WASHINGTON — The Senate Foreign Relations Committee met Wednesday to evaluate the potential reauthorization of the Better Utilization of Investments Leading to Development (BUILD) Act.
The BUILD Act, introduced in 2018 by Sen. Bob Corker, R-Tenn., and co-authored by Sen. Chris Coons, D-Del., passed with overwhelming bipartisan support. It established the U.S. International Development Finance Corporation (DFC), which serves as an agency that facilitates economic development in countries with “low- or lower-middle-income economies.”
The act is set to expire at the end of 2023, setting a three-month timer on the reauthorization process.
The DFC has the ability to make loans or guarantees, acquire equity or financial interests in entities as a minority investor and provide insurance or reinsurance to private sector and qualifying sovereign entities.
The corporation can also provide technical assistance, administer special projects, establish enterprise funds, issue obligations and charge service fees.
The DFC is uniquely positioned among foreign affairs agencies as the only one with an independent check on its mandate. More specifically, the BUILD Act states that there must be an Independent Accountability Mechanism, which annually reports back on the corporation’s “compliance with environmental, social, labor, human rights, and transparency standards.”
In the hearing, the committee spoke with DFC CEO Scott A. Nathan, exploring how Congress can better help the corporation in its endeavors abroad. Nathan said his overarching task as CEO is to balance strategic concerns, advancing U.S. foreign policy interests, and development projects, making a positive economic impact in struggling countries.
“I don’t see these two mandates as intention. I think they work very well together,” Nathan said. “It’s through development, through providing economic opportunity, through alleviating poverty, through creating greater stability, through economic growth, that U.S. foreign policy interests are served.”
While examining the witness, some senators focused their line of questioning on the potential for increasing investment in Latin America and the Balkans. Others asked more about competing with Chinese investments in similar countries.
One theme that many committee members emphasized while discussing China is its influence in countries with corrupt governments. Sen. Chris Murphy, D-Conn., expressed concerns about China’s amoral investing patterns.
“China takes advantage of countries with high levels of corruption and really weak rule of law,” Murphy said. “The DFC cannot really operate in environments where you have public officials on the take.”
Sen. Mitt Romney, R-Utah, also touched on the importance of DFC’s work in fighting public corruption in these countries and China’s strategic use of it to accrue influence there.
But for all of the concern about corruption abroad in this hearing, there was no explicit mention of the potentially corrupt elephant in the room with them: Sen. Bob Menendez, D-N.J.
In an indictment unsealed last week, federal prosecutors allege that Menendez used his position as chair of the Senate Foreign Relations Committee to “protect and enrich” three businessmen and “benefit the government of Egypt” in exchange for hundreds of thousands of dollars worth of bribes.
Menendez stepped down from his post as chairman following the indictment, passing the torch to Sen. Ben Cardin, D-Md. Menendez remains on the committee as a member.
As he opened his first hearing as chairman, Cardin said he seeks to strengthen American diplomacy by promoting core values, like democracy, good governance and anti-corruption in his new position.
“These are the values that give strength to American foreign policy,” Cardin said.
Later in the hearing, Cardin emphasized his interest in promoting good governance and anti-corruption at large by building up the capacities of American embassies to provide the DFC with the most updated information on corruption in countries it is considering investing in.
Among committee members more focused on Latin American investment, Sen. Tim Kaine, D-Va., mentioned that he and Cardin met yesterday with the president-elect of Guatemala, Bernardo Arévalo, who won on “a very aggressive anti-corruption campaign.”
Kaine said the U.S. would have a lot of interest in seeing Arévalo succeed in Guatemala.
“It would be a security interest in the United States for an anti-corruption and government in the Northern Triangle to be successful,” Kaine said.
Kaine expressed concerns that Guatemala would not qualify for DFC investment without a waiver because the country does not meet the World Bank classification for “low- to lower-middle-income economies.”
The senator said the DFC should look into ways to help pro-democratic and anti-corrupt governments.
“I sometimes think we spend a lot more time figuring out ways to use sanctions to punish enemies than we do figuring out ways to reward good behavior,” Kaine said. “The DFC is one of the areas where we can reward good behavior and I just hope that the restrictions in place don’t make that unnecessarily challenging.”
The hearing wrapped up with a discussion about looking to use DFC resources to rebuild a “thriving private sector” in Ukraine and help the country recover after the war. Nathan said funding Ukraine is “the right thing to do” and that it is in the U.S. government’s best national interests, particularly because Ukraine is the biggest source of grain to the World Food Program, which helps prevent people around the world from starving.
Sen. Jeanne Shaheen, D-N.H., said there is an interconnection between the U.S. economy and Ukrainian interests in the war against Russia, which she encouraged the DFC to continue considering as they seek out new investments. She also suggested the DFC look to the Western Balkans or Eastern Europe for an investment opportunity.
“I would hope Georgia is one of the places you’re also considering for an office because of its strategic location between Europe and Central Asia,” Shaheen said.
Nathan seemed receptive to the idea of use of DFC to reconstruct and recover Ukraine, but highlighted the “impediment” posed due to “political risk,” which Sen. Chris Van Hollen, D-Md., first addressed in his line of questioning. The CEO said Ukraine is a greater risk of investment than other markets today, but he appeared to be receptive and committed to the cause.