Friday, March 31, 2006

So now we are the evil foreigners?

Daniel Gross in Slate raises alarmist bells at the thought that non-US firms were buying up government toll roads. One such firm is Australia's Macquarie Bank. After the ridiculousness of the Dubai ports non-issue (with real effects), this is similarly silly. After all, US governments are putting these up for sale and non-US firms are bidding more than US ones to take the assets. And the problem with this is ... um, that they aren't American companies?

Gross worries that revenues that could have ended up staying in the US will be going outside in the future. Of course, don't forget that similarly capital that could have ended up staying outside the US will be coming to it. Moreover, it is not like this was forced on anyone. Gross makes it sound like a foreign conquest, seizing future road revenues and leaving US citizens with a worthless pile of cash!

And why didn't American companies win these bids? Gross has a 'theory':

Why aren't American companies buying the roads and making the profits that are going to Cintra and Macquairie? Oddly, it may be because the toll roads are good investments—but not great ones. The long-term economics of these sweetheart deals don't appeal enough to today's quick-buck American investors. Big private-equity firms are sitting on piles of cash, and money is cheap. And yet they're not bidding seriously on these lease deals. Ironically, the very factors that make the United States an appealing market for foreign investors—its size and stability, the security afforded by the rule of law—make it comparatively unappealing for some local investors. Macquairie and Cintra might be perfectly happy with 12 percent internal rates of return. But many big U.S. investors are seeking returns at twice that rate, which they believe can be found more easily in riskier markets like India and China.

Yes, you read right: they aren't good enough investments for US firms? Well, if they aren't good enough investment for US firms, how can they be good enough investments for US taxpayers? How could it be that the losses to the US are so great? These horrifically inconsistent arguments have no place in Slate.


vee said...

Bit off topic, but do you know where I can find a full list of Macquarie Bank companies - I've tried, without much success

Not my real name said...

Why do Americans never bemoan the increase in foreign income they generate when they buy foreign assets or infrastructure?

Just an idea that really bugs me, that Americans are hostile to revenue leaving the country, but are not willing to give up their own foreign interests.