Home Letters Understanding role, opportunities of America’s DFC
I write to explain the role of the International Development Finance Corporation (DFC) and the opportunities it provides for investments in, and by extension, benefits to Guyana. The DFC, to distinguish it from the World Bank International Finance Corporation (IFC) that is a grouping of 184 member countries, is a US Government finance company and not an investment company. It is an American Government corporation. And contrary to what Guyanese may feel, DFC does not directly undertake investment in a project in a country. The DFC is not going to pour US$200 billion into Guyana in investment. It can provide soft loans to Americans, with some exceptions to non-American companies, for investments in Guyana.
The DFC encourages and funds private investment for projects in poor countries like Guyana through grants and loans. Private companies, primarily but not exclusively American-owned, apply for grants and/or loans, to fund investments in developing countries. The company is flush with funds from the US Congress — US$60 billion for loans, not just for Guyana but for other countries as well. If more funds are needed, Congress will make it available. The agency was created in December 2019. It is involved in only a few loan investment projects so far and the results are not known. The agency insures American companies’ investments of up to 50 per cent were it unable to recoup the investment.
Guyana has been targeted for American investment in line with the commitment made by Secretary Pompeo in his visit to Guyana earlier this month. Suriname, where the Secretary also visited, is also on the agenda of the DFC as part of the Growth of Americas Investment Initiative that is the brainchild of Pompeo. Guyana signed the initiative earlier this month. The DFC project is undertaken to counter the investment influence of the Chinese who have been spreading their US$3 trillion surplus in investments around the globe over the last two decades. The DFC replaces the US Overseas Private Investment Corporation (OPIC) and the Development Credit Authority (DCA), both of which used to finance American investment in developing countries to counter communist threat. Those of us who study development economics, like Ramesh Gampat, Tarron Khemraj, among others, would be familiar with the role and intention of IFC, DFC, OPIC, and DCA. DFC is new and literature on it is slowly becoming available; its achievement is not rated as yet. The ultimate objective of DFC is security-related through private investment that would lead to economic growth. Guyana is the second poorest country in the hemisphere. It, along with several others in the region, has been slowly ebbing out of US influence laden with Chinese investment. The US wishes to redirect influence and re-assert hegemony to secure its economic and security interests in the region. And as such, the Americas Investment Initiative through the DFC was launched a few months ago.
Opportunities abound for Guyana. Through the new DFC, loans will be given to American companies to invest in Guyana. Inevitably, these companies would team up with local Guyanese companies. The potential investment could add up to the equivalent of some $42 trillion (US$200 billion). Would that really happen? The CEO of the DFC and the State Department under which the corporation falls, as well as US AID, are serious about investments in Guyana. The US believes that through investment, democracy will be strengthened and protected in Guyana unlike what happened between December 2019 and August 1, 2020, when Guyana descended into extra-constitutional rule.
Since the DFC is a foreign aid agency, the CEO has to be approved by the US Senate as per US law. Adam Boehler was confirmed for the position last December. His trip to Guyana to promote investment may be his first for a developing country since COVID, signalling the importance and priority given to Guyana and other countries in the region by the US Administration.
Guyana stands to benefit from this Americas Investment initiative; the big bucks are available in America, not the Caribbean or Europe or China. Enormous low-interest loans are available in Washington for projects waiting for the requests. The financial terms are very generous. Missing are the American investors, the areas to be invested, strategies and methodologies of investment, local partners willing to take risks, and economists to evaluate the potential projects. A task force or a think tank should be quickly established to identify potential areas of investments (gas and oil line to bring fuel to the shore, refinery, petro-chemical products, power generation, urea production, methanol, oil and gas institute, housing and infrastructure construction, utilities, internet services, Demerara and Corentyne rivers bridges, among others) and to court American companies to set up operations in Guyana. The think tank or task force should have as members representatives of the Private Sector and potential investors, Government (Central Bank and or Ministry of Finance), economists and business persons from the diaspora (US-based), as well as diaspora specialists (worked with or have been immersed in diaspora affairs).
The visit by the DFC members and private business partners is welcomed by Guyanese Americans. Everyone I conversed with supports the move by the DFC to promote American investment in Guyana. This is the first official US investment initiative in Guyana since the 1960s. Guyanese Americans tell me they intend to take advantage of the initiative and are seeking to team up with American companies as well as local investors in Guyana to explore business opportunities. They are grateful to Pompeo, Ambassador Sarah-Ann Lynch, and DFC CEO Adam Boehler for this initiative and for President Ali to embrace it. Such planned investments, if come to fruition, would create massive numbers of jobs and incalculable wealth-boosting GDP. It is hoped that investments would be directed to underserved rural and hinterland communities that have been neglected since independence.
Dr Vishnu Bisram