U.S. Foreign Equity Investments Lack Governance Standards
A policy expert argues that U.S. Government equity investments in foreign companies, like mines in Mozambique and Brazil, lack standard corporate
The United States government has invested billions in foreign companies, including a graphite mine in Mozambique and a rare earth mine in Brazil, without requiring them to meet standard U.S. Corporate governance rules. This gap leaves taxpayer funds with fewer protections and grants foreign firms a competitive edge, according to an analysis published on War on the Rocks.
There is a strong national security rationale for using equity to build secure American supply chains. Congress established the Development Finance Corporation (DFC) in 2018 and the CHIPS program office in 2022, accelerating the pace of government investment over the past eighteen months. Federal money now flows into critical minerals, semiconductors, and defense industrial capacity, creating substantial government ownership in foreign and domestic firms. The government currently holds more than a dozen foreign project investments.
The Governance Gap
When public funds go to a foreign company not listed on a U.S. Exchange, the American taxpayer receives fewer protections than from an investment in a U.S.-traded stock. The protections are even fewer for privately held companies, whether foreign or domestic. Also, the foreign company benefits from U.S. Investment and market access without bearing the same compliance burden as its American competitors, creating a problem of reciprocity and returns.
American corporate governance for publicly traded companies is considered the global gold standard. Investing in a U.S.-listed company generally guarantees a majority independent board and an independent audit committee. Unlisted foreign companies can bypass this system entirely. While foreign companies listed on a U.S. Exchange may follow home-country practices instead of the majority independent board rules for domestic issuers, they are still required to have independent audit committees.
Case Study: The Balama Graphite Mine
Recent trouble with a foreign equity investment highlights the risks. The Balama graphite mine project in Mozambique, led by Syrah Resources' unlisted subsidiary Twigg Exploration, received a $150 million loan from the DFC in November 2024. Financial exposure was concentrated at the project level, which had high operational risk and low governance visibility.
After a $53 million tranche was disbursed that month, nationwide post-election unrest and a force majeure declaration forced the DFC into a January 2025 waiver of resulting default events, with further disbursements suspended to protect Syrah Resources from formal default. In March 2026, the agency proposed converting roughly $31 million of the loan into a stake of about twenty percent in Syrah itself. That proposal remains unsigned, but if it closes, Washington will have become a major shareholder only after the loan encountered distress.
The author, an investor and board member in the critical minerals and defense sectors, argues that requiring an independent subsidiary-level board could have strengthened governance. "Such a board would not have prevented the national political crisis," the analysis notes, acknowledging this is the kind of risk the DFC exists to absorb. However, loan terms could have given an independent audit and risk committee a mandate to review local labor disputes and security protocols before major capital infusions, providing more direct visibility into operational problems.
A Proposed Baseline Standard
Washington should compile a standard set of existing U.S. Corporate governance terms and apply them as a baseline when negotiating equity investments in unlisted foreign companies, the analysis recommends. Support should be conditioned on compliance with fundamental principles: a majority independent board, an independent audit committee that selects and oversees the auditor, audited financial statements, and a consent right if the company falls out of compliance.
This is not the full set of listed-company regulation, as rules on compensation committees and executive pay add cost without necessarily protecting the taxpayer. Implementing these core terms would allow agencies like the DFC and the Office of Strategic Capital to move efficiently and create defensible investment positions.
Ensuring Competitive Fairness
Federal agencies must also ensure foreign companies receiving federal equity assistance do not gain a competitive advantage over American firms that comply with U.S. Governance requirements, such as MP Materials, Albemarle, and Energy Fuels. Requiring the Department of Commerce, the Department of Defense, the Department of Energy, and the DFC to condition their equity investments on foreign companies agreeing to standard governance terms is presented as the fastest path forward, requiring no new legislation.
Currently, federal agencies negotiate protections transaction-by-transaction. A single package of corporate governance terms, developed with the Securities and Exchange Commission and applied as a default, would empower each agency to act swiftly. Foreign companies listed on a recognized foreign exchange could meet it through equivalent home-market rules plus the audit and consent terms.
The proposed standard terms should include a majority independent board using the American definition of independence, an independent audit committee with authority over the external auditor, an annual governance certification provided to the investing agency, and a consent right for the agency if the company falls out of compliance. Implementing these standards should occur at the earliest stages of a transaction to establish that fiduciary structures are prerequisites for accessing taxpayer capital. Meanwhile, another investment, in the Brazilian rare earths producer Serra Verde, is also beginning to face challenges.
