Legal Definitions - Overseas Private Investment Corporation

The Overseas Private Investment Corporation (OPIC) is a U.S. government corporation that encourages American businesses to invest in developing countries. It achieves this by offering financial products and services, including direct loans and loan guarantees, support for private investment funds focused on international markets, and political risk insurance to protect investments against unforeseen events like political instability or expropriation.

Here are some examples illustrating how OPIC functions:

• Loan Guarantee for Infrastructure Development: A U.S. company specializing in renewable energy seeks to build a large-scale solar power plant in a developing nation in Southeast Asia. Local commercial banks are hesitant to provide the full financing due to the perceived risks associated with such a significant project in that region. OPIC could provide a loan guarantee to a commercial bank, reducing the bank's financial exposure and enabling the U.S. company to secure the necessary funding. This allows the project to move forward, bringing clean energy and economic development to the host country.
• Political Risk Insurance for Manufacturing Expansion: An American automotive parts manufacturer plans to establish a new production facility in a rapidly growing economy in Africa. The company is concerned about potential political instability, such as the risk of the host government nationalizing foreign assets or imposing severe restrictions on transferring profits back to the U.S. OPIC could offer political risk insurance, protecting the manufacturer's investment against losses from events like expropriation, currency inconvertibility, or political violence. This insurance mitigates the risk for the U.S. company, making the investment more secure and attractive.
• Support for Private Equity Funds in Emerging Markets: A U.S.-based private equity fund focuses on investing in small and medium-sized enterprises (SMEs) across various emerging markets in Latin America. To expand its reach and support more local businesses, the fund needs additional capital. OPIC could provide financing or a guarantee to this private equity fund, helping it raise more capital from other investors. This support would enable the fund to invest in a greater number of Latin American SMEs, fostering economic growth and job creation in those regions.