OPIC Loan Authority Expands At the Expense of the Poorer Countries

In a move to strengthen the position of U.S. multinational companies overseas, the House and Senate Foreign Relations Committees have passed legislation to broaden the role of the Overseas Private Investment Corporation (OPIC).

OPIC was created by Congress in 1969 to insure the activities of U.S. corporations in the developing world against the risks of war, government expropriation, and currency inconvertibility. The agency is self-sustaining; from its premiums, it requires only periodic reauthorization from Congress. OPIC also functions in two additional capacities: it has a $50 million fund for direct loans to developing countries (used mainly for small businesses) and it insures commercial bank loans (see MM, June 1980).

The legislation would allow OPIC unlimited consideration to provide insurance for companies operating in all-but-the wealthiest Third World countries-a change from OPIC's ostensible orientation to "development" in poorer nations. The bills would lift the annual per-capita income ceiling on countries for which OPIC generally may insure businesses. The current level is $1000 in 1975 dollars (approximately $1500 today); the legislation would raise this to $2200 in 1975 dollars (over $3000). This expansion in OPIC's mandate would free the U.S. government agency to provide coverage for 17 additional countries, including Brazil.

C. Fred Bergsten, senior associate of the Carnegie Endowment for International Peace and formerly Assistant Secretary of the Treasury and a member of OPIC's Board of Directors, opposes the change in OPIC's lending capacity. "The record clearly shows that the more advanced developing countries can attract sizable levels of foreign direct investment without any help from the governments of home countries," he stated in testimony before the Senate Committee on Foreign Relations. "Only the poorest countries need such help."

The legislation would institute another important change in OPIC's mandate, enabling it for the first time to insure against "civil strife," This yet-to-be-defined term could encompass such acts as riots where corporate property was damaged, or even strikes against companies themselves. In the event of loss due to "civil strife," U.S. corporations could turn to OPIC to foot the bill-one more way the U.S. government would hold a vested interest in the stability of current governments, no matter how repressive they might be,.

"OPIC is tailoring its programs to what the corporations want," says William Goodfellow, a deputy director of the Center for International Policy, in response to the legislation. "It is not to the benefit of the developing countries; they didn't ask for it. The new mandate is simply to serve the corporations better."

Recognizing the vagueness of the term "civil strife," the Senate Committee has asked OPIC officials to come up with a precise definition, which OPIC officials would have to submit for approval to the Senate Committee at least 60 days prior to issuing such insurance for the first time.