Worse Than the World Bank? Export Credit Agencies: The Secret Engine of Globalization

Food First Backgrounder, Winter 2003, Vol. 9, No. 1

Bankers are always very secretive about the precise structuring of their deals, but essentially the strategy is simple. The key is to get as high a return as possible, while pawning the risk off on somebody else. That is why you should never listen when people tell you that export credit agencies are… dinosaurs. What could be nicer in times of turmoil than having the risk picked up by the taxpayer? – Euromoney

The Three Gorges dam project in China is probably the biggest and most controversial construction project on the planet. Its reservoir is nearly half the length of California, in a watershed that is home to more than 3 70 million people. Many experts predict the outcome will be a nightmare: enormous amounts of residential and industrial waste and 530 million tons of silt a year—most currently flushed out to sea—will instead collect in the reservoir; by some estimates, the odds of the dam’s breaking are l in 1,000 (not counting a military or terrorist attempt to destroy it), endangering tens of millions of lives downstream; and already nearly 2 million people are being forcibly evicted to make way for the reservoir.

Under intense pressure from non-govermental organizations (NGOs), the World Bank has refrained from financing the project due to the environmental, social, and economic controversies surrounding the dam. But few people know that other institutions run by the leading industrial nations have provided almost $ 1.5 billion in taxpayer-backed loans, guarantees, and insurance to construct the dam. These institutions are export credit and investment support agencies (ECAs). While movements for global justice have succeeded in generating public debate about other previously anonymous institutions, such as the World Bank, the World Trade Organization (WTO), and the International Monetary Fund (IMF), one big piece has been missing from our understanding of how the global economic system favors multinational corporations and banks from rich countries over the poor and the environment in developing countries. That missing piece is the role of export credit agencies. “ECA” must be the next international acronym dragged into the public light.

• BK9_1 Winter 2003 Vol 9 #1 Worse Than the World Bank