When private businesses of the North obtain a market in a DC, there is a risk that economic or political problems may prevent payment of bills. To protect themselves, they can take out insurance with an Export Agency Credit such as COFACE in France or Ducroire in Belgium. If there is a problem, the agency pays instead of the insolvent client and the Northern business is sure of getting what is owed.
According to the Jakarta Agreement for the reform of public export credit and credit-insurance agencies, they “now the greatest source of public funding in the world, underwriting 8% of global exports in 1998, i.e. 391 billion dollars of investment, mainly for big civil and military projects in the developing countries. It is far more than the annual average of Official Development Assistance
ODA
Official Development Assistance
Official Development Assistance is the name given to loans granted in financially favourable conditions by the public bodies of the industrialized countries. A loan has only to be agreed at a lower rate of interest than going market rates (a concessionary loan) to be considered as aid, even if it is then repaid to the last cent by the borrowing country. Tied bilateral loans (which oblige the borrowing country to buy products or services from the lending country) and debt cancellation are also counted as part of ODA. Apart from food aid, there are three main ways of using these funds: rural development, infrastructures and non-project aid (financing budget deficits or the balance of payments). The latter increases continually. This aid is made “conditional” upon reduction of the public deficit, privatization, environmental “good behaviour”, care of the very poor, democratization, etc. These conditions are laid down by the main governments of the North, the World Bank and the IMF. The aid goes through three channels: multilateral aid, bilateral aid and the NGOs.
(…) which approaches 50 billion dollars. The outstanding debt of the Export Credit Agencies represents 24% of the debt of developing countries and 56% of public credits held on these countries.”
One of the main criticisms lodged against them is that they are not very fussy about the nature of the contracts insured (arms, infrastructure and huge energy projects such as the gigantic Three-Gorges Dam project in China) nor about their social or environmental consequences. They often give their support to repressive and corrupt regimes (like Total in Myanmar (formerly Burma) which means implicitly supporting fundamental human rights violations.