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Providing Financing for Foreign Trade

by Diogo Figueiroa on Categories: financing

Providing Financing for Foreign Trade

 
By Diogo Figueiroa

Miami is internationally recognized as the gateway to the Americas. For decades, South Florida-based banks have been supporting international trade transactions between the U.S. and foreign countries, playing an important role in promoting and developing the region.

With its central geographic location, infrastructure, airports and ports, proximity to Latin American and Caribbean countries, friendly business environment and multinational culture, Miami is distinctively positioned to benefit from the anticipated growth in trade activity. Given that Miami has a lot going in its favor from a business standpoint, it’s surprising that the vast majority of Florida banks do not finance any international trade activity, and, instead, limit their customer relationships to only the domestic side of their businesses.

The small representation of trade finance providers in Florida becomes even more surprising in a region that depends and relies so much on trade. The tourism, real estate and wealth management industries foster some of the most significant businesses in South Florida and each of them has experienced an unprecedented influx of foreign funds; these funds supported the recovery from the financial crisis of 2007 and 2008. We can look at some of the following key facts to understand that international trade is one of the key drivers of the Florida economy:

  • Over the last decade, Florida’s trade has nearly doubled, surpassing $158 billion in 2013.
  • International trade, along with employment by foreign-owned companies, is estimated to support more than one million jobs in the state.
  • Exports of 60,000 Florida companies accounted for 20 percent of all U.S. exporters in 2011.
  • Latin America and the Caribbean combined represent more than 60 percent of Florida’s trade business.

Florida has also benefitted from free trade agreements (FTAs) with neighboring territories in the Caribbean and Latin America. The U.S. has multilateral FTAs in effect with 20 countries, such as the North American Free Trade Agreement (NAFTA) and the Dominican Republic—Central America—U.S. FTA (known as CAFTA-DR). Some FTAs are bilateral, such as the recently announced U.S.-Colombia agreement; other important FTAs are currently under negotiation, and will develop in the coming years.

The strategic importance of international trade to the overall U.S. economy is crystal clear. In 2010, the National Export Initiative strategy was announced, with the goal of doubling U.S. exports from 2010 to 2014 as well as supporting 2 million domestic jobs. 

One of the tools the government utilizes to increase U.S. exports, particularly of small- and medium-sized companies, is the Export-Import Bank of the United States (Ex-Im Bank), the country’s official export credit agency. Its mission is to support the export of U.S. goods and services to international markets. The Ex-Im Bank enables U.S. companies to turn export opportunities into real sales that help maintain and create American jobs, contributing to a stronger national economy. 

The limited number of trade finance banks in Miami impacts Florida-based companies that are import/export-related. Small- and medium-sized businesses are especially limited in their international capabilities, creating a very interesting opportunity for banks with an expertise and interest in the trade finance arena. I joined Sabadell Bank’s trade finance team to pursue this very opportunity.  We have also recently expanded our trade finance team significantly to serve this important business segment and to have the capacity to grow with our clients.

Over the years Sabadell has been setting up a corporate and investment banking group and culture unique to Miami. We have different teams that complement each other in providing customers with a variety of financing options, and a range of services that include trade finance solutions, structured and project finance loans and syndications, supply chain and international factoring, working capital, and cash management services.

Our trade finance team brings several years of combined experience; we have structured hundreds of Ex-Im Bank-backed transactions and are one of the most experienced trade finance teams in the region with hundreds of million dollars funded, particularly in Latin America-related transactions. 

Our team often encounters questions and doubts posed by customers about how companies deal with international clients, the lack of knowledge of foreign trade regulations and trade law jurisdiction. These customers are concerned about the inability to access existing trade finance tools to promote trade transactions and mitigate intrinsic risks, and these concerns usually revolve around the same topics: 

  • How can I ensure that I will receive agreed-upon payment for the products I am exporting? 
  • How can I ensure that I will receive the correct products, of the expected quality and quantity, within the timeframe requested in my purchase order?

While these concerns might apply to all domestic transactions, the international element adds a series of new risks, uncertainties and concerns that are not present when dealing within the country. For many decades, banks have been developing tools to facilitate international transactions, primarily with the purpose of mitigating risks to both exporter and importer, with the letter of credit being the most traditionally known. 

Although this is still a very important tool worldwide, there are several other risk-mitigating and financing products available to exporters and importers that enhance trade transactions, including the Ex-Im Bank, export-promoting credit agencies in several countries, trade credit insurance, international factoring and forfeiting. 

With increased globalization and the need to compete effectively on an international playing field, companies will have to invest in new opportunities and markets.

To take advantage, companies must realize that challenges associated with international transactions are quite different from domestic ones. As a result, it’s wise to partner with an experienced trade finance bank ensuring that the expectations of all parties involved in an international trade transaction are met. By letting banks handle the risk mitigation and financing side of transactions, companies can focus on targeting new markets, customers and opportunities to increase sales. 

In Miami we believe that this is the decade of Latin America. We at Sabadell are proud to support our international trade customers and excited to be part of this growth. 

Diogo Figueiroa is the SVP and Head of Trade Finance at Sabadell United Bank. He manages the Bank’s Trade Finance Team and is responsible for the overall development of the Bank’s line of business in the USA and in Latin America. Figueiroa and his team have originated and structured export finance transactions for companies in most Latin American and Caribbean countries and have contributed to the business increase in the region. He has extensive knowledge of Eximbank, export credit agencies and private insurance backed credits including medium term loans, revolving lines of credit and factoring facilities. Figueiroa’s team is recognized as one of the most experienced trade finance teams in Miami with hundreds of million dollars of trade finance transactions, particularly in Latin America. Prior to joining Sabadell he was the Head of Trade Finance at Espirito Santo Bank in Miami and worked in the international division of Banco Espirito Santo in Lisbon, Portugal. He has been a member of FIBA’s trade committee. Figueiroa holds a Masters in Business Administration with a specialization in finance, a business administration degree and a management executive course at INSEAD, France. He is a native Portuguese speaker, and also fluent in English and Spanish. He is Portuguese and has been living in Miami since 2007.


South Florida Legal Guide 2014 Financial Edition

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