Order Code 98-567
Updated October 20, 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. OPIC is currently authorized through March 9, 2009 under the
Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009
(P.L. 110-329). On July 23, 2007, the House approved H.R. 2798 to reauthorize OPIC
through 2011 and make other changes. The Senate Committee on Foreign Relations
reported this bill with an amendment on March 4, 2008. 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
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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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
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.
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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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
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.

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Political violence coverage compensates U.S. citizens and firms for property and
income losses directly caused by various kinds of violence, including declared or
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)
FY03
FY04
FY05
FY06
FY07
FY08
FY09
NON CREDIT ACCOUNT
Operating Expenses
$84
$94
$46
$166
$86
$83
$91
Non credit personnel costs
16
16
17
17
18
19
21
Insurance payments/provisions
—
—
—
118
33
34
38
Admini
stration costs
24
25
26
25
25
28
30
Adjustments to accounts
44
3
2
1
2
2
2
Iraq Middle Market Dev.
50
1
—
8
—
—
Foundation
Budget authority (gross)
56
81
51
172
112
83
92
Outlays (gross)
76
180
-10
46
52
90
95
Offsetting collections
-346
-316
-257
-323
-292
-260
-281
Federal sources
-24
-50
-26
-25
-34
-28
-30
Interest on U.S. securities
-272
-222
-203
-200
-206
-208
-226
Non-Federal sources
-50
-44
-28
-22
-24
-24
-25
Budget authority (net)
-287
-229
-201
-153
-185
-177
-189
Outlays (net)
-270
-135
-267
-277
-240
-170
-186
Budget authority:
Transferred to other accountsa
48
48
49
45
45
52
59
CREDIT ACCOUNT
Program Expensesc
211
198
180
167
177
123
61
Direct loan subsidy
17
6
22
7
16
11
11
Guaranteed loan subsidy
1
33
11
1
20
12
14
Program cost re-estimates
168
134
131
134
116
71
2
Administrative expenses
25
25
26
25
25
28
31
Budget authority
216
182
174
179
161
123
59
Appropriationb
168
134
120
134
116
71
—
From other accountsc
48
48
49
45
45
52
59
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. This figure 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 March 6, 2009 in the Consolidated Security,
Disaster Assistance, and Continuing Appropriations Act, 2009 (P.L. 110-329). This bill
passed after OPIC operated for six months without authorization. Previously, the House
approved H.R. 2798 on July 23, 2007 to reauthorize OPIC through 2011 and introduce
new requirements for OPIC. On March 4, 2008 the Senate Committee on Foreign
Relations reported this bill out of committee, substituting it with an amended version.
Identical language was included in S. 3297, introduced on July 22, 2008. Both House and
Senate versions of the bill include similar new directives for OPIC, such as to promote

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the use of clean energy technology and reduce greenhouse gas emissions associated with
OPIC-supported projects. Both versions also direct OPIC to ensure that extractive
industry projects conform to Extractive Industry Transparency Initiative (EITI) standards
and principles, and provide more information to the public about current and proposed
projects. In addition, both versions would strengthen the statutory provisions on workers’
rights overseas, and prohibit assistance to entities with investments in countries that are
state sponsors of terrorism. The House and Senate versions differ somewhat in language
and details in these and other provisions, and they each include provisions not found in
the other. The Senate has yet to approve the bill because some members are reportedly
opposed to the provisions on clean energy technology.
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 promote greater investment in clean energy technologies and
includes a reporting requirement. 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 development of petroleum resources off Cuba’s coast. H.R. 1886
would prohibit OPIC from supporting any 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. They also believe 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), it may not have a negative impact on the federal
government’s budget. 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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