Assessing risk is vital to international trade. To protect U.S. exporters from international buyer nonpayment due to commercial and political risks, the Export-Import Bank of the United States (EXIM) offers Export Credit Insurance (ECI). Support for buyers in a specific country can be found in the Country Limitation Schedule (CLS), a document which indicates whether full, limited, or no EXIM support is provided for public and private-sector-type buyers in each country. The CLS provides rates for countries open for EXIM coverage which are used to calculate policyholder premiums for ECI and other EXIM programs. Some markets carry more risk and therefore have higher premiums.
The information in the CLS, including rates and whether EXIM will provide support to buyers in a specific country, is subject to change, and the quarterly process of updating the CLS involves several stakeholders within the bank, including EXIM’s Country Risk and Economic Analysis (CREA) division led by Aryam Vazquez, EXIM’s Chief Economist. Mr. Vazquez was interviewed about country risk and CREA’s important role of CLS advisor.
Q: Why is assessing country risk important in trade finance?
Mr. Vazquez - Anytime you’re conducting business internationally, there’s a need to understand challenges and opportunities in the region; an assessment of country risk conditions. Examples include how a country’s economy operates, exchange rate dynamics, banking system, legal structure, business sector conditions, political and social dynamics and their impact on business operations, and external and internal threats, among other factors.
Q: How does EXIM update its Country Limitation Schedule, which reflects EXIM’s country risk assessments?
Mr. Vazquez - EXIM’s Office of the Chief Risk Officer oversees the CLS and brings its analysis and recommendations to EXIM’s Enterprise Risk Committee (ERC) and then the EXIM Board of Directors, which makes determinations about whether to provide support to public and private-sector-type buyers in each country. EXIM’s CREA division provides independent assessments on country risk conditions to EXIM’s ERC and Board of Directors, much like an independent advisor.
Additional resources and assistance about country risk can be found on this U.S. Department of Commerce website and more information about EXIM’s CREA division, including its early 2023 global economic outlook, can be found here. To learn more about EXIM’s Country Limitation Schedule and coverage around the world, please click here to schedule a free consultation with an EXIM trade finance specialist.
