[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]



 
                   HEARING ON REAUTHORIZATION OF OPIC

=======================================================================

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                INTERNATIONAL ECONOMIC POLICY AND TRADE

                                 OF THE

                              COMMITTEE ON
                        INTERNATIONAL RELATIONS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                                   ON

                               __________

                             APRIL 14, 1999

                               __________

                           Serial No. 106-51

                               __________

    Printed for the use of the Committee on International Relations



                    U.S. GOVERNMENT PRINTING OFFICE
60-297 CC                   WASHINGTON : 1999



                  COMMITTEE ON INTERNATIONAL RELATIONS

                 BENJAMIN A. GILMAN, New York, Chairman
WILLIAM F. GOODLING, Pennsylvania    SAM GEJDENSON, Connecticut
JAMES A. LEACH, Iowa                 TOM LANTOS, California
HENRY J. HYDE, Illinois              HOWARD L. BERMAN, California
DOUG BEREUTER, Nebraska              GARY L. ACKERMAN, New York
CHRISTOPHER H. SMITH, New Jersey     ENI F.H. FALEOMAVAEGA, American 
DAN BURTON, Indiana                      Samoa
ELTON GALLEGLY, California           MATTHEW G. MARTINEZ, California
ILEANA ROS-LEHTINEN, Florida         DONALD M. PAYNE, New Jersey
CASS BALLENGER, North Carolina       ROBERT MENENDEZ, New Jersey
DANA ROHRABACHER, California         SHERROD BROWN, Ohio
DONALD A. MANZULLO, Illinois         CYNTHIA A. McKINNEY, Georgia
EDWARD R. ROYCE, California          ALCEE L. HASTINGS, Florida
PETER T. KING, New York              PAT DANNER, Missouri
STEVEN J. CHABOT, Ohio               EARL F. HILLIARD, Alabama
MARSHALL ``MARK'' SANFORD, South     WILLIAM D. DELAHUNT, Massachusetts
    Carolina                         GREGORY W. MEEKS, New York
MATT SALMON, Arizona                 BARBARA LEE, California
AMO HOUGHTON, New York               JOSEPH CROWLEY, New York
TOM CAMPBELL, California             JOSEPH M. HOEFFEL, Pennsylvania
JOHN M. McHUGH, New York
KEVIN BRADY, Texas
RICHARD BURR, North Carolina
PAUL E. GILLMOR, Ohio
GEORGE RADANOVICH, California
JOHN COOKSEY, Louisiana
THOMAS G. TANCREDO, Colorado
                    Richard J. Garon, Chief of Staff
          Kathleen Bertelsen Moazed, Democratic Chief of Staff
                                 ------                                

        Subcommittee on International Economic Policy and Trade

               ILEANA ROS-LEHTINEN, Florida, Chairperson
DONALD A. MANZULLO, Illinois         ROBERT MENENDEZ, New Jersey
STEVEN J. CHABOT, Ohio               PAT DANNER, Missouri
KEVIN BRADY, Texas                   EARL F. HILLIARD, Alabama
GEORGE RADANOVICH, California        BRAD SHERMAN, California
JOHN COOKSEY, Louisiana              STEVEN R. ROTHMAN, New Jersey
DOUG BEREUTER, Nebraska              WILLIAM D. DELAHUNT, Massachusetts
DANA ROHRABACHER, California         JOSEPH CROWLEY, New York
TOM CAMPBELL, California             JOSEPH M. HOEFFEL, Pennsylvania
RICHARD BURR, North Carolina
             Mauricio Tamargo, Subcommittee Staff Director
        Jodi Christiansen, Democratic Professional Staff Member
                Yleem Poblete, Professional Staff Member
                      Camila Ruiz, Staff Associate


                            C O N T E N T S

                              ----------                              

                               WITNESSES

                                                                   Page

Mr. George Munoz, President, Overseas Private Investment 
  Corporation....................................................     4
Mr. John Hardy Jr., Vice President of Project Finance, Enron 
  International..................................................    15
Mr. Willard A. Workman, Vice President, International Division, 
  U.S. Chamber of Commerce.......................................    17
Mr. Jim Sheehan, Director of International Environmental Policy, 
  Competitive Enterprise Institute...............................    19
Mr. Scott Fischer, Vice President, Latin America North Division, 
  Citicorp.......................................................    22

                                APPENDIX

Prepared statements:

Hon. Ileana Ros-Lehtinen, Chairman, a U.S. Representative from 
  the State of Florida...........................................    32
Mr. George Munoz.................................................    34
Mr. John Hardy, Jr...............................................    55
Mr. Willard A. Workman...........................................    63



                   HEARING ON REAUTHORIZATION OF OPIC

                              ----------                              


                       WEDNESDAY, APRIL 14, 1999

                  House of Representatives,
 Subcommittee on International Economic Policy and 
                                             Trade,
                      Committee on International Relations,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 2:05 p.m., in 
room 2200, Rayburn House Office Building, Hon. Ileana Ros-
Lehtinen, (Chairman of the Subcommittee) presiding.
    Mrs. Ros-Lehtinen. The Subcommittee will come to order. 
This hearing highlights one of the most important areas of 
responsibility that this Subcommittee has--the reauthorization 
of the Overseas Private Investment Corporation, (OPIC).
    In the last Congress, sessions evaluating OPIC's programs 
and the use of its appropriated funds to promote U.S. exports, 
spur U.S. foreign investment in overseas markets and promote 
economic development were held amidst an environment framed 
with concerns about the costs to American taxpayers and 
characterization of OPIC as corporate welfare.
    Criticism of OPIC as a safety net for large multinationals 
dependent on Federal subsidies was supported by the 
introduction of numerous pieces of legislation calling for 
OPIC's termination or, at the very least, its privatization. 
Nevertheless, some analysts contend that the recent currency 
crisis and the tumultuous political developments around the 
globe have lowered the volume of the attacks.
    Opposition remains, however, with legislation having been 
introduced in both the House and the Senate calling for the 
termination of OPIC within 180 days of the enactment of these 
proposals. The critics' concerns deal with the U.S. risking and 
spending billions of taxpayer dollars to subsidize foreign 
investment for American companies which are some of the richest 
in the world.
    They also raise the issue of the government becoming 
involved in the process of rectifying certain market failures 
which could dissuade U.S. firms from investing in the least 
developed economies. Critics are concerned about the potential 
for direct investment abroad to the displace U.S. workers at 
home while still others worry about the tendency of Government 
subsidies to distort trade currents and investment flows.
    Supporters of OPIC respond to the criticism launched at it 
by highlighting OPIC's self-sustaining status, by emphasizing 
that OPIC does not entail Government subsidies because expenses 
are derived from fees and premiums paid by members, which OPIC 
then pays back to the U.S. Treasury in the amount of the 
appropriations. They further underscore OPIC's ability to 
contribute to the Government's overall budgetary resources.
    Recently, OPIC supporters have focussed on the benefit that 
it provides to small businesses who would otherwise be unable 
to expand into foreign markets and compete on a level playing 
field without OPIC's support, financing, or insurance.
    A factor which must be taken into account when evaluating 
OPIC's programs is the existence of OPIC counterparts, 
particularly in Europe, which are fully subsidized by the 
Governments or are largely so, placing U.S. companies at a 
competitive disadvantage when seeking entry into emerging 
markets.
    Supporters ask: When the private sector does not offer the 
same services OPIC does, where can American businesses turn to?
    Nonetheless, OPIC's purpose and the issue of its 
reauthorization cannot and must not be approached in a vacuum 
devoid of other considerations except U.S. business interests 
and trade priorities. As the Subcommittee of jurisdiction, it 
is imperative that we also look at OPIC's role relating to U.S. 
foreign policy and our national security interests.
    In the past we have heard from companies that have been 
denied OPIC support because the projects they propose or 
governments they sought to do business with were subject to 
U.S. restrictions. However, some of these companies found the 
funding and insurance through foreign venues, which raises a 
new series of concerns about the activities of American 
businesses and their subsidiaries.
    These and other matters will be addressed during this 
hearing as we focus on OPIC's budget request for fiscal year 
2000.
    Before we begin, I'd like to remind my colleagues that we 
are under time restraints due to the continuation of the Full 
Committee mark-up following this hearing.
    Now I am pleased to turn to the Ranking Member of our 
Subcommittee, Congressman Menendez of New Jersey.
    [The prepared statement of Hon. Menendez appears in the 
appendix.]
    Mr. Menendez. Thank you, Madam Chairlady. Just for the 
future, can I change my chair? There is a conspiracy here to 
have me several inches below the level of the table. I do not 
want OPIC's chances to sink here, by any stretch of the 
imagination.
    Mrs. Ros-Lehtinen. We will change it. Sorry, Bob.
    Mr. Menendez. That is all right.
    Madam Chairlady, the question is to reauthorize or not and 
as someone who is an unabashed supporter of OPIC and was 
responsible the last time it was reauthorized for making sure 
that we worked with others on the other side of the aisle to 
bring it to the floor, the answer to that should clearly be 
yes.
    Now that might not seem to be the view of some who suggest 
that this is corporate welfare. And it certainly might not seem 
to be the view of someone who is a Democrat from a very urban 
district in a very urbanized State, New Jersey. But as the 
Ranking Democrat on this Subcommittee, I clearly believe that 
OPIC is vital to the interests of the United States, to its 
economic well-being, to the growth and opportunity for 
Americans here at home and its reauthorization, as well as TDA 
and ITA Programs, are essential for us to consider in this 
Congress and to pass.
    I think perhaps the most overlooked fact about OPIC is that 
it is the only program in the 150 function account which 
returns money to the U.S. Treasury every year. OPIC has had a 
positive net income for every year of operation, with reserves 
now totaling more than $3 billion. Last year OPIC earned a 
profit of $139 million and in fiscal year 2000, OPIC will 
contribute $204 million in net negative budget authority. Net 
negative budget authority.
    At a time when the Congress is striving to adhere to the 
constraints of a balanced budget, OPIC stands apart as a 
revenue-earning program. OPIC's budgetary contributions are 
returned to the function of 150 or international affairs 
account and help offset the deep cuts that have been made to 
our foreign aid and development programs.
    That relationship is fitting, as OPIC was created by 
President Richard Nixon to complement our aid programs. OPIC 
not only complements our foreign aid programs; it is helping to 
sustain them.
    OPIC, through its operation in 140 countries, fulfills the 
aid component of its mandate by bringing much-needed investment 
to developing nations while simultaneously providing a much-
needed services and market opportunities to American 
businesses.
    In my home State of New Jersey, OPIC has provided more than 
$1 billion in financing and insurance, generated $3 billion in 
U.S. exports and created 10,288 jobs, jobs here in the United 
States.
    From Newark to Camden to Princeton, OPIC has supported New 
Jersey companies and their suppliers. More American exports 
means American jobs. U.S. exports of goods and services are 
estimated to support more than 12 million domestic jobs. Each 
$1 billion in U.S. goods and services exports supports some 
13,000 U.S. jobs.
    So if, through a program like OPIC, we can help American 
companies to export their goods and services, create jobs here 
at home, while also helping the economy and infrastructure of 
developing nations and furthering our foreign policy goals, I 
believe we have a program that constitutes a good marriage 
among all of these desired efforts.
    Critics of OPIC who advocate for a divorce need to take a 
look at the impact of exports on our economy, on our jobs here 
at home. They need to take a look at OPIC's net revenues to the 
Government. They need to really consider that OPIC is not 
corporate welfare but, in fact, in the vital interest of the 
United States. It serves America's interests, both domestically 
and its foreign interests.
    Last, earlier this year I had the opportunity to work with 
OPIC on the creation of a Central American investment facility, 
a joint venture between OPIC and Citibank which will provide 
much-needed capital to businesses and much-needed investment to 
the region.
    And having just met with the Central American Ambassadors, 
again while we are in the midst of a humanitarian crisis in 
Kosovo, people have forgotten about the humanitarian crisis 
here in our own hemisphere. The devastation caused by Hurricane 
Mitch in Central America will take years to fully recover from. 
The OPIC Citibank investment facility will expedite the process 
by bringing services and jobs to the region while helping 
American companies to get a foothold on the region.
    That is exactly the type of Government program we should 
support. It fulfills domestic and foreign policy goals while 
returning revenue to the U.S. Treasury. I doubt there are many 
other programs that can make the same statement.
    Thank you, Madam Chairlady.
    Mrs. Ros-Lehtinen. Thank you.
    Would you like to make an opening statement, as well?
    Mr. Delahunt. I will defer. Thank you.
    Mrs. Ros-Lehtinen. Thank you.
    It is my pleasure to introduce Mr. George Munoz, who has 
served as the president and chief executive officer of the 
Overseas Private Investment Corporation since 1997. Prior to 
taking the position at OPIC, Mr. Munoz was the chief financial 
officer of the U.S. Treasury Department from 1993 to 1997 and 
most of his career has been focussed on international law and 
business. He was a partner in the law firm of Meyer, Brown and 
Platt and a principal with former Senator Adlai Stevenson in an 
investment banking firm focussed on international transactions.
    Mr. Munoz has also headed his own law firm, concentrating 
in corporate and international business, and it is a pleasure 
for us to welcome you today. Thank you, George. We will be glad 
to enter your statement in the record.

    STATEMENT OF GEORGE MUNOZ, PRESIDENT, OVERSEAS PRIVATE 
                     INVESTMENT CORPORATION

    Mr. Munoz. Thank you, Madam Chair and Members of the 
Subcommittee. I am here to answer any questions you may have 
with respect to the reauthorization. Therefore, Madam Chair, I 
request that my long written statement, as well as my oral 
statement that has been submitted to all of you, be submitted 
for the record.
    I also want to thank you, Madam Chair, for your very well 
balanced opening statement that I think went to the crux of the 
debate, a healthy debate that has taken place regarding our 
reauthorization.
    But I think most will agree, including this Congress that 
voted last year on a bill that would have cut back expenses, 
the operating expenses for OPIC when the Congress, by a two to 
one vote, voted to keep OPIC on a positive growth path.
    I also want to acknowledge a good friend and welcome 
Congressman Bob Menendez as the new Ranking Member of this very 
important Subcommittee, especially because of his experience 
with working with OPIC firsthand.
    As you know, OPIC is a critical element of U.S. foreign 
policy. It was established to mobilize American private capital 
to support the growth of developing countries and economies 
that are in transition to democracies and transitions to free 
markets as a means of increasing our own security and well-
being, while helping bring about stability and development 
abroad.
    OPIC is requesting reauthorization because we continue to 
make a valuable difference in meeting our mission of helping 
America compete while supporting development and stability in 
strategic regions around the world at no cost to the taxpayer.
    Madam Chair, I just want to briefly outline that as 
president and CEO of OPIC, I want to make sure that we fulfill 
our mission in the most optimal manner. As a result, I have set 
out four priorities for our agency: first, that OPIC take a 
leadership role in implementing foreign policy investment and 
development priorities of the U.S. Government, as determined by 
the Administration and the Congress; second, that OPIC be 
prudent in its use and care of the full faith and credit of the 
U.S. Government, ensuring that OPIC's self-sustaining status 
remain; third, that OPIC facilitate the involvement of U.S. 
small business in international business development; and 
fourth, that OPIC operate and be recognized as a model, high-
performance organization striving to have the best in people, 
products and systems. Today we can report that on all these 
priority items, OPIC has excelled.
    Madam Chair, I would like to point out to all the Committee 
Members the pictures that I have brought with me today to show 
you the difference that we can make. On my extreme left is a 
picture of a project that we have helped in Africa. This is a 
project, the Tea Importers, that employs approximately 30,000 
employees in that region. It is a project that has faced 
political problems, but because of OPIC political insurance, it 
has stayed the course and today it continues to be the sole 
source of cash income for approximately 30 farm families in 
Rwanda.
    Next, it's a picture that was just taken last month in 
Honduras. This is one of the few remaining shacks that the 
hurricane left in its tracks. And right next to it, in 
Nicaragua, also taken last month, is the remains of where there 
was some development taking place, homes of other people.
    We are now in a position to make a difference by again 
bringing the private sector to Central America, much as you see 
as the Tea Importers example. And we can only do it, Madam 
Chair, if the private sector believes that OPIC will be with 
them all the way, not year to year, depending on whether we 
will be reauthorized, not with more limitations or 
restrictions, but whether or not the U.S. Government wants to 
have an agency that will continue on the roots on which it was 
created with the Marshal Plan, bringing the private sector to 
fulfill the development needs of many of these countries.
    I would like to say, Madam Chair, that I know that yourself 
and certainly the Ranking Member, Congressman Menendez, have 
shown your care and interest in Central America. I know that 
Madam Chair, as we traveled there a couple of months ago, 
people from Nicaragua and Honduras expressed their sincere 
appreciation for your leadership in bringing about some relief 
on the immigration level to those countries.
    But they expressed a strong interest in having people stay 
in their own countries, to the extent there can be jobs and 
development and security in their own homeland, and I believe 
that OPIC is one of the few instruments that the U.S. 
Government has to partner up with the private sector in order 
for that to take place.
    Madam Chair, we are asking that the Administration's 
request for reauthorizing OPIC for 4 years, because of its 
current reauthorization expires on September 30, 1999, be 
approved. I can report that this agency's reauthorization has 
received the full vote of confidence in the Senate. The Senate 
Foreign Relations Committee, just last month on March 23, 
unanimously reported legislation reauthorizing OPIC for 4 
years. The Senate Bill S. 688 sponsored by Chairman Jesse Helms 
sends a very strong message of OPIC's relevance in today's 
global markets. We are hopeful that this Subcommittee will also 
follow the lead that the Senate has taken with respect to our 
reauthorization.
    Madam Chair, as I said, I am here to answer questions. My 
written statement has examples of the human face that OPIC has 
put on its project for bringing about jobs and development. But 
I would like to comment on a few matters that you mentioned in 
your opening statement with respect to the corporate welfare.
    There are those who say that the term ``corporate welfare'' 
is something that should apply to OPIC. First, there is a 
question of what corporate welfare means. It has many 
definitions.
    In one extreme, it could be viewed as a corporation getting 
something for nothing. This definition does not fit OPIC 
programs. It can only be a case of mistaken identity as applied 
to OPIC. All OPIC services are paid for by the private sector.
    An alternative definition of corporate welfare may be that 
OPIC services are partially subsidized by the Government. That, 
too, does not fit our program. OPIC has not been a drain on the 
U.S. Treasury. To the contrary, in our history we have 
contributed to the Treasury more in private sector fees than we 
have taken out for our own operations.
    Others have viewed corporate welfare as anything of value 
that is provided to a select group of businesses. This, too, 
does not characterize OPIC. We are an instrument of foreign 
policy. When the Foreign Assistance Act creating OPIC was 
signed, it was done with a clear objective in mind: the 
development of strategic countries important to our well-being 
and the well-being of the world. That is the mission that was 
established for OPIC and it is still our mission today.
    Furthermore, even the GAO has looked closely at OPIC's cost 
to the Federal Government and their findings are noteworthy. 
According to the 1997 GAO study, ``Historically, OPIC's 
combined finance and insurance programs have been profitable 
and self-sustaining, including costs due to credit reform and 
administration.''
    One last item, Madam Chair. You mentioned in your opening 
statement the arguments that sometimes are made that OPIC 
mostly helps the large businesses. It so happens that mostly it 
is the larger businesses that are involved in international 
development, so we are by their side in the development that 
takes place. But I would like to note two things.
    One, as I mentioned, one of the priorities that we have set 
out at OPIC is for the small business, that small businesses be 
facilitated into international business. We have declared 1999 
as small business at OPIC.
    As a result and at the request of this Committee, Madam 
Chair, in the last meeting that we had, we have acted on 
streamlining our processes for small business applications. 
Two-thirds of the suppliers for OPIC projects are in the small 
business area and approximately 28 percent of all of the 
projects that OPIC does are with small businesses.
    So I would like to underscore, Madam Chair, that this is 
the direction that we are going in and we believe that, as any 
of the critics have identified items that deserve merit and 
attention, we certainly have paid that attention to them.
    I very much welcome any questions that this Committee may 
have for the reauthorization of OPIC. Thank you, Madam Chair.
    [The prepared statement of Mr. Munoz appears in the 
appendix.]
    Mrs. Ros-Lehtinen. Thank you so much, Mr. Munoz. We 
appreciate it.
    I want to talk about this photo that you have displayed 
about the Tea Importers in Westport, Connecticut. As all of us 
know, all but one country in Latin America has a democratic 
system of Government so why then is OPIC political risk 
insurance still needed for any businesses to do business in the 
region? Are American businesses in danger of expropriation of 
their properties or political violence?
    For example, the one that you point to, the Westport, 
Connecticut company that obtained $500,000 in OPIC insurance to 
establish tea production and trading operations in Ecuador is 
an example and in Brazil OPIC also provided more than $200 
million in insurance for three separate Enron power projects. 
Brazil and Ecuador may not, especially in Ecuador, may not have 
the strongest economy now but certainly that political risk 
insurance is kind of in question in those particular countries. 
What do you say about OPIC's involvement in Latin America? Why 
is it still needed, with the growing democracies and strong 
economies getting hold?
    Mr. Munoz. Madam Chair, the projects that OPIC supports are 
all long-term. Most of them are infrastructure projects. And, 
in fact, it is because OPIC supports mostly long-term projects, 
projects that require 15 to 20 years before they really are up 
and running from a profit point of view to be commercially 
viable, the markets are just not there to support that, because 
of the risks. People know that over such a long period of time, 
the politics of a country can change, so there is that 
protection that American private sector investors need.
    The market is the one that dictates such need and the 
market is saying that long-term projects require protection 
from political risks.
    Second, Madam Chair, the political risk insurance that we 
sell has a double benefit. No. 1, it sends a signal to the 
governments of those countries where the project is going that 
that project meets international standards, so that it does not 
harm the environment and it is helpful to the development of 
the country.
    But No. 2, it also sends a signal to the government that 
this is a project that will have the support of the U.S. 
Government and therefore, as times change and there is a risk 
of political violence or some actions on the part of the 
government to endanger the project, that because of the 
insurance, those risks are usually identified and tried to be 
negotiated before it turns into a difficult situation.
    I would say, Madam Chair, that the market, the U.S. market 
has sent a very loud message that long-term projects in many of 
the emerging markets and certainly in all of the developing 
countries still run a risk that must be protected against.
    Mrs. Ros-Lehtinen. Thank you. Mr. Munoz, please elaborate 
on the need for a $400,000 increase for OPIC's administrative 
expenses and how these additional resources will be used by 
OPIC.
    Mr. Munoz. Madam Chair, OPIC is a very small organization. 
Most people do not realize that we are approximately 200 
employees, yet every year we are being asked by Congress, as 
well as the Administration, to make sure that we are present 
and visible in very needy areas around the world, including 
sub-Saharan Africa, Central America, Latin America, the 
Caucuses and many other areas.
    In order to carry out those responsibilities and look into 
the risk analysis that is required for us to support a project, 
we need the proper resources. In order for us to monitor our 
ever-growing portfolio, which is right now approximately $18 
billion, we need to have the right personnel.
    The one reason why we can assure the taxpayer that their 
exposure is not real in terms of real risk is because we are 
able to monitor all our projects.
    As our portfolio grows and the responsibilities put upon us 
grow, then it is important that we have the proper resources. 
If anything, I would say that you will not find another agency 
that is as streamlined and low-cost as OPIC, given all the 
responsibilities that it is taking. So this is the natural 
growth that we will require for our monitoring requirements.
    Mrs. Ros-Lehtinen. Well, what mechanisms do you have in 
place to ensure that the contingent liabilities will not become 
obligations for the U.S. taxpayers?
    Mr. Munoz. That is a very good question and one that we are 
very proud of our record. The first line of defense is that we 
do not approve a project that just does not make any sense 
economically. In fact, we approve no project that requires any 
kind of subsidy or concessions in lending rates or the like 
because we are mandated by Congress to be self-sustaining.
    So the first line of attack is that we try to do good 
business transactions.
    The second line is we have built up a substantial fortress 
of reserves against any liability for when political risk 
insurance must be paid for or we have financing that has 
failed, that the project has failed.
    Right now our reserves are over $3 billion and we have had 
independent auditors and outsiders look at our books and they 
have stated that as far as the industry practice in the private 
sector, we actually have a buffer or a cushion of reserves 
greater than what even the industry would have required under 
the circumstances. I think that is the second one.
    And then last, Madam Chair, we have the full knowledge and 
resources of the U.S. Government at play. When a project is 
endangered for political reasons--let us say like the Rwanda 
project or a project in Brazil--we have the State Department's 
U.S. Embassies, we have the Department of Commerce employees 
and we have OPIC employees who can come as a team and try to 
work out the matter so that the projects, in fact, do not fall 
into failure.
    So I think with those three lines of defenses, it has 
proven that our track records is as good as it is.
    Mrs. Ros-Lehtinen. Thank you.
    Mr. Menendez.
    Mr. Menendez. Thank you, Madam Chair.
    First of all, Mr. Munoz, let me congratulate you on your 
tenure at OPIC and the work you have done there and I am glad 
to hear that this is the year of small businesses because that 
is an area that many of us are concerned about in terms of 
seeing some further efforts by OPIC and we are glad to see 
that. I read in your statement that is one of the areas that 
you intend to fulfill.
    Let me ask you a couple of quick questions and maybe we can 
go through and get some of these myths versus facts on the 
table, if we can.
    Myth No. 1 that I always hear is that OPIC subsidizes 
American businesses. What is the fact?
    Mr. Munoz. We charge rates that are market, at the market 
we are active in. There is no concessionary lending or 
concessionary political risk insurance that we give. Fees are 
paid. $3 billion of reserves that I have mentioned earlier, its 
foundation and its base is the user fees that get paid by our 
clients.
    Mr. Menendez. Second myth I always hear is that private 
investors in OPIC funds are protected from losing their money. 
What is the fact?
    Mr. Munoz. Well, we do not lend to anybody unless they have 
their own equity at risk, No. 1. And No. 2, if it is political 
risk insurance, by definition, we are protecting equity 
investments, so for the investment of the individual.
    We do not, on the political risk insurance side, protect 
against commercial risks, so the investor is certainly at risk 
on the commercial side. And if we are on the lending, we 
require that the investor have equity at risk, also.
    So there is no such thing as any investor having an 
investment that is risk-free.
    Mr. Menendez. The other myth I hear is that OPIC costs 
America jobs.
    Mr. Munoz. That is a very good question, Congressman, 
because at one point this Congress, a Congress debated that 
issue and put into OPIC's legislation a requirement that we not 
support a single job that will be detrimental to the U.S. 
economy.
    We have interpreted that internally as quite stringent, so 
internally we have a guideline that we will not support a 
single investment overseas that will show a loss of a single 
U.S. job.
    So therefore any U.S. companies that are shutting down 
their operations here and opening up overseas, if they come to 
OPIC for their opening up overseas and we look at the record 
and find that their overseas operation is a cause for their 
shutting down jobs here, we will not extend any assistance.
    Mr. Menendez. And last, I hear this issue and although I 
think it is a much smaller segment that raises this issue, I 
hope you can respond to it as that--the argument that OPIC's 
partnership with the private sector interferes with the 
functioning of the markets.
    Mr. Munoz. This is a good myth to take on and that is 
because for the longest time, our U.S. Government and private 
sector have boasted that the best way to conduct business, 
especially in transition times, is for a partnership to take 
place, a partnership between the U.S. Government and the 
private sector.
    There is no way right now that the private sector, on its 
own, can go into many of the regions that the United States 
wants them to go into and there is no way that the United 
States, on its own, can go without the private sector.
    So the partnership between the U.S. and the private sector 
is a perfect model that is often boasted about by both sides as 
the right model for development and investments to take place. 
So I think if anything, this is something that the U.S. should 
be very proud of, that it is, in fact, partnering up with the 
private sector to accomplish its goals.
    Mr. Menendez. I want to thank you for your answers. I think 
it is helpful. I am very happy to be working with Mr. Manzullo 
on this reauthorization and I do want to see it hopefully pass 
this year. Thank you.
    Mr. Manzullo--[presiding]. Thank you very much. I am sorry 
I am late. I just wanted to bring out a couple of things and 
have you tell my favorite OPIC story.
    Mr. Munoz, your background is that of investment banker. Is 
that correct?
    Mr. Munoz. That is correct. Attorney, CPA and investment 
banking.
    Mr. Manzullo. And you have an extensive background in 
international trade law. So this is not a situation where we 
are dealing with somebody who is what I call a political 
appointment, somebody who has no expertise in a particular 
area.
    I want to thank you for lending us a couple of years out of 
your private life to devote to the public sector. I think that 
is commendable and I just wanted to publicly thank you for your 
public service.
    Mr. Munoz. Thank you.
    Mr. Manzullo. Would you tell us the story about Monique 
Matty?
    Mr. Munoz. About what? I am sorry.
    Mr. Manzullo. Monique Matty.
    Mr. Munoz. This is one of our favorite stories because it 
does--Congressman Menendez talked about small business--a 
perfect example of a small business that basically without OPIC 
would not have taken place.
    We had an investment for an African country that was in 
need of somebody to give some experience and holding the hand, 
if you will, for an investment that needed to take place, 
needed to believe in the investment to help finance the 
business.
    Monique Matty has testified before Congress on the 
important role that OPIC played for them in terms of financing 
the business, making it grow. She has been very successful, 
expanding the business.
    Mr. Manzullo. If I could jog your memory a little bit, I 
may not remember every story on it but I believe she is an 
American citizen and she was born in Liberia and her background 
was in telecommunications. She set up two facilities, one in--
maybe I should tell the story.
    Mr. Munoz. Yes.
    Mr. Manzullo. She set up two facilities, one in Ghana and 
the other one in Tanzania, where I think in the latter country 
she has about 400 employees that manufacture these portable 
telephone booths. It is all hooked up with a system of 
satellites and you see in these developing countries these 
telephone booths that are just set up there.
    What she did was I think she and one other person have an 
American company and went over there with an OPIC resource and 
if you want to talk about sustainable development that provided 
jobs for those people over there and she is not exporting to 
the United States.
    Mr. Munoz. Right.
    Mr. Manzullo. But the profits are coming to the United 
States because she is an American citizen. I am sure next time 
you come you will probably----
    Mr. Munoz. She brought not only the technology but she made 
it so easy. This was not a service that was meant for the well-
to-do but rather, because of her little calling card, if you 
will, the phone card that she had with her, made it very 
accessible to many of the citizens, and that is one reason why 
it has been made profitable.
    But this is a perfect example of where American ingenuity 
and entrepreneurship can be fostered overseas and that kind of 
know-how can be spread around.
    Mr. Manzullo. And that cost the U.S. taxpayers nothing.
    Mr. Munoz. Nothing.
    Mr. Manzullo. She paid the premium on that insurance and 
talk about helping people in that continent that really needs 
some jobs--she did it.
    Mr. Munoz. Congressman, and if someone were to say, ``Well, 
why don't you just let the market work for itself? '' Because 
the market would have not functioned there. That is that 
Monique would not have had someone to partner up with--not the 
international banks, not anybody else in the private sector, 
because of many of the unknowns.
    We should realize that the U.S. Government has, because of 
our embassies and our long relationships and special 
relationships with many of these governments, that we have the 
proper information and we have the ability and resources to 
team up with a Monique and let that business transaction occur.
    If we did not partner up with Monique or many of the other 
private sector entrepreneurs and businesses, many of these 
businesses would not take place. OPIC, in the earlier part of 
its history, was asked whether or not we have additionality, 
whether we do make a difference for a project, whether it will 
take place or not.
    In many cases it is a very difficult question to answer but 
there is much anecdotal evidence, Monique being one of them, 
that without OPIC, that business investment would not have 
taken place.
    Mr. Manzullo. I appreciate you telling the story, with a 
little bit of my help. It is a great story. She is a great 
lady.
    Mr. Delahunt.
    Mr. Delahunt. Thank you, Mr. Chairman. Thank you for the 
story.
    Did I hear you say Senator Stevenson, Adlai Stevenson?
    Mr. Munoz. Yes, sir.
    Mr. Delahunt. Did you work for Senator Stevenson? You 
certainly don't----
    Mr. Munoz. We worked together.
    Mr. Delahunt. You worked together?
    Mr. Munoz. Oh, yes. I am 48.
    Mr. Delahunt. That was a very good question. You do not 
look old enough to have worked with Senator Stevenson. That was 
the point. It was an inverse compliment, Mr. Munoz.
    Let me just say that I think you have a very easy sell 
here. The record speaks loudly. It speaks clearly.
    In terms of the corporate welfare issue, I noted that you 
are no longer on the green scissors list, so that, I would 
submit, is some sort of benchmark that you ought to be very 
pleased with. I think most likely more and more constituencies 
and individuals are recognizing the good work that you do.
    I was very pleased to hear your observation, your comment 
about internally not losing, putting at risk a single American 
job. And I know on a net basis, you generate American 
employment opportunities.
    Also in some of the papers that you have submitted here you 
talk about respecting workers' rights and environmental 
standards. Do you have a mechanism in place? Do you conduct 
audits? How do you ensure that, in fact, you are realizing that 
goal? Because that is very important to me and to my part of 
the country.
    Mr. Munoz. It is and we understand that the reason for the 
bipartisan support is because our assistance is balanced. That 
is we do not just help a U.S. business that is looking at 
purely the economics without also having to look at the 
international standards for environmental protection, as well 
as worker rights and human rights.
    We have, because it is a statutory mandate that we look 
toward that sector of the investment, we have in our office a 
department that reviews all programs for compliance with the 
environmental guidelines that have been put out by the World 
Bank. We also review the worker rights impact of the project 
and the country's history with that, and also the State 
Department's designation for human rights.
    Mr. Delahunt. Do you generate reports that are circulated 
in the public domain?
    Mr. Munoz. Yes, sir. I believe that we supply a report 
annually to the Congress on that.
    Mr. Delahunt. I see one of your staff nodding 
affirmatively. I would appreciate receiving that because again 
that is important to my district.
    Mr. Munoz. There are two other levels of oversight that are 
helpful here. One is our board of directors. We are an 
independent agency that reports directly to the board of 
directors. The board of directors has, by statute, a 
representative from the bargaining unit, from labor, as well as 
the Department of Labor. And we have representatives from small 
business. We have representatives from a variety of sectors 
that oversee our operations.
    And then last, we do monitor projects after they have been, 
on a sampling basis, after they have been approved by OPIC.
    Mr. Delahunt. That is very important. And let me also just 
echo the sentiments expressed by Mr. Menendez in terms of I am 
really enthused to hear the focus is on small businesses 
because for many of us, small business in terms of our economy 
is where it is at. And again traditionally and historically, 
small businesses add to the community more than just simply the 
bottom line.
    One more question, Mr. Manzullo?
    Mr. Manzullo. I thought maybe Mr. Sherman would have a 
question. If Mr. Sanford does not have them, we could finish 
up, if that is OK with you.
    Mr. Delahunt. Whatever you say, Mr. Manzullo. I just had 
one more question.
    Mr. Manzullo. Just make it short.
    Mr. Delahunt. I will make it short.
    You know, I noted that one of your projects that you funded 
was the flour mill in Haiti.
    Mr. Munoz. Yes.
    Mr. Delahunt. Could you give me a very brief and concise 
update on the status of that particular project?
    Mr. Munoz. Well, it is still moving forward. This is one of 
the projects that I went to visit myself. It is the only flour 
mill in Haiti. It used to be operated by the government. It 
basically went defunct. It sat there.
    Mr. Delahunt. I am familiar with the history of it.
    Mr. Munoz. It is still moving forward, Congressman.
    Mr. Delahunt. Are you satisfied with it?
    Mr. Munoz. Very satisfied with it.
    Mr. Delahunt. Thank you.
    I yield back, Mr. Manzullo.
    Mr. Manzullo. Mr. Sherman.
    Mr. Sherman. Thank you.
    If OPIC just made a profit for the Federal Government, it 
would be enough. If OPIC just represented the fact that we do 
not believe in unilateral disarmament in the economic contest 
with our trading partners in Europe and Japan but we wanted our 
companies to be able to compete where their companies are 
getting far more in the way of government help, that would be 
enough. And if it was just the help for development cognizant 
of human rights, workers' rights and the environment, that 
would be enough. So I would think that I should be allowed by 
the House to vote three times to reauthorize OPIC.
    But the real question before us is Mr. Munoz's supposed age 
and I am here to vouch for that because we did go to the same 
law school and he was ahead of me. So we will be asking which 
version of Rogaine he uses.
    [Laughter.]
    Mr. Manzullo. That company got an OPIC guarantee.
    [Laughter.]
    Mr. Sherman. And finally I would point out that when U.S. 
companies do business abroad, they face a greater risk than 
their competitors in Germany and Japan because they are a 
politically charged symbol. Some demagogue may want to 
nationalize all of the American assets. It has happened before 
and it is more likely perhaps to happen than--I cannot imagine 
somebody demagoging the issue and saying, ``And that is why we 
have to nationalize all the Norwegian-owned businesses in this 
country.'' But the United States is high profile. We intend to 
continue a high profile in foreign policy and I think our 
businesses need to be able to turn to a government organization 
to have some insurance against the effects of that, especially 
if we make money on it.
    So Mr. Munoz, I do not know if you have a response.
    Mr. Munoz. Congressman, I would like to report very happily 
that one reason why small business--you had a special comment 
on OPIC's application for small business, that you had asked us 
if we could streamline it and I am happy to report that we have 
and I think you have seen it. It is a very streamlined process 
and now small businesses are able to more quickly transact 
their business.
    Mr. Sherman. I know there are people here who are part of 
the OPIC international investing world. I have never seen a 
government agency quite this responsive. Within 2 weeks after I 
believe it was your last authorization hearings when I pointed 
out that if somebody was seeking a $1 or 2 million guarantee or 
even $10 or 20 million guarantee, they might not have the legal 
expertise or just the money to buy the legal expertise to fill 
out a form that is applicable to a billion-dollar project.
    You folks provided--not only was it a two-page form but as 
I recall, it requires reviewed but not audited financial 
statements. So it is not just two-fifths the length of the old 
form but I am sure it is well below 40 percent of the cost of 
filling out the old form.
    Mr. Munoz. We are grateful for you, Congressman, as well as 
this whole Committee. I think I have heard one thing 
consistently from all Committee Members and that is that small 
business should be a priority and I am happy to say it is one 
of the top four priorities that I have identified.
    I would like to, for the record, say that one of the 
individuals at OPIC who is taking the most lead in this thing 
is the executive vice president, Kirk Robertson, who is right 
behind me here. He has seen to it that 1999 is the year of 
small business at OPIC.
    Mrs. Ros-Lehtinen--[presiding.] Thank you. Thank you so 
much, Mr. Munoz.
    We will hear from our second panel, the private panel, when 
we come back from these two votes and the Subcommittee is just 
suspended for a few moments.
    [Recess.]
    Mrs. Ros-Lehtinen. The Committee will be reconvened. We 
thank the private panelists for being here today and I would 
like to introduce you and then you can make your opening 
statements and we will be glad to put all of your remarks as 
part of the official record.
    I will start with Mr. John Hardy, Jr., who joined Enron 
International as vice president for project finance in 1997. 
His focus in that capacity is on international financing and 
project development through Washington-based resources. Prior 
to joining Enron, Mr. Hardy was director of corporate 
development and finance at Brown & Root, an international 
engineering and construction company headquartered in Houston, 
Texas. Prior to his work for Brown & Root, Mr. Hardy held 
several positions with the Agency for International 
Development.
    Next will be Mr. Willard Workman, who has testified in our 
Subcommittee before. He is currently vice president of the 
International Division of the U.S. Chamber of Commerce, 
responsible for the formulation and implementation of the 
Chamber's policy position on international economic and trade 
issues.
    He also serves as vice president of the Center for 
International Private Enterprise and Mr. Workman joined the 
U.S. Chamber in 1988 as deputy director for policy and programs 
in its International Division.
    Before joining the Chamber, he was the special negotiator 
for international trade controls at the U.S. Department of 
State and prior to that position, he served as director of 
strategic planning and policy at the Bureau of Export 
Administration in the U.S. Department of Commerce. And we 
welcome Mr. Workman to our Subcommittee.
    Mr. James Sheehan is currently director of international 
environmental policy at the Competitive Enterprise Institute. 
At CEA he specializes in policies concerning international 
environmental regulation, international financial institutions 
and world trade.
    He is the author of ``Global Greens: Inside the 
International Environmental Establishment,'' a book dealing 
with international environmental advocacy groups. His writings 
have appeared in various leading publications and he has been 
featured as a commentator on various television programs, 
speaking on issues of international environmental policy. Thank 
you, Mr. Sheehan.
    Next is Scott Fischer, who is the vice president of 
Citicorp Latin America North Division and that is based in my 
home town of Miami, where he is responsible for the bank's 
capital markets and corporate finance businesses. In this 
capacity he has been involved in transactions across the 
regions for both public and private sector clients, including 
debt fund-raising, privatizations, mergers and acquisitions and 
private equity.
    Mr. Fischer spent over 9 years with Chase Manhattan as 
corporate finance head for Spain and a senior transactor for 
Chase Investment Bank Latin America and as relationship 
manager. So we welcome Mr. Fischer here with us.
    Thank you, Mr. Hardy, if you could start.

 STATEMENT OF A PANEL CONSISTING OF JOHN HARDY, VICE PRESIDENT 
            OF PROJECT FINANCE, ENRON INTERNATIONAL

    Mr. Hardy. Thank you, Madam Chairwoman. I appreciate the 
opportunity to speak to you today in support of OPIC. I am also 
pleased to appear at this hearing on behalf of the Coalition 
for Employment through Exports and the International Energy 
Development Council and the National Foreign Trade Council, 
which together represent a wide array of businesses, both large 
and small, and in the full spectrum of industry sectors. Each 
of these organizations and their Members view OPIC as a 
critical tool in promoting U.S. competitiveness.
    OPIC supports the export of U.S. goods and services in 
markets throughout the emerging world and through those goods 
and services, the jobs of U.S. workers. Accordingly, we 
strongly support a 4-year reauthorization of OPIC.
    What I would like to do is to give you a perspective from 
the field and make three points about OPIC: first, that OPIC 
financing is essential to U.S. sourcing of goods and services 
in major projects internationally; second, that OPIC has an 
essential role as a catalyst in attracting commercial bank 
financing to support these international projects; and third, 
that OPIC is not corporate welfare.
    With regard to the first issue, a big part of what OPIC is 
doing today is providing finance and insurance for large 
infrastructure projects in developing countries. This is a huge 
market--the World Bank has estimated it in excess of $200 
billion per year--in energy, telecommunications, water and 
transport.
    But the market is extremely competitive. In the energy 
sector, essentially all of our export competitors produce the 
equipment for electric power plants and also have state-of-the-
art design engineering services. The same is also true in the 
other sectors.
    So the critical issue is in sourcing of such equipment and 
services, whether it comes out of the United States, whether it 
comes from Japan or from the European countries depends largely 
on the availability and terms of financing and the importance 
of OPIC is that OPIC makes available its financing to enable 
U.S. sponsors to source U.S. goods and services.
    This is fundamentally a competitiveness issue. Each of the 
developed countries has one or more programs in place to 
provide precisely the same sorts of services in the exporter 
investment-related finance as OPIC. Some 40 industrialized 
countries have programs like OPIC and some 80 countries have 
programs like Eximbank.
    If programs like OPIC were not available, we as sponsors of 
these projects would have no choice but to move our sourcing to 
other countries where financing is available. And indeed in my 
testimony I have provided an actual and immediate example of 
that in the context of India.
    The availability of OPIC financing also has a critical 
impact on small, as well as large, U.S. manufacturers. Sourcing 
for a major infrastructure project has a tremendous ripple 
effect through the manufacturing sector because a great many of 
the larger suppliers in turn out-source components to smaller 
supplies, so there are many small companies involved that 
ultimately end up producing elements of goods that go into 
these major projects. If OPIC financing is not available, the 
support for these smaller suppliers is lost.
    In summary, since it was created, OPIC estimates that its 
programs have fostered 237,000 jobs and in excess of $58 
billion in exports.
    As to the second point, OPIC's role is as a catalyst. 
Private banks and insurers cannot themselves provide the 
necessary loans and insurance to support these projects. OPIC 
has a catalytic role to draw commercial banks into supporting 
these projects in more difficult markets.
    Asking why? It is because in transition markets, the key 
risks are risks of adverse government action by host countries 
where the projects are being built. Only OPIC or Eximbank, as 
government agencies, can bring governmental action to bear, and 
this is the key tool that separates OPIC and really makes it 
unique, in terms of being able to bring private lenders and 
insurers into the marketplace.
    But once OPIC comes in for a piece of the financing or 
insurance, then private lenders and insurers will be able and 
willing to come into the deal for the remainder, the bulk of 
the financing. And appropriately, OPIC usually charges a higher 
price and thus receives a higher margin for the portion of 
financing that it provides than the private lenders charge for 
the portion they provide.
    Let me spend just a moment on the corporate welfare issue. 
OPIC's programs are fee for service at market-equivalent rates. 
We need to look at the facts here because there has been an 
awful lot of rhetoric around this issue.
    First, OPIC imposes charges for all aspects of the 
financing and insurance it provides to its customers. Second, 
OPIC's charges are usually higher than what private lenders do 
charge. And again in my testimony I have provided several 
examples of that.
    OPIC's terms are also more onerous than private lenders' 
terms, as OPIC requires not only the projects be financially 
and technically sound but also that they satisfy numerous 
policy requirements which private lenders and many foreign 
government finance programs do not impose.
    Last and perhaps most importantly, OPIC charges fully cover 
both OPIC's costs and OPIC's risks. OPIC's revenues have 
exceeded operating costs throughout OPIC's 30-year existence 
and OPIC's revenues have not only covered all of the risks that 
have materialized into problems but have accumulated $3.3 
billion in retained earnings, now held by OPIC in Treasury 
securities. I think the fundamental lesson here is that OPIC is 
managing its programs in a very prudent manner.
    In conclusion, OPIC is a real success story. In performing 
a catalytic role, it is making a profit, providing financing 
and insurance that private banks and insurers cannot provide 
alone, and it is generating American exports and jobs. OPIC is 
making it feasible for companies like Enron to keep the 
sourcing for their international projects here at home in the 
United States the winners are U.S. workers.
    Accordingly, we urge your full support for 4-year 
reauthorization of OPIC. Thank you very much for the 
opportunity to testify.
    [The prepared statement of Mr. Hardy appears in the 
appendix.]
    Mrs. Ros-Lehtinen. Thank you, Mr. Hardy.
    Mr. Workman.

STATEMENT OF WILLARD A. WORKMAN, VICE PRESIDENT, INTERNATIONAL 
               DIVISION, U.S. CHAMBER OF COMMERCE

    Mr. Workman. Thank you, Madam Chair. My name is Willard 
Workman. I am the VP International from the U.S. Chamber of 
Commerce. We represent about 3 million American companies here 
and abroad. We have accredited American Chambers overseas. We 
have 87 of those in 77 countries, the most recent one being in 
Lebanon, which was accredited 2 weeks ago.
    We are pleased to be here. The bulk of our membership are 
small business. Ninety-six percent of our membership are 
companies that employ less than 100 workers. Sixty percent of 
our membership are companies that employ less than nine 
workers.
    You have my statement. We support 4-year reauthorization 
for OPIC. And what I thought might be valuable for the 
Subcommittee would be if I could sort of put this in a small 
business context. I just want to give you some statistics, and 
I will be glad to provide these for the record.
    What is the business opportunity out there, looking into 
the 21st century? OECD expects that within the next 20 years, 
world GDP will double. That is a very conservative scenario. In 
the last 10 years, the percent of U.S. GDP to trade has 
doubled, so we can reasonably project that into the next 10 to 
20 years.
    Over the next 20 years emerging markets, the kind that OPIC 
operates in, which have currently populations 10 times the U.S. 
population, will account for 40 percent of all U.S. export 
opportunities.
    Putting it on a more mundane level in terms of the business 
opportunities out there, only 50 percent of the world's people 
have ever made a phone call. Only 50 percent of the world's 
people have daily access to electricity. Less than 11 percent 
of the people in the world have ever owned a car. So that is 
the market. That is what very competitive, world competitive 
American companies, especially small and mid-sized companies, 
are interested in.
    American small business. Currently, and these are census 
statistics, American small business, defined as less than 500 
employees, employ 53 percent of the American work force, 
account for 51 percent of the private sector output, account 
for 96 percent of export firms. There are about 113,000 
companies that are engaged in exporting and about 108,000 are 
small businesses. Their exports represent 30 percent of all 
American exports in 1998.
    So that is who they are currently. What are the trend 
lines? I can report this from a variety of sources. Where are 
small and mid-sized companies in the United States going in the 
global trading and investment environment?
    According to the Institute for International Economics, in 
1987 only one in 10 manufacturers with fewer than 100 workers 
exported. That is one in 10. Five years later, in 1992, it was 
one in five, so it doubled in 5 years.
    The share of small and mid-sized firms that get 10 percent 
or more of their sales from exports doubled between 1994 and 
1996. That is in only 3 years.
    In 1992 the Commerce Department 800 number to help small 
firms export received 39,000 telephone inquiries. In 1996 they 
received 72,000 inquiries.
    At the U.S. Chamber we get a lot of calls not only from our 
member companies but from American business in general. We have 
seen over the 11 years that I have been at the Chamber a 
quintupling of the number of inquiries, either phone or fax or 
now e-mail, that are coming into my division related to what 
are the opportunities to invest, to be an importer, to export 
or what have you.
    So clearly American small business has decided to go 
global. Activities in agencies and programs like the Overseas 
Private Investment Corporation are essential to that.
    I must commend Mr. Munoz on the efforts that he has not 
only proposed but actually implemented in terms of helping 
small business access the programs of OPIC. From our point of 
view, we have been trying to get a lot of government agencies 
to do more than just talk about helping small business and I 
have to commend President Munoz and OPIC for actually getting 
the job done. I think as the time goes by, it will be 
interesting this time next year to come back and see how their 
1999 OPIC for Small Business Program, statistically what kind 
of results that has yielded.
    So again to sum up, small business is going global. They 
need programs like OPIC. This is one of the silver bullet 
Federal programs where it costs the taxpayer nothing, it makes 
a profit for the taxpayer. It is accountable and it only has a 
bureaucracy of 200 employees. I think the only political danger 
in this whole situation is if the general American public found 
out that we had a program like that, they would insist that we 
replicate it across the Federal Government, and I am not sure 
that is possible.
    So I thank you for the opportunity to testify here.
    [The prepared statement of Mr. Workman appears in the 
appendix.]
    Mrs. Ros-Lehtinen. Thank you, Mr. Workman.
    Mr. Sheehan.

      STATEMENT OF JIM SHEEHAN, DIRECTOR OF INTERNATIONAL 
     ENVIRONMENTAL POLICY, COMPETITIVE ENTERPRISE INSTITUTE

    Mr. Sheehan. Thank you, Madam Chair, very much for inviting 
me and this opportunity to testify today. My name is James 
Sheehan. I am director of international environmental policy at 
the Competitive Enterprise Institute. We are a free market 
think-tank.
    It is fitting that we address this important subject today. 
It is the day before many taxpayers submit their tax forms and 
it is the taxpayers, after all, who are expected to finance 
programs like OPIC.
    My employer does not receive any benefits or subsidies from 
OPIC of any kind.
    OPIC is a Federal agency, as we know, that props up foreign 
investments of private corporations in developing countries. It 
offers subsidized political risk insurance and financing, 
guarding against losses in unstable markets. While private 
companies can make handsome profits using OPIC financing, the 
taxpayers actually bear the risk of any losses that would 
occur. With the Asian financial crisis and other currency 
debacles in Russia and Brazil, I think we have learned some 
important lessons about risk and what the conditions are like 
in the highest risk areas of the world.
    The Federal Government has exposed the taxpayer to these 
risks, in an unwarranted fashion, I believe. Currently OPIC's 
insurance contingent liability is $12 billion and its exposure 
under investment guarantees is around $6 billion. The two 
countries with the largest finance and insurance exposure are 
Russia and Brazil, where currently devaluations have caused 
economic havoc.
    OPIC's portfolio is backed by the full faith and credit of 
the U.S. Government. Should the multi-billion-dollar OPIC 
scheme prove to be as shaky as Federal Deposit Insurance was, 
it will need a costly bail-out. And I would hasten to note that 
many of the arguments we have heard today are very reminiscent 
of arguments that we heard before the S&L bail-out.
    The Asian financial crisis--I would like to say a few words 
about OPIC's involvement in some of the countries that are 
embroiled in that crisis.
    First of all, in Russia, the agency's exposure, as I 
mentioned before, in this reeling economy is a whopping $2 
billion. In Brazil OPIC exposure totals $1.9 billion. And OPIC 
concedes that fully half of its loans in Brazil will be 
materially impacted by the crisis. In Indonesia, the maximum 
contingent liability is $600 million.
    Now despite the recent turmoil in these markets, the agency 
claims it is still making a profit and it continues to rely on 
what I call clever accounting gimmicks to make that claim.
    To start, OPIC is a Government agency. It does not pay 
taxes like a normal insurer or a financial institution would. 
In addition, most of its income is derived from the U.S. 
Government. While the agency reported $139 million in net 
income for fiscal year 1998, $193 million in revenues consists 
of interest on U.S. Treasury securities. This is really a shall 
game. It is a loss for the government. It is a loss for 
taxpayers of $54 million, but OPIC insists that that is called 
a profit.
    Now Madam Chair, if this Congress would be so generous as 
to pay me $193 million in interest on Government securities, I 
will be happy to pay back next year only $139 million and we 
can all report that as a profit for the Government.
    The question of corporate welfare is an interesting one. 
Just a few words about that. OPIC aid recipients, to them, the 
value of OPIC subsidized foreign investment is no different 
than a welfare check. They are getting benefits they could not 
get on the private market. Many of the companies benefiting 
from this, some sitting at this table, are very familiar 
names--Citicorp, AT&T, Pepsi-Cola, to name a few. Even the 
billionaire financier George Soros is getting a helping hand 
from OPIC.
    The taxpayers' loss in this scheme is the politicians' 
gain. The Boston Globe reported last year that 27 American 
companies receiving OPIC aid have donated more than $2.3 
million to the Democratic National Committee and there are 
several examples of very wealthy individuals who were on those 
infamous foreign trade missions with the late Commerce 
Secretary Ron Brown. If a Republican were in the White House, 
the story would be much the same. OPIC is a scheme for 
connected businessmen, not small businessmen, as I think some 
of the prior testimony has conceded.
    Now let us talk about some of OPIC's negative economic 
impacts. OPIC's defenders say that it promotes economics 
stability in developing countries. In fact, private capital 
flows that are not subsidized at all to emerging markets are 
plentiful. We had $150 billion in private capital flows in 
1998.
    OPIC's entire portfolio is a small fraction of what the 
private sector invests on its own abroad. If anything, OPIC 
only makes the financial crises worse in places like Russia and 
Indonesia because it is diverting valuable resources from more 
viable projects into unstable countries.
    In contrast to some of the claims we have heard, others 
argue that OPIC has a net negative impact on American jobs. In 
1997, for example, OPIC issued a $29 million insurance policy 
to Levi Strauss for a plant in Turkey. That same year Levi 
Strauss workers applied for trade adjustment assistance from 
the U.S. Labor Department--6,400 workers--because their jobs 
were displaced by cheap imports.
    I am not going to rehash the arguments on small business. I 
think most of the witnesses and the president of OPIC today 
have conceded that OPIC is not really serving small businesses 
and they are increasing their efforts to do so. More than 90 
percent of OPIC projects are for large businesses.
    OPIC also claims to be creating innovative financial 
products for investors, these 26 investment funds abroad that 
it has created and capitalized. But despite OPIC's claims, 
publicly guaranteed investment funds are not desperately needed 
by the private sector. In fact, OPIC's activities duplicate the 
activities of many existing mutual funds.
    In Asia, for example, OPIC's South Asia Capital Fund 
competes with the T. Rowe Rice New Asia Fund. In Africa, the 
OPIC-backed Africa Growth Fund competes with the Morgan Stanley 
Africa Investment Fund. And plenty of private firms have tried 
their hand in the Russian casino. Morgan Stanley has a Russia 
and New Europe Fund to bet against OPIC's Russia Partners Fund.
    Along with foreign policy considerations, OPIC is forced to 
consider a lot of nonfinancial factors, including environment 
and labor standards, and we have heard some talk about these. 
While these political niceties may score points with the 
environmental movement or the Vice President's office, OPIC has 
really not made substantial changes to its operations.
    John Sohn of Friends of the Earth, for example, has written 
that OPIC harms valuable ecosystems and impacts local 
populations and even though its environmental standards are 
practically brand new, it has already tried to violate them. It 
has a project that is under consideration in the Bolivia and 
Brazil rain forest right now that has green NGO's in a tizzy.
    Export-Impact Bank has similar standards that it has tried 
to ignore and that is probably an example of what happens when 
a government agency has billions of dollars in portfolio and it 
is a very political process and some of the standards and rules 
can get bent.
    Overall, I think the experience of Freeport McMoran in 
Indonesia several years ago is indicative of the future of 
business with OPIC. These political strings that are attached 
to OPIC subsidies, like environment and labor standards, caused 
Freeport McMoran to lose its insurance in 1995, I believe is 
the year.
    Now companies like Enron and Shall are facing a similar 
challenge in the Bolivia-Brazil Pipeline and I think that this 
is an increased trend for the future that business will have to 
consider and I think it is going to lead them to the 
unfortunate conclusion that OPIC is not truly beneficial to 
their interests.
    If OPIC's claims have any basis in fact and the agency can 
be run without government support, then it should not be asking 
Congress for new authorizations. If OPIC can truly be made a 
profitable enterprise, I argue it should be spun off as a 
private corporation.
    Though OPIC might have to be sold off at a slight discount 
due to the riskiness of its portfolio, a privatization option 
is quite feasible. In 1997 a consortium of private insurers led 
by Export Insurance Company submitted a proposal to Congress to 
privatize $5 billion of OPIC's insurance operations. If private 
insurers are willing to undertake OPIC privatization, who is 
Congress to stand in the way? Government bureaucrats whose own 
money is not at risk are not as capable of picking winners and 
losers in the private marketplace.
    Keeping OPIC in business as a government corporation 
subjects private companies to unfair competition. They do not 
enjoy the full faith and credit guarantee that OPIC does. They 
do not have the deep pockets of the U.S. Treasury to cover 
their liabilities if things go wrong. If OPIC bureaucrats had 
any real expertise in foreign investment, they would be 
employed to do this work in the private sector.
    Foreign investment subsidies are inconsistent with the 
ideals of open trade that we so often preach to undeveloped 
nations and former Communist states. If OPIC were an agency of 
the European Union or of the Chinese Government, many 
legislators in this Congress would be calling for counteractive 
trade sanctions against that country.
    The time is ripe for Congress to set an example of real 
economic reform and to transfer OPIC from public to private 
hands. Madam Chair, thank you very much.
    Mrs. Ros-Lehtinen. Thank you, Mr. Sherman.
    Mr. Fischer.

STATEMENT OF SCOTT FISCHER, VICE PRESIDENT, LATIN AMERICA NORTH 
                       DIVISION, CITICORP

    Mr. Fischer. Madam Chair, Congressman, I am happy to be 
here today in support of OPIC's reauthorization. I would like 
to just briefly give you Citibank's perspective and my 
perspective as a market practitioner on some of the benefits of 
the recently announced OPIC-Citibank facility for the Caribbean 
and Central America.
    Essentially this facility increases Citibank's ability to 
act as a much-needed source of medium- and long-term capital in 
a region which has limited access to this type of loans, either 
from financial institutions or from the capital markets. Given 
the structure of the facility, the typical projects these loans 
will support will normally create significant direct and 
indirect employment, as well as improve infrastructure, such as 
power and telecommunications, which should have significant 
positive long-term and ripple effects on these economies.
    The strengthening of these economies should have a 
favorable impact in the United States, particularly in South 
Florida, where I live, which has significant trade and 
financial interaction with the Caribbean Basin; I also might 
add that where Citibank has a number of employees who deal with 
this particular region.
    My next point I want to preface by mentioning an example of 
some of the things that we are seeing coming from the recent 
announcement of the facility, specifically in South Florida. 
This is an example, I think, of how important the OPIC support 
can be.
    We were approached recently by a small South Florida 
company which builds children's furniture in Honduras and they 
bring it to the United States and sell it into major retailing 
chains, such as Toys R Us or Walmart. This company had some 
damage to its facilities from the hurricane. They are looking 
to term out some of their local debt, which tends to be very 
expensive, and also to build a new facility. This is a fairly 
small company by normal Citibank standards but we are looking 
at that transaction and I think if it does happen, it would be 
made possible by this OPIC facility.
    The next point I also wanted to preface by saying that as 
the major U.S. institution in the Central American Caribbean 
region, I think it is safe to say that we see more projects, 
more investment proposals than probably anyone else in that 
region. So I can also safely say that the specific support 
provided by OPIC in this facility is unique and that it is not 
generally available from private or market sources and it may 
well make the difference in many cases in investment decisions 
of companies looking to take advantage of the otherwise 
attractive investment climate of these countries.
    I think it is also important to note that the OPIC support 
does not represent a subsidy in this instance but has been 
structured as a risk-sharing exercise, which will allow 
Citibank to incrementally support the investment plans of our 
clients, many of which are U.S. multinationals doing business 
in the region. Thank you.
    Mrs. Ros-Lehtinen. Thank you so much. Thank you, gentlemen, 
for being here with us.
    We have heard some testimony this afternoon about OPIC 
diverting resources from projects and competing with privately 
financed ventures. Is this not counterproductive and doesn't it 
run counter to the objectives of OPIC?
    Mr. Sheehan. I would be happy to take that one.
    Mrs. Ros-Lehtinen. Somehow I figured that you would.
    Mr. Sheehan. It is part of OPIC's mandate, through foreign 
policy, to spur investment in areas that the private market is 
not willing to invest in. Some of these countries are simply 
too risky, but the White House or the Federal Government has 
decided it is a political decision that it would somehow be in 
our interest for there to be more economic activity in Russia 
or in Indonesia, so let us try to divert some of it there using 
these very favorable financing subsidies. And I do call them 
subsidies because they are achieved at rates that are below 
what the market would otherwise bear.
    Mrs. Ros-Lehtinen. Now Mr. Sheehan pointed out in his 
testimony the risky ventures, the economic climate not being 
very positive in Russia; he mentioned Brazil, Indonesia. What 
do the rest of you say about OPIC's ventures in those regions 
of the world and what should we say to taxpayers when they see 
the level of involvement that OPIC has in those regions?
    Mr. Workman. I will take a hit at that. First of all, it 
has been asserted that there has been diversion from the 
commercial sector by OPIC, and that is all it is--an assertion. 
I do not believe--I listened to President Munoz's testimony and 
I thought he was pretty straightforward on that subject. So it 
is an assertion; it is not proved. And in practice it has been 
my experience that it does not occur.
    In terms of operating in these new markets, these emerging 
markets, I think we are dealing with a new paradigm in global 
finance and in international trade. In 1982 when you had the 
peso crisis in Mexico and basically it rippled through the rest 
of Latin America, you had what was called the lost decade in 
Latin America. It took over 10 years for them to recover. In 
1995, when you had the peso crisis in Mexico, you had the lost 
18 months in terms of the economy turning around.
    Something similar has happened with Korea. Those countries 
that take the tough economic decisions, we are now looking at 
positive GDP growth projected for 1999 in South Korea, whereas 
16 months ago everybody said South Korea was in the tank.
    First, things happen much faster now. I think probably it's 
because you can have a trillion dollars go around the world in 
a nanosecond now, where it was a little more difficult in 1985. 
So I think, that has changed.
    Second, do we really want to take ourselves out of the 
game? Because no one else is taking themselves out of the game. 
At least 40 other industrialized countries have similar 
programs.
    Now we at the Chamber, I would agree with my right to my 
right that we do not like subsidies. We have never liked 
subsidies and it has always been one of these things where you 
have to grit your teeth when you come before the Congress and 
say, ``Well, we need an Eximbank and we need an OPIC and in a 
perfect world it would be nice if we did not have government 
subsidies.''
    But then our companies have to deal with the real-world 
reality that there is competitive subsidization going on by 
other governments--our friends, who are also our biggest 
competitors--the Europeans and the Japanese and the Koreans.
    So I think yes, we have to be there. That is what we spent 
the past 15 years restructuring American business to be very 
competitive, to go out and win in the global market, and I say 
let's have at it.
    Mrs. Ros-Lehtinen. Thank you.
    Yes, Mr. Hardy.
    Mr. Hardy. If I could add to that, let us take Brazil as an 
example. I think a situation like Brazil really underscores the 
valuable role that an OPIC can and is playing.
    Brazil is far and away the largest economy in South 
America. Brazil, over the last several years, has undergone a 
dramatic, almost revolutionary transformation in its economy. 
It has moved toward privatization, stripped away layers of 
bureaucracy. It has become much more efficient.
    But in any sort of transformation like this, it is at a 
point now where it is sort of in the midst of this reform that 
is going on. It has gotten caught up in difficulties from Asia 
and from Russia. And indeed, as we know, it has gone through 
some very difficult times.
    The commercial banks, the financial community were red hot 
on Brazil and had been over the last several years, but became 
increasingly nervous and have backed away and are that way at 
this point. If we remain totally dependent upon the ups and 
downs of the marketplace in terms of the financing, you end up 
with a lack of a coherent policy and an inability to provide 
the sort of level of support that a Brazil needs.
    There are extraordinary opportunities in Brazil. We have 
moved fairly aggressively in the energy sector in both 
electricity and the gas markets, which have been totally 
transformed. We are facing very stiff European competition, 
particularly from the Spanish but also from elsewhere in Latin 
America.
    As Mr. Workman has said, there is financing that is 
available from those countries and for us to turn around and 
walk away from Brazil at this critical point, when the market 
is being shaped and market share is being determined would be, 
in our mind, a terrible disaster over the long term.
    I think everybody is entirely comfortable with the 
direction that Brazil is going in and looking at 5 years out 
and 10 years out, you are looking at a market that already is 
but even increasingly so is going to be extraordinarily 
important to the United States and to the U.S. export 
community.
    It is precisely this situation where OPIC can step in and 
signal to the marketplace a commitment on the part of the U.S. 
Government in terms of making stable, long-tern investments.
    Let us remember that sponsoring companies like Enron and 
like others, we are putting hundreds of millions of dollars of 
equity into these projects and that equity is the first 
financing that is tapped into in the event that there are any 
difficulties.
    So we are the ones who are significantly at risk. But OPIC 
support enables other banks to come in, in terms of the long-
term sort of lending that is necessary for these projects, and 
has a very stabilizing sort of influence.
    For us, and I think for the business community in general, 
it is a very pragmatic, a very positive sort of step that 
OPIC's participation plays and ultimately in terms of U.S. 
jobs.
    Mrs. Ros-Lehtinen. Thank you, Mr. Hardy.
    I have three more questions for you but in the interest of 
time, because we do have to clear the Subcommittee to go to the 
Full Committee for the continuation of our mark-up, I would 
like to yield to my colleagues. Mr. Delahunt.
    Mr. Delahunt. Thank you, Madam Chairperson. I will stay 
after the formal hearing because this is fascinating and, as 
you know, I am new to the Committee, as well as to the 
Subcommittee, so this is very informative and educational and I 
appreciate everyone coming and providing this testimony.
    The chair said something earlier about these economies and 
democracy now in Latin America and clearly I think we all 
applaud the fact that there has been electoral reform and that 
we see people and suffrage occurring in Latin American 
societies, but I dare say we are a long way from democracies 
that are stable because of the history of Latin America. And my 
sense is that OPIC here serves a real foreign policy imperative 
in terms of seeing that these nations secure some sort of 
economic justice so that they continue to mature as 
democracies. In my own sense, this is what is so intriguing 
about this particular program.
    I think I will direct these questions to Mr. Workman or Mr. 
Hardy. Are either one of you aware, and I meant to ask this 
earlier to the president, Mr. Munoz, but he has already gone; 
is there a relationship between OPIC and the SBA, given what we 
are hearing about clearly from the members in terms of outreach 
to the small business community, to see that this program is 
focussed and is available and at least the small business 
community is aware of its existence, because oftentimes the 
reality is that it is not.
    And I did ask him one question on the way out as he was 
leaving, and I would be interested in your response, in terms 
of the limitations of the program. I think it was Congressman 
Sherman earlier who enumerated three reasons to vote for it and 
I think clearly this Subcommittee is very positive about the 
program, but in my question to the president, I said to him, 
``What are your limitations?'' and he needs more resources.
    In other words, the demand and the capacity of OPIC to 
provide the kind of services I think that at least there 
appears to be a consensus and support of is not there.
    Comments. Mr. Hardy, Mr. Workman?
    Mr. Workman. On the relationship between OPIC and SBA, yes, 
they do cooperate. We cooperate with OPIC in trying to get the 
word out to the American small business community.
    Mr. Delahunt. Is the SBA doing the job?
    Mr. Workman. It is my understanding yes. There is always 
room for improvement. There is room for improvement, quite 
frankly, in the U.S. Chamber's effort to reach out to American 
small business, and that is an on-going sort of communications 
problem.
    I think in terms of the way they have designed the small 
business outreach program, it is more than just--when I used to 
write regulations and we got the word down from on high to 
reduce the number of pages, we just went to a smaller font and 
wider margins.
    Mr. Delahunt. I did that when I was writing papers in 
college and in law school.
    Mr. Workman. But in this case I can testify because we have 
heard from the small business members of the Chamber that yes, 
this is really a streamlining exercise.
    I think it is of recent enough vintage that, as I mentioned 
earlier, we think it is something that this Subcommittee should 
take another look at a year from now but clearly in design, it 
eliminates a lot of paperwork for small companies, which is 
their biggest complaint. The threshold, in terms of their 
eligibility, has gone from $2 million, I think, to a quarter of 
a million, which is more in line with the kinds of average 
contracts and investments that they are thinking about making. 
So this is beyond just changing the font size. This is 
substance.
    On the limitations of OPIC, I can tell you that with OPIC, 
with Eximbank, with the Trade Development Agency, with the 
programs that we traditionally have to support American 
business overseas, we do not come close to doing, by any 
measure--by per capita, by per billion dollars of exports or 
anything--we do not come close to what our G-7 partners are 
doing to support theirs. I mean Canada, with a population of 25 
million people----
    Mr. Delahunt. You will agree with the statement that the 
demand far exceeds the ability of these various institutions to 
respond.
    Mr. Workman. Absolutely. And I will let John weigh in.
    Mr. Delahunt. I think that is something that this 
Subcommittee should consider in its deliberations on 
reauthorization. Mr. Hardy?
    Mr. Hardy. I don't have any direct knowledge in terms of 
the relationship to the SBA, but I do want to emphasize the 
fact that even in the context of the large projects in which we 
are involved, the infrastructure projects and in the 
telecommunications area, there are a myriad of small firms that 
are indirectly involved.
    And it is important for us to recognize, again to go back 
to the issue that if the ability to source out of the United 
States is lost because financing is not available, because OPIC 
is not present or not available, whether it is because of 
sanctions or because of other policy issues there may be or 
because of decisions that have been made regarding 
reauthorization, then it is very clearly the end result that 
sourcing will move off-shore and that it will not be so much 
the Enrons or the larger companies but it is going to be the 
small manufacturing facilities that do not have the ability to 
move off-shore.
    I mean G.E. has facilities all over the world. The smaller 
manufacturing facilities do not and do not have the ability to 
move. So, in effect, they are the ones who ultimately are hurt 
far and away the most because they lack that flexibility and I 
think it is very important for us to recognize that whether it 
is power plants or pipelines or telecommunications facilities, 
that so much of that work and so much of that production goes 
back to small businesses throughout the country.
    With regard to the limitations of OPIC, I concur that in 
significant part, it is a resource issue. This is absolutely an 
extraordinary time in the emerging markets because----
    Mr. Delahunt. My concern is that we are missing 
opportunities by not having adequate resources available to the 
business community.
    Mr. Hardy. Absolutely, and it runs across the interface 
between what the business can do in terms of----
    Mr. Delahunt. I do not want to take any further time except 
one additional question.
    Mr. Sheehan, you said something about a politician's dream?
    Mr. Sheehan. Politician's gain, sorry.
    Mr. Delahunt. Gain?
    Mr. Sheehan. Yes.
    Mr. Delahunt. I mean do you really believe that, that 
anybody on this panel would cast a vote to support a program 
predicated on a trip?
    Mr. Sheehan. I am not going to speak for anyone who is in 
the room, sir, but I do know that many of the companies that 
receive benefits from OPIC also turn around and make 
contributions to the Democratic Party or the Republican Party 
or whatever they think they need to, and that seems to be 
business as usual in Washington. It is not just OPIC. There is 
a problem across the board with pork barrel spending.
    Mr. Delahunt. Well, that might be something to do with 
campaign finance but I am sure, and I think I speak for every 
Member here, both Republican and Democratic, that clearly any 
decisions that are made are far removed from the invitation to 
a trip to some foreign nation. I mean believe me, Mr. Sheehan, 
let me disabuse you of that particular thought.
    And I think that unfortunately, you have made the statement 
and I would submit to you that it diminishes the credibility of 
the rest of your statement, at least as far as this Member is 
concerned.
    Mrs. Ros-Lehtinen. Thank you.
    Mr. Cooksey.
    Mr. Cooksey. Just to add to the comment, I have traveled a 
lot more internationally before I got my new day job in 
Congress. I have only done one trip. There may be some people 
who would vote that way but I took a cut in pay to take this 
job and my wife is still unhappy. So I resent these kinds of 
statements, too.
    I am very familiar with Enron. Enron is a company that had 
a lot of vision and took a lot of risks 20 years ago when you 
were formed and you have done a good job internationally and 
nationally. I know you have brought a lot of production to my 
area because we have a lot of oil and gas production in my 
state and some in my area.
    But the independent producers had been suffering and they 
were particularly suffering, felt like they were really paying 
a price 2 weeks ago or 2 months ago when the price of oil was 
down and I had a couple of them who reminded me that 20 years 
ago when the DOE or the Administration that was in place 20 
years ago or Congress--surely Congress would not have made any 
dumb mistakes, but when they put the windfall profits taxes on 
these people, that some of them felt like they should have that 
returned now because a lot of them are going out of business.
    My question is what can be done to help someone that 
belongs to the IPA, that is not as large as you are, not as 
successful as you are, does not have the resources? What can be 
done to help them participate in this world economy that we are 
in?
    Mr. Hardy. I am afraid that your question pulls me sort of 
out of my area of focus. Enron is a company that has remade 
itself in a number of evolutions, as the market has changed, as 
the market has moved. As you know, it started with the merger 
of two gas pipeline companies in the mid-1980's, so it is a 
relatively new company and it is a long way, where we are now 
from where we were then.
    I think that there has been, in my own view and I am 
relatively new to the company, tremendous vision, as you say, 
in terms of getting from where we started to where we are now.
    There is no question it has been an extraordinarily 
difficult time for the energy community. We have focussed in 
the areas where we think that there are tremendous future 
opportunities. We are heavily involved in infrastructure 
throughout the emerging markets and this really underscores 
again the long-term perspective. This has been a very difficult 
time, as I said, in much of the industry, near-term. We do not 
believe it is going to stay that way.
    We think that the energy industry worldwide, but 
particularly in the emerging markets, is going to be totally 
transformed into the next decade, 15 to 20 years. I think that 
this company has moved aggressively to try and shape that 
vision and become a significant player in that market. And 
frankly, I am grateful to be a part of it.
    It means taking a lot of risks. It means coming to grips 
with the political uncertainties in terms of operating in a lot 
of difficult environments, and that is one reason why we look 
to OPIC.
    We are certainly prepared to place at risk our equity 
funding in projects, and that is very significant--hundreds of 
millions of dollars. We are certainly prepared to look at the 
risks on the commercial and the economic side.
    The difficulty is, as has been mentioned before, the 
difficulty of looking 20 years out and determining what is 
going to happen in Indonesia or what is going to happen in 
Bolivia, and that is where a partnership between the government 
and the business community has indeed, with OPIC, has worked 
extraordinarily well.
    I think to come back to the sort of baseline here, OPIC has 
been an extraordinarily successful agency in working with the 
business community?
    Mr. Cooksey. Let us say you are going to do a $100 million 
project in Bangladesh. What percentage of that funding would be 
likely to come from OPIC, on average, that would not be your 
money at risk or your stockholders' money at risk?
    Mr. Hardy. Our equity in a project is generally 30 to 35 
percent, right in that area, so you are talking about 30 to 35 
percent equity. OPIC has certain limitations in terms of the 
percentage. It cannot provide any more than half of the equity, 
half of the debt that would be provided, so there are 
limitations.
    Its value is not in terms of providing the bulk of the debt 
financing to the project. It is really in providing that sort 
of participation, really a slice of participation that enables 
and attracts the private financing and commercial bank 
community to come in and participate because it has that 
ability, in the event that the Bangladesh Government, for 
whatever reason, takes steps after this project is up and 
running, to undermine the economics of the project, to be able 
to sit down and to, on a government to government basis, work 
that out.
    And, as a consequence, it has an extraordinarily good track 
record.
    Mr. Cooksey. That is probably more important to the 
funding, I guess, almost.
    Mr. Hardy. Exactly. What it does, it really prevents the 
Government from taking those sorts of steps because it is 
taking those sorts of steps against the U.S. Government.
    Mr. Cooksey. Right. We need to get that message out 
probably a lot more so because when this comes up, this bill 
comes up here every year, as is the case with most all the 
legislation, there is a certain amount of misinformation, 
disinformation and demagoguery. I know that comes as a surprise 
to you that any politicians would do that but it does occur. I 
have noticed that. Thank you.
    Mrs. Ros-Lehtinen. Well, thank you so much. I thank all of 
our panelists for being here and the audience, as well. The 
Subcommittee is now adjourned.
    [Whereupon, at 4:08 p.m. the Subcommittee was adjourned.]
      
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                            A P P E N D I X

                             April 14, 1999

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