As Korea's defense corporations move in earnest to export weapons to Latin America, the door is expected to open for domestic public financial institutions to support those exports. When defense corporations export weapons to Latin American countries, the Export-Import Bank of Korea and Korea Trade Insurance Corporation provide loans and guarantees to those countries. The Peruvian government, which recently began importing Korean weapons, is showing interest in financial support.
According to diplomatic authorities and the defense industry on the 15th, the Peruvian government, while importing Korean weapons, has expressed interest in borrowing funds from Korea's state-run banks. Earlier, in Dec. last year, the Peruvian government signed a framework agreement with Hyundai Rotem to supply ground equipment.
The framework agreement includes the Peruvian Army introducing 54 K2 tanks and 141 K808 wheeled armored vehicles in cooperation with Hyundai Rotem. The deal is said to be worth a total of 2 trillion won. Based on the framework agreement, Hyundai Rotem plans to negotiate detailed export terms and amounts and sign the main contract.
During the contract process, the Peruvian government is said to have shown interest in using export finance from Korean policy finance institutions. Export-Import Bank of Korea President Hwang Ki-yeon said at a press briefing on the 11th that during a business trip to Latin America in Sept. last year, meetings with local ambassadors confirmed that Latin American countries have strong defense demand. At the time, with an introduction by Ambassador to Korea Choi Jong-uk of Peru, Hwang is also known to have discussed financial cooperation plans with Peruvian government officials. The Export-Import Bank of Korea is currently discussing with the government ways to cooperate on defense export financing with Peru.
The Peruvian government has not yet formally requested export financing from the Korean side. It is reported to be reviewing whether to purchase Korean weapons with its own budget or seek help from Korean financial institutions.
If the Peruvian government formally requests export financing, domestic policy finance institutions plan to review it positively. Peru's sovereign credit rating is BBB, an "investment grade" level that poses no problem for Korean policy finance institutions to arrange export financing.
In the defense industry, there is analysis that financing terms determine success or failure in international arms export competition. In fact, financing terms emerged as a key issue in the defense deal between Korea and Poland. When the Polish government imported K2 tanks, K9 self-propelled howitzers, and FA-50s last year, it asked that a significant portion of the purchase expense be supported in the form of loans and Vice Minister. At the time, the Export-Import Bank of Korea and Korea Trade Insurance Corporation provided about 7.2 trillion won in financing. The $46 billion Canadian submarine program, which Korean corporations have entered, is also seeing fierce intergovernmental financing competition.
An official at a policy finance institution said, "It is true that the Peruvian government is interested in Korean export finance," adding, "Importing countries usually decide how to finance import expense at the end of the contract. If an official request comes, we will decide through an internal review."