Grey2White Initiative

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(Article Reprinted by Popular Demand)

Hypothesis:

Given Ukraine’s current economic and geopolitical situation, one of the most beneficial  steps the US government, business and NGO community can take, is to encourage significant external and internal direct investment into the country’s economy.

Although the US Government has had some success in attracting and supporting American direct investment into Ukraine, those investment amounts are far from sufficient. US investors new to the Ukrainian market are wary of the country’s reputation for corruption, difficulty in doing business, threats from Russia and lack of financing options.

A second and much more viable economic development option, would be to support and enable direct investment by the successful Ukrainian business people who have amassed sufficient capital and are much more comfortable and adept in investing in their home market.

One problem with pursuing that option are high Western standards, which often preclude US government development agencies and public US investors from working with this potential class of investors.  This is due to the fact that for the last twenty-five years, practically all business people in Ukraine had to operate under a certain set of conditions widely considered “grey” and in many cases “black” in the West.

Some of these “grey” conditions are lack of financial transparency, inadequate corporate governance, use of yellow press, use of cash, as well as offshore accounts to conduct operations, bribery and use of adverse political influence.

In their attempts to succeed, some folks in Ukraine went beyond previously acceptable business norms and crossed the proverbial line even further by engaging in criminal “black” behavior – graft, extortion, corruption, tender rigging and illicit drug trade.

To date, these grey conditions have presented significant challenges for the IFIs, development agencies and regulated financial US investors. Yet, it is vital to recognize the necessity to find an acceptable solution that allows Ukraine’s economy to reap significant benefits from the anticipated increase in direct investment and low-cost, long-term financing.

It is also very important to understand that the proposed Grey2White (G2W) initiative aims to broaden and scale up very important development and capacity building work already undertaken over the last quarter century by IFIs, such as IFC and EBRD, USAID; development agencies such as OPIC and USTDA and financial investment communities. Those initial efforts, although quite effective, focused on a relatively small sample of Ukrainian companies and were undertaken during a different stage of the country’s development.

Initiative

The G2W initiative will only work with those companies and individuals, who will be able to create meaningful economic impact in Ukraine, after undergoing the conversion process.  G2W will not in any way target those convicted of the “black” behavior, as their reputation gap is un-bridgeable within the scope of the project.

Thus the question becomes, is it possible for US stakeholders to create an environment and a broad platform from which so-called “grey” Ukrainian businessmen seeking to utilize US financing, equipment, services and franchises, as part of their major investment programs, become “bankable” under Western standards? If the answer is “Yes.”This type of conversion will provide hundreds of millions, if not billions of dollars in direct economic benefit and enhanced geopolitical security to Ukraine and the US.

If the answer is “No,” these businessmen will either be forced to forgo the planned capital investments, or seek alliances with other grey, or black global actors in countries like Russia, China, Brazil, Iran, etc.

It is the fundamental belief by the creators of the proposed initiative that given a concerted effort by the US and Ukrainian stakeholders to develop and implement realistic procedures to increase corporate transparency, introduce financial standards, address any existing reputation issues head-on and provide reputable outside management and board oversight, it is possible within short to medium time-frames to bring these so called “grey” businessmen and their respective projects up to elevated western standards, mitigate investment and reputation risks and affect substantial economic growth in Ukraine.

Thus we hereby propose the following:

Select three-four financially viable projects sponsored  the “grey” Ukrainian actors and use them as a pilot to develop, refine and implement an effective conversion strategy to bring that project up to acceptable Western standards.

From the government side, we propose to involve the US Commercial Service, USTR, US Embassy, Ukrainian Embassy, Cabinet of Ministers of UA, members of the US Congress focused on UA issues, OPIC, regional Governors and local administrations in Ukraine, IFC, USTDA and the US EXIM Bank (when that Agency resumes its activities in Ukraine).

Among the NGO stakeholders we would like to see US-Ukraine Business Council (USBC), AMCHAM, Transparency International, Freedom House, Atlantic Council and US Ukraine Foundation. Additionally, reputable international law firms, audit firms, press, appropriate private individuals, corporate off-takers, financial market regulators, as well as relevant providers of US goods and services should be involved.

The framework of the proposed initiative shall be as follows:

  • Initial Sponsor/Project assessment and preliminary due diligence
  • Project selection and stakeholder awareness and involvement
  • Project G2W Team building (attys., directors, advisers, auditors, suppliers, investors etc.)
  • Full due diligence and implementation plan for the Western financial, FCPA and governance standards
  • Investor cultivation and underwriting of the financing package
  • Project development and implementation
  • Monitoring and compliance

To kick off the proposed initiative, we propose an intensive education and awareness-building campaign designed to simultaneously involve all the stakeholders.

After the initial buy-in into the initiative is secured, work will begin on developing the pilot projects.

During the pilot project phase, the G2W pilot project team will be seeking to achieve specific and tangible goals:

  • Fully assess the existing reputation risks, possible political influence issues, suitability for OPIC/IFC financing and Political Risk Insurance for the US project participants
  • Prepare a legal due diligence report by a world-class law firm
  • Recruit highly reputable and competent outside board members to the Project’s Board
  • Design a comprehensive PR/IR strategy to inform stakeholders of the project and its ongoing developments
  • Design and implement transparent financial audit, reporting and management accountability standards
  • Develop ways to tangibly measure economic effect of the pilot project
  • Continue to promote the initiative and seek to move it from the pilot project phase to full-blown implementation.

(to be continued)

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Broad Street Capital Group’s new assignments in Ukraine total over $300 million

Ukraine - Proprietary Fi180 Country Profile - page 1 of 4(June 15th, 2016, London, UK)  Broad Street Capital Group announced today that it will act as the Financial Developer and Exclusive Financial Adviser on two complex, high-profile financing assignments in Ukraine. The underlying projects for these assignments deal with Ukraine’s energy security, food security and infrastructure development.

In the first assignment, Broad Street Capital Group , will serve as the Project’s Financial  Developer, and will be part of a mandated financing consortium, which will consist of a major banking institution, a Development Agency of the US Government, a US lending trust and an internationally renowned law firm.  The financing consortium will evaluate and structure a cutting-edge $250 million capital markets transaction to finance US supply and construction contract to build a national energy safety facility to be located in the Kyiv region of Ukraine.

In the second assignment, Broad Street Capital Group will serve as the exclusive Financial Adviser, whose role will be to secure up to $75 million in long-term debt financing, provided by a development agency of the US Government.  The funding will be part of the financing required to develop and construct a major grain terminal in the Odessa region of Ukraine.

“We are delighted to serve as financiers for these two cutting-edge projects” stated Alexander M. Gordin, managing director of Broad Street Capital Group. “Our assignments should serve as catalysts and spark broad-based financing of worthy infrastructure projects. The financing climate in Ukraine has been extremely challenging over the last few years, but despite continued difficulties, the prognosis is quite optimistic. We look forward to being part of Ukrainian financial renaissance, as that country rebuilds itself and finds a way to regain its economic footing.”

 

About Broad Street Capital GroupWP_20130620_022

Based in the World Trade Center’s Freedom Tower in New York City’s financial district, Broad Street Capital Group is an international private merchant bank, which since 1988 has served several foreign governments, multiple state-owned companies, as well as SMEs in emerging markets. The Firm focuses on arranging project financing in the $50-500 million range, providing political risk mitigation, export management services and cross-border market development advisory. Although the Firm has clients ranging from Bangladesh to Oklahoma, its primarily geographic focus is on the countries of Eastern and Central Europe and Central Asia.

The  firm works closely with all trade and development agencies of the U.S. Government and Export Credit Agencies of several European and North American countries.  Since its inception, Broad Street Capital Group has been involved in several high-profile cross-border transactions in IT/telecom, aerospace, healthcare,  energy generation, food security, nuclear safety, hospitality and franchising sectors. The firm’s current advisory portfolio exceeds $675 million.  For more information, please visit www.broadstreetcap.com, or contact Rustem Tursynov at info@broadstreetcap.comBroadStreetCapitalGroupServices_Page_1

Post-Boehner, risk of December government shutdown and Export-Import Bank closure is high

On Friday, House Speaker John Boehner announced he will resign at the end of October.

Photo: Associated Press The Export-Import Bank building in Washington D.C.

With John Boehner stepping away from the negotiating table, the chances increase for a December government shutdown and a permanent shuttering of the Export-Import Bank.

Other question marks: Will Congress and the White House be able to agree on new federal borrowing authority and revise the way the U.S. pays for the upkeep of roads and bridges.

The immediate shutdown threat may have passed, since Mr. Boehner, a core group of House Republicans, House Democrats and a Senate majority appear to be in agreement on a stopgap bill to carry the government from Oct. 1 through Dec. 11.

Mr. Boehner told reporters he plans to get as much done as he can before he leaves. President Barack Obama said he hoped Mr. Boehner would try to get as much done as possible in the next month and pledged to help him do that.

What happens to the government in December will be determined by Mr. Boehner’s successor.

If House Republicans choose a new speaker who favors more confrontations with the White House, the outcome could be either a partial government shutdown or a full-year stopgap spending bill—an option that the Defense Department, in particular, opposes unless the measure is written to allow new programs to begin.

Whoever gets the speaker’s gavel may feel obliged to promise the conservative wing of the party a willingness to go all the way to a shutdown to achieve goals such as ending funding for Planned Parenthood.

For years, there has been speculation that Mr. Boehner would strike a grand compromise with Obama and the Democrats and then resign. The first part of that—a push for a grand bargain on tax and entitlement spending, as he tried to negotiate in 2011—is probably out of reach given the proximity of the next elections.

More in realm of possibility before Boehner leaves is a smaller agreement, perhaps on the debt ceiling and reviving the Export-Import Bank. If not, all bets are off.

Here are some of the deadlines to watch during the House leadership transition:

EX-IM: The charter for the Export-Import Bank of the U.S. was allowed to lapse on June 30. Some Republicans and small- government groups oppose reauthorization, saying Ex-Im benefits only a few large corporations and that its activities should be left to the private sector. Boehner backed the Ex-Im’s renewal.

Two key decision-makers, Majority Leader Kevin McCarthy and Financial Services Chairman Jeb Hensarling, are Ex-Im opponents.

OPIC: The Overseas Private Investment Corp.’s authorization runs through Sept. 30. Republicans have been divided over whether the loan-guarantee agency should continue. Last year, 116 House Republicans voted against reauthorization.

DEBT LIMIT: The Treasury Department has been using so- called “extraordinary measures” to juggle the government’s cash flow. Secretary Jacob Lew has said that borrowing authority needs to be raised before late October or else the U.S. could default on its obligations.

In 2011, the government was pushed to the brink of default in a dispute over a debt-limit extension.

HIGHWAY BILL: Highway, transit and road safety programs are currently authorized only through Oct. 29. Lack of action could cause programs financed through the the Highway Trust Fund to shut down, partially or completely. The chief complication is that the fuel taxes that provide the bulk of Highway Trust Fund revenue haven’t been increased in more than two decades and haven’t kept up with growing infrastructure needs, better fuel efficiency and changing driving patterns.

Agreement on sustainable funding streams—such as shifting to a vehicle-miles-traveled system—has been difficult, and leading House Republicans have discussed using corporate tax changes to fund a long-term bill, though so far no plan has been unveiled.

TAX BREAKS, NUTRITION: The race to be speaker — and a possibly more contentious battle for the majority leader spot — could determine the ability of Congress to renew dozens of tax breaks that expired at the end of 2014 and to come to a compromise on reauthorizing $30 billion in nutrition programs that expire Sept. 30.

Another Pot Calling the Kettle Black, and Damaging US Economy In The Process

Another little-known, but very important and effective federal agency is under attack by the tea party pit bulls serving the interests of their corporate masters. After trying to bring down US EXIM Bank, spending massive federal resources and creating a half a billion dollar hole in the US annual budget, these clowns (there is no other word to use here) are targeting OPIC – Overseas Private Investment Corporation – a federal trade and development agency.  This agency uses full backing of the US Government, not only to protect and finance  US investors investing into high-risk markets abroad from perils like expropriation, nationalization and currency inconvertibility, but also is completely self-funding and contributes billions to the US Treasury.

As someone who had over a decade of experience working closely with OPIC, I can certainly attest to the fact the it is one of the most professionally run agencies in the Government. It is small, lean and provides terrific tools to both small and large businesses, which are investing overseas. It runs microfinance investment, provides help in war-torn, or earthquake effected countries (Georgia, Haiti, Afghanistan, Ukraine are just some examples) and helps promote US economic and foreign policies by helping major US franchises including Marriott, Ritz Carlton etc. to set up their brands and improve their presence in far corners of the world.

It is very ironic, that people pointing the finger at these agencies, as being tools of corporate  welfare, are themselves instruments of corporate interests and cronyism. The junior who wrote the article below, is not only poorly informed about OPIC and its role in our country’s foreign policy, but is a glaring example of a patsy, whom certain US airlines and corporations run by two very wealthy brothers use to further their own interests at the expense of not only American taxpayers, but the entire US economy.

OPIC: Corporate Welfare by Any Other Name

The winds of change might finally be blowing in Washington. For the first time in 81 years taxpayers are no longer dolling out dollars on risky loans to subsidize big businesses and foreign corporations, thanks to the expiration of the controversial Export-Import Bank. While this represents a victory for the taxpayers over well-funded special interests, there remains an alphabet soup of government bureaucracies that continues to dispense taxpayer goodies to those with political connections and clout.

OPIC (Overseas Private Investment Corporation) despite what the name implies, is not private but rather a taxpayer-backed outfit that provides subsidies for American businesses who invest overseas. The government provides loan guarantees as well as direct loans to American companies in emerging markets. By doing so OPIC shifts the risk of these ventures off the companies and straight to the taxpayers. Sound familiar?

The bad news is that, like the Export-Import Bank, this creature of Washington has been around for decades and has survived by free riding on legislation with broad bipartisan support to escape scrutiny. The good news is that bringing previously unknown organs of the federal government out into the open has proven to be an effective way to make these outdated and unpopular agencies a thing of the past – something we have seen recently in the fight over the little-known Export-Import Bank.

Put another way, the more everyday Americans witness how their hard earned money is being spent by unaccountable bureaucrats in Washington, the louder the cries to Congress to let corporate welfare expire.

Some of the most egregious examples of OPIC funded projects include $50 million for a Ritz-Carlton luxury hotel in Istanbul, $150 million for Citibank to open up three overseas branches and even a loan that defaulted on an Enron operated power plant. Not exactly the best use of taxpayer dollars.

These sweetheart deals represent the worst of Washington, influential corporate interests finding obscure government agencies to pad their bottom line, while taxpayers assume the risks.

Fortunately, like the previously mentioned Export-Import Bank, OPIC’s authorization is set to expire in September. And like Ex-Im, lawmakers should take that opportunity to send this antiquated agency packing.

As we saw recently in the tug-of-war over the Export-Import bank, this will be an uphill battle, but it is a battle than can be won. A strong anti-cronyism movement across the country has buoyed the efforts of leaders committed to breaking up the cozy relationship between big business and big government that too often thrives in Washington. It is a chance to capitalize on the momentum of recent policy victories, and notch another win for taxpayers. Lawmakers should seize it.

As Milton Friedman wrote in 1996 “”I cannot see any redeeming aspect in the existence of OPIC. It is special interest legislation of the worst kind, legislation that makes the problem it is intended to deal with worse rather than better. …OPIC has no business existing.” It seems Washington might finally be catching up with Friedman’s wisdom, but now it’s time to follow through.

Export Champions! webinar – Transforming Your Company into an Export Powerhouse with Cutting-edge Financing.

Export Champions! – Transforming Your Company into an Export Powerhouse with Cutting-edge Financing.

Join us for a webinar on July 07, 2015 at 3:00 PM EDT.

Register now!

https://attendee.gotowebinar.com/register/4402376754828717314

Fi3E BadgeExport Champions™ is a new program, which allows small and mid-size US manufacturing companies to vastly boost their export sales by utilizing cutting-edge export credit and capital markets financing for international opportunities.

Using actual case studies of the three US companies, whose export revenues from just three projects total over $525 million, as the result of their foresight to deploy financing techniques traditionally reserved for large companies and mega projects, Broad Street Capital Group and representatives of various US Government and private trade and project financing institutions, will empower other US small and midsize companies to successfully compete for large export business opportunities.
“Today, we are witnessing a paradigm shift in the way US small and mid-size companies are able take advantage of sales opportunities, which are two or three times their annual revenue.” said Alexander Gordin, Managing Director of the Broad Street Capital Group. “The key, is a carefully structured project, which is developed with specific long-term, low-cost financing solution in mind from the beginning” said Gordin. Featured Image -- 2741

The Export Champions™ webinar is a one hour introductory presentation during which participants will learn: 
which foreign markets and buyers to target, 
how to correctly develop a financeable transaction, 
which financing tools and programs to utilize, 
how to put together a correct team of advisers, 
utilizing external economic and political factors to gain an advantage, 
how to mitigate risks along the entire transaction life cycle

After registering, you will receive a confirmation email containing information about joining the webinar.

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Export Champions!™ With help of cutting-edge financing, four small and mid-size US companies are poised to export over $525 million of goods and services!

With the help of cutting edge financing, four small and mid-size US companies are poised to export over $525 million in just three individual transactions! 

Fi3E Badge(April 23, 2015, Washington, DC) During US EXIM Bank’s Annual Conference, Export Champions!™, a new program, which allows small and mid-size US manufacturing companies to vastly boost their export sales by utilizing cutting-edge export credit and capital markets financing for international opportunities, was announced by the Broad Street Capital Group.

Using actual case studies of the three US companies, whose export revenues from just three projects total over $525 million, as the result of their foresight to deploy financing techniques traditionally reserved for large companies and mega projects,  Broad Street Capital Group and representatives of various US Government and private trade and project financing institutions, will empower other US small and midsize companies to successfully compete for large export business opportunities.

“Today, we are witnessing a paradigm shift in the way US small and mid-size companies are able take advantage of sales opportunities, which are two or three times their annual revenue.” said Alexander Gordin, Managing Director of the Broad Street Capital Group. “The key, is a carefully structured project, which is developed with specific long-term, low-cost financing solution in mind from the beginning” said Gordin.

The Export Champions! program will offer monthly half-day web based programs and live training events to help companies learn:

  • which foreign markets and buyers to target,
  • how to correctly develop a financeable transaction,
  • which financing tools and programs to utilize,
  • how to put together a correct team of advisers,
  • utilizing external economic and political factors to gain an advantage,
  • how to mitigate risks along the entire transaction life cycle

The first Export Champions! event to take place in New York on May 8th.  Companies seeking to boost their international sales opportunities should send their inquiries to info@broadstreetcap.com , or call  + 1 212 705 8765 ext 702

About Broad Street Capital Group

Based in the heart of the New York City, Broad Street Capital Group is an international private merchant bank with extensive experience in developing and financing exports and infrastructure projects in emerging markets. The firm works closely with a number of international Export Credit Agencies, as well as with all trade and development agencies of the U.S. Government.   For over 25 years, Broad Street Capital Group has successfully served a broad array of private and state-owned clients in multiple countries and has been involved in several high-profile cross-border transactions in energy, IT/telecom, aerospace, healthcare, hospitality and franchising sectors. The firm’s hallmark is its proprietary Develop, Finance, Supply and Insure™ approach to help clients achieve their international business goals For more information, please visit www.broadstreetcap.com

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Maintaining Export Advantage in the Face of a Rising Dollar: Part 2

The path to becoming competitive in the international export space.In my previous post, I outlined the first two steps of the five-step framework that would enable U.S. exporters to maintain their competitive edge in the face of rising U.S. dollar, which makes all U.S. goods and services more expensive abroad. Those first steps were to recommit to exports and expand markets served.

Below, I describe the remaining three steps: READ MORE

Crimean Lessons for US Companies Doing Business Abroad

Protecting your business when crisis eruptsInternational political disturbances such as current events in Crimea and prior upheavals in, among others, Syria,Venezuela,Thailand, Kyrgyzstan, Egypt, Georgia, Congo, Iran and even Cuba always have profound effect on US businesses operating in the countries involved in those conflicts. Large US companies operating across the world have long learned to foresee and mitigate risks associated with politics, while small and medium-sized businesses (SMEs), not so much. This is at the time when US SME sector has undergone unprecedented international expansion fueled by low dollar exchange rate, reduced costs of telecom and travel, advances of the internet and growing demand for US products and services.

So what can US exporters, contractors, investors and franchisors learn from the Crimean conflict and what steps can they take to protect themselves from the next eruption in a seemingly safe international destination?

DO NOT PANIC!

This is by far the most important lesson. My business and I have survived three full-blown political crises, living through the fourth and have saw many significant government and policy changes, financial melt downs a half-dozen revolutions and a war in countries where we have had permanent operations, or business dealings.

First, protect your employees, corporate property and information. Start implementing contingency plans and have all non-essential personnel leave the country if the State Department issues travel warnings for the country you operate in. Stay in constant touch with the local US Embassy, or US Commercial Service. Analyze and reanalyze the news and information you gather from your private network. Look for signs of permanent shifts, if those are not present odds are any crisis will blow over and things will return to normal and in many cases lead to greater economic prosperity.  Some crises play out in days (Georgian war, GkCHP in Russia in 1991) some like Crimea look like they are long-term game changers and require a more fundamental reaction and adjustment of one’s business to be in sync with the new reality and with the modified US policy.

STAY INFORMED

Develop and cultivate multiple sources of reliable information. During rapidly breaking international events, there is a tremendous amount of white noise and inaccurate information pouring out of multiple sources. Social network posts, experts of various stripes appearing on TV, newspaper and magazine articles all putting their own spin on the events, with many being inaccurate and some just plain fake.  Thus it is important to distill several balanced general news, as well as trade sources to extrapolate accurate and timely information. For instance during Crimean crisis multiple US mainstream news sources were a day late reporting many important developments, so having reputable local sources (often available in English) is important.

Develop an informal network of Embassy and government agency officials, local chambers of commerce (AMCHAM) offices, bilateral councils, legal and financial professionals operating in the countries of interest. Initiate regular information exchanges and analysis sessions with members of your network. Join LinkedIn groups and actively monitor subject discussions. Ask yourself periodically if coverage you are receiving is correct and balanced. Make sure you understands all the issues and perspective of all sides involved in the conflict.

CONTINGENCY PLANNING

What happens if you have an order in route to a foreign country and a conflict arises there? What happens if your buyer is arranging credit and you have ramped up your production when sanctions are imposed? What happens if you, or your employees are in the country during the start of an unrest?  What happens if the ruling party changes during significant contract negotiations? What about a politically motivated change in leadership among your perspective customers, borrowers, and other interested parties?

To minimize your risks, you will want to keep your business, your person, and your information secure. That means at least taking common sense precautions in your daily business operations.  It also means that you have to be absolutely ready to  abandon your entire business in the foreign country at a moment’s notice. In the movie Heat, Robert DeNiro, playing the part of Neil McCauley, defined his survival strategy:  “Don’t let yourself get attached to anything you are not willing to walk out on in 30 seconds flat if you feel the heat around the corner.” A similar strategy should be employed when doing business abroad.

An effective survival strategy must always include contingency plans. These could include getting out of a country in a hurry whether via traditional or alternate routes, implementing a crisis management plan and hiring security, using medical evacuation insurance, or knowing where you can get access to  a few thousand bucks for when your wallet is lost, office ransacked, ATMs cease operating or Visa/Mastercard system is disabled. For exporters who have goods en route, or are n the middle of a contract production, know your rerouting options, alternative markets and formulate your plan in case the force majeure clause of your contract is invoked.

DO NOT SAVE ON LEGAL COSTS and PAPER ALL TRANSACTIONS PROPERLY

Small and mid size businesses generally despise lawyers (well certainly legal costs) and temptation is often to cut corners, re-use standardized contracts, distribution agreements and not go through with full legalization of property and asset acquisition in country. Often owners wish to remain hidden and transactions are done through intermediaries and sometime with “tax optimized” funds. BIG mistake. What will you do if a country has change of government, or worse yet the place where your company does business become’s another country (Crimea is just one of many examples of such transformations over the last 25 years.)  Use reputable lawyers both in the US and locally. Spend a bit extra upfront and have a piece of mind later on.

BUY INSURANCE!

In addition to commonly used freight insurance used by exporters, three specialized kinds of insurance are available to protect US companies and their employees venturing abroad:

Political risk insurance (PRI) – covers investors from such perils as political upheaval, currency inconvertibility and expropriation, creeping expropriation or nationalization of their assets. This type insurance also protects franchisors from loss of their royalty streams and protects contractors who are building international projects. Many private companies offer PRI, but OPIC – a federal agency tasked with financing and insuring American cos.’ investments abroad offers the most comprehensive and flexible policies for the money. MIGA – a unit of World bank is another potent source of PRI. Coverage is open in about 150 countries and we recommend it to all our clients venturing abroad.

It is important to consider PRI at the very early stages of the planned international investment or franchising process. Underwriting process is similar to that of a traditional loan and takes a few months.

Export credit insurance (ECI) – covers exporters from the risk of non-payment by the foreign buyers whether due from financial or political causes. It allows exporters to vastly expand their intentional business by offering open account sales with terms of up to 180 days. ECI policies range from an umbrella type of insurance covering multiple buyers to an individually tailored, albeit more expensive, single buyer coverage. Underwriting for ECI policies depends on the size of the proposed transactions and usually takes 1-2 weeks. ECI is offered through a number of private insurance carries and through the Export Import Bank of The United States (US Ex-Im).

Travel Medical Insurance (TMI) – covers business travelers against illness or injuries while traveling abroad. This type of coverage either permits subsidized or free treatment at authorized local doctors and hospitals, or when needed, allows for MEDEVAC evacuation to safe jurisdictions in case of serious injury

Fluent In Foreign Academy puts a series of bi-weekly educational webinars on selecting the right PRI, TMI and ECI solutions. To register for the upcoming sessions, please complete the form below:

International business is often very profitable and exciting, but events like the Crimean crisis remind of the perils and should force each and every one of us doing business abroad to reassess and augment our risk mitigation strategies and procedures.

Please email me with any questions you may have about making your company better prepared to deal with international crises – agordin@broadstreetcap.com

FI3Indices

Kenya Siege Damages African Success Story

Major Retailer Whose Flagship Store Was Destroyed Struggles to Recover, as Fears Rise Over Broader Economic Impact

 

By  PATRICK MCGROARTY, WSJ.com

Nakumatt, a homegrown corporate success story in Kenya, is now a charred husk in the wake of the Westgate mall terror attacks. Patrick McGroarty joins the News Hub with a look at what the tragedy means for Africa’s premier emerging economy. (Photo: AP)
NAIROBI, Kenya—When Islamic militants killed dozens of people at Nairobi’s Westgate mall last week, they also battered one of Africa’s homegrown corporate success stories and set back a rising economy.
Gunmen entered the Nakumatt retailer shortly after the assault began on Sept. 21, spraying bullets across the aisles as some shoppers tried to climb the shelves and others cowered with their children in a store room. Those who failed to recite Islamic prayers were executed. The four-day standoff killed at least 67 people, injured hundreds and left a shining symbol of emerging Africa, Nakumatt Holdings Ltd., in tatters.
Nakumatt, which sells everything from bananas to bicycles, earns more than a 10th of its $500 million in annual revenue from its flagship Westgate store, whose destruction is a major blow to the company, said Atul Shah, managing director of Nakumatt Holdings Ltd. Three of his employees were slain in the attack. “We are still trying to believe this is not real,” he said. “‘What next?’ is the question I’m asking.”The question is also weighing on the minds of many investors in Kenya. Like Africa’s other dynamic economies, the country has troubled neighbors, in this case Somalia, whose terror group al-Shabaab claimed responsibility for the attack. The Westgate attack is a reminder of how easily extremists with guns can move across porous borders to strike at pockets of African prosperity.
“There’s always going to be that lingering fear now: Can this happen again?” said Biniam Yohannes, who manages a fund in Nairobi with $150 million invested in East Africa. Somalia is still emerging from two decades of civil war. African peacekeepers have pushed al-Shabaab out of its Somalian strongholds, including the capital, Mogadishu, but militants have shown they are still capable of violent attacks inside the country and beyond.
A similar pattern has surfaced in other parts of Africa. After Libyan dictator Moammar Gadhafi was deposed in 2011, arms from his arsenal seeped south across the Sahara, bolstering militants that took control of northern Mali this year and continue to attack civilians and soldiers in northern Nigeria. South Africa is hampered by its northern neighbor Zimbabwe, where the failed economic policies of strongman President Robert Mugabe have sent millions of his citizens fleeing across the border. “A state isn’t failing in isolation,” said Clare Allenson, an Africa analyst at Eurasia Group. “When it’s your neighbor there are really problematic linkages.”
Before the Westgate attack, Kenya’s economy was humming. Nairobi, the capital, is a hive for African technology firms and multinationals. Kenya’s statistics agency said Tuesday that the economy grew at an annualized rate of 4.3% in the second quarter and 4.4% in 2012.Moody’s Investors Service said last week that the Westgate attack would likely shave 0.5 percentage points off Kenya’s economic growth this year and curtail critical foreign currency earnings mainly due to the likelihood of fewer tourist visits to the country’s national parks and beaches.Among the biggest potential victims are the companies riding Kenya’s emerging consumer class. Restaurants, hotels and consumer-oriented manufacturers are expected to all feel the pain if Kenyans stay home and foreign visitors curtail spending.
“Kenyans need to be urged to spring back and continue doing whatever they are doing, defy all the doings of terrorists and support growth,” said Nakumatt’s Mr. Shah.  Mr. Shah, 53 years old, was raised in the dusty Rift Valley town of Nakuru, where he grew up working in his father’s mattress store. In the late 1980s he dreamed of converting it into a chain of Western-style grocery and retail outlets, opening his first store in Nairobi in 1992.Today Nakumatt is East Africa’s top retailer by sales and revenue, with 40 stores across Kenya, Uganda, Rwanda and Tanzania. Before the Westgate attack, Mr. Shah was developing plans to open six stores this year in Kenya and Uganda. He still hopes to do so. Its Westgate store, in the heart of Nairobi’s embassy district, attracted the city’s comfortable and cosmopolitan upper crust. Mr. Shah visited the store himself on the morning of the attack, and he had just settled into his office near the airport when his wife called him screaming. 
image

Associated Press

A Kenyan policeman walks through the remains of the Nakumatt store in Nairobi’s Westgate mall on Tuesday, days after Islamist militants attacked.
“There is firing going on like mad, mad—they are going to kill us,” Ms. Shah said from her car, parked outside Westgate, Mr. Shah recalled. She cowered beneath the steering wheel while attackers fired 10 bullets into her car. Mr. Shah rushed to the scene, hoping to help her and a regional manager taking cover on the store’s loading bay as militants gunned down shoppers and workers inside. “I was just trying to be hopeful,” Mr. Shah said. “I could do nothing else.”
After avoiding malls for a week, Mr. Yohannes, the private equity director, said he started shopping again at a Nakumatt two blocks from Westgate. Such a yearning for normality, says he and others, points to the potential recovery for Nakumatt, a pillar of daily life for many East Africans, and other retailers. “Consumer demand is still intact—people still need reliable goods and services and suppliers need to keep up,” said Vimal Shah, who heads an edible oils manufacturer that supplies Nakumatt and isn’t related to its owner.On Tuesday, Kenya’s President Uhuru Kenyatta pledged to keep the country on track and punish the perpetrators. “We fought back as one people and continue to heal our grievances together,” he told a multi-faith prayer service in honor of those killed.He also announced a government inquiry into the police and army’s response to the attack.
Business owners in the mall have accused those forces of looting their stores, and Kenya’s Red Cross says 39 people may still be missing in connection with the attack. The government maintains no one has been reported missing to police.Meanwhile, Mr. Shah is trying to mend his business. He spent the last 10 days meeting with tight-lipped security personnel and insurance companies, discerning what he’ll recoup from a store that contained up to $11.6 million worth of stock and equipment. Reassuring those who work for him and buy his goods could take longer. “We’re in trouble. There’s a lot of pressure,” he said. “We have to bring customers back.”

Write to Patrick McGroarty at patrick.mcgroarty@wsj.com

Fluent In OPIC™- Getting financing and political risk insurance for your projects abroad

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Please join us for a “Fluent In OPIC™ – Getting financing and political risk insurance for your projects abroad” webinar series.

This webinar will only be presented three more times this year. Please register for the date and time that work best for you.

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Sponsored by the Broad Street Capital Group, this proprietary complimentary webinar ($379 Value) will offer comprehensive “beyond the website” look on how to effectively utilize little-known programs offered by the Overseas Private Investment Corporation (OPIC) – a US Government Agency – to finance international investment and franchise transactions for US companies expanding abroad.

The workshop will address the types of transactions and industries being financed. It will go over the application process, deal structures, sponsor requirements and commitments, approval procedure, realistic time frame estimates, costs, fees, legal and developmental issues. The workshop will also examine various options for protecting investment through effective use of political risk insurance.
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ALEXANDER GORDIN, Managing Director of the Broad Street Capital Group and Creator of the FLUENT IN FOREIGN BUSINESS franchise.
An international merchant banking professional with over 25 years experience providing cross-border strategic advisory services in the areas of export finance, international project finance, risk mitigation and business development. Clients include foreign governments and state enterprises. Transactional and negotiations experience in over thirty-five countries. Author of the critically acclaimed “Fluent in Foreign Business” book. Published and featured in numerous publications including: The Wall Street Journal, … for more ….http://wp.me/P1iIhX-I

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