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Government Bank Subsidizes Loan Against Foreign Competition

April 11, 1989

WASHINGTON (AP) _ The government’s Export-Import Bank, which has been borrowing money at more than 9 per cent interest, announced Tuesday it is making a $17 million loan to the firm of Babcock and Wilcox at 6.5 percent.

Most loans by the bank go to other countries to encourage them to buy U.S. goods, but the bank also is authorized to lend to American companies to help them compete for business at home against subsidized loans from other governments.

Babcock and Wilcox will use the money to install a heat recovery boiler at a Gaylord Container Corp. paper mill at Bogalusa, La. The loan is for eight years, with repayment beginning in July 1990.

The loan was announced after the government determined that the Brazilian government had offered a 6.5 percent ″noncompetitive″ loan to Gotaverken, a joint venture of Brazilian and Swedish companies. The U.S. bank matched the offer.

Ann Frey, public information officer at the bank, said, ″Babcock and Wilcox employees will build the equipment in the United States. We’re supporting American jobs and not Brazilian jobs.″

A noncompetitive loan by an official agency needs a subsidy from taxpayers to make up the difference between the higher interest rate that the government has to pay for the money it borrows and the lower-cost financing it offers to the private company.

Last time the U.S. bank itself borrowed money it had to pay 9.34 percent.

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