Overseas Private Investment Corporation

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.

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.

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. 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

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. 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.

Congress created OPIC in 1969 through an amendment to the Foreign Assistance Act, and the agency began operations in 1971, during the Nixon Administration, 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."

Organized as a corporation with a corporate structure, OPIC is governed by a Board of Directors, President and CEO, and Executive Vice President, 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." 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).