Transcripts For CSPAN2 Hearing 20240703

This hearing of the Senate Foreign Relations Committee will come to order. Let me start by making something Crystal Clear to the international committee. To the u. S. Foreign policy community, to the nations allies and adversaries. As the Committee Moves forward we will continue our work on behalf of the American People as we have done for more than two centuries. The world faces challenges as well as opportunities. This committee the Senate Foreign Relations Committee, its members and a staff play a Critical Role meeting the challenges america faces in National Security. And as i accept the chairmanship with great humility, thanks to the support of our members, thanks to the support of the Ranking Member and thanks to our dedicated and hardworking committee staff, we will continue to advance our values and National Interests on the global stage. My priority is simple, to strengthen americas diplomacy. To make sure our diplomats have the tools they need and congress provides the appropriate oversight carrying out that responsibility. All needs to be done promoting american values. American values of democracy, anticorruption, Good Governance, human rights, transparency. These are the values that give strength to americas Foreign Policy. Effective International Development is a critical part of this effort. The american approach to entrepreneurship with individuals building businesses that contribute our shared economy has fueled much of the countrys success promoting growth that sustains the middle class and holds the government accountable. Over the decades weve experimented with different ways to make economic diplomacy our efforts abroad. From the Marshall Plan to the loan programs from women in rural areas to purchase, we have different tools in different contexts. But we know that Economic Development and finance are essential for stable economies. And a stable economies lead to stable countries that lead to prosperity and security for all. So today i would like to hear about how the Development Finance corporation is fulfilling its mandate. It was established in 2018 by the build act which i know many of our colleagues on the committee worked tirelessly to get that done. This is the first hearing the Foreign Relations committee is holding to look at how you are doing and what we need to consider is the authorization comes up for renewal. I would like to welcome you to this hearing from west africa to the western hemisphere on energy and healthcare, technology and innovation, womens empowerment and addressing the climate crisis. I want to commend the work of the improved Energy Security with investments in the region of iraq, the Telecom Networks more reliable in gambia and sierra leone and efforts through ecuador. Your helping secure the Energy Supply chains and investments. You work the Renewable Resources and you do so without forced labor that we see the peoples republic of china. The kind of investments and models champion are what make the United States a better partner in comparison to the diplomacy efforts. As we consider the reauthorization we need to make sure the United States remains a preferred investment partner. We need to make sure we have the tools to match our allies capabilities and that we are good stewards of the taxpayer money. So, here are some of the challenges that we confront that i hope that we will have a chance to discuss during the hearing. We need to talk about the issues with of the Equity Investment program and that faculty of maximum viability cap and we need to figure out how we can expand the eligibility pools to pursue deals. I also believe we need more transparency with the finance deals. Theyve been slow to establish Accountability Measures required by the build act. I specifically refer to the Development Advisory council and an independent mechanism to diversify more of its funding away from the worlds biggest banks and must make sure to properly vet micro lenders so we can write any wrongs when they dont go as planned and i hope you will lay out your proposal to reorganize. How do you see this in proving the operations and its ability to advance the National Security and Foreign Policy objectives . I expect you to address the concerns heard from the labor unions and how youre going to involve the workforce in your reorganization plans. Finally i want to underline i am committed to working with everyone on the committee to develop the reauthorize asian moving forward. With that let me turn to the distinguished Ranking Member with a thanks for his help as ive assumed the chairmanship. Thank you weve worked together in the past and i look forward to doing so in the future. For those of us that watch the committee the changes are inevitable on the committee that we have a process in place for the seamless transition. There is nothing more nonpartisan and bipartisan than the National Interests and National Security of the United States of america and this committee certainly leads us forward in that regard. Together we appreciate working with you, mr. Chairman. Thank you for having the hearing today. It is in the interest to promote Economic Freedom which lifts hundreds of millions out of poverty and achieves shared prosperity. Its also in our strategic interest to protect Economic Freedom from encouragement by the authoritarian regimes that seek to undermine free markets. Thats why in 2018, congress authorized the creation of the corporation an agency with a unique authority to make the finance more efficient, effective and impactful. I am concerned, however, about the ability to balance the dual mandate to advance and protect Economic Freedom particularly when the Administration Seeks to use to promote its agenda. At times it appears some people have forgotten the development is an event in the name. It comes as no surprise the administration and colleagues are eager to put the resources to work in specific regions, countries or handpicked sectors, but they cannot be everything to everyone all at once. They can play an Important Role with other Government Agencies and the overall strategy of countering china but they cannot seek its own. The mission is market oriented developed. The committee mandates and posts by congress or the administration will strangle this mission the success depends on the willingness in developing countries and the more policy riders congress or administration the harder it will be to find those partners. Repeated efforts to launch investments in high Income Countries invite rightful skepticism to work the commitment to maintaining a development focused u. S. Taxpayers shouldnt be subsidized in rich countries who have the money to pay their own policy priorities. Nowhere is the abandonment of the foundational principles more evident than any Energy Sector instead of listening to what the developing countries want and need, the administration is pushing a zero carbon mandate that will fail to close the energy gap and will only push other countries closer to china and russia who do not impose those mandates. However, it is moreover it is outrageous that the agency would rely so heavily upon the Solar Energy Products built on the backs of the slave labor. Theres no place for slave labor in any supportive projects indeed for anything that the United States touches including solar supply chains. The United States cannot compromise its values to achieve messaging related to claimant objectives and must continue to make it clear forced labor is unacceptable. With that being said there are plenty of opportunities to enhance the work to creative legislative fixes and im eager to hear what it needs to succeed in achieving its mission. Thank you. Thank you, senator for that Opening Statement. I think youve really highlighted one of the issues i hope that we will have a chance to get into how you balance strategic and development goals. Thats one of the key points and i appreciate the Ranking Member raising that as an Opening Statement. Its now my honor to introduce the witness today, chief executive officer scott nathan currently leads the Development Finance corporation at a critical moment for enhancing the development priorities. Prior to his leadership, mr. Nathan served in the Obama Administration including being the special representative for the commercial Business Affairs at the state department where he led the team a Foreign Service officers and Civil Servants who focused on protecting u. S. Economic interests abroad and advocated on behalf of of american exports. Mr. Nathan also worked in the private sector and served as the board chair of the league of conservation voters. Mr. Nathan i look forward to hearing from you today. Your full statement will be included in the record. Without objection. I ask you summarize your comments in five minutes so we can be engaged in a conversation the way the committee performs its hearings most effectively. Chairman, Ranking Member richey and members of the committee, thank you for having me here today to discuss the United States International Development corporation. I want to thank congress and especially this committee for its continued support. Its now almost four years since the launch and with reauthorization coming in the next two years, i welcome the opportunity to talk about our organization. With your support we are continuing to build our capacity to finance the private sector in countries where we work to make developmental and strategic impact. In fiscal year 2022, they did more than 7. 4 billion in transactions across 138 deals and in the fiscal year they concluded a few days ago we significantly surpassed that total with more than 9 billion in deals, the record. Im proud of the team and encouraged by the results. But i know they can do more even more as we continue to develop and execute on our strategy. In transactions with deep strategic significance to the United States in energy across a range of technologies, dfc is helping to provide reliable access to power in countries from malawi and nigeria to ecuador and india. Also in india we have lent nearly a billion dollars in the last 18 months to two projects that advance the diversification of the solar power manufacturing supply chain away from reliance on the peoples republic of china. At the same time with investments in central and Eastern Europe, we are promoting Energy Security by helping communities become less dependent on russia to meet their energy needs. Dfc prioritizes transactions and highquality infrastructure providing support for seaports, airports and railways that connect communities to the opportunities of the global marketplace. Over the past year, for example, dfc financing supported the modernization of the seaport and ecuador and airport in sierra leone. Dfc is also investing in Digital Infrastructure including safe, secure and open Information Technology networks, for example supporting the acquisition of an Australian Company of the Pacific Island assets of did gisele helping to secure highquality trusted Network Services in these important markets. Similarly in africa we are financing the build out in the Digital Infrastructure with trusted equipment across numerous markets. We are also working to secure supply chains for minerals that are vital to u. S. National security. Last month the board approved a loan for a graphite mine in mozambique to help diversify global supplies of this material, this important mineral away from prc dominance. We also provide support for the Small Businesses that are the engines of every free and dynamic marketplace. In ecuador, turkey, sri lanka and dozens of other countries we are bolstering the ability of banks and other Financial Institutions to lend to the Small Businesses that generate jobs and opportunities. We look to support entrepreneurship and more open economies wherever we work. Our strategic competitors do not make these kind of investments. The United States does. Food security is another priority area. In effort that has become even more urgent as russias brutal land a legal war against ukraine and dangerous global Agricultural Supply chains for communities well beyond the region. Additionally, we support more Resilient Health systems helping to prepare vulnerable communities for the next health emergency. In every area where we partnered with the private sector, the transactions carry u. S. Values of openness, respect for local laws and conditions and high environmental labor quality standards. To accomplish this, weve continued to enhance our capacity to screen transactions and monitor and measure our impact. Over the short history, weve significantly increased the capacity to do strategic and highly developmental transactions. We inherited the structure that provided great results, but now with a broader toolset and a dual mandate and even Higher Expectations for what can be delivered. We need to be more strategic in our planning and more focused and proactive in our Business Development. To improve our effectiveness and efficiency, we are engaged in a process of realigning our transaction teams around a set of n during priority sectors, infrastructure, energy, health, agriculture and support for small business. Organizing around sectors will allow us to promote greater accountability by optimizing investment planning and resource allocation across our priorities and enable Better Solutions for our clients. The process has benefited from extensive input from all parts of our organization and we have engaged staff through numerous workshops, interviews, town halls and more than 100 consultations and meetings. As dfc grows to better fulfill the promise act we need to make sure we are organized to put the resources congress has given us to the best use. Our authorization under the build act expires in october of 2025 and weve begun planning for reauthorization. We are eager to share our successes and challenges with congress in the coming months and continue ongoing discussions on a range of issues including maximum contingent liability, cease spending authority, hiring incentives, country eligibility and our equity and other tools. We look forward to continuing these discussions with you so we can fulfill the promise of the build act. Thank you for support that makes our work possible and for your continued commitment to helping achieve even more. I look forward to your questions. Thank you for your service and statement and for being here today. We have fiveminute rounds for members to ask questions. And i want to start on the point senator risch made during his Opening Statement and that is how you are balancing those strategic concerns with the development objectives. And let me just put this in context we all understand chinas belt and rode initiative requires us to be strategic in how we use all of our tools including those that dfc. About to be very clear about it, the build act mandated that the development mandates be front and center so how do you go about balancing those strategic importance of what youre doing with the Development Opportunities that are out there . Thanks for the question. The build act was very clear that we have a dual mandate and this is the difference from our predecessor agency to advance the Foreign Policy interest in the United States and to make Development Impact in the poorest countries of the world. I dont see these mandates as intention. I think they work very well together. Its through development, through providing Economic Opportunity and alleviating poverty, through creating greater stability through Economic Growth that the u. S. Foreign policy interests are certain. The stability, Economic Opportunity, Free Enterprise are directly in the United States interest. That said, we do transactions across a range of sectors. Last year we did over 130 transactions. We did a similar amount in the year before. So, every transaction has different elements to it. Some are very explicit in terms of the National Security component related to the global competition with our strategic competitors. Others are more related to Economic Growth. But ive maintained that every deal has both Development Impact and advances this Foreign Policy interest in the United States. I agree i dont think that you are inconsistent, but it is helpful for us to have a better understanding how you go about making that decision. One of the questions we have as we are considering reauthorization, is there any authority that currently you do not have that would make that process easier for you that we should be considering in the reauthorization bill . On the Development Impact we do have a framework thats been refined over time that was developed at the beginning called at the impact quotient which looks at all different factors in terms of giving a Development Score for every deal. We also look at the Foreign Policy impact against the countries strategies that the state department promulgates and individual National Security components. In terms of things that hold us back, we would like to have a little bit more flexibility on eligibility. At the moment, under the build act, country eligibility is determined by income level under the World Bank Income classification and this tool is really blunt in terms of what countries are included and which countries arent. More flexibility on that would enable us to help the poorest communities in countries that might not meet those income level classifications. As you review this in regards to specific recommendations on including eligibility to be useful if you share that with that information with our staff so that we could get up to where we need to be as we are considering the reauthorization language. I want to ask the question in regards to the realignment by sector rather than financial product. Im interested as the input youre receiving from the workforce and we understand theres challenges whether the teams will remain in place or not and what feedback you are receiving from the workforce as you make this change in structure. Weve engaged in the process throughout the year in terms of refining the Strategic Priorities and then translating that into an organization that is best aligned to achieve those priorities. This process is ongoing. As i mentioned in my testimony, weve had over 100 meetings and workshops into town halls and other meetings for gathering input from the staff and all parts of our organization. Its incredibly important to be able to ground truth. The structure that is being developed to make sure that its as effective and efficient as possible thats why is the process has gone on weve taken that input and changed the elements of it and that will continue to be the case. The organization and the four years since launching doubled its size in terms of employees. The structure that existed previously worked very well for opec, but as we grow we need to make sure that we are able to continue to focus on Business Development. The key is making sure the deal pipeline is filled with the best transactions to lead to the highest developmental and strategic impacts and having an organization aligned around sectors allows us to better meet the client needs to have consistency in Business Development and focus in planning on the goals that we have for what kind of impact we can make in each sector as opposed to by deal size or product type which is far more sideload and relied on a smaller team as our team grows i think the current structure would have trouble with efficiency and effectiveness and the Realignment Process thats underway is designed to improve that. I would be interested in the specific ways you are engaging the workforce as you make these decisions so there is harmony and understanding input from the workforce. As i mentioned weve had over 100 individual meetings and workshops, town halls and interviews in the process and ongoing. Senator risch. First of all, id like to enter ive written five letters one on solar, mission and purpo, to on zimbabwe and finally brazil. Without objection. I want to thank you. It was solely focused on climate and i wanted a broader aperture evangelist climate. You agreed with that. Lets talk for a minute about solar. Its Common Knowledge of course that there is a slave labor slar involved in the Solar Industry through china and people are concerned about that so can you tell us what you have in place to make sure the United States has been financing projects since ive been in place on this important issue i absolutely agree theres no place for slave labor. Slave labor in any supply chain gets of the support of the United States. Under the act the task force was created and why that act doesnt bind we are following the rules that are outlined in that piece of legislation, the list of companies that are prohibited is one thats incorporated into the contractual requirements in any deal we do. But beyond that we have a strategy to diversify the solar supply chain away from china and in the last 18 months we made to investments first solar that is about to open a solar powered manufacturing facility in Southern India this plant will produce the Technology Panels that have no involvement in any way. Recently the board approved another transaction 425 million loans for Solar Panel Manufacturing diversifying away from china. This is a strategy that we want to deploy elsewhere and are looking for more opportunities to diversify of the Solar Manufacturing supply chain away from china entirely. I appreciate that. Thats a good explanation. I am assuming you have a team of some kind of that knows the industry and supply chain and they can spell these things out if youve got the influence. Thank you very much. I want to talk a little bit about the balancing act that you have and i understand it is a balancing act. I want to give an example so all of us have a little better understanding. Suppose you are faced with a situation where the developing country has a considerable resource or access to coal and they want to build a plant. Obviously they will contact you and certainly engage russians and chinese also. How do you need to that and obviously youre going to say is there another way we can do this . What do you do, how do you balance that . We are constantly balancing the probability of a deal getting through all the different Eligibility Criteria statutory criteria we have as the requirement to do social labor, and environmental screenings meeting the performance standards. We want to be realistic with our partners and not to take things down the road and at the end of the day not to be able to close on a transaction, but the transactions take time. To our analysis appeared at the end of the day if we can support projects that generate Economic Opportunity and have strategic impact i feel like we are doing what that build back intended for us to do. Let me drill down a little deeper. So if the scenario i painted comes on your desk it is a fire plan or nothing the chinese are going to build it if we dont. Is this a no question is that an automatic disqualifier . Im sorry i missed the sector you are talking about. My understanding Administration Policy agrees or g7 allies to provide note findings to the coal industry progressed in that case china signed up with the project cost records my understanding china has articulated they will not finance coal projects either. We have all seen how that works for. Yes i understand that. Thats why said they have articulated. My time is up but thank you. Will turn to the person who could really tell about the congressional intent of the bill back center kunda. Thank you chairman carter, Ranking Member thank you for this hearing. Thank you mr. Nathan for your leadership. It has been a long and strange approach the moment we are at right now the transition from opec and its scope in authorities and the risk Tolerance Mission where the dfc is today. I respect the questions and framing to make in the dfc agile want to focus on equity scoring one of two things i do not do right up front we gave a couple of years the total lending cap at 60 billing as opposed to 100 billion. The way your equity authority is treated is scored. Along with senator cornyn earlier this year enhancing competitive back to britt this is to address how your equity is scored. That belt does not amend the fair credit reporting act to be clear those who are concerned about it okay to scoring mechanism for the fair value of Equity Investment similar to how loan is scored. It allowed the dfc was smaller amounts invested to invest much larger amounts of private capitol lease that is my understanding. I would be very interested in hearing from you. To what extent has a current scoring of equity served as a constraint on what the dfc is able to do . Are there specific projects you could cite you have had to forgo because the current scoring and how that do in terms of competing with the prc and the Development Impact which i think needs to be the focus of everything. And, if we have another few minutes after that what other key priorities do you have before we get to reauthorization that we have to address the near term . Thanks very much for the question. And of course for all of your support over the years. To make the equity problem simple, we get a Program Budget and appropriation for funds that can be used for equity. That can be used for positive subsidy that requiring. In particular difficulty at the moment, ukraine and being an example. Go with Technical Assistance and Technical Assistant grants as aa tool given to us by the build back we did not previously have. All of these different tools compete for that pot of subsidy. Equity at the moment for every dollar that we invest in equity is using a dollar of that appropriation. As if its a grants. Theres no offsetting asset by virtue will lose one 100 i dont believe dfc is the highest record at the extraordinary private Equity Investments shows on average high single digit returns i dont think will be in the vat. This is a real constraint it means we are constrained by the appropriation. We do not get the kind of leverage with your lover and our leading activity. Last year for 7. 4 billion of transactions we did roughly half a billion dollars of that was equity. The rest with debt and Political Risk insurance and a tiny bit of capitol. A minute or two we have left what difference would it make if we fixture equity scoring challenge . It would enable us to be earlier investments. To be more influential have a seat at the table. To provide more risk oriented capitol to the developers. An example of the kind of think i would like to do if we had more as the investment in tech med which is critical mineral investment platform. A strong pro u. S. Event to it. I love to find other platforms and provide deals in the Energy Sector, and the Infrastructure Sector on the house and agriculture by backing developers earlier, we could influence our choice of vendors. Their choice of vendors or co financers. The two direction and produce potential deal flow for our lending activity. We are currently too constrained to do that. Its hard to build a team also without certainty run how much capitol we have to invest. This is really my highest priority to fix this issue i appreciate your attention to it because i will conclude if i could if i hear you right where the core goals of the sum of our key partners south korea, japan, when we only have debt were at there atthe end of the process. Omit equity we are early in the process we can syndicate better we can shape deals better we better leverage from her deep private sector. Rankly were blessed a lot more about the field than i ever will. I think we need to fix this another year or two or three. The funds we are appropriating we have before request in the senate version. Those will go much further you are a critical resource in the more transparent mort develop finance thank you mr. Chair predicts thunder . Quick think it mr. Chairman. Thank you mr. Nathan for being here. I want to hit upon what Ranking Member risch was talking about with regard to the energy development. It is, on his first day and Office President biden enacted executive order went to quote here to promote ending International Financing for carbon intensive fossil fuel based energy. While simultaneously advancing Sustainable Development and agreeing recovery. However, here in mattis we are attempting to same thing. Would you agree . Yes. Who do you think is the highest the state that consumes most Renewable Energy what state you think that is not expecting to make that answer. I wish it was nebraska we are number 11th 25 the top state of south dakota at 50 . Think about that. 50 . Of Renewable Energy. We are making pusher. States around the area here. So pennsylvania 6. 1 ranks number 42 virginia at 7. 8 number 38 new jersey, 4. 3 number 47. So you can see even with the push that we have here many states are single digit percentage of Renewable Energy. And yet you just said you would not finance a coal plant. And of course we have the instance earlier where the binder ministration vetoed wondered 8 milliondollar idb proposal for Debt Financing guyana shore based infrastructure that was to develop the oil and gas resources. Twelve projects are in that field of oil and gas were quarrying and mining or Something Like that. It seems to be if we have developing nations that have Energy Independent independent for places like russia are going to need to develop resources. Got dispute Renewable Energy thats not going to be the only thing. A chore policy to only develop Renewable Energy. Our projects only going to be Green Energy Projects . No. And i can give some examples. We are financing about the regionally provided additional Political Risk insurance to gasfired Power Generation plant to a country that has incredibly low penetration to the population. It has no reliable source of electricity at the moment. This will be a Development Game changer for them in terms of providing reliable electricity. In Eastern Europe with Energy Security issues you referenced report through Political Risk insurance and guarantees to help the purchase of u. S. Lng cargoes in poland. Other Energy Security. Other possibilities. Recite the figure of 12 with the Oil Extraction are you telling me you are actually going to be looking to expand that as far as oil and gas customer help developing countries get more Baseload Energy as well as renewable projects . Between oil and Gas Exploration which typically the weight that works as we have a requirement to be additional. Theres commercially available financing we are not looking at the project. We are not trained to crowd out the private sector we are trying to crowd in the private sector print oil and Gas Development typically spinous at a corporate level the monies pushed out to projects and individual countries theres not really an opportunity for us to get involved in that. What i am talking about is provision of power electricity being freed from reliance on russian gas, freed from the reliance on burning diesel for dung and a waste product for cooking. These are think has a role in looking at. I would love to follow up with you with regard to that it is important that we understand developing nations the depth Baseload Energy as well as renewable. We open the door to chinese or russian influence when we dont do that i think dissenters point earlier. If i could have one more quick question mr. Gerry priddy also mentioned earlier trying to find the graphite i think you said earlier, you coordinated with other agencies with regard to those Critical Minerals to be able to dissolve seo batteries, Technology Comes at coordination with other people to target those . Thank you for the question. That is directly on point for the mine the department of energyis financing a processing facility in louisiana will commit off taker about mine. Thank you very much. They wondered 17 Congress Interested economic statecraft of the 21st century act. Which directs the whole of government approach to confront chinas anticompetitive and predatory International Economic policies. Click calls on for the establishment of the office of strategic investment at the dfc to coordinate federal government initiatives intent to counter adversaries. What is your view of that . We incorporate strategic considerations into every investment that we make. It is a critical component of meeting our dual mandate. Anything to bolster our ability to do that i am certainly interested in talking about. I look at as strategic investment focus on dealing with adversaries. During your nomination hearing we discussed the potential the dfc has to be a vehicle for providing support your friends and allies under increasing economic and diplomatic pressure from beijing. I still believe that to be the case. Since it was First Authorized five years ago what changes have you seen and chinas foreign lending and Development Practices . Do any of these trends suggest we should further refine the dfc . What we have seen is some volatility in China Lending practices. Some years really pushing out a great deal of capitol other years being far more cautious because theyve lost a lot of money and some of the areas where they invested. And countries are becoming more aware of the quality and the death burdens that go along with financing are becoming more wary. People want us to show up and offer a choice and that is what we are trying to do. These are partners that are traditionally allies of china. Allies of russia. We are looking to diversify their relationships. Or anything that you witnessed any view or changing of authority or additional to meet the challenge . Certainly having an improved equity tool that is no longer constrained by the budgetary treatment would enable us to have them build more flexibility. Clearing out some of the issues to our use of Political Risk insurance in full one 100 guarantees would give us broader to open that regard. Being able to operate in a broader set of countries or High Development potential but currently we are constrained by World Bank Classification levels will be another one. EconomiC Development is critical to addressing challenging issues throughout the western hemisphere. The region is experiencing unprecedented growth and migration due to civil unrest for deterioration of the rule of law correspondent lack of Economic Opportunity. Solving our challenges at the border 20 Million People in the Southern Hemisphere who are displacement native country seeking refuge for asylum. Theyre presently in other countries. If they failed to meet that challenge who have 20 million feet watching north United States challenges at the border it will be a minor now compared to what that would mean. And thinking about how we deal with is a put out a planet recommended the establishment of an enterprise managed to increase Investment Companies across the americas. That higher a significant number of those individuals in their countries. How can the dfc worked with work with otherinstitutions to C Development throughout the americas for those countries hosting significant numbers of migrants and refugees . We are always looking for partners. Partners who can increase the available pool of financing or who can share deal flow can be the Interamerican Development bank or engage in discussions with disregard more local developing banks. And especially private sector. We have done in the latter deals with Financial Institutions in honduras and el salvador totally directed at what youre talking about providing jobs, Economic Opportunity and growth in order to keep people in place and not have it economic necessity of leaving their home. I commend your to the Enterprise Fund as a way to further out and achieve that goal its in our National Interest and creates greater stability. Thank you mr. Chair. Thank you. Thank you, mr. Chairman. Welcome back. Scott, it is good to see you. I would like to acknowledge senator coons and my friend who had a great deal to do with build act which is empowered of what youre doing. One of the things that struck me when my colleagues put this together was its ability to counter china. I think the ccp has been top of mind for us in many respects. They championed the ability to strengthen our hand versus child i want to focus on that my conversation with you today. Balance sheet relative to china is very small. Its invested roughly trillion dollars 147 Different Countries. In their belts and road initiatives. You have a 60 billion Balance Sheet. Out of focus on the small resources . With esg oriented investments those types of things which while perhaps laudable dont get atwater critical priorities happen to be. I would like to get your thoughts on how we deal with the fact of a small, how we focus our investment. You talk about investments and pedals and things of this nature for a much more interested in the potential dual use infrastructures like ports, rail, air, we know it is focus where our presence can be extraordinarily valuable. I want to highlight that and get your thoughts on that as well as one other thought. This is the fact you ready to out hire an outstanding team. It is known from it really, really great professionals. How do you punch above your weight when you have a small Balance Sheet . My thought would be hiring the absent best professionals you can get. You can lead investments with a small equity component you can put yourself with the best talent we can help free up your equity a little more would senator coons and i talked about im all in favor of doing that. You talk to us about focus . Thank you for the question thank you for the dialogue. We have had over the last year. For the question with strategic investment, i am really proud what weve done in the last year. We are going to report our results later this week. I will include investments the modernization of a seaport in ecuador. It will include more than five or Million Dollars went to the modernization of a port and sri lanka a port in colombo the Container Terminal we are supporting looks directly at the Container Terminal the chinese are supporting for this is done in concert with the Development Bank of india they have a very strong interest in seeing shipping in that area be freed and unencumbered by coercion. We expanded our Financial Support for report on the black sea in georgia because of the conflict in ukraine and russia aggression this has become more important than ever. We did the financing of airport expansion which will have a huge impact on this very poor country progress all laudable i commend that direction ill be interested the percentage of total investments these dual eugenic investments . Coming dollar point of view they are huge. These kinds of deals absorbed hundreds of millions of dollars. I do not have an exact number. In terms of the partnership for Global Infrastructure and investment the vast majority of her deals qualify under that. You need to focus their continued discussion on talent. Were absently right on a transaction based organization like ours without good people we can do nothing. Human capitol is the most dear thing that we havent heard we have a fantastic team, great people with deep transactional experience the whole Organization Expenses that. But we are growing as a very competitive market particular for people of deep transactional experience the lawyers, the investment officers. I discussed with my step is whether we could have some greater flexibility on hiring and incentives in order to compete in this very difficult labor market. That will be very helpful. I could believe that p source of competitiveness. In a different form and love it update on the Infrastructure Project assignment on behalf of the United States i would look forward to getting an update. But so be happy to do that. I think you be pleased under the trilateral sum at the japan creed the night since we also assigned an agreement with their hercounterparts in those countrs also in addition to the Trilateral Infrastructure Partnership but you are involved in signing. Great thank you. Hundred murphy. Thank you very much for your service. Referenced the ongoing desire to open up an office in brazil to a quarterback or degreasing efforts there. Wanted to talk about that as a means to the way you view the utility in country presence. So one place were dfc present seems to be working is in the balkans. There is a Belgrade Office opened it was unique means the United States but to be able to project influence all across the region. Even those located in belgrade folks from kos of oh and other albanian majority nations about the dnc was a fair actor. It is close now, which i think was a mistake. It does seemed like the opening to the proposed opening of a site in brazil you see the efficacy of having some folks on site. It is any opportunity to take a look at the presents we have seen events their spiral nearly out of control. My read is that very small investment of will pay dividends in terms of deals but also had a calming effect on the region at large brickwork signs for the questioner absolute right. Increasing our International Presence is important are. In the Financial Institutions have between 15 and 30 of their staff abroad government local information. Doing Business Development and having a presence on the ground coordinate with their embassies and so forth. We have a 1 of our staff we have five people. It is way too small it requires funding a requires congressional notification and just to show where the same page about what helping them belgrade that office never open because it never cleared in time congressional notification. There were people there on temporary duty assignments for. Yes really good staff. This all happened long before i arrived but i have looked into it. We are now, after comprehensive review of where it would be best to expend the presents we now have a plan to try to take it to three or 4 of our staff by tripling or quadrupling of our staff. We are looking region by region were looking at space at embassies where we can get but with the court at the state department we have to congressionally notify every Single Office that we open. But we are working hard at it and have begun discussions the Brazil Office was fined by the state department the Ranking Member mentioned we are contributing funding in order to broaden out the mandate for what the state department fighting was restricted to progress is good news i hope you find bipartisan support for the effort and again i hope you will take a look at that region in particular. Last question time takes advantage of countries with the highest level of corruption weak rule of law. Dnc can operate where your Public Officials on the take. And so i just wanted you to say a few words about how important the work the u. S. Government does in particular through state and usaid to fight public corruption. How important those efforts are to your ability to find the state space to do deals this is an advantage china has their willing to do deals with officials looking for handouts, we arent. My guess is you rely on the work the United States in europe are doing to try to run anticorruption programming in places that are interest you. First i say its not always an advantage. I think having our values be clear transparent to the rule of law private enterprise is something people want to be associate that has a political advantage to be associate with an american project because it shows it is clean that has an advantage. That i take your point many circumstances particular in competitive situations corruption is a problem and is an important tool for working with her inter agent collects state department usaid but also others were important for help creating and enabling an economic reform creates more opportunity for business to operate that is important for our deals. In terms of corruption and transparency these are things we are committed to make sure the standards are very high. We work with all of our colleagues at the poster in the Intelligence Community as we conduct your customer work and Due Diligence in vetting on our partners. And often times that results in information that causes us to not be able to pursue deals but these standards are important. I do not think we should compromise our standard in order to win a deal. Having our values be clear through what we do is one of the most important elements of dfc and the other parts of the u. S. Government do. Well said thank you, mr. Chairman. And a romney . Works thank first street nathan i applaud you for your willingness to step away from the group to help us in the governmental level for those who do not know its one of the most if not the most successful private Equity Investment firms in our country. So thank you for that. I want to associate myself with the comments made in particular senator hagerty with regards to a strategic interest. Particular as it relates to china. I sometimes feel that we in congress and in the senate live in fantasyland. Which as we think we can do everything for everybody. We think we can solve the problems of health, of food, of energy, the list goes on and on. Not just here but all over the world and frankly theres not enough money for that if you think about all the projects you might do that will deal with the issues you were just describe food challenges, energy challenges, created more jobs to people, alleviating poverty my goodness we cannot alleviate poverty here how in the world willing to alleviate poverty over the entire world . We are not. It would be massively beyond our capacity. Senator menendez spoke a moment ago we need to try to alleviate poverty in latin america. Our wages are fire higher than everywhere else in latin america we cannot raise the economy of latin america to a level people dont want to come here. Im so spending money around the world to alleviate things that we wish would go away but we are never going to get there would only make sense in my view if it has a strategic significance for us if it is something that deals with the interest of the United States of america and our National Security. I am pleased you indicated that is exactly what you feel you have a dual mission you consider two things is not easy to consider two things at once. But you recognize a strategic interest is essential for us to make investment by the dfc. How do you evaluate strategic interest . In your view what is the Strategic Interests of the nine states of america . Its Foreign Policy interests i think includes greater stability, openness, particular countries where we are trying to strengthen democracy and our allies. We take advantage of the National Security strategy and all the sub strategies for individual countries to understand in the operating environment we are looking at deals with issues are and how our deals relate. And in a more global sense it is what senator hagerty referred to the global competition with the china and other potential authoritarian governments. That is securing for us diverse supply chains and material that we need. These are all parts of the consideration. I agree with you particular with regards when it came down to sing with regards to china in particular which is saying how do we make sure we have supply chain and the materials we need. That they dont establish monopolies to keep us from being able to receive the key elements that we need for our economy and so forth. That makes all the sense in the world to me. How do you assess those strategic choices . Do you work with other agencies . Is it something you deal with on your own . How do you decide is it going to be a port were going to invest in or a factory that makes widgets . Next we take input obviously from all of our board agencies that state, usaid, commerce and treasury and to be on that throughout the rest of the inter agency including the white house the National Security council. We have 600 people who are focused on doing and supporting an accounting for the deals we need to take advantage of posts on the ground are embassies. And colleagues throughout the inter agency in order to do that. I would close by saying i believe our strategic interest in National Security revolve around if you will china, russian authoritarian states versus ourselves. And it is entirely consistent with your mission as i understand it to invest in those things that promoted National Interest. That keep china and other authoritarian states from impeding our capacity to trade with the world. To lead the world and have a prosperous life here in the United States and would encourage effort not to say how can we alleviate poverty around the world because that is a task monumentally beyond our Financial Capacity to instead say which things are specifically in the interest of National Security interested in a states of america particular as it relates to china because that today that is our Foreign Policy and National Security challenges china, russia, the authoritarian states. Thank you, mr. Chairman. ; center romney. Senator kaine . Thank you mr. Chair mr. Nathan i joined the sender romney and saying the country is fortunate to have you in this position at this time. My colleagues have asked a number of good questions i really was a focus on latin america. To a limit sip issues and not just latin america based fusing latin america as an example. You are a reference and think senator cardin did in his opening comments and the fact that you are limited and where you must prioritize investments by the World Bank Classification of countries by income. You should prioritize lower middle Income Countries and you need a waiver to invest elsewhere. Theres only five countries in latin america that meet the world bank category. And they are bolivia, el salvador, haiti, honduras, nicaragua are the only five that stay within the World Bank Classifications. Now by waiver the dfc is involved in other countries peru, brazil, ecuador, dominican republic, guatemala, columbia, mexico. But you have to get a waiver to do that. Russia is not worried about World Bank China is not worried about World Bank Classifications theyll make investments where everything they can advance or interest. So the current set up we have at least put a hurdle in your way. As i travel around the americas when i hear again and again from some of the nations that arent in the five ways we are your friends but were doing things the right way. We can advance more quickly be a good example in the neighborhood. Hopefully abate some of the migration pressures. But you limits investments talk about the limitation and that waiver processes. Is the waiver sufficient . Or as you contemplate reorganization what suggestions would you have with congress and the space . What thank you so much with the question. Under the build act to operate and do transactions and upper middle income country you are right we need a waiver from the president it is in the economic or National Security interest that is been delegated to the state department. We have spent a lot of time to negotiate with the state department to try to create exemption pathways for certain categories of investment so we know in advance that we can do deals in upper middle income in that sector progress you dont have to go down the road forever single deal pick. That is working. It is why in the last year ecuador became the second biggest exposure for dfc and our whole portfolio globally productive sPort Investment progressivism Port Investment at the hospital investment. It is a power deal. Its the largest debt for nature swap in history that will help ecuador by reducing debt to help them deal with economic coercion. And also provide funding for conservation activities the enforcement against illegal and un regulated fishing in the galapagos. We have done a whole series of the action partial because we had a government is been a great partner and president there has been fantastic. Hes leaving soon. But ecuador is a good model for where its working for. You are right there still friction and other circumstances. To think the waiver processes sufficient to give the tools you need . As i am traveling in the region im hearing a while, trying it doesnt have these restrictions we wish you were a little less restrictive in the space plus i completely get why she wouldve prioritize the countries of the greatest economic need but there are other imperative values as well. Ask the waiver process is working but it is not perfect. It also creates a resubmittal and exemption pathways are significant delayed and administrative work, a hurdle progressing to give you an example the term and i met yesterday with the president elect of guatemala. Guatemalas not on the five country list he won a surprise election on the very aggressive Anticorruption Campaign the u. S. Would have a lot at stake continuous efforts succeed when he is inaugurated in january. But right now guatemala might not get the National Security waiver not might not be able to demonstrate an absence of private capitol it would be in the security interest of the night statesman anticorruption government in the northern triangle to be successful. I would hope, said this to the chairman yesterday sometimes think we spent a lot more time figuring out ways to use sanctions to punish enemies than we do figuring out ways to reward Good Behavior. Dfc is one of the areas we can reward Good Behavior i hope the restrictions in place to not make that unnecessarily challenging especially with china neil mr. Chair. Thank you, senator kain. Senator young . Thank you chairman. Woke up mr. Nathan. Thank you for your service. The first thing i would like to discuss dfc general focus. We know its on development that is laid out in its charter. In fact his decisionmaking process as advised by counsel focus on development but develop mental produce for good reason theres definitely a need for that. Things the committees went up to think about moving forward as we consider the future of the dfc is what focus were explicitly putting on the agency emphasizing National Security concerns in addition to developmental priorities for something i know my colleagues are brought up. What current consultative methods exist beyond the board of directors to ensure inter agency opinions on National Security risks or priorities from dod, the Intelligence Community, National Security council for example how are these shared and incorporated into financing decisions . Et cetera, thanks for the question or absolutely write these considerations are at the floor of our decisionmaking. The first area is thinking about where we should be spending time looking for deals. What countries. As senator kaine indicated for example were spending a lot of time in guatemala looking for deals. Despite the certification hurdle. Because of all of the Foreign Policy National Security interest that would be involved there. We consult with the embassy with the state department, regional bureau, the Intelligence Community is very important certain circumstances for thinking about where our strategic competitors might be focusing pickets is there a formal process or protocol that dfc goes through to try and prioritize Different Countries . Raises a lot of consultation, is not a formal process. Perhaps would one makes sense or do you feel like a more flexible . Really important. Each different circumstance would require different consultation. For example i recently had meetings with the commander yourself, but was very focused on Economic Development and the tools dfc has that is extremely viable the tools within the inter agency and across the government. For the doing this analysis is a central part of our work the other thing i want to address as the financing of heart Infrastructure Projects something i would like to see is the Digital Infrastructure like dsc support and kenya. The secure and Reliable Networks are going to have to be a priority. And you are taking some actions in this area we cannot limit this priority to basic advisory or technical support. Given a limited time here, that 40 seconds, would you please comment what dfc is doing to support grid developments in particular microgrids . And how you are coordinating that Development Financing with complementary bodies mcc, u. S. Trade development agency, cyberspace and Digital Policy Bureau the state department et cetera. Thanks for the question at first i completely agree with you on the Digital Infrastructure front. We have had recent success in that area through to Million Dollars to Africa Data Centers im headed to ghana next week. Theyre opening a nether data center with trusted equipment. There are other opportunities in the mobile telephone space its very important for us to push forward with secure safe open networks with trusted equipment. And that we support an alternative offering to it china is offering. On the microgrid area we have had success in funding some of that activity particularly in africa for distributed energy for areas that are not connected to larger grids. You are right are interagency partners are often source of deal flow or technical expertise. That is certainly something we rely on. This is an area that we would definitely like to advance further providing reliable access to sustainable electricity is a key to development and in our strategic interest. Thank you for. Thank you, senator young. Think it mr. Chairman and thank you mr. Nathan for being here. I want to begin by recognizing dfcs finalizing the commitment for up to three to Million Dollars in the Investment Fund for the three cs initiative. I think that is very important investment. And especially given ukraine recently being granted a partner nation to the Investment Initiative i hope you will consider this as another way that we can support what is happening in ukraine. Like most of us on this committee i was very disappointed when they pass the continuing resolution on saturday it did not fund ukraine and the way we had talked about and believe it should be. And i wonder, for the benefit of those people who say why are we supporting ukraine, would you talk about the interconnection between our economy here and what is happening in ukraine . Why our investments there have some real benefit for the American Public and the businesses in the u. S. . First i would say senator, i think it is the right thing to do. I have been to ukraine three times in the last year. Our predecessor agency had 800 million worth of exposure there through a variety of different investments and we have continued to expand that portfolio to support the private sector in ukraine. Thats support for small business, that its in the agricultural space. That is healthcare. A thriving private sector in ukraine which is possible at the moment will help them be in the position for reconstruction and recovery. As opposed to being further damaged. We are committed to keeping people employed. Have them pay taxes, support the war effort and support the government. So we are trying through many different possible projects to do that. We are starting to have a great deal of success. But in a broader way particularly in the agricultural space and Food Security ukraine plays such an Important Role in the middle east, north africa across the african continent the World Food Program is the biggest source of grain still to the World Food Program. It is in our interest to not have people starving around the world. It is also the right thing to do. Anything we can do to support ukraine in that regard i think is worthwhile. Thank you i would also argue it is interNational Security interest not to have Vladimir Putin who feels free to go into any country that he likes to take it and the message that sends to china and to iran and north korea is very important. I understand before i got here that you testified about 1 of the employees of dfc are outside of the United States, is that correct . I was very happy to see that your request which the appropriations subcommittee has fully fun includes funding 10 dfc country offices. I certainly support that pretty think its hard for us to figure out the needs are if we dont have people there on the ground. And i certainly share senator murphys concern about the missed opportunity and the balkans. Right now we have several countries in the balkans that are on the verge of outright conflict, kosovo, bosnia. We also have several countries there that have made tremendous progress as have those countries in some areas on democracy building, North Macedonia are members of nato. Those are places we want to invest because we dont want Southern Europe to explode in the same way we are seeing the land war in ukraine. So, can you talk about what criteria you are looking at in to what extent you might be considering offices in the western balkans . Part of our Strategic Review and our planning for how to deploy offices, we looked at by region where we are likely to locate offices that can be useful to a region from a connectivity point of view to avoid the difficulty of travel. We looked at where we are likely to get the most leverage from having a person on the ground for Business Development and filling our pipeline of potential deals. And so are you looking anywhere in the western balkans . We would consider europe as part of our plan. Whether it would be Central Europe in ukraine, or in the balkans is still up in the air. One of the things about europe is its easy for people to get there from washington as opposed if you look at certain places in west africa or in south asia for. You have been to georgia recently have you . I was there a year ago. You think its easy to get there. [laughter] you should try to get to. [laughter] none of it is easy. I will say in georgia i was delighted to visit there because dfc has a 30 year history of investing there and obviously with our predecessor. From washington d. C. Weve been over 60 deals in georgia and that history. I would hope georgia will be one of the places you are also o considering for an office. Because of its strategic location between europe and central asia i know im out of time mr. Chairman bellamy also weigh in and say i certainly support the equity scoring fix that has been raised and hope that can get done. Hundred at home and that hold appreciated took the extra two minutes so he can make it to the committees center ben holland and hollandif you are ready or. Thank you, mr. Chairman thank you for taking a little more time. Let me also second what senator shaheen im sure others have said about the importance of making the equity fix. I know mr. Nathan that something you focus on thank you to you and your team at the dsa for all youre doing pretty want to pick up a question i understand was asked earlier on Political Risk insurance. Because of course the dfc grew out of opec and opec specialize in Political Risk insurance. My understanding is that we could be helping a lot of investments and ukraine potentially which will be essential for reconstruction. But there is an impediment right now in terms of the scoring on Political Risk, is that right . And if you could please talk a little bit about that. Are absolute right Political Risk insurance is extremely valuable tool for mobilizing private capitol which is really its about mobilizing private capitol to address the kinds of issues we have been discussing today. You are also right that Political Risk insurance particularly fort Risk Insurance is key to attracting private capitol today in ukraine for obvious reasons. Taken that tail risk off the table for potential lenders or investors is critical so they can focus on making the commercial and Business Analysis and not have to worry about the larger macro or war issues. You also write the tool is somewhat constrained at the moment. I do not want to go too deep on the technicalities of it but its not quite first scoring reason but because of a disagreement about whether Political Risk insurance on debt should be considered as a guarantee. Or insurance. The build act talks about Political Risk insurance as an insurance tool. That is our position. And if we are able to use Political Risk insurance to its full promise i think the potential to make impact in ukraine for financing not only recovery in the future but today to help businesses stay alive and have money flowing to the private sector today is huge. And this disagreement you are referencing it is my understanding that the disagreement between the omb am i correct about that . That is correct. If we took ombs interpretation would dfc actually be more constrained in providing Political Risk insurance and opec was . Are very well informed. Yes that is exactly the case. The issue there is whether we would need to obligate subsidy against our appropriation against Political Risk insurance. Not something opec ever did or we viewed weve ever had to do. And in situations like ukraine, which is obviously a greater risk than most other markets today for clear reasons the amount of subsidy that would have to be obligated if we were even allowed to do that would be very large or we would have to price the product in a way that no person would ever accept that pricing. And use the tool to begin with. I appreciate that. I was here for the discussions over transforming opec into dfc. I think i can speak at least for most members the idea was to expand the authorities of dfc compared to opec not constrained them in any way from what opec had. It would be a step backwards if folks are essentially saying dfc does not have the tools when it comes to Political Risk insurance that opec had. If i could just turn quickly to justice some of the internal machinery. Another way dfc is set up and need other agencies to provide inputs. But my team recently met with representatives from a company a u. S. Company investing in Telecommunication Networks in africa without using chinese technology. Trying to encourage the move away from them. They found their experience with dfc painfully slow they ended up going to look for others. Could you describe in any way we can help you . I know this is sort of an open question but what can we all do to help turnaround to help fix the timeliness of your decision so you could be more flexible and nimble . Site thanks for the question. We need to be faster. , we need to be more responsive to clients. Thats why we are realigning the Investment Organization around our priority sectors so we can have that consistency. In terms of the process of reauthorization, you know, theres a whole set of issues that slow us down that create uncertainty, some addressed today. Some of it is just the nature of what we do, through know your customer process, theres uncertainty through the vetting process and uncertainty. Thats necessary that we do that. I dont want to change our standards on that. But streamlining approvals and certifications and notifications and those kind of things would allow us to be quicker, working with our board and working with approvals is important, getting through the kind of vetting that i mentioned in a more expeditious manner would mean that we can meet those clients needs more rapidly and be more responsive. Thank you, i look forward to following up with you on some things we can do to help and thank you, thank you mr. Chairman. Thank you senator van holland. You can tell theres great deal of interest in the subject and we welcome your thoughts as we move to reauthorization process. I want to make observation to senator romneys question of Good Governance and anticorruption and several times you mentioned your reliance upon and one of the challenges that we have, legislation with senator young and i have gotten to committee in National Defense authorization act but to build our capacity, our missions to be able to evaluate good governing issues. We find as youre going through the strategic aspects of your that the mission may well be focused on how to help ukraine and deal with supply chain issue or how to deal with military issue and the capacity in regards to anticorruption doesnt always go front and center. I would be curious as to how you make evaluations if you dont have the capacity within the mission to advice you and give you the up to date information about the corruption issues of the country that youre dealing with. We are trying to build that capacity within our embassies and we hope that that legislation will be successful in the National Events authorization act. Im going to have a few questions for the record for you in regards we recognize senator for any additional comments that you may want to make. The committee will stand