| Project Finance from North
America
In each developed
country there is an export credit agency, and its mandate is usually to support exporters
doing business in international markets. Export Development Corporation (EDC) is
Canada’s export credit agency, a financial institution 100% owned by the Canadian
government. Some may say that EDC’s business in Iran is insignificant compared to the
volume of Iran-Italy and Iran-Germany transactions covered by the likes of Sace and
Hermes. But it may be interesting to know about the latest measures the export credit
agency of a North American country is taking to expand its business in the Iranian market.
Iran International talked to Ihab Tadros, EDC’s regional manager for the Middle East
and Africa, about a range of issues. Excerpts:
Start of Transaction:
When a Canadian company is interested in investing in another country, they would want to
protect themselves against any risks. They often do not know the politics of that country
or what could happen. So we provide the investment insurance to protect them against all
risks excluding the project risks. We would tell the investor that he knows his field and
his project, and we know the economic condition of that country and the risks involved. We
would then provide him with an insurance policy and they would no longer be afraid of
investing in that country.
Experience with Iran: Iran is a very important market to
both Canada and EDC. That is not only at the EDC level, but also at the Canadian trade
level. The two most important markets in this region are Iran and Algeria.
| Any
country may face economic problems, but the good thing about Iran is they honor their
commitments |
When it comes to business in general between Canada and Iran and
also when it comes to EDC support or insurance in the region, it’s always Iran and
Algeria having the highest volume. The volume itself is important, but besides that there
is also experience, because EDC is a financial institution. If we have a good experience
with a country, we would do our best to accommodate their needs. If we have a bad
experience, our activities would be limited. We have an excellent and long relationship
with Iran. Iran has sometimes faced economic difficulties but has always had the courage
of telling people that it has problems. And immediately they do what is necessary
internally to correct the mistakes. Once they correct them, they start giving back the
installments. Any country would face economic problems like that, but the good thing about
Iran is they honor their commitments. That is very important to us and that’s why we
always try to accommodate the needs here in Iran.
Close Relationships: In Iran, we have a close relationship with
the Central Bank of Iran (CBI). We have relationships with most of the Iranian banks and
we cooperate on a constant basis. We know the Iranian Steel Company (NISCO), and have
established relationships with most of the large companies. By forging these
relationships, when there is a transaction the groundwork would be ready and we can
immediately support the customers. EDC staff come to Iran on a constant basis to meet with
these institutions, keep the relationships going and understand their needs and
requirements and prepare the ground for Canadian exporters as well as Iranian buyers when
transactions are ready.
Project Finance: Projects
and financing projects are very important to both parties. It is a complicated process
which needs a good support, a good financial instrument for medium-term financing. But in
order to establish medium-term financing, the documentation attached to it is a
complicated one that requires a lot of work and understanding between parties. In the past
the CBI and the Ministry of Finance & Economic Affairs had certain views on that
financial instrument. We had other views on that. It therefore took some time for them to
understand us and for us to understand them. But we are happy to say that in July 2000 we
reached an agreement with the CBI and the Ministry of Finance & Economic Affairs on
the documentation for supporting a project. The document negotiated is going to be a model
for any future transactions. In other words, the standard is now there. From now on, there
will be a lot of next steps. |
