The budget just released zeroes out the Overseas Private Investment Corporation, the nation’s development finance institution. In an era where many government agencies are under threat, it may not be surprising that OPIC would come under fire. Yet, none of the arguments often used to justify killing off OPIC are logical. Here’s why:
Save taxpayer money? Nope. OPIC has paid money into the US Treasury for 37 years in a row. Last year, it contributed $358 million toward the federal budget. Even the Heritage Foundation admits that closing OPIC will cost (!) taxpayers an additional $2.2 billion over the next ten years.
Drain the swamp? Nope. A decade ago, many critics worried that OPIC was fostering corporate welfare by subsidizing large American companies. It’s true that in the 1990s OPIC lent money to Enron and occasionally it has approved some questionable investments, but today there’s no evidence that OPIC is engaging in corporate welfare. In fact, a thorough scrub of OPIC’s portfolio found that less than 8 percent of OPIC commitments have involved any Fortune 500 company.
OPIC is irrelevant to US national security? Nope. When the US government wants to help promote stability and job creation in strategic allies, it turns to OPIC. Last year, OPIC lent money to build financial services in Egypt, power in Pakistan, and to catalyze private investment in infrastructure in crucial allies like Jordan and Kenya. In Iraq, OPIC has played a major role in helping rebuild the economy by spurring investment in water, agriculture, electricity, banking, construction, housing, and industry. (Check out the whole portfolio here.)
- The US has better tools to promote private sector development? Nope. OPIC’s mandate is to mobilize private capital to solve development problems and build markets overseas. To do this, it can provide commercial loans, risk insurance, and seed capital for venture and private equity funds. No other agency has these capabilities.
That only leaves pure ideology. If the current administration truly wants to get government out of the way of any market potential distortions, then one could imagine getting rid of OPIC as part of an extreme laissez faire policy that could only logically also include completely free trade and completely open borders.
If the administration takes a deep breath and looks at the pros and cons of OPIC, it’s not even a close call. If the White House truly wants to build markets for American goods in fast-growing emerging markets, support private sector led growth in our strategic allies, and ensure that US companies are competing in these markets with Chinese and European firms—all at less than zero cost to taxpayers—then there’s isn’t a more valuable agency than OPIC. In fact, a sober assessment can only conclude that the U.S. should get serious about making OPIC bigger and better.
If the White House won’t do the sensible thing, then it’s up to you, Congress.
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.