Working With International Finance Institutions.

General Motors Corp. and AvtoVAZ, Russia's largest automaker, will soon begin producing 75,000 new Niva vehicles a year in Togliatti, Russia at a factory financed by the European Bank for Reconstruction and Development (EBRD). The EBRD announced in March that it is putting up 41 percent of the funds for the joint venture, with a combination of a loan of $100 million and an equity investment of $40 million. Established a decade ago to foster the transition toward open market-oriented economies in the countries of central and Eastern Europe and the former Soviet Union, the EBRD is now a major resource for companies moving into that part of the world.

International finance institutions, such as the EBRD, the World Bank and the Inter-American Bank for Development, are playing an increasingly important role in financing and risk mitigation for corporations that want to expand into emerging markets but who may not be able to secure traditional financing and insurance for specific projects. The World Bank alone approves several hundred projects each year, with annual lending reaching $22 billion, generating thousands of procurement opportunities in parts of the world where companies might not venture alone. (See Figure 1.) The Overseas Private Investment Corporation (OPIC) provides project financing and insurance for companies entering into emerging markets where commercial lenders and insurers may be reluctant to go.

Assistance from the international institutions often enables companies to secure deals that would otherwise be beyond reach. The Export-Import Bank of the United States (Ex-Im Bank) recently approved an $18 million medium-term loan guarantee to support $21.7 million in exports of equipment and services by General Electric Co., Salem, VA and various US suppliers to modernize a hot strip steel mill in China. Without the Ex-Im Bank's financing, the buyer said, it would have procured the equipment from French and German companies, and the opportunity would have been lost for the US firms. In recent years, all of the international institutions have restructured their programs and updated their delivery systems to make them more useful to private companies. Credit managers who are not already tapping these institutions for financing, insurance and procurement opportunities should take a second look at the programs and services they offer.

World Bank

The World Bank (www.worldbank.org) is the largest source of financial and technical assistance for developing countries. It provides loans, credits, guarantees and technical assistance to member country governments, government agencies or private institutions that can obtain their government's guarantee. Most Bank assistance is in the form of investment loans, which support specific development projects and sector programs.

Each World Bank project can involve a few to hundreds of separate contracts or export opportunities for suppliers worldwide. Some 30,000 contracts are awarded to firms annually by borrowers of World Bank funds. Approximately 70 percent are for goods and equipment, 20 percent for civil works and 10 percent for consulting services.

The World Bank consists of four closely associated institutions: the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA).