Toward a New Foreign Policy.

Private companies, not the federal government, should sell insurance and make loans and loan guarantees for overseas investments. If the federal government continues to provide these services, restrictions should apply.

Eliminate OPIC 

The left and right, conservatives, libertarians, and progressives support privatizing OPIC for diverse reasons. Some are concerned about OPIC's obvious contradictions relative to "reforms" in the U.S. welfare system for needy individuals or the agency's impact on jobs and the environment. Others want to downsize government, sever the business/politics connection, and reduce potential taxpayer risks from OPIC loan defaults and insurance claims. OPIC's programs even seem to contradict government policy, as illustrated in a House of Representatives' committee report arguing that "genuine and sustainable development would be promoted far faster by the example and investment of real entrepreneurs." The federal government's promotion of private-led development with public subsidies and programs--such as OPIC--is hypocritical.

Business leaders themselves should support the privatization of OPIC, Congress places a ceiling on the aggregate dollar amount of OPIC's loans, loan guarantees, and insurance policies, thereby limiting the number of companies that can obtain OPIC's services. This favors a handful of "corporate welfare" recipients over businesses that must obtain financing and insurance that isn't taxpayer-backed. Moreover, OPIC doesn't provide financing and insurance in all countries. For example, projects in China and Mexico currently cannot receive OPIC benefits. If companies select their investment locations based on the availability of OPIC services, they may not make optimal decisions.

Businesses, such as Freeport-McMoran, that obtain OPIC support expose themselves to public scrutiny and ridicule, sabotaging the companies' public relations efforts. Corporations with OPIC financing and insurance may also be accused of contradicting their public policy campaigns. Companies constantly beg government to get off their backs by reducing regulations and cutting taxes, yet many continue to collect and even demand more corporate welfare, including OPIC services. Private insurance firms, lenders, and investment. funds are then forced to compete against the government's taxpayer-backed programs. Already though, some companies are rejecting government support programs. Fifty technology companies have declared their "independence from the corporate welfare state" and have promised to endorse cuts in these programs.

To privatize OPIC, the government should-sell its existing portfolio of loans, loan guarantees, and insurance on the open market. Recently, a consortium lead by Exporters Insurance proposed to the administration and Congress a plan for privatizing most of OPIC'S outstanding risk insurance policies. A 1995 report on the feasibility of privatizing OPIC, prepared at the request of Congress, identified several other insurance companies offering policies similar to OPIC's.

Renew OPIC with Strict Requirements

If OPIC survives, strictly enforced operating requirements should be imposed. Companies and funds benefiting from OPIC financing and insurance should be required to follow codes of conduct formulated by private groups and multinational entities such as the United Nations. For example, organizations in the U.S., Canada, and Great Britain have established and disseminated Principles for Global Corporate Responsibility. These principles require that companies set forth standards governing corporate behavior and advertising, and that they protect the environment, workers, and children.

OPIC transfers to the U.S. Treasury should be increased by raising the fees and interest collected from business beneficiaries. Private investors in OPIC-backed funds are generating huge returns while OPIC collects fixed fees of less than 10 percent. In 1998, OPIC paid no dividends to the U.S. Treasury, compared to $43 million in 1997, even though OPIC generated income of almost $139 million in 1998.

OPIC and recipients of loans, loan guarantees, and insurance must not be permitted to hide behind claims of business confidentiality. Even the new draft environmental guidelines facilitate only communication of "non-business confidential information regarding the environmental impacts of major projects under consideration for OPIC insurance, finance or investment." Full transparency of OPIC activities should be mandated to ensure the accountability of both the agency and its business beneficiaries.

In 1996, a broad coalition of groups from the left to the right joined with Rep. Kasich (R-OH), chair of the House Budget Committee, and Rep. Andrews (D-NJ) to fight a bill introduced by Rep. Roth (R-WI) that would have doubled the aggregate amount of financing and insurance that OPIC could provide. In one of the few victories against corporate subsidies, this strange coalition was able to generate almost twice the votes needed to defeat the bill. Stunned OPIC proponents then scrambled to find the votes needed just to ensure OPIC'S survival. In the waning hours of the congressional session, with members eager to return home to campaign, OPIC's one-year reauthorization (at the existing dollar level) was dumped into an omnibus bill and passed. By 1997, the coalition was struggling to stay together, but OPIC's proponents had regrouped, not to be blind-sided gain. Now, the left-right coalition has fallen apart, and OPIC will likely be renewed for its requested four years in 1999.

Key Recommendations

* Organizations from the left to the right believe that OPIC's operations should be privatized.

* If OPIC continues as a federal agency, its operations must be more transparent and beneficiary companies must follow codes of conduct.

* Terminating or improving OPIC's operations is difficult due to the vested interests of OPIC beneficiaries and the agency itself.

Janice Shields is coordinator of the Corporate Welfare Project and TaxWatch, projects of the Institute for Business Research.