Clinton Administration Policy Ties Economic Aid to Foreign Policy Goals (1994)

The Clinton administration has implemented significant changes in the policy goals of the Overseas Private Investment Corporation (OPIC). In a break from OPIC's traditional independence from foreign policy, the U.S. government will use the agency as an instrument to further certain foreign relations objectives. OPIC encourages U.S. businesses to invest in developing countries and emerging market economies, creating economic growth abroad. As U.S. businesses compete to meet demand in the expanding markets, U.S. exports increase and U.S. jobs are created. Since 1971, OPIC has supported investment in projects valued at $60 billion, generated over $26 billion in exports, and created more than 100,000 U.S. jobs.(1) In 1992, OPIC sponsored 118 projects, generating approximately $2.6 billion in U.S. exports and 10,000 U.S. jobs. And since OPIC pays back the small appropriations it receives from Congress, it costs the U.S. taxpayers nothing.(2) OPIC provides an array of financial services to promote investment and economic growth in countries that have operational OPIC programs. The agency offers direct loans to projects sponsored by U.S. small businesses and guarantees loans for larger projects sponsored by U.S. investors. To mitigate risks of investing abroad, OPIC insures U.S. investments against political violence, inconvertibility of currency, and expropriation. For companies considering overseas investment, OPIC also provides various investor services, including feasibility studies, investment missions, a data bank of business opportunities, and businesses outreach. As part of a long-term strategy to increase exports, the Clinton administration has pursued a policy of tying foreign aid to export promotion in an attempt to the playing field with foreign competition. Under the U.S. Commerce Department's strategic plan for tied aid, foreign assistance will be linked to the purchase of products from the countries receiving the aid. The Export Enhancement Act of 1992 mandated the development of the export promotion plan as a blueprint to coordinate effective U.S. export promotion and export financing programs to maximize U.S. advantages and opportunities in today's global marketplace.(3) Previous administrations had been reluctant to support the use of tied aid as a matter of policy, and the Export-Import Bank currently maintains a war chest of $200 million to combat the use of tied aid by other countries. However, because many other nations use tied aid extensively, the U.S. government has reconsidered its position. The decision to use OPIC as a foreign policy instrument likely will lead to a record level of OPIC insurance and financial support for U.S. investors abroad. OPIC currently issues more than $3 billion in insurance and $400 million in loans and loan guarantees each year.(4) OPIC expects these amounts to be significantly higher in fiscal year 1994, which began on October 1, 1993, due to the agency's expanded role. OPIC's recent increase in its per-project funding limit for loan guarantees from $50 million to $200 million reflects this expectation. In October 1993, OPIC President Ruth Harkin said her organization will expand its assistance to U.S. investors abroad and actively encourage developing nations to privatize industries. Through its insurance and financial programs, the agency particularly seeks to promote the privatization of the infrastructure of these nations. In accordance with its new foreign policy dimension, OPIC presently is focusing its efforts on three primary regions: the former Soviet Union, South Africa, and the Middle East. Each region will receive significant attention from OPIC in the form of trade missions and investment financing. I. Former Soviet Union The former Soviet republics are OPIC's largest focus(5) To encourage U.S. investment in Russia and the other former Soviet nations, OPIC has substantially increased its limits on financial support to individual projects. …