Order Code 98-567
Updated January 16, 2008
The Overseas Private Investment Corporation:
Background and Legislative Issues
Danielle Langton
Analyst in International Trade and Finance
Foreign Affairs, Defense, and Trade Division
Summary
The Overseas Private Investment Corporation (OPIC)1 was established in 1969 and
began operations in 1971 to promote and assist U.S. business investment in developing
nations. OPIC is a U.S. government agency that provides project financing, investment
insurance, and other services for U.S. businesses in 154 developing nations and
emerging economies. Congress reauthorized OPIC through April 1, 2008 in the
Consolidated Appropriations Act of 2008 (P.L. 110-161). On July 23, 2007, the House
approved H.R. 2798 to reauthorize OPIC through 2011 and make other changes. The
Senate has not considered this bill. The Consolidated Appropriations Act of 2008
provides $47.5 million for OPIC’s FY2008 administrative expenses and allows a
transfer of $20 million from OPIC’s non-credit account to fund its credit program. This
report will be updated as events warrant.
Background
Structured like a private corporation, OPIC operates on a self-sustaining basis and
has recorded a positive net income for every year of operation, with reserves now totaling
more than $3 billion. OPIC was established in 1969 amid an atmosphere of congressional
disillusionment overall with U.S. aid programs, especially large infrastructure projects.
In his first message to Congress on aid, President Nixon recommended the creation of
OPIC to assume the investment guaranty and promotion functions that were being
conducted by the Agency for International Development (AID). President Nixon also
directed that OPIC would provide “businesslike management of investment incentives”
to contribute to the economic and social progress of developing nations.2
In creating OPIC, the Nixon Administration indicated that it was not attempting to
end official U.S. foreign assistance, because “private capital and technical assistance
1 For additional information, see OPIC’s Internet address: [http://www.opic.gov/].
2 Public Papers of the Presidents: Richard Nixon. Washington, U.S. Govt. Print. Off., 1969.
p. 412.

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cannot substitute for government assistance programs,” a combination that can provide,
“official aid on the one hand, and private investment and technical assistance on the
other.” Private investment activities, however, were meant to complement the official
assistance programs and, thereby, multiply the benefits of both. In addition, market-
oriented private investment was viewed as an antidote to the government-oriented aid
projects that were viewed by some as costly and inefficient. OPIC was created as a first
step in the eventual overhaul of the entire U.S. aid program. In 1973, this overhaul was
completed as the United States largely abandoned infrastructure building and other large
capital projects in favor of humanitarian aid to meet basic human needs.
At present, OPIC is directed to “mobilize and facilitate the participation of United
States private capital and skills in the economic and social development of less developed
countries and areas, and countries in transition from nonmarket to market economies.”3
OPIC’s programs are intended to promote U.S. private investment in less developed
countries by reducing risks, especially political risks (including currency inconvertibility,
expropriation, political violence, and terrorism), for U.S. firms associated with overseas
investment. To accomplish these goals, OPIC is authorized to finance U.S. investment
through loans and guarantees, insure against political risk, and provide various investor
services. OPIC’s authority to guaranty and insure U.S. investments abroad is backed by
the full faith and credit of the U.S. government and OPIC’s own substantial financial
resources. OPIC’s activities also were intended to assist U.S. firms and small businesses’
foreign operations. For instance, Congress directed OPIC to focus on projects that have
“positive trade benefits for the United States.” OPIC is required to decline its services,
however, if it believes an overseas investment may reduce employment in the United
States, either because a U.S. firm shifts part of its production abroad, or because output
from an overseas investment will be shipped to the United States and “reduce
substantially the positive trade benefits” of the investment.4 OPIC also is generally barred
by its enabling legislation from participating in projects that pose an “unreasonable or
major environmental health, or safety, hazard,” or participating in countries that do not
“extend internationally recognized workers rights,” or that impose domestic content
requirements.
Programs
OPIC operates in approximately 154 countries and areas worldwide, including
countries in Central and Eastern Europe.5 Although OPIC offers U.S. firms an array of
services, its activities can be grouped into three categories: finance, insurance, and
investment development.
Finance. OPIC’s finance program operates like an investment bank, customizing
and structuring a complete package for each project. To obtain OPIC financing, the
venture must be commercially and financially sound and be wholly owned by U.S.
companies, foreign subsidiaries of U.S. companies, or joint ventures involving local
companies and U.S. sponsored firms. In the case of a joint venture involving existing
3 22 U.S.C. Section 2191.
4 22 U.S.C. Section 2191, 3(k)(1).
5 Annual Report, various years. Overseas Private Investment Corporation.

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firms, the U.S. investor is expected to own at least 25% of the equity of the venture. For
new ventures, financing may be equal to 50% of the total project cost; a larger share is
possible for plant expansions. OPIC provides financing to investors through two major
programs: direct loans and loan guarantees. Direct loans generally range between $2
million and $10 million and are available only for ventures sponsored by, or significantly
involving, U.S. small businesses or cooperatives (such as joint ventures).
Loan guarantees typically are used for larger projects, ranging in size from $10
million to $75 million, but in certain cases can be as high as $200 million. OPIC’s
guarantees are issued to financial institutions that are more than 50%-owned by U.S.
citizens, corporations, or partnerships. Rates and conditions on loans and guarantees
depend on financial market conditions at the time and on OPIC’s assessment of the
financial and political risks involved. OPIC charges up-front, commitment, and
cancellation fees, and reimbursement is required for related administrative expenses.
OPIC also requires that proceeds of its financing be spent for capital goods and services
in the United States, in the host country, or in other less developed countries, but not in
other industrialized countries.
OPIC also sponsors a number of funds that offer equity financing to U.S. firms that
either cannot allocate or cannot raise sufficient capital to start or expand their businesses
overseas. These funds represent a blend of public and private sector capital and are
managed by firms with venture capital investment capability and experience. Among the
direct investment funds OPIC has invested in are: the Africa Growth Fund, Africa Growth
Fund II, the Central and Eastern European Growth Fund, the India Private Equity Fund,
the Israel Growth Fund, and the InterArab Investment Fund. OPIC also is supplying
guarantees for private funds to assist the Newly Independent States (NIS). These efforts
include the Russia Partners Fund, the Poland Partners Fund, and the Global Environment
Emerging Markets Fund.
Insurance. OPIC political risk insurance is available to U.S. citizens, U.S. firms,
or to the foreign subsidiaries of U.S. firms as long as the foreign subsidiary is at least
95%-owned by a U.S. citizen. According to OPIC, such insurance is available for
investments in new ventures or in expansions of existing enterprises, and can cover equity
investments, parent company and third party loans and loan guarantees, technical
assistance agreements, cross-border leases, assigned inventory or equipment, and other
forms of investment. This insurance covers three broad areas of political risk: currency
inconvertibility, expropriation, and political violence. Currency inconvertibility
coverage compensates investors if new currency restrictions are imposed which prevent
the conversion and transfer of remittances from insured investments, but it does not
protect against currency devaluation.
Expropriation coverage protects U.S. firms against the nationalization, confiscation,
or expropriation of an enterprise, including actions by foreign governments that deprive
an investor of fundamental rights or financial interests in a project for a period of at least
six months. This coverage excludes losses that may arise from lawful regulatory or
revenue actions by a foreign government and actions instigated or provoked by the
investor of foreign firm.
Political violence coverage compensates U.S. citizens and firms for property and
income losses directly caused by various kinds of violence, including declared or

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undeclared wars, hostile actions by national or international forces, civil war, revolution,
insurrection, and civil strife (including politically motivated terrorism and sabotage).
Income loss insurance protects the investor’s share of income from losses that result from
damage to the insured property caused by political violence. Assets coverage
compensates U.S. citizens and firms for losses of or damage to tangible property caused
by political violence. OPIC also has a number of special programs that protect U.S. banks
from political violence. This type of insurance reduces risks for banks and other
institutional investors, which allows them to play a more active role in financing projects
in developing countries. Specialized types of insurance coverage is also available for U.S.
investors involved with certain contracting, exporting, licensing, or leasing transactions
that are undertaken in a developing country.
Investment Development. OPIC also offers various pre-investment services to
aid U.S. investors. For instance, OPIC sponsors periodic investment missions with U.S.
businesses to developing countries and investor conferences to inform U.S. businesses
about investment opportunities.
OPIC’s Budget
OPIC regularly turns funds back to the Treasury Department. Each year, however,
Congress approves a credit program level for OPIC and appropriates funds for its
administrative expenses. These funds are not actually provided to OPIC, because OPIC
relies on its own resources. Congress follows this procedure in order to exercise its
oversight role and to set limits on the extent to which OPIC can obligate U.S. government
resources. Prior to FY1992, OPIC relied exclusively on non-appropriated resources (fees
and interest on Treasury securities) to fund its operations. With federal government credit
reform, however, OPIC was required to receive an appropriation based on an estimate of
its credit programs (direct loans and guarantees). From 1992 to 1994, OPIC returned to
the general fund an amount equal to its direct appropriation. For FY1995 and beyond,
OPIC has received authority to forego additional appropriations.
OPIC’s budget is composed of non-credit and credit accounts, in conformity with the
standards set out in the Federal Credit Reform Act of 1990 (see Table 1). The non-credit
portion of OPIC’s budget relates to OPIC’s political risk insurance program; its credit
program accounts are comprised of OPIC’s direct and guaranteed loans. In FY2004,
OPIC extended about $1.9 billion in insurance to U.S. firms and had $12 billion in
insurance policies outstanding. OPIC also disbursed $300 million in direct loans and $1.1
billion in guaranteed loans. OPIC has accumulated over $3.5 billion in assets in its non-
credit account, which it uses to fund losses it may experience in its guarantee and
insurance coverage. OPIC uses premium income and the interest it accrues from the
assets in its non-credit account to fund the direct and indirect expenses in its non-credit
and its credit accounts.

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Table 1. OPIC’s Budget Summary
(in millions of dollars)
FY02
FY03
FY04
FY05
FY06
FY07
FY08
NON CREDIT ACCOUNT
Operating Expenses
$74
$84
$94
$46
$166
$104
$85
Non credit personnel costs
16
16
16
17
17
17
20
Insurance payments/provisions
34
—
—
—
118
50
35
Admini
stration costs
23
24
25
26
25
26
28
Adjustments to accounts
1
44
3
2
1
3
2
Iraq Middle Market Dev.
50
1
—
8
—
Foundation
Budget authority (gross)
38
56
81
51
172
125
88
Outlays (gross)
49
76
180
-10
46
141
90
Offsetting collections
-308
-346
-316
-257
-323
-249
-265
Federal sources
-23
-24
-50
-26
-25
-26
-28
Interest on U.S. securities
-223
-272
-222
-203
-200
-203
-217
Non-Federal sources
-62
-50
-44
-28
-22
-20
-20
Budget authority (net)
-268
-287
-229
-201
-153
-133
-177
Outlays (net)
-239
-270
-135
-267
-277
-108
-175
Budget authority:
Transferred to other accountsa
47
48
48
49
45
35
58
CREDIT ACCOUNT
Program Expensesc
160
211
198
180
167
165
59
Direct loan subsidy
5
17
6
22
7
10
16
Guaranteed loan subsidy
14
1
33
11
1
9
11
Program cost re-estimates
118
168
134
131
134
120
3
Administrative expenses
23
25
25
26
25
26
29
Budget authority
23
216
182
174
179
151
58
Appropriationb
—
168
134
120
134
116
—
From other accountsc
47
48
48
49
45
35
58
Source: Budget of the United States Government, various years. U.S. Govt. Print. Off., Washington.
a. Budget authority transferred to other accounts, including OPIC’s credit account.
b. OPIC does not receive an actual appropriation. The figure listed here is calculated by OMB to
approximate the total subsidy OPIC provides through its programs, using its own resources. FY2003
and 2004 appropriations included guarantees for private funds and OPIC finance to assist the NIS.
c. These funds include transfers from OPIC’s Non-Credit Account (see footnote ‘a’) and from the Export-
Import Bank and AID for OPIC guarantees to NIS countries.
Legislative Issues
Congress reauthorized OPIC through April 1, 2008 in the Consolidated
Appropriations Act of 2008 (P.L. 110-161). The House previously approved H.R. 2798
on July 23, 2007 to reauthorize OPIC through 2011 and introduce new requirements for
OPIC. The bill includes specific actions for OPIC to take, such as to post summaries of
all new projects publicly on its website; consult with affected communities on
environmentally sensitive projects; promote “clean energy technologies;” institute a
climate change mitigation action plan; create an Office of Accountability; refer certain
fraud cases to the Department of Justice; institute a competitive process for the selection

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of investment fund managers; report to Congress on investment funds’ performance and
status; notify Congress before approving projects involving extractive industries; and
notify Congress if OPIC’s maximum contingent liability outstanding exceeds the previous
year’s by 25%. The bill would also prohibit OPIC from supporting any project where an
applicant for OPIC assistance has provided a loan to a government that is a state sponsor
of terrorism, or has an investment of $20 million or more in the energy sector in a country
that is a state sponsor of terrorism.
Other legislation pertaining to OPIC has been introduced in the 110th Congress. The
Energy Independence and Security Act of 2007, P.L. 110-140, expresses the sense of
Congress that OPIC should undertake certain activities to promote greater investment in
clean and efficient energy technologies and requires OPIC to include a description of such
activities in its annual report. The Caribbean Coral Reef Protection Act, H.R. 1679,
would prohibit OPIC from providing its services to any person who has made investments
contributing to the Government of Cuba’s ability to develop petroleum resources off the
coast of Cuba. H.R. 1886 would prohibit OPIC from supporting an investment involving
an oil or gas project. The Currency Reform for Fair Trade Act of 2007, H.R. 2942, would
prohibit OPIC from supporting projects in designated countries that issue fundamentally
misaligned currencies.
Economic and Policy Issues
Economists generally oppose the use of subsidized credits to promote trade or
investment abroad. They believe such subsidies tend to distort the flow of capital and
resources away from the most efficient uses and to distort trade and investment flows
abroad. As a result, they conclude that by promoting investment abroad, OPIC may be
crowding out, and thereby reducing, some domestic investment. As long as OPIC’s non-
federal collections — or the fees it charges the public for its services — are sufficient to
cover all of its credit and non-credit activities (as indicated by some estimates), its impact
on the federal government’s budget may not be negative. OPIC’s impact on U.S. capital
and resource markets, however, may well be negative due to the distortionary effects of
subsidized credits.
Much of the rationale for OPIC relates to U.S. foreign policy goals, a premise that
is being questioned by Members of Congress in a number of ways. Initially, OPIC was
established to enhance U.S. aid policy during a period when policymakers were
dissatisfied with the focus of U.S. aid programs on officially supported capital intensive
projects. OPIC was designed to assist U.S. private firms take the lead in developing
projects that not only would enhance economic development but be economically viable
as well. In recent years, OPIC has supported efforts within the Newly Independent States
to convert defense industries into market-oriented industries producing consumer
products. In this role, OPIC’s programs may serve to rectify certain “market failures” that
dissuade U.S. firms from investing in developing countries. In many of these countries,
labor, goods, and capital markets are not well established, and information about the
economy often is difficult to obtain. Given this lack of information, individual firms may
well attach more risk to investing in developing economies than is warranted. Until the
firms gain greater experience or information, or otherwise change their assessments of the
risks and rewards of investing in developing countries, they may be overly reluctant to
commit resources to investments in the least developed countries without OPIC’s
guarantees.
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