Overseas Private Investment Corporation

The Overseas Private Investment Corporation (OPIC) is an independent agency of the United States Government that mobilizes U.S. private sector investment in new and emerging markets overseas in order to support both the sustainable economic development of those markets and the creation of American jobs at home. OPIC operates on a self-sustaining basis at no net cost to the American taxpayer; the agency has recorded a positive net income for every year of operation, with reserves (consisting of U.S. Treasury securities) totaling approximately $5 billion. Since its establishment in 1971, OPIC has financed more than 4,000 projects providing $188 billion of investment in emerging markets. OPIC-supported transactions are estimated to have generated $74 billion in U.S. exports and to have supported more than 274,000 U.S. jobs. OPIC manages a $13 billion portfolio of projects in more than 150 countries.

OPIC began operations in 1971 as a development agency to promote and assist U.S. business investment in developing nations. President Richard Nixon recommended the creation of OPIC in order to provide “businesslike management of investment incentives” to contribute to the economic and social progress of developing nations. OPIC’s budget is fully self-funded from its own revenues. Each year, the U.S. Congress provides through the appropriations process authority for OPIC to pay its administrative expenses from user fees and other income. This fulfills OPIC’s statutory mandate to conduct its operations on a self-sustaining basis. These funds are not actually provided to OPIC, because OPIC relies on its own resources.

OPIC achieves its mission by insuring and financing investment projects with substantial U.S. participation that are financially sound, promise significant benefits to the social and economic development of the host country, and foster private initiative and competition. OPIC will not support projects that could result in the loss of U.S. jobs, adversely affect the U.S. economy or the host country’s development or environment, or contribute to violations of internationally recognized worker rights.

OPIC’s three principal products are financing, political risk insurance and support for private equity investment funds.

OPIC financing provides medium- to long-term funding through direct loans and loan guarantees to eligible ventures. OPIC can provide financing on a project finance or a corporate finance basis. OPIC expects a U.S. equity or debt investor to assume a meaningful share of the risk, generally through ownership of at least 25 percent of the equity of a project. OPIC provides loan guarantees, which are typically used for larger projects, and direct loans, which are reserved for projects sponsored by or significantly involving U.S. small businesses and cooperatives. OPIC can normally guarantee or lend from $100,000 up to $250 million per project.

OPIC provides political risk insurance to U.S. investors, contractors, exporters and financial institutions involved in international transactions. OPIC can insure up to $250 million per project and up to $300 million for projects in the oil and gas sector with offshore, hard currency revenues.

OPIC insurance can cover the following three political risks:

• currency inconvertibility — inability of the investor to convert profits,debt service and other investment returns from local currency into U.S. dollars, or to transfer U.S. dollars out of the host country;
• expropriation — loss of an investment due to expropriation, nationalization or confiscation by the host government; and
• political violence — loss of assets or business income due to war, revolution, insurrection, or politically motivated civil strife, terrorism or sabotage.

OPIC investment funds mobilize private capital for direct equity investment by qualified fund managers in private companies located in developing countries and emerging markets. OPIC provides (through a guarantee program) debt capital to private equity funds. OPIC’s support is combined with funds raised from private sector institutions and invested in private companies in these markets. OPIC is thus a creditor of the funds it supports, providing in most instances approximately one-third of the fund’s total capital, and receiving debt returns on its investment.

Elizabeth L. Littlefield is the current President and Chief Executive Officer of OPIC.

References

External links

• Official website
• Governing Legislation through 2005
• U.S. Fiscal Commission Suggests Killing OPIC - The Government's Cash Cow