484-595-0100
Officially Launched: U.S. International Development Finance Corporation (DFC)

Officially Launched: U.S. International Development Finance Corporation (DFC)

U.S. International Development Finance Corporation Launches

The end-of-the-year appropriations deal struck by Congress and the Trump Administration brought a number of policy changes offering significant opportunities for U.S. export and investment growth overseas.

A new agency, the U.S. International Development Finance Corporation (called the DFC) began operations on January 2, 2020.  Created by the BUILD Act of 2018, the DFC begins its first year in operation having secured a working $299 million budget for 2020.

Along with the recent seven-year reauthorization of the EXIM Bank, the DFC represents a significant step by the United States in asserting a larger and more capable role in international trade and investment.

What Is the DFC?

The International Development Finance Corporation is a merger of the former Overseas Private Investment Corporation (OPIC) and the Development Credit Authority, formerly housed in the U.S. Agency for International Development, the DFC represents an effort to streamline and bolster American support for private-sector projects in low and lower-to-middle-income countries.

In emerging markets, the role of state-run and multilateral Development Financial Institutions (DFIs) are growing, raising calls for the U.S. to adapt and expand its efforts, while also countering the increasing economic role of China.  While China puts billions into emerging market projects, mainly in infrastructure development, its private-sector development finance role is emerging.  

EXIM Shipping Containers Miami Port

The DFC Brings New Changes

The DFC significantly expands the capacity of the U.S. government to support private-sector-led development projects.  The DFC now has a $60 billion investment cap, up from OPIC’s $29 billion cap.  But unlike OPIC, the DFC has a more explicit mandate to focus on low- and middle-income countries (though waivers can be obtained for high and middle-income country projects that meet U.S. national interest, or that specifically focus on poor and vulnerable populations.)

In addition to adopting OPIC’s debt financing and political risk insurance portfolios, the DFC is now able to fund project feasibility studies and technical assistance grants and can lend in local currency to hedge against currency risk.  The most notable change, however, is the DFC’s new capacity to take an equity stake in investments (Congress approved $150 million for 2020) allowing it to play a stronger role in projects chosen for financing.

The DFC will be allowed to take up to 30% position in any project.  The DFC will also adhere to OPIC’s lending standards for social and environmental risk and impact.  While OPIC was formerly tasked to work with companies that were either U.S. based or included a U.S. partner, the DFC has only a mandate to prioritize U.S. companies. 

Concerns raised since the passage of the BUILD Act in 2018 about the amount allocated for DFC equity investments (considered low), accounting rules about the budgetary treatment of equity investments, and a prohibition on the DFC’s use fees to offset its operating expenses were not addressed in the time between the passage of the BUILD Act and launch of the DFC, but are expected to be raised in the future by congressional supporters of the new agency.

For more information about the DFC, see https://www.dfc.gov/

About Securitas Global Risk Solutions

Since 2004, Securitas Global Risk Solutions (“Securitas”) has helped clients across the United States develop solutions to mitigate credit and investment risk across the world.  As a specialty insurance broker focused on developing trade credit and political risk insurance programs, Securitas is focused on developing solutions that meet the needs their clients.  See our Website at https://www.securitasglobal.com/ for more information, or contact us at:

Telephone: 484-595-0100

Fax: 484-582-0111

Recommended News

Let’s Get in Touch

Office

900 West Valley Road
Suite 701, Wayne, PA 19087

Call Us

484-595-0100

EXIM Reauthorized Through 2026

EXIM Reauthorized Through 2026

Exporters Can Pursue Trade Goals with Confidence

Legislation passed just before the end of 2019 has reauthorized the Export-Import Bank of the United States (EXIM) for a seven-year period, until December 31, 2026, the longest authorization in the institutions history.  EXIM reauthorization was part of the nearly $1.4 trillion federal appropriations package passed by Congress and signed by President Trump on December 20, 2019. 

In addition to the seven-year authorization extension, the legislation also includes a process that allows EXIM to continue operations in the event that the bank’s Board of Directors lacks a quorum.  (EXIM’s quorum lapsed in 2015, significantly limiting the bank’s lending operations, and was only restored in mid-2019).   

EXIM’s authorization also includes a number of key policy changes critical to bipartisan congressional support as well as support from the administration.  These include: 

1. A goal of increasing small business exporters participation in EXIM projects, with a target of increasing small business exports to 30% (from the current 25%) of total EXIM supported exports by 2021.   

2. An additional goal for EXIM to reserve 5% of its exposure authority to support renewable energy, energy efficiency, and energy storage technology exports.   

3. A new initiative, called the “Program on China and Transformational Exports” which reserves 20% of EXIM exposure authority to assist American exporters to compete directly with Chinese exports and to assist exporters in innovative technologies, such as artificial intelligence, biotechnology and biomedical sciences, wireless communications, quantum computing and high performance computing, renewable energy, energy efficiency and storagesemiconductor manufacturing, emerging financial technologies, and water treatment and sanitation.  

4. A requirement that EXIM consult with the State Department to assess risk to national interest of any proposed transaction over $25 million in which the end user, obligor, or lender is controlled by, or a business entity of the Chinese government.  

With an extended period of authorization and full financing capacity, US exporters and their overseas clients can more confidently access and utilize EXIM’s services.  EXIM Chair Kimberly Reed noted, ““This legislation ensures EXIM’s authority to support jobs and keep America strong through exports for a long time to come.”  In addition to the initiatives noted above, the EXIM Bank helps support US exports through a range of programs, including guaranteeing loans to foreign buyers, credit insurance and some direct lending to foreign companies. To learn more about the range of products offered by the EXIM Bank, click here. 

As a active EXIM broker, Securitas has years of experience working with ExIm’s various trade credit insurance policies to ensure U.S. companies generate export-driven growth.  In 2015, Securitas was named EXIM Broker of The Year. 

Securitas is ready to help companies, particularly small businesses interested in pursuing an export strategy, learn how to access EXIM’s services. 

Recommended: EXIM News

Let’s Get in Touch

Office

900 West Valley Road
Suite 701, Wayne, PA 19087

Call Us

484-595-0100