News

Thank you for that kind introduction. It's great to be back home in Houston. But it's especially gratifying to be in Houston representing the Export-Import Bank of the United States and the Bush Administration. Today, I'd like to talk about the agency that I'm proud to serve and the complex global environment that we operate in.

I am still adjusting to the transition from being an old banker to my new job at the Ex-Im Bank and the Federal Government. At first blush it may seem that the public and private sectors don't match perfectly. But I'm finding that many things about my background in commercial banking match the way that Ex-Im Bank does business. I've always wanted to keep my customers in mind, to serve them with a winning team. And I believe that keeping those elements in harmony leads to success.

At Ex-Im Bank, our customers are U.S. exporters and the banks that serve them. I am pleased to say that we have a winning team of well-versed professionals eager to carry out the Bank's mandate of supporting U.S. exports and U.S. jobs. We are responsible to the taxpayers. Because we cannot address each of them by name, we identify them by their representatives — the Administration and Congress. We all share a common passion: to support jobs and the US economy.

My values and personal philosophy have not changed. I've always made myself accessible to my customers, and been interested in hearing all sides of an issue before making a decision. I intend to make Ex-Im Bank as accessible, inclusive and user-friendly as possible to all of our constituencies.

Although Ex-Im Bank is a small agency, it is a key player on the Bush Administration's trade policy, foreign policy, and economic stimulus policy teams. As many of you know, Ex-Im Bank has been in the business of supporting U.S. jobs by backing U.S. exports to challenging markets since the 1930s. In fact, one of the Bank's first chairmen was the great Houstonian, Jesse Jones, who established the Houston Endowment and under President Franklin Roosevelt was so powerful that he was known as the fourth branch of government.

But the world of 2002 is a very different world from the one that Jesse Jones confronted in the 1930s. The biggest change is this: Trade and cross-border investment flows have grown so rapidly in the last few decades that there is hardly a business, much less a country or even a community that is not touched by globalization. Let me give you one example: A recent PBS special about Jesse Jones was titled Brother, Can You Spare a Billion? Well, a billion dollars was a staggering amount of money during the Depression. When Ex-Im Bank was founded, the United States exported less than $2.5 billion worth of goods and services. In 2000, U.S. exports passed the trillion dollar mark for the first time. Moreover, as much as $1.5 trillion of capital flows through global capital markets every day.

One hallmark of globalization is a heightened degree of economic interconnectedness. A financial crisis in an emerging market could just as surely affect the United States, as a slowdown in the U.S. will impact growth prospects in Latin America, Asia, or other regions of the world.

Today, Ex-Im Bank stands at the confluence of powerful forces that are changing the business environment throughout the world. Not only has global commerce been rapidly growing in recent years, but American exporters face increased competition for overseas markets. At the same time, emerging markets, where Ex-Im Bank primarily finances transactions, appear to be riskier. From the onset of the currency devaluations in Thailand to the crises in Russia in 1997 and 1998 and most recently Argentina, emerging markets have been battered by swiftly moving capital flows. Today, most private-sector lenders are reluctant to provide long-term financing to emerging markets, and most investment flows are seeking short-term gains. The events of September 11, of course, have dampened investor confidence. According to the IMF, 2001 marked the lowest level of net private capital flows- including bonds, equity and loans- to emerging markets since the early 1990s. At the same time, world trade growth was flat last year, after years of steady growth.

While there is still weakness in the global economy, there are unmistakable signs of recovery in the U.S., Europe, and some emerging markets. If this recovery takes hold, trade growth will probably be 4 percent this year, according to the World Bank. The rebound should be rapid after the upturn, due to aggressive interest rate cuts, low inflation, technology-driven productivity growth and high depreciation rates of investment goods in both the U.S. and Europe.

Throughout the 1990s, many developing countries instituted structural changes, diversified into manufacturing, and gained global market share that will position them to expand in 2003 and beyond. But countries that remained primarily dependent on commodity exports will not fare as well. At the same time, there has been a flight to quality among lenders and investors and away from many emerging markets. Net capital flows to emerging markets will probably decline again this year.

Emerging markets hopefully will see stronger growth next year. By 2003, low interest rates, a global recovery, increased confidence and reduced risk perceptions could spur the return of private capital flows to emerging markets. However, capital flows are likely to be more selective and more discriminating than they were in the mid-1990s. East Asian and Pacific emerging markets are expected to see GDP growth rates of about 5 percent this year and nearly 7 percent in 2003, according to the World Bank. While Latin America-s high debt will keep risk perceptions high, the World Bank forecasts that- because of sound macroeconomic policies in a number of Latin American countries- there will be growth of about 4.5 percent next year. Likewise, World Bank forecasters predict that Central and Eastern Europe should see about 4 percent GDP growth in 2003.

Despite these improving prospects, many investors and businesses are likely to continue to shy away from emerging markets because of the perceived risks. But, where others may see danger and insurmountable risks, we at Ex-Im Bank see opportunity. Emerging markets are home to nearly 90 percent of the world's people, and are where much of the economic growth in the coming years is likely to be.

Ex-Im Bank's charter directs that we provide financing to support U.S. exports in those markets where the private sector is unwilling or unable to go. We offer loans and loan guarantees to foreign buyers and export credit insurance and working capital loans for U.S. exporters. We do not compete with private lenders. We find opportunities, take risks and try to draw the private sector in, although our mandate also specifies that we must have a reasonable assurance of repayment. We also step up in times of crisis — as we did during the 1997-98 global financial crisis, and as we did this past fall in supporting the airline industry in the wake of the September 11 attacks. In so doing, we not only foster stability but economic growth in emerging markets as well as in the United States.

Export credit agencies (ECAs) such as Ex-Im Bank play a critical role in filling the financing gaps to emerging markets. ECAs provided approximately one-fifth of the total long-term credits — of more than one year — that went to emerging markets in 2000, with most of the funds going to the private sector. In 2000, the ECAs of OECD member nations provided a total of $58 billion in long-term export credits.

Reducing the likelihood of crises brought on by sharp declines in investment flows and keeping trade flowing and growing are central to Ex-Im Bank's mission. They are also key components of the Bush Administration's efforts to re-ignite global economic growth. As the President said last year: Our goal is to ignite a new era of global economic growth t