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The American International Development Finance Corporation, known as DFC, is only about two years old. It was born out of a congressional amalgamation of two older agencies. It finances itself mainly with fees and interest on the loans it grants abroad. Recently he has a new COO. Former Carlyle Group chief executive and presidential transition expert David Marchick said Federal Drive with Tom Temin Following.
Tom Temin: David, it’s good to see you again in a different role than the last time you were there.
David Marchick: Thank you very much, Tom, nice to be with you.
Tom Temin: And tell us what form the CFDs have taken over the past few years now, that is, an existing bodily continuing agency.
David Marchick: Well, it’s an amazing agency with outstanding career professionals, top to bottom, and across the agency, and Congress on a bipartisan basis created the DFC and did a few things. It took what was once known as OPEC, the Overseas Private Investment Corporation, doubled its size from $ 30 billion to $ 60 billion, gave us extra tools, brought some aspects of USAID to the agency, and now we’re basically the development bank of the United States. We encourage private sector investment across the developing world to raise living standards, advance US foreign policy interests, and help these developing countries.
Tom Temin: So at this point, how much money is there roughly on the street, so to speak?
David Marchick: Well, we have about $ 32 billion or $ 33 billion in investment in the soil. During the last fiscal year, which ended on September 30, we invested $ 6.7 billion, which represents a 25-year record for the agency. The staff have just done a fantastic job scaling up investments in climate, in global health, in investments to support women and women-led businesses, and in technology. And so we’ve invested around 60% more this fiscal year than the average for the past five years. So the agency really works on all cylinders.
Tom Temin: And where you invest are loans that should be repaid properly, not grants?
David Marchick: So in fact, Congress has given us several tools. So we have loans that we expect to be repaid, and OPEC and DFC have never lost money for the US taxpayer. We have equity investments so that we can invest directly in businesses and help them grow and prosper. We provide political risk insurance for companies investing in developing markets. And then we also give grants. The tools at our disposal are therefore quite numerous. And Congress has extended these tools on a bipartisan basis.
Tom Temin: And if you look at the list of nations just under recent activities, they range from Rio de Janeiro, Brazil, Belize, Vietnam, at all levels, what’s the organizing principle behind the loans and grants that are granted by DFC?
David Marchick: Well, when Congress passed the law, which is called the Build Act, they asked the agency to prioritize what is called low income and lower middle income countries. The World Bank therefore has a country classification list, where it classifies countries according to their income level into four classifications. We prioritize low-income and lower-middle-income countries. We are also investing in some upper middle income countries like Brazil, where we can have a very big impact on development. And the investments we’re making are really, really amazing. I will give you some examples. This year we have done a lot in vaccine manufacturing. We are therefore in a pandemic, many people are still isolated and in many developing countries, especially in Africa, are still very late in terms of vaccination of their populations. Part of the reason is that we need more vaccine manufacturing capacity. So before the pandemic, the world produced about 5 billion doses of all vaccines. This includes polio, yellow fever, etc. We know we need 11 billion doses of COVID-19 vaccines alone. And so globally, we need to relax and expand the capacity to manufacture vaccines. And we’ve made a number of investments that will help build capacity for approximately 2 billion doses of COVID-19 vaccines made in the developing world for the developing world.
Tom Temin: And do you have enough oversight to make something so sensitive to be made to, for lack of a better word, Western standards of purity, and so on?
David Marchick: Yes. All of the investments we have made have been with proven companies, and they require numerous regulatory approvals, including the World Health Organization or regulatory approval from the United States. And they’ve also partnered with American pharmaceutical companies like Pfizer, or Johnson and Johnson, or in one case, they’ve partnered with an American university, Baylor University. So they have to meet the same strict regulatory standards that we have in the United States.
Tom Temin: We speak with David Marchick. He is COO of the US International Development Finance Corporation. And let’s talk about the recent investment of $ 610 million in political risk insurance for an innovative debt conversion in support of marine conservation in Belize. It sounds like a lot of different topics under one loan here.
David Marchick: It is a truly fantastic investment that our team has made. And so here is what happened. Belize is a heavily indebted country. We have partnered with the NGO The Nature Conservancy to reduce Belize’s debt. And in exchange for reducing part of their debt, they devote part of the savings to the protection of biodiversity, the protection of marine fauna, the protection of coral reefs and the protection of mangroves. And this is not only important for the environment, it is also important for the economy of Belize, which depends on the fact that 40% of its gross domestic product is linked to tourism, and most of it is linked to tourism. ecotourism. So people traveled to Belize for the beautiful oceans, coral reefs and scuba diving, and with our work they will strengthen the protection of their marine ecosystem, which in turn will help them boost the development of the sea. country. Belize has been hit hard by the COVID-19 vaccine, its GDP falling by about 14%, four times the blow the United States has suffered.
Tom Temin: And what control is there over these investments by the DFC itself? For example, do you put people, say, in Belize or Brazil, to be on stage to kind of watch it, to kind of be the controller, or how does it all work?
David Marchick: We therefore have a monitoring and evaluation program in the DRC where we send people to visit the sites. We do audits. We have the project managers reporting to us on how they’re doing. And we have that capacity, but we’re also building it up to do a better job of measuring development results after you’ve made an investment.
Tom Temin: Let me ask you a bigger question here. If you look around the world, you might be pessimistic about what’s going on with freedom. Let’s put it that way. You look at Belarus, Russia, what is happening in China vis-à-vis its neighbors, perhaps Taiwan. Even in our own hemisphere, Venezuela has fallen into a nasty dictatorship. Cuba is kind of a lingering sore there. Do you see, DFC, does the administration see these types of investments as one of the tools of our bulwark against the spread of dictatorship and trying to keep freedom moving?
David Marchick: Absoutely. This is one of the essential goals of the Build Act, and the reason Congress on a broad bipartisan basis supports the DFC is that what we are doing is advancing our foreign policy and national security interests in all areas that you have mentioned. So, for example, in Latin America, we just announced a transaction that supports both the Venezuelan migrant community in Colombia – many Venezuelans have left Venezuela and now live in Colombia – and we are providing financial support to these two people, but also for the communities that host these people. We therefore want to work with our partners around the world to support economic freedom, support opportunities and strengthen democracy.
Tom Temin: And in that note, there is one that, for those of us who are quite old, is still surprising to look at on its surface. And that’s the DFC committed $ 37 million for the Vietnam Fulbright University campus in Ho Chi Minh City. I mean, there was a time that would’ve been unimaginable in my lifetime, and now we have pretty decent ties to Vietnam.
David Marchick: Yes, it is an incredible investment. In fact, the idea for it dates back over 25 years, thanks to the late Senator John McCain, former Senator John Kerry and a former Delaware Senator named Joe Biden. And they have put in place a process to normalize relations with Vietnam and strengthen our ties. And that investment, that support for Fulbright, is just the latest manifestation of the work that John McCain and Joe Biden and John Kerry began 25 years ago.
Tom Temin: And it should be noted that you have personally had a mixed career, primarily in the private sector, but have had stints in the Clinton administration in the commercial arena. So you haven’t been in government for a long time. How does it feel to be back?
David Marchick: It’s good. It’s a great agency. What I really like about this agency, which will be important for your auditors, is that it is above all an agency which is run by career staff. We have a very small number of politicians. And so, a lot of my job is to support the career managers at the agency, give them space to do their jobs, and then step aside. And that’s what I’m trying to do.
Tom Temin: David Marchick is COO of the US International Development Finance Corporation, thank you very much for joining me.
David Marchick: Thanks a lot, Tom.