Mexico's Cemex May Sell Two U.S. Plants to Brazil

The Overseas Private Investment Corporation (OPIC) is a self-sustaining federal agency that sells investment services to small, medium and large American businesses expanding into approximately 150 developing nations and emerging markets around the world. Charging user-fees for its services, OPIC operates at no net cost to the American taxpayer. OPIC’s political risk insurance, project finance and investment funds fill a commercial void, create a level playing field for U.S. businesses and support development in emerging economies. Since 1971, OPIC has supported $150 billion worth of investments that will generate $66 billion in U.S. exports and create more than 257,000 American jobs.

Frequently Asked Questions

Taxpayers pay administrative costs every year despite the claim that OPIC functions at no net cost to taxpayers. OPIC creates disincentives for private investment. OPIC is used corruptly to reward political allies. OPIC is corporate welfare. But you know this and still support it. Why is the federal government then "investing" in countries outside our own? When did it become the place of the federal government to "invest" in foreign countries? The FedGov is not a private corporation and its activities are clearly limited by the constitution. Yet you support OPIC. Why?

OPIC: Washington's Emerging-Market Meddling by JANICE SHIELDS / JAMES SHEEHAN

Investors Business Daily 7/17/97

Last year, the House overwhelmingly rejected an attempt to double the international activities of the Overseas Private Investment Corp. Business leaders and voters now should get behind new efforts by House Budget Committee Chairman John Kasich, R-Ohio, and others to scrap OPIC entirely.

The House is due to vote today on a $32 million appropriation to cover OPIC's administrative costs. Shutting down this agency would be a boon to international investors and insurers, as well as U.S. taxpayers.

OPIC provides taxpayer-backed financing and insurance for private investments in risky overseas markets. Yet the agency duplicates products of private lenders and insurers and forces them to compete with the government for contracts.

Contrary to the self-serving claims of OPIC officials trying to save their agency, OPIC is not needed to finance or insure foreign investment. Emerging markets attracted $243.8 billion in private investment in 1996, dwarfing OPIC's entire financing portfolio of $2.2 billion that year. And private insurers stand ready to offer policies for the same political risks covered by existing OPIC programs, on the same terms.

Recently, a consortium led by Exporters Insurance Co. proposed to the Clinton administration and Congress a plan for privatizing most of OPIC's outstanding risk insurance policies. A 1995 report on the feasibility of privatizing OPIC, prepared at Congress' request, identified several other insurance companies offering policies similar to OPIC's, including American International Group, Exel Ltd., and ACE Ltd.

Another, Zurich Insurance Co. , recently launched a Washington, D.C.-based subsidiary offering political risk insurance for major infrastructure, mining and telecommunications projects in emerging markets.

Not only are private lenders and insurers available to serve overseas operations of U.S. businesses, but a plethora of funds supplies a flood of private equity capital to finance those foreign investments. The U.S. firm Fidelity Investments , for example, has an Emerging Markets Fund, a Southeast Asia Fund and a Latin American Fund.

Why, then, should OPIC be covering the same ground with its South Asia Integration Fund and its South American Private Equity Growth Fund? Perhaps OPIC's funds are used more to reward domestic political allies than enhance foreign relations.

Dirk Ziff, who manages OPIC's South Asia fund, is a major contributor to the Democratic Party. The contact person for OPIC's South American fund is the son of Sen. Richard Lugar, R-Ind.

Accepting federal handouts subjects companies to the vagaries of politics even beyond the quid pro quo of campaign finances. In order for a company to qualify for OPIC insurance or financing, the overseas investment is supposed to meet agency regulations limiting the operation's impact on the host country's environment and worker rights.

This is an open invitation for politically motivated meddling in private sector projects.

Freeport-McMoRan, an international mining firm, experienced firsthand the disruptions created by political restrictions. In 1995, environmental activists successfully pressured OPIC to cancel the insurance policy on the company's mining project in Indonesia. Though OPIC later agreed to reinstate the policy, Freeport-McMoRan gave up OPIC coverage, in part because of the uncertainty created by interest-group lobbying.

Congress will later vote on OPIC's request to increase the agency's international activities by $6 billion, raising maximum loss exposure to $29 billion. Like savings-and-loan deposit insurance, OPIC's programs are backed by the full faith and credit of the U.S. government. If insurance claims and loan defaults exceed OPIC's reserves, all U.S. taxpayers would be faced with another billion-dollar bailout.

The time has come for Congress to eliminate this counterproductive agency and leave the business of international investment to those who do it best - private businesses.

Janice C. Shields is director of the Institute for Business Research. James M. Sheehan is research associate at the Competitive Enterprise Institute. Both groups are nonprofit public-policy organizations based in Washington, D.C.

In terms of corruption, furthermore, Cemex is relatively clean.

Relatively clean? It's virtually impossible to be a success in Mexico without participating in the corruption --- the mordida is a way of life --- corruption is deeply engrained. We don't need their business practices here.

I'm not defending OPIC, mind you . . . I'm simply pointing-out some inconsistency in your "document dump." Specifically, claiming that

Cemex is partnering with the United States government, with money guaranteed by that taxpayer supported guarantee against bad business investments, OPIC . . .

is inconsistent with claiming that

Taxpayers pay administrative costs every year despite the claim that OPIC functions at no net cost to taxpayers.

Furthermore, the IBD article that you claim shows that OPIC "is used corruptly to reward political allies" simply identifies two men that either contribute to political campaigns, or are family members of a member of Congress. Hardly a smoking gun.