NCPA - National Center for Policy Analysis

OPIC Is Corporate Welfare

September 16, 1996

Unless Congress reauthorizes it by the end of this month, the Overseas Private Investment Corporation (OPIC) will have to shut its doors. Free market economists and others say that is a consummation devoutly to be wished.

OPIC, created 25 years ago, insures U.S. investments against the risk of nationalization finances the projects and guarantees loans to U.S. firms pursuing private profits in developing economies.

  • A bill which just failed in Congress would have cost taxpayers $45 billion for a huge expansion of OPIC's authority to issue insurance and loan guarantees.
  • Political risk insurance rose last year to $8.6 billion, project finance ate up $1.8 billion and investment funding cost $1.4 billion.

OPIC's supporters argue that he agency should be kept because it pays for itself. But if OPIC's "profits" really come from the economic merits of the projects it takes on, critics contend, then it should stop crowding out private insurance and investment companies from that line of business. In fact, critics argue, OPIC's profits are simply the result of its power to coerce taxpayer dollars.

The risks to American capital are substantially greater in countries with poor economic policies and resistance to reform. Critics assert that funneling money into such areas is not only risky business, but poor international politics -- allowing these countries to coast along without making efforts to reform.

Source: Perspective, "Bailing Out Risk-Takers," Investor's Business Daily, September 16, 1996.

 

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