USING EXPORT‐CREDIT INSURANCE TO ENHANCE THE WORKING CAPITAL REQUIREMENTS OF THE OVERSEAS CUSTOMER: ACCOMMODATING MEXICAN IMPORTERS AMIDST THE 1994–95 PESO CRISIS

While export‐credit insurance is traditionally utilized by exporters to protect foreign receivables, to facilitate domestic financing, or to match credit terms of competitors, there is an interesting fourth function. The exporter targeting a creditworthy foreign customer within a country undergoing a temporary economic disruption can use export‐credit insurance to provide a key addition to the foreign customer's working capital needs. This paper quantifies the working capital gains for a Mexican importer when a U.S. exporter liberalizes payment terms by using export‐credit insurance and so alleviates the importer otherwise confronting sharply higher short‐term domestic borrowing costs and a depreciating peso.