Trade finance crisis eases, gaps persist-OECD

By Laura MacInnis

GENEVA (Reuters) - Trade loans are now easier for exporters to access but many major transactions are still frozen because of financing trouble, the head of the Organisation for Economic Cooperation and Development (OECD) said on Monday.

OECD Secretary-General Angel Gurria told Reuters in an interview that trade finance had gone "from being closed at the beginning the year to now being selectively more open."

"Not all of the financing has disappeared. Every day more is reinstated," he said, projecting that letters of credit and other financial instruments would be more available to exporters when troubled banks were back to full health.

Global trade flows are expected to fall 10 percent this year, with sharp drops already seen in emerging markets in Latin America, Southeast Asia and Africa. This is due both to dried-up credit and dampened consumer demand in the world's recession.

Gurria, on the sidelines of a World Trade Organisation conference, said that the downturn itself had cut the number of shipments that companies need financing for.

"Trade has contracted violently and therefore you have less needs. It is a paradox," he said, adding it was unclear how much trade was halted because companies' financing fell through in the wake of the credit crunch.

"A lot of large deals did not take place. That is still going on," he said, saying it was critical that banks returned to the marketplace so that companies were not forced to provide credit and shipment guarantees directly between themselves.

"You are not supposed to put your balance sheet on the line every time you buy or sell a piece of equipment," he said. "When producers become banks the whole thing is very disorganised."

Loan scarcity has been affecting business decisions on the assembly line, in sales and in procurement decisions, according to Gurria, who stressed the estimated $250 billion (154.1 billion pounds) trade finance gap was only a fraction of total commercial flows.

The top providers of trade financing include Standard Chartered, HSBC and Citigroup, and the World Bank and other development lenders have also been working to provide liquidity in the trading system.

The OECD projects that trade flows will steady in 2010, with volumes up two percent over 2009 levels. Gurria said that almost all economic measures should stabilise next year, except for unemployment which he said could reach 10 percent in the United States and up to 12 percent in the European Union.

(Editing by Jon Boyle)