Overseas Private Investment Corporation - History

History

In the American effort to rebuild Europe following World War II, two facts became clear to policy makers: private investment is a more powerful generator of economic development than aid; and there is an appropriate role for government in encouraging private investment where it has the potential to do the most good. Accordingly, the Marshall Plan authorized the U.S. government to insure private U.S. investors against the risk that earnings generated overseas in foreign currencies might not be convertible into U.S. dollars. This new tool—political risk insurance—was expanded in the 1950s to cover losses from war and expropriation, as wells as government interference with investors’ rights to the proceeds of their investments. It was subsequently complemented with the addition of project financing.

In 1966 Congress established the International Private Investment Advisory Council (IPIAC) under the Foreign Assistance Act of 1966. In December 1968 IPIAC published "The Case for a U.S. Overseas Private Enterprise Development Corporation", a report articulating the need for such an entity. In the report, the IPIAC recommended the organization of an overseas private enterprise development corporation of and funded by the United States, as responsive to the Javits Amendment to the 1968 Foreign Assistance Act.

As administration of the U.S. guaranty program moved among various agencies, bipartisan support grew to establish it on a permanent basis as a self-sustaining, independent agency.

“The most original of recommendations is the one dealing with the establishment of an Overseas Private Investment Corporation. Even opponents of foreign aid agree, I feel sure, that the burden of our international development program can and should be shifted increasingly from public to private resources. The Administration’s proposal to set up a Corporation has as its basic objective stimulation of American businessmen into examining the possibility of profitable and productive enterprises in countries hungry for development. I believe OPIC means business—a businesslike approach to foreign aid. After all, the profit motive was the prime mover in our own Nation’s development. Why not use this profit motive in helping the development of others?” —Representative Clement Zablocki (D-WI) during Congressional debate preceding establishment of OPIC November 19, 1969 “ first really big initiative that has come along in the foreign aid field almost since it began, which goes back to 1948 and 1949…this corporation will for the first time apply business methods and business accounting procedures to the business operations of project development, investment, insurance, guarantees and direct lending—that is, to private activities which are sensitively and directly geared into the development of the less-developed areas which we propose to help in the foreign aid program." —Senator Jacob Javits (R-NY) during Congressional debate preceding the establishment of OPIC, December 12, 1969

Congress created OPIC in 1969 through an amendment to the Foreign Assistance Act, and the agency began operations in 1971, during the Nixon Administration, with a portfolio of $8.4 billion in political risk insurance and $169 million in loan guaranties.

Organized as a corporation with a corporate structure, OPIC is governed by a Board of Directors, President and CEO, and Executive Vice President, all nominated by the President of the United States and approved by the U.S. Senate. Although it operates on a self‐sustaining basis at no net cost to American taxpayers, OPIC is appropriated administrative funding, and reauthorized on a regular basis, by the U.S. Congress.

Both Republican and Democratic administrations have since expressed strong support for OPIC:

“I am a strong believer in the importance of private investment to the development process. It is the most effective way of transferring the financial resources, technology, and management skills which play so vital a role in stimulating development.” —President Richard Nixon on the publication of OPIC’s first annual report, October 25, 1971 “The greatest contribution this nation can make to developing countries is through increased investment in their developing markets. Private investment by American companies continues to be the most effective way to transfer the financial resources, technology and management skills that play such a vital role in stimulating long-term and independent development. OPIC fulfills an important responsibility by encouraging greater involvement of American business in developing countries, in the process helping our own economy to expand as well.” —President Ronald Reagan in a letter to OPIC President Craig A. Nalen, October 15, 1981 “As OPIC expands into new markets and countries, it is at the crest of a new wave of American assistance, bringing growth, business know-how, and prosperity to the developing world. Millions of people in this country benefit at the same time. While it promotes investments in freedom abroad, OPIC is also creating jobs here at home and increasing American exports.” —President George H. W. Bush on OPIC’s 20th anniversary, December 17, 1991 “Since 1971, OPIC has harnessed the resources of American businesses to build hope and opportunity through investment and commerce in countries around the world. By standing behind the U.S. private sector, OPIC has both encouraged long-term stability in developing markets and made significant contributions to America’s economic growth. Small, efficient, and self-sustaining, OPIC is the very essence of good government.” —President Bill Clinton on OPIC’s 25th anniversary, November 15, 1996