[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
FINANCING OVERSEAS DEVELOPMENT:
THE ADMINISTRATION'S PROPOSAL
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON FOREIGN AFFAIRS
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
SECOND SESSION
__________
APRIL 11, 2018
__________
Serial No. 115-119
__________
Printed for the use of the Committee on Foreign Affairs
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COMMITTEE ON FOREIGN AFFAIRS
EDWARD R. ROYCE, California, Chairman
CHRISTOPHER H. SMITH, New Jersey ELIOT L. ENGEL, New York
ILEANA ROS-LEHTINEN, Florida BRAD SHERMAN, California
DANA ROHRABACHER, California GREGORY W. MEEKS, New York
STEVE CHABOT, Ohio ALBIO SIRES, New Jersey
JOE WILSON, South Carolina GERALD E. CONNOLLY, Virginia
MICHAEL T. McCAUL, Texas THEODORE E. DEUTCH, Florida
TED POE, Texas KAREN BASS, California
DARRELL E. ISSA, California WILLIAM R. KEATING, Massachusetts
TOM MARINO, Pennsylvania DAVID N. CICILLINE, Rhode Island
MO BROOKS, Alabama AMI BERA, California
PAUL COOK, California LOIS FRANKEL, Florida
SCOTT PERRY, Pennsylvania TULSI GABBARD, Hawaii
RON DeSANTIS, Florida JOAQUIN CASTRO, Texas
MARK MEADOWS, North Carolina ROBIN L. KELLY, Illinois
TED S. YOHO, Florida BRENDAN F. BOYLE, Pennsylvania
ADAM KINZINGER, Illinois DINA TITUS, Nevada
LEE M. ZELDIN, New York NORMA J. TORRES, California
DANIEL M. DONOVAN, Jr., New York BRADLEY SCOTT SCHNEIDER, Illinois
F. JAMES SENSENBRENNER, Jr., THOMAS R. SUOZZI, New York
Wisconsin ADRIANO ESPAILLAT, New York
ANN WAGNER, Missouri TED LIEU, California
BRIAN J. MAST, Florida
FRANCIS ROONEY, Florida
BRIAN K. FITZPATRICK, Pennsylvania
THOMAS A. GARRETT, Jr., Virginia
JOHN R. CURTIS, Utah
Amy Porter, Chief of Staff Thomas Sheehy, Staff Director
Jason Steinbaum, Democratic Staff Director
C O N T E N T S
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Page
WITNESS
The Honorable Ray W. Washburne, president and chief executive
officer, Overseas Private Investment Corporation............... 4
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
The Honorable Ray W. Washburne: Prepared statement............... 7
APPENDIX
Hearing notice................................................... 34
Hearing minutes.................................................. 35
Material submitted for the record by the Honorable Edward R.
Royce, a Representative in Congress from the State of
California, and chairman, Committee on Foreign Affairs
Statement from the Press Secretary Supporting the Goals of the
Better Utilization of Investments Leading to Development
(BUILD) Act of 2018, dated April 10, 2018.................... 37
Letter from the Honorable Elizabeth L. Littlefield, former
President and CEO, Overseas Private Investment Corporation,
dated April 6, 2018.......................................... 39
The Honorable Gerald E. Connolly, a Representative in Congress
from the Commonwealth of Virginia:
``Opinion: The Development Credit Authority needs to stay in
USAID,'' by Eric Postel and Andrew Natsios, devex.com,
February 26, 2018, submitted for the record.................. 41
Prepared statement............................................. 45
Written responses from the Honorable Ray W. Washburne to
questions submitted for the record by the Honorable Dina Titus,
a Representative in Congress from the State of Nevada.......... 47
FINANCING OVERSEAS DEVELOPMENT:
THE ADMINISTRATION'S PROPOSAL
----------
WEDNESDAY, APRIL 11, 2018
House of Representatives,
Committee on Foreign Affairs,
Washington, DC.
The committee met, pursuant to notice, at 10:00 a.m., in
room 2172 Rayburn House Office Building, Hon. Edward Royce
(chairman of the committee) presiding.
Chairman Royce. We will call this hearing to order.
Across the planet, lack of access to capital often
constrains economic growth and especially this is true in the
world's least-developed countries. In these emerging markets,
foreign investment is critical to empowering entrepreneurs, to
creating jobs, and, of course, to reducing poverty.
America has an undeniable interest in supporting the
development of vibrant and stable economies around the world
and healthy private sectors promote good governance, supports
thriving civil societies. They help reduce civil strife within
the country and the resulting stability is not only good for
our national security, it also benefits U.S. exports and
benefits jobs.
Increasingly, other countries are working to advance their
economic and political interests by shaping overseas markets.
Beijing is doing this in a big way. China's $1 trillion ``One
Belt, One Road'' initiative could be contrasted with the
Marshall Plan, which rebuilt war-torn Europe. But it works in a
very different way. If you visit any African capital you'll see
China's name on new construction projects.
But as Chairmen Yoho and Smith's subcommittees know well,
China often entices foreign governments in search of easy money
and then saddles them with unsustainable debt burdens, and they
do that through predatory--basically, predatory lending
practices.
In the Indian Ocean, for example, Sri Lanka was forced to
forfeit a 99-year lease to one of its strategic ports because
it could not afford the debt burden on that Chinese loan.
The U.S. cannot and shouldn't match China's investments
dollar for dollar, but we can and should do more to support
international economic development and do it with partners who
have embraced the private sector-driven development model and
done so under a concept of rule of law.
Today, we will hear from the president and CEO of the
Overseas Private Investment Corporation whose mission is to
complement traditional U.S. foreign assistance by mobilizing
private capital in support of America's development objectives
and support of our foreign policy interests.
This was established in the 1970s. OPIC was to provide, to
quote from the document, ``businesslike management of
investment incentives'' and that included political risk
insurance, direct loans, loan guarantees, and other services to
developing nations.
So we are 50 years later here. The OPIC's toolkit has
largely remained the same while the international economic
landscape has changed dramatically.
And that's why I am in support of this bipartisan
legislation by our Subcommittee Chairman Yoho to build a modern
development finance institution that will promote enduring
growth in emerging economies and will support our U.S. national
security objectives.
In an era of tight budgets, this proposal would consolidate
the resources and consolidate the expertise of OPIC and the
Agency for International Development's Development Credit
Authority and it would do all this under one roof with new
powers to make limited equity investments, conduct feasibility
studies, provide wrap-around services such as grants and
technical assistance, and double its book of business.
This proposal would also create an independent inspector
general. Now, that would increase the accountability for
taxpayers and it would put in place tough statutory benchmarks
that must be met to ensure that American development finance
complements and does not crowd out private sector investment.
I am encouraged that the administration has embraced this
bipartisan approach, which members of this committee have been
working on, and today we'll hear more about its vision for
international cooperation and how the new development finance
institution would work with USAID and Millennium Challenge
Corporation to ensure coordination between our development
agencies.
With the right leadership and authorities, a new
development finance institution can be a powerful instrument to
create opportunities in countries hungry for growth and jobs
and its creation would also send a strong signal about
America's commitment to international economic engagement in
uncertain times.
And with that, let me yield to the ranking member, Mr.
Bera, today for an opening statement.
Mr. Bera. Thank you, Mr. Chairman. While Facebook may be a
household name, I think this is the most important hearing
that's happening this morning because the impact of the
Overseas Private Investment Corporation that you oversee, Mr.
Washburne, has had the ability and has impacted lives of
millions of folks across this world.
This is a very timely hearing as we look at the BUILD Act,
as we think about how we modernize overseas investment and
credit.
It is one of the remarkable things that we can do in terms
of good will for the United States and not cost the taxpayers
anything--actually, generate revenue for the Treasury as well
as generate good will around the world.
So as we look at these programs it's important for us to
examine OPIC's story as well as its role in the development
toolkit. Founded in 1971, OPIC seeks to promote economic growth
in developing and emerging markets by providing political risk
insurance and direct loans and guarantees to businesses.
And while OPIC is appropriated by Congress, it actually
returns, as I said, over $250 million to the taxpayers because
it runs a surplus and it's achieving important development
outcomes.
OPIC is doing this while enhancing the welfare of
recipients. One small example is its partnership with
MicroBuild, which is a housing first micro finance program
established by Habitat for Humanity.
MicroBuild provides micro finance lending to families who
do not have access to traditional means of credit in developing
countries like Cambodia.
By investing in the MicroBuild fund, OPIC has allowed
thousands of low-income individuals around the world to find
homes. It's a great example of development at work.
OPIC helped to crowd in investment for MicroBuild and
improved the lives of new homeowners who would not have been
able to access the financing otherwise.
This focus on quality and improved outcomes is in stark
contrast to other countries are who are in developed finance.
Take, for example, the Isimba and Karuma Dams in Uganda funded
by the Ex-IM Bank of China, both of which have sprouted cracks.
It's probably not a good thing that you want to see in dam.
Development finance by the newly empowered DFI then offers
a high-quality alternative to Chinese financing. As we seek to
confront the challenges of the 21st century and to ensure that
the youth dividend is not wasted in developing countries,
development finance can be a powerful tool in our tool kit.
It'll need to be wielded expertly by our development
professionals and cannot replace our other forms of assistance
but, rather, complement them.
Ultimately, development finance can improve the lives and
wellbeing of millions of people, catalyze private sector
growth, build capacity in recipient nations, and set these
nations on a path to self-reliance.
I look forward to hearing from Mr. Washburne on how a newly
empowered DFI can achieve these development outcomes in a
sustainable and responsible way.
And with that, Mr. Chairman, I yield back.
Chairman Royce. Well, I thank you, Mr. Bera, and this
morning I am pleased to welcome Ray Washburne, president and
CEO of OPIC, the Overseas Private Investment Corporation.
This is his first appearance before our committee and he
brings to the table decades of experience in business and
investment including overseas and including in the real estate
and restaurant industries over the course of his career.
He has served on the board and loan committees of several
banks, infrastructure, construction, and manufacturing
businesses. He's been engaged in those as well.
He's spent a great deal of time in Africa where he funded
the construction of a new K-12 school for children in Zambia.
So we very much appreciate him being with us today to
discuss this and without objection the witness' full prepared
statement is going to be made part of the record.
Members here are going to have 5 calendar days to submit
any statements or questions to him or extraneous material for
the record. We will ask him to summarize his remarks and then
we will go to questions.
I know the Summit of Americas starts today and I know
something about the flight schedule down to Lima, Peru.
So I think we are going to have to probably wrap up by
12:15 for you to make that flight. So we will go right to your
opening statement now, and thank you again, Mr. Washburne.
STATEMENT OF THE HONORABLE RAY W. WASHBURNE, PRESIDENT AND
CHIEF EXECUTIVE OFFICER, OVERSEAS PRIVATE INVESTMENT
CORPORATION
Mr. Washburne. Thank you.
Thank you for inviting me to testify today on this critical
topic. Chairman Royce, I'd like to acknowledge the work you
have done to advance U.S. foreign policy, particularly in
Africa.
From the African Growth and Opportunity Act to empowering
women to Electrify Africa, you were a step ahead. Dr. Bera, I
enjoyed getting to know you yesterday and learning more about
your priorities.
Indeed, this committee's bipartisan work has helped set the
stage for the administration's proposal for the United States
to establish a reformed, more effective Development Finance
Institution with modernized tools and a focus on supporting
private sector-driven development.
When it comes to meeting the massive development needs
around the globe and advancing American foreign policy, this
proposal--and the legislation the committee is weighing--is
essential.
As you know, development finance uses tools such as loans,
guarantees, and political risk insurance to facilitate private
sector investment in emerging markets that will have positive
developmental impact.
These are transactions the private sector won't do on their
own.
Through OPIC, the U.S. Government has used these tools to
back projects in key sectors such as power, water, and health
that improve life for millions and lay the groundwork for
economic growth.
Likewise, the U.S. Government has used USAID's Development
Credit Authority to drive private investment into countries
that have not had sufficient--or any--access to commercial
finance.
This model of mobilizing private investment is only
becoming more prominent, as the needs in the developing world
are just too great to meet with government resources alone.
Yet, U.S. capabilities have become outdated as we have gone
without significant legislative updates. As a result, we lack
the modern 21st century mechanisms needed to either compete
with countries like China or cooperate with our allies like
Britain, Germany, and Japan, which are investing heavily in
emerging markets.
And a global competition for influence is on. While I was
in Asia, I saw how China's Belt and Road Initiative is changing
the political and economic landscape.
The amount of investment China has planned for this
initiative is staggering, aimed at interconnecting 65 percent
of the world's population, one-third of the world's GDP, and a
quarter of all goods and services.
Of course, a condition of many of these loans is that
Chinese firms and labor get the business. And we know what
happens when countries can't pay.
In December, for example, Sri Lanka gave control of a
strategic port to Beijing for 99 years. This comes as China has
been stepping up its presence in the Indian Ocean and South
China Sea and all of its critical shipping lanes.
Mr. Chairman, we have to be engaged in the developing world
with a robust alternative to these state-directed investments,
which can leave developing countries worse off. And we have an
alternative in a new United States Development Finance
Institution.
This proposal is a result of the President's Executive
order on reorganizing government which prompted a fresh
interagency look over several months. We found that the U.S.
Government's ability to deploy these tools strategically is
limited by outdated legal authorities and fragmentation.
With this in mind, the administration developed a proposal
to improve efficiencies, reform programming, and--as envisioned
by the National Security Strategy--elevate these tools to
advance U.S. foreign policy goals.
The President's budget proposes to consolidate multiple
U.S. Development Finance Institutions into a new stand-alone
Development Finance Institution. The DFI will have better
policy alignment and strong links to State and USAID to ensure
its transactions align with U.S. foreign policy and leverage
USAID's programming.
This includes $56 million in funding for technical
assistance and grants for potential DFI projects that need a
bridge to becoming investment ready. We also need governance
and management structures to ensure the DFI and USAID's field
work seamlessly.
The administration is requesting $96 million in
administrative expenses for the DFI. However, through careful
loan and insurance underwriting, it is expected the DFI will
not only offset its own operating costs but also return
hundreds of millions of dollars to the U.S. Treasury.
The new DFI will include reforms to better manage taxpayer
risk and ensure its investments are additional to the private
sector. We will not subsidize projects that can or should be
financed on their own and we will ensure that our work upholds
the highest environmental, social, and worker rights standards.
Another part of the reformed DFI is increased transparency
and accountability through expanded inspection and oversight.
The President's budget requests $2 million for this purpose.
In conclusion, Mr. Chairman: In 7 months as the head of
OPIC, I've seen the power of the private sector unleashed to
advance U.S. foreign policy.
OPIC approved a transaction which will increase Ukraine's
energy independence from Russia. OPIC formally launched its 2X
Women's Initiative to catalyze over $1 billion in capital to
invest in projects that empower women; and OPIC signed an MOU
with our Japanese counterparts to bolster investment in the
Indo-Pacific region and beyond.
A new modernized DFI will be far more competitive, creating
countless opportunities throughout the developing world. But
this modernization of development finance cannot happen without
the support of this committee.
I am extremely thankful for the leadership of Mr. Yoho for
embracing this concept through H.R. 5105. Indeed, just last
evening, the administration released a statement noting its
strong support for the goals of this legislation. I look
forward to working with the committee as the process moves
forward to ensure the DFI is structured for long-term success.
I'll be happy to address any questions you may have.
[The prepared statement of Mr. Washburne follows:]
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Chairman Royce. Very good. I have some quick questions for
you and, as you know, one of the advantages of USAID's
development credit authority is it relies on the expertise of
the men and the women in the field and that their expertise
helps to ensure that the risk sharing agreements are in line
with America's development objectives.
So the question I have is if you're going to merge the
development credit authority and OPIC, would the new
Development Finance Institution still be able to benefit from
USAID's personnel in the field? Is that what this is predicated
on?
Mr. Washburne. Yes, sir. I met with Administrator Mark
Green last week. We have his strong support. We have a letter
of support from USAID. In the field they can use OPIC now as a
force multiplier----
Chairman Royce. Okay.
Mr. Washburne [continuing]. Because USAID right now has one
tool and merging it with the new DFI they'll have seven
different financing fields.
Chairman Royce. So just so we have a grasp on this, what
sort of institutional linkages here to do envision between
USAID and the development credit authority that----
Mr. Washburne. Well, the development credit----
Chairman Royce [continuing]. In other government agencies?
Mr. Washburne. The development credit authority will be
moved over to OPIC and administered by OPIC----
Chairman Royce. Okay.
Mr. Washburne [continuing]. But the field staff will still
be USAID.
Chairman Royce. All right. All right.
Chairman Yoho's BUILD Act would authorize the new
Development Finance Institution to make limited equity
investments in projects. So I just ask what investment criteria
would the--a new development--the new DFI use to ensure that
such authority goes to worthy recipients and that it is not
politicized and that it is--does not replace private sector
capital?
Mr. Washburne. The equity authority helps modernize OPIC's
financing tools. Currently, every other DFI in the world has
equity authority and we have an opportunity to participate in
some very strategic investments with the British and the
Germans and others and we don't have the ability to do that
because we are purely a debt instrument at this time.
So having the equity authority enables us to participate in
many more projects.
Chairman Royce. We discussed one example--there are a
number of examples of predatory practices in terms of loans
that we've see applied by other countries.
During Secretary Tillerson's trip to Africa, I know he
warned nations on the continent not to forfeit any elements of
your sovereignty as you enter into loans with China.
As you noticed in your testimony, you mentioned a condition
of many of these loans is that Chinese firms and Chinese labor
get the businesses, not local firms, right--not people in
country--and that comes at a cost.
A new think tank paper out last month identifies eight
countries that China is loaning to at risk of debt distress. So
how would a new Development Finance Institution counter this
predatory Chinese model and allow for sustainable economic
growth?
Mr. Washburne. Well, in the banking business we call what
the Chinese are doing ``loan to own.'' Their whole purpose is
to overloan on projects with the purpose to go in and take
control of them.
As you know, the United States--this development authority
will only make private sector-led projects. We don't lend to
state enterprises, and so a considerable amount of equity goes
into these projects.
So we've had a great success in investing with the private
sector into these areas. One thing that the equity authority
gives us is the ability to counteract a lot of these Chinese
investments because we don't have enough tools in our tool belt
to compete with them.
Chairman Royce. My time is going to expire here.
So I will go to Dr. Ami Bera. And he's deferring to Mr.
Brad Sherman.
Mr. Sherman. I think the basic facts are clear. You do a
lot to help international development, which is an important
objective of the United States, and instead of at a cost to the
taxpayer you actually return some money to the taxpayer.
What's absurd is you haven't--you're not functioning under
a long-term authorization. That is not your fault. That is
Congress' fault.
Back in 2007, we worked together on a comprehensive long-
term reauthorization. My hope is that the provisions of that
bill find their way into the legislation we are working on.
But I want to commend OPIC for doing what I would like to
see other agencies do and that is take congressional input
seriously you have adopted by regulation or by policy.
Many of the provisions of that 2007 bill which passed this
committee overwhelmingly with the support of the chairman and
which--as a matter of fact, I think we were both chair and
ranking member of the relevant subcommittee that created that
product.
And I would hope that your staff would indicate whether you
have an objection to including those same provisions in the new
legislation. In particular, a preference for renewable energy
projects, annual reports to Congress, support for international
workers' rights.
I assume that these are things that are now part of your
ongoing process and that you wouldn't have an objection to
seeing them in statutory language. Mr. Washburne?
Mr. Washburne. Yes, sir.
Well, thank you, Representative Sherman, and thank you for
our conversation yesterday. We talked many of these points out.
And thank you for your leadership. You went over yesterday in
2007 your frustrations in getting this bill pushed forward.
Mr. Sherman. I have been a strong supporter of a unicameral
legislature for the Federal Government for a long time.
Mr. Washburne. Yes.
Mr. Sherman. To Nebraska. Yes.
Mr. Washburne. Okay. And your points--we went back and
discussed them with the staff. The provisions of the bill, you
championed many of them, have become part of OPIC policy and we
are happy to have our staff get together with yours to go over
the other specific issues that you don't feel are included.
Mr. Sherman. And I want to commend you for having a policy
against what I call an anti-Armenia railroad and for
limitations on investments in Gaza.
The new bill does not have the provision that would require
you to have on your board a representative of small business
and a representative of organized labor.
Have the people filling those posts been useful? Would it
be useful to have those people on your board in the future?
Mr. Washburne. Yes, sir. I had nothing to do with the
makeup of the board. That was what the committee brought to us.
They have been helpful in the past, yes.
Mr. Sherman. Okay. My colleagues will point out usually I
have a host of not entirely pleasant questions for witnesses
and I am at a loss with----
[Laughter.]
Mr. Sires. Would you yield?
Mr. Sherman. I could indeed, but that would be so
uncharacteristic that the effect on the cardiovascular system
of some in the room would not be something I could take
responsibility for.
I go through a few of--now, when it comes to the extractive
industry transparency standards, it's one thing to say that
OPIC's project would adhere to those standards.
But could you live with a rule that said that the host
country in all of its activities would live with those
extractive industry standards?
Mr. Washburne. Sir, whatever the committee decides to
include in the bill is how OPIC will operate. So I don't have a
comment on that.
Mr. Sherman. At the risk to Karen's health, I will yield
back. [Laughter.]
Chairman Royce. We thank the gentleman for yielding.
We go now to Mr. Dana Rohrabacher of California.
Mr. Rohrabacher. Mr. Chairman, I will yield to Mr. Yoho.
Mr. Yoho. I thank my colleague from California.
Mr. Washburne, thank you for being here. We are excited,
obviously, with the rollout of this bill. I want to thank
Chairman Royce and Member Engel and all the people that are on
the committee that have co-sponsored this bill, H.R. 5101, the
BUILD Act.
The BUILD Act sets out to accomplish one not-so-simple
thing--transitioning countries--and this is something that--you
know, I've been up here going on 6 years--is how do we move
countries from aid to trade, and if you look at our top 15
trading partners, 12 of them were a recipient of foreign aid.
And so we looked at a way that we can coalesce all the
different agencies and departments. I think there are over 70
of them that give out some form of foreign aid and assistance.
And so we wanted to bring them together and we appreciate the
input you have had on this and moving forward.
We met with a group today that rebutted what you just said
about the lending to private-owned enterprises and we do not
lend to state-owned enterprise--we brought that up but they
didn't believe that. So we sure help you putting that out more.
And I think one of the big things is to counter China. We
can't compete with them dollar for dollar, and as we know, it's
the One Belt, One Road and I tell people it's one way and it
leads to China's depositories.
And they remind me of the robber barons of the old days in
America where they did those lending practices to consume what
they lent to, as we saw with Sri Lanka and their port there.
And so as we move forward with this, I think Chairman Royce
brought out a very good point. It mobilizes the private capital
markets is what we see and what I envision in this is by the
BUILD Act acting as a catalyst to spur that private capital
investment in countries that are searching for that investment
with the goal, again, to transition from foreign aid of the
past where we spent $1 to moving to where we are investing $1
in infrastructures, developing those economies so where we can
grow this.
Knowing that we can't compete dollar for dollar with China,
do you see this bill as a way to counter what they're doing in,
like, the South China Sea?
We know that that area now--ASEAN bloc of nations--there's
going to be more people living in the Southeast China Sea area.
By 2050, there's going to be more people living in that than
outside of that in the rest of the world.
Do you see this as a good vehicle to start countering that
and one that's needed by this country?
Mr. Washburne. Thank you, and your leadership has been
critical to this bill and I thank you for that----
Mr. Yoho. Thank you.
Mr. Washburne [continuing]. And the entire DFI community
thanks you for that.
Mr. Yoho. This has been a team effort with the whole
committee so I appreciate it.
Mr. Washburne. Right. But speaking specifically to the
South China Sea, one thing that OPIC does, as you know, is
large infrastructure projects--things like ports, railroads,
LNG plants, things that bring power and electricity.
The Chinese have swung under the underbelly of India, I was
recently in India. They have come to us and wanted us to come
in and help prop up, with private enterprise, their ports and
things so the Chinese don't come in and control that area
because the Sri Lanka deal was a wake-up call for that entire
region.
Mr. Yoho. It sure was, and we are seeing that in other
areas like the Maldives and that island--they're investing
between Australia and the United States in the Hawaii area----
Mr. Washburne. Yes.
Mr. Yoho [continuing]. And they're going to do that over
and over again and we've seen that in Djibouti. And we just
need a vessel, a vehicle, that we can change the dynamics and
we haven't had a major reform to OPIC, which was started in
1971, for the last 40 to 50 years and this is something that is
sorely needed and I look forward to having your leadership on
this and any recommendations that you can give us. I don't know
if you can in your official capacity but anonymously--if you
can give them to us through Edward, maybe----[laughter]--would
be great and we look forward to this getting moved down through
that. And I think the biggest thing is, how do you choose a
country to go ahead and invest with the model that we are
putting up here with the development finance? I would like to
also hear your thoughts on the Development Finance Institution
that's being created that we can partner with private
enterprise and we can partner with other countries where before
we were limited what we could do with OPIC. What's your
thoughts on that?
Mr. Washburne. Well, I will start with the first one--the
regions that you spoke to. One is as the chairman mentioned
earlier, I am going to the Summit of the Americas this
afternoon.
The Western Hemisphere is a top priority for this
Government. The Chinese have committed $10 billion to Port-au-
Prince in Haiti. So right at the front door of the United
States they're going to control one of the largest ports.
I am meeting with multiple port development people and
government officials in Mexico, Colombia, Peru, trying to see
what the situation is there because the ports in most of these
countries, as you know, are controlled by private enterprise
because they have the shipping. We are talking to Dole Bananas,
actually, in Peru. They've got a very large port on the Pacific
that they want to expand because they need to get agricultural
products out.
The Chinese have stepped up and said they'd like to do it.
The local governments are on to what the Chinese are up to and
so they've asked us to step in.
When we look at multi-billion-dollar type projects, OPIC's
maximum loan that we do to a single project is only $500
million. These projects are multi-billion-dollar size projects.
Mr. Yoho. Right.
Mr. Washburne. But the fact that we have some involvement
in it shows those host countries that the United States has an
interest in keeping them secure.
Mr. Yoho. Thank you. I yield back.
Mr. Chairman, thank you and I appreciate your support.
Mr. Washburne. Thank you.
Chairman Royce. Well, thank you, and without objection I
would just like to submit for the record a statement by
Elizabeth Littlefield, the former president and CEO of OPIC
under the Obama administration in support of this proposal,
Reform and Modernize America's Development Finance Toolkit.
And also I would like to submit for the record a statement
of support from the White House also for Subcommittee Chairman
Yoho's legislation here, the H.R. 5105, the BUILD Act.
Without objection.
Chairman Royce. And we go now to Mr. Ami Bera.
Mr. Bera. Thank you, Mr. Chairman.
Mr. Washburne, what you have been able to accomplish is
pretty miraculous. The White House, Obama administration
officials, Mr. Sherman, a broad consensus, House and Senate all
supporting something. So maybe this is a beginning of a new era
in Congress and in Washington, DC.
If not, it's a testimony to the importance of OPIC and the
belief that the United States has to be engaged globally in a
smart way, that we have to be looking at modernizing our
ability to invest and compete around the world, again, in a
smart way.
One thing that you touched on in one of your comments with
the modernization--with the BUILD Act was the ability to give
OPIC equity authority versus just debt investment.
If you could expand on the limitations that OPIC currently
has as well as with modernization, the ability to do equity
authority--how that would benefit us.
Mr. Washburne. Sure. Well, what the equity authority does
is today we just give a debt instrument on a loan, which gives
us senior status to all the other debt.
If a project was to have issues with it, the equity gets
wiped out and goes away, and that's fine and we can continue
doing that.
The problem is where the world has gone is we've lowered,
in many instances, the leverage we give on a project to not
that much debt, maybe 50 percent debt or less, and the equity
portion goes in.
But other countries won't go in that if they think the
United States has a superior position to them.
And so we need the ability to put a portion, and we are
talking about club deals where you go in together with other
countries.
In some instances, some we'll do on our own, When we are
able to compete more effectively on the worldwide scale that
these other countries are going into.
For example, in Japan when I signed the MOU in Tokyo last
fall, the Japanese wanted to co-invest with us in projects but
they don't want to do it where we are senior to them.
And so we signed an MOU that we are going to look at
projects where we can do it on a collaborative basis. On the
debt side, if this legislation goes through we'll be able to
also do a portion of it on the equity side.
And the British have had equity authority since 1948, and
we are the last country, kind of the hold out that hasn't done
it.
Mr. Bera. So, again, this would be an important tool----
Mr. Washburne. Absolutely.
Mr. Bera [continuing]. To modernize things. You also
touched on--as you were highlighting some of the port deals and
so forth, if I heard correctly, OPIC has a limit at $500
million. Is that what----
Mr. Washburne. Well, currently, per project.
Mr. Bera. Right. And in the BUILD Act would you be given
greater authority?
Mr. Washburne. Yes, sir. It would. I don't know the exact
number it would be. It would be larger, yes.
Mr. Bera. And raising that and giving you that ability as
we look at the Chinese model and how China's investing, will it
give us a competitive advantage or at least a better advantage
to----
Mr. Washburne. Well, again, the Chinese are putting in
sometimes 100 percent of the debt on projects. We'll keep our
cap at, on an extreme basis, at 75 percent.
So there's still a large amount of equity in there. That's
why the default rate is so low with OPIC. There's so much
equity in projects behind us that we just back reputable
developers and project sponsors that we haven't had an issue.
Mr. Bera. What is the default rate?
Mr. Washburne. What?
Mr. Bera. What is the----
Mr. Washburne. The default rate? As I understand it, since
OPIC's inception, 1 percent.
Mr. Bera. That's pretty remarkable.
Mr. Washburne. Yes, and OPIC's made a profit for 40 years
in a row, including last year. OPIC made a profit of $260
million. But we call that deficit reduction. We give it back to
you.
Mr. Bera. Absolutely. Which certainly is a good thing. So
and for the taxpayers that is a good deal as well. So, again,
relatively noncontroversial, and I want to thank my colleague,
Mr. Yoho, for his leadership on this and, again, this is the
type of thing that we ought to be able to get done in Congress.
So I thank you.
Mr. Washburne. Thank you, sir.
Mr. Bera. With that, I yield back.
Chairman Royce. We go to Mr. Dana Rohrabacher of
California.
Mr. Rohrabacher. Thank you very much.
First and foremost, I want to make sure that people
understand that these micro loans that we just touched on, how
important they are to establishing to the people of the world
that we are not just on the side of the big guys.
We are not just going in and making friends with the rich
people who control their societies. Countries like Cambodia,
where--which was mentioned, where you have basically a criminal
regime headed by Hun Sen, who was--basically held power with
brute force and corruption--these micro loans do--give people
the sense of optimism that they can improve their lives and
thus resist tyranny.
So I would like to make sure that that's clearly on the
record and I would imagine you agree with that?
Mr. Washburne. Yes, sir.
Mr. Rohrabacher. Okay. Let me ask you this. OPIC, over the
years, has OPIC ever lost money, and you might describe the
situation where it has, if it has--lost money where they have
guaranteed a loan to a business idea that didn't work out and
thus the taxpayers didn't get paid back?
Mr. Washburne. Well, I haven't seen the records for the
entire history of OPIC. Since I've been here in August we
haven't.
Mr. Rohrabacher. You haven't? Okay.
Mr. Washburne. We haven't. Sir, I am happy for our staff to
get with you and give you a complete list of all the
transactions----
Mr. Rohrabacher. I think I would like to have that list----
Mr. Washburne. Yes, sir.
Mr. Rohrabacher [continuing]. If you could have one of your
staff, because the second part of that question is, now, as I
would assume that the way we've set this up that there have
been situations where a private loan that was guaranteed by
OPIC didn't pan out and that the money was lost and thus the
American taxpayers were guaranteeing the loan and thus we had
to pay for it.
The question then is has there ever been a bank that lost
any money once the OPIC has guaranteed a loan?
Mr. Washburne. Sir, I would have to get my staff with you
to give you those details.
Mr. Rohrabacher. Well, what I would like to know is the
procedure that you use, does it put the bank that is the
partner--basically, we are ensuring that the bank will either
break even or make a profit.
Is there any risk that a business that receives this kind
of a benefit is having to make in order to receive that
benefit?
Mr. Washburne. If we give a guarantee to a bank, we will
give them a guarantee on the principal, not on the interest.
So if a project was to go bad, again, these are real asset
properties. These aren't a software development company or
something to where--I mean, it's a hard asset. So a hard asset
doesn't go to zero.
And so since we've been a senior lender we have got an
underlying asset for--to collect upon. Typically, there's 25
percent skin in the game, as I said, with the equity side of
the equation and that money gets lost. So if we did a----
Mr. Rohrabacher. So the bank actually--if something goes
wrong--we miscalculated, we are trying to help some people but
they don't succeed, the bank actually loses money as well as
the taxpayer?
Mr. Washburne. No. No, not----
Mr. Rohrabacher. No.
Mr. Washburne. So, I just want to clarify. So on a typical
deal, if we put in 75 percent debt and there's 25 percent
equity, of the 75 percent debt the bank is at risk for 25 of
that 75 percent.
Mr. Rohrabacher. So the bank----
Mr. Washburne. So they would lose 25--if $1 is lost, the
equity to the private developer----
Mr. Rohrabacher. Okay.
Mr. Washburne [continuing]. Gets totally wiped out and then
every lost dollar after that is 75 from OPIC, 25----
Mr. Rohrabacher. So there is some risk that these----
Mr. Washburne. Oh, absolutely. Absolutely.
Mr. Rohrabacher. We are not just guaranteeing a profit and
no loss so----
Mr. Washburne. For example, we recently did a deal in Costa
Rica for small business lending with a large U.S. commercial
bank. We put in $50 million. They put in 25 percent of that and
then the local bank put in the equity of that.
So if there was a loss on a loan, the local bank gets their
equity wiped out and, once again, OPIC would lose 75 percent
and the partner institution in the U.S. would lose 25 percent.
Mr. Rohrabacher. Thanks for clarifying that, and just one
note--that the Chinese are deeply involved, as we've already
heard, throughout the developing world and quite often they
rely on bribes and on making sweetheart deals with government
officials in countries that are not really all that democratic.
So that's something that we--if that's our competition, we
have to understand that and we do not want the Chinese to have
this outreach and actually beginning to have that type of
global influence.
It is a negative influence on the world, and so we wish you
luck in your restructuring and hope we can work together in the
future, even though Ed Royce, who's put his heart and soul into
this all of these years, isn't going to be with us.
We'll carry on, Ed. Thank you very much.
Mr. Washburne. Thank you, sir.
Chairman Royce. Thank you. We go now to Mr. Greg Meeks of
New York.
Mr. Meeks. Thank you, Mr. Chairman. Mr. Washburne, welcome.
Mr. Washburne. Thank you.
Mr. Meeks. Now I just want to say offhand I really have,
for the most part, believed that OPIC does excellent work and
this propose of the Development Finance Corporation I assume is
presumably to provide loans and grants and guarantees to
businesses that commercial banks won't or can't support, right?
That's basically what it's going to do. It gives people there
an opportunity.
But I want to be sure that those efforts extend to--I am
always concerned about diversity and that there's diversity in
lending and everybody has an opportunity.
So my first question is well, is how well did DFC work
continue with existing--will it continue to work with existing
U.S. programs to complement traditional assistance and
encourage diversity in its partnerships?
Because oftentimes when I go to certain communities,
there's no diversity or they want to make sure they have the
opportunity to be included in some of the lending and
investment opportunities.
So have you thought about how you'd make sure that there
are diverse loans that are there?
Mr. Washburne. Are you saying with U.S. companies for----
Mr. Meeks. Yes.
Mr. Washburne. Yes. Well, a big part of my job is being an
outward-facing CEO and going and meeting with new potential
people. Only 8 percent of our loans are with Fortune 500
companies.
So we have 675 projects in 90 countries. So we have a very
diverse and open marketing apparatus. We have--we use the U.S.
Commerce Department to help market us as well with this new
legislation. USAID and their field offices are going to help
drive this business.
Mr. Meeks. So I just want to make sure, because we know
there's a lot of minority and women-owned businesses that are
looking to invest abroad.
Mr. Washburne. Sure.
Mr. Meeks. And I want to make sure that they have a clear
opportunity and whether or not there will be specific policies
within the new DFC that--you know, strong outreach to women and
to minorities so that they know that you exist and that they
know what their opportunities are because they are looking to
do it and oftentimes they don't know the opportunities that are
there.
Mr. Washburne. Yes, sir. Well, the first person I hired
when I came to OPIC is a lady that set up a women's initiative
area within OPIC. We committed $350 million from OPIC, which
will catalyse $1 billion of investment. I am going to Lima this
afternoon and tomorrow we are having a large press conference
to announce this.
It's called the 2X Initiative and is an example--I spoke
earlier on that small business loan deal we did in Costa Rica.
We required of that loan that 20 percent had to go to women-
owned businesses. And so we've not only talked about it, we've
put real money to work.
Mr. Meeks. And on the flip side of that, I know that
generally OPIC had been very conservative, which meant that
many of the poorest countries were not included in the
investment portfolio. So I didn't see as many investments in
some of the poorer countries and I was wondering if not--if you
could now with this new DFC there would be further investment
in some of the poorest communities like on the continent of
Africa.
Mr. Washburne. Sir, I think we have projects in almost
every country in Africa and I am happy to submit to you where
our projects are located and a map to show where they are. We
are open in 130 countries.
We are active in 90 countries. We are closed in the high-
income countries or Communist countries. We are throughout
Africa. In fact, I had a team over there a couple weeks ago. I
am going myself this summer for 2 weeks and we are marking
ourselves heavily there.
As you know, OPIC was one of the leads of Electrify Africa
and----
Mr. Meeks. Absolutely, and I want to be assured that that
will continue.
Mr. Washburne. Oh, absolutely.
Mr. Meeks. Yes.
Mr. Washburne. When we look at----
Mr. Meeks. So let me ask this. I don't know whether this
does anything or not. I know that under the BUILD Act it
proposes that the DFC have equity authority, right, so too,
that I know OPIC doesn't currently have, and I was just
scratching my head.
Why is equity authority important and how would that change
the way that DFC approaches investments?
Mr. Washburne. OPIC was set up in 1971 and the tools under
which we loan to and invest with are pretty much the same as
they were then. The world has changed a lot since then and what
equity authority enables us to do is partner up with other
countries such as England and Germany.
Every other country that has a DFI has equity authority and
we are able then to participate in a lot more projects and a
lot more deals.
Currently, by just having a debt instrument we are left out
of a lot of things.
Mr. Meeks. My time is up. Thank you very much.
Chairman Royce. Thank you, Mr. Meeks.
We go now to Mr. Ted Poe of Texas.
Mr. Poe. Thank you, Mr. Chairman.
Thank you, Mr. Washburne, for being here. I also want to
recognize Mr. Mosbacher, who's in the audience today, and thank
him for all of his work that he's done in this area.
In 2016, Congress unanimously adopted my bill, the Foreign
Aid Transparency And Accountability Act basically to strengthen
accountability of development agencies--mainly, reporting short
verse--it's an audit of our foreign aid, foreign assistance,
things we do in foreign countries.
How are you ensuring accountability of OPIC to American
taxpayers?
Mr. Washburne. Well, sir, part of this bill is going to be
funding for an inspector general to come in. So we,
fortunately, have had very tough underwriting and this is going
to ensure as we go forward that the concerns you might have are
going to be covered.
Mr. Poe. I noticed that was in the bill. I just wanted to
hear it orally that that's a concern of yours and you're going
to make sure the American public knows how the money is being
spent?
Mr. Washburne. Yes, sir.
Mr. Poe. That's the purpose of the Foreign Aid Transparency
Act. Tell me what your feelings are, opinion, and how Ex-Im
Bank plays into all of this.
Mr. Washburne. Well, I can't really speak to Ex-Im because
it's a domestic oriented institution. We are, as you know,
totally international and we can't do anything in the United
States or its territories. So----
Mr. Poe. But can you give me your opinion of the Ex-Im
Bank?
Mr. Washburne. I haven't studied it, sir. [Laughter.]
Mr. Poe. What a great answer.
Mr. Washburne. This is my day job. So I can't speak to
that. I am sorry.
Mr. Poe. I am a supporter of the Ex-Im Bank and it's been
stonewalled over in the Senate because the Senate refuses to
appoint commissioners so that it can do what I think is a
good--beneficial not only to America but other entities across
the globe as well.
What role does China play in financing similar entities and
their government in dealing with foreign countries? What is
China doing?
Mr. Washburne. Well, they have the China Investment
Corporation, or CIC, and they've committed several trillion
dollars to--that's their main investment entity and that's what
we come up against and every country I travel to you get off
the plane and China--I was in--like last summer in Zambia and
you get off. The airport is a Chinese airport being developed
by the Chinese. You drive through town, they've just built a
soccer stadium and given it to the government.
And so it's a coordinated effort by the Chinese. As I said
in my opening statement, they want to tie together 65 percent
of the world's population in their Belt-Road Initiative, from
China all the way around through the Suez Canal.
Mr. Poe. And they use Chinese workers when they build all
these projects. They bring in all the Chinese. Locals don't
build these projects. No matter where it is, it's Chinese
workers come in and develop, build, construct, maintain all of
these projects.
Mr. Washburne. And even a country like the country of
Georgia, which has a port. If you look at the Belt and Road as
it goes all the way to England, that's a key logistic point for
the Chinese and the Georgian Government has come to us, said,
will you help us finance the logistics port so the Chinese
don't do it? Otherwise the Chinese are going to do it, and
that's a key, and you think the country of Georgia, how would
that have anything to do with the Belt and Road? That is a key
point for distribution.
So we can't match them dollar for dollar nor do we desire
to match them dollar for dollar because they do a lot of things
that don't make any economic sense whatsoever. But we could
back projects that are strategic to the United States.
Mr. Poe. Once again, I want to thank you for what you do. I
believe this OPIC is a--not only a financial entity that works
good for America and other countries but it's a diplomatic
positive for us in foreign countries, and I know this is going
to shock the chairman but I am going to yield back a minute to
the chair. [Laughter.]
Chairman Royce. I thank your Honor. Thank you, Judge.
We go to Albio Sires of New Jersey.
Mr. Sires. Thank you, Chairman.
Mr. Washburne, thank you for being here. Thank you for
helping us pay the debt that we owe--for the money you return
to the Treasury--just a little bit.
I have a couple of concerns and I am glad you're
reorganizing and I think it's the right thing to do, and you're
focusing on the Western Hemisphere, which is one of the
committees that I serve on.
How does this political risk insurance work with some of
these countries? I am thinking in terms of Venezuela. You know,
they've been just atrocious.
Did we ever have any investment there or anything like that
in the past?
Mr. Washburne. No, sir. We are closed in Venezuela and have
been for years. We don't have any projects there nor are we
allowed to even look at projects there.
Mr. Sires. Okay. And in terms of--we just had island hit
very badly by these hurricanes. U.S. Virgin Islands, Puerto
Rico, St. Thomas.
Mr. Washburne. Yes, sir.
Mr. Sires. Are you making any effort to partner up with the
private sector to see if we can help or just some of the
projects to assist these islands? Because they really are a
mess and I know that they don't have a lot of equity to put
forward in some of these places when you do this partnership.
Mr. Washburne. We are closed in U.S. territories so I can't
go to Puerto Rico. But we committed $1 billion to the Caribbean
region, whether Dominican Republic, a lot of the islands
throughout there, and we are working on multiple projects right
now, primarily infrastructure--power grids, ports, upgrading
airports.
Mr. Sires. That's what I was thinking in terms of some of
these islands that got hit so hard.
Mr. Washburne. Yes. And the interesting thing is very
little money goes a very long way in a lot of those islands.
But we are very actively--obviously, we are not open in Cuba or
Venezuela but everything else through that region we are very
actively engaged.
Mr. Sires. So, in other words, Puerto Rico is out of the
question?
Mr. Washburne. Yes, sir. It's a U.S. territory.
Mr. Sires. So the U.S. Virgin Islands also?
Mr. Washburne. That's out. St. Croix is out.
Mr. Sires. St. Croix.
Mr. Washburne. You know, the Solomon--anything that's a
U.S. territory.
Mr. Sires. Is there any way in your new reorganization that
you can try to include some of these places that got hit so
hard by the hurricanes?
Mr. Washburne. Sir, this is an international--that's not in
the legislation currently. And if that's something the
committee wanted to change--but that's not what OPIC was for.
There are other aid programs that feed to the domestic issues.
Mr. Sires. No, I mean, I just----
Mr. Washburne. And I will tell you, we did look at the
Puerto Rico issue when that hit. Obviously, we got a lot of
calls and our staff looked at it and we just can't participate
in there.
Mr. Sires. Totally?
Mr. Washburne. At all. Yes. Yes, sir.
Mr. Sires. And this political risk insurance, can you go
over that again for me? How does this work?
Mr. Washburne. Okay. Well, sometimes we just do the
political risk insurance. We don't even do a loan. But if a
company is going to build a project, for example, like a power
project in Vietnam, which is a Communist government but they've
got democratic reforms, we are trying to get them away from the
Chinese.
We gave them a political risk insurance which meant we get
a contract that we guarantee will be honored and then we go to
the Vietnamese Government and we get a counter party that, if
they sell electricity produced by an LNG plant into the
Vietnamese grid, they don't change contract terms.
They don't nationalize it, expropriate it, and those
things. And the governments know that it's the U.S. Government
with an insurance policy on that and that's why we had a very
low default rate because people realized it's actually the U.S.
Government they're changing the contract terms on.
Mr. Sires. Okay. Chairman, I am also finished. Thank you
very much.
Chairman Royce. Thank you for yielding back.
Mr. Tom Garrett of Virginia.
Mr. Garrett. Thank you, Mr. Chairman, and thanks to the
committee and specifically Member Yoho as well as Mr. Washburne
and the administration for advancing this initiative.
A moment ago you said, and I quote verbatim, ``The Chinese
do a lot of things that don't make any economic sense.'' I
agree. Would you submit that they make strategic sense?
Mr. Washburne. I would.
Mr. Garrett. And so if the Chinese are not dumb, and
they're not, and they're doing things that don't make economic
sense with lots and lots of money, would it seem then logical
to presume that they're doing them in order to advance a
strategic agenda?
Mr. Washburne. Well, they could do things like build a
soccer stadium in Zambia that makes no economic sense and then
just give it away. So----
Mr. Garrett. Right. But they might do that to curry favor
with the regime in Zambia, for example, and that would be then
advancing their strategic agenda, correct?
Mr. Washburne. That's correct.
Mr. Garrett. Okay, and I am not trying to be hostile. I
think what you're doing is great and I think you're doing it
well.
But I've pointed out in this committee before that there
seem to be two paradigms in the patterns of foreign aid. The
Chinese tend to give aid to dictatorial regimes and autocrats--
for example, building entire Presidential palaces that rival in
size and scope, say, for example, the Rayburn Office Building
with Chinese dollars and then giving them to foreign autocrats,
versus the United States, which renders aid in the form of
clean water and food to people, right?
There's aid to the top and aid to the people, and I would
submit that the American paradigm works only when the people
exist in a nation wherein the people have the ability and the
right to assert themselves, and where that is the case that
indeed the American paradigm is superior to the Chinese
paradigm. We get more bang for the buck. We generate more good
will.
I will tell you that as a soldier deployed in uniform every
pack of M&Ms I pulled out of my MRE went to a young person in
that nation where I was deployed so that the memory that they
had would be of an American soldier giving them a pack of candy
that they might not otherwise have the opportunity to enjoy
ever.
And I hoped at the time, as a 20-something, that that might
foster good will amongst these young people toward our nation,
moving forward. The Chinese paradigm is give their dad $1.
But I am not going down this road wantonly. I would submit
that this legislation and the bipartisan nature thereof
should--and I think it was Dr. Bera who said serve as a wake-up
call or maybe a new beginning that when Vandenberg suggested
that politics should stop at the water's edge, all too often in
this committee and in Homeland Security--I understand it
Education and Workforce where I also sit--I've seen partisan
sniping by this side taking shots at policies from the previous
administration and by that side taking shots at this
administration, which don't serve to advance the American
nation's best interest at home or abroad and it makes me want
to pull my hair out--that we should get back to that Vandenberg
concept that politics should stop at the water's edge because
we are so darn far behind here that I wonder if we can catch
up.
And I am not trying to lecture you, but this needs to be
said. Maybe somebody somewhere will watch it and take it to
heart. An American prominent political philosopher recently
stated publicly that there were inherent advantages to the
autocratic regime in China by virtue of their ability to act
decisively without debate.
Now, as someone who is absolutely passionately in love with
the idea of the American experiment--that individuals should
have the rights to make decisions for themselves--that the best
interests of the collective is advanced best by empowering the
individual--I loathe the idea that that person might have been
right.
But to the extent that we can all get behind something that
makes more efficient private investment in foreign nations in a
manner such to create alliances and strengthen trade
partnerships, to advance not only the interests of the United
States but a free--and those who aspire to be free across the
planet, it's about time.
So thank you for what you're doing. My genuine and sincere
thanks to my colleagues on the other side of the dais. We need
to work together to get this sort of thing right because we are
being lapped by people who do not have the best interest in
freedom and self-determination at their hearts.
I would yield back.
Chairman Royce. We thank the gentleman for yielding.
Karen Bass of California.
Ms. Bass. Thank you, Mr. Chair, and once again thank you
for your leadership in bringing a bipartisan bill that I think
is really going to make a difference and I also want to thank
Representative Yoho for your leadership on this bill.
Mr. Washburne, I appreciated our conversation yesterday and
welcome you to OPIC. Excited that you're there and very excited
by this initiative.
I raised a couple of concerns with you yesterday that I
think were probably in reference to a much earlier version of
the bill and know that I've had time to look at it, very
excited about it.
So I want to ask you in terms of moving forward in the
future, I know one of the things that you were saying yesterday
that you thought was going to be helpful was the fact that the
DFI would not have staff around the world but you could take
advantage of staff that were already there from USAID or in
Embassies.
So if you look at what the British are doing, which they
call their DFI CDC, they do have staff around the world.
So thinking out in the future, do you see the need for
that? Would you want to come back to us and ask for that type
of support? How do you think will develop in the future?
Mr. Washburne. Well, we want to use the USAID staff and we
also use a lot of the Commerce Department. They have staff in
almost every Embassy around the country for their purposes and
through a joint marketing we have been very successful with
them.
When I was recently in the Ukraine we went and marketed to
a number of companies there--U.S. companies that were there
through the Commerce Department's embeds into the Embassy--
their Commerce Department.
Ms. Bass. So you see that model being stagnant? You don't
see it growing?
Mr. Washburne. Oh, I see it growing. It's a big education
process. With this modernization of it, going forward, I am
with the State Department.
We, obviously, interface with them on a daily basis about
countries we are going to, what's strategic, where should we
stay out of, where we need to be cautious. So yes, ma'am, and I
also checked. Yesterday you asked on the African Women's
Entrepreneurship Program.
Ms. Bass. Yes. Yes. I was going to ask you about that.
Mr. Washburne. And it's a State Department grant program,
and one that is going to continue working under OPIC and State
can contact us with women entrepreneurs and through that
program we can give them financing through OPIC. So that is----
Ms. Bass. So it stays in USAID?
Mr. Washburne. Stays, but we provide the capital for them.
Ms. Bass. Right. Okay. Good. Good. Good.
Mr. Washburne. Yes, I went and checked on that for you, and
on the African trade hubs----
Ms. Bass. Before you move onto that, at AWEP then if you
would be providing the financing, I would think that AWEP would
be able to expand then. Is that correct?
Mr. Washburne. Oh, absolutely. Yes.
Ms. Bass. You would be adding much more resources than
currently exist.
Mr. Washburne. Right. And the head of our 2X Women's
Initiative I talked to her yesterday and she's actually going
to Lima with us today and when she gets back that's the top of
her agenda.
Ms. Bass. Great. Great. I appreciate that. And you were
going to reference the trade hubs.
Mr. Washburne. Oh, you asked about the trade hubs.
Ms. Bass. Uh-huh.
Mr. Washburne. We see them as rainmaking deals for us in
these areas.
Ms. Bass. So how do you think you would specifically
collaborate with them?
Mr. Washburne. Well, no. It's just market. They just could
submit us ideas and things that we market off of.
Ms. Bass. Okay. We probably, at another point, should talk
a little more about that.
Mr. Washburne. Absolutely.
Ms. Bass. Because I think that there have been improvements
in the trade hubs.
Mr. Washburne. Right.
Ms. Bass. There's definitely the need to have more trade
hubs on the continent of Africa. But how successful they are
and how that collaboration--I think it could be very beneficial
but we probably--it probably deserves deeper conversation.
Mr. Washburne. Good. Okay. Thank you.
Ms. Bass. Thank you. I yield back, Mr. Chairman.
Mr. Connolly. Would my friend yield?
Ms. Bass. Oh. Be happy to yield to you, Mr. Connolly.
Mr. Connolly. Because I am going to be brief. Thank you so
much.
First of all, Mr. Chairman, I would ask that an opinion
piece on the development credit authority published in the
devex.com be entered into the record.
Chairman Royce. Without objection.
Mr. Connolly. I thank the chair. Have you seen this op-ed
piece by a former aide to Administrator Natsios raising some
concerns about including the USAID piece in a superannuated DFI
and that it would, they claim, would hurt USAID's ability to
finance longer-term development projects?
Mr. Washburne. Sir, I haven't seen the article but
Administrator Green is in full support of this and----
Mr. Connolly. Yes, but that's not my question. I am trying
to get at the substance of it. Do they have a point that
potentially this could hurt USAID's capacity without intending
to and have you taken that into consideration?
Mr. Washburne. From the legislation that's been presented
to us, which USAID has given its approval to. I don't
understand what the issue would be.
Mr. Connolly. Would you be willing to talk to former USAID
Republican Administrator Natsios on this matter?
Mr. Washburne. I would be happy to speak with him. Sure. He
has never reached out to me. I have not seen that article. But
I wish he had contacted me before he wrote it.
Mr. Connolly. We'll make it available.
Mr. Washburne. Okay. Thank you.
Mr. Connolly. I thank you. Thank you to my colleague.
Chairman Royce. Would the gentleman yield?
Mr. Connolly. Of course.
Chairman Royce. And an earlier debate here we had some of
the discussions about the linkages to make sure that we
guaranteed the expertise and involvement of those men and women
on the ground.
It probably would behoove us to, as the bill moves forward,
define that a little more precisely. And so in keeping with the
gentleman's point we'd be happy to work with you in order to
strengthen and guarantee that symbiotic relationship there and
the use of that personnel and experience on the ground.
Mr. Connolly. Mr. Chairman, I thank you so much for that
because that's the only point I am trying to make. There can be
unintended consequences and let's make sure there aren't.
Chairman Royce. Precisely.
Mr. Connolly. And certainly Mr. Natsios has some gravity in
this matter that should be considered and why he didn't reach
out to Mr. Washburne I don't know. But we can fix that.
Chairman Royce. In his own way I think he did. [Laughter.]
Mr. Connolly. That's right. I thank the chair.
Chairman Royce. Thank you.
We go now to Joe Wilson of South Carolina.
Mr. Wilson. And thank you very much, Mr. Chairman, and
thank you, Chairman Ed Royce, for your long-term commitment to
the Overseas Private Investment Corporation.
The chairman has been an OPIC cheerleader for a number of
years, understanding how important what you're doing. And Mr.
Washburne, your background is just, in my view, perfect,
fulfilling something that I really respect--that President
Trump has appointed people of great talent to serve. So thank
you very, very much, and I we all look forward in a bipartisan
manner to working together with you.
OPIC has a dual mandate to support development while
advancing America's foreign policy and interest. How does it
balance with these priorities?
Mr. Washburne. With our foreign policy objectives?
Mr. Wilson. Yes.
Mr. Washburne. Well, it's a tool of foreign policy in the
sense that countries are regions that the U.S. Government would
like to prop up through free enterprise and I will give you an
example. In the Northern Triangle of Central America where
there's a very, very high unemployment rate we've been tasked
with finding companies that can go down there and create
employment to help stabilize those regions.
And so a big part of our mandate is how do we create
employment in those regions.
Mr. Wilson. And I wish you well. I, last summer, had the
opportunity for the Food for the Hungry program to visit
Guatemala.
Mr. Washburne. Right.
Mr. Wilson. And it was exciting to me to see the level of
economic development that was very clear in Guatemala City and
then needed in the more rural areas.
So what you're doing is making a difference. How does the
dual mandate compare to other Development Finance Institutions
including China's development finance model and should support
or preference for U.S. jobs and commercial interests be an
explicit mandate in the new Development Finance Institutions?
Mr. Washburne. Well, the Chinese strategic goal is the Belt
and Road Initiative and also worldwide trade. So they have
gotten into the Western Hemisphere through the Panama Canal.
They're trying to control, as I said earlier, through a lot
of the ports and things like that so they can open trade
passages for their ships. So we are very cognizant on where
they are. I've signed an MOU with the Australian Government
recently when their prime minister was in DC to where we are
going to work with the Australians and the Japanese on trying
to strengthen the outer islands outside of Australia on things
they need, like undersea cables to get communication going--
that the Chinese are trying to control that.
And so, like I said earlier, we can't match them dollar for
dollar but we can strategically find some places to----
Mr. Wilson. Well, it's really making a difference and we
all appreciate that. What opportunities for cooperation exist
between OPIC and foreign DFIs to address common development
goals?
Under your leadership, OPIC has signed memorandums of
understanding with Japan and Kazakhstan to support development
finance cooperation.
Does OPIC have other similar agreements or plans for
additional cooperation with foreign DFIs?
Mr. Washburne. Well, we also have one with Australia, as I
mentioned. We are currently working on one with India to where
Japan, Australia, India, and the United States will combine
forces in that Indo-Pacific region and try to share in projects
we can do together and intelligence that we can find projects
to go into.
As far as other DFIs, each country has specific regions or
areas they're interested in. A lot of them are interested in
Africa and OPIC was the leader on the Power Africa initiative.
We've invested over $2.5 billion to help electrify Africa
and other countries look for us to be the lead. They're
smaller. A lot of them are organized together and they would
like to invest together and that's why the equity authority is
so important to us because a lot of them invest is equity, not
through debt.
Mr. Wilson. And I am grateful to hear about the working
relationship with India. I am very grateful that I have worked
very closely with Chairman Ed Royce, who was the former
chairman of the Caucus of India and Indian-Americans and I
followed him and the opportunities that we have with Prime
Minister Narendra Modi are just so positive. So this is really
very good news.
You pride yourself on a self-sustaining agency which
returns funds to the Treasury every year. Will the new DFI also
be expected to make returns to taxpayers?
Mr. Washburne. Yes, sir.
Mr. Wilson. And that's good. In fact, that is so good I
yield back my time. You were very clear. [Laughter.]
We are not used to people being this clear. Thank you very
much.
Mr. Washburne. Yes.
Chairman Royce. We go now to Norma Torres of California.
Ms. Torres. Thank you, Mr. Chairman.
Mr. Washburne, thank you for all the work that you're
doing. I have very focused my work in the Western Hemisphere,
specifically I co-lead the Central America Caucus. It's a
bipartisan caucus that has been focused on the Northern
Triangle.
I understand that OPIC has an active project in Guatemala
involving Banrural--a rural development bank linked to the
Government of Guatemala.
Unfortunately, there's been accusations of public
corruption. Are you aware of these allegations?
Mr. Washburne. You know, Citibank is the lead on that
particular loan. I don't have the minute details of that. But
OPIC's loan is through Citibank and they're the ones managing
that relationship and that's the only project we have.
Ms. Torres. My question is, sir, are you aware of these
allegations of public corruption.
Mr. Washburne. Well, there's a lot of corruption in
Guatemala.
Ms. Torres. That is not my question, sir.
Mr. Washburne. Right. On that particular deal, I don't have
the specifics. No, ma'am.
Ms. Torres. So what is it that you do to ensure that you
are not working and that American dollars--taxpayers' dollars
are not going to corrupt individuals, the drug cartels, the
people that are harming--the people that are making their way
north to our southern border are the people that we are trying
to help in trying to address the root causes of migration,
which is a primary objective of this administration?
Mr. Washburne. Well, when I first started at OPIC I was
asked to focus on the Northern Triangle where OPIC had not had
a focus in a long, long time.
Ms. Torres. I appreciate that.
Mr. Washburne. And so in El Salvador, Honduras, Guatemala--
I took a trip there. My teams have been down there multiple
times looking for projects we can do to help the people on the
ground.
Electrification, transportation--as you know, in
Guatemala--it's very difficult to drive anywhere with the
mountainous roads. We try to go in with ag businesses where
they can get the agriculture out of the mountains and to the
ports. The ports are very undersized, and we realize the
immigration issue but we feel with creating opportunities of
employment in those countries that'll stabilize those
countries.
Ms. Torres. I wholeheartedly agree with you, sir. The issue
is because there is so much public corruption opportunities for
American business to thrive there when they're having to
compete with other local organizations that may be having to
pay off a corrupt government official I want to know what steps
are you taking to work with the attorney generals in this
region, with CICIG specifically, to ensure that the folks that
you are trying to help are not the ones that are hurting our
American agenda.
Mr. Washburne. Well, the businesses that we back to go in
those countries are very well vetted. We always go in with a
U.S. partner like a Citibank or someone like that goes through
their own anti-corruption----
Ms. Torres. Should my question be addressed then to
Citibank to see why, as an American bank--banking institution
is doing business with a corrupt organization in Central
America? Is that your statement here today?
Mr. Washburne. My statement is we do very intense
investigations of the people we do business with as well as the
lending institutions we partner with.
Ms. Torres. What does that look like--an intense
investigation?
Mr. Washburne. Well, I am happy for our staff to come over
and walk you through exactly how we process a loan, how we
monitor a loan, and how we do background checks on who we deal
with.
Ms. Torres. I know that this is an uncomfortable
conversation to have and to have publicly, but I need to have
some reassurances that while you're working there and we want
you to continue to work to create local opportunities for the
youth there but at the same time I don't want you to focus and
for the work to damage the work that we are doing in trying to
address the public corruption issues there by providing
opportunities for these corrupt individuals to continue to
thrive.
Mr. Washburne. We are very happy to sit down with you and
your staff and walk through everything. All our loans are
totally transparent. You can go on the web and see who we do
business with. And so I am happy to come over anytime and----
Ms. Torres. Just for the record, Mr. Chairman, since I
can't get an answer from our guest here today, does that mean
that this is a classified briefing that I need to ask for?
Chairman Royce. Congresswoman Torres raises a point, which
has to do with a case for which she's seen a press report. We
have strong laws on the books in terms of, well, the Foreign
Corrupt Practices Act and other laws which should guarantee
that we do not have a situation where U.S. agencies are engaged
with financial interests overseas.
A cartel is what you refer to. There are also laws on the
books that prevent the engagement here in terms of involvement
with foreign governments overseas.
So that being the case, I would suggest, Congresswoman
Torres, you and I and the ranking member should meet along with
the staff of the agency and we should review this particular
case--get to the details and have their investigative people
come in and we'll get to the bottom of it.
Ms. Torres. Thank you, Mr. Chairman. I yield back.
Chairman Royce. Very good. We go now to Mr. Mike McCaul of
Texas.
Mr. McCaul. Thank you, Mr. Chairman.
Ray, good to see you again. We've known each other for
quite some time. I want to applaud and commend the President's
decision to put you in this position. I can't think of a
stronger mind, business leader, and someone with just dogged
determination to get things done, and I think you bring a fresh
enthusiasm to what was becoming not such a fresh face for us,
and it's what we need right now and we need it from a foreign
policy standpoint. It's really the soft power piece that
complements what our military does around the world.
So, again, I want to thank you. I want to say personally
anything we can do to assist your mission we are strongly
supportive of you.
My question has to do with--I get two but the first one,
China, they are a superpower now. It's hard to compete. As you
know, they're in South America. They're in South America. Their
model--they have $12.6 billion in loans now. It's also hard to
compete with a country that doesn't have any anti sort of
corruption practices--laws on them, so they can walk in a room
and hand basically a suitcase full of cash. Our guys, we
obviously can't do that. We are prohibited by Federal law.
They also offer to build soccer stadiums to get their
contracts, to get access into these countries. So I guess my
first question is how do you compete with someone when you're
on sort of an unlevel playing field from the get-go and they
have made great advances and strides in both these continents?
Mr. Washburne. Thank you for your comments, first of all. I
appreciate those.
You know, the Chinese--we are not going to match them
dollar for dollar and your point of soft power is exactly what
OPIC is. It's a soft power agency of foreign policy for the
United States.
And so there are certain areas we can go in. If the Chinese
are at Port-au-Prince, which I mentioned earlier--they're
rebuilding the port there, which gives them control--then as a
counteraction we need to find other ports. We should have been
the ones in there doing that and we kind of fell asleep at the
switch. I don't know why we weren't there.
And so it's more of a strategic play for us because our
dollars are very limited. We are not an aid agency. We are a
business agency, and I have to underwrite projects that
businesses believe will make a profit and come back because
they have so much equity in them.
So building a soccer stadium obviously serves no purpose.
Building a port like in Sri Lanka that made no sense to begin
with, we can't find a developer to do that and we are not an
aid agency. So we are very strategic on where we go and what we
are investing in.
Mr. McCaul. Right. I think Djibouti is another example
where we actually have a military post there and they're there
as well. I think one argument that always plays against them
though are these countries that they move into, it doesn't
benefit the host country, at the end of the day. They may have
shiny objects they can wave in front of them but they really
don't invest in the wellbeing of the country's health overall.
In fact, they bring in their own workers many times and it
brings no real, I think, assets to the host country itself.
And so, hopefully, over time countries in Africa and South
America will see that and they'll turn away from that
competition.
Secondly, I think--maybe Mr. Yoho had maybe asked you this
question--but I co-sponsored his BUILD Act, which creates a
U.S. international Development Finance Corporation and it
really helps leverage all the loans that you have with OPIC and
USAID's development credit authority. Are you supportive of
this? I know it was in the President's budget as well.
Mr. Washburne. I am supportive and Administrator Mark Green
is supportive of it. The White House--we gave them a letter
last night. They're in support. In fact, USAID and I met and
so, yes, I am supportive of it.
Mr. McCaul. And just to close, I mean, I think, again, your
enthusiasm is welcome here. You're going to do a great job and
OPIC has a great story to tell because a lot of--most of it, it
can bring billions of dollars of investment yet with almost--
with not a whole lot of appropriations from Congress.
And so a lot of it is primarily self-funded and I think we
should be taking greater advantage of OPIC's reach and
authorities throughout the globe to advance the United States'
interests abroad.
When we have such a complex world right now with Russia and
China being expansive and with Iran and North Korea and so many
hot spots, I really applaud your leadership, sir, and I look
forward to working with you.
With that, I yield back.
Mr. Washburne. Thank you.
Chairman Royce. I thank the gentleman for yielding back.
I want to thank Mr. Washburne for being here today and for
sharing the administration's views on the importance of
development finance and how it can be reformed and for your
support here today for Subcommittee Chairman Yoho's BUILD Act.
I know you're on your way to the Summit of the Americas.
But before you go, I also want to acknowledge Edward Burrier
sitting behind you. Edward was the deputy staff director of
this committee and one of our closest advisors for many years,
and Edward is one of the best.
And while it's a little strange to see him sitting behind
the witness and not behind the chairman, I can't imagine anyone
better than Edward to be serving you at OPIC and we thank
Edward for his work and dedication.
And Mr. Washburne, we wish you all the best in Peru.
The hearing stands adjourned.
[Whereupon, at 11:30 a.m., the committee was adjourned.]
A P P E N D I X
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