The charter of the Export-Import Bank of the United States expires June 30. Despite a high-profile fight in Congress, many Americans don’t know what Ex-Im does. For each of the agency’s final 17 work days, this space will give an example of an Ex-Im financing deal.
Caterpillar last summer sold power equipment to a Dutch firm, and Ex-Im provided $15 million guarantee to the Dutch bank financing the sale. Ex-Im’s announcement of the deal stated “the credit will support approximately 100 U.S. jobs.”
But there’s good reason to believe this sale would have happened even without Ex-Im financing. I say that because the Dutch buyer is a subsidiary of Caterpillar. And the only thing it does, basically, is rent out Caterpillar equipment. The buyer even has “Cat” in its name.
Ex-Im’s announcement refers to the buyer as “Energyst B.V.” but the full company name is “Energyst CAT Rental Power,” and it was founded “as a joint venture between Caterpillar and 10 of its European dealers,” according to the company’s literature. Energyst Cat Power also describes itself as “A subsidiary of Caterpillar Inc.”
So Caterpillar was selling equipment to its own subsidiary and it got Ex-Im financing for the export.
Ex-Im Myths Exploded
1) Ex-Im steps in where there is no available credit: Caterpillar has its own finance arm, and the credit risk has got to be low when selling something to your subsidiary.
2) Without Ex-Im financing, these U.S. exporters couldn’t get the sale: I’m pretty sure Caterpillar was going to win the sale to Cat Power Rental.
3) Ex-Im subsidizes small business: Caterpillar in FY 2013 was the No. 2 beneficiary of Ex-Im loan guarantees, as Veronique de Rugy of the Mercatus Center shows here, benefitting from $1.3 billion in guarantees, more than 10 percent of Ex-Im’s total that year.
Past deals of the day:
June 8: $36M direct loan to Chinese nuclear proliferators$36M direct loan to Chinese nuclear proliferators
