Export-Import Bank Connects US Taxpayers to Foreign Scandal

Diane Katz /

Marcelo Odebrecht, a Brazilian industrialist of immense wealth and power, was arrested and jailed recently on charges of corruption. He and dozens of other businessmen and politicians are accused of swindling the state-controlled oil company Petrobras—the largest business enterprise (by market capitalization) in the Southern Hemisphere.

American taxpayers have a stake in this scandal: Both the Odebrecht conglomerate and the government-owned Petrobras are subsidized by the U.S. Export-Import Bank.

That such moneyed and allegedly corrupt enterprises are backed by American taxpayers is yet more evidence that Ex-Im is a fount of cronyism, primarily serving the interests of major corporations here and abroad. This is contrary to the rhetoric of bank proponents, who incessantly claim that small businesses are Ex-Im’s “core mission.”

Ex-Im’s dealings with the likes of Odebrecht and Petrobras ought to convince Congress that the bank’s charter should not be reauthorized after it expires on June 30. As it is, the bank has its own problems with corruption; in at least 74 cases since April 2009, bank officials have been forced to act on the basis of integrity investigations by the Office of Inspector General.

Multiple reports have thoroughly documented that Ex-Im financing principally undercuts American businesses and workers. For every foreign firm that Ex-Im subsidizes, there is likely a U.S. company that must compete without such government assistance. A significant proportion of these foreign firms also collect subsidies from their own governments.

The Odebrecht conglomerate generated $35 billion in revenue last year through infrastructure construction, petrochemicals, real estate, agribusiness and military contracting, including $380 million in contracts from the U.S. Department of Defense. Yet in 2010, Ex-Im provided a $38.6 million loan guarantee to finance a highway in the Dominican Republic for which an Odebrecht subsidiary in the United States exported road-building materials to the Odebrecht division constructing the road.

Odebrecht is also listed as the primary borrower in a 2011 deal for $10 million in loan insurance for machinery on a construction project in Brazil. The company also enjoys a close partnership with the Cuban Castro regime, helping it to manage Cuba’s sugar industry and to modernize the port of Mariel. (That construction deal was inked on the same day that Cuban political prisoner Orlando Zapata Tamayo died from an 85-day hunger strike.) Odebrecht also worked with the late Venezuelan strongman Hugo Chavez.

Ex-Im has been even more generous with Petrobras, which has a market cap of $61 billion and 2014 revenue of $143 billion. In 1998, for example, the Ex-Im board conferred “delegated authority” on Petrobras to issue up to $100 million in loan insurance and guarantees backed by the bank. Other deals include:

As the Ex-Im charter expiration date draws closer, the bank’s beneficiaries are issuing dire warnings about a future without Ex-Im, one in which exports abruptly decline and jobs supposedly disappear. The facts point to a far different result. All existing Ex-Im deals would remain intact, and the industries that benefit from bank financing would continue to post robust sales in overseas markets.

In fact, the only differences in a charter-less world would be beneficial. Export subsidies to conglomerates like Odebrecht and Petrobras would shrink, easing the burden on U.S. taxpayers. And a lot fewer American businesses would be disadvantaged by the Ex-Im subsidies lavished on their foreign competitors.

Ex-Im subsidies constitute a form of corporate welfare that is neither necessary nor appropriate. There is no credible reason to reauthorize the bank’s charter.

Originally published in The Hill