What Is the Overseas Private Investment Corporation?
A U.S. government agency that assists businesses looking to invest abroad. Operated out of Washington, D.C., the Overseas Private Investment Corporation (OPIC) helps companies investing overseas analyze and manage risks, and tries to promote development in emerging markets in addition to supporting domestic foreign policies.
Understanding Overseas Private Investment Corporation (OPIC)
The Overseas Private Investment Corporation (OPIC) supports projects that reinforce and are aligned with current U.S. foreign policy. These are projects that are believed to foster political stability and free market ideals. OPIC also offers political risk insurance for businesses and investors as protection from expropriation risks, political violence, and other country risks.
On its website, OPIC states that it "helps American businesses gain footholds in new markets, catalyzes new revenues and contributes to jobs and growth opportunities both at home and abroad. OPIC fulfills its mission by providing businesses with financing, political risk insurance, advocacy and by partnering with private equity investment fund managers."
According to the agency, its services are available to new and expanding businesses planning to invest in more than 160 countries worldwide. There's no net cost to U.S. taxpayers for these services because OPIC charges market-based fees for its products. As part of its operating statute, all OPIC projects cannot cause job loss in the United States.
The agency was established in 1971 by President Richard Nixon with $8.4 billion in political risk insurance and $169 million in loan guarantees. It broke with the old model of providing grants, instead relying on private sector investment. OPIC says it disburses political risk insurance and loans only to projects with sound business plans.
"Today, OPIC maintains a robust portfolio of more than $20 billion, which has doubled over this past decade. This portfolio spans more than 160 developing countries, including a large number of conflict-affected countries and a growing portfolio in Sub-Saharan Africa," the agency states on its website.
Political risk insurance covers private companies doing business overseas where governments may be unstable or terrorism is prevalent. The agency provides coverage of up to $250 million against losses resulting from "currency inconvertibility, expropriation, regulatory risk, political violence, and breach of contract, when private political risk insurance is not available."
To aid development in underserved areas that are unable to raise sufficient commercial financing, OPIC offers direct loans and guarantees of a few million dollars up to $350 million for as long as 20 years.
The agency cites this example: "Joshi Technologies Inc., a small business based in Tulsa, Oklahoma, used OPIC financing to extend the life of an oil field in Colombia. By using its innovative drilling technology, Joshi was able to produce 4,000 barrels of oil per day from a field that had been considered past its prime."