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The writer was on the Development Advisory Committee of the US International Development Finance Corporation and was the president of its predecessor, the Foreign Private Investment Corporation.
When it comes to Latin America, the Trump administration’s top priority is creating a flow of illegal immigration and drugs to the US, but at the same time implementing initiatives to slow China’s economic impact on the region and expanding investment It is essential to do so. Under the cover of the Belt and Road Initiative, a multibillion dollar global infrastructure development program, China has provided significant benefits for access to critical minerals, electricity development and transportation infrastructure, but the US is almost there. Not there.
Of the many investments, China manages roughly two-thirds of Chile’s energy sector and virtually all of Lima, Peru’s electricity generation. In November, President Xi Jinping launched the $3.5 billion megaport north of Peru’s capital, a cutting-edge logistics hub that serves as a key link to the Belt and Road Initiative. China has now replaced the United States as a major trading partner for many of the region’s large economies, with the exception of Mexico and Colombia. As one observer said, “Chinese brings their check books, and Americans bring their notebooks.”
As a result, the US has lost not only market share and influence, but also the ideological battle between free markets, righteous capitalism and the dictatorship of state-owned enterprises. Assisting the host government to not attack transactions with Chinese people is not an effective strategy. Instead, all the US has to do is to build a viable, US-led alternative to China’s investment. In particular, comprehensive joint strategies are needed that actively compete with important minerals and infrastructure, and develop creative approaches to fundraising.
This starts with working with the private sector to mobilize public institutions both in the US and internationally that can support investment in Latin America. For example, the US International Development Finance Corporation (DFC) was created to encourage investment in low-income countries. DFC has a flexible toolkit, vast funding capabilities and a record of collaboration with both the US and international banks. He also enjoys bipartisan support in Congress.
The DFC must lead and cooperate with like-minded international development financial institutions such as the Inter-American Development Bank, as well as other US government players. IDB Invest, the private sector of IDB, has the market intelligence and ability to build transactions that maximize private capital mobilized for projects.
Together, they need to identify several priority countries where they can align their financial support with host countries’ economic policy and development priorities. Working with these governments, we need to encourage the pursuit of projects that directly promote growth through the provision of critical infrastructure and allow for safe access to products to local and global markets.
DFC and IDB Invest will need to register US and international banks to fund the project, as well as companies that provide construction capabilities to ensure that these projects are realized. Putting together a package of resources that all major players are consistent will simplify and speed up the overall process.
Some successful projects can be recreated and not only developed momentum, but also created templates for finance and development, and subsequently replicated. Once sufficient projects are undertaken, investors and lenders can create portfolios and sell these to investors such as pension funds that can accept single-digit higher blend returns. This is a great way to remove projects from your lender’s balance sheet, allowing you to recycle resources and create more loans.
The US cannot match Chinese investment dollars with the dollars. It always comes at a disadvantage when you compete with state-owned companies that don’t need to earn returns. However, we can meet our strengths. This starts with innovation and entrepreneurship. Development of high-quality infrastructure benefits both sides of a transaction with transparent, sustainable growth. It also allows us to leverage financial thermal power through strong partnerships between bilateral and international organizations.
If the new administration wants to silence China’s investment and the growth of influence in Latin America, alternatives that could align with our values, reflect historic ties with the region and promote economic growth. You must take the lead in providing the
