811.516 Export-Import Bank/4–148
Memorandum by Mr. J. J. Stenger of the Division of Investment and Economic Development to the Director of the Office of Financial and Development Policy (Ness)
Subject: Agenda for Meeting of Board of Directors Eximbank April 2, 1948.
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11. Brazil—Laminação Nacional de Metais. This application was last considered in December, 1947, and at that time action was deferred awaiting the outcome of the Rio Doce negotiations. This was done in spite of the fact that the Department recommended that no projects for Brazil should be held up because of the Rio Doce problem. The application was again discussed about two weeks ago and the Board agreed that Mr. West1 should be consulted regarding the possible effect that the approval of this project would have on his negotiations with the Brazilians. Mr. West agreed that the approval of this credit would not interfere with his work, and he also raised no objections to the possible approval of other credits to private companies.
To refresh your memory—Reynolds & Company of New York, acting on behalf of Laminação Nacional de Metais of Sao Paulo, has requested a credit of $4,869,923 to finance the purchase of U.S. equipment and materials required by Laminação Nacional de Metais for the expansion of its existing facility for the manufacture of non-ferrous metal products. The application covers two credits; (1) $3,569,923 for the purchase of equipment and materials required for plant [Page 383] construction and equipment and (2) $1,300,000 for the purchase of U.S. raw materials to be processed in the plant. The latter to be in the form of a revolving credit.
The total cost of the expansion program is estimated at about $5.5 million, of which $4,358,000 represents the cost of U.S. equipment and materials. Virtually all contracts for the equipment and materials have been placed and an advance payment of $788,000 has already been made to U.S. supplies. The credit requested for the purchase of capital goods is, therefore, equal only to the residual payments to be made or $3,570,000.
The conclusions reached by the staff of the Bank when the application was first considered were: (1) expansion of non-ferrous metal manufacturing in Brazil appears to be a sound line of development for Brazilian economy and should result in substantial foreign exchange savings equivalent to at least $2.5 million per year; (2) the prospective earnings of the company after completion of the proposed expansion program should be adequate to permit repayment of the credit within a period of 7 years; (3) the guarantee of the Banco do Estado of São Paulo, which was offered by the applicant, does not appear to be entirely satisfactory, but it should considerably reinforce the obligations of the company; (4) extension of the credit would be a material assistance to a number of U.S. manufacturers; and (5) the request for a revolving credit of $1.3 million for the purchase of raw materials should not be approved because it appears that the company should be able to finance such imports without recourse to the Eximbank.
Since last December certain developments have occurred which affected adversely the worth of the guarantee of the Banco do Estado. The staff, therefore, has amended the recommendation previously made. It now recommends that the Board approve a credit of $3,570,000 for the purposes indicated above provided that the applicants can obtain the unconditional guarantee of the Banco do Brasil.
Recommendation: The Department strongly supports the recommendation of the staff of the Bank.
- Robert K. West, representative of the Export-Import Bank.↩