Overseas Private Investment Corporation (OPIC)

What Was the Overseas Private Investment Corporation (OPIC)?

The Overseas Private Investment Corporation (OPIC) was a U.S. development finance institution. This government agency assisted private businesses that wanted to invest abroad. OPIC encouraged development in emerging markets through private sector investment overseas by assisting corporations to analyze and manage risks while encouraging development in emerging markets. This helped the agency advance the country's foreign policy and national security goals.

OPIC was consolidated with the U.S. Agency for International Development's (USAID) Development Credit Authority to form the U.S. International Development Finance Corporation in 2019.

Key Takeaways

  • The Overseas Private Investment Corporation was a U.S. development finance institution.
  • It encouraged development in emerging markets through private sector investment overseas, especially in emerging markets.
  • The agency provided both risk insurance and loan guarantees to companies with sound business plans.
  • OPIC supported projects that reinforced and were aligned with U.S. foreign policy, promoting the country's national security interests.
  • The agency merged with the U.S. Agency for International Development's Development Credit Authority in 2019 to form the U.S. International Development Finance Corporation.

Understanding the Overseas Private Investment Corporation (OPIC)

The Overseas Private Investment Corporation was established in 1971 as a U.S. government agency under then-President Richard Nixon. It was the country's one-and-only development finance institution (DFI) and was based in Washington, D.C. DFIs are government-owned organizations that invest in private sector projects and promote national interests.

As the country's DFI, OPIC helped private sector investment abroad. OPIC-backed projects were reinforced and aligned with U.S. foreign policy. They fostered economic and political stability, along with free-market ideals, especially in conflict-ridden areas.

Its initial portfolio included political risk insurance worth $8.4 billion along with $169 million in loan guarantees. That portfolio expanded to more than $20 billion, reaching out to more than 160 different developing countries. Direct loans and guarantees ranged from a few million to $350 million for up to 20 years in underserved areas without easy access to commercial financing.

Funding was only provided to companies with a sound business model, for which it charged market-based fees. This allowed the agency to operate without the need for any taxpayer assistance. The agency reported that it actually generated money for American taxpayers, contributing as much as $3.7 billion toward reducing the national deficit between 2006 and 2016.

According to OPIC's operating statute, the projects it helped could not cause job loss in the United States.

Special Considerations

As mentioned above, OPIC was consolidated with USAID’s Development Credit Authority to form the U.S. International Development Finance Corporation (DFC) in 2019. The merger was realized after the passing of the Better Utilization of Investments Leading to Development Act was passed on Oct. 5, 2018. The new entity allows the use of newer and more innovative financial products to help distribute private capital to developing economies.

Just like its predecessor, DFC aims to advance the interests of American foreign policy and national security as the private sector helps the development of emerging market economies. It accomplishes this through political risk insurance and debt financing, comprising of direct loans and guarantees of up to $1 billion for up to 25 years. It also provides:

The DFC allows private sector investment in several sectors, including energy, health care, critical infrastructure, technology. Businesses are required to meet specific standards and have an established history in their specific industries.

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