The U.S. Export Import Bank And The Three Gorges Dam

1714 words - 7 pages

[Type text] [Type text] [Type text]Case Analysis October 12, 2014 Dalal Al AbsiThe U.S. Export-Import Bank and the Three Gorges DamThis paper summarizes and analyzes the case of "The U.S. Export-Import Bank and the Three Gorges Dam", and answers the following questions: 1- what should the Export-Import Bank do about the project?, 2- What is your opinion of the EIB in general, is it needed to compete globally or just corporate welfare?, 3- would the lack of participation by the U.S. firms do anything to change the situation?, and 4- this is clearly a case where politics and business intersect- do you think this is common and how should business plan for these situations?The case describes the U.S. Export-Import Bank's (EIB) decision to refuse granting loans to three American-based companies which were: 1- Caterpillar, "a manufacturer of earth-moving equipment", 2- Voith Hydro, "a subsidiary of a German company that made turbines", and 3- Rotec Industries, "a manufacturer of concrete placing and handling equipment". These three companies wanted to take part of one of the world's largest infrastructure projects in China. The project was the construction of China's Three Gorges Dam that was planned to provide hydroelectricity to a significant portion of the Chinese population. In addition, the new dam would control the Yangtze River floods that occur every year and destroys a number of towns and villages and claims hundred of thousands of lives.The three American companies that were turned down by the EIB believed that they were robbed from a great opportunity to make business abroad and sell "American-made capital goods" to a very important international project. Many of these companies' growth has become tied with international business and markets. To be denied to participate in such a profitable project infuriated the management of these companies. Caterpillar Group President James Owens said, "America's export competitiveness has suffered as a result of today's decision", referring to EIB refusal to approve their application for financing.The EIB's main agenda is to help finance "overseas sales of U.S. goods and services". It is a government owned corporation managed by a board of directors who were all chosen by the President of the United States. Therefore, EIB exists mainly to help American companies participate in international markets. However, the decision to refuse financing the Three Gorges Dam contradicts its main objective. The EIB had been under a lot of pressure, in regards to its decision, from different sides. The reason EIB made the decision to turn down the companies' applications for financing was based on the fact that the project did not fulfill EIB's environment-sustaining requirements.EIB had concerns in regards to the construction of the Three Gorges Dam on China's Yangtze River. These concerns were as follows: 1- quality of water in the project's reservoir, 2- the risks to the preservation of endangered species and the...

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