Reauthorize or Retire the Overseas Private Investment Corporation?

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The Overseas Private Investment Corporationis a government agency that providesloans and investment insurance to U.S. companiesdoing business around the world. Itsfour-year, renewable charter will expire inSeptember 2003. Proponents of OPIC claimthat the agency helps the U.S. economy andpromotes economic development abroad.

A close look at OPIC activity in the pastfour years undercuts those rationales. OPIClowers U.S. economic output by transferringresources from productive uses to politicallyfavored ones. OPIC beneficiaries are highlyconcentrated in terms of companies andindustries. The majority of OPIC's largessegoes to a small group of large multinationalcorporations and overwhelmingly supports afew highly profitable industries such as oiland gas, financial services, and power.

OPIC activity is also highly concentratedgeographically. A handful of troubledemerging market economies has received60 percent of OPIC support in the past fouryears. The agency's finance and insurancefor those countries represented only 3 percentof their total foreign direct investment.In other countries that are unable to attractforeign investment because they do nothave the proper policy environment, OPICsupport undermines development byrewarding the lack of policy reform.

OPIC's record does not live up to its advocates'rhetoric. Congress should abolish thisfont of international corporate welfare.

Ian Vásquez and John Welborn

Ian Vásquez is director of the Cato Institute's Project on Global Economic Liberty and editor of Global Fortune: The Stumble and Rise of World Capitalism. John Welborn was a research assistant at the Cato Institute in 2002-2003.