Monday, August 6, 2018

A US Response to China's Infrastructure Construction in Africa?

CNBC posted on 2 August 2018 a story titled "Wilbur Ross and Chris Coons: China Is 'Pouring Money into Africa.' Here's How the US Can Level the Playing Field." Wilbur Ross is the US Secretary of Commerce and Chris Coons is a Democratic Senator from Delaware.

The two officials agree that the US must do more to present America's African partners with better alternatives to state-led economic models, which are promoted by countries like China, so Africa can assume its rightful place in the global economy. Consequently, they are urging passage of the "Better Utilization of Investment Leading to Development Act of 2018" that would reform and modernize government development finance by establishing the U.S. International Development Finance Corporation. The new organization would consolidate the existing Overseas Private Investment Corporation (OPIC) and USAID's Development Credit Authority (DCA).

While this proposal is a step in the right direction, it is important to put it in perspective. In 2017, OPIC and DCA together obligated $46 million globally to support loans and loan guarantees. The President's 2019 budget request for the proposed new consolidated corporation is $94 million. Compared to the billions of dollars that China makes available to support loans and loan guarantees, this is a rounding error. It will not level the playing field.

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