There is a governmental agency that actually makes money: Overseas Private Investment Corp, which provides loans and insurance for U.S. companies, including fund managers, investing in emerging markets.
OPIC may not be all that well-known among the general population, but it is among the GPs who invest in emerging markets, committing to funds and projects in some of the riskiest frontier economies. The agency has returned money to the federal government, contributing $2.6 billion toward deficit reduction since 2008. In 2016, OPIC’s investments generated $239 million, according to the agency’s annual report.
President Donald Trump’s budget request calls for winding down OPIC, with no new activity in 2018. The budget request, which is now in the hands of Congress, calls for funds to keep on a small staff to wind down OPIC’s $22 billion portfolio. The budget’s rationale for shuttering OPIC is that developing-finance institutions like OPIC distort free markets, in effect pushing out private capital.
I’m not one to support more government interference in private markets, but in this case the government should reverse course and support OPIC. The agency does important work helping investors and businesses operate in developing economies. This work in turn helps those countries, typically poor and with few local funding options. OPIC can’t distort private markets in regions where private markets barely exist, where commercial lending is nonexistent or available only to a handful of wealthy, politically connected individuals.
OPIC is the U.S. government marshaling private-sector expertise and resources to try and do some good around the world, and make money doing it.
Sure, these investments are frequently risky, and ultimately taxpayers are on the hook to backstop losses. But OPIC’s long track record of making money should count for something.
There is another aspect to this — by pushing American values into developing countries, OPIC helps spread the message of capitalism and democracy in places that may be struggling to build their free societies, like Iraq. This is an important aspect of OPIC’s mission and one that, in this era of rising protectionism and insularity, is more important than ever.
Better to help places like Iraq, or countries in Africa, develop free-market economies, and create jobs for their huge populations of young people. The alternative is a large percentage of idle youth with no training, no skills, scant education, susceptible to other sorts of messages. That’s never a desirable situation.
Congress should do the right thing and push back against this request. What do you think? Send me your thoughts at email@example.com
Private Equity Editor Chris Witkowsky reflects at home. Photo by Wendy Witkowsky