Document Type

Research Paper

Publication Date

5-10-2026

Abstract

The following report discusses the risks and construction of a hypothetical short-term trade finance transaction involving the five parties: Citibank N.A., Caterpillar Inc. (CAT), Banco Do Brasil, Paracatu Gold Mine and EXIM Bank. Fair warning: this is a long paper for a short-term transaction.

For the deal, Caterpillar Inc. (CAT) has approached Citibank N.A. in New York regarding a financing transaction for five 797F-400 short-ton haul trucks. The trucks are worth $5mn each, including the costs of training and spare parts, for a total of $25mn. Put simply, the trucks are beasts for mining. They will then be shipped to Paracatu, the largest gold mine in Brazil. To note, Paracatu is operated by Kinross Gold Corporation (headquartered in Toronto, Ontario, Canada) and located in the Minas Gerais region of Brazil. The trucks will be physically delivered to the Port of Santos, in São Paolo.

The deal will be structured as a trade finance transaction. Considering Paracatu, in Brazil, is the importer of the trucks they ordered from CAT, they will need to arrange a letter of credit with a Brazilian bank for the deal to work. For the purposes of this deal, Banco do Brasil will be used.

There’s a plethora of risks involved with foreign dealings. A good rule of thumb is, “If the country is bad, get out.” I am not going out on a limb to say Brazil is a “bad” country to construct deals with; it is a large economy. It’s not a country like its neighbor in Venezuela where reserves are begging for spare change, inflation rates are soaring, and currencies are flailing. But there are specific risks which will be investigated, such as political uncertainty and commodity cycles in relation to exports, to name a couple.

As a result, CAT wants their money as soon as possible, as they should. One of the main concerns is a high-stakes Presidential election coming in October for the giant South American state. This was written in May, so giving Paracatu 90 days to pay- until August 2026, right before the home stretch of probable political warfare, is logical.

Here is where EXIM Bank enters the picture. Given the political risks that exist in Brazil, Paracatu would be wise to consider export credit insurance from EXIM to secure their financing.

To provide a comprehensive analysis for such a transaction, it will require a deep dive into the last four decades of Brazilian political and economic history and of all parties involved in the transaction, so please bear with me here as we will go through some sharp twists and turns here to safely get the trucks from CAT to Paracatu.

Download

Share

COinS