AS Russian arrears on United States-backed loans continue to mount, a new congressional analysis has criticized the loan-guarantee program as costly to taxpayers and questioned its usefulness in promoting farm exports. But exporters and US agriculture officials defend the program passionately.
Russia and, before it, the Soviet Union have received a total of $5.7 billion in loans under a US Department of Agriculture program called General Sales Manager (GSM) 102. The three-year loans enabled Russia to buy grain and other food commodities from US exporters.
The USDA suspended Russia from the program in November when wrangling between reformers and conservatives disrupted the Russian government's normally punctual payments. A December meeting of Russia and its lenders had been expected to resolve the situation by restructuring Russia's debt payments.
A US Treasury official says lending countries presented a payment-restructuring offer to the Russians. But upon taking it home for approval, the chief negotiator lost his post in the government shakeup then under way. He has not yet been replaced.
"The vibes are, [the restructuring offer] will be accepted," the Treasury official says. The department hopes that will take place before the US negotiator leaves office in the change of US administrations on Jan. 20, which could delay a resolution further.
Meanwhile, Russian arrears to the US have passed $130 million. And $450 million in US credits remain in limbo.
This week a report issued by the General Accounting Office, the investigative arm of Congress, faulted the GSM program as being increasingly expensive and questioned its effectiveness. The program incurs costs when the government has to make good on defaults by borrowers.
Allan Mendelowitz, author of the study, says the cost of the $13.55 billion in outstanding guarantees and arrears owed to the US as of last June 30 will be $6.5 billion. The study assumes that borrowers can only make their current payments by obtaining ever more credit and that they will eventually default on some of it.
The GAO report forecasts the cost to rise by $74 million for each year the GSM program continues. As for the program's usefulness, the report reached no conclusion. Mr. Mendelowitz says that while the USDA gave examples of how the GSM program had expanded sales in individual countries, what was needed was an analysis showing its impact on worldwide sales. The USDA and organizations involved in farm commodity exports dispute the report's findings.
Stephen Censky, acting administrator of the Foreign Agricultural Service, notes that defaults total only $3.2 billion out of the $40 billion in credit guaranteed since the program began in 1981. Of that figure, $1.4 billion is owed by Iraq (and $600 million more owed by Iraq will eventually come due). The USDA expects the Iraqi loans to be paid either by a new regime or by a US claim against frozen Iraqi assets in the US valued at $1.2 billion.
Mr. Censky also disagrees "quite strongly" on the usefulness of the GSM program. It has enabled exports to Mexico to double to $3 billion in just five years, for instance. He says the USDA isn't equipped to perform the kind of econometric modeling that Mendelowitz demands.
"We know our competition would eat our lunch" without the GSM program, says Nelson Denlinger, executive vice president of US Wheat Associates.
"The single most important program we have [in agriculture] is GSM 102," adds an official of Cargill, an agribusiness company.