The Mysteries of Global Trade

Global trade finance is one of those mysterious economic terms that we know affect our economy—and other countries' economies—but that's usually about as far as we know.

That's no surprise to Keith Karako, who is head of global trade finance for Citigroup.

“Don't worry about not knowing what global trade finance means,” he reassures. “Nobody knows what it means.”

Basically, it means facilitating trade between countries—often between developing countries and developed countries. For example, major American retailers are increasingly “sourcing” or, having their goods made, in Asia. The Asian suppliers will often need financing to fill those orders. Karako helps to facilitate financing for the supplier knowing that repayment is, ultimately, coming from the major retailer.

Keith Karako

“U.S. technology companies source a lot of their parts from Asia,” he says. “So we will work with these companies to identify and help their Asian suppliers access the capital they need to fill orders. These Asian suppliers usually have weaker balance sheets than the buyers.”

Although Karako graduated in 1976 with a major in finance, he took more economics credits through the College than through Smeal, and this helped to spark his interest in supporting liberal arts. Upon graduation, he went to Dallas where he attended graduate school at night at Southern Methodist University. In 1979 he was approached by Citibank (now Citigroup), and has been working for them ever since. Karako started in his current position in June of last year. Since then, he has been traveling to the Asia-Pacific, Latin America, Europe, the Middle East, and Africa, learning his new business, their customers, and the market.

“The United States capital and lending markets are the most sophisticated in the world,” he says. “The capital markets of almost everyplace I do business are less developed than the United States'. Asia has the biggest exporting business, with massive technology and consumer products industries that service the top technology and retail companies. As a result of the leverage in negotiating trading terms, these suppliers often have to absorb a tremendous amount of working capital related to these transactions. We try to help the suppliers finance this working capital growth related to these cross-border trade transactions.”

Karako is also active in a non-governmental organization (NGO), the United Nations Commission on International Trade Law, a group that seeks to harmonize and unify the laws on international trade. The UN General Assembly created the Commission to help reduce or remove obstacles to the flow of international trade, which primarily helps underdeveloped countries. Citicorp has been working since the late 1990s on UNCITRAL's secured transaction initiative which is intended to promote the financing of assets that cross-border in a transaction or as a normal course of business. Karako says that as the world's most global financial services company, Citigroup often plays a large role in financing companies in developing countries, which, he says, will result in better lives for the citizens of these countries.

“A liberal arts education teaches you to think broadly,” he says. “The potential impact from helping developing countries through economic means will broadly affect all aspects within those countries. I'm a believer in the notion that after economic help, other improvements will follow.”

Karako and his wife, Beverly, are also believers in rescuing animals. After living in California for many years, they now live in Ridgefield, Connecticut with an ever-changing group of animals. Currently there are 15, including four rescued horses, two dogs and nine cats.

“No one else wanted these animals,” he says. “So they're part of our family now.”

Since moving back East, Keith and Beverly have reconnected with Penn State. Besides becoming football season ticket-holders, Keith was recently invited to join the College's development council.

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