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The U.S. International Development Finance Corporation, known as the DFC, is only about two years old. It grew out of a congressionally ordered merger of two older agencies. It mostly funds itself with fees and interest on the loans it provides overseas. Recently it got a new chief operating officer. Former Carlyle Group managing director and presidential...
The U.S. International Development Finance Corporation, known as the DFC, is only about two years old. It grew out of a congressionally ordered merger of two older agencies. It mostly funds itself with fees and interest on the loans it provides overseas. Recently it got a new chief operating officer. Former Carlyle Group managing director and presidential transition expert David Marchick told Federal Drive with Tom Temin more.
Tom Temin: David, good to have you back in a different capacity than the last time you were on.
David Marchick: Thanks so much, Tom, great to be with you.
Tom Temin: And tell us the form that DFC has taken in the past several years now that is a ongoing corporeal existing agency.
David Marchick: Well, it’s an incredible agency with exceptional career professionals, up and down, and all across the agency, and Congress on a bipartisan basis created the DFC and did a few things. It took what was formerly known as OPEC, the Overseas Private Investment Corporation, doubled its size from 30 to $60 billion, gave us additional tools, brought certain aspects of USAID over to the agency, and now we’re essentially America’s development bank. We are driving investments in the private sector throughout the developing world to raise living standards, to advance American foreign policy interests, and to aid those countries in development.
Tom Temin: So at this point, roughly how much money is on the street, so to speak?
David Marchick: Well, we have about 32 or $33 billion of investments in the ground. In the last fiscal year, which ended September 30, we invested $6.7 billion, which was a 25-year record for the agency. The staff just did a fantastic job stepping up in climate investments, in global health, in investments to support women and women run businesses, and also in technology. And so we invested about 60% more this fiscal year than in the average we did for the past five years. So the agency really is operating on all cylinders.
Tom Temin: And where you invest, these are loans that are expected to be paid back correct, not grants?
David Marchick: So actually, Congress gave us multiple tools. So we have loans, which we expect to be paid back, and OPEC and the DFC have never lost money for the U.S. taxpayer. We have equity investments so that we can invest directly in companies and help them grow and thrive. We provide political risk insurance for companies investing in developing markets. And then we also do grants. So the tools we have are quite numerous. And Congress expanded those tools on a bipartisan basis.
Tom Temin: And if you look at the list of nations just under the recent activities, they ranged from Rio de Janeiro, Brazil, to Belize, to Vietnam, across the board, what is the organizing principle behind the loans and grants that are made through DFC?
David Marchick: Well, when Congress passed the law, which is called the Build Act, they mandated that the agency prioritize what are called lower income and lower middle income countries. So the World Bank has a country classification list, where they put countries based on their income level into four classifications. We prioritize low income and lower middle income countries. We also invest in some upper middle income countries like Brazil, where we can have a highly developmental impact. And the investments we make are really, really extraordinary. I’ll give you a couple examples. This year, we have done a lot in the area of manufacturing of vaccines. So we’re in a pandemic, many people are still remote, and in many developing countries, particularly Africa, are still way way behind in terms of getting their populations vaccinated. Part of the reason is that we need more manufacturing capacity for vaccines. So prior to the pandemic, the world produced around 5 billion doses of all vaccines. That includes polio, yellow fever, and etc. We know we need 11 billion doses of COVID-19 vaccines alone. And so globally, we need to flex up and expand manufacturing capacity for vaccines. And we’ve done a number of investments that will help create capacity for around 2 billion doses of COVID-19 vaccines made in the developing world for the developing world.
Tom Temin: And do you have sufficient oversight so that the manufacturing of something that sensitive is done according to, for lack of a better word, Western standards of purity, and so on?
David Marchick: Yes. All of the investments we’ve made have been with companies that have a proven track record, and they require numerous regulatory approvals, including World Health Organization or U.S. regulatory approval. And they’ve also partnered with U.S. pharmaceutical companies like Pfizer, or Johnson and Johnson, or in one case, they partnered with U.S. university, Baylor University. So they have to meet the same stringent regulatory standards that we have in the United States.
Tom Temin: We’re speaking with David Marchick. He’s chief operating officer of the U.S. International Development Finance Corporation. And talk about the investment recently $610 million for political risk insurance for innovative debt conversion in support of marine conservation in Belize. That sounds like a lot of different topics under one loan here.
David Marchick: This is a really fantastic investment that our team undertook. And so here’s what happened. Belize is a highly indebted country. We partnered with the NGO, The Nature Conservancy, to reduce Belize’s debt. And in exchange for reducing some of their debt, they are plowing some of the savings into biodiversity protection, marine wildlife protection, protection of coral reefs, and protection of mangroves. And that’s not only important for the environment, it’s also important for the economy of Belize, which depends on 40% of their gross domestic product is related to tourism, and most of it is related to ecotourism. So people traveled to Belize for the beautiful oceans and the coral reefs and the scuba diving, and with our work, they are going to strengthen protection of their marine ecosystem, which will in turn help them drive development in the country. Belize was hit hard by the COVID-19 vaccine, their GDP dropped around 14%, which is four times the hit the United States took.
Tom Temin: And how much oversight is there of these investments by the DFC itself? For example, do you place people, say, in Belize, or in Brazil, to be on scene to kind of watch it, to be sort of a controller of it, or how does that all work?
David Marchick: So we have a monitoring and evaluation program at the DRC where we send people out to visit the sites. We conduct audits. We have the project managers report to us on how they’re doing. And we have that capacity, but we’re also strengthening it to do a better job to measure development outcomes after we make an investment.
Tom Temin: Let me ask you a bigger question here. If you look across the globe, one could be pessimistic about what’s happening with liberty. Let’s put it that way. You look at Belarus, Russia, what’s happening in China vis-a-vis its neighbors, possibly Taiwan. Even in our own hemisphere, we’ve got Venezuela has descended into an ugly dictatorship. Cuba is kind of a persistent sore down there. Do you envision, does DFC, does the administration envision these types of investments as one of the tools in our bulwark against the spread of dictatorship and trying to keep liberty on the move?
David Marchick: Absolutely. That is one of the essential goals of the Build Act and why Congress on a broad bipartisan basis supports the DFC is that what we do advances our foreign policy and national security interests in all the regions that you mentioned. So, for example, in Latin America, we just announced a transaction which supports both the Venezuelan migrant community in Colombia — a lot of Venezuelans have left Venezuela, and now live in Colombia — and we’re providing financial support for both those individuals, but also for the communities that are hosting those individuals. So we want to work with our partners throughout the world to support economic freedom, to support opportunities, and to strengthen democracy.
Tom Temin: And in that note, there’s one that for those of us old enough, is still surprising to look at on its surface. And that is the DFC committed $37 million for the Fulbright University Vietnam’s campus in Ho Chi Minh City. I mean, there was a time when that would have been unimaginable in my lifetime, and now we have fairly decent ties with Vietnam.
David Marchick: Yeah, this is an incredible investment. Actually, the idea for this traces back more than 25 years, thanks to the late Senator John McCain, former Senator John Kerry, and also a former senator from Delaware named Joe Biden. And they put in place a process to normalize relations with Vietnam, and to strengthen our ties. And this investment, this support for Fulbright, is just the latest manifestation of the work that John McCain and Joe Biden, and John Kerry started 25 years ago.
Tom Temin: And we should point out that you personally have had an in-and-out career, mostly in the private sector, but you did stints in the Clinton administration in the trade area. So you’ve been out of government for a fair amount of time. What does it feel like to be back?
David Marchick: It’s great. This is a great agency. The thing that I really love about this agency, which will be important for your listeners, is it’s mostly an agency that is run by career staff. We have a very small number of political officials. And so in large part my job is to support the career officials in the agency, give them room to do their work, and then get out of the way. And that’s what I’m trying to do.
Tom Temin: David Marchick is chief operating officer of the U.S. International Development Finance Corporation, thanks so much for joining me.
David Marchick: Thanks so much, Tom.