Export credit insurance between climate protection and fair competition

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The unique, global crisis triggered by the pandemic has once again brought the role of export credit guarantees to the center of political attention.

Export credit guarantees as an instrument to combat the crisis

The unique global crisis triggered by the pandemic has once again brought the role of export credit guarantees to the centre of political attention. Why? On the one hand, OECD members have been very quick to use their export credit insurance and export financing instruments to combat the crisis. On the other hand, the question of the role of export credit agencies (ECAs) in the climate transformation of the economy has gained momentum at national, European and OECD levels.

Large-scale plant construction is particularly caught between rising expectations of government export credit insurance and the ongoing global distortions of competition. Whether European large-scale plant construction can continue to assert itself worldwide as a technological enabler, as a solution provider for efficient energy technology, for raw materials extraction and processing or for modern industrial production, for example, depends on the concrete implementation of the political course set in connection with the reform of the OECD Consensus, which companies have been calling for for years.

Export credit guarantees for projects in non-European markets, especially in emerging and developing countries, which will not only be affected by the pandemic but, above all, in some cases much more severely by its economic consequences, are of particular importance, especially when it comes to questions of risk coverage and the financing of large-scale projects.

Developing countries are particularly affected by the supply shock triggered by the pandemic, which also affects supply chains, and by a demand crisis. Thus, for many countries, external debt ratios to export earnings have risen abruptly. In addition, the political risk relevant for the granting of export credit guarantees has receded, for instance due to social upheavals. Uncertainty about future developments continues to delay investment decisions.

Consequently, this means for the project business that efforts to tap several sources of financing, such as ECA financing, participation by private investment capital and flanking by development aid funds for large foreign projects, will continue to increase.