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Exclusive: New U.S. development agency could loan billions for reshoring, official says

[June 24, 2020] By David Lawder

WASHINGTON (Reuters) - U.S. government financing for projects to return critical supply chains to the United States as part of coronavirus response efforts could reach tens of billions of dollars and clients may include a projected $12 billion Taiwanese semiconductor plant, the head of the agency managing the funds told Reuters.

The U.S. International Development Finance Corp is talking to companies about reshoring the manufacturing of personal protective equipment, generic drugs and pharmaceutical ingredients, DFC Chief Executive Adam Boehler said in an interview on Monday.

Boehler said letters of understanding for some initial projects could be signed within the next month. The Trump administration has been pushing https://www.reuters.com/article/us-usa-china-supply-chains/u-s-mulls-paying-
companies-tax-breaks-to-pull-supply-chains-from-china-idUSKBN22U0FH for U.S. companies and importers to move manufacturing out of China.

The agency, which opened its doors in January to boost U.S. overseas development financing efforts to counter China's massive Belt and Road infrastructure drive, was drafted into domestic service in May, after President Donald Trump signed an executive order https://www.whitehouse.gov/
presidential-actions/eo-delegating-authority-dpa-ceo-u-s-international-development-finance-
corporation-respond-covid-19-outbreak under the Defense Production Act.

DFC and the Defense Department agreed https://www.defense.gov/Explore/|
News/Article/Article/2227560/dod-partners-with-dfc-to-protect-industrial-base-from-economic-effect-of-pandem on Monday to jointly administer $100 million in supply-chain reshoring funds from the $2.3 billion coronavirus legislation passed in March.

Company proposals to reshore are already pouring in, Boehler said.

"The areas that have come on hot right away are on the PPE side and within the pharmaceutical value chains," Boehler said, adding there was interest in returning some generic drug production - almost all of which is imported - to the United States.

The $100 million can be leveraged into "tens of billions of dollars" in loans by using it as a pool of capital similar to the U.S. Treasury's backing of Federal Reserve loan facilities, Boehler said. At that scale, the agency could participate in the financing of Taiwan Semiconductor Manufacturing Co Ltd's <2330.TW> planned factory in Arizona.

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Adam Boehler, the CEO of the U.S. International Development Finance Corporation, addresses the daily coronavirus task force briefing in the Rose Garden at the White House in Washington, U.S., April 14, 2020. REUTERS/Leah Millis

The project is a centerpiece of the push to wrestle global technology supply chains back from China. TSMC, the world's largest contract chipmaker, is a major supplier to Apple Inc <AAPL.O>, Qualcomm Inc <QCOM.O> and other major U.S. tech firms. <nL1N2CW20O>

"We provide loan and investment financing, so could we be relevant there? Absolutely. We're talking tens of billions of dollars in potential here, so that's a possibility, I wouldn't exclude that," Boehler said.

A financing package for TSMC would likely include private capital from the state of Arizona. It is too soon to say whether the agency would be able to participate.

'FOOT ON THE GAS'

DFC was created under 2018 legislation that combined the former Overseas Private Investment Corp (OPIC) and part of the U.S. Agency for International Development, more than doubling OPIC's overall lending and investment capacity to $60 billion. Its planned October 2019 launch was delayed until January by a budget fight in Congress that threatened a government shutdown.

Boehler said DFC's development mission would not be affected by Trump's executive order and would keep its "foot on the gas" to accelerate projects in poor countries.

The 337-employee DFC - small for a federal agency - is adding about 15 people to focus solely on the domestic reshoring projects, he said, and the funding for overseas development will be kept separate.

The agency approved https://www.dfc.gov/media/press-releases/dfc-approves-1-billion-investments-global-development $1 billion worth of investments and loans at its June board meeting, including a $200 million loan to Guatemala's Banco Industrial to expand lending to small and medium-size enterprises. Boehler said the bank's board in September would consider a larger slate of projects.

(Reporting by David Lawder; Editing by Nick Zieminski and Peter Cooney)

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