As Uncle Sam Sells Insurance, Critics See 'Corporate Welfare'
For more than two decades, an obscure federal agency has helped American companies do everything abroad from baking hamburger buns in Brazil to drilling for natural gas in India.
But why should the Overseas Private Investment Corp. be providing $14 million in loan guarantees to a bun bakery in Brazil? That's the question being asked by a coalition of environmentalists and fiscal conservatives who are attacking the agency on Capitol Hill. Groups including Friends of the Earth and the Competitive Enterprise Institute, a conservative Washington think tank, are calling OPIC an example of "corporate welfare."
The coalition says OPIC is one of a dozen trimmable programs that will cost federal taxpayers more than $11 billion in the next five years. Cutting OPIC alone, they claim, will save taxpayers $281 million over that period. Supporters say the program is not only useful but profitable.
Launched in 1971, OPIC provides loans, loan guarantees, and political-risk insurance to American companies operating in 140 countries. Until recently, the agency, which employs 180, enjoyed relative obscurity. But two years ago, environmentalists began criticizing OPIC for its financial support of projects that include logging in the forests of eastern Russia, large-scale fishing ventures in the north Pacific, and gold mining in Indonesia.
Last fall, when OPIC submitted a five-year reauthorization package to Congress, environmental groups teamed with fiscal conservatives, including Rep. John Kasich (R) of Ohio, chairman of the House Budget Committee, to oppose the package. OPIC ended up getting funded for just one year. Now Congress has until Sept. 30 to reauthorize the program.
Jim Sheehan, an associate at the Competitive Enterprise Institute, says American taxpayers shouldn't be helping fund private-sector ventures. "These corporations are large and profitable," he says. "They ought to be able to get credit on the private market."
If there is a recession in the emerging countries where OPIC's portfolio is concentrated, Mr. Sheehan adds, American taxpayers will be liable to lose money.
Doug Norlen of the Pacific Environment and Resources Center in Washington, says that unlike other multilateral lending agencies, OPIC does not release environmental analyses of the projects it sponsors. "If OPIC can't operate in an open, mature manner," he says, "then we ought to be questioning its basic existence."
OPIC's clients have rallied to its defense. Ken Lay, chief executive of natural-gas giant Enron Corp., says, "Anyone who has paid OPIC's fees knows that this is not corporate welfare." The Houston company relies on OPIC for financing and insurance on several projects, including power plants in Turkey and the Philippines, as well as $200 million in political-risk insurance for a natural-gas field the company is developing in the Arabian Sea near Bombay.
In addition, supporters say OPIC makes money. According to a 1996 income statement, OPIC's revenues exceeded its $32.5 million administrative costs by $42.6 million, all of which went to the US Treasury.
"This is a government program that provides valuable benefits to our country," says Mildred Callear, OPIC's treasurer. "And we are able to do it without costing taxpayers any money."
President Clinton remains an OPIC supporter. The budget he submitted to Congress last week will allow OPIC to be self-funding, which might help the agency avert future budget battles.