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Monday, October 22, 2018
Angola and Brazil have signed a protocol of understanding and published through a presidential decree in Angola this month which revolves around export credit insurance. The protocol of understanding establishes the “criteria for concession” to Angola of Export Credit Insurance (ECI), within the scope of the Export Guarantee Fund (EGF), and backed up by “interest rate equalization using resources from the Export Financing Program (Proex)”.
The new agreement specifically stipulates an “additional exposure” of the Brazilian State, of $2 billion, to guarantee export credit insurance of goods and services from Brazil to Angola.
“The Angolan government will indicate the operations that will be analyzed by the Brazilian government,” states the document, adding that the bank credit for these exports will also be guaranteed “in specific financial conditions.”
In exchange, in line with the agreement, “the Republic of Angola undertakes to maintain the financial flow relative to the annual supply of 20,000 bpd of crude, delivered preferably through one load every 45 days, meaning two loads each quarter.”
The return of these deliveries will be managed by the Bank of Brazil, acting as the agent for the Federative Republic of Brazil, and will be used in the “amortization” of the Angolan debt due, through the establishment of deposits for amortization of debt due. The plan is for “the final balance to be returned to Angola for free use of the resources by the government of the country.”
The agreement with Brazil is not the only funding the Angolan government is going after, the president approved, by presidential order, a new financing agreement with the UK management firm Gemcorp, the second in three months, which may reach up to €430 million.
The document, dated June 28, states that João Lourenço approved the financing agreement to be signed between Angola, through the Ministry of Finance, and Gemcorp, “for treasury support.” This financing will be for the overall amount of €215 million, “with the possibility to increase it” to €430 million.
In March, another financing agreement contracted from Gemcorp was approved by the Angolan president for the overall amount of €430 million, “with the possibility to increase it” to double that amount.
The financing in question shall be used for importation by Angola of goods and equipment not specified in the same document, dated March 2, which did not add further information about the binding conditions for the Angolan State in this agreement.
In the previous month, February, Angola announced plans for a special issue of $500 million in foreign currency this year, precisely to repay the debt to Gemcorp. The information is in the government’s Annual Debt Plan for 2018, which outlines the issue of Foreign Currency Treasury Bonds in the name of the National Bank of Angola, to repay the Gemcorp debt.
“This operation falls within the issue limits defined in the 2018 State Budget,″ says the Ministry of Finance document.
Gemcorp has financed the Angolan State since 2015, granting it several loans. This year, credit of 250 million dollars (215 million euros) was approved, allocated at the start of the financial crisis caused by a fall in the price of oil, among other factors.
At the end of 2017, Gemcorp agreed to a loan of €129 million to cover the deficit in the investment to build the Laúca Hydroelectric Power Plant, the biggest dam in Angola.
The Angolan minister for Economic and Social Development said in Luanda, in June, that resources generated by oil should be used to fund the diversification of the domestic economy.
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