§ Sir Jim LesterTo ask the President of the Board of Trade what was the outcome of the Export Credits Guarantee Department's reassessment, commenced in August 1995, of the premium rate chargeable in respect of exports to Argentina; how the rate charged now compares to the rates chargeable prior to this review; what information he has on the rates charged for comparable cover in the United States, France, Germany366W and Italy; what factors underlie the difference between these rates and the ECGD rates; and if he will make a statement. [6221]
§ Mr. Lang[holding answer 27 November 1996]The ECGD's most recent review of Argentina pointed to improving risk prospects, which resulted in a premium rate reduction of around 7 per cent. The ECGD's benchmark premium rate is now 7.75 per cent., compared with the average of the rates of USA, France, Germany and Italy of 4.46 per cent. and of the average of all the main export credit agencies—ECAs—of 5.12 per cent. I am unable to provide information on individual ECA rates, which have been given to the ECGD in confidence.
The ECGD is required to match its premium to the perceived risk; its premium is consistent with the view of Argentinian risk taken by bond markets as reflected in yield spreads. We do not know precisely what factors other countries take into account in setting premium rates; but others such as Eximbank (USA) are charged with providing competitive premiums. Work is well advanced in the OECD and the EU on premium harmonisation.