[Senate Report 108-194]
[From the U.S. Government Publishing Office]
Calendar No. 386
108th Congress Report
SENATE
1st Session 108-194
======================================================================
OVERSEAS PRIVATE INVESTMENT CORPORATION AMENDMENTS ACT OF 2003
_______
November 11, 2003.--Ordered to be printed
_______
Mr. Lugar, from the Committee on Foreign Relations,
submitted the following
R E P O R T
[To accompany S. 1824]
The Committee on Foreign Relations, having had under
consideration the bill S. 1824 to amend the Foreign Assistance
Act of 1961 to reauthorize the Overseas Private Investment
Corporation, and for other purposes, reports favorably thereon
and recommends that the bill do pass.
CONTENTS
Page
I. Purpose and Summary..............................................1
II. Background and Need for the Legislation..........................2
III. Committee Action.................................................4
IV. Cost Estimate....................................................4
V. Evaluation of Regulatory Impact..................................6
VI. Changes in Existing Law..........................................6
I. Purpose and Summary
The bill reauthorizes the Overseas Private Investment
Corporation through September 30, 2007, makes several technical
and perfecting amendments to its underlying statute, provides
the Corporation with modest enhancements in its investment
insurance and local currency guaranty programs and directs the
Corporation to collect data on the amount of insurance and
financing provided to minority and women-owned businesses.
OPIC's authorization expired on September 30, 2003, and has
been extended through November 21, 2003 by continuing
resolution.
OPIC is a self-sustaining, independent government agency
providing political risk insurance and project finance to U.S.
businesses in over 150 emerging markets and developing
countries. Its operations and activities have supported over
250,000 U.S. jobs and produced $64 billion of U.S. exports
while generating $4.4 billion in reserves. Over the past 30
years, it has created close to 670,000 host country jobs and
supported $145 billion of investments overseas. Nearly 70
percent of suppliers to OPIC-backed projects are U.S. small
businesses.
II. Background and Need for the Legislation
In 1971, OPIC was established as an independent government
corporation by Congress to help American businesses compete
overseas and to promote economic development in host countries.
OPIC Chairman and CEO Peter Watson is to be commended for
his efforts to refocus OPIC on the administration's overall
development priorities, particularly in sub-Saharan Africa,
where new project approvals over the past two years now amount
to $750 million. It is focused on the housing and health
sectors, promoting projects and activities in South Africa that
meet the challenges of HIV/AIDS, and providing clean drinking
water to countries in West and East Africa.
OPIC and Its Outreach Efforts
The committee commends the recent efforts of OPIC to reach
out to nongovernmental organizations (NGOs) and the labor
community on issues relating to accountability, transparency,
environmental and labor standards, human rights and corruption.
The committee expects OPIC to continue a regular dialogue with
all stakeholders and the goal of making reforms and process
improvements with respect to issues such as accountability,
transparency, environmental, social/labor and worker rights
protections.
OPIC and An Accountability Mechanism and A Transparency Initiative
The committee is aware of the establishment in recent years
of various mechanisms within multilateral and bilateral
financial and export-promotion institutions to increase
accountability and transparency of those institutions. These
institutions include: the World Bank, the International Finance
Corporation, the Asian Development Bank, the Inter-American
Development Bank, the Multilateral Investment Guarantee Agency,
the European Bank for Reconstruction and Development, the
International Monetary Fund, the Export Development Corporation
of Canada, and the Japan Bank for International Cooperation.
The committee encourages OPIC to follow the example of the best
practices of these institutions and work with all stakeholders
to establish an ``accountability mechanism'' and continue its
``transparency initiative.''
An accountability mechanism should: evaluate and report on
OPIC compliance with environmental, social, labor, human
rights, and transparency standards consistent with OPIC
statutory mandates; provide a forum for resolving concerns
regarding the impacts of specific OPIC-supported projects with
respect to such issues; and provide advice regarding OPIC
projects, policies and practices. Such a mechanism should also:
be transparent in its operations and outputs, and be responsive
to stakeholders' considerations on environmental and social
concerns, including labor, human rights and corruption
concerns; be accessible to project-affected parties; and insure
the independence and integrity of the evaluations and advice
provided by the accountability mechanism. With respect to the
independence of the accountability mechanism, the committee
urges the Corporation to follow the model of several
international financial institutions by providing the mechanism
the ability to report directly to the Corporation's Board of
Directors.
The committee commends OPIC's efforts to convene a dialogue
with stakeholders on a transparency initiative and encourages
OPIC to continue this dialogue. The committee believes a
transparency initiative should heighten transparency and
information disclosure concerning OPIC's projects and internal
mechanisms, consistent with existing statutes and laws.
Interested stakeholders, including NGOs, environmental and
labor organizations, and the business/investor community,
should play an active role in this process and provide
recommendations on how it should be used to strengthen OPIC's
programs and policies.
The committee will use its oversight function to monitor
OPIC's performance and progress toward achieving these goals,
and expects a fulsome briefing by OPIC on such progress and
performance six months after enactment of this Act, and
annually thereafter for the duration of the authorization
contained in this bill.
OPIC and Labor Issues
The committee recognizes that OPIC has statutory
obligations with regard to worker rights which must be fully
implemented.
The committee also commends the efforts of OPIC in guarding
against an erosion of U.S. jobs as a result of OPIC-supported
projects. OPIC should continue to work, in consultation with
all its stakeholders, to ensure that: OPIC-supported projects
do not result in significant job loss or substantially reduce
positive trade benefits for the U.S.; investors provide
detailed information on jobs created or supported by an OPIC-
supported project; due diligence, reporting, and monitoring
procedures provide detailed, accurate and timely information on
U.S. effects; and enforcement procedures are comprehensive,
effective, and transparent.
The committee will use its oversight function to monitor
OPIC's performance and progress toward achieving these goals
and expects a fulsome briefing by OPIC on such progress and
performance six months after enactment of this Act, and
annually thereafter for the duration of the authorization
contained in this bill.
OPIC and Minority-Business Outreach
The committee commends OPIC for its minority-owned business
outreach efforts and encourages the Corporation to continue its
activities and to work with other U.S. Government trade,
development and finance agencies in promoting economic
opportunities for small and minority-owned businesses in
developing countries.
OPIC and Small Business
The committee commends OPIC's efforts in support of U.S
Small- and Medium-sized Enterprises (SMEs). The committee notes
that many of these firms, particularly those with annual
revenues of less than $35 million, could substantially increase
their exports to the extent that they secure access to OPIC
financing and investment support. The committee supports recent
efforts by the Corporation to establish a Small Business
Center, to create a Small Business Initiative in coordination
with the Small Business Administration, to launch a SME shared-
risk loan guaranty program in partnership with the private
sector, and to create a new Small and Medium Enterprise
Department to implement and oversee SME activities.
III. Committee Action
On November 6, 2003, the Committee on Foreign Relations
considered the bill, pursuant to notice, in open session. The
committee agreed to a motion by Chairman Lugar to favorably
report the bill to the Senate, by voice vote, a quorum being
present.
IV. Cost Estimate
In accordance with rule XXVI, paragraph 11(a) of the
Standing Rules of the Senate, the committee provides the
following estimate of the cost of this legislation prepared by
the Congressional Budget Office:
U.S. Congress,
Congressional Budget Office,
Washington, DC, November 10, 2003.
Honorable Richard G. Lugar, Chairman
Committee on Foreign Relations,
United States Senate,
Washington, DC.
Dear Mr. Chairman:
The Congressional Budget Office has prepared the enclosed
cost estimate for S. 1824, the Overseas Private Investment
Corporation Amendments Act of 2003.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Joseph C.
Whitehill.
Sincerely,
Douglas Holtz-Eakin, Director.
Enclosure.
S. 1824--Overseas Private Investment Corporation Amendments Act of 2003
SUMMARY
S. 1824 would extend through 2007 the authority of the
Overseas Private Investment Corporation (OPIC) to issue
political risk insurance and to finance investments in
developing countries and emerging market economies. The bill
would clarify that the term ``expropriation'' would include
actions by political subdivisions or a foreign government or
corporations owned by or controlled by foreign governments. It
also would authorize OPIC to issue guarantees in local
currencies, and it would require OPIC to report to the Congress
on the effectiveness of its activities to reach businesses
owned by women and minorities. OPIC's authority would be
limited to such amounts as may be provided in advance in
appropriations acts. CBO estimates that implementing the bill
would cost $146 million over the 2004-2008 period, assuming the
appropriation of the necessary funds. The bill would not affect
direct spending or receipts.
OPIC is a government corporation authorized to encourage
private-sector investment in developing countries and emerging
market economies. It insures investments against the risk of
losses due to expropriation, inconvertablity of currencies, and
war or political violence. In addition, OPIC finances
investments through guaranteed and direct loans. OPIC is
largely self-financing. Its noncredit program earns income from
investments in government securities and insurance operations.
S. 1824 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act (UMRA)
and would not affect the budgets of State, local, or tribal
governments.
ESTIMATED COST TO THE FEDERAL GOVERNMENT
The estimated budgetary impact of S. 1824 is shown in the
following table. The estimate assumes that the bill will be
enacted before the end of calendar year 2003, that funds and
authority will be provided in annual appropriation acts near
the start of each fiscal year, and that outlays will follow
historical spending patterns. The costs of this legislation
fall within budget function 150 (international affairs).
----------------------------------------------------------------------------------------------------------------
By Fiscal Year, in Millions of Dollars
-----------------------------------------------------------
2003 2004 2005 2006 2007 2008
----------------------------------------------------------------------------------------------------------------
SPENDING SUBJECT TO APPROPRIATION
Spending Under Current Law for OPIC:
Estimated Authorization Level \1\................. -209 -233 -245 -266 -282 -297
Estimated Outlays................................. -213 -218 -232 -257 -277 -294
Proposed Changes:
Estimated Authorization Level \2\................. 0 27 35 47 58 36
Estimated Outlays................................. 0 3 14 31 46 53
Spending Under S. 1824 for OPIC:
Estimated Authorization Level \1\................. -209 -206 -210 -219 -224 -261
Estimated Outlays................................. -213 -215 -218 -226 -231 -241
----------------------------------------------------------------------------------------------------------------
Note: OPIC = Overseas Private Investment Corporation.
\1\ The 2003 level is the amount appropriated for that year plus the estimated amount of offsetting collections
in OPIC's noncredit account. A full-year appropriation for fiscal year 2004 has not been enacted for OPIC; the
amounts shown here assume limited funding to permit OPIC to continue servicing its outstanding insurance and
credits and to receive offsetting collections.
\2\ The estimated authorization level assumes the 2003 funding level adjusted for inflation through 2007.
Funding at the 2003 level over that period would lower outlays by $21 million over the 2004-2008 period.
BASIS OF ESTIMATE
In 2003, OPIC received appropriations of $40 million for
administrative expenses and $24 million for the cost of credit
as defined by the Federal Credit Reform Act. Funding for 2004
has not been enacted. The estimated spending under current law
assumes that OPIC continues to service its outstanding
insurance and credits and to receive collections on its
investments in U.S. securities, but that it issues no new
insurance or finances no new investments after September 30,
2003. (Interest on existing securities brings in collections of
more than $230 million a year to the OPIC account; but those
collections are offset by interest paid elsewhere in the
federal budget.) CBO assumes that administrative expenses under
current law would be gradually reduced to a minimum rate
necessary to service outstanding insurance and credits.
CBO assumes that under S. 1824 OPIC would continue to issue
insurance over the 2004-2007 period and that funding for
administrative expenses and the cost of credit would be
provided in annual appropriations acts at the 2003 level
adjusted for inflation through 2007 since a full-year
appropriation has not been enacted. Based on information from
OPIC, CBO estimates that the new reporting requirement and
local-currency guarantees would not significantly affect the
costs of OPIC's operations. Thus, enacting the bill would
continue the policies that are assumed in CBO's baseline
through 2007. Because the bill would extend OPIC's authorities
through 2007 only, we estimate that funding in 2008 would only
be needed for the administrative expenses of servicing
outstanding insurance and credits.
INTERGOVERNMENTAL AND PRIVATE-SECTOR IMPACT
S. 1824 contains no intergovernmental or private-sector
mandates as defined in UMRA and would not affect the budgets of
State, local, or tribal governments.
PREVIOUS CBO ESTIMATE
On September 30, 2003, the CBO transmitted an estimate for
H.R. 3145, the Overseas Private Investment Corporation
Amendments Act of 2003, as ordered reported by the House
Committee on International Relations on September 25, 2003. The
two bills are identical, as are their estimated costs.
Estimate prepared by: Federal Costs--Joseph C. Whitehill.
Impact on State, Local, and Tribal Governments--Melissa
Merrell. Impact on the Private Sector--Paige Piper/Bach.
Estimate approved by: Peter H. Fontaine, Deputy Assistant
Director for Budget Analysis.
V. Evaluation of Regulatory Impact
In accordance with rule XXVI, paragraph 11(b) of the
Standing Rules of the Senate, the committee has concluded that
there is no regulatory impact from this legislation.
VI. Changes in Existing Law
In compliance with paragraph 12 of Rule XXVI of the
Standing Rules of the Senate, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman).
Foreign Assistance Act of 1961
Part I
* * * * * * *
Chapter 2--Other Programs
* * * * * * *
TITLE IV--OVERSEAS PRIVATE INVESTMENT CORPORATION
* * * * * * *
Sec. 233. Organization and Management.--(a) Structure of
the Corporation.--The Corporation shall have a Board of
Directors, a President, an Executive Vice President, and such
other officers and staff as the Board of Directors may
determine.
(b) Board of Directors.--All powers of the Corporation
shall vest in and be exercised by or under the authority of its
Board of Directors (``the Board'') which shall consist of
fifteen Directors, including the Chairman, with eight Directors
constituting a quorum for the transaction of business. Eight
Directors shall be appointed by the President of the United
States, by and with the advice and consent of the Senate, and
shall not be officials or employees of the Government of the
United States. At least two of the eight Directors appointed
under the preceding sentence shall be experienced in small
business, one in organized labor, and one in cooperatives. Each
such Director shall be appointed for a term of no more than
three years. The terms of no more than three such Directors
shall expire in any one year. Such Directors shall serve until
their successors are appointed and qualified and may be
reappointed.
The other Directors shall be [officials] principal officers
of the Government of the United States whose duties relate to
the programs of the Corporation, including the President of the
Corporation, the Administrator of the Agency for International
Development, the United States Trade Representative, and [an
official] one such officer of the Department of Labor,
designated by and serving at the pleasure of the President of
the United States. The United States Trade Representative may
designate a Deputy United States Trade Representative to serve
on the Board in place of the United States Trade
Representative.
* * * * * * *
Sec. 234. Investment Insurance and Other Programs.--The
Corporation is hereby authorized to do the following:
(a) Investment Insurance.--(1) To issue insurance, upon
such terms and conditions as the Corporation may determine, to
eligible investors assuring protection in whole or in part
against any or all of the following risks with respect to
projects which the Corporation has approved--
(A) inability to convert into United States dollars
other currencies, or credits in such currencies,
received as earnings or profits from the approved
project, as repayment or return of the investment
therein, in whole or in part, or as compensation for
the sale or disposition of all or any part thereof;
(B) loss of investment, in whole or in part, in the
approved project due to expropriation or confiscation
by action of a foreign government or any political
subdivision thereof;
* * * * * * *
(g) Pilot Equity Finance Program.--
* * * * * * *
(h) Local Currency Guaranties for Eligible Investors.--To
issue to--
(1) eligible investors, or
(2) local financial institutions, guaranties,
denominated in currencies other than United States
dollars, of loans and other investments made to
projects sponsored by or significantly involving
eligible investors, assuring against loss due to such
risks and upon such terms and conditions as the
Corporation may determine, for projects that the
Corporation determines to have significant
developmental effects or as the Corporation determines
to be necessary or appropriate to carry out the
purposes of this title.
* * * * * * *
Sec. 235. Issuing Authority, Direct Investment Authority
and Reserves.--
(a) Issuing Authority.--
(1) Insurance and financing.--(A) The maximum
contingent liability outstanding at any one time
pursuant to insurance issued under section 234(a), and
the amount of financing issued under sections 234 (b)
and (c), shall not exceed in the aggregate
$29,000,000,000.
(B) Subject to spending authority provided in
appropriations Acts pursuant to section 504(b) of the
Federal Credit Reform Act of 1990, the Corporation is
authorized to transfer such sums as are necessary from
its noncredit activities to pay for the [subsidy cost]
subsidy and administrative costs of the investment
guaranties and direct loan programs under subsections
(b) and (c) of section 234.
(2) Termination of authority.--The authority of
subsections (a), (b), and (c) of section 234 shall
continue until [November 1, 2000] September 30, 2007.
(b) * * * [Repealed--1992]
(c) There shall be established in the Treasury of the
United States [an insurance and guaranty fund, which shall have
separate accounts to be known as the Insurance Reserve and the
Guaranty Reserve, which reserves] a noncredit account revolving
fund, which shall be available for discharge of liabilities, as
provided in subsection (d) of this section until such time as
all such liabilities have been discharged or have expired or
until all [such reserves have] of the fund has been expended in
accordance with the provisions of this section. Such fund shall
be funded by: (1) the funds heretofore available to discharge
liabilities under predecessor guaranty authority (including
housing guaranty authorities), less both the amount made
available for housing guaranty programs pursuant to section
223(b) and the amount made available to the Corporation
pursuant to subsection (e) of this section and (2) such sums as
shall be appropriated pursuant to subsection (f) of this
section for such purposes. [The allocation of such funds to
each such reserve shall be determined by the Board after
consultation with the Secretary of the Treasury.] Additional
amounts may thereafter be transferred to such [reserves] fund
pursuant to section 236.
(d) Any payment made to discharge liabilities under
investment insurance or reinsurance issued under section 234
under similar predecessor guaranty authority or under section
234A, shall be paid first out of the [Insurance Reserve, as
long as such reserve] noncredit account revolving fund, as long
as such fund remains available, and thereafter out of funds
made available pursuant to subsection (f) of this section. Any
payments made to discharge liabilities under guaranties issued
under section 234(b) [or under similar predecessor guaranty
authority shall be paid first out of the Guaranty Reserve as
long as such reserve remains available, and thereafter out of
funds made available pursuant to subsection (f) of this
section] or 234(c) shall be paid in accordance with the Federal
Credit Reform Act of 1990.
(e) There is hereby authorized to be transferred to the
Corporation at its call, for the purposes specified in section
236, all fees and other revenues collected under predecessor
guaranty authority from December 31, 1968, available as of the
date of such transfer.
(f) There are authorized to be appropriated to the
Corporation, to remain available until expended, such amounts
as may be necessary from time to time to replenish or increase
the [insurance and guaranty fund] noncredit account revolving
fund, to discharge the liabilities under insurance,
reinsurance, or guaranties issued by the Corporation or issued
under predecessor guaranty authority, or to discharge
obligations of the Corporation purchased by the Secretary of
the Treasury pursuant to this subsection. However, no
appropriations shall be made to augment the [Insurance Reserve]
noncredit account revolving fund until the amount of funds in
the [Insurance Reserve] noncredit account revolving fund is
less than $25,000,000. Any appropriations to augment the
[Insurance Reserve] noncredit account revolving fund shall then
only be made either pursuant to specific authorization enacted
after the date of enactment of the Overseas Private Investment
Corporation Amendments Act of 1974, or to satisfy the full
faith and credit provision of section 237(c). In order to
discharge liabilities under investment insurance or
reinsurance, the Corporation is authorized to issue from time
to time for purchase by the Secretary of the Treasury its
notes, debentures, bonds, or other obligations; but the
aggregate amount of such obligations outstanding at any one
time shall not exceed $100,000,000. Any such obligation shall
be repaid to the Treasury within one year after the date of
issue of such obligation. Any such obligation shall bear
interest at a rate determined by the Secretary of the Treasury,
taking into consideration the current average market yield on
outstanding marketable obligations of the United States of
comparable maturities during the month preceding the issuance
of any obligation authorized by this subsection. The Secretary
of the Treasury shall purchase any obligation of the
Corporation issued under this subsection, and for such purchase
he may use as a public debt transaction the proceeds of the
sale of any securities issued under the Second Liberty Bond Act
after the date of enactment of the Overseas Private Investment
Corporation Amendments Act of 1974. The purpose for which
securities may be issued under such Bond Act shall include any
such purchase.
Sec. 236. Income and Revenues.-- * * *
* * * * * * *
Sec. 237. General Provisions Relating to Insurance
Guaranty, and Financing Program.-- * * *
* * * * * * *
Sec. 238. Definitions.--As used in this title--
(a) the term ``investment'' includes any contribution or
commitment of funds, commodities, services, patents, processes,
or techniques, in the form of (1) a loan or loans to an
approved project, (2) the purchase of a share of ownership in
any such project, (3) participation in royalties, earnings, or
profits of any such project, and (4) the furnishing of
commodities or services pursuant to a lease or other contract;
(b) the term ``expropriation'' includes, but is not limited
to, any abrogation, repudiation, or impairment by a foreign
government, a political subdivision of a foreign government, or
a corporation owned or controlled by a foreign government, of
its own contract with an investor with respect to a project,
where such abrogation, repudiation, or impairment is not caused
by the investor's own fault or misconduct, and materially
adversely affects the continued operation of the project;
(c) the term ``eligible investor'' means: (1) United States
citizens; (2) corporations, partnerships, or other associations
including nonprofit associations, created under the laws of the
United States any State or territory thereof, or the District
of Columbia, and substantially beneficially owned by United
States citizens; and (3) foreign corporations, partnerships, or
other associations wholly owned by one or more such United
States citizens, corporations, partnerships, or other
associations: Provided however, That the eligibility of such
foreign corporation shall be determined without regard to any
shares, in aggregate less than 5 per centum of the total issued
and subscribed share capital, held by other than the United
States owners: Provided further, That in the case of any loan
investment a final determination of eligibility may be made at
the time the insurance or guaranty is issued; in all other
cases, the investor must be eligible at the time a claim arises
as well as the time the insurance or guaranty is issued;
(d) the term ``noncredit account revolving fund'' means the
account in which funds under section 236 and all funds from
noncredit activities are held; [and]
(e) the term ``noncredit activities'' means all activities of
the Corporation other than its loan guarantee program under
section 234(b) and its direct loan program under section
234(c);
(f) the term ``predecessor guaranty authority'' means prior
guaranty authorities (other than housing guaranty authorities)
repealed by the Foreign Assistance Act of 1969, section 202(b)
and 413(b) of the Mutual Security Act of 1954, as amended, and
section 111(b)(3) of the Economic Cooperation Act of 1948, as
amended (exclusive of authority relating to informational media
guaranties)[.]; and
(g) the term ``local financial institution''--
(1) means any bank or financial institution that is
organized under the laws of any country or area in
which the Corporation operates; but
(2) does not include a branch, however organized, of
a bank or other financial institution that is organized
under the laws of a country in which the Corporation
does not operate.
* * * * * * *
Sec. 240. Small Business Development.--[The Corporation]
(a) In General._The Corporation shall undertake, in cooperation
with appropriate departments, agencies, and instrumentalities
of the United States as well as private entities and others, to
broaden the participation of United States small business,
cooperatives, and other small United States investors in the
development of small private enterprise in less developed
friendly countries or areas. The Corporation shall allocate up
to 50 percent of its annual net income, after making suitable
provision for transfers and additions to reserves, to assist
and facilitate the development of projects consistent with the
provisions of this section. Such funds may be expended,
notwithstanding the requirements of section 231(a), on such
terms and conditions as the Corporation may determine, through
loans, grants, or other programs authorized by section 234 and
section 234(A).
(b) Outreach to Minority-Owned and Women-Owned
Businesses.--The Corporation shall collect data on the
involvement of minority- and women-owned businesses in projects
supported by the Corporation, including--
(1) the amount of insurance and financing provided by
the Corporation to such businesses in connection with
projects supported by the Corporation; and
(2) to the extent such information is available, the
involvement of such businesses in procurement
activities conducted or supported by the Corporation.
The Corporation shall include, it its annual report submitted
to the Congress under section 240(A), the aggregate data
collected under this paragraph, in such form as to quantify the
effectiveness of the Corporation's outreach activities to
minority- and women-owned businesses.