Legal File: Foreign Financing
Conn, Richard A., Jr., Business Credit
Obtaining private financing for activities in the CIS is extremely difficult. Traditional Western institutions do not yet view this market as stable enough for standard lending activity. Private capital is, however, beginning to flow into the CIS through various venture capital finds and individual investors.
Not surprisingly, government-sponsored financing becomes quite important in this market. Yet, there is a dizzying array of abbreviations and acronyms to confuse the entrepreneur seeking financial support for projects in Russia.
The Export-Import Bank (Ex-Im Bank) provides loans or guarantees to support exports from sponsoring countries. Historically, the U.S. Ex-Im Bank has required sovereign guarantees to support such activity, but has now reportedly relaxed that requirement.
The overseas Private Investment Corporation (OPIC) assists American investors through four basic programs: 1. financing of investments through direct loans and loan guarantees; 2. insuring investments against political risk; 3. providing a variety of investor services; and 4. assisting project development. OPIC now has bilateral agreements with all CIS countries.
The World Bank consists of four closely associated institutions: the International Bank for Reconstruction and Development (IBRD), the International Development Association, the International Finance Corporation (IFC), and the Multilateral Investment Guaranty Agency (MIGA). The World Bank supports development projects and sector investment programs to rebuild capital infrastructure such as transportation and communication, improve education, expand economic opportunities and strengthen population planning, health, and nutrition services. The IFC in particular is an important source of financing for private investment in developing countries.
The European Bank for Reconstructing and Development (EBRD) is controlled by several different countries, including the U.S.. Its primary targets for investments are telecommunications, energy, and infrastructures (e.g., transportation services, roads, and sewerage). The distribution of goods and services, and the development of banking systems and associated financial services are also high priorities of the EBRD. …