How Export-Import Bank shutdown could affect SoCal businesses

A generic photo of the Washington, DC building that houses the Export-Import Bank. Between 2009 and 2014, EXIM directly supported 702 businesses in California with loans of more than $18.6 billion, according to The White House.
A generic photo of the Washington, DC building that houses the Export-Import Bank. Between 2009 and 2014, EXIM directly supported 702 businesses in California with loans of more than $18.6 billion, according to The White House. PAUL J. RICHARDS/AFP/Getty Images

Some Southern California businesses could be without a key lender after the sudden shutdown of the U.S. Export-Import Bank, and at least one company is already feeling the pinch.

Last week, for the first time in its 81-year history, the obscure, government-backed bank stopped issuing new loans because of a political fight over whether it represents a wasteful handout to big business or an important engine of the economy. 

Between 2009 and 2014, Ex-Im Bank directly supported 702 businesses in California with loans of more than $18.6 billion, according to The White House.

As of Tuesday morning, visitors to Ex-Im Bank's website were greeted with a message: "Due to a lapse in EXIM Bank’s authority, as of July 1, 2015, the Bank is unable to process applications or engage in new business or other prohibited activities."

One Southern California business that is already feeling the impact is the Corona-based Combustion Associates Inc., which designs and manufactures power plants all over the world.

"I think we would seriously be in jeopardy of cutting down on our staff and projects" without Ex-Im Bank financing, said company president Kusum Kavia, who added that many of the manufacturer's materials come from other companies in Riverside County, so there would be a ripple effect. "We are just shocked that this could ever happen to the United States, where small businesses like myself are not able to compete in the global economy."

(Screenshot from Ex-Im Bank's website as of Tuesday morning)

For the last five years, Combustion Associates has been working with investors in Nigeria to build a new 44-megawatt plant, but when the Nigerian delegation flew to Corona last week to finalize the contract, Kavia had some bad news: The financing from Ex-Im Bank she had promised was no longer available.

"It was an embarrassing moment for us because we've built this relationship with the client," Kavia said. 

Now, with competitors in Europe, China, and Korea circling, Kavia is worried the deal will fall through, because the Nigerian investors want to sign the contract next month.

There are other banks – but they have higher interest rates and a lower tolerance for risk, which is inherent in the sort of capital-intensive projects Combustion Associates builds in developing countries. That’s why most of their projects are backed by Ex-Im Bank, which Kavia doesn’t even want to think about losing permanently.

If Ex-Im Bank remains closed to new business, Kavia said she would consider moving to a country where the cost of doing business is cheaper.

"We get calls from Mexico all the time," she said. "But we would like to stay in California."

Democrats – as well as many Republicans – are still hoping to bring Ex-Im Bank back to life later this summer. A solid majority of Republicans and Democrats in both houses of Congress support the bank, but Tea Party Republicans have been successful in not letting reauthorization come to the floor for a vote.

Ex-Im Bank is also opposed by nearly all the major Republican presidential candidates. 

"The government should not be picking winners and losers when it comes to the free market," Republican Sen. Marco Rubio said in April, according to NPR. "It doesn't level the playing field for U.S. exporters....It doesn't create jobs."

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