Foreign sources of capital will increasingly look to invest in US infrastructure as the nation comes to terms with how much it needs to fix its crumbling infrastructure and the political environment becomes more welcoming, according to project finance and M&A lawyers at Patton Boggs in New York.
“The trend will inevitably be toward inbound investments in infrastructure development from sources . . .where wealth has been transferred to, back into where it has been transferred from,” said Tim Pfister, partner at Patton Boggs.
He pointed to the massive oil wealth accumulated by Middle Eastern nations – about $381 billion in 2007 alone, according to a recent report by accounting firm Ernst & Young – as one of the sources of capital that will increasingly look to invest in the US.
“There will be a focus on the US. I think that’s driven by the lack of available funds here but it’s also driven by a desire among many of these sources of funds to unload their dollars for something that’s tangible,” said Jay Fortin, a partner at Patton Boggs.
“They’re not comfortable holding treasuries, as they’ve done in the past, or investing in banks,” he added.
Pfister also pointed to new sources of oil wealth coming online, such as Libya, that may seek to invest in US infrastructure as the two countries begin to normalise investor relations. On 31 October, Libya paid $1.5 billion to compensate the families of American victims of Libyan-sponsored terror attacks in the 1980s.
We're already hearing about investors in the Middle East looking to go into Iraq and rebuild the infrastructure there.
Improved investor relations with Libya could mark the beginning of a larger trend in which the US welcomes increased foreign investment amid staggering national spending needs.
“The political climate is different,” Pfister said, adding that it is changing as a result of the US coming to terms with its national challenges in infrastructure spending. Deals such as Dubai World Ports’ proposed acquisition of port operator P&O Ports in 2006 may not necessarily see the same kind of political backlash going forward, he said. The Dubai World deal was shelved because of national security concerns from members of Congress.
However, the upward trend for US-bound investment will likely be tempered by foreign sources of wealth increasingly looking to invest in their own regions, which also face major infrastructure challenges.
“We’re already hearing about investors in the Middle East looking to go into Iraq and to rebuild the infrastructure there,” Fortin said.