U.S. Industry Sector Advisory Committee on Small and Minority Business
for Trade Policy Matters (ISAC No. 14)
The following information was assembled on the Overseas Private Investment Corporation (OPIC) for the benefit of ISAC members and the U.S. business community. For further information please visit the OPIC home page at: http://www.opic.gov
Overseas Private Investment Corporation
I. The type and nature of the international programs:
The mission of the Overseas Private Investment Corporation (OPIC) is to mobilize and facilitate the participation of U.S. private capital and skills in the economic and social development of less developed friendly countries. This is accomplished through financial assistance, political risk insurance, and a variety of investor services. OPIC programs bring benefits to the developing world, and to the U.S. as well. Currently, OPIC programs are available in over 140 countries and areas worldwide.
OPIC is required by statute to give preferential treatment to investments involving small business. Based on information recently published by Fortune, the definition of "small business" includes those companies falling within the following parameters:
1. Industrial companies with annual sales of less than $166,000,000.
2. Non-industrial businesses with stockholders' equity of less than $56,000,000.
B. Key Programs
OPIC 's main departments which assist U.S. businesses are finance and insurance.
OPIC financing is available for small and large projects through both direct loans and loan guaranties. For projects sponsored by U.S. small businesses or cooperatives, financing may be provided through direct loans. These loans generally range in amount from $2 million to $10 million. Loan guaranties, which are typically used for larger projects, range in size from $10 million to $75 million. Under both financing techniques, the borrower approaches OPIC to analyze structure financing for an overseas project.
The Insurance program provides political risk insurance tailored to protect investment against losses due to inconvertibility of currency, expropriation, and political violence. The terms are up to 20 years and the rates are determined on a per project basis. Political risk insurance can be crucial to a small U.S. company or to a cooperative embarking on an investment project in the developing world, as it is much less able than large multinational corporations to accept the risk of loss caused by unforeseen political events.
C. Contact Information
OPIC maintains an automated system to provide callers with information on OPIC's finance and insurance programs 24 hours a day. Callers may listen to brief recorded program description, request printed program information via mail or fax, or (from 9:00 am to 6:00pm) speak with an OPIC Information Officer by calling:
OPIC InfoLine: (202) 336-8799
Callers with fax machines may directly obtain facsimiles of various OPIC documents, including program information, special reports, and registration and application forms, by calling:
OPIC FactsLine: (202) 336-8700
OPIC's main fax number is: (202) 408-9859
II. The accessibility of these programs to the U.S. private "for profit" sector, with particular attention to small and minority businesses:
A. Guidelines for Eligibility
OPIC services are accessible to all U.S. businesses which adhere to the eligibility requirements. The following are guidelines for U.S. businesses to participate in OPIC programs.
U.S. corporations, partnerships or other business organizations over 50% U.S.-owned and foreign corporations, partnerships or other business organizations over 95% U.S.-owned are eligible for investment services.
New projects, expansions, acquisitions, privatizations which have a positive development effect on the host country and no negative U.S. economic effects are eligible for OPIC services. In addition, the project must be environmentally sound and significantly U.S.- owned with limited government participation.
Eligible investments are for a 3-year term or longer. Contributions of value include equity, debt (inter-company debt or bank financing), leasing (capital, financial, leasing companies), services, and technical assistance. OPIC will not assist exporting that is unrelated to a long-term investment commitment.
B. Programs and Services
OPIC services are accessible to businesses of all sizes through political risk insurance and direct loans for small and mid-sized businesses, loan guarantees for businesses of all sizes, and investment funds targeted at specific regions and industrial sectors to promote private sector investment, stimulate commercial lending, and leverage OPIC's resources for Finance and various coverage types for Insurance.
1. Direct loans for small and mid-sized businesses
2. Loan Guaranties for large and small businesses
3. Investment Funds targeted at specific regions and industrial sectors to promote private sector investment, stimulate commercial lending, and leverage OPIC's resources
1. Inconvertibility Coverage protects cash flow against blockage
2. Expropriation Coverage protects net worth
3. Political Violence Coverage protects physical assets and lost income
III. The funding available for these efforts in fiscal years 1994 and 1995:
A. Program Funding Trends
Since its inception in 1971, OPIC has operated on a self-sustaining basis. Starting in 1992, OPIC was required to receive a direct appropriation because of implementation of the Federal Credit Reform Act. OPIC has annually repaid these direct appropriations back to the U.S. Treasury out of its own income and revenues. Starting in 1995, OPIC returned to funding itself from its own operations and did not receive a direct appropriation.
(a) In FY 1994 OPIC received transfers of $68 million from other agencies for expanded credit activities. The bulk of this funding, $56 million, was for the Newly Independent States activities.
(b) In FY 1995 OPIC received transfer for NIS activities in the amount of $60 million.
(c) Includes non-credit administrative expenses as well as credit administrative expenses.
B. Program Projects
|Number of Projects||Small Business (%)
During FY93, the Corporation provided aggregate insurance coverage of approximately $208.7 million for 16 projects involving smaller businesses. During FY94, OPIC provided aggregate insurance coverage of approximately $1.2 billion for 23 projects involving smaller businesses. In addition, OPIC provided assistance to five growth funds and two on-lending facilities in FY94. Each of these projects will, in turn, invest in numerous smaller sub-projects, multiplying OPIC's ability to help U.S. small businesses.
Loans and loan guaranties totaling $221.2 million were committed to seven small business projects in FY93 and $181.3 million were committed to 9 small business projects in FY94.
As part of the United States Government's American Business Initiative for Eastern and Central Europe, NIS Health Sector Initiative, and NIS Private Sector Initiative, OPIC has launched new programs to encourage U.S. companies to explore investment opportunities in these regions. These multi-year programs will provide assistance to eligible U.S. companies that are conducting feasibility and market entry studies for projects in these regions. Small businesses may receive OPIC funding for 75 percent of their total study costs.
For FY93, 11 out of 18, or 61 percent, of the studies for which funds were committed involved small businesses. During FY94, 15 out of 20, or 75 percent, of the studies for which funds were committed involved small businesses.
Smaller businesses or cooperatives were involved in 22 out of 79, or 28 percent, of the OPIC-assisted projects in FY93, compared to 31 percent in FY92. In FY94, smaller businesses or cooperatives were involved in 25 out of 100, or 25 percent, of all OPIC-assisted projects.
IV. The level of actual private sector participation in the most recent fiscal years.
A. OPIC fiscal year 1993 and fiscal year 1994 program highlights:
Finance and Insurance
OPIC raised both finance and insurance per-project ceilings to $200 million to help U.S. companies compete for larger projects that produce higher levels of U.S. exports and American jobs.
OPIC's 1993 projects supported total investment of $3.7 billion in 36 countries, including 16 projects facilitating more than $734 million of investment in the New Independent States of the former Soviet Union.
OPIC's new insurance commitments doubled, from $2.8 billion in 1993 to $6 billion in 1994. Finance commitments quadrupled, from $415 million to $1.7 billion.
OPIC's 1994 projects supported total investment of $11.3 billion in 48 countries, including nearly 30 projects facilitating $2.1 billion of investment in the New Independent States of the former Soviet Union.
B. Specific fiscal year 1993 and fiscal year 1994 small business participation:
1. Global Environment Emerging Markets Fund
OPIC provided $50 million in financing in 1993 to support the formation and capitalization of the Global Environment Emerging Markets Fund.
In 1993, OPIC financed $1 million to a small Oregon company, Larson Wood Products, to support the refurbishment of a selective logging operation and processing plant, called Amacol, near Belem, Brazil.
2. Manufacturing and Services
OPIC facilitated a joint venture between Purolite, a small business based in Pennsylvania and Viromet S.A., a state-owned Romanian chemical company. OPIC provided $5 million in financing and $15 million in political risk insurance for Purolite's equity investment. The joint venture will build and operate a plant to produce resins used in water treatment processing and the manufacturing of industrial, pharmaceutical and food products.
3. Commitment and Innovation
PADCO, Inc. a small U.S. company was able to acquire and expand a Russian company which uses Russian satellite data and U.S. and Russian expertise to develop geographic information and mapping systems for commercial customers. Contributions to this unique project from the U.S. investor included equipment, cash, and a revolving line of credit, each of which was insured by OPIC. Over $2 million in U.S. exports is expected to occur.
Three small rural American telephone companies entered into a joint venture with a consortium of 31 Hungarian municipalities, winning a concession to build a local telephone system. The companies - Consolidated Companies, Denver and Ephrata Telephone & Telegraph, and Hun Tel Systems - entered the venture with support of a $30 million OPIC loan.
V. The prospects for enhanced participation given the changes in the international policy and regulatory environment:
OPIC will continue to promote its programs and services in order to help U.S. businesses participate in new investment opportunities opening up throughout the world. Participation in OPIC's programs is open to small, mid-size, and large businesses.
By helping small businesses to expand abroad, OPIC contributes to the expansion and diversification of the U.S. economy as a whole. Small businesses are vital in maintaining U.S. productivity, exports, employment, and product innovation. OPIC programs help minimize the specific barriers faced by small business when investing overseas. OPIC provides various support and information services that benefit small business such as investment services programs, investment missions programs, and direct loans and loan guarantees for small businesses and cooperatives.
OPIC's mission is supports U.S. job creation through exports of American goods and services to the new market openings being created internationally.
For example, in fiscal year 1994, OPIC projects generated $5.5 billion in U.S. exports and created and maintained approximately 90,000 person-years of direct and indirect U.S. employment.