The arrangement of financing plays an increasingly important role in export trade negotiations, and this trend has gained strength in recent years. Finnvera facilitated Nokia’s telecommunications equipment deliveries to Verizon, one of the leading teleoperators in the world, by providing financing and and guarantee. In this major transaction, the share of Finnvera’s guarantee and financing is USD 1.5 billion, or roughly EUR 1.3 billion. Targeted at North American operations, financing is a result of cooperation between export credit agencies: the Canadian export credit agency Export Development Canada (EDC) also took part in the arrangement of financing.This financing arrangement carried out jointly by export credit agencies is the first of its kind.“Verizon is one of Nokia’s leading customers for all major technologies, products and services, and we are pleased to have been able contribute to the close Nokia-Verizon relationship with this landmark Export Credit Financing, which was supported by Nokia’s ECA partners Finnvera and EDC,” says Nokia’s Lenny Floria, Head of Regional Treasury & Structured Finance, Americas.The largest telecom sector deal where Finnvera has participated in financingThe more difficult and more competitive the market an enterprise strives to enter, the more probable it is that the buyer sees financing as a competitive edge.As an export credit agency, it is Finnvera’s task to improve the chances of Finnish export companies on the market. What was exceptional for Finnvera in this deal was its size. This is the largest telecom sector deal in which Finnvera has been involved.“This demonstrated that with financing and guarantees, we can promote Finnish companies’ export activities. Even when the buyer is a global company, an export credit agency may play an important role in financing as major corporations aim to seek financing in a diversified manner from various sources,” says Antti Saviaho, Senior Adviser at Finnvera.Finnvera provided Deutsche Bank, the bank that arranged the financing, with a guarantee. The buyer credit was financed by Finnvera’s subsidiary Finnish Export Credit Ltd.“For Finnvera, this is a normal financing arrangement that is based, like other major financing transactions, on careful analysis, risk assessment and self-sustainability, which is a key guiding factor in Finnvera’s operations. Finnvera does not hand out subsidies but instead covers its expenses with income received from customers,” notes Jussi Haarasilta, Executive Vice President at Finnvera.Telecommunications is one of the main export sectors in FinlandDue to increasing demand, the ceilings of Finnvera’s export credits and export credit guarantees were raised with legislative amendments twice during 2016. On the basis of the current year’s figures, the increased authorisations were truly needed. The Verizon deal is a good and large-scale example of how Finnvera uses its increased authorisations to promote the Finnish export sector.As is typical of export credit agencies in general, Finnvera’s export financing focuses especially on three sectors: telecommunications, shipping and shipbuilding industry, and forest industry.Further information:Jussi Haarasilta, Executive Vice President, Finnvera, +358 50 346 9537 Antti Saviaho, Senior Adviser, Finnvera, +358 50 468 4478
Ensuring that proﬁtable projects do not fail due to lack of ﬁnancing, is an important part of Finnvera’s mandate as a state-backed risk ﬁnancier. Katja Keitaanniemi, executive vice president responsible for SMEs at Finland’s Finnvera, explains what special measures the group takes to look after smaller businesses.Small and medium-sized enterprises (SMEs) have become an important part of our export credit agency (ECA) mandates. We all like to (repeatedly) state this in our strategies and in our communications, both internally and externally. Certainly, many ECAs have streamlined their products and processes to better serve their SME clients.Finnvera too has ‘upgraded’ its products targeting SMEs or small transactions in general. The group recently launched ‘Export Receivables Guarantee’ aimed at the exporter and ‘Receivables Purchase Guarantee’ aimed at banks ﬁnancing export invoices. Finnvera has also introduced a ‘Bill of Exchange Guarantee’ for markets where bills of exchange work well as a simple way of documenting an export credit. In the trade credit business, these new modiﬁed credit insurances and buyer credit guarantees serve the short-term credit insurance with relatively small amounts. However, there has been some discussion about longer credit terms and about the possibility to oﬀer direct cross-border export credits for small transactions – a business area where banks seem to have lost interest due to ever-increasing transaction costs resulting from tightening regulation.Many ECAs have in recent years successfully introduced products such as Working Capital Guarantee. From our perspective this seems curious as Finnvera has been combining domestic SME ﬁnancing and an export credit agency from the beginning and has always had Working Capital Guarantee in its product portfolio. Providing credit enhancement for the working capital needs of SMEs, has been bread and butter in our business model since the 1960s.When working with SMEs, one must use simpliﬁed policies and procedures. Most ECAs have by now introduced SME-friendly approaches to process applications quickly and eﬃciently and to oﬀer products with a minimal amount of ‘ﬁne print’. But what else can be done for SMEs apart from improving products and processes? In its risk policy, Finnvera has introduced increased ﬂexibility, a more aggressive approach to taking risk in SME exporters’ small transactions compared to larger exporters’ transactions. This may be shown, for example, in accepting a lower level of information required on the buyer. We have experienced a tendency where SMEs often sell or export to other SMEs – and the buyer credit information tends to be insuﬃcient or very scarce. In such cases, Finnvera can be more ﬂexible. The experience so far is encouraging. If loss ratios turned out to be higher, one could argue that the impact of these transactions for SMEs is very high and the SME-related buyer credit portfolio is only a small fraction of Finnvera’s overall portfolio.Focusing merely on products is clearly not enough - and may even be a bit old-fashioned. SMEs may not know which products they need or want. And client managers in commercial banks working with growth oriented SMEs and mid-caps may have gaps in their knowledge of ﬁnancing instruments used in foreign trade. To bridge these gaps Finnvera has been organising training programmes both for growth oriented companies and their bankers. It is now considering the next step: oﬀering trade ﬁnance-related consulting services for SMEs.As a domestic SME ﬁnancier, Finnvera oﬀers a product palette that covers loans and guarantees from investments and working capital to ﬁnancing changes of company ownership, environmental guarantees, start-up -guarantees, internationalisation guarantees, etc. Until recently the products on oﬀer also included early stage Venture Capital ‘Seed Financing’ for innovative growth-oriented SMEs. The special focus is to oﬀer a palette that covers ﬁnancing needs from the start to internationalisation. And for the customer, it does not really matter which product is being used: they just need ﬁnancing or risk cover.Finnvera focuses speciﬁcally on SMEs aiming at growth and internationalisation. Our target clients are growing and globalising enterprises - or ‘global’ companies. The special unit that covers this market segment oﬀers both domestic ﬁnancing needs and export credit products. It is absolutely essential that our client relationship and credit managers can oﬀer solutions on a larger scale of ﬁnancing needs so that domestic SME ﬁnancing and export credit guarantees as operational functions do not work in silos.This of course requires some expertise from the personnel as they need to master a wider range of products. These particular client managers focusing on growth-oriented and export-oriented customers are very experienced and have worked on both the domestic and the export ﬁnance side of business. The same specialisation is needed on the credit manager side as Finnvera has separated its credit function from its client function. Finnvera has some 1,000 clients in this customer segment taken care of by around 20 highly skilled customer relationship managers, and the yearly oﬀering reaches to several hundreds of millions of euros.Combining domestic ﬁnancing solutions with export credit agency oﬀerings is not all: Finnvera is part of ‘Team Finland’, which gathers various oﬃcial actors together to ﬁnd synergies when serving customers. Team Finland members include other important state-backed agencies or entities promoting innovation and growth such as TEKES (organisation for ﬁnancing research, development and innovation), Finpro (Finland’s export promotion agency helping SMEs to export), and TESI (equity / venture capital provider). These groups share the same premises in the same oﬃce building. In total, 600 experts from four separate organisations now share a modern open plan, multi-space oﬃce focusing on their joint customer base of growth and export-oriented companies.We are quite sure that the next megatrend in public SME ﬁnancing will be in external focusing and cooperation, not any more in internal concentration: how to combine forces with your colleague organisations to serve SMEs better. This requires a new attitude, but Finnvera is determined to remain in the frontline in ﬁnding new and better ways to support SMEs. In the end, it is results that matter: we need more ‘global’ companies!Katja KeitaanniemiExecutive Vice President, SME's, FinnveraThe article was originally published in Berne Union’s newsletter The Bulletin in September 2017 More information about Berne Union
Stock Exchange Release 29 September 2017, 10.00 amFinnvera issued on 27th September 2017 a USD 1 billion three year bond. The subscriptions quickly rose to approximately USD 1.6 billion.The bond is Finnvera’s largest US Dollar transaction to date.Lead managers for the issue were Crédit Agricole CIB, Citi, HSBC and Nordea. The greatest demand came from investors in the Americas and Asia.Finnvera uses the funds for financing export credits as well as the domestic SME sector.The bond was issued under Finnvera’s EMTN (Euro Medium Term Note) programme. The programme is guaranteed by the Republic of Finland. The rating of Finnvera’s EMTN Programme corresponds to the rating assigned to the Republic of Finland for its long-term liabilities. The rating given by Moody’s to Finnvera is Aa1 and that given by Standard & Poor’s is AA+.Additional information:Ulla Hagman, CFO, tel. +358 29 460 2458Mikael Nordgren, Head of Treasury, tel. +358 29 460 2467
Rising export industry orders have increased demand for Finnvera’s export financingThe upturn in the Finnish economy and the rise in export industry orders have increased the demand for Finnvera’s export credit guarantees and export credits. The ceilings for Finnvera’s export credit guarantees and the authorisation to finance export credits were raised from the start of 2017 to help the company meet the increased demand especially in ship financing. Raising the ceilings for Finnvera’s and export credits proved useful during the first half of the year. The higher ceilings were really needed, not only for securing new large orders but also, for instance, in the telecommunications sector. Demand for SME and midcap financing remained steadier during the first half of the year. The Group’s financial performance was strong in the first six months of the year. The profit was EUR 57 million (-7 million).The maximum amounts of Finnvera’s export credit guarantees and export credits were raised from the beginning of 2017. The authorisation to grant export credit guarantees was raised to EUR 27.0 billion, while the authorisation to grant export credits was raised to EUR 22.0 billion. According to an external evaluation of Finnvera’s activities commissioned by the Ministry of Economic Affairs and Employment, the company’s risk management is at an excellent level internationally. When granting financing, Finnvera manages risks through careful analysis. Exposure is monitored constantly and, whenever possible, protective measures are taken using for instance reinsurance.During the period under review, Finnvera’s funding responded to the increased demand for export credits. In May, Finnvera issued a 15-year bond of EUR 750 million, which attracted a great deal of interest. By means of a private placement, the bond sum was raised by EUR 100 million at the end of June. This has the longest maturity among the bonds issued by Finnvera to date.Business operations and the financial trendThe value of the export guarantees and special guarantees offered by Finnvera in January–June totalled EUR 6.3 billion, or over five times more than during the corresponding period the year before (1.2 billion). Significantly more export credits were also offered. The value of export credits offered by Finnvera in January–June totalled EUR 5.7 billion (0.5 billion). Some large individual projects for instance in the shipbuilding and telecommunications sectors contributed to the growth.Finnvera continued to speed up the financing of small export transactions by launching the Receivables Purchase Guarantee, which is suitable for short-term export transactions of less than EUR two million. The goal is to boost financing and to promote the operating potential of Finnish export companies of all sizes.The total exposure for export credit guarantees and special guarantees, including current exposures and offers given, totalled EUR 22.4 billion at the end of June (18.4 billion). Total exposure increased by 22 per cent during the period under review. The increase was attributable, in particular, to the rise in offers given. Current exposure accounted for EUR 15.8 billion of the total exposure at the end of June, or only 2 per cent more than at the start of the year. At the end of June, the exposure included in the maximum authorisation of EUR 27 billion for export credit guarantees totalled EUR 17.2 billion (14.4 billion).In January–June, the demand for SME and midcap financing was slightly higher than the year before. However, as financing was available on market terms, the volume of loans and guarantees offered during the period under review was 6 per cent less than in the previous year. Domestic loans and guarantees in SME and midcap financing stood at EUR 2.2 billion at the end of June; this was 2 per cent less than at the start of the year. SME and midcap financing still focuses on working capital, but a positive feature is that financing is now more closely targeted at investments and growth enterprises. During the period under review, Finnvera continued its well-received campaign to accelerate transfers of ownership in SMEs. The goal is to increase the number of growth enterprises through transfers of ownership. By the end of June, Finnvera contributed to the financing of ownership arrangements for nearly 550 enterprises, which was 3 per cent more than the year before. Expressed in euros, financing for ownership arrangements was 18 per cent less than during the same period in 2016. Finnvera Group 1 Jan–30 Jun 2017 1 Jan–30 Jun 2016 Change % Offered financing, MEUR Loans and guarantees 454 483 -6 % Export credit guarantees and special guarantees 6 262 1 226 411 % Export credits 5 748 477 1105 % 30 Jun 2017 31 Dec 2016 Change % Outstanding commitments, MEUR Loans and guarantees 2 226 2 261 -2 % Export credit guarantees and special guarantees 22 397 18 426 22 % Export credits 5 043 4 782 5 % 1 Jan–30 Jun 2017 1 Jan–30 Jun 2016 Change % Net interest income and net fee and commission income, MEUR 90 93 -4 % Operating expenses, MEUR 23 25 -8 % Operating profit, MEUR 60 -7,4 913 % Profit for the period, MEUR 57 -6,9 929 % 30 Jun 2017 31 Dec 2016 Change % Balance sheet total, MEUR 9 986 9 498 5 % Equity, MEUR 1 264 1 207 5 % -of which non-restricted reserves, MEUR 1 012 955 6 % 30 Jun 2017 31 Dec 2016 Change %-point Equity ratio, % 12,7 % 12,7 % 0,0 Capital adequacy, Tier 2 , domestic operations, % 23,1 % 22,5 % 0,6 Cost-income ratio, % 25,4 % 27,0 % -1,6 The Group’s profit for January–June 2017 was EUR 57 million, as against a loss of EUR 7 million during the corresponding period the year before.The main reasons for the improvement of financial performance from the previous year were the smaller losses from export credit guarantee operations and the smaller provisions for losses recorded by the parent company, Finnvera plc. In January–June, export credit guarantee losses and provisions for losses totalled only EUR 2 million, whereas the losses entered and the provisions made in the reference period amounted to EUR 66 million. In the report period, the Group’s guarantee losses and provisions as well as impairment losses on loans amounted to EUR 9 million (65 million), or EUR 57 million less than during the corresponding period the year before. The entries for impairment losses and provisions for losses are estimates. Their amounts may change even substantially as the volume and accuracy of information increase.Apart from smaller guarantee losses and provisions, the gains from items carried at fair value contributed to the Group’s improved performance during the period under review. These totalled EUR 3 million (-10 million). The increase in gains from items carried at fair value was mainly attributable to changes in the fair values of derivatives, liabilities and venture capital investments.In addition, financial performance was improved by the decrease of 8 per cent, or EUR 2 million, in operating expenses. Above all, the lower operating expenses were the result of a decrease in personnel, lease and property expenses.The profit of the parent company, Finnvera plc, stood at EUR 53 million (-7 million) in the period under review. The profit was broken down by the divisions as follows: Large Corporates accounted for EUR 40 million (-17 million) and SMEs and Midcap for EUR 13 million (10 million). The subsidiaries had an impact of EUR 4 million on the Group’s profit for the period (0.1 million). Finnvera Group H1/2017 H1/2016 Change Change 2016 MEUR MEUR MEUR % MEUR Net interest income 23 27 -3 -12 % 50 Fee and commission income and expenses (net) 66 67 -0,3 -1 % 144 Gains/losses from items carried at fair value 3 -10 12 127 % -20 Net income from investments -0,5 0,1 -0,7 -496 % 0 Other operating income 0,6 0,2 0,4 202 % 12 Administrative expenses -22 -22 -0,4 -2 % -44 Depreciation and amortization -0,8 -0,7 0,2 25 % -2 Other operating expenses -1,0 -2,6 -1,6 -61 % -4 Net impairment loss on financial assets -9 -65 -57 -87 % -66 Impairment loss on other financial assets 0 0 0 0 % -2 Operating profit 60 -7,4 67 913 % 69 Profit for the period 57 -6,9 64 929 % 70 Outlook for financingIt is expected that the demand for export credit guarantees and export credits provided by Finnvera will continue to be strong. Total volumes will be largely dependent on individual major projects, especially in shipbuilding and telecommunications. Large corporations’ trade negotiations requiring long-term financing often take a long time, and we do not foresee any significant changes in the demand forecast previously.More often than before, demand focuses on Western industrialised countries, which indicates the importance of long-term financing in the export of capital goods. Ships, telecommunications and the forest industry are still expected to account for the bulk of demand associated with large corporations’ exports. Among Finnvera’s major country exposures, Russia has shown signs of modest economic growth. It is also believed that demand for export credit guarantees will pick up when compared against previous years. Despite the problems in the Brazilian economy and administration, demand for guarantees is expected to continue and focus widely on different industries. New demand is also visible in the Middle East region.Driven by Finland’s good economic growth, the demand for and granting of Finnvera’s SME financing are expected to pick up speed towards the end of the year. In the first half of the year, an increasingly large percentage of the financing was granted to growth enterprises. Launched in 2016, the volume of loans guaranteed for banks by the European Investment Fund (EIF) increased, as did Finnvera’s partial guarantees. During the first six months of 2017, the volume of partial guarantees tripled, to about EUR 24 million, when compared to late 2016. This predicts that demand will continue to be strong.The campaign to accelerate transfers of ownership continued in the first half of 2017. The number of transfers of ownership financed during the first six months was record high when compared to previous years. The demand for financing for transfers of ownership is also expected to continue at a good level for the second half of the year.With respect to financial markets, it is likely that the trend in demand for both export financing and domestic SME financing will remain at the present level for the second half of 2017 as well.CEO Pauli Heikkilä:“Judging by the demand for Finnvera’s export credit guarantees and financing, it can be assumed that Finnish exports are reviving in other sectors as well. The barometer surveys published last spring also forecast rising investments and greater demand for financing in Finland, but this has not yet been seen as definite growth in the demand for Finnvera’s domestic SME financing. We assume the explanation to be that the Finnish banking sector operates well and can respond to the demand for financing on market terms. The economic outlook is good, and companies seeking financing are economically in a better shape than before, which may reduce the risk-sharing role sought from Finnvera. In addition, there is a new option: a guarantee granted by the European Fund for Strategic Investments, which banks can use as an alternative to Finnvera’s guarantees.The use of Finnvera’s authorisations means at the same time that the State’s total exposure associated with export financing has risen rapidly. However, it is worth noting that the increase in authorisations is associated with export deliveries taking place in the future. The growth of Finnvera’s real commitments based on current disbursements is clearly more moderate. Finnvera manages risks through careful analysis when granting credits and by constantly monitoring the exposure situation. According to the international assessment report commissioned by the Ministry of Economic Affairs and Employment and published in March 2017, the export financing system implemented by Finnvera in Finland is of a high standard, and risk management is on a par with the best international practices.Financially, Finnvera’s first six months of 2017 were strong. On the whole, our objective continues to be that Finnvera’s activities remain self-sustainable in the long term and that our activities are funded by proceeds from guarantee activities. Our statutory task is to bear credit risks that arise, for instance, from export transactions. The realisation of individual risks is impossible to predict in every respect.”Half-Year Report 1 January–30 June 2017 (PDF)Inquiries:Pauli Heikkilä, Chief Executive Officer, tel. +358 29 460 2400Ulla Hagman, Senior Vice President, CFO, tel. +358 29 460 2458
Finnvera is one of the ECA partners of an international export finance conference in the autumn. Annual Global Export Finance Conference (GEF) takes place in Barcelona, Spain 12th–14th September 2017.As the only conference dedicated solely to the export finance market the Global Export Finance conference is the most influential and most established gathering of export finance professionals that gathers participants all over the world. This year the Global Export Finance Conference is being arranged for the 18th time by a global trade and finance publisher Euromoney Trade Finance.Finnvera’s Deputy CEO Topi Vesteri is one of the event’s key speakers. Vesteri is president of the Berne Union that is an association for the global export credit and investment insurance industry.More information about the Global Export Finance Conference.
Finnvera’s new Receivables Purchase Guarantee speeds up the financing of small export transactionsHalf of Finnish SMEs engaged in exports believe that the value of their exports will rise this year. Equally many companies will also increase their investments in internationalisation. These are some of the findings of the SME Barometer Survey that was conducted this spring. The survey encompassed about 4,800 companies, of which 1,100 operate on the international market. However, export companies still face challenges in arranging financing for small export transactions and protecting themselves against export risks. In order to speed up financing, Finnvera has introduced a new Receivables Purchase Guarantee to complement the Bill of Exchange Guarantee and the Export Receivables Loan, which were launched a year ago.The Receivables Purchase Guarantee is typically applicable to continuous exports with a short payment period, when the export products are, for example, consumer goods, raw materials, services or semi-finished products. Finnvera bears the risks associated with financing and the bank is protected from the eventuality that the buyer fails to pay the invoice on the due date. The guarantee is granted directly to the bank that purchases receivables from its own client, i.e. the exporter, in connection with foreign trade.- The instruments used for financing small export transactions should be as simple and easy to use as possible for both the exporter and the bank. We continuously strive to develop our products so that banks would find it easy, with the help of our guarantees, to offer financing for even small export deals. For products aimed at contracts of under two million euros, Finnvera bears more of the risk itself and, by relaxing the terms, strives to speed up financing and promote the business opportunities of Finnish export companies irrespective of their size, says Minna Lindqvist, Development Manager at Finnvera.New products reduce the exporter’s and bank’s riskBoth the Receivables Purchase Guarantee and the Bill of Exchange Guarantee enable the exporter to grant payment time to the buyer while receiving the money for the transaction on cash terms. Both guarantees protect the bank against credit risks associated primarily with the buyer and the buyer’s country. A Bill of Exchange Guarantee can be granted for a payment period of up to five years and it is well suited, for instance, to an individual capital goods transaction, such as exports of machinery or equipment, whereas the Receivables Purchase Guarantee is suited to short payment periods. The products complement each other. For instance, Finnvera does not grant Bill of Exchange Guarantees for exports to Russia, but a Receivables Purchase Guarantee may be granted for this purpose.The Bill of Exchange Guarantee was launched a year ago, and its use is gradually increasing. Applicants for the guarantee include large, small and midcap companies that have exported primarily to European and South American markets. Calculated on the basis of the applications, the average contract value has been EUR 1.3 million. So far the smallest contract guaranteed by a Bill of Exchange Guarantee has been valued at EUR 200,000. Only one in three export companies protect themselves against risksThe new products also provide exporters with additional means of protecting themselves against risks associated with export trade. According to the SME Barometer, Finnish SMEs export goods and services abroad at a high risk. As many as two thirds of export companies trust their customers’ ability and willingness to pay so much that they do not protect their sales receivables.This is the case even if a single credit loss may at its worst endanger the future of the entire company, especially if the company is just starting exports. Protection against export risks is also important now when exports are gaining momentum and the economy is at a very promising stage.- The more important and more tailored the transaction is for the company, the more crucial it is to protect receivables. We encourage export companies to contact us at an early stage of business negotiations if something about the export transaction puzzles them. We are glad to advise about selecting an applicable financing solution. Our goal is to help Finnish companies of all sizes to win contracts and protect themselves from risks associated with exports, says Lindqvist.Inquiries:Minna Lindqvist, Development Manager, Finnvera, +358 50 5267 639, firstname.lastname@example.orgThe SME BarometerThe Federation of Finnish Enterprises, Finnvera and the Ministry of Economic Affairs and Employment jointly conduct an SME Barometer Survey twice a year. The barometer for spring 2017 is based on responses given by about 4,800 SMEs throughout Finland. Nearly 1,100 of the respondents are active on international markets.Read also:More about the Bill of Exchange Guarantee More about the Export Receivables Loan
Russians now believe in cautious economic growth, says Team Leader Anu-Leena Koskelainen.Finnish companies’ increasing interest in Russian markets is reflected as more frequent inquiries at Finnvera’s Representative Office in St. Petersburg. The Russian economy has had a slight upturn. Despite challenges, this is opening opportunities for Finnish companies. Finnvera estimates that demand for financing for Russian trade will pick up this year.The following tip sounds like a cliché but is absolutely true: A company aiming at Russian markets must do its homework well.- In Russia, one cannot think that a good product sells itself. Relations and the trading partner’s trust are important, says Team Leader Anu-Leena Koskelainen of Finnvera.Koskelainen was appointed to lead the management of country and environmental risks in the Large Corporates Unit of Finnvera in April 2017. Before that she had worked as an economic and financial adviser at the Embassy of Finland in Moscow, where she had an excellent view of the development of the Russian economy for three and a half years. She was already familiar with Russia and its neighbouring areas from her previous career at Nordea Bank and its predecessors, and she also knew Finnvera through corporate finance.Compared to the situation in 2014–15, the economic outlook in Russia has improved. The sanctions imposed by the West and Russia’s own counter-sanctions have undoubtedly had an effect, but maybe not as great as had been predicted, Anu-Leena Koskelainen says.- When the economy shrinks, it must also grow at some point. Private consumption, previously the engine of economic growth, is showing a slight upswing after a steep decline. Russia’s foreign trade is increasing after having decreased for two or three years. A turn in sentiments took place in early 2017, and Russians now believe in cautious economic growth.Investments need machines and equipment exported by FinlandFinnish companies also have a more positive view of Russia than before. Although Russia has turned to a more protectionist direction and has an import substitution policy that favours domestic production, opportunities may open for Finnish export companies. For instance, the sanctions imposed by the EU on trade with Russia are still in force, but trade is possible when the sanctions are taken into account.- The development of Russia’s own production calls for investments, and these require technology from abroad. There is then a need for machinery and equipment, the greatest of Finland’s exports, Koskelainen says.Russia is a very noteworthy trading partner despite the fact that exporters must know the local conditions and authorities, get used to the bureaucracy and ponder their attitude to corruption.- Russia encourages foreign companies to shift their production to Russia. Export trade, in turn, is easier without having to become established. However, there are challenges: finding partners; trust; and how to secure receivables from the goods sold.- Among established partners, trade is generally conducted against an invoice. Finnish exporters can insure their receivables from a foreign buyer by means of Finnvera’s export receivables guarantee which is well suited to the short-term exports of raw materials and consumables. At the moment Finnvera is covering credit risks connected to over 100 Russian buyers. When there’s a crisis in Russia, advance payments are common. Then the buyer must trust the seller. A letter of credit is often used to secure receivables, but in Russia it is also a financial instrument.No change in economic policy is foreseen for the next few yearsRussia’s economy is troubled by structural problems, such as the state’s strong role, a low productivity of work and demographic challenges. However, major changes in economic policy are hardly likely before the presidential election in March 2018. In recent years, funds collected from oil revenues have been used to cover the budget deficit.- The budget deficit is one of the biggest problems in the economy. In an economy dominated by the state, this affects the allocation of resources. Now that the economic outlook is better, it is not absolutely necessary to carry out extensive reforms.From the Finnish perspective, Russia is near and geographically huge, when compared against many other export markets. Even though there are problems, Russia has improved its ranking in the Doing Business comparison conducted by the World Bank on business regulations.--“Inquiries keep coming about how Russia is doing”After a break of a few years, Finnish companies are again interested in trading with Russia.- Many clients inquire generally about the market and how Russia is doing. This is a positive feature. It’s also positive that more Russian tourists are again coming to Finland this year, giving a boost to Finnish business on this side of the border. The purchasing power of the rouble against the euro has improved, which makes Finland a more attractive destination for Russian tourists, says Timo Pietiläinen, Head of Finnvera’s Representative Office in St. Petersburg, who has been managing Finnish companies’ relations in the St. Petersburg area for about ten years. During this time, he has been stationed in St. Petersburg for a total of seven years. - I act as Finnvera’s eyes and ears in St. Petersburg, he says, characterising his role.Finnvera’s financing for exports to Russia kept rising in 2014–15, when Finnvera’s exposure in Russia increased 1.5-fold. Since then, the exposure has diminished slightly because Russians are paying back their loans.Tools for networking and efficient expert servicesAccording to Pietiläinen, the Finnish SMEs that invest in Russia at present are primarily those that already know Russian markets as exporters or that are already established in Russia. A production line in Russia helps a company now that Russia is restricting imports from outside its customs territory.Even now, many Finnish companies engaged in the building product industry, wood processing industry and the service sector are operating in Russia.In Russia, Finnvera works in cooperation with Team Finland actors. They help companies to network and create contacts, and guide companies for instance in the use of local expert services. After the initial phase, companies themselves manage most of their contacts with the authorities and other Russian cooperation bodies.In Northwest Russia, Finns have a good reputation as reliable trading partners. Most Finnish companies active in Russia operate in the St. Petersburg area. Knowledge of Finland is not as solid in Moscow or further away. The Astana Expo 2017, being held in Kazakhstan from June to September, will offer Finland the opportunity to raise its profile also outside Russia.Read also:Country classification and mapCredit risks in export trade
Finnish companies’ business deals with Brazil are traditionally very large. SMEs also have good export prospects.The tunes of the samba, Brazil’s national dance, are gradually turning from a minor key to a major key. The economy of the country with the world’s fifth largest population and area has emerged from the worst recession of its history. In 2015, the economy shrank by nearly four per cent, and last year was not much better.- Brazil has traditionally been a strong exporter of raw materials, but both the recession sparked by the global downturn and the political crisis have shaken the business environment in recent years. Modest growth is finally expected for this year, and more growth is predicted for next year, says Mika Relander, Senior Adviser responsible for Latin America at Finnvera.What’s more, statistics support Relander’s view. Brazil’s gross domestic product turned positive early this year. According to Relander, protectionism and bureaucracy still hold sway and issues related to corruption are in the public eye, but attitudes to free trade are gradually becoming more favourable. At the same time, the United States is going in a different direction.- Brazil has a huge internal market, and domestic demand has traditionally been the engine for economic growth. Demand has suffered slightly as unemployment has risen, but there has been a turn for the better even in that respect.Brazil has long been Finland’s most important trading partner in South America. Individual contracts are very large in monetary terms. Finnish exports to Brazil have mainly been machines and equipment for heavy industry, various chemicals and fertilisers. The country also offers enormous opportunities for the exports of SMEs.Relander points out that, with regard to Finnvera’s export credit guarantee exposure, Brazil is still among the three countries with the highest political risks.- Demand for guarantees is continuous and fairly extensive, even though it has been quieter than before in the pulp and telecommunications sectors. Investments in Brazil’s infrastructure are expected to pick up in the coming years. This will create opportunities for Finnish exporters, says Relander.Growth keeps Valmet in BrazilThe developing economy attracted Valmet to Brazil over 50 years ago.Valmet’s current focus in Brazil is on pulp production technologies and the associated automation and service solutions. During the past five years, Valmet has delivered two large pulp mills to Brazil. The value of the deliveries has been hundreds of millions of euros. In addition, Valmet has established service business in the region. At present, the company has about 500 employees in Brazil, divided among five locations. Bertel Karlstedt, President of Pulp and Energy at Valmet, says that Brazil’s economy and political system are much less stable than those in Europe.- The instability naturally has an impact on us and our customers. Brazil has had periods of strong growth, for instance from 2002 to 2011. On the other hand, the country has also gone through periods of recession, like those of the past couple of years. The business environment is still attractive to us, as we operate on global markets and seek growth in developing regions.Karlstedt says that much of the pulp produced by their customers is exported.- Our customers’ investments and profitability of business are largely dependent on global markets. The pulp mills built in Brazil during a period of over ten years have been among the world’s largest.According to Karlstedt, Brazil’s annual inflation has recently been around six per cent. However, in 2015 inflation exceeded ten per cent.- High inflation affects both wages and various supply contracts.Brazil has not been the easiest possible operating environment for Valmet. Competition among pulp technology suppliers is very stiff.- Valmet is one of the leading players in Brazil, but new competitors are also entering the market. We have developed both our own local production and production with a partner network. We must act in this way so that we can ensure competitiveness and, on the other hand, can pay import duties and taxes.Karlstedt remarks that the Brazilian administration has striven to steer production into the country by means of import duties and taxes.- There is pressure to dismantle duties. The internal situation in the country may also drive things to another direction.In Karlstedt’s opinion, a company planning to locate in Brazil should also be prepared for the fact that companies in Brazil bear social responsibility by investing in charity, especially in the company’s own operating area.- Valmet gives significant support to local charity organisations, such as Instituto Ayrton Senna and Instituto Ecofuturo. The goal of the programmes supported is to promote basic education and environmental protection. In addition, we have donated old computers to a school and collected funds for a daycare centre.FACT: Brazil The country category determined by Finnvera for Brazil’s credit quality is 5/7 (questionable credit quality). Gross domestic product: About EUR 1,603 billion (2015). Finland’s gross domestic product is EUR 207 billion (2015). Gross domestic product per capita: EUR 7,838 (2015). Finland’s gross domestic product per capita is EUR 37,827 (2015). Economic growth: -3.6% (2016). The growth expected for this year is 0.6 per cent. Inflation: 10.7% (2015). Exports: EUR 170 billion (2015). Imports: EUR 152 billion (2015). The total value of Finnish exports to Brazil in 2016 was about EUR 381 million. Principal sectors: agriculture, mining industry and pulp industry. Currency: Brazilian Real: The exchange rate is EUR 1 to BRL 3.3. Links:Country classification and mapExport Credit GuaranteesSources: Ministry for Foreign Affairs, Focus Economics, Finnish CustomsMain photo: Mika Relander, Finnvera
On the competitive international market, financing associated with export trade may give a decisive edge to a Finnish player. The guarantee granted by Finnvera and financing offered by Nordea helped Metso to secure a contract in Oman, where Metso will deliver a crushing and screening installation to Al Tasnim, a local cement company. The project is underway and the first equipment deliveries were made in February 2017.This is Metso’s first contract for the delivery of an entire crushing and screening plant to Oman, after a break of many years. It is also the first deal in Oman that was decided with the help of a buyer financing arrangement.Metso gave Al Tasnim an offer where export financing covered 85 per cent of the price of the export contract. The financing was provided by Nordea, and Finnvera covered the credit risks by means of a Bill of Exchange Guarantee.The Bill of Exchange Guarantee covers the credit risks arising from the buyer and the buyer’s country. The most typical risk is the buyer’s insolvency, i.e. bankruptcy.The Bill of Exchange Guarantee is well suited, for instance, to individual capital goods transactions, such as purchases of machinery and equipment. The exporter and the buyer agree in their negotiations that the buyer pays the purchase price on credit terms and the debt instrument is a bill of exchange. The exporter receives the payment in cash and the buyer repays the credit to the bank in accordance with the payment schedule agreed. Finnvera gives the bank a Bill of Exchange Guarantee, i.e. compensates the bank if the buyer is unable to repay the credit.- The Bill of Exchange Guarantee is feasible as a guarantee when the buyer and the buyer’s country are creditworthy and the buyer’s country has working legislation on bills of exchange. The Bill of Exchange Guarantee has the challenge that preparations must be started at a fairly early stage of the transaction. While the exporter and the buyer are negotiating about the product, the financier’s representatives are analysing the terms of financing and the risks associated with the transaction, Eeva-Maija Pietikäinen, Head of Trade Finance at Finnvera, explains.Finnvera has developed the Bill of Exchange Guarantee and wants to promote its use in projects lasting at most five years and valued at a few million euros. In the Oman contract, the buyer’s repayment period for the bill of exchange is three years.- From the perspective of competition, an equally matched trading partner offering financing has an edge over a competing enterprise if the latter is unable to offer a comparable financing package. In international competition, the aim of export credit guarantees is always to promote the competitiveness and exports of Finnish enterprises, says Pietikäinen. The successful Oman contract is a good example of cooperation between the exporter, the export credit agency and a commercial bank.- Winning a competition is based not only on the solutions we offer but also on seamless cooperation between sales and financing. We are committed to lowering buyers’ threshold for signing a deal by ‘meeting them halfway’ in terms of financing. I appeal to our sales teams across the world so that they really listen to customers in order to understand what would ease their customers’ pain during the purchase process, says Olli Kellokumpu, General Manager, Sales and Services, Metso Minerals, Middle East and Eastern Africa.More information about Finnvera's export credit guarantees.Read more about the Bill of Exchange Guarantee.