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Problems With Current U.S. Policy.

Critics on both the left and .the right, from the Corporate Welfare Project and Friends of the Earth to the Cato Institute and the Heritage Foundation, have supported elimination of OPIC as a government agency, albeit for different reasons. Conservatives want to cut OPIC as part of their campaign to downsize government. Progressives cite the hypocrisy of reducing welfare for the poor while continuing welfare programs for wealthy corporations.

Clinton's welfare "reform" limits the number of years that the needy poor can receive payments, yet some prosperous corporations, such as Citibank, obtain OPIC insurance and financing year after year. Poor families must prove financial need to receive assistance, but wealthy companies, such as Enron and Pepsi-Cola, feed at the OPIC trough. Convicted criminals are excluded from some assistance programs, but OPIC doles out benefits to companies that have also committed crimes or misdeeds. Magma Copper Company, for example, obtained $200 million in OPIC insurance for its copper mine in Peru just after the company had paid a $1.55 million penalty for violations of federal mine-safety standards that had led to the collapse of a U.S. mine, killing four workers.

Individuals receiving government payments must find jobs, yet corporate beneficiaries of government programs often are not required to create jobs. OPIC may even help companies export jobs. Levi Strauss, for example, recently announced plans to shutter its U.S. plants and lay off thousands of workers while obtaining more than $29 million in OPIC insurance to set up garment manufacturing facilities in Turkey. The year before,Levi Strauss had received almost $2 million in OPIC insurance for investment in overseas production. Kimberly-Clark's former workers collected trade adjustment assistance when their OPIC-insured employer increased imports into the U.S. In response to such cases, Congress requires OPIC to screen out projects that may adversely affect U.S. employment. The Congressional Research Service says it cannot substantiate OPIC's claims of U.S. job creation.

OPIC's program handbook requires the agency to reject support for projects that would have an "unreasonable or major adverse impact on the environment." Yet OPIC has come under attack by environmentalists for insuring companies that pollute their host countries. For example, OPIC provided $100 million in insurance coverage for Louisiana-based Freeport-McMoran's goldmining project in Indonesia, even though the project created as much as 120,000 tons of waste materials daily, dumping much into a nearby river and valley.

International publicity forced OPIC to cancel the insurance in 1995, but the company's well-connected friends--including Sen. John Breaux (D-LA) and Rep. Billy Tauzin (R-LA) (both of whom had received political contributions from Freeport and its directors) and former Secretary of State Henry Kissinger (who sits on the company's board, and whose firm received a retainer fee from Freeport)--rallied to Freeport's defense and the insurance was reinstated. As the international campaign targeting the mine's environmental impact continued, Freeport decided to sever its ties with OPIC. But another partially U.S.-taxpayer-funded organization, the World Bank's Multinational Investment Guarantee Agency (MIGA), is stepping in to provide risk insurance to international investors.

OPIC has drafted an environmental handbook and in January 1997 began publicizing applications for OPIC assistance for what the agency classifies as "Category A Projects" (for which an Environmental Impact Assessment Audit will be required) and providing a 60-day comment period. However, OPIC classifies seemingly few of the projects as "Category A."

OPIC has long been susceptible to political influence. In 1984, U.S. embassy officials in Costa Rica and an associate of Oliver North intervened to advocate that OPIC loan John Hull $375,000 to set up a factory in Costa Rica. Hull , a CIA asset, never repaid the loan. The primary investor and manager of CEENIS--a friend and campaign supporter of President Clinton--received $160 million in OPIC financing in 1995. And Senator Richard Lugar's (R-IN) son is the contact person for OPIC'S South America Private Equity Growth Fund.

Ironically, some of OPIC's funds have generated returns of 140% for their private investors even though, according to Mildred Callear, OPIC's former acting president, "the idea behind the funds is to replace foreign aid." Replacing foreign aid, intended to meet the basic needs of the poorest people in developing and newly independent countries, with funds directed at entrepreneurs puts decisions in the hands of narrow local and foreign interests. For example, Coca-Cola is an investor in OPIC's Africa Growth Fund; one of that fund's early investments was in a bottling plant in Kenya.

Key Problems

* OPIC provides "Aid for Dependent Corporations," while assistance for needy families is being cut.

* OPIC-financed and -insured foreign investments by U.S. companies shift U.S. jobs overseas and pollute host countries' environments.

* U.S. companies and individuals with political connections can reap personal gains from OPIC's programs.

Janice Shields is coordinator of the Corporate Welfare Project and TaxWatch, projects of the Institute for Business Research.
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Article Details
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Author:Shields, Janice C.
Publication:Foreign Policy in Focus
Geographic Code:1USA
Date:Jul 15, 1999
Words:812
Previous Article:Overseas Private Investment Corporation.
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