Foreign Aid: Observations on the Overseas Private Investment Corporation

GAO discussed the Overseas Private Investment Corporation (OPIC), focusing on: (1) its project screening and monitoring procedures; (2) the direct trade and employment effects of selected OPIC projects; (3) its procedures for approving and monitoring direct loans; and (4) the completeness of its loan documentation. GAO noted that its 1987 study found that: (1) OPIC screening and monitoring procedures contained several weaknesses; (2) OPIC combined negative project effects with possible positive effects of alternative projects in its reports to Congress; and (3) OPIC projects had negative effects on U.S. trade and potentially negative effects on U.S. employment. GAO had recommended that OPIC: (1) include more direct estimates of projects' possible economic effects; (2) report positive and negative economic, trade, and employment effects separately from any possible alternatives; and (3) closely monitor ongoing projects to ensure that it accurately assessed economic effects. GAO noted that OPIC disagreed with and did not adopt most of its recommendations. In its 1988 study, GAO found that OPIC: (1) adequately reviewed loan applications prior to approval, except for its review of credit risk on two loans; (2) did not obtain key financial information on borrowers' operating forecasts for 1988; (3) adequately documented its loans; and (4) was implementing improvements in its approval and monitoring procedures. OPIC agreed with the thrust of the GAO recommendations concerning strengthening credit analysis procedures and the independence of post-disbursement oversight.