[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.]

                                     
                                    

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