Every state, in order to promote foreign investment, and to stimulate its economy, offers loans and insurance against certain risks to investors willing to invest abroad. For that purpose, Export Credit Agencies (ECAs) were created. Their purpose is to facilitate foreign investments and to cover and insure against certain political and financial risks that foreign investors may encounter in the host state.
Since political instability and the fear of expropriation in some developing states pose grave risks to foreign investors, together with the behaviour of the financial markets of some states, the need to insure against such risks is something to be considered in order to encourage investments in these regions. ECAs have also been established to assist foreign investors conducting their business in a given market through granting them loans, guarantees and insurance against certain risks encountered by them. These loans to foreign investors are granted in order to ease their entry into foreign markets so that the recipient market can benefit from the foreign investors’ expertise and technology.
This new book examines Export Credit Agencies in some detail. It concludes that even with the existence of various safeguard mechanisms, such measures are not enough to eliminate the risks faced by investors, rather these are risk-reduction mechanisms and the success of such reduction depends upon a particular investor’s due diligence and proper analysis of the foreign market and in knowing the protection limits present in laws and regulations and in international agreements.
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