VIII. TRADE AND PROJECT FINANCING: Belgium is a country where exports and imports amount to roughly 2/3's of GDP. Consequently, the process of paying for imported goods is well understood by banking staffs - even in the smallest regional and local branches. Generally speaking, buyers show a preference for payment by cash against documents (CAD), as this is the simplest and least costly method. However, they understand U.S. and transcontinental buyer requirements for letters of credit (L/C). This is often the form of payment for U.S. companies beginning to sell to Belgium. In cases, where Belgian importers and their U.S. suppliers have built up mutual confidence, letters of credit are superseded by time drafts and eventually by CAD terms. Exceptionally, open account terms; i.e. where the importer pays after receipt of the goods, are used. Belgian importers are relatively small, with inadequate sources of inexpensive capital. Real rates of interest for working capital loans now run more than seven percent, and Belgian importers will ask for the most lenient credit terms possible. In addition, they are accustomed to being offered flexible payment terms, mainly from their neighboring trading partners, i.e. France, Germany, Holland, U.K., Switzerland, and (sometimes) Italy. Extended payment terms of 30, 60, 90 and even 120 days are not unusual, though the most common payments terms are net 30 days. However, Belgian businesses, like many in Europe, routinely delay payment beyond the agreed upon payment terms. In Belgium, some 43% of all payments are not made on time, although 80% of the delayed payments are made within another 30 days. In short, 91% of all payments by Belgian businesses are made net 60 days. This is a better record than in Italy or the U.K. and equal to that of France and the Netherlands. Since the use of credit is consequently wide-spread, flexible credit terms can be important to winning sales contracts in Belgium. A U.S. firm should consider offering such terms, provided he/she is able and willing to provide such finance and provided the U.S. company has done a full credit check into the bonafides of the Belgian company. Even then, it would probably be wise to try several shipments on a secured credit basis before moving to easier terms. There are several local credit agencies available, including Dun and Bradstreet. Additionally, the U.S. Embassy provides such a service via its World Traders Data Reports. Import duties and value added tax (vat) are applied to the CIF (cost insurance/freight) value of goods. The rate of import duties is the same as that applied by all EU countries. Since products coming from other E.C. members enter Belgium duty free, U.S. products often start off with an average 5-6% price disadvantage. By offering favorable credit terms, U.S. suppliers can help their importers offset a portion of that higher price. There are no foreign exchange regulations or limitations on the transfer of capital or profits in Belgium, except in exceptional situations; i.e. U.N. sanctions against Iraq, Libya, and Haiti. Counter or barter trade, mainly with Eastern European and other countries short of foreign exchange, continues to be a recognized business practice in Belgium. Because of its sophistication in international trading practices, Belgium is well placed to develop this type of business. The Belgian financial marketplace is private-sector oriented, and there are no government-sponsored institutions for financing imports. The Belgian franc is linked to the Deutsch mark within the EU's Exchange Rate Mechanism (ERM). It has fluctuated widely, as have all other currencies, against the U.S. dollar. The current exchange rate is one U.S. dollar equals thirty-four Belgian francs. There are three main trading banks in Belgium: the General Bank, Brussels Bank Lambert and Kredietbank. Each one of them has a well-developed correspondent bank network in the U.S., as well as a local representative office in at least one major U.S. city. Because of the lack of restrictions, easy tele-electronic communications, and fluent use of English, banking relationships with the U.S. and other countries are smooth. Though Belgium has a very high public debt, 85% of that debt is domestically held. Therefore, there are no foreign exchange problems. Moreover, the balance of payments situation is very healthy, and there are no problems related to the country's ability to maintain its extensive import program. The looming problem for the Belgian economy is its ability to join the first tier of players in the European Monetary Union, scheduled for 1997 with preliminary steps to begin in 1994. Belgium desires to be part of the first group of countries to form the EMU, but its annual budget deficit at nearly 7% of GDP and its total deficit equal to over 120% of GDP may prevent it from doing so. The consequences of not doing so, at a time when its trading competitors and partners - such as Luxembourg, Germany, and The Netherlands - are moving ahead, would have serious repercussions on the Belgian economy. The Luxembourg government has already begun steps to divorce itself from a joint currency and central banking operation with Belgium. While such a step would be a natural one within the EMU, it has caused pressure on Belgian bond rates and is being perceived as a warning by Luxembourg that Belgium must put its economic house in order over the next several years. The government is determined to do so, but that will be difficult in the current economic slowdown facing Europe. This situation bears watching, though its effects on U.S. trade with Belgium over the next several years will be minimal. Key Banks in Belgium: GENERALE BANK Montagne du Parc, 3 1000 Brussels Tel: 02/516.21.11 Fax: 02/516.42.22 Paul-Emmanuel Janssen, Chairman of the Board of Directors and Ferdinand Chaffart, Chairman of the General Management Committee and Managing Director. Employs: 14,444 in Belgium and the total staff amounts to 22,944; consolidated balance sheet: BF 2,318 billion ($64.4 billion). This is Belgium's largest bank principally controlled by the powerful Soci t G n rale de Belgique holding company. In fact, it ranks as the 22nd largest deposit bank in Europe while ranking in the 28th position in total assets. Initially established in 1822, this bank offers - through its branch network in Belgium and its overseas establishments - to its domestic and international customers, individual or corporate, a complete range of financial products and services. It also heads a network of subsidiaries geared to specialized sectors of the financial market such as private banking, bank insurance, diamond and vehicle finance, the stock exchange, leasing, factoring, venture capital and security. In Belgium it operates through a network of 1100 branches, coordinated by 32 regional offices, and divided into 6 areas. BANK BRUSSELS LAMBERT Avenue Marnix, 24 1050 Brussels Tel: 02/547.24.84 Fax: 02/547.22.17 Jacques Moulaert, Chairman of the Board and Daniel Cardon de Lichtbuer, President of the Bank. Employs: 12,000; consolidated balance sheet: BF 1,993 billion ($55.4 billion). This bank is the result of the merger of Banque de Bruxelles, founded in 1871, (formerly ranking second) and Banque Lambert (fourth largest) established around 1974. Belonging to the Group Brussels Lambert holding company, BBL (more commonly known) is Belgium's second largest private- sector commercial bank. According to the British periodical "The Banker", BBL ranks as the 49th European bank and as the world's 90th. BBL provides its services to private individuals, small- and medium-sized enterprises, large companies, multinationals, institutional investors and public authorities. Since 1991 its activities have been divided into two business groups, personal customers and enterprises and professional and international banking. In Belgium it operates through a network of 13 district head offices, which are divided into three regions under which, in turn, consist of 965 branches and 200 "self-banks". KREDIETBANK Arenbergstraat, 7 1000 Brussels Tel: 02/517.52.62 Fax: 02/517.51.95 Edward Wauters, President of the Board and Marcel Cockaerts, President of the Management Committee. Employs: 11,495; consolidated balance sheet: BF 1,754 billion ($48.7 billion) Founded in 1935, this is a Flemish area bank, which belongs to the Almanij-Kredietbank Group, and has worldwide representatives and branches. Also known as the KB, it controls another bank in Belgium called Credit General de Banque, which operates in Wallonia and Brussels. The bank operates a domestic network of more than 800 branches. Engaged in international banking, it provides all commercial and investment banking services to private customers, companies, public and semi-public entities as well as institutions both in Belgium and abroad through its 1500 correspondent banks all over the world. CREDIT COMMUNAL DE BELGIQUE S.A. Boulevard Pacheco, 44 1000 Brussels Tel: 02/222.11.11 Fax: 02/222.40.32 Frank Swaelen, Chairman of the Board of Directors and Fran ois Narmon, Chairman of the Management Committee. Employs: 3,751; balance sheet total: BF 2,134 billion BF ($59.3 billion). Just after 1912, this municipal credit institution created a totally new method of financing its short-tern loans, the savings bond. Today, it still continues to develop and constantly improve the savings bond. Apart from being the number one credit institution in the savings bond area, it is becoming a fully-fledged major bank. MORGAN GUARANTY TRUST COMPANY Avenue des Arts, 35 1040 Brussels Tel: 02/508.82.11 Fax: 02/508.83.34 Herv Huas, Managing Director and Chairman of the Management Committee. Employs: 1,200; total assets: unknown for Belgium, consolidated with the J.P. Morgan & Co. Inc. results. Ranking as the 5th largest bank in Belgium, this is a branch of the J.P. Morgan & Co. with headquarters in New York City. The bank offers commercial and investment banking services to corporate and institutional clients. In addition to the traditional commercial banking services, it offers a variety of specialized services to international customers. Another company of the J.P. Morgan group in Belgium is Euroclear, located at Blvd. Emile Jacqmain, which is a clearing house for Eurobonds and internationally traded securities. CITIBANK BELGIUM S.A. Rue du Trone 60 1050 Brussels Tel: 02/504.55.11 Fax: 02/504.55.39 Anthony S. Fortunato, Managing Director. This is the Belgian subsidiary of Citibank N.A. with headquarters in New York City. Citibank opened its Belgian branch in 1919 at the Grand Place. During the Second World War, this branch was closed but re-opened in 1962. As a result of local acquisitions, it now has 60 branches in Belgium. Today it is a leading international and domestic bank which has relations with most of Belgium's largest industrial and trading companies. This bank also offers specialized services to financial institutions, insurance companies and to public sector entities. BANK OF AMERICA Uitbreidingstraat 180,bus 6 2600 Antwerp Tel: 03/280.42.11 Fax: 03/239.61.09 James L. Prouty, Senior Vice President and Regional Manager Northern Europe. This is the Belgian branch of Bank of America N.T.&S.A. with headquarters in San Francisco. This Belgian branch was established in 1965. It provides a full range of commercial banking services and has a branch office in Brussels at Avenue Louise, 480.