

We wanted to know more about these problems, so in preparing our annual competitiveness report we took a systematic look at what we had been hearing anecdotally.

What we found was rampant unregulated financing - underground and in the dark - much more extensive than we expected.

We found growing use of direct investment and untied financing - and dramatic growth in the export finance agencies of Brazil, India and China - free to operate outside OECD requirements.

The volume of this financing was striking.Unregulated government export finance exceeds all the official activity of the G-7 agencies combined.

We estimated roughly $100 billion in unregulated OECD export financing and another $60 billion from Brazil, India and China.

This is probably a low estimate, given how murky these transactions can be.

Even so, by what we could measure, OECD regulated financing has dropped from two-thirds to only one-third of export finance worldwide in just the last decade.

And it's still dropping.

Growing problems like these require a new international framework - one that will bring more unregulated financing into the open - and reduce the market distortions that can make our global trading system inefficient and unstable.That's in nobody's best interests.

We made a start when President Obama and Vice President Xi met earlier this year.They agreed to set up a working group to negotiate a new rules-based, transparent framework.

That effort has expanded to include more countries, with a deadline by the end of 2014.

Reaching such an agreement is urgently needed by American workers in export businesses today to build on our success of the past three years.

The financial crisis in Europe and elsewhere enabled the Export-Import Bank to fill the void left by retreating banks and government.

But this is temporary and won't last much longer.

What is permanent is the rapid increase in government-backed financing - what looks increasingly like the Wild West.

Our competitors show all signs of strongly supporting their favored businesses and industries outside the rules for years to come.

This is the new order of things, and I look to stakeholders like you to remain engaged with us - and to help us create urgently needed solutions.

Thank you.