In the twilight of the Cold War, President Reagan used a 1987 White House speech to articulate a vision for the widespread ownership of property in developing nations, “The people of Central America, and, in a broader sense, the entire developing world, need to know first-hand… that property is not just something enjoyed by a few, but can be owned by any individual who works hard and makes correct decisions… and that business, large or small, is something in which everyone can own a piece of the action.” 

The pending reauthorization of the US International Development Finance Corporation (DFC) presents an opportunity to advance American interests by enabling people in the developing world to own a piece of the action. Created during the first Trump administration through the bipartisan BUILD Act, the DFC is the market-oriented American counterweight to the Belt & Road Initiative, a strategy by the Chinese Communist Party (CCP) to deploy large-scale infrastructure financing in ways that advance its economic, political, and military interests across the developing world.  

As the Belt & Road Initiative has proliferated, China has demonstrated a consistent pattern of eroding the economic sovereignty of the countries that receive its investments. It has done so by promoting a coercive development model characterized by exploitative lending terms, predatory labor practices, and the arrogation of economic benefits to Chinese state-owned enterprises (SOEs) directed by the CCP at the expense of small and medium-sized businesses in the recipient country. Any responsible development actor would instead treat these businesses as the linchpin of future economic growth, job creation, and technological innovation. 

By contrast, the DFC enables America to offer a competing financing alternative, premised on strengthening rather than undermining the market institutions of a developing nation and its citizens in ways that advance US economic and security interests, while generating a healthy profit for the American taxpayer. 

It operates with an explicit mandate to attract private investment through co-investments and risk sharing with local institutional investors and other multilateral development banks. Its toolkit includes political risk insurance, loans and loan guarantees, and equity investments in projects and investment funds that support a portfolio spanning infrastructure and critical minerals, energy assets, agriculture, health services, and........

© The National Interest