Foreign Relations of the United States Diplomatic Papers, 1940, The American Republics, Volume V
The Secretary of State to President Roosevelt
The President: The undersigned, the Secretary of State, has the honor to lay before the President, with a view to its transmission to the Senate to receive the advice and consent of that body to ratification, if his judgment approve thereof, a convention for the establishment of an Inter-American Bank.
There is also enclosed a copy of a memorandum prepared by the experts of this Department describing in some detail the proposed Inter-American Bank.
President Roosevelt to the Senate of the United States
To the end that I may receive the advice and consent of the Senate to ratification I transmit herewith a convention for the establishment of an Inter-American Bank. This convention has been signed on behalf of the Governments of the United States, Bolivia, Brazil, Colombia, the Dominican Republic, Ecuador, Mexico, Nicaragua, and Paraguay, and remains open to the adherence of others of the American republics.
I also transmit for the information of the Senate a report on the convention made to me by the Secretary of State.
It is my opinion that the establishment of an Inter-American Bank would be a step of major importance in the development of Inter-American financial and economic cooperation and the economic implementation of the good neighbor policy. It has been apparent for some time that there has existed a wide zone of economic and financial activity among the American republics for which the existing machinery of cooperation has been inadequate.
The Bank, generally speaking, is designed to promote a fuller development of the natural resources of the Americas, to intensify economic and financial relations among the American republics, and to mobilize for the solution of economic problems the best thought and experience in the Americas. Its organization, purposes, and powers [Page 348]are provided for in detail in the charter and by-laws of the Bank which are annexed to the convention and are integral parts of it.
Since it is envisaged that the proposed Bank would be set up under a Federal charter granted by the United States, I, in accordance with the terms of the convention, request that the Congress issue such a charter. A bill embodying such charter and additional enabling provisions to permit the participation of the Government of the United States in the Bank is transmitted herewith. This bill was drafted by experts of the Departments of State and Treasury, the Federal Loan Agency, and the Board of Governors of the Federal Reserve System.
The present project for the establishment of an Inter-American Bank is the result of several months of intensive work in the Inter-American Financial and Economic Advisory Committee and is the outcome of many years of discussion of the desirability of creating such an institution. The First International Conference of American States discussed the matter of providing adequate inter-American banking facilities, and on April 14, 1890, adopted a resolution recommending that the governments grant liberal concessions to facilitate inter-American banking and especially such as might be necessary for the establishment of an international American bank. This resolution was approved by a vote of 14 to 0, Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Guatemala, Honduras, Mexico, Nicaragua, Paraguay, Peru, the United States, and Venezuela all indicating their concurrence. The Secretary of State, James G. Blaine, in transmitting the resolution to President Harrison indicated his approval of passage of a law by the United States incorporating such an inter-national American bank, and President Harrison transmitted the resolution and letter of Secretary Blaine to the Congress for appropriate action.
The Second International Conference of American States on January 21, 1902, recommended that a powerful inter-American bank be set up in New York, Chicago, San Francisco, New Orleans, Buenos Aires, or any other important mercantile center and that it be assisted in every manner compatible with the internal legislation of each of the American republics. This resolution was signed by Argentina, Bolivia, Colombia, Costa Rica, the Dominican Republic, Ecuador, El Salvador, Guatemala, Haiti, Honduras, Mexico, Nicarauga, Paraguay, Peru, the United States, and Uruguay.[Page 349]
The provision of inter-American banking facilities, especially in view of the dislocations occasioned by the European war, was discussed at length at the First Pan American Financial Conference which met from May 24 to 29, 1915.
In 1933, the Seventh International Conference of American States, upon the initiative especially of the delegations of Peru and Uruguay, unanimously adopted a resolution recommending the creation of an inter-American bank to establish and promote inter-American credit and the interchange of capital, to collaborate in the reconstruction of national monetary conditions, and to perform such other tasks as the Third Pan American Financial Conference might entrust to it. The Third Pan American Financial Conference did not take place, and the Eighth International Conference of American States in 1938 considered a number of resolutions which had been presented to the Seventh Conference and to the Inter-American Conference for the Maintenance of Peace, which took place in 1936. It resolved to request the Pan American Union to study the possibilities of establishing an organization to carry out the purposes envisaged.
In 1939, the Meeting of the Foreign Ministers of the American Republics at Panamá adopted a resolution creating the Inter-American Financial and Economic Advisory Committee to study, among other things, the need, form, and conditions for the establishment of an inter-American banking institution. Later in the same year the First Meeting of Finance Ministers of the American Republics at Guatemala recommended to the urgent attention of the Inter-American Financial and Economic Advisory Committee a study of the desirability of creating such a bank.
The Inter-American Financial and Economic Advisory Committee began its work in Washington on November 15, 1939, and immediately turned its attention to the matter of an inter-American Bank. After several months of intensive effort in which the delegates representing the twenty-one American republics were assisted by a group of experts from the United States Departments of State and Treasury, the Board of Governors of the Federal Reserve System, and the Federal Loan Agency, the Inter-American Committee on February 7, 1940 adopted a resolution recommending to the governments of the American republics the establishment of such a bank and submitted for their consideration drafts of a convention, charter, and by-laws for its establishment. Comments and suggestions were received from a number of the governments and were carefully studied, and on April 16, 1940 the Inter-American Committee approved the final texts mentioned above.
The charter and by-laws of the proposed institution, which are annexed to the Convention and are integral parts of it, provide in [Page 350]detail for its organization, purposes, and power. The Bank is to be an intergovernmental organization. All of the shares are to be subscribed by governments of the American republics, and none of the shares may pass to others than governments of the American republics. The minimum number of shares to be subscribed by each of the American republics in order to participate in the Bank is specified in section 2–B of the by-laws; this schedule is based upon the foreign trade of each of the American republics in the year 1938. According to this schedule the United States is in group H with Argentina and Brazil; the members of this group are required to subscribe to a minimum of 50 shares, or $5,000,000 each. The liability of shareholding governments on their shares is limited to the issue price thereof.
Voting among participating nations is distributed as follows, in accordance with section 2–H of the by-laws: 20 votes for each government for its minimum shares and 1 vote for each additional share which it may subscribe. Important decisions require a four-fifths vote.
The directors of the Bank are all to be appointed by the shareholding governments and are to be responsible to them alone. Generally speaking, moreover, the Bank may take no action which may affect a particular nation until after that nation has been given an opportunity to object to, or has given its consent, approval, or guaranty to the operation. This safeguard of the interests of individual nations is inherent in the entire plan and appears throughout the drafting. In addition, it is specifically provided in section 5–C that:
“The operations of the Bank shall at all times be conducted in conformity with the laws of the territory where the Bank is acting and, so far as possible, be conducted in conformity with the policies of the participating government directly concerned.”
The powers with which it is proposed to endow the projected institution are specified in section 5–B of the by-laws. In general it may be said that the Bank is given rather broad powers, subject to restrictions which will be mentioned immediately below, to engage in all usual banking operations. In keeping with the intergovernmental character of the institution, it is specified that all extensions of credit by the Bank, either direct or indirect, must be to a participating government or to a fiscal agency, central bank, political subdivision, or national of a participating government with the guaranty of that government, or, in the case of extensions of credit having a maturity not exceeding two years to any such fiscal agency, central bank, political subdivision, or national, which may be made without government guaranty, only if the government thereof does not make a timely objection. In this way, and in accordance with the provisions of section 5–C of the by-laws, which was quoted above, special care [Page 351]has been taken to ensure to each country the ability to bar any activity of the Bank within its territory which such country may deem undesirable.
While the purposes and powers of the projected Bank have been stated in fairly broad and elastic terms, as is both customary and essential in the organic laws of such institutions, discussions during the drafting of the convention and by-laws indicated that it was the intention of the Inter-American Financial and Economic Advisory Committee to complement existing financial institutions rather than to provide a substitute for them.
In view of the intergovernmental character of the Bank, arising especially from the fact that all the participants are sovereign governments, article II of the convention would grant to the proposed Bank certain rights, privileges, immunities, and exemptions which would permit the Bank to carry on any operations to which the governments concerned have indicated no objection without being liable to subsequent unilateral action against the Bank by any of the governments. Special care has been taken in the drafting to concede such rights, privileges, immunities, and exemptions which are essential to the proper functioning of the Bank without permitting abuses to occur. Thus article II, A and D, of the convention permits legal action in regard to adjudicated claims against the Bank and its depositors. Similarly, article II C specifically excludes general nondiscriminatory taxation, such as income taxation, upon individuals dealing with the Bank from any tax exemption accorded by the convention. Moreover, article II B assures the Bank that, where exchange restrictions or controls exist, it shall be accorded facilities for transferring out from a country, on the most favorable basis, amortization, interest, and other returns only from loans and investments of funds to which the government concerned had not previously made the timely objection which it is privileged to make.
It is provided that the convention shall come into force when ratifications of five of the signatory countries which have agreed to subscribe for at least a total of 145 shares of the stock of the Bank have been deposited with the Pan American Union, and that each party shall remain bound under the convention for one year after it ceases to participate in or to be in any way obligated to the Bank.
[The Convention for the Establishment of an Inter-American Bank was signed at Washington on May 10, 1940, by the United States, Colombia, the Dominican Republic, Ecuador, Mexico, Nicaragua, and Paraguay, and on May 13 by Brazil. It was laid before the President by the Secretary of State on July 3, 1940, and sent by the President to the Senate on July 5, 1940. The Convention was withdrawn from the [Page 352]Senate by President Truman on April 8, 1947. For the text of the Convention, see Department of State Bulletin, May 11, 1940, pp. 512–522; or Executive K, 76th Congress, 3d Session. For President Truman’s request for withdrawal, see Executive M, 80th Congress, 1st Session. For the Senate Resolution returning the Convention, see Congressional Record, April 17, 1947, vol. 93, pt. 3, p. 3583.]