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Administrative Reform

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Case No. 1 - The U.S. Export – Import Bank and the Three Gorges Dam (A) Case – HBS No. 900017 – 10 pages.
Covers Introductory Public-Private Finance Issues, Expropriation, Property Rights and Environmental Concerns –
Executive Summary Required
Study Questions:
1. What is the role of Export Credit Agencies (“ECA’s”) in international Project Finance and how are they competing actors on the world finance stage? Should EXIM continue – going forward from May 2015 – see hand-out article. What is the role of the U.S. Export-Import Bank (“EXIM”) with respect to the Three
Gorges Dam Project?
2. What are the motivations of Congressmen Hastert and Manzullo – do your agree that their priorities are in the right place?
3. What are the motives of Caterpillar, Voith Hydro and Rotec and why do they need to have the U.S. Export
– Import Bank participate with them in this transaction? Should EXIM favor one firm over another – explain your thinking. How big is Caterpillar’s international business today (2011) – you may wish to look at Caterpillar’s 10K and the detail on international business.
4. What are the environmental concerns with the Three Gorges Dam and who has the right to say what the environmental standards should be – China or the United States?
5. Consider the difference in roles between Export Credit Agency support and the International Finance
Corporation (“IFC”). Also consider how these roles can be complementary. See www.exim.gov and www.ifc.org 6. Put yourself in the position of Martin A. Kamarck, President and Chairman of EXIM bank. At the time of the case, what were the trade-offs that he had to consider. If the time of the case was not May, 1996 but
May, 2009, how might Mr. Kamarck’s priorities have changed given the state of international finance and relations between the United States and China.
7. Build a simple one-page cash flow model – like the one presented in class using the following parameters
– Total cost - $US 30 billion, construction period is 15 years from 1994 with equal disbursements each year, Revenue inflows start at $6.50 billion in 2010 and grow at a rate of 3% per annum to 2040, discount rate is 10%. Answer the following:
a) What is the simple payback period in years and months.
b) What is the NPV
c) What is the IRR
d) What is China’s nominal GDP in Billions/ Ratio of $6.50 to GDP – Can China afford this project – show quantitatively and comment. Does your view of the project change if you use Exports instead of nominal GDP – support with data.

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