Overseas Private Investment Corporation

Overseas Private Investment Corporation (OPIC)
Agency overview
Formed January 19, 1971
Headquarters Washington, D.C.
Agency executives
Website www.opic.gov

The Overseas Private Investment Corporation (OPIC) is the United States government's development finance institution. It mobilizes private capital to help solve critical development challenges and, in doing so, advances the foreign policy of the United States and national security objectives.

Because OPIC works with the U.S. private sector, it helps U.S. businesses gain footholds in emerging markets, catalyzing revenues, jobs and growth opportunities both at home and abroad. OPIC achieves its mission by providing investors with financing, political risk insurance, and support for private equity investment funds, when commercial funding cannot be obtained elsewhere. Established as an agency of the U.S. government in 1971, OPIC operates on a self-sustaining basis at no net cost to American taxpayers.

All OPIC projects adhere to high environmental and social standards and respect human rights, including worker's rights. By mandating high standards, OPIC aims to raise the industry and regional standards in countries where it funds projects. OPIC services are available for new and expanding business enterprises in more than 160 countries worldwide.[1]

Products and services

Financing

Medium- to long-term funding through direct loans and loan guarantees to eligible investment projects in developing countries and emerging markets. By complementing the private sector, OPIC can provide financing in countries where commercial financial institutions often are reluctant or unable to lend.

OPIC recognizes that businesses both large and small can play an important role in developing nations. In recent years, OPIC has made it a priority to work with American small businesses, which comprise, on average, 80 percent of projects supported by the agency. OPIC’s Department of Small and Medium-sized Enterprise Finance offers qualified small businesses a streamlined approval process and direct loans from $100,000 to $10 million with terms from three to 15 years. While the eligible U.S. small business must own at least 25 percent of the overseas project, OPIC may be able to finance up to 65 percent of the total project cost. OPIC has conducted more than a dozen small business workshops around the United States since 2006, educating nearly 1,600 business owners about OPIC products and services.

Political risk insurance

OPIC’s political risk insurance enables U.S. businesses to take advantage of commercially attractive opportunities in emerging markets, mitigating risk and helping them compete in a global marketplace. OPIC helps U.S. investors protect their investments in a variety of situations, including political violence, expropriation or other government interference, and currency inconvertibility.

Investment funds

OPIC provides support for the creation of privately owned and managed investment funds. These funds make direct equity and equity-related investments in new, expanding or privatizing emerging market companies. OPIC-supported funds help emerging market economies to access long-term growth capital, management skills, and financial expertise, all of which are key factors in expanding economic development for people in developing nations.

Investment projects

OPIC supports projects in a range of industries—from energy to housing, agriculture and financial services. It focuses on regions where the need is greatest and in sectors that can have the greatest developmental impact. OPIC has increasingly focused on projects that encourage the use of renewable resources, which represent not only an urgent global need but also a significant investment opportunity.

A current example is Project Salvador, a 70 megawatt-peak photovoltaic power plant in Chile, where solar power is economic without government subsidies due to the volume of solar irradiation in that country. Working with private energy companies Total and Etrion, OPIC provided 70% financing for the $200 million project.[2]

Power Africa

Another key priority is impact investing, which aims to produce positive social impacts while generating financial returns sufficient to make these projects sustainable. OPIC has committed to provide $1.5 billion to develop energy projects in Africa over the next five years, in support of President Obama’s Power Africa initiative to double the number of people on the continent who have access to electricity. The Power Africa initiative will help African countries develop more of their extensive energy resources, including oil and gas, geothermal, hydro, wind, solar and biomass, while also building out power generation and transmission infrastructure.[3]

Requirements

OPIC requires that its projects have a meaningful connection to the U.S. private sector. For financing, this means a U.S.-organized entity 25 percent or more U.S.-owned or a majority U.S.-owned foreign-organized entity; U.S. citizens, lawful permanent residents and U.S.-organized non-governmental organizations. OPIC does not support projects that negatively affect the U.S  economy.

Environmental and social standards

OPIC projects must meet congressionally mandated requirements regarding protection of the environment, social impacts, health, and safety.[4] The guidelines and procedures are based in large part on environmental and social impact assessment procedures applied by organizations such as the World Bank Group, the European Bank for Reconstruction and Development, the Inter-American Development Bank and the U.S. Export-Import Bank. Projects that are likely to have significant adverse environmental or social impacts are disclosed to the public for a comment period of 60 days.

History

The Overseas Private Investment Corporation headquarters plaque in Washington, DC.

In the American effort to rebuild Europe following World War II, two facts became clear to policy makers: private investment is a more powerful generator of economic development than aid; and there is an appropriate role for government in encouraging private investment where it has the potential to do the most good. Accordingly, the Marshall Plan authorized the U.S. government to insure private U.S. investors against the risk that earnings generated overseas in foreign currencies might not be convertible into U.S. dollars. This new tool—political risk insurance—was expanded in the 1950s to cover losses from war and expropriation, as well as government interference with investors’ rights to the proceeds of their investments. It was subsequently complemented with the addition of project financing.

In 1966, Congress established the International Private Investment Advisory Council (IPIAC) under the Foreign Assistance Act of 1966. In December 1968, IPIAC published "The Case for a U.S. Overseas Private Enterprise Development Corporation", a report articulating the need for such an entity.[5] In the report, the IPIAC recommended the organization of an overseas private enterprise development corporation of and funded by the United States, as responsive to the Javits Amendment to the 1968 Foreign Assistance Act.

As administration of the U.S. guaranty program moved among various agencies, bipartisan support grew to establish it on a permanent basis as a self-sustaining, independent agency.

“ The most original of [President Nixon’s] recommendations is the one dealing with the establishment of an Overseas Private Investment Corporation. Even opponents of foreign aid agree, I feel sure, that the burden of our international development program can and should be shifted increasingly from public to private resources. The Administration’s proposal to set up a Corporation has as its basic objective stimulation of American businessmen into examining the possibility of profitable and productive enterprises in countries hungry for development.

I believe OPIC means business—a businesslike approach to foreign aid. After all, the profit motive was the prime mover in our own Nation’s development. Why not use this profit motive in helping the development of others? —Representative Clement Zablocki (D-WI) during Congressional debate preceding establishment of OPIC November 19, 1969

 ”
“ [OPIC is the] first really big initiative that has come along in the foreign aid field almost since it began, which goes back to 1948 and 1949…this corporation will for the first time apply business methods and business accounting procedures to the business operations of project development, investment, insurance, guarantees and direct lending—that is, to private activities which are sensitively and directly geared into the development of the less-developed areas which we propose to help in the foreign aid program. —Senator Jacob Javits (R-NY) during Congressional debate preceding the establishment of OPIC, December 12, 1969 ”

Congress created OPIC in 1969 through an amendment to the Foreign Assistance Act, and the agency began operations in 1971, during the Nixon Administration,[6] with a portfolio of $8.4 billion in political risk insurance and $169 million in loan guaranties. In a special message to Congress in 1971, President Nixon stated that OPIC’s establishment will help “give new direction to U.S. private investment abroad… and provide new focus to our foreign assistance effort."[7]

Organized as a corporation with a corporate structure, OPIC is governed by a Board of Directors,[8] President and CEO,[9] and Executive Vice President,[10] all nominated by the President of the United States and approved by the U.S. Senate. The majority of the Board of Directors, including its President, are “drawn from private life and have business experience."[7] Although it operates on a self-sustaining basis at no net cost to American taxpayers, OPIC is appropriated administrative funding, and reauthorized on a regular basis, by the U.S. Congress.

Criticism

In the 2000s, Friends of the Earth, Greenpeace together with the cities of Boulder, Arcata and Oakland won against the Overseas Private Investment Corporation (and the Export-Import Bank of the United States), which were accused of financing fossil-fuel projects detrimental to a stable climate, in violation of the National Environmental Policy Act (case filed in 2002 and settled in 2009).[11][12][13]

See also

References

Further reading

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