OPIC exit memo: 'We are an agency whose time has come'

Devex
By Adva Saldinger

Elizabeth Littlefield, president and CEO of the Overseas Private Investment Corp. Photo by: Stuart Isett / Fortune Brainstorm Green / CC BY-ND

In its exit memo to the White House, the Overseas Private Investment Corp., which some expect to face a potentially difficult reauthorization process under incoming President Donald Trump, outlined its successes and made the case for why the U.S. government’s development finance agency is a critical part of its development and foreign policy approach.

The memo, penned by President and CEO Elizabeth Littlefield, called out some of the limitations holding back the agency, including a need for more funding, more flexibility and more tools, including the ability to make equity investments, an issue Devex has explored in the past.

OPIC has a $21.5 billion portfolio of loans and guarantees in about 100 developing countries, an increase of about 160 percent from 2009. The agency operates at no cost to taxpayers and has generated about $2.3 billion for the federal government in the past six years.

“Geographically, the gradual reorientation reflects the agency’s progress in emphasizing investment where development impact can be the greatest and where private investors require some public sector finance or risk mitigation to be able to feasibly invest,” the memo read.

That has translated to a more than 250 percent increase in OPIC’s investments in sub-Saharan Africa and they now account for almost a third of the agency’s investments. The agency has also increased investment in conflict-affected and fragile states as well as in low-income countries. Those investments have been in a wide variety of sectors, from energy, to agriculture, to finance and housing.

“In recent decades, a variety of changes — technological, economic, legal, financial, political and market — have created viable development finance opportunities in sectors where none existed before,” the memo said.

Littlefield wrote about the changes in the way development assistance is delivered and the rise of market-based and private sector-led development, which makes this a critical juncture for OPIC. U.S. companies seeking to take advantage of the growth rates in emerging markets will increasingly demand OPIC’s services, which will impact four key areas: energy security, youth unemployment, infrastructure and connectivity, the memo said.

“Today, private investment and sector growth are viewed as the leading edge of helping developing nations achieve economic self-sufficiency,” the memo read. “We are an agency whose time has come,” it said.

That may be somewhat surprising language to those that expect a potentially difficult fight in Congress to reauthorize OPIC. OPIC has been criticized by lawmakers across the political spectrum for a variety of reasons, from those who call it corporate welfare to those who believe that the agency should be privatized and the government need not step in when the private sector could fill the gap. OPIC argues that it provides critical loans and guarantees in situations where commercial capital markets would not.

Despite the potentially challenges ahead, the memo calls for a long-term or permanent reauthorization that would give the agency stability, and give it more resources to hire additional staff, improve monitoring and technical systems and work with more small businesses.

In order to fund those expansions, it recommends allowing OPIC to use its profits to pay for future growth and operations. In addition the memo recommends updating the statute to align requirements across different investment types and allow OPIC to make some equity investments, changes that would not have any cost.