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Realize a World of Opportunity

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Presentation on theme: "Realize a World of Opportunity"— Presentation transcript:

1 Realize a World of Opportunity
The presentation is intended to be about how financial institutions can use us – and not just about what we can sell to them or their clients. Emphasize at the outset: We are looking to partner with the financial institutions. We are not looking to compete with them. We want to help them meet their targets by providing security. We want to help our mutual clients do more with the financial institutions. Presentation to Kawartha Manufacturers Association September 23, 2008

2 EDC’s Global Footprint
CANADA: St. John’s – Moncton - Halifax Quebec City - Montreal Windsor - London – Mississauga - Toronto Calgary – Edmonton – Vancouver - Winnipeg MUMBAI MOSCOW SHANGHAI NEW DELHI WARSAW OTTAWA BEIJING MONTERREY SANTIAGO ABU DHABI SÃO PAULO MEXICO CITY Brief intro to EDC’s global footprint: Head office The head office and executive offices are located at 151 O'Connor St. Ottawa, Ontario, K1A 1K3. Global reach EDC has offices from coast to coast across Canada as well as international representations in seven countries: Brazil, Poland & Central Europe, China, India, Mexico, Russia & CIS, and Malaysia & Southeast Asia. EDC provides services to Canadian exporters and investors in up to 200 markets. SINGAPORE RIO DE JANEIRO

3 Expanding Canada’s Global Trade
In 2007, EDC … Served 6,963 customers … 84% of which were small- or medium-sized businesses Operated in 183 markets Facilitated $77.7 billion in global trade … 27% of which was in emerging markets PRIMARY MESSAGE: EDC is a global player – and financial institutions can use us as leverage to augment the support they can offer to their clients ADDITIONAL MESSAGE: EDC is looking to partner with financial institutions, and NOT to compete with them. Benefits to the financial institution of partnering with EDC: Complements the financial institution’s offerings to its customers, especially where customer needs stretch the financial institution’s ability to cover off additional or specific risks Strengthens the financial institution's offerings by broadening & enhancing its range of solutions to serve customers – while at the same time helping to manage its own risk Differentiates the financial institution in a competitive market by creatively leveraging EDC solutions to provide greater value added to your customers Helps to grow prospects, increased share of customers' wallets, and/or its portfolio - customer retention and growth through enhanced value-added The Case Study can be used to walk through the ways in which the financial institution can use EDC

4 The Integrative Trade Model
Canadian Company Foreign Customers Export Sales Canadian Foreign Affiliate Imported Inputs Outbound Direct Investment Foreign-sourced Foreign Suppliers Imported Inputs International trade was traditionally been thought of as the exchange of commodities and manufactured items between countries. Global economy trade is Merchandise Trade in services – legal, management, banking, consulting, training, warehousing Technology Investments Financial transfers - RIM example Affiliate Sales

5 Knowing the Game: International Trade Rules
International Trade Terms – Incoterms (International Chamber of Commerce) Dispute Settlement Negotiation, mediation, arbitration, litigation Technical Standards Safety Packaging Labeling Quality Health and Environmental Regulations Documentation

6 Global Logistics Transporting goods – ocean, air, rail, truck, train
Custom clearance Documentation Storage Delivery Transporting Goods - India Custom clearance – give fish story to Egypt Documentation - Export permit, certificate of origin, packing list, carnet, inspection certificates, bill of lading, consular invoice, insurance certificate, certificate of origin… etc. Storage – do the facilities have security, fire proof, who is responsible for loadind/unloading, insurance, tracking Delivery – responsibility - Incoterms

7 Market Entry and Market Distribution
Product Place Price Promotion Distribution channels Plant and warehouse locations

8 Legal Considerations Dispute resolution Limitation on damages
Location of arbitration or court proceedings Intellectual property – Patents Civil Law, Common Law, Religious Law (i.e. Sharia Law)

9 Business Cultures Phone vs. face to face
Traditional vs. non-traditional Verbal communication vs. non verbal Language and interpreters Hospitality and gift giving Art of Negotiating Traditional – asian, middle east Non-traditional – North America, Europe Negotiating – Japan example of staying quiet. “perhaps, maybe, we’ll consider it” usually means No in China

10 Political and Financial Risks
Currency fluctuations Currency conversion Payment methods and techniques Performance bonds Cancellation of import/export permits Expropriation AND MOST IMPORTANT OF ALL……

11 Getting PAID!!!!

12 Why Go Global? Opened doors to unprecedented opportunities
Access to global supply chains Producing for a world market instead of a merely local one a manufacturer can develop economies of scale lower production costs lower prices mitigate risk Diverse trading partners helps safeguard against an economic crisis i.e.. “Credit Crunch” in the U.S.) Where is your competition? Trade is responsible for 1/5 of the jobs in Canada. - Countries trade b/c it enables them to acquire goods they cannot produce themselves. As a a result of trade they can specialize in areas where they enjoy a competitive advantage, and sell their expertise to those that need it. companies that aggressively construct global supply chains of their own, and actively participate in those of others reap the greatest rewards “Going Global” is the way to take advantage of the opportunities; it provides a stmulus to companies to increase their competitive advantages

13 Case Study - Kawartha Export Inc.
Electrical control equipment for water treatment industry w/world-class software to manage the system Sales: $8 million / Equity: $3.2 million / Op LOC: $2 million – OK for normal day-to-day ops Situation US$2 million contract to supply a system to a buyer in Brazil. This is 2x the size of normal contract, but standard technology Terms: 85% net 60 shipment / commissioning + delivery of a 24-month warranty bond Buyer has requested 5-year financing Chinese subcontractor needs advance payment & payment by ILC before starting Manufacturing costs = $1.25 million Cash flow over 9-month manufacturing period = - $1.25 million

14 Delivery and Installation
Kawartha Export Inc. Delivery and Installation Manufacturing Period Pre-contract Period Credit Period Warranty Period Final Payment Shipment Contract Signing 9 months 60d Non-payment Risk (15%) Risk (85%) Warranty Bond Buyer Financing time Cash flow ILC to Chinese supplier Advance Payment Slide opens with just a blank timeline to provide the option of talking through the risks and solutions the financial institution would face if their client came in with this situation. Alternatively, you can immediately launch the contract details graphics and start to build the situation with the bubbles. WIP LOC F/X Risk

15 Kawartha Export Inc. … 2010 Final Payment Shipment time 60d
Opportunities - and Risks - Abroad Follow-on foreign investment opportunities may arise related to export transactions Integration into global supply chains Establishment of off-shore production facilities JV or other investment partnerships But with opportunities come risks and the need for financial support Final Payment Shipment 60d Canadian Direct Investment Abroad time Canadian Direct Investment Abroad A wide range of products can contribute to an overall solution The Export Guarantee Program can be used to guarantee the financial institution up to 100% on loans extended to acquire assets abroad A Financial Security Guarantee to the financial institution can backstop domestic guarantees issued to help a sub located abroad obtain an LOC from a foreign financial institution Political Risk Insurance can protect The investor against in-country political risks like expropriation, transfer & conversion problems and war damage The financial institution on project loans in developing countries To name a few …

16 EDC Solutions – Buyer Risks
Who Pays? Buyer becomes insolvent Accounts Receivable Insurance Contract Frustration Insurance Single Buyer Insurance EXPORTProtect Exporter Buyer defaults on payment Buyer cancels contract Buyer is a sovereign entity Political Risk Insurance Buyer makes a wrongful call on a contract bond Performance Security Insurance Buyer needs vendor financing Foreign Buyer Financing Buyer

17 EDC Solutions – Exporter Risks
Who Pays? Exporter defaults on its operating loan Export Guarantee Program Financial Institution Exporter defaults on its term loan Exporter’s contract bond is called by the buyer Performance Security Guarantee Exporter defaults on its F/X facility Foreign Exchange Guarantee Exporter’s supplier bond is called Financial Security Guarantee Foreign financial institution calls standby L/C (i.e., security for foreign financial institution)

18 Our Services Loan Guarantees Financing Insurance Bonding
Export Guarantee Program offers risk-sharing guarantees to Canadian financial institutions for loan related export contracts or general corporate purpose facilities. Financial Institution Guarantee Program provides cover to Canadian and international financial institutions financing the sale of Canadian exports to customers in developing markets. EXPORTExpressCredit offers export credit loans to companies with little access to the cash they need. Security Compliance Loan is available for up to $150,000 to finance the costs related to becoming C-TPAT compliant Equity Investments – EDC engages in both direct and indirect equity investments. Note Purchases involving simple payment terms on export contracts with high-quality foreign buyers. Canadian Direct Investment Abroad – a wide range of financing structures is available to suit the needs of the investment and to address the ongoing working capital needs of foreign affiliates. Foreign Buyer Financing solutions provide one to ten-year coverage for up to 85% of the sale. Lines of Credit to foreign companies who repeatedly buy from Canadian companies and to foreign financial institutions or intermediaries that onlend money to foreign buyers. Corporate Loan Syndications pull together multiple financial institutioning partners to fund a borrower’s large, medium-term capital requirements. Leasing - EDC does not act as a lessor but can provide funding to lessors. Project Finance - limited-recourse financing for large-scale infrastructure and industrial projects. Account Receivable Insurance covers receivables up to 90 per cent of losses resulting from commercial or political risks. Single Buyer Insurance covers unlimited sales to one customer for six months on contracts worth up to USD$250,000. EXPORTProtect covers single export transactions for up to USD$250,000. Contract Frustration Insurance covers up to 90 per cent of losses for one export contract. Documentary Credit Insurance covers the financial institution for 90 per cent of losses resulting from commercial or political risks on documentary credits it confirms, negotiates, accepts or pays. Political Risk Insurance protects overseas assets, including equipment and manufacturing facilities. Performance Security Insurance covers up to 95 per cent of losses if the buyer demands payment of a bond issued by the exporter’s financial institution without valid reason. Bonding Performance Security Guarantee fully protects the financial institution in the event of a call on a contractual guarantee it issues on an exporter’s behalf. Surety Bond Insurance fully protects a surety company in the event of a call on a contractual guarantee it issues on an exporter’s behalf. Foreign Exchange Facility Guarantee -gives the financial institution a guarantee in lieu of collateral so the exporter can buy a foreign exchange contract to protect against currency fluctuations. Financial Security Guarantee -replaces the collateral usually needed to secure a variety of payment guarantees, including operating lines of credit with foreign financial institutions, letters of guarantee for suppliers, regulatory, utilities, etc.

19 Resources Forum for International Trade and Training
Export Source Canadian Trade Commissioner Service Dun and Bradstreet’s “Exporter’s Encyclopedia” Product Map and Trade Map and Industry Canada

20 Ken Giffen Account Manager 416-640-7611
Involved in an export transaction or investment abroad? Call us. We’d love to talk to you Update Name, Title, Telephone Number and Ken Giffen Account Manager

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