CHAPTER 8:

INTERNATIONAL CREDIT AND TRADE FINANCING

CONTENT
o Overview of international credit
o International credit types
o Short-term credit: Trade financing
o Long-term credit and Cost of credit
o International credit and problems with foreign debt
o Foreign debt crisis
o Question and discussion
 CHAPTER 8:
INTERNATIONAL CREDIT AND TRADE FINANCING

Overview of international credit

o Concept and Characteristics:
- International credit is defined as credit relationship
between those who reside and non-residents
- Concerning various countries with different
economic characteristics, political, cultural, social,
etc
- International credit roles

o International credit participants

 CHAPTER 8:
INTERNATIONAL CREDIT AND TRADE FINANCING

International credit types

- Based on participants
1. International trade credit
2. International bank credit
3. Mixed Credit
- Based on the duration and purpose
1. Trade Financing
2. Official Financing
3. Credit for developingprograms
4. Commercial Loans
 CHAPTER 8:
INTERNATIONAL CREDIT AND TRADE
FINANCING
Trade Financing forms
o Features :
1. Short-term
2. Associated with import export operations
o Forms :
1. Trade financing between the import export enterprises:
Credit International Trade
2. Commercial banks financing forms: International bank
credit
 CHAPTER 8:
INTERNATIONAL CREDIT AND TRADE
FINANCING
Trade financing between enterprises -
International commercial credits
o Export to import enterprise credit type
1. Credit account
2. Accept payments in accordance with the draft
o Import to export enterprise credit type
Differences between Cash in advance and Deposit
 CHAPTER 8:
INTERNATIONAL CREDIT AND TRADE
FINANCING
Commercial bank financing forms
o Commercial bank loans to import export
1. Import enterprises loan
2. Export enterprises loan
3. Loan between commercial banks
o Bank Guarantees
o Factoring and Forfaiting
 CHAPTER 8:
INTERNATIONAL CREDIT AND TRADE
FINANCING
Long-term international credit forms
o Official financing from various nations
o International financial institutions’ credit for
developing programs
o Commercial Loans
 CHAPTER 8:
INTERNATIONAL CREDIT AND TRADE
FINANCING

International cost of credit

o Identify international cost of credit
- International creditfinancial expenses
- The loans actual expenses
- The loan actual usage
- General credit period and average credit period
o Official financing cost of credit
o Developing program cost of credit
o Commercial loans cost of credit
 CHAPTER 8:
INTERNATIONAL CREDIT AND TRADE
FINANCING

The formation of foreign debt: Characteristics of

the developing countries andLoan demand
o The underdevelopment of the economy
o The underdevelopment of financial markets
o International credit and developing countries
foreign debt formation
o Criteria eflects the foreign loans
 Chapter 8:
INTERNATIONAL CREDIT AND TRADE FINANCING

Classification for debtor nations

- MIMICs: The middle-income countries with moderate

debt
- SIMICs: The middle-income countries with serious

debt
- MILICs: The low-income countries with moderate

debt
- SILICs: The low-income countries with serious debt

However, MILICsandSILICsare major concerns

 Chapter 8:
INTERNATIONAL CREDIT AND TRADE FINANCING

Foreign debt crisis 1980s

- The debt crisis began when Mexico declared inability to pay
$80 billion Foreign loans
- After Mexico, a greatnumber of countries claim having
difficulty in repaying debts similar to Mexico
- Banks and creditor governments, the international financial
institutions realize the serious situation of debt crisis
- Different views on the issue of debt crisis
 Chapter 8:
INTERNATIONAL CREDIT AND TRADE FINANCING

Foreign loans crisis causes

- The rise foreign loans, especially commercial banks
lent excessively, the policy "rolled over" or
"reschedule" increase the scale of debt
- The oil price shocks on the domestic debt
- Deficit financing policies and other economic
policies of borrowing countries
- External influences: Recession and policies of the
developed countries
- Other causes: war, civil war, natural disasters and
financial crisis
 Chapter 8:
INTERNATIONAL CREDIT AND TRADE FINANCING

Handle foreign loans crisis 1982-1994

- Phase I (1982-1985): Debt restructuring through The short-term
credit and financing purposes and under the conditions of IMF
- Phase II (1985-1989): J. Bakerplanned to reform and economic
adjustment in the direction of the market for each "debtor":
loosen trade and investment control, budget cuts spending,
monetary tightening, etc ... through strengthening the role of IMF
andWB
- From period 1989-1994: N. Brady planin fact continuedto
pursue plans to J. Baker combined with debt settlement and debt
relief through the market for particular countries and in particular
$ 70 billion debt relief for LDCs 39 formed on the basis of funds
for lending to the approval of economic reforms
 Chapter8:
INTERNATIONAL CREDIT AND TRADE FINANCING
Questions and Discussion
1. International credit roles
2. International credit forms
3. Cost of credit and the significance of study matter
4. The formation of Vietnam's foreign loans
5. Current situation foreign loans managementand
Foreign debt repayment capability of Vietnam
6. Effective solutions to improve usage management
and Foreign debt repayments