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Mitigating Overseas Risk Through The Overseas Private Investment Corp

Thursday 7 August, 2008

Alison Germak, Public Information Officer for the Overseas Private Investment Corp. was in town to make presentations @ the Africa-US Trade & Investment Forum & the Illinois Global Partnership.  She forwarded it to me, so here it is:newopic-brief-2008

Like the Export-Import Bank (with which they often work), they fill in the gaps that private industry does not want to provide.  Their investment funds, of which there are 40, attracted the most interest from the audience.  Eligible countries for these funds are different than those for ExIm Bank’s Country limitation schedule.  A few ineligible countries are China, Venezuela, Libya, & the Ukraine.  Examples of private equity partners invested in OPIC are Conduit Capital & Emerging Markets Group.  OPIC does not allow open requests-all investments must originate from OPIC.  There are a few restrictions with OPIC projects, such as no detrimental effects on the environment, workers’ rights, & US jobs.

Priority regions are Africa, the Middle East, & Central America.  Priority sectors are renewable energy, & housing/mortgage finance.  To ensure adherence to their financing guidelines, they actually visit projects in which they’re invested all over the world.  Alison offered a real-world example:  a frozen poultry processor couldn’t move into Eastern Europe because there were no cold storage facilities available, so they provided a $4M loan to build one.  They do hold an international investment conference which allows all participants to get to know 1 another.

As nice as it is to have our government supporting good causes like investing in the developing world, it does make me a little nervous.  It’s laudable that the government takes on the risks that industry won’t & political risk insurance & long-term financing are helpful enough, but there are reasons why professional investors are judicious in investing these kinds of funds.   I know midwestern private equity & venture capitalists  are criticized for not taking risks, but some of the risks these projects take on are probably way outside of their risk tolerances.

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