Background
Following the lead of the British government that established its export credit
programs in 1919, many developed, developing, and other countries established their
export credit programs with similar objectives1. These were: (i) to promote the growth of
exports by providing insurance to exporters, (ii) to offer financing for exporters’ foreign
clients, and (iii) to make guarantees to exporters’ commercial banks in obtaining their
export financing. They considered their export credit programs to be useful policy
instruments and as means of encouraging their producers to expand and diversify exports.
These export credit programs were thought necessary to improve their trade balance,
diversify their exports beyond primary products, increase their foreign exchange reserves,
and reduce their national unemployment (UNCTAD, 1976; Mutharika, 1976). They also
felt that their export credits could contribute at least three direct benefits to their
countries: (i) protect exporters from potential losses due to non-payment risks, (ii) serve
as collateral for exporters in securing bank financing from the private sector, and (iii)
reduce the cost of collecting information on the credit standing of foreign markets.
The importance of export credits in the trade of manufactured and agricultural goods has
been apparent, especially during periods of economic and financial crises in importing
countries, such as the oil shock in the 1970’s, debt crises in the 1980’s, and the financial
bubble in the 1990’s. For instance, the International Monetary Fund (IMF) recommended
that the debt crisis of least-developed and developing countries could be alleviated if the
Export Credit Agencies (ECAs) of developed countries resumed their export credits to
1 The first group of followers was developed countries, which included France, Spain, Italy, Japan, the
United States, and Canada. After the oil shock of 1970, developing and other countries such as Argentina,
Brazil, Columbia, Czechoslovakia, Hong Kong, Hungary, India, Israel, Jamaica, Mexico, Pakistan, Peru,
Poland, the Republic of Korea, Uruguay, and Yugoslavia also developed their export credit insurance
programs (UNCTAD, 1976).