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Division
of Investment and Export
PO Box 7970
Madison, WI 53707-7970
USA
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Vol.
8 #2, November 2008
Interview with Pauline Klaffenboeck: a Wisconsin Banker’s View on the Global Economy
Pauline Klaffenboeck has spent over 30 years in the banking
industry starting as a foreign exchange trader at a bank in Salzburg,
Austria. In her current capacity as Vice President of Global
Trade Services at M&I Marshall & Ilsley Bank, she assists
companies with their international needs, specializing in foreign
political and economic risks. She has served as chairperson of
the National Association of Credit Managers, International Credit
Executive Group, and president of the Madison International Trade
Association. Ms. Klaffenboeck currently serves on the Executive
Committee of the Wisconsin District Export Council and Governor
Doyle’s Wisconsin International Trade Council, and is Chairperson
of the Board of the International Institute of Wisconsin. We
asked her to share her thoughts on the current economic situation and
its impact on Wisconsin’s international business community.
Q: What impact will the global banking crisis that started
out with subprime mortgages have on Wisconsin exporters? Which
markets do you see as most adversely affected by the crisis?
A: Economists are predicting a global slowdown with some
pockets impacted more than others. Countries dependent on exports
to the United States, such as China and India, will suffer the
most. Other countries, such as Russia, Ukraine, Hungary, and
South Korea, have their own domestic economic issues to contend with,
and these markets have deteriorated very rapidly.
Q: Is there something that exporters should be doing differently in times like this?
A: Exporters are taking a more conservative approach in
quoting terms of sale. They have become cognizant of shipping
risks and documentary risks and are taking more control of the entire
process of getting goods to the buyer’s country. This
assures the exporter’s freight forwarder is working on their
behalf to ensure compliance with U.S. government regulations and ensure
control of the goods. Buyers’ credit worthiness has always
been difficult to ascertain and even if provided, foreign financial
statements can be difficult to understand. In order to be
competitive, exporters have relied on relationships or what they
believe a competitor may be quoting in term of payment. Given the
current liquidity and credit crisis, exporters, along with their banks,
are reevaluating their exposures. This may mean insuring open
account receivables, or using banks as intermediaries with collections
or letters of credit, especially for customized capital equipment and
specialty products.
Q: After a significant period of decline, the dollar has started to increase in value. How can Wisconsin exporters respond?
A: The U.S. dollar has appreciated in value against major
currencies in the last several months. Some economists believe it
is near parity with the euro. Some exporters believe that if they
sell in U.S. dollars, they have no currency risk. This is true
from a price perspective, but if the value of the buyers’
currency falls against the U.S. dollar, the U.S. product becomes that
much more expensive and perhaps unaffordable for the buyer.
Exporters should establish a dialog with their bank’s foreign
exchange traders or the correspondent bank used by their bank for
foreign exchange. There are many reasons why a currency may
strengthen or weaken, some of them unpredictable. Traders are
able to offer risk mitigation solutions and economic indicators and
charts indicating possible movement.
Q: Are there markets with significant potential for
Wisconsin exporters that you think are not getting the attention that
they deserve?
A: At M&I we have actually seen an increase of
shipments to Europe, the Middle East, Mexico, and Brazil. The
U.S. government, through ExIm Bank, has made Africa a special focus of
interest and offers very advantageous insurance programs to exporters.
Q: What changes in Wisconsin’s international business community have you noticed over your career at M&I?
A: Wisconsin is very fortunate and unique to be able to
support multiple trade organizations. The universities and
technical colleges offer classes and courses in all aspects of trade
and global economics. The U.S. Department of Commerce supports an
office in Milwaukee and ExIm Bank has an office in Chicago.
Service providers such as banks and freight forwarders are experienced
and very helpful. Our Wisconsin Department of Commerce supports
offices in China, Canada, Brazil, Europe, and Mexico and its staff here
offers first class advice and services.
When I started in banking, Wisconsin exports went to Canada, Europe,
and Mexico. Now there is no part of the world Wisconsin does not
export to. Globalization may be slowing, but it is not
stopping. We hope companies will call with any questions or
concerns.
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