Supporting Investment in Emerging Markets

1
Supporting Investment in Emerging Markets

• Overseas Private Investment Corporation

John Simon Executive Vice-President
2
Net FDI and ODA to Developing Countries
Source IBRD and OECD
3
FDI Impact on Development

• Benefits
• Capital Flow ()
• Technology Transfer
• International Best Practices
• Cross-border Linkages (supply chains, trade
  markets, etc.)
• Competitive Pressure
• Responds to Policy Signals

4
Challenges of FDI

• Stable in Global Sense Can be Volatile Locally
• Affected by Global Conditions
• Lags Policy Changes
• Highly Concentrated - Difficult for Small Markets
  to Achieve Critical Mass

5
US Investment Related Activities

• AGOA
• MCC
• USAIDs DCA Program
• GDA
• USTDA
• OPIC

6
Role of DFIs

• Address the Perception-Reality Gap
• Bear Risks Market Cannot
• Provide Finance Tools Not Yet Available in Local
  Market
• OPICs Tools
• Political Risk Insurance
• Structured Finance
• Investment Funds

7
Africa Overview

• Macro Generally Improved
• Inflation Moderate (with exceptions)
• Fiscal Efforts Stronger
• Debt Levels Much Lower
• Payoffs From Reform
• Record Economic Growth
• Access to Global Capital Markets (Ghana Bond
  Offering)
• FDI Flows Stronger

8
Political Risk Insurance

• Political Risk Insurance covers U.S. Investors
  against
• Inconvertibility Inability to convert and
  transfer local currency into U.S. dollars.
• Expropriation Losses due to expropriation,
  nationalization or confiscation by a foreign
  government.
• Political Violence Losses due to war,
  revolution, insurrection or political motivated
  strife.
• Example
• SORWATHE/Tea Importers, Rwanda OPICs payment
  of four political violence claims for losses
  during 1990-1994 Civil War encouraged Tea
  Importers to stay and rebuild. In 1997, OPIC
  provided 1.2 million to insure expansion.

9
OPIC Housing Initiatives

• OPIC Housing Services
• Land Development Home Construction
• Lease-Purchase Finance
• Mortgage Finance
• Mortgage Securitization
• Housing Support Services
• Since 2001, OPIC has
• Provided support to more than 50 housing
  projects, with total commitments of over 1.1
  billion.
• Leveraged over 7 billion in additional capital
  into the emerging markets.
• Supported over 450,000 housing units to
  predominantly moderate and low-income households.
• Example
• OPIC is providing a 30 million loan to Ghana
  Home Loans to fund residential mortgages for up
  to 600 single family residences. Ghanaians will
  be able to obtain 15 year GHL mortgages with a 25
  percent down payment.

10
Small Business Finance Initiativefor Latin
American Banks
People in this region have the talent and drive
they need to succeedWhat they need is, in order
to be able to realize that hope, is better access
to capital. President George W. Bush March 5,
2007

• Earlier this year President Bush called for a
  new initiative that will help U.S. and local
  banks improve their ability to extend good loans
  to small businesses in Latin America.
• In partnership with the US Treasury and the
  Inter-American Development Bank, OPIC has
  responded to the Presidents call by
  significantly expanding the availability of
  risk-sharing guarantees and loans to eligible
  banks in Latin America to extend their financing
  activity for small businesses.
• OPIC currently anticipates 150 million will be
  available for small business lending through
  several different mechanisms it has available.

11
Investment Funds - Africa

• Recent Funds Include
• Africa Social Development Fund Call
• Africa Telecoms, Media, and Technology Fund
  (100mm)
• AfricInvest Fund II (175mm)
• Africa Healthcare Fund (100mm)
• Africa Capital Markets Call
• Millennium Global Africa Opportunities (300mm)
• Africa Catalyst Fund (300mm)
• Atlantic Coast Regional Fund (150mm)
• Africa Debt Fund (300mm)
• Global Housing Call
• International Housing Solutions (300mm)
• Africa Capital Alliance Property Investment
  (200mm)
• Africa Call 2006
• Helios Sub-Saharan Africa Fund (300mm)
• Sub-Saharan Africa Call 2004
• EMP Africa Infrastructure Fund II (533mm)
• Ethos Capital V (780mm)