RUNNING RISKS FOR IBM

...and the chances of such events occurring are high in much of the Third World...

...In addition, OPIC clients must be U.S...

...Ninety-six developing countries— the latest is the People's Republic of China—have signed bilateral agreements which allow OPIC to operate within their borders...

...Judging that the company's operating abilities were thereby impaired, OPIC paid the claim...

...There's more than enough money available for investment...

...God willing...

...Small" companies, which OPIC defines as those not among the top 1,000 on Fortune's annual list, are eligible for direct OPIC loans to fund Third World projects...

...The GNP limit, however, has already been waived in the case of energy and mineral projects, and OPIC officials say they are hoping to expand the exemption or do away with the GNP-level rule altogether...

...He cites the case of International Nickel Corporation, a Canadian company, which did just that under OPIC advice...

...Hoadley exhorts his fellow investors to dismiss, as he does, the threat of international restructuring and nationalism...

...On the other hand, if potential financial losses will instead be felt directly by the U.S...

...we will do everything we can for you...

...Says an OPIC film made for that purpose, "We understand that part of the world is called 'developing.' We understand it in terms of the opportunities for investment, growth, and profit it offers to American companies...

...One such limitation prohibits OPIC from offering services in countries "showing a pattern of gross and consistent violations of human rights...

...If you consider it to be of value, that's our criterion," OPIC's Graham Williams told potential clients at the San Francisco seminar...

...According to Arnold E. Brown, Kaiser senior vice president, when Kaiser went looking for funds needed to finance the project it was able to raise only a small portion of the $29 million required—$5 million from the International Finance Corporation, which is part of the World Bank—because private lenders were afraid the nationalized Indonesian Oil Company was overextended...

...The entire financing of the Kaiser project was made possible by the direct loans, insurance, and loan guarantees of public agencies, with private profits going to Kaiser and to private institutions that advanced the loans under OPIC's guarantees...

...Meanwhile, OPIC is doing what it can to promote Third World investment...

...abroad the public is told that its government will protect it from the ravages of foreign investors...

...Give us a call if you are in doubt...

...Usually called the "North-South dialogue," this restructuring effort, promoted by such agencies as the World Bank as well as by the Third World, has produced a mountain of books, articles, and speeches, and some slight hope from poor nations for a redress of economic grievances...

...In so doing, it may put the U.S...

...The opportunities are limitless...

...And when OPIC does go in, its loan guarantees and insurance are backed by "the full faith and credit of the U.S...

...The reference is to an expropriation claim filed by an OPIC client because the Somali government required the company to take a 270-pound Somali official along on trips in the company's light plane...

...In both cases the public is being led a long way from the truth...

...Added Mansbach, "And remember, there are loopholes and loopholes-within the loopholes...

...The problem is that it is all short-term money...

...There is just too much uncertainty and fear...

...The North-South dialogue should be identified as a "myth" or "shibboleth," says Hoadley, and corporations should adopt a hard line in relation to it...

...According to Mansbach, OPIC has already agreed to pay up when civil strife makes working conditions too dangerous for company employes and equity capital is thus rendered useless...

...citizens...

...Among OPIC's clients are Uniroyal, ITT Industries, Scott Paper Company, Mobil International Petroleum, IBM, General Electric, the Bank of America, and Union Carbide...

...That rule didn't prevent OPIC from writing almost $2.5 million in coverage on six new projects in Haiti last year, but it is, for the present, keeping the agency out of Chile, Argentina, and Uruguay...

...OPIC takes the worry out of making profits abroad...

...Speaking at a San Francisco conference for potential clients, Walter E. Hoadley, chief economist for the Bank of America, summarized the problem faced by multinationals: "The world is awash in liquidity...

...How many times," he asks, "have we had a minister of resources pounding his fist on the table yelling at us, and then come up later and assure us that the rhetoric is just for local consumption, a political necessity...

...OPIC, however, agreed to provide both loan guarantees and insurance and, because of OPIC's backing, private investors then supplied the additional funds needed...

...No less significant an objection to OPIC is the tendency for American investment abroad to distort development, destroy local initiative, and create greater dependencies in countries already suffering from lack of autonomy and internal control...

...By insuring against risks and by offering easy, low-cost financing, OPIC also encourages companies to take risks...

...That may be why OPIC invites people like Bank of America's Walter Hoadley to speak at its conferences...

...There is a nice correspondence here between the rhetoric being offered for consumption in the United States and that offered to the people of poverty-stricken Third World countries: In the United States the public is told that the Government is getting out of the marketplace...

...Perhaps not for long...

...And for companies of any size, OPIC will guarantee loans from private lenders, Anne Jackson is a free-lance writer in Sacramento, California...

...Government agency...

...The effort by less-developed countries to restructure patterns of trade and investment to favor poor rather than rich countries could cause untold damage to corporate profits and holdings...

...Government in the position of having to defend interests it would otherwise be reluctant or unable to defend...

...Although the Reagan Administration has made much of cutting back the budgets of the Export-Import Bank and the Agency for International Development, as a nontax-supported agency OPIC not only escapes the budget axe but is also able to operate without the public scrutiny and political vulnerability of programs dependent on tax dollars—all the better for the reticent investor...

...Angus Wright heads the Environmental Studies Department of California State University in Sacramento...

...If there were a caption, it would, one supposes, read something like this: "OPIC's investor services help U.S...

...subsidiary in order to qualify for OPIC assistance...

...We can be very creative, very imaginative...

...Indeed, OPIC is often willing to go ahead with a project where other insurers or lenders have judged the risks to be too high...

...The woman is brushing her teeth with a plastic brush, while her smiling daughter clasps a giant-economy-size tube of Colgate-Palmolive toothpaste...

...The $29 million expansion of a cement plant in Indonesia owned by Kaiser vCe-ment, the world's fifth-largest cement manufacturer, is an excellent case in point...

...BY ANNE JACKSON AND ANGUS WRIGHT American business has long known that the profits to be made in the Third World are immense—but so are the risks...

...When asked whether the human rights clause might be stricken by the Reagan Administration and the new Congress, B. Thomas Mansbach, a senior director of OPIC, replied, "Ojala...

...Nor is insurance OPIC's only form of aid to the corporate needy: A company eyeing a likely investment can get OPIC funds to conduct a feasibility study and need not repay the money if the study results are negative...

...ventures in thirty-six countries from Honduras to Rwanda and paid off $13 million in claims—including two for losses in Iran...

...A full-page glossy photograph of an Egyptian peasant woman and two children which appears in OPIC's annual report illustrates the point nicely...

...The agency has also extended coverage to "creeping expropriation," as measured by what OPIC Vice President Caryl S. Bernstein calls the "Fat Somali Theory...

...OPIC general counsel Richard Stern says the agency has not yet tried to collect from the Khomeini government, but that OPIC officials will soon begin "conversations on salvage" with Iran...

...thereby relieving both the company and the lending bank of risks they might otherwise incur...

...No one wants to lend for the long term...

...War or government seizure can wipe out a multi-million-dollar investment overnight...

...companies with investments in developing countries— protection against losses due to expropriation, war, revolution, insurrection, and foreign limits on the amount of local currency an investor can convert to dollars and bring back to the United States...

...Last year OPIC wrote coverage totaling more than $1.1 billion on 100 new U.S...

...Presumably, OPIC insurance would not solve the problems presented to corporations by such changes in the terms of trade and finance...

...No one, that is, except OPIC...

...corporations enter new markets and spread the benefits of American hygiene...

...They should look "with courage" to the opportunities offered abroad and take advantage of the OPIC programs...

...OPIC's main service is providing "political risk insurance" for U.S...

...One argument in OPIC's favor, perhaps, is that if corporations are covered by OPIC insurance and guarantees, they may be less aggressive in pushing the State Department, the Pentagon, and the CIA to protect investments by military and diplomatic means...

...Enter the Overseas Private Investment Corporation (OPIC), self-described as "a small, self-supporting U.S...

...As a bonus, he reports, OPIC advised Kaiser on how to get around Indonesian real estate mortgage laws...

...One thing that makes OPIC's services so enticing to business is that the agency will insure for a much longer term than will a private insurer—twenty years as compared to the one-year to three-year coverage available on the private market...

...But if the opportunities OPIC makes possible are "limitless," so are the implications...

...Says Brown, "The project would not have gone ahead without OPIC...

...To heighten its ability to help companies out, OPIC is hoping Congress will expand the war, insurrection, and revolution insurance to cover civil disorders such as labor disputes...

...When OPIC has to pay a political risk claim, it bills the host government for reimbursement...

...OPIC loans are also offered for longer-than-normal periods, and at about 60 per cent of commercial rates—11.25 per cent instead of the prime commercial rates of 17 to 22 per cent...

...In October, when OPIC's operating authority comes up for renewal, OPIC officials plan to push for expansion of agency activities...

...For all that they are able to do for investors, though, OPIC officials still lament a number of restrictions placed by Congress on the agency's operations...

...Other legislative restrictions prevent OPIC from backing "runaway" industries and from operating in countries with a per capita gross national product that exceeds $1,000...

...After all, the dialogue and similar efforts only "crystallize negative thinking, most of it anti-American...

...Mansbach also suggests that companies not meeting the U.S...

...OPIC representatives like to emphasize that so long as there are real profits to be made and so long as a project is not demonstrably a runaway shop, they don't make judgments about the appropriateness of an investment...

...We certainly hope so...

...While OPIC may be able to help with everything from revolution to overweight inspectors, it cannot by itself change a world political climate that worries investors...

...companies at least 50 per cent owned by U.S...

...Then they beg us to stay and look at the opportunities...

...citizens, or foreign businesses at least 95 per cent owned by U.S...

...Government, the Government will have its own reasons to react strongly...

...citizen ownership requirement consider setting up a U.S...

...Nor, says Hoadley, should overseas investors tremble at the specter of nationalism in underdeveloped nations...