“Export Credit Agencies” (ECAs) are publicly financed corporations that subsidize the exports and foreign investments of their countries’ corporations. They fulfill this function in several ways. For example, the Export Development Corporation (Canada’s ECA) may lend money at below market rates to Southern governments in order to allow those governments to pay for goods and services purchased from Canadian companies. Money lent in this manner is often used to finance large-scale projects such as building hydro dams, nuclear power stations and pulp mills. ECAs also issue political risk insurance to Northern companies when those companies invest in business activities in politically unstable countries. This type of insurance is meant to offset the risks of investing in countries whose governments have limited commitment to the rule of law and little accountability to their people. (see Odious Debts: Loose Lending, Corruption, and the Third World's Environmental Legacy, PART II: Introduction, and Chapter 8)
While these activities benefit corporations in the North, they are often disastrous for the citizenry of the South. By taking away incentives for accountability and efficiency, ECAs often encourage unsustainable and destructive investments. For example, a report by Environmental Defence entitled Export Credit Agency Finance in Sub-Saharan Africa explains how ECA activities in Africa have been linked to mismanagement, environmental disruption, corruption, and social conflict. Furthermore, in Export Credit Insurance and the fight against international corruption, Dieter Frisch from Transparency International explains the role of ECAs in supporting corruption in the Third World.
The result of this half-century long practice has been inflated project costs, environmental destruction, human rights abuses, and a crippling debt for Southern countries that now have to pay for economically unsound projects.
ECAs now hold a significant amount of the debts owed by the most heavily indebted countries, and the legitimacy of these debts is coming under increased scrutiny. For example, Indonesian power sector contracts have been at the centre of some of the most vociferous accusations of ECA-backed corruption. Academics and debt activists have charged that ECA-backed companies offered free equity to General Suharto and his relatives in exchange for overpriced and unneeded energy contracts. Now, many of the debts owed under these allegedly corrupt contracts have been assumed by ECAs which, in turn, are forcing Indonesia to honour its contractual obligations (please see our Indonesia page for more information).
A growing number of debt activists are calling for greater transparency and accountability in Export Credit Agency activities. In a letter endorsed by 78 NGOs from 33 countries, the Berne Declaration calls upon the OECD’s Export Credit group to adopt measures to ensure that export credit agencies cancel all loans and guarantees linked to evidence of corruption. In May 2000, 347 NGOs from 45 countries endorsed the Jakarta Declaration for reform of Official Export Credit and Investment Insurance Agencies. The declaration demanded the adoption of binding guidelines to end environmental destruction, human rights abuses and corruption linked to ECA supported investments and called for the cancellation of ECA debt for the poorest countries.
