International Trade

New Arena For The Project Business

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...the physical construction and erection of the project with other companies that have a long-term presence on the ground, are more comfortable with local risks and will charge a correspondingly lower price.

But if pricing and competitive conditions are getting tougher, the options for financing and risk protection for trade in capital goods have also changed radically – and that is probably to the benefit of smaller specialist engineering, technology or service firms. The tools for funding their deals and covering payment risk have become more varied, and the scope for securing support at an affordable price is consequently greater.

Ten or 15 years ago, the cost of cover from the UK’s Export Credits Guarantee Department (ECGD) was a major concern for British companies, who feared they could be priced out of the race for key deals. However, today they can turn to a host of alternative sources for insurance, even for medium-term exposures of several years for markets that are perceived as fairly high risk.

Traditionally, official ECAs such as ECGD, Coface of France or Germany’s Hermes, were the main source of cover for big project deals that needed a repayment period of more than three years.

The role of private market insurers such as Lloyd’s of London syndicates, AIG or Paris-based Unistrat was mainly to cover the political risks attached to individual contracts with credit periods of up to three years; they were able to back deals in a wide range of difficult markets, but only for this short time span. As an alternative, exporters could turn to forfaiting – a technique under which banks and finance companies buy trade payment paper and the attached risks outright.

This limited range of options has now evolved radically. Forfaiting is still on offer, and for a notably wider range of... continued on page three >

 

 

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