Ex Im Bank Funds Andalou Naturals

This is fair warning to investors and customers, that according to the ExIm Bank, this company relies upon  corporate welfare:

Founded by Stacey Egide in 2010, Andalou Naturals, a small business-exporter based in Novato, Calif., relies upon Ex-Im Bank to sell natural and organic products for skin, hair, and body care abroad. The company currently employs 21 employees in California, Ohio, New York, Texas, Illinois, and Colorado.

 (Emphasis added) I wonder if Andalou notes its reliance upon the ExIm Bank in its financial statements.

"Ex-Im's export credit insurance is designed to support small businesses like Andalou Natural expand their exporting portfolio by neutralizing the risk of nonpayment," said Ex-Im Bank Chairman and President Fred P. Hochberg. "In California alone, Ex-Im Bank has authorized $11 billion to support $23 billion inCalifornia small business exports since fiscal year 2007."

Even if any of that is true, how come the majority of exporters need no such help?  If it is designed to help small business, why does almost all of it go to large businesses?

Andalou Natural has become a repeat policyholder of Ex-Im Bank's export credit insurance and expanded their export reach to Taiwan, Malaysia, South Korea,Singapore, Japan, Thailand, Indonesia, Vietnam, and the U.A.E. Total company revenue currently amounts to $18 million, approximately 15 percent of which is export-related. "By providing affordable accounts receivable export insurance, Ex-Im Bank has given us the opportunity to expand at a much faster rate and has broadened our pool of possible importers," said Mark Egide, President of Andalou Naturals.

OK, so about $2.5 million is at taxpayers risk.  But how come other exporters need no such help?   Sure, there are all sorts of things that can be done to speed up processes if you privatize the profits and socialize the losses.  How is this any different than Bank of America?

"Ex-Im Bank support has allowed us to hire an export manager and a sales-support assistant as we have expanded. Without this insurance coverage, we would require prospective importers to pre-pay for their orders, and this typically limits the number of companies who show interest."

I thought you said the money was for export insurance, not hiring staff.  No objection to hiring staff, but much objection to expanding the false economy, and misallocating resources and malinvestment at taxpayers risk.   Yes, EZ Cheap credit does expand the customer pool to include people who otherwise would not make it overseas.  It does not mean you would have NO business, it only means your competitors in USA find their customers overseas losing out to sketchy buyers competing overseas.  In this way, among many others, ExIm Bank harms USA exporters.

Export credit insurance enables companies to increase export sales by limiting their risk of non-payment by purchasing an insurance policy, just as someone limits their risk of fire by purchasing homeowners insurance. 

Well, not "just as" in any way. Most exporters limit their risk by being prepaid, a rather fool proof method.  Companies do not "purchase" insurance, and we end up with the bad debt on taxpayers books, while ExIM Bank books bad debt as "assets."  One limits the risk of fire by safety measures and being careful.  ExIM Bank loans foster carelessness.  If your house does burn down, you've paid a full premium amortized for risk.  ExIM Bank loans are so heavily subsidized and cheap that losses are immaterial to the company.  Compare getting your money from another source to having to deal with your house burnt down.  The Ex Im people are dishonest in their PR.

There are perfectly viable ways of organically growing export business with any ExIm Bank interference.  Almost all exporters do it.  But ExIM Bank does give you and edge by privatizing profits and socializing losses, misallocating resources to picked winners while harming the ones who do not take welfare.

The ExIM bank, along with its recent push for reauthorization, now hides who gets loans and the losses incurred, so, as with most government programs, there is no possible oversight, like the IRS (tea party scandals) or the DEA (fast and furious).

An interesting study would be to learn who got loans, the effect on their competitors, and the loss rate, plus any correlation between loans granted and political contributions.  If we have to pay for the success of these companies who report they rely upon the ExIM bank, then we really should know what we are getting.

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