Loan Guarantees

Export Credit Guarantee Programs' Costs are High Gao ID: GGD-93-45 December 22, 1992

The cost of running the Commodity Credit Corporation's (CCC) General Sales Manager-102/103 programs, which guarantee repayment of bank-financed loans to foreign buyers, has been very high. Large costs were incurred when CCC provided higher levels of guarantees to existing program participants or added new countries to the programs. How much additional cost will be incurred in the future will depend on the characteristics of any new loan guarantees that CCC makes. "Rolling over" existing guarantees to current program participants entails little additional cost. Increasing the amounts of outstanding guarantees to most existing program participants or adding new high-risk countries to the program, however, will add substantial additional costs. At the same time, the extent of any meaningful benefits is unknown. Therefore, it is very important to pay careful attention to future program costs.

GAO found that: (1) CCC had about $9.04 billion in outstanding GSM-102/103 guarantees on loan principal and $4.51 billion in accounts receivable resulting from loan guarantee payments on delinquent guaranteed loans; (2) the cumulative program costs are estimated at $6.5 billion out of a total of $13.55 billion; (3) CCC based credit guarantees on assessments of a country's agricultural needs, market development potential, and its credit history; (4) the high cost associated with the loans resulted from loans to high-risk countries; (5) CCC extended guarantees to high-risk countries because of market development reasons and foreign policy considerations; (6) GSM-102/103 program costs are expected to rise to $74 million annually; (7) extending guarantees to new program participants or increasing existing guarantees to high-risk participants could incur additional costs; and (8) there was no evidence that GSM-102/103 programs increased U.S. exports worldwide.

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.