Five Questions With: Fred P. Hochberg

HIGH VALUE-ADDED GOODS from American manufacturers find greater resonance in the global marketplace, says Export-Import Bank Chairman and President Fred P. Hochberg. /
HIGH VALUE-ADDED GOODS from American manufacturers find greater resonance in the global marketplace, says Export-Import Bank Chairman and President Fred P. Hochberg. /

Fred P. Hochberg is the chairman and president of the Export-Import Bank of the United States, an independent federal agency that provides loans and insurance to American exporters as well as foreign firms and governments that are purchasing U.S. goods.
Last year the bank authorized $24.5 billion in loans, up 70 percent from 2008. That activity generates fees that in turn allows the bank to return money to the U.S. Treasury, a total of $3.4 billion over the last five years above all expenses, including write-offs, which average less then 2 percent, or “better than the banks,” said Hochberg.
Through the first six months of fiscal year 2011, the bank authorized $13.4 billion in transactions, a record, including $670,000 in Rhode Island.
Hochberg took a few moments to talk with PBN while en route back to Washington after taking part in an exporter forum on June 7 at Bryant University.

PBN: How are you working more closely with businesses in a small state like Rhode Island?

HOCHBERG: One of the key ways we do this is working with local partners, be they congressmen or mayors or governors. We’re doing more than 20 of these, what we call global access events, around the country. Today actually marks the 15th one we’ve done since January. … We had over 40 small businesses today. Essentially we provide them an overview on the export opportunities. Then we had a panel with the Ex-Im Bank, the Commerce Department, and the Small Business Administration to talk about what the resources are that can help small businesses. And most importantly today, we had a panel with three or four exporters who talked about their own exporting experience and can share that with the audience. So people can hear firsthand from other exporters.
Frequently there is a one-on-one Q&A that accompanies these programs. I met with a company afterward that is interested in exporting to Mexico. What they need and what we provide is what is called ‘credit insurance;’ we can insure your accounts receivable so that if you sell to a foreign company, you know you get paid. … If I have a problem collecting in Chicago or Boston, I know what to do. But if my customer in Brazil or Turkey doesn’t pay, then what do I do? What we’ll do is insure your receivables so that you don’t have to worry that you may not get paid by your customer.

PBN: Has the increase in your activity been a result of private lenders backing off because of the increased risk in the global marketplace?

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HOCHBERG: I think it’s three things.
One, private lenders have backed off.
Two, exports are up 17 percent in 2010 over 2009, so there’s greater demand. In fact, March was the largest month of exports from the United States on record.
Three, more exports are going to more emerging economies, and banks are feeling a little more reluctant to be lending to those markets than maybe to more traditional economies.

PBN: Are some exports better than others?

HOCHBERG: Basically, where we have a competitive edge, in products that have higher value, more technology, more innovation, we aren’t the low-cost labor producer [that’s where we have an edge]. It’s going to be hard to go back to making some consumer electronics, or articles of clothing. So the more high-tech products, they tend to have greater resonance.
But we are helping a company called Wallquest in Pennsylvania that sells decorative wallpaper and a large part of their sales now are exports.
Our focus is on U.S. jobs. The best way to think about Ex-Im Bank – and whether we can help [a business] – is where were the jobs generated? If [the product] helped create American employment, we can help facilitate that.

PBN: Which is bigger – exporter or buyer financing? Has that changed in the last five years?

HOCHBERG: I would say the largest is buyer financing. And the buyer financing is often dominated by expensive heavy equipment. Airplanes to power turbines to earth movers to tractors to farm equipment. They also tend to be higher value.
The big change is more and more of our work is with the private sector overseas. And where maybe 10 or 15 years ago more of it was sovereign. So there has been a real shift to the private sector. … The utilities, the power companies, transportation and telephones are now moving away from government institutions to the private sector.

PBN: Is the Export-Import Bank working with the U.S. Small Business Administration on the new online tool it announced [June 7] to help small businesses develop an export business plan?

HOCHBERG: Yes. Karen Mills, who runs the SBA, she and I worked together on the transition team, because I was at the SBA under President Bill Clinton. So we’ve been coordinating a lot closer with the SBA and actually with the Commerce Department to make it seamless and easier for small businesses, in particular, to get access to the information and the credit they need.
Right now about 12 percent of the U.S. economy is exports. So we are not an export nation like Germany is. We’re not an export nation the way China is or Japan is or Korea is. So exporting still is not as common in the United States as for example, in the European Union.
So part of what the president is trying to do with the national export initiative, what we are trying to do with our global access program for small business, is to take exporting, demystify it, take away the risk, make it easier for companies to tap into those sales.

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