Last Wednesday, in Milan, in the splendid setting of Palazzo Mezzanotte, the first presentation of the SACE Export Report 2012-16, the seventh Report on the subject, was held. On the conclusions of this Report FIRST online has already published a first summary. From the debate following the presentation of Alexander Terzulli, the Chief Economist of SACE, some have emerged considerations and reflections which we think is important to underline and report below. To which we add our proposal to improve access to credit for our exporters.
When export becomes necessary
The first, and most evident, consideration contained in the Report is already contained in its title: "When export becomes necessary". It is not a new thing, and we have been repeating it since our newspaper was born: exports are the only engine that can pull us out of the crisis. But the Report (which can be read on the SACE website at this link) supports this argument with continuous logical and statistical proofs. For all, we want to remember the one contained in the premise written by Raul Ascari, the Chief Operating Officer of our Export Credit Agency (ECA), who also serves to clarify SACE's mission:
“Empirical evidence now unequivocally demonstrates that companies that internationalize are stronger and more solid and offer the best employment opportunities (Tab.1, shown in the photo above): higher wages; professional growth prospects; better working standards. This shouldn't come as a surprise: what improves the company, which drives it to continuously innovate products and processes, is the need to compete on the largest possible scale. For this reason, our best clubs, our National Champions, are the ones that impose their brands on the world. A fabric of competitive companies hardly develops in a country that is not competitive. We also have irrefutable evidence of this: country risk translates into a disadvantage not only for the State, which has to be financed on international markets at high costs, but also for all private entities whose risk is assimilated to that of the country in question. which they operate. Finance, prudent and sustainable, is a lever of growth. For this reason, SACE's objective in 2012, and will be even more so in 2013, was to assist companies that internationalize not only in risk management, through traditional insurance products, but also and above all in accessing funding for their activities, working in collaboration with all subjects, private and public, national and international.”
It is therefore evident the need, for a country like ours, to use the lever of exports to overcome the most difficult moment of our economy. But we must also ask ourselves: which exports, and for which companies? And only exports, or also other forms of active internationalisation?
Export or produce elsewhere?
The eternal “make or buy” dilemma has been resolved in modern business economics, in which, as Prof. James Vaciago, vertical specialization has replaced vertical manufacturing, clustered in one or a few plants in a single country. In fact, the majority of international trade concerns components or semi-finished products (as well as production tasks and services) rather than finished products.
Then a the current question is: produce in our country and export or produce elsewhere and sell on local and nearby markets? Or, in other words, invest abroad in commercial networks or production sites? But, even in this case, it is not enough to say export, nor is it enough to say invest abroad.
As pointed out by Dr Alexandra Lanza, responsible for research and economic analysis of Prometeia (who will return to these topics with an article of his in the next few days), the experience and strength of German exports lies in their ability to export a full package, which encompasses the full scope of products / services of an industry from the time of market entry to after-sales; while the weak point of our export lies in the limited size of Italian SMEs, and especially in the lack of a supply chain strategy. Is exactly it is therefore necessary to intervene on these shortcomings, favoring the aggregation of SMEs, consortia for internationalization, supply chain strategies that aim at product/market combinations with the greatest possibilities for expansion (well described and detailed in the SACE Report).
Also with regard to IDEs, investing is fine, but not (or not only) relocating. The experience of recent years has taught that those who have invested abroad only to seek convenience and cost savings on the various production factors (mainly labour) have not had success, particularly after the crisis and in sectors such as those of Made in Italy, where the competition is no longer based on price, but on quality and design. The Report underlines that in all advanced countries phenomena of backshoring e nearshoring, i.e. companies that have backtracked: after having ascertained the failure of a relocation based solely on saving on labor costs, they have returned to produce at home or in neighboring countries that are highly integrated into free trade areas (typically the case of United States / Mexico).
We must therefore target vertical and international integration strategies (as our most competitive companies have done), or to production plants in charge of strategic markets, which cannot be covered by simple exports from Italy, and can be a platform for business expansion on nearby markets. The image that characterizes internationalization today is that of an entrepreneur who must increasingly focus on staying close to his own outlet market.
Finally, we must not underestimate the markets that will have a greater potential development in the coming years: not only the BRIC, therefore, but also the mature markets and the so-called "next generation markets". In fact, the SACE research office indicates that among the key markets for Italian exports, not only emerging economies such as China (to which an average annual growth of Italian exports of 12,3% is expected in the four-year period 2013-16), Brazil (+11,3%), Romania (+10,6%), Turkey (+10,2%), Russia (+9,4%) and Poland (+8,4%) but also mature economies such as Switzerland ( +11,5%), United States (+11,2%), France (+7%) and Germany (+6,6%). These are the countries that will generate the greatest value for our exports in the coming years. Instead, in a medium-long term logic, the Report signals a significant number of next generation markets, mainly located in South-East Asia, to which our exports have not yet reached high levels but are preparing to achieve of sustained growth in the coming years: Indonesia (+10,1%), Philippines (+10,8%), Malaysia (+9,6%), Chile (+8,9%), Nigeria (+9,4% ), Angola (+10,2%) and Qatar (+9,7%).
Support the best part of our export
On the fact that we must not stop at protecting the large industries in decoction (apart from the protection of the weakest workers), but above all support the best part of our export, agreed all the speakers. With his usual amusing irony, prof. Vaciago said he feared, in the next legislature, a government that would still save Alitalia. We must instead focus on those companies (some large companies, but above all the standard bearers of the fourth capitalism) that are already competitive on international markets and able to drive SMEs in their respective sectors. This does not mean that we should delay the aggregation and development processes mentioned above, but simply acknowledge that they will produce effects only in the medium term, while the crisis is here now, and it doesn't wait for us.
More training for the growth of an international corporate culture
A fundamentally important issue is that of creation of an international corporate cultureproblem that arises from different perspectives. On the one hand, small entrepreneurs struggle to understand that their skills are not enough (intuition of market growth possibilities, flexibility, capacity for innovation) but special characteristics are needed in managers who go abroad and perhaps have to reside there ( knowledge of languages, ability to adapt to different logistical and cultural situations, knowledge of the fundamentals of marketing and international finance, as well as of the productive sector in which one operates); in short, you have to invest in the training and growth of young managers able to respond to these requirements, and above all to believe in them. On the other hand, young people must be ready to be fully available to all opportunities for growth in professionalism and work experience in an international context. Being able to work abroad, even in positions that are not of the highest level, but accompanied by professionals with proven technical knowledge and experience in international markets, means for a young person to acquire a wealth of knowledge and training that is irreplaceable in his future evolution on the job market. From the point of view of the legislator, in a country which has been struggling for some time with degrowth and youth unemployment at very high levels, such as best measure of growth, for the economy and employment, there may be compared to the support for training and placement of young graduates in companies with a strong focus on exports and internationalization?
Finding the tools to overcome the credit crunch
Marco Valli, Chief Eurozone Economist of UniCredit, added some important considerations on the credit crunch of recent years. In his opinion, the Italian banks, also thanks to the interventions of the ECB, have largely solved the funding problems; however they are held back from giving credit due to a negative outlook on the real economy. In other words, they have money to lend, but the credit risk of Italian households and businesses is still perceived as too high. This is the underlying problem: tools must be found to overcome the credit crunch, especially for exporters, and to revive the economy.
It must be said that SACE, for its part, in recent years has significantly expanded the range of its products, including financial guarantees that are precisely aimed at this purpose: facilitating access to bank credit through the guarantee, provided by SACE in favor of the bank, of a 70% share of the risk of a company that internationalizes (Financial guarantee for internationalization), which invests abroad (Financial Guarantee for investments) or which has to carry out an important supply abroad (Pre-shipment Financial Guarantee). What's left out? The most important chapter: exports with short-term settlement, i.e. all those supplies that are paid by foreign customers in 60, 90, 120 days (and sometimes even more) from the shipment of the goods. Why only these? Because those with advance or sight payment do not need financing, while for those with deferred settlement in the medium term (from 2 years upwards, we are talking about machinery, plants, works) there are already the financial and insurance instruments for financing the transaction (buyer credits, disposals of supplier credits). How much are we talking about? Of at least half of total Italian exports (more than 400 billion euros a year, growing). If we give a flywheel to move this enormous mass of money at least in part, guaranteeing the restart of a series of loans that have often been blocked due to the fears of the banks in granting risky credits, then yes, the economy could start running well again !
But there is a problem: SACE cannot grant financing or insurance for exports with short-term settlement: it is not a bank, nor is it a private commercial credit risk insurance company, and would violate EU and OECD regulations on the matter.
A proposal to improve access to credit for our exporters
Is there a way around this impasse? Let's make a proposal, which starts from the fact that SACE, together with Simest, is part of the financial hub for exports headed by the Cassa Depositi e Prestiti (Cdp).
If they organized some lines for medium-term loans (3 years), disbursed by Italian banks in favor of exporting companies for the release of supplier credits in favor of foreign customers with deferred payment from 60 to 180 days, SACE could guarantee a significant portion (for example 70 %) without infringing EU insurance rules. The lines should be "committed”, ie with the commitment of the banks to disburse the funds upon presentation of documents certifying the supply (invoice, shipping documents, etc.); of course they should be rotary (i.e. reconstitute once the receipts of some exports have been made); part of the collection could be carried out on the equipped with CDP, in order to lower the final cost of loans to exporters. Furthermore, some additional conditions on export credits and beneficiaries of loans: some capital or rating requirements of the beneficiary company; a maximum percentage of defaults or delays in the previous period; credit risk insurance in favor of the supplier/exporter with a global policy issued by SACE BT or other private insurance companies in the sector.
Is one tool to refine, but we do not see any drawbacks or regulations that prevent its implementation. would result undoubted advantages: for exporters (healthy companies, which work abroad and have to finance their credits to continue production) a lower weight of the loans received (thanks to the guarantee from SACE) and probably a lower cost (thanks to the funding from CDP) ; for banks, lower risk (again thanks to the SACE guarantee) and funding guarantee; for SACE and Cdp the continuation of what is becoming their main mission, that is to facilitate access to credit for companies.
We are waiting for an answer: if all this is feasible, in what time frame and for what amounts.
