Supporting Investment in Emerging Markets

Overseas Private Investment Corporation

John Simon

Executive Vice-President

2

Net FDI and ODA to Developing CountriesNet FDI and ODA to Developing Countries

0

50

100

150

200

250

300

350

1998 1999 2000 2001 2002 2003 2004 2005 2006

$US

bill

ion

Net FDI Inflows to Developing Countries Net ODA

Source: IBRD and OECD

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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

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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

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US Investment Related Activities

• AGOA• MCC• USAID’s DCA Program• GDA• USTDA• OPIC

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Role of DFIs• Address the Perception-Reality Gap• Bear Risks Market Cannot• Provide Finance Tools Not Yet Available in

Local Market

• OPIC’s Tools• Political Risk Insurance• Structured Finance• Investment Funds

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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

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Political Risk InsurancePolitical Risk InsurancePolitical 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: OPIC’s

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.

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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.

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Small Business Finance Initiativefor Latin American Banks

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 President’s 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.

“People in this region have the talent and drive they need to succeed…What they need is, in order to be able to realize that hope, is better access to capital.”

President George W. BushMarch 5, 2007

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Investment Funds - AfricaInvestment Funds - AfricaRecent 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)

Total Capital Mobilization For Africa = $2.8 billion