811.516 Export-Import Bank/4–2748
Memorandum by Mr. J. J. Stenger of the Division of Investment and Economic Development to the Chief of That Division (Havlik)
Subject: Agenda for Meeting of Board of Directors Eximbank April 28, 1948.
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5. Brazil—Sorocabana Railway. On April 23, 1947 a credit of $6,649,021 was authorized for the Electrical Export Corporation to finance the sale of electric locomotives and electrification equipment for the Sorocabana Railway of Brazil. The credit was guaranteed by the State of São Paulo.
The Railway has become very seriously involved financially and has defaulted in the payment of its notes. The State of São Paulo has failed to make good on its guarantee of the Sorocabana paper. The aggregate amount owing to the Bank including interest is close to $1,680,000 covering a disbursement of about $1,425,000. The Bank has postponed the purchase of notes presented. Other notes will shortly be presented. The Bank has had conversations with Mr. Bouças, who has presented a plan for reducing the payments on the principal of the loan and has offered the guarantee of the Banco do Brasil if the plan is accepted.
The staff has studied the possibility of requesting the suppliers to suspend the work and shipments under the contract, but the work has advanced to a stage where this would not be practicable to do so or where it would prove too costly. The Electrical Export Corporation is being pressed for payment by the suppliers.
The credit expires on June 15, 1948. The staff has recommended that the expiry date be extended to December 31, 1948; that Mr. Bouças be informed, through the Electrical Export Corporation, that he may present to the Brazilian Minister of Finance his plan for the adjustment and guarantee of the obligations as being acceptable to the Bank; and that the purchase of notes drawn under the credit be resumed in accordance with the terms of the agreement.
Recommendation: While this is a matter which is of immediate concern to the Bank, the Department would be willing to express its views provided that it had more time to study the proposal. The agenda and documents were received too late for the Department to consider the paper prior to this meeting.
6. Brazil—National Railways. In April 1947 the Steam Locomotive Association (the American Locomotive Company and the Baldwin Locomotive Works) filed an application for financing the sale of [Page 390] 130 locomotives for the National Department of Railways of Brazil. This application was withdrawn on April 14, 1948. American. Locomotive Company withdrew from the Association. Baldwin has now applied on its own account for a commitment to finance the entire order. The total value of the order is about $14 million, of which 30% or about $4.2 million will represent cash payments leaving 70%, or about $9.8 million, to be financed. The Eximbank has been asked to finance, without recourse, about 85% of the balance to be financed ($8,330,000) or 59.5% of the invoice value. The obligor will be the National Department of Railways of Brazil, the obligations to be guaranteed by the Banco do Brasil. It is proposed to amortize the credit over a 5 year period starting six months from the date of delivery, with interest at 4%.
Recommendation: The staff’s memorandum was received at a late hour this morning. There has hardly been time to read it and no time to digest the facts. The Department is not prepared to comment at this time.
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