OPIC Is Out Of Status

OPIC is the Overseas Private Investment Corporation, a bureau of the US Treasury Department, which provides capital and risk insurance to companies who need help from the taxpayer to move their operations to foreign countries and avoid paying US taxes and sidestep US labor and environmental laws.

Freetrade.org assessment

•OPIC and Ex-Im Bank Funding. The Overseas Private Investment Corporation charges private companies a fee to insure their investments abroad, often in places where the risk of failure is relatively high. The agency returns a nominal profit to the U.S. Treasury each year but still requires an annual appropriation of $32 million for administrative costs. The agency currently backs about $20 billion in projects overseas, exposing U.S. taxpayers to huge payments should those investments go bad. OPIC distorts the international flow of capital by steering investment dollars to projects and countries that a truly free, private capital market would deem too risky. It also discourages reform in less-developed countries by shielding policymakers from the full effects of their uneconomic policies.28 The Export-Import Bank provides subsidized incentives for U.S. exporters to sell in markets where the risk of nonpayment would otherwise be too high. Export subsidies do not significantly expand total U.S. exports but instead shift exports toward the small percentage of U.S. companies that qualify for the subsidies. OPIC and the Ex-Im Bank distort rather than promote trade and investment.

OPIC has still not received Congressional reauthorization since its past authorization expired on April 1. This means that the agency has no formal authority to exist, much less to hold board meetings and approve projects with legally binding contracts. This situation is unprecedented, and may last until next year, so now is a very good time to go after them if you are so inclined. The mainstream media has not done so.

Here’s a link to report language from the 2003 re-authroization that indicates that OPIC was reauthorized until September 30, 2007

OPIC AMENDMENTS ACT OF 2003

(2) TERMINATION OF AUTHORITY- The authority of subsections (a), (b), and (c) of section 234 shall continue until 5November 1, 20006 September 30, 2007.

Here is a link showing the reauthorization bills that have been debated since, but nothing has passed except some temporary extensions, which have all expired:

http://thomas.loc.gov/
search "OPIC"

The situation is that Senator Coburn put a hold on the currently debated reauthorization bill in the Senate Foreign Relations Committee because he objects to the climate change-related provisions. There was then an attempt to extend reauthorization through the Appropriations Committee but Coburn blocked that, also. As a result, OPIC is operating without any Congressional authorization.

Special thanks to Doug Norlen for his alert and commentary.

See background:

OPIC

OPIC Offshoring

EX-IM

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Comments

Cato Institute

Why would you link to that propaganda site Cato? As far as I know, both right/left based in reality, Cato has never had valid stats, for anyone who isn't a multinational corporation.

Here is an overview from the FPIF that at least gives an objective description of the issues and charter of the OPIC.

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"Think tanks"

Yes, these neo conservative think tanks base their talking points on the scantist and flimsiest cherry picked information and anecdotes to further their agendas. Cato and Heritage are two of the very worst offenders. If you dig deeper into who their supporters are you will find a good bit of them tied to the fossil fuel industry and multinational corporations.

I have long maintained that the product of these "think tanks" is little different than what is produced when I am sitting on my own "think tank" each morning

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references

That's true and even worse the flaws are buried deep within their "research". That said, Heritage has come out with a few things that I read valid, but honestly I cannot recall anything from CATO that was!

Also, I've seen some bogus data from a few left ones too, so this isn't just a one sided game. Special interests cover their bets and fund all flavors of organizations.

I think Dana's blog post is onto something though. With multinational corporations running the show, why is it this entity even exists when we really need investment into the United States.

This is going to sound crass, but when I see the TV ads for poverty stricken kids around teh world and how you can sponsor one for $30 a day, I ever wonder about all of the kids in the United States going hungry, who have no day care, terrible schools, cannot get health care.

I mean we need 3rd world Medical doctors to set up free clinics in the United States these days. Dentists too.

So, why would any government agency be assisting in funding foreign investments when they should be assisting in funding domestic investments?

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OPIC Is Out Of Status

Unfortunate that absolutely nothing in your post is accurate.

OPIC is an indepedent agency of the government, not a bureau of the Treasury Dept. It has a 15 member board made up of public and private sector members, nominated by the president and confirmed by the Senate.

-- OPIC is required by statute to be self sustaining and turns a PROFIT of between $150 and 250 million each year. OPIC "spends" the money from its profits for its operations, meaning NO taxpayer money is appropriated.

-- OPIC has strong statutory prohibitions on "runaway plants" and strict policies regarding projects that may harm the US eoonomy. OPIC does not support projects that would result in job loss in the US.

-- For environmentally sensitive projects, OPIC follows World Bank standards, and in most cases improves environmental conditions and workers rights in the country where the project is operating.

-- OPIC's outstanding portfolio is $13 billion with reserves of $5.5 billion; one of the best reserved financial institutions on earth. Historically OPIC has recovered over 90% of the insurance claims that have been filed with it from host governments.

-- And by mobilizing private capital for investment in developing countries, OPIC helps promote our greatest export, private enterprise, so emerging economies can grow without perpetual grant assistance.

--OPIC projects have a significant "demonstration effect", helping developing nations to understand and adapt to greater transparency, rule of law and environmental protections.

--OPIC is a critical tool of US foreign policy where OPIC projects bring the hope of jobs and skills in countries of massive importance to the US including Afghanistan, Jordan, Lebanon and Liberia.

-- The current lack of authorization prevents the agency from making obligations on behalf of the US government, it does not shut down the agency. OPIC authority to do so expired on April 1st. Authority should be restored before October.

-- A government agency that promotes private sector led development in emerging markets, protects the US economy from harm associated with those projects, raises standards overseas for the environment, workers rights and transparency, serves important foreign policy objectives, and all for no cost to the taxpayer.

If there weren't an OPIC, we'd need to invent one.

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either is yours

OPIC gives government subsidized loans to multinational corporations, so while you may "turn a profit" the reality is you are giving subsidizes, which is taxpayer money.

You're running the classic "if we do not give away the US economy, oh, those other nations won't become Democracies or build up their own economies" line.

Hmmm, would you be interested in investing in Detroit? Oh, I guess not, there isn't any oil under it.

Ralph Nader on OPIC in 1996.

CBO on OPIC. Hmmmmm, when the Congressional Budget Office says this might not be of benefit to the United States, do you think there is any ring of truth to it?

Although you do say the obvious "promote the US biggest export, private enterprise". That's right, multinational corporations assuredly play the world and that is not in the US worker's interest or national interest.

One might obtain some facts by looking at a hearing Congressman Brad Sherman held in the Subcommittee on Subcommittee on Terrorism, Nonproliferation and Trade (May, 2007). The transcript from the hearing, Reauthorization of OPIC:

Jeff Vogt, Global Economic Policy Specialist for the AFL-CIO raised a lot of questions on what OPIC says versus what OPIC does:

OPIC’s reauthorization request presents the committee with a
critical opportunity to review its effectiveness and to make necessary reforms to the laws that govern its operations. The AFL–CIO generally supports the mission of OPIC, which is to strengthen our trade balance and create jobs, and it contributes to sustainable developments and sustainable and equitable development abroad, based on full respect for workers’ rights, human rights, and the environment.

However, we remain concerned that OPIC is not fully compliant with its statutory mandate. We believe that OPIC continues to support corporations that have committed workers’ rights violations abroad. The positive effect on U.S. employment appears in some cases speculative, particularly given the size of the investments.

Moreover, there is little transparency and information available to assess whether these projections are based on realistic information.

As to the impact of job creation and development abroad, the information provided by OPIC is also equally vague, and the methods used to assess the impacts on development both before and after project approval we feel are insufficient to predict positive broadbased development.

And, fourth, the lack of transparency in general makes it difficult for civil society to participate meaningfully in raising relevant concerns prior to project approval and in monitoring projects once underway.

Ah, so why the charter idea sounds great, it seems the actions and results could be something else entirely and on top of it, accurate monitoring is near impossible.

I see.

The Heritage Foundation testified in this hearing also. I think they are the organization who wants OPIC plain dissolved.

Note OPIC was on Senator Bernie Sanders radar of corporate welfare recipients for a long time.

and another minor quote from the hearing:

The OPIC 2006 Development Report states that for its investment of $2.85 billion, roughly 2,767 jobs were created in the U.S.

$2.85B, 2767 jobs. Let's see, that's $1.03 million spent to create each job. Wow! That's cost effective!

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Ad Hominem Parading as Fact

Such a mean and angry poster.

It would be useful first, if you stopped using data that is more than a decade old to justify your predjudice here. Ralph Nader in '96? Ralph Nader on anything?

And your charges otherwise are stale as they are refuted. OPIC doesn't give subsidized loans to your self styled multinationals out to sell off the US economy, or play a role contrary to the interests of US workers or the national interest. As my previous post notes, Congress has provided detailed instructions on the types of projects OPIC can support, specifically to provide for public comment and environmental and worker rights impacts. Its not zero sum as you suggest.

But more broadly, your basic point is faulty If you bothered to look, you'd see that 87% of OPIC's business in FY 2006 was with SMEs (that's small and medium enterprises in case you didn't know). It was 80% in 2007. Are these folks exploiting workers and selling off the American economy too?

Nice non sequitur on Detroit by the way. Investment there would be a good thing, but it wasn't what OPIC was created for. OPIC was chartered to mobilize and facilitate the participation of US private capital and skills in the economic of social develoment of less developed countries.

Maybe the governor could be helpful in directing help to Detroit or perhaps a direct appeal to the Mayor, when he's not otherwise focused on his building legal woes.

Nice faulty reasoning on the Bernie Sanders quote and domestic job support. It fails to take into account OPIC's primary mission. Over its history, OPIC has supported over $177 billion in US investment overseas. That has resulted in $73 billion in US exports overseas and the support of 271,000 jobs. Pretty good, but looking to its mission of supporting economic development overseas, OPIC projects have created 800,000 jobs in the countries where it supports projects.

Since your using a lot of quotes, check out material provided by OPIC critic Tom Coburn,"CBO estimates that, in total, this bill will result in a net decrease of discretionary spending because OPIC profits are higher than its administrative costs."

Soft power engagement in the world is essential. Private sector led assistance is more effective and transparent. Tied with standards on worker rights and the environment it adds value beyond just the project.

As a nation, we can crawl in a hole and hide. Terrified of Free Trade Agreements like the one with Colombia, which ironically, only benefits US exportes but that America Firsters insist will harm American workers and the economy.

If not this, then what? USAID funneling unaccounted billions out the door? Multilaterals that even more unaccounted for? Or do we just let the developing world stew in their hopelessness until the next rabble flies into a building.

We need to help todays struggling countries to emerge as stable and growing partners. OPIC does that. It does it at no cost to taxpayers and with no harm to the US economy.

Those are the facts.

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Hey anonymous

There is no attack. We don't do attack here.

Secondly, hmmm....well, trying to claim that the free trade deal with Columbia is something we are afraid of....

hmmm....who is the one resorting to emotions and attacks instead of the projected statistics. Or are the trade deficit numbers too much to cope with?

Let's see, so how much investment did OPIC put into China? They are still classified as an EE, yet about to supersede the United States Economically.

The entire threat that if Americans don't agree to give away their prosperity, magically those other nations will cause trouble or in other words, Americans are supposed to sit by while our jobs, our financial security is given away by some wrong headed foreign policy agenda is beyond stuck on stupid, it's simply a lie by the results.

My favorite is you ignore the testimony from 2007.

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Actually

"As a nation, we can crawl in a hole and hide. Terrified of Free Trade Agreements like the one with Colombia, which ironically, only benefits US exportes but that America Firsters insist will harm American workers and the economy."

I'm one of those American Firsters- and I claim that FTAs harm almost everybody they touch, not just American Workers, but American Consumers, foreign workers, foreign farmers, American Farmers.....everybody other than the big corporations.

OPIC sounds good on it's face- but unless they hold to *ONLY* local economic development (that is, exporting US knowledge and goods for sale in the local market), then they're going to be harming the US Economy.

Of course, I'm also one of those nuts who thinks that current emphasis on continuous growth in economics is wrongheaded- we should be seeking stable-state local economics, not constant-growth-on-the-backs-of-the-poor international economics.

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-------------------------------------
Maximum jobs, not maximum profits.

U Need A Fact Checker

Do you bother to think before write?

That was rhetorical.

OPIC isn't open in China. It hasn't been since 1989.

Ooops.

OPIC screens for the impact of its projects on the trade defict.

Ooops.Ooops.

In the case of you, Heritage and AFL, its not how much you know that troubles me. It's what you know that's simply not true.

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ok anonymous

That's your last post, unless you can be civil, use facts and make your case by them. This site is fact based. We debate, but we sure do not insult people. You can be respectful, use tables, statistics and spreadsheets to make your argument or you can go elsewhere. This ain't Redstate.

Again, from AFL-CIO testimony:

OPIC is only directed to “consider” the possible adverse effect of the investment upon the balance of payments of the United States

The OPIC 2006 Development Report states that for its investment of $2.85 billion, roughly 2,767 jobs were created in the U.S.[10] However, there is scant information as to how OPIC arrived at that number other than its explanation that it drew on company information regarding expected initial and ongoing procurement and uses multipliers to determine direct and indirect employment created. As to job loss, there is no information other than the bald assertion that none of the 2006 projects are expected to result in job losses in the U.S.

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Apologies...

For the record, you started the sarchasm, and I took the "stuck on stupid" personally. But I respect your rules and your format and respond as follows.

The actual statutory reference made in the AFL statement is as follows:

Section 231 (h), "to further to the greatest degree possible, in a manner consistent with its goals, the balance of payments and employment objectives of the United States, (i)...and to seek to support those developmental projects having positive trade benefits to the US."

(l)"to decline to issue any contract or insurance...or enter into any agreement to providing financing ...if the Corporation determines that such investment is likely to cause a significant reduction in the number of employees in the US." Section (k)(1) bans support for runaway plants.
Appropriations language, seperate from this authorizing language requires the corporation to report ANY job loss to Congress.

231A(1) The Corporation may insure or finance a project only if the country in which the project is being undertaken is taking steps to adopt and implement laws that extend internationally recognized worker rights in that country.

231B The Board of Directors of the Corporation shall not vote in favor of any action proposed to be taken by the corporation that is likely to have significant adverse envirobnmentl impacts that are sensitive, diverse or unprecedented.

The presumption of this thread is of a government agency that harms the US economy by taking jobs and businesses overseas -- at taxpayer expense no less -- and then harms the countries it operates in, all for the multinationals.

That's simply not supported by the facts.

The agency has a long history of dealing with big business, but that's changed. It still does business with larger businesses because in many instances, the smaller companies cannot provide a energy resources, extension of credit et al, that larger companies do. And these firms have add on benefits for the US economy by subcontracting at home.

But the change has been for the better. And for its larger infrastructure projects, the agency now requires local community involvement, a very positive step.

The agency has taken its mandates for the environment and worker rights and transparency very seriously. As a matter of policy -- not mandated by Congress - the agency has joined the EITI, the Extractive Industries Transparency Initiative, which requires companies and countries to publish what they pay.

OPIC has augmented is anti corruption activities with a new handbook and hotline. The agency has pledged to make more information available to the public.

The agency voluntarily announced a 20% cut in Greenhouse Gas emissions for the agency's portfolio over ten years. No other USG agency has done so yet.

In sum, the agency has evolved and continues to evolve in its corporate social responsibility. These are solid, proactive changes.

The AFL and Heritage...and CATO, Brookings, AEI are all entitled to their view of what the agency does and what the agency should do. But the underlying facts about OPIC, from the statute up, make it the kind of agency that should be emulated, not denigrated.

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AFL-CIO

AFL-CIO Testimony is not saying to dissolve the OPIC. What they say is they want further reforms and transparency. They also say that the charter is a good thing and are trying to get reforms for the organization.

You need raw data to prove your case on sm. business. For example a body shop can be a small business. (What's a body shop?). A body shop is a contracting organization whose business model is pure labor arbitrage. They pay their workers less and then try to obtain large contracts, usually from foreign MNCs (multinational corporations). India has built up heavily it's economy by such methods. India GDP is now ~7.5% BPO (business process outsourcing) and these profits can absolutely be traced back to the US middle class pocket books. In other words, out of US workers income and straight transfer to India. That's the difference. There is economic global expansion and then there is pure labor arbitrage. MNCs hunting the globe, squeezing costs, i.e. an arbitrage model, vs. an expansion model.

Now it's quite clear that OPIC from the deals being made have been party to that from the testimony.

Then, on a higher level, one must wonder where is the government directive, department, iniative on the federal level to invest in the United States? We have areas in the US that truly are approaching 3rd world and need investment, support, resources badly. It seems philosophically the focus is always external to the US instead of investing in the US, as if she is a deep well which will never run dry and that is just not the case. They are sucking off pretty much well most of the investments made from 1934-1980 without putting much back in. In terms of US investments, from the citizens to infrastructure, the US is seen as an unlimited credit card to be used for purposes which defocus what is in the United States (and her people's) interests.

What I said was stuck on stupid is not you but the policy, overall to tie foreign policy to economic policy and that's when they trade away US assets, contracts, funds, intellectual property, military know how (e.g. U.S. Nuclear Technology - India and Pakistan) on some nebulous foreign policy agenda which from history, sure as hell doesn't look like it has any real payout in the national interest by a long shot. There are other ways to develop nations economically but literally handing over huge chunks of the United States economy just ain't it.

(Think Japan and their global presence, yet they are not selling their citizens short in the process).

Also, bear in mind I did not write this blog post. I'm merely commenting on it.

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A Philosophical Look

A few points.

I frankly have no idea regarding the SME and OPIC and if there is the pass through concept that you're talking about that leverages lower cost labor. Homework I guess.

What I do know about OPIC is that its worker rights conditionalities exist on two levels. That the country must be "taking steps to implement" int'l work rights, but OPIC also provides unique conditions on the projects with regard to child labor, timely payment of wages, et.al., that address the circumstances of each project.

Philosophically, I would agree with you that the US needs to invest in itself. I just don't think that the goals of promoting economic development internationally and improving infrastructure domestically are mutually exclusive. You certainly shouldn't invest overseas to the exclusion of US infrastructure, but it shouldn't be dependent. A little now will save us a lot later down the road. That's my opinion.

Your last point seems to point to the current account deficit and ancillary issues associated with it.

To me, OPIC does't fit there...its probably part of something larger you feel strongly about. Having studied the organization, I can tell you that it doesn't "give away" anything. For permission to spend from its own profits, the agency helps give developing countries a helping hand. It's not going to change the course of history, but it may give hope to someone who doesn't know what that means today.

OPIC changes things, one project at a time, one life at a time. Not for corporate greed, or for favored investors, or to lose money or hurt average Americans who pay the bills that kill, but as a unique tool. The people who monitor OPIC, the NGOs supporting workers issues or the environment, the corporates the small businesses interests, the Hill....none of them will be completely satified.

For a government agency, that just means that OPIC is probably, finally doing something right.

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Wow

Whoever is refuting the gentleman's (or gentlewoman) theory of the evil OPIC is quite well versed both on the actual facts and the legislative nuances of the OPIC statue. Mr. Site Administrator I would cede this argument as you obviously have not delved into facts as deeply as your interlocutor. Other than that this is an awfully shallow site. No/stale facts and totally bonkers lefty which I don't mind just put a little thought into it. Geez.

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