Financiamiento comercial

This publication is the result of a joint effort of the IFC and the WTO and was prepared under the guidance of Susan Lund Vice President of Economics at the IFC and Ralph Ossa Chief Economist of the WTO. Nathalie Louat and Denis Medvedev of the IFC and Marc Auboin of the WTO provided leadership for the research. Marcio Cruz Maty Konte Francesca de Nicola Alexandros Ragoussis and Trang Thu Tran of the IFC and Eddy Bekkers and Alexei Timofti of the WTO managed the project teams across the two organizations. Working team members included: Karlygash Dairabayeva Milagros Deza and Gianluca Santoni of the International Bank for Reconstruction and Development (IBRD); Stephanie Annijas Gbenoukpo Robert Djidonou Sarah Hebous Ibrahim Nana Alexander Vanezis and Ariane Volk of the IFC; and Kirti Jhunjhunwala Saptarshi Majumdar and Ruoyi Song of the WTO.

The expansion of trade depends on reliable adequate and cost-effective sources of trade financing which help to fill the time gap during which goods are produced shipped and paid for. Trade finance is routinely supplied to exporters and importers by banks and other financial intermediaries which mitigate the financial and payment risk involved in crossborder trade. While developed countries can often rely upon large and advanced economic sectors mobilizing sophisticated trade finance instruments such as supply chain finance significant shortages exist in developing countries. These shortages can have many reasons both international (inflation availability of correspondent banking relationships country risk) and local (level of development and expertise of the financial sector cost access to finance by local firms).

While conditions in trade finance markets returned to normality in the main routes of trade the structural difficulties of poor countries in accessing trade finance have not disappeared – and might have been worsened during and after the global financial crisis. There is a consistent flow of information indicating that trade finance markets have remained characterized by a greater selectivity in risk-taking and flight to "quality" customers. In that environment the lower end of the market has been struggling to obtain affordable finance with the smaller companies in the smaller poorer countries most affected. In an area where statistics are difficult to find this paper looks at recent available information and provides background on the persistent and significant market gaps for trade finance in developing countries notably in Africa and developing Asia. It discusses various initiatives in which the WTO and partner institutions are involved to alleviate in part this situation.

The paper discusses the efforts deployed by various players mainly multilateral financial institutions regional development banks export credit agencies to mobilize greater flows of trade finance for developing countries with a view to help them integrate in world trade. As an institution geared towards the balanced expansion of world trade the WTO is in the business of making trade possible. Its various functions include reducing trade barriers negotiating and implementing global trade rules and settling disputes on the basis of the rule of law. The WTO is also interested in strengthening the "supply-side" of developing countries so that they can respond to new market opportunities. To this end it supports various initiatives aimed at improving the "trade infrastructures" of developing countries ranging from the ability to meet international product safety and sanitary standards to run efficient customs or to participate effectively to the multilateral trade negotiations by training public servants. The WTO carries out various initiatives with other partners (public and private sector institutions) in the context of its own technical assistance program or in the context of multi-agency projects such as the Integrated Framework or the Aid-for-Trade Initiative. Since more than 90% of trade transactions involve some form of credit insurance or guarantee one can reasonably say that trade finance is the lifeline of trade. Producers and traders in developing or least-developed countries need to have access to affordable flows of trade financing and insurance to be able to import and export and hence integrate in world trade. From that perspective an efficient financial system is one indispensable infrastructure to allow trade to happen. In line with the above initiatives the WTO has been following actively and at times directly supporting initiatives to boost the availability of trade finance in developing and least-developed countries wherever it was needed. Since the WTO is not a financial institution it has been supporting in the past few years partners engaged in this effort such as international financial institutions export credit agencies large banks and regional development banks. Initially the WTO has been asked by its members at several points in recent years to examine the issue of availability of trade financing – as a key infrastructure needed by developing and leastdeveloped countries to integrate in world trade. Paragraph 36 of the Ministerial Declaration of Doha requested WTO Members to examine and if necessary come up with recommendations on measures that the WTO could take within its remit to minimize the consequences of financial instabilities on their trade opportunities. In the context of the newly created Working Group on Trade Debt and Finance (WGTDF) the interruptions of the flows of trade finance in emerging markets during the Asian and Latin American financial crises were quickly identified as concerns by Members as well as the chronic difficulties of low income Members to secure more affordable flows of trade financing in the long-run. These concerns were channelled to the WTO Ministerial Meetings in Cancun (2003) and Hong-Kong (2005).2 During this period of examination the Heads of the IMF World Bank and the WTO agreed at the General Council Meeting on Coherence of 2002 to form an expert group including all interested parties multilateral and regional public institutions export credit agencies private banks to examine what went wrong in this segment of financial markets and how to create an enabling environment in local markets to provide adequate flows of trade finance on a on-going basis. In chairing one of these meetings the Director-General of the WTO defined the role of the WTO in this area: encouraging liberalization of this type of financial services under the financial services agreement being a regulator of export credit and guarantee subsidies under the ASCM and serving as a forum to discuss WTO-compatible ways of providing support to developing countries. Conclusions by the Working Group were presented at the WGTDF and later at the General Council. WTO Secretariat work on this topic up to 2003 in particular its contribution to the WGTDF and to the expert group was summarized in WTO Discussion Paper 2.4 While the liquidity in financial markets improved from 2002 until the recent turmoil created by the crisis of the sub-prime mortgage markets trade finance remained an issue for concern for WTO Members in particular the poorest which do not have access to international financial markets or for emerging markets which remain prone to changes in market sentiment and hence credit rating. Despite the rapid development of "trade finance facilitation" schemes developed by regional development banks and the IFC with immediate success in low income countries the issue of availability of trade finance came back among other "supply-side" constraints identified by the Aidfor- Trade Task Force after the WTO Ministerial Meeting in Hong-Kong. While the mandate of the WTO under the Aid-for-Trade is essentially one of evaluation and monitoring it may be in cases one of advocacy. Based on the work being carried out since 2002 and after consultation with partners (regional development banks multilateral institutions export credit institutions...) input by the WTO Secretariat to boost the availability of trade finance for developing countries under the Aid-for-Trade umbrella was welcomed by Members. Lack of trade financing and guarantee infrastructures were identified as one of the barriers to integration of low income countries in world trade by each of the three regional Aid-for-Trade Reviews. It was acknowledged that the current Aid-for-Trade Initiative could provide the extra leverage to convince WTO partners to deliver more plentiful of trade credit and guarantees to WTO members that need it the most. This paper provides background on the difficulties of some countries and traders to access affordable trade credit and finance on the growing divide between these low income countries and economically advanced countries in handling modern trade finance instruments and on the joint reflection undertaken by the WTO most recently under the Aid-for-Trade programme and previously under the umbrella of the WGTDF and the Coherence Mandate to help strengthen developing countries' capacities in this area.

This paper reviews a number of initiatives taken by public and private institutions aimed at minimizing the impact of the on-going crisis of the financial sector on its ability to supply trade finance to support trade at affordable rates. In doing so it draws a few policy lessons. One of them is that a relatively stable segment of the financial industry is now regularly hit by the contagion of financial crises with potentially very harmful spill-overs on global trade through a dry up of its financing. Specific policy measures to restore confidence in this otherwise safe market required a good level of coherence and dialogue between national governments and international and regional development organizations. Lessons from the Asian and Latin American financial crises of the late 1990's have been learned and academia provided input by developing understanding on a previously under-rated topic in the literature. Learning-by-doing and leadership have also been features of the policy response which altogether had some successes. Still longer-term challenges remain such as addressing the structural gaps in the availability of trade finance in low-income countries - ad hoc programs have been designed to fill the gap between the perceived and actual risk of extending trade credit to traders in these countries. Moreover regulation of the trade finance market needs to continue to take into account its low-risk character the absence of leverage and its impact on development.

The paper studies empirically the fiscal policy instruments by which governments try to influence election outcomes in 24 developing countries for the 1973-1992 period. The study finds that the main vehicle for expansionary fiscal policies around elections is increasing public expenditure rather than lowering taxes and public investment cycles seem particularly prominent. Institutional mechanisms which constrain discretionary expenditure policies and which strengthen fiscal control are therefore worthwhile considering to prevent opportunistic policy making around elections.