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Country Commercial Guides FY 2000: Luxembourg Report prepared by U.S. Embassy Luxembourg, released July 1999 Note*

CHAPTER VIII. TRADE AND PROJECT FINANCING

BRIEF DESCRIPTION OF BANKING SYSTEM

Luxembourg is a major world financial center, hosting more than 215 international banks operating as "universal banks" with an unrestricted range of activities. Luxembourg is considered a tax haven due to its bank secrecy, absence of exchange controls, lack of withholding on interest, and politically stable environment. Luxembourg banks generally loan directly to entities in other European countries and to North America. Total bank assets climbed by 9.8 percent between 1997 and 1998 reaching 20,446 billion LUF ($552.6 billion). Luxembourg banks play an important role in both the Eurobond market generally and in the ECU bond market. In addition, Luxembourg acts as headquarters to all big six accounting firms and the EU Cour des Comptes (Court of Auditors).

FOREIGN EXCHANGE CONTROLS AFFECTING TRADING

There are no foreign exchange regulations or limitations on the transfer of capital or profits in Luxembourg, except in exceptional situations such as the UN sanctions against Iraq and Libya. Luxembourg has run a persistent trade deficit over the past ten years, but enjoys an overall balance of payments surplus. This is due to the substantial revenues from the financial sector.

GENERAL FINANCING AVAILABILITY

Luxembourg is a country that depends heavily on imports and exports. Consequently, the process of paying for imported goods is well understood by banking staffs-even in the smallest regional and local branches. The formalities for state aid are kept to a strict minimum. The Chamber of Commerce and the Ministry of the Economy handle applications. Every effort is made to help the enterprises concerned.

HOW TO FINANCE EXPORTS/METHODS OF PAYMENT

Import duties and value added taxes (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 European Union countries. Since products coming from other EU members enter Luxembourg 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.

Types of Available Export Financing and Insurance The Luxembourg banks offer the usual facilities provided in the banking world with regard to both the pre-finance of exports, to cover their cost during the period of manufacture, and long or short-term loans for the export itself. There are a number of direct aids to the finance of exports:

* Country-to-country loans
* Interest rebates on loans to finance the export of goods, granted by COPEL - the Comité pour la Promotion des Exportations Luxembourgeoises
* Export credits granted by The National Credit and Investment Corporation (SNCI).

The Ducroire Office, established by the Law of November 25, 1961 and underwritten by the State, encourages exports by providing guarantees against the risks involved - particularly those relating to credit. The Office can cover commercial and political risks. Its services are open to exporters or banks with risks abroad resulting from the export of Luxembourg products or services. Export guarantees can be given to cover payment over any length of time. The secretariat of the Ducroire Office is provided by the Luxembourg Chamber of Commerce, and can be reached them by phone at +35/2 42-39-39-320.

PROJECT FINANCING AVAILABLE

In Luxembourg, public aid for business and investment projects is available in many different forms. Facilities are provided by the state and by the European Union, and include the following incentives:

* Funds may be raised through a capital grant awarded by the State or, if preferred, through a minority shareholding by the Société Nationale de Credit et d'Investissement (National Credit and Investment Corporation)
* Long term capital may be borrowed in the form of reduced-rate loans from the Société Nationale de Credit et d'Investissement or from the European Union
* Loans contracted from private credit institutions may be eligible for an interest rebate from the Luxembourg Government or be underwritten by the Luxembourg State
* Industrial land may be made available by local authorities and the government
* Up to 50% of the cost of research and development projects may be financed by the government
* Government grants are available for organizational studies
* Various forms of tax relief are available as an incentive to new investment in Luxembourg.

LIST OF BANKS IN LUXEMBOURG WITH CORRESPONDENT U.S. BANKING ARRANGEMENTS

Citibank Luxembourg SA
58 Boulevard Grande-Duchesse Charlotte
L-1330 Luxembourg
Tel: +35/2 45 14 14-1
Fax: +35/2 45 14 14-75
http://www.citibank.lu

Chase Manhattan Bank Luxembourg SA
5 Rue Plaetis
L-2012 Luxembourg
Tel: +35/2 46 26 85-1
Fax: +35/2 46 26 85 416

Morgan Stanley Asset Management SA
Morgan Stanley Capital (Luxembourg) SA
6B, Route de Treves
L-2633 Senningerberg
Luxembourg
Tel: +35/2 34 64 61
Fax: +35/2 34 64 6220

Republic National Bank of NY (Luxembourg) SA
32, Boulevard Royal
L-2449 Luxembourg

Major Luxembourg Banks
Banque et Caisse d'Épargne de l'État (State and Savings Bank)
Place de Metz 1-2
L-2954 Luxembourg
Tel: +35/2 40 15-1
Fax: +35/2 40 15-2099
http://www.bcee.lu

Banque Générale du Luxembourg
50 Avenue John F. Kennedy
L-2951 Luxembourg
Tel: +35/2 42 42-1
Fax: +35/2 4242 2579
http://www.bgl.lu

Banque Internationale à Luxembourg
69 Route d'Esch
L-2953 Luxembourg
Tel: +35/2 4590 4826
Fax: +35/2 4590 2010
http://www.bil.lu

Cedelbank SA
67 Boulevard Grande-Duchesse Charlotte
L-2967 Luxembourg
Tel: +35/2 44 99 21
Fax: +35/2 44 99 28 210
http://www.cedel.lu