Washington, 11 February 1998 (RFE/RL) -- An unusually large delegation of 85 Bulgarian business people are accompanying President Petar Stoyanov on his visit to the U.S. this week, anxiously looking for trade and investment opportunities with American firms and banks.
But they are learning along the way that despite good intentions, fine rhetoric, and returned economic stability in Bulgaria, attracting foreign investment or getting loans to finance trade remains very difficult.
The election of the current reformist government last April and its implementation of the Currency Board form of Central Bank in July, on the insistence of the International Monetary Fund (IMF), has brought stability to Bulgaria's economy.
Inflation, which shot up to nearly 2,000 percent in early 1997, is now significantly lower and falling fast. The value of the lev, which plunged to near worthlessness on global markets, is now firmly re-established under the rules of the currency board, anchored to the deutsche mark.
A senior official of a major American bank told the Bulgarian businessmen, however, that it will be some time yet before Bulgaria's economic stability is fully accepted by financial markets.
William Beyer, Vice President for International Operations of Crestar Bank, based in Richmond, Virginia, says businesses in Bulgaria looking for financing for imports will have a tough time in the United States.
Unless a Bulgarian company has a long-term, solid relationship with overseas suppliers or western banks, the company must be ready to pay cash for any purchases made, he said. And pay dearly for usable letters of credit from western banks.
Beyer spoke in Washington Tuesday to a meeting the business delegation held with American counterparts under the auspices of the U.S.-Bulgaria Trade Council.
He said many alternative sources of short term trade financing dried up with Bulgaria's banking crisis and won't re-emerge until the confidence of the financial markets is restored.
One remaining alternative for import financing are the Export-Import agencies of Great Britain, France, Germany and the U.S., said Beyer, although the U.S. export financing agency will for now only write short and medium term guarantees and only to state-owned enterprises.
Private companies in Bulgaria are not eligible for U.S. Exim Bank guarantees because the agency is requiring sovereign (other government) guarantees for any loans on American made equipment destined for Bulgaria.
The U.S. Exim Bank generally provides guarantees to American commercial banks which agree to provide loans of 85 percent of the value of the total purchase of goods and services from an American company. Generally, it requires sovereign guarantees from the country to which the goods are being sold, although increasingly it is setting up alternative arrangements.
Those alternatives are not yet available to Bulgaria, says an Exim Bank spokesperson.
Beyer said the loan guarantees are for a maximum term of only seven years in Bulgaria and require a cash downpayment of 15 percent of the value of the goods being purchased.
Additionally, said Beyer, while the Exim guarantee brings the commercial interest rate down, there are additional fees, including a risk category charge which is currently a full eight percent for any commercial loan involving Bulgaria. That can be included in the amount financed, said the bank official.
Because any loan requires a sovereign guarantee, said Beyer, it would require the approval of both the Council of Ministers and the Parliament in Bulgaria. In addition, under the IMF agreement, the transaction must be fully collateralized -- meaning an equivalent value in securities and goods would have to be pledged to support any loan.
So, he said, except for the most essential imports, Bulgaria companies will find loans for buying equipment and services from the U.S. and other western countries scarce.
However, one Bulgarian-American businessman told the group there are sources of financing available if they know where to look. Stoyan Bakalov, President of the Clover International Coal Company in Northern Virginia, says his firm has sold more than $50 million worth of goods to Bulgaria in the last few years ranging from coal to city busses.
He would not publicly name the specific sources of trade financing for Bulgarian firms, but said its availability is growing.
Meyer agreed, saying that by the end of next year he expects Bulgaria's financial crisis of the mid-90s "will only be a memory and Bulgaria will once again enjoy economic progress."