The Overseas Private Investment Corp. has approved a $39 million loan guarantee to help establish a secondary mortgage market in Costa Rica. The pledge is the self-sustaining agency's first-ever venture in the international housing sector.

The guarantee will help establish a new company that, by using bonds sold in the U.S. capital markets, will acquire mortgage originated by Costa Rican banks.

OPIC is applying the U.S. housing model to stimulate the creation of a secondary market in Costa Rica. Once the central American nation has developed a reliable record of mortgage payments and recovery of defaults, it should be able to attract more capital to help house its citizens.

"Housing is the most basic unit of economic development, yet most countries lack the capital to meet their urgent needs," said OPIC President George Munoz.

"By marrying the strength of the U.S. capital markets to American housing expertise, OPIC has found an innovative way to help Costa Rica begin to establish its own secondary mortgage market."

Debra Erb, president of Societas, the International Institute for Real Estate Finance, called OPIC's approval of the loan guarantee "an important milestone" in efforts to bring American know-how to the international housing sector.

OPIC sells such investment products as political risk insurance, project finance and investment funds to American businesses which want to expand in nearly 150 developing nations around the globe. By filling a void for such products, the agency helps support emerging economies.

Since 1971, it has backed some $130 billion worth of investments that will generate an estimated $61 billion in U.S. exports and create more than 242,000 American jobs.

Mr. Munoz said housing is the "logical next step" for his agency, which has assisted in a variety of developments throughout the world.

"The commitment to developing housing markets exists everywhere, but the knowledge base, the legal and physical infrastructure and the access to adequate resources are often lacking," he said. "The U.S. has a tremendous amount of information, technology and expertise to offer."

The loan guarantee to Costa Rica will be used to support a special purpose company that will issue up to $69 million in bonds, some of which will be sold to American investors who also are the beneficiaries of the guarantee. But it is being made on the condition that the country undertake reforms in the areas of property rights recognition expropriation.

Published: September 22, 2000

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