When President Donald Trump’s “skinny” budget was released earlier this year, the Overseas Private Investment Corporation was one of the agencies on the chopping block. Since then, support has emerged from both sides of the aisle for the small Unites States development finance agency.
Several recent events in Washington, D.C., and a number of opinion pieces or public comments have addressed the issue of OPIC, but just how much traction or support the agency will get given the laundry list of other issues demanding attention remains to be seen.
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Former U.S. Agency for International Development Administrator Gayle Smith weighed in on OPIC’s fate at an event last month, and appealed for it to be saved. She called the agency “glue” that helps the social entrepreneurship ecosystem. “If you get rid of all of the glue, everything falls apart,” she said.
Daniel Runde, the William A. Schreyer chair and director of the Project on Prosperity and Development at the Center for Strategic and International Studies, wrote a piece in Forbes calling on the U.S. Congress and the administration to put OPIC “on steroids” rather than get rid of it.
In the piece, he argued that OPIC’s work mobilizing private capital to address development challenges supports U.S. businesses and U.S. strategic interests.
“Creating jobs and economic opportunity in places like Haiti, South Sudan, and Afghanistan is critical for long-term stability and serves the U.S. national interest. Unfortunately, even the most risk tolerant U.S. investor is unlikely to enter these markets creating a need for OPIC’s tools and authorities,” he wrote.
OPIC, which provides loans, guarantees and risk insurance to companies with a U.S. tie, has a $21.5 billion portfolio of investments 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.
Willy Foote, the founder and chief executive officer of Root Capital, which has received OPIC financing, echoed Runde’s call to expand rather than eliminate the agency in a piece he wrote, detailing how smallholder farmers and agribusinesses have benefitted from the OPIC investment. He also highlighted the importance of OPIC in driving investment to conflict-affected countries.
“From Bogota to Bamako and beyond, these are the communities that are more likely to backslide into violence if President Trump’s budget blueprint become[s] reality,” he wrote.
Concern about OPIC isn’t confined to the U.S. Nanno Kleiterp, the chairman of the European Development Finance Institutions, recently told Devex that his organization and development finance institutions in Europe work closely with OPIC, and are closely aligned on policies and views.
Losing the agency would be like losing a family member, he said.
The conservative case
While some conservatives have advocated for the elimination of OPIC, there are others who believe there is a strong conservative case to be made for the agency and the type of private sector-driven development it enables. That was the subject of an event this week at the Center for Global Development in Washington, D.C.
Todd Moss, a senior fellow at the CGD, said he believed the case was simple.
“I thought conservatives believe in private sector solutions wherever possible and that they encourage private sector development solutions,” he said. “OPIC is the best tool we have if that’s what we’re trying to achieve.”
Other panelists, including Robert Mosbacher, Jr., a former CEO of OPIC, offered other arguments — from the benefits to U.S. businesses and job growth at home to the case that OPIC helps improve stability in fragile states, thus serving U.S. national security interests.
“If we don’t have OPIC and it is not one of our tools other countries will step forward,” said Jen Olson, a lobbyist at Peck Madigan Jones, who spent years working on Capitol Hill, adding that it would mean ceding American leadership to China, India and European countries who have larger and stronger development finance institutions.
By comparison, while the administration contemplates closing OPIC, China is adding the equivalent number of staff as all of OPIC to its development finance institutions.
While talk of it’s demise swirls, the agency continues to do its work, though businesses who are OPIC clients have expressed concern. The administration is close to naming a CEO for the agency, pending the resolution of a few final details, Devex has learned. The man expected to be named is Ray Washburne, a Texas-based investor and businessman who served as vice chairman of the Trump Victory Committee and chair of the transition’s commerce team.
Whether he will lead the closure of the agency or not will fall to Congress. And in any case, closing the agency won’t be as easy as zeroing out its budget appropriations — it will take years for OPIC to wind down existing financial engagements. The cost of shuttering the agency that returned about $2.3 billion to U.S. Treasury in the past six years would be about $2.2 billion over 10 years, according to The Heritage Foundation, a conservative think tank that supports eliminating OPIC.
“As far as I can tell there are not a lot of conversations going on broadly speaking about OPIC and what a beefed up OPIC would look like, or how to make it more effective.”— Jen Olson, lobbyist at Peck Madigan Jones
While one of OPIC’s key stumbling blocks in Congress remains a lack of information, the other barrier in getting reauthorized is the sheer number of issues at stake with this budget. Aid advocates are generally more focused on ensuring that the foreign aid budget isn’t slashed by 30 percent or that USAID isn’t folded into the State Department, while few are outspoken about OPIC.
The focus should be on keeping the agency, rather than trying to take this moment to expand it or make changes, Olson said.
“As far as I can tell there are not a lot of conversations going on broadly speaking about OPIC and what a beefed up OPIC would look like, or how to make it more effective. It is not a front burner issue for most members,” she said.
Those working to get OPIC reauthorized or expanded can go about trying to offer quiet encouragement to supporters and can outline why they believe criticisms of the agency don’t hold water, which Moss said he hopes will work, and perhaps even provide an opportunity to make reforms.
Some of those reforms, which Moss called “nerdy little rule” may not be as little, politically speaking, as advocates for expanding OPIC’s authorities would hope. What may seem like small changes can often still be political stumbling blocks, Olson said. The issue of allowing OPIC to do equity investing, seems like a straightforward suggestion to those in the DFI community, but Congress has sometimes questioned whether the U.S. government should take equity positions in companies.
There are other contentious issues as well — such as OPIC’s carbon cap, which has been a hang up in reauthorization conversation in the past. Moss called the carbon cap debate “symbolism politics” in which OPIC and investors are caught in the middle.
While there are OPIC supporters in Congress, there are few champions of the agency, which may impact where things land in budget debates. Though for those looking for signs of support — Rep. Ted Yoho, a Republican from Florida, once again praised OPIC at a House Foreign Affairs hearing on Africa Thursday. Still, Olson cautions, it is best to manage expectations and aim for another year extension for the agency through the appropriations process, as has been the case for the past decade.
“Given the chaotic nature of what the foreign ops bill looks like, it’s hard to see real fundamental reforms, or a beefed up OPIC in the short term,” Olson said.