Dollar diplomacy and new markets

Money, even moreso than math or music, is truly the universal language. And a U.S. government agency is offering cash to plastics processors, among others, hoping greenbacks translate into new markets and opportunities.

When it comes to the propagation of free markets, the U.S. government is generally more than willing to put its money where its mouth is. In the last 32 years, through its Overseas Private Investment Corp. (OPIC), it has assisted business expansions in 150 countries to the tune of $145 billion in financing and political risk insurance.

Created as an offshoot of the Marshall Plan, OPIC officially came into existence in 1971 as a self-sustaining development agency that evaluates U.S. businesses'' plans to expand into emerging nations—especially those that have recently adopted free-market systems. If the proposals meet certain criteria, OPIC provides loans, loan guarantees, political risk insurance, and private capital through OPIC-supported funds.

Now offering financing from the private sector, George Munoz, principal of Munoz Group Investment Banking, was appointed by former U.S. President Bill Clinton to head OPIC during the late ''90s, a time when germinal free-market systems truly began to grow from the rubble of fallen communist states.

"The United States cannot just preach [free markets] without supporting them," Munoz says. "It preaches free-market systems; it preaches opening borders; it preaches international standards of fairness in trade and investment. But in order to be taken seriously, it has to show that it has an OPIC to support companies that put into practice that free flow of investment and trade."

In 2003, the agency supported 73 new projects, doling out $2 billion in loans, guaranties, and insurance. Plastics and composites processors were represented, with Nypro Inc. receiving $2.7 million in financing to expand its Russian facility (see January 2004 MP, p. 12, for an initial report), $1.4 million going to Grupo Landivar for packaging manufacturing in Bolivia, and Domes International of Mississippi receiving $1.2 million to manufacture fiberglass dome structures for housing and storage in India. "In many of these countries," Munoz explains, "plastics have not yet arrived for a variety of goods."

Eligible nations

While the program only supports investments in countries that OPIC has dubbed "emerging," Munoz says a simpler rule of thumb is any country that isn''t in the G7. Mexico, Brazil, China, India, and several nations in southeastern Europe and Asia, as well as central America, have all received significant investments from U.S. firms, and offered healthy dividends to the American investor and OPIC. The agency has made money in each year of its existence, earning $272 million in 2002; it is the single largest political risk insurer in the world and it currently boasts an $18 billion portfolio.

Eligible companies

Addressing the primary needs of companies trying to expand into developing nations, OPIC provides money where commercial banks can''t lend due to collateral, security, or financing issues, and it insures companies'' investments in nations where unstable governments and immature markets can threaten capital. With its insurance, the cost of a premium means the U.S. will act if anything is expropriated by the host government.

"It sends a message to that country that [the OPIC-sponsored venture] is an investment that the U.S. government understands, supports, and is willing to step into its shoes if there''s something wrong," Munoz says.

To be approved, a business plan must prove that no commercial bank would approve the loan; that the investment creates jobs and provides a transfer of knowledge; that it won''t harm the environment and will abide by international labor standards; and that it isn''t a runaway plant that''s trying to avoid regulation in the U.S.

Additionally, Munoz says, it won''t support companies looking to send products back to America. "OPIC is not supporting any U.S. company that merely wants to take jobs to another country and then export back to the U.S."

All G7 countries, in one form or another, offer incentives to native companies to expand to the developing world in a bilateral fashion. Multilaterally, the World Bank''s International Finance Corp. operates in the same manner as OPIC, but it offers funding regardless of the investing firm''s nationality.

Tony Deligio [email protected]

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