Here is a picture of a project in Brazil that, if it goes bust and the Brazilians can’t pay the American contractor, your tax dollars will end up paying for:
The Atlantic City Lab describes the project, an Export-Import Bank–backed deal to build the largest aquarium in South America:
When it is completed in 2015, Acquario Ceará, a new public aquarium planned for the northeastern Brazilian city of Fortaleza, will easily be the world’s most recognizable aquarium—an architectural statement piece if there ever was one. It may also be the most truly American project in the Western Hemisphere. While the backers of Acquario Ceará are aiming to create a new design symbol for South America, it will be almost entirely a product of North America. …
The Export-Import Bank of the United States is financing the aquarium’s construction through a $105 million direct loan, claiming that the transaction will support 700 jobs in the U.S., with most of the work going to small businesses.
Note that the taxpayer exposure is $150,000 per job “supported.”
Some people in Brazil are rightly upset about this. The Ex-Im loan may have lower interest rates and better terms than a regular loan, but this is probably money the indebted and poor Brazilian government can’t afford.
But the project—for which construction and fabrication work kicked off today—is not without controversy.
In Brazil, where critics say that the aquarium is being built without transparency, protestors launched a Facebook group called “Quem dera ser um peixe”—which translates to “I wish I were a fish” (a punny echo of a lyric by a popular Ceará-born singer, apparently). Elizabeth Duffield, a fellow at the SIT Graduate Institute, wrote a study confirming their fears. “Ceará, one of the poorest states in Brazil, is using public money, in part, to construct the aquarium while it has long standing social problems yet to be resolved,” shewrites.
That’s a real problem with the Ex-Im Bank: On one hand, it gives cheap money to large companies who would have access to capital markets even in its absence. But on the other hand, it encourages middle-income or poor countries to take on debt that they probably can’t afford, whether the products purchased are “made in America” or not.
I wrote about that in my latest Reason column:
Since 1996, the International Monetary Fund and World Bank have maintained a list of Heavily Indebted Poor Countries (HIPCs), which face debt burdens their governments cannot sustainably manage. Since fiscal year 2007, the Export-Import Bank has added to the debt levels of 20 of the 39 countries listed in some phase of the HIPC Initiative’s debt management process.
Just as Fannie Mae and Freddie Mac convinced low-income Americans to take out risky loans to purchase homes they otherwise wouldn’t dream of buying, the Export-Import Bank sways governments in developing countries to splurge on shiny new air fleets, futuristic wind farms, and unnecessary luxury tour buses-all made, of course, in the U.S.A.
Ex-Im’s records show that $180,000 in insurance was extended to Honduras to cover an aircraft deal with Atlantic Airlines, but the records are incomplete and Ex-Im’s website does not mention this deal. Tanzania, too, took on an estimated $2.5 million in debt in 2013 to purchase aircraft from Cessna at Ex-Im’s urging.
According to its own records, the Export-Import Bank extended almost $3 billion in financing to HIPCs from 2007 to 2014. Assuming that the Bank covered the standard 85 percent of the loan value, this could mean that these already indebted countries took on another $3.5 billion in debt so that companies like Boeing could make a little more money each year.
Brazil doesn’t belong to “Heavily Indebted Poor Countries” list, but it isn’t a rich country either — it’s only ranked 85 on the U.N.’s Human Development Index. Besides, I can’t imagine that the Brazilian government feels flushed with cash after the World Cup, since such events tend to be a money pit for cities and countries.