Loan Guarantees

Export Credit Guarantee Programs' Long-Run Costs Are High Gao ID: NSIAD-91-180 April 19, 1991

Pursuant to a congressional request, GAO examined the Commodity Credit Corporation's (CCC) Export Credit Guarantee Program and the Intermediate Export Credit Guarantee Program, focusing on: (1) the programs' estimated long-run costs due to loan payment delinquencies; and (2) whether program regulations effectively prohibited foreign-owned, U.S.-based financial institutions from receiving credit guarantees for financing agricultural commodity sales to their owner countries.

GAO found that: (1) the long-run costs for the programs would be about $6.7 billion, or 60 percent of the $11.2 billion in outstanding credits and accounts receivable as of May 1990; (2) the average long-run cost was high, since CCC provided guarantees to high-risk countries; (3) the programs were slightly more risky than the highly concessional food aid programs that were specifically targeted to high-risk countries; (4) CCC established few program restrictions governing the participation of U.S.-based financial institutions and relied on arm's-length business transactions to ensure that financial institutions and the borrowing government conducted program loans properly; (5) at least three financial institutions that were directly or indirectly owned by the borrowing foreign country received credit guarantees for sales to that country; and (6) CCC planned to issue regulations to prohibit such guarantees.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Team: Phone:


The Justia Government Accountability Office site republishes public reports retrieved from the U.S. GAO These reports should not be considered official, and do not necessarily reflect the views of Justia.