Transcript NAFTA and Investment Opportunities

The Housing Sector at OPIC
Debra Erb
Overseas Private Investment Corporation
National Association of Realtors
International Forum
May 19, 2006
Developmental Value of Housing
Sector
• Economic value of housing construction
and all related activities – including SMEs
• Social stability – community building
• Property rights, poverty reduction
• Capital markets – long term financial
stability
OPIC objectives
• Increase affordability of housing and access
to housing for LOW and MIDDLE income
families
• Increase jobs
• Skills transfer – better quality homes
• Development of financial infrastructure
• Encourage development of property rights
framework
Realities of the markets
• Lack of infrastructure (water, sewage,
roads, power, phones, etc.)
• It’s not just houses: need schools, health
care, small retail, recreation areas etc.
• Can’t build houses if families can’t buy
• Varying levels of private property rights
development and enforcement
• Identifying qualified local partners
U.S. Value Added
•
•
•
•
•
Construction/project management expertise
Low cost materials, building methods
Quality technology (natural disaster)
Mortgage lending technology/expertise
Established capital markets infrastructure,
investor base
Potential investors/participants
•
•
•
•
•
•
Developers
Construction firms
Engineering firms
Architects
Raw materials
Manufactured
components
• Hard goods
(plumbing, fixtures)
• Mortgage finance
experts
• IT companies
• Mortgage Insurance
• Title insurance
• Investment banking
services
• Pension funds
Identifying U.S. investors
• OPIC role in encouraging, supporting
investors (U.S. and foreign) is key
• Strong interest from immigrant/citizens,but
they often lack expertise
• Trying to combine financial investors with
U.S. services companies
• Leverage capital markets access
• Work with other U.S. agencies in outreach
Standard housing products
• Construction/development: loans and political
risk insurance
• Primary market mortgages: loans to fund
purchase of long term loans
• Hybrid construction/installment sales contract
• Long term warehouse loan: to “construct” MBS
pools
• Capital markets: PRI and financial guarantees for
mortgage securities
OPIC Tools
•
•
•
•
Political risk insurance
Direct loans (SME;s only)
Unfunded guaranties (to U.S. beneficiary)
Capital markets funding – COPS program
NGO’s in the Housing Sector
• Support the lowest income groups when
governments cannot
• Combine housing with other social
development programs
• Support projects that cannot produce normal
commercial returns
• Tend to be more community-based for
informal sector
Constraints - Internal
• Definition of U.S. eligibility – few U.S. banks
involved in this industry in emerging markets
• Dollar denominated programs – adds cost and risk,
works against affordability goal (pending change)
• Project finance model difficult to apply to capital
markets programs
• Fixed rate financing
Constraints - External
• Limited legal framework for property rights,
foreclosure, etc.
• Limited credit infrastructure and limited
experience with consumer debt
• Macro-economic conditions
– High costs vs low wages
– Inflation
• Political volatility and corruption
• For MBS markets – small markets/demand
OPIC Recent Housing Experience
Country
Afghanistan
Romania
Bosnia
Purpose
Construction
Micro-loans for housing
Construction of apartments
S. Africa
Nicaragua
Guatemala
India
Honduras*
Construction of low income houses
Mortgage finance
Mortgage bond
Housing components
Home construction
Ghana
Azerbaijan
Housing construction
Housing Finance
Product
Direct Loan
Direct Loan
Direct Loan and
Insurance
Loan Guarantee
Direct Loan
Insurance
Direct Loan
Direct Loan &
Insurance
Direct Loan
Direct Loan
Amount
$2.5 m
$2.5 m
$2.5 m
$15 m
$30 m
$15 m
$1.2 m
$1.5 m
$4 m
$1.5 m
13
Pipeline Highlights
• Brazil – housing
development - $5m
• Kenya - $7mm loan, for
construction and lease
purchase program
• Uganda – housing
construction - $5 m
• Ghana – mortgage
program $30 m
• Zambia – mortgage
program - $46 m
• Kenya – LIS and tax
collection system $.84 m
• Nigeria - $4.4 for
construction
• S, Africa – construction
loan guaranty $5.6 m
• Pakistan – mortgage
insurance facility guaranty
Mexico and CAFTA
•
•
•
•
Resort worker housing program
Capital markets support for mortgages
Employer assisted housing
Land and infrastructure development