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Monday, July 18, 2011

The Overseas Private Investment Corporation: Background and Legislative Issues

Shayerah Ilias
Analyst in International Trade and Finance

The Overseas Private Investment Corporation (OPIC), which was established in 1969 and began operations in 1971, is an independent U.S. government agency that provides political risk insurance, project finance, and other services to support U.S. investment in over 150 developing countries and emerging economies. OPIC’s programs are intended to promote U.S. private investment, by mitigating risks, such as political risks (including currency inconvertibility, expropriation, political violence, and terrorism), for U.S. firms making qualified investments overseas. OPIC’s governing legislation is the Foreign Assistance Act of 1961 (P.L. 87-195) as amended. The agency’s authority will expire at the end of FY2011 unless extended by Congress.

OPIC’s activities are guided by U.S. foreign policy and development objectives. OPIC operates in over 150 countries around the world and across a range of economic sectors. Its regional priorities are the Broader Middle East, Sub-Saharan Africa, and South Asia, and its sectoral priorities are clean and renewable energy; critical natural resources (such as agriculture, water, and food security); and “impact investing” projects. U.S. investors that utilize OPIC services vary from large to small, but OPIC has placed special emphasis on encouraging U.S. small businesses to invest overseas. In FY2010, OPIC provided $2.4 billion in new market-based financing and political risk insurance to U.S. businesses. Since its inception, OPIC has funded, guaranteed, or insured over $180 billion in investments. Congress does not approve individual OPIC transactions. However, it places statutory requirements on OPIC’s activities, such as those related to economic and environmental impacts of projects.

While OPIC’s budget is fully self-sustaining from its own revenues, Congress annually provides OPIC with the authority to cover its administrative expenses and credit subsidy funding from its offsetting collections, which include user fees and interest from U.S. Treasury securities. For FY2011, Congress provided $52.31 million for OPIC’s administrative expenses and authorized a transfer of $18.115 million from OPIC’s noncredit account to conduct its credit and administrative programs (P.L. 112-10). President Obama’s budget proposal for FY2012 requested $57.89 million for OPIC’s administrative expenses and a transfer of $31 million from OPIC’s noncredit account to conduct it programs.

The 112
th Congress may consider legislation to extend OPIC’s authority. In doing so, Congress may examine the policy debate related to OPIC’s mission, the length of time for which to extend the agency’s authority, the statutory restrictions and limitations on its support for investments, and the agency’s organizational structure.

Date of Report: July 5, 2011
Number of Pages: 15
Order Number: 98-567
Price: $29.95

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