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In late 2012, Kusum Kavia’s company started competing for a new power project in Nigeria. A massive new cement factory was to be built, so large it would require its own power plant. Despite fierce competition from foreign competitors, Kavia’s small company – California-based Combustion Associates, Inc. (CAI), which designs and builds gas turbine power generation systems – impressed the factory’s owners with its proposal. The two sides spent the better part of the past three years negotiating the terms and finalizing a deal to build the plant.
“There’s a lot at stake here for a small business like ours,” said Kavia, a second-generation Kenyan and president of the company, which employs 47 people. “We've put in countless administrative hours, management hours, engineering hours and lawyer hours to get to this point.”
CAI was on pace to close the deal this summer; a deal that Kavia notes would generate $39 million in revenue for her small business and require her to create a bare minimum of 30 new jobs.
However, those plans – for the project and for the new hires – have been suddenly and indefinitely derailed by a bizarre policy battle in Washington over the U.S. Export-Import Bank (Ex-Im).
That’s because CAI’s deal depends on financing and trade insurance from Ex-Im, a small federal agency that for the past 80 years has helped thousands of American companies sell their products and services to customers around the world. Congress permitted the bank’s charter to expire at the end of July, and while it looked like lawmakers might rethink that decision and renew its authority before leaving for the August recess, they left town last week without taking further action.
Consequently, Ex-Im can’t make any new loans or extend insurance to any new projects – and as a result, Kavia and CAI can’t finalize their so-nearly-finalized deal to build the power plant. It’s not just that project that is being held up by lawmakers’ inaction, though. Ninety percent of CAI’s sales come from exports, many of them the result of plants the company builds in West Africa, Central America and Eastern Asia -- areas where there’s a surging demand for reliable power, but also areas where private banks are sometimes hesitant to extend lines of credit or insure export sales.
Kavia’s firm is one of 3,000 U.S. small businesses that depended on Ex-Im’s services to support more than 150,000 jobs for Americans. Many of those jobs are now in jeopardy.
In fact, CAI is in the late stages of planning two other power plant deals in Nigeria, both of which were nearly finalized but are now on hold without Ex-Im. All told, the three projects in Nigeria are worth upwards of $50 million in revenue and would prompt Kavia to hire more than 100 workers.
“I’m very embarrassed when I say to my client that Ex-Im is still pending reauthorization,” Kavia said in an interview. She initially showed them reports suggesting the bank’s closure would likely be short-lived, but she is now running out of excuses. “Now, we really don’t know when it will be back.”
What makes matters even more challenging, she explained, is that her company’s competitors in countries like China, India, France and Germany all have the support of government-run export credit agencies. In fact, every major trading nation around the world has just such a bank; every major trading nation, that is, except for the United States.
“We never thought the day would come that a first-world nation like the U.S. would not have an export credit agency,” Kavia said. “Here you have China, whose export credit agency has been very bullish, and Korea with their two export credit agencies; it puts us at a real disadvantage.”
She’s now waiting for a call any day now with bad news from her clients in Nigeria.
“If we don’t get Ex-Im back soon, there’s a very good chance we will lose these contracts to one of our competitors,” Kavia said. “There’s been fierce competition from Chinese and European firms, and I don’t know how much longer our clients will wait before taking one of their offers instead.”
Critics have suggested that companies that previously relied on Ex-Im’s services can simply find comparable alternatives in the private sector. However, like many other small business owners, Kavia says those critics are mistaken. In the month since Ex-Im went dark, she has started searching for insurance and loan alternatives that could save the projects. So have her clients in Nigeria.
“There’s not much out there, at least not for a small business like ours,” Kavia said. “We’re praying at this point that the Ex-Im Bank comes back.”
If the bank’s charter isn’t reauthorized soon, that’s 100 U.S. jobs that CAI won’t create. Instead, those jobs will likely be created by a Chinese or European company for Chinese or European workers.
If the bank’s charter isn’t reauthorized at all, the damage would be much more severe.
“There’s definitely a threat to our current employees, too,” Kavia said. “If we don’t finalize these contracts, and if we are held back from winning more in the months ahead, and next year starts to look too sparse, we’ll be forced to consider layoffs. I would have to let some of these highly skilled, highly trained individuals go, because there just won’t be enough work.”
It’s hard to believe, she added, that Congress would make such a damaging decision in the first place. It’s even harder to believe that lawmakers still haven’t gone back and reopened the bank.
“I wish Congress members would come to my office and see what it’s like to have these contracts depending on Ex-Im, to have our employees depending on Ex-Im,” she said. “Ex-Im is extremely important for our growth, and really, for our survival, and I wish they could see that.”