NAC Files, Lot 60 D 137

Draft of Minutes of the 162nd Meeting of the National Advisory Council on International Monetary and Financial Problems



Secretary John W. Snyder (Chairman), Treasury Department

Mr. Oscar Zaglits, Agriculture Department, Visitor

Mr. James E. Webb, State Department

Mr. Leroy D. Stinebower, State Department

Mr. Phil R. Atterberry, State Department

Mr. Arthur Marget, Board of Governors, Federal Reserve System

Mr. Frank Tamagna, Board of Governors, Federal Reserve System

Mr. Herbert E. Gaston, Export-Import Bank

Mr. Walter Sauer, Export-Import Bank

Mr. Edward Lynch, Export-Import Bank

Mr. Richard M. Bissell, Jr., Economic Cooperation Administration

Mr. James A. McCullough, Economic Cooperation Administration

Mr. Lawrence S. Dreinian, Economic Cooperation Administration

Mr. Frank A. Southard, Jr., International Monetary Fund

Mr. Elting Arnold, Treasury Department

Mr. Charles R. McNeill, Treasury Department

Mr. Andrew M. Kamarck (Acting Secretary)

Mr. Allan J. Fisher (NAC Secretariat)

[Page 964]

[Here follows a table of contents.]

1. Proposed Export-Import Bank Credits to Mexico

Mr. Kamarck said that the Export-Import Bank had asked for the advice of the Council regarding requests of Mexico for a line of credit up to $150 million to finance projects in agriculture, transportation and other fields. Except for two irrigation projects, no specific projects had been presented by the Mexican Government, nor had it indicated how the $150 million would be allocated. The Staff Committee had examined the Mexican position, and noted that there has been considerable improvement in the international financial position of Mexico recently. The official reserves have increased by over $80 million in the last year. The balance of payments showed a small surplus in 1949. The long-term outlook for Mexico’s balance of payments depends to a large extent upon the ability of its Government to control increases in money incomes. Mexico’s foreign debt is now around $287 million, of which $77 million is due to the Export-Import Bank. Even with the addition of the new indebtedness, Mexico should be able to meet its debt burden without undue difficulty. The Staff Committee had recommended approval of the request (NAC Document No. 1038).1

Mr. Webb said that the United States had had problems with Mexico in fields other than finance, such as aviation. The State Department felt that this proposal would go a long ways toward putting relations between the two countries on a more satisfactory basis and would contribute to improvement of foreign relations in that field.

Mr. Zaglits said that the Department of Agriculture was very conscious of what Mr. Webb had said about the political importance of the program. However, the Department would like to call attention to the special feature of irrigation projects. These were designed to expand production, primarily in commodities for which the United States had a price support program. The working group study (NAC Staff Document No. 456)1 pointed out that Mexican cotton was generally similar to that of the United States and was indirectly accorded the high and stable world price for dollar cotton resulting from United States domestic support measures. The United States cotton and other stockpiling programs raised problems which could not be solved by discussion at the present meeting, but the Department of Agriculture would desire that they be discussed between the Export-Import Bank and the Department.

Mr. Gaston said he had had a conversation with Mr. Zaglits the preceding day on this matter and had told him that the Export-Import Bank would be very happy to talk to the Department of Agriculture [Page 965] on problems of irrigation credits. The project which was particularly involved was that of the Falcon dam, which was a subject of international treaty. It would be a problem as to whether the Mexicans could direct their production into lines which would give a greater promise of long-range stability than would cotton. The Bank would be glad to discuss this matter further.

Without further discussion the recommended action was approved unanimously. The Chairman announced that Secretary Sawyer had stated that he was strongly in favor of the proposal.

Action. The following action was taken (Action No. 421):

The National Advisory Council advises the Export-Import Bank that it approves consideration by the Bank of the establishment of a line of credit up to $150 million to the Republic of Mexico to finance projects in agriculture, transportation, communications and electric power development.

It is understood that the average term of maturities under this line of credit might be in the neighborhood of 15 years with interest of about 3½ percent per annum. It is further understood that the Export-Import Bank will report to the National Advisory Council the categories of projects proposed to be financed under this line of credit, and the approximate amounts involved in such financing.2

[Here follows draft of minutes of the remainder of the meeting, which was devoted to topics unrelated to Mexico.]

  1. Not printed.
  2. Not printed.
  3. Following the NAC meeting the U.S. and Mexican Governments exchanged aide-mémoire, not printed (both of which had been cleared in advance with all interested agencies of each Government) that same day.

    In a memorandum of August 28 to Mr. Webb, Mr. Miller had said in part that the aide-mémoire was particularly “… intended to show that Mexico withdraws its request for a petroleum loan and that Mexico understands the Eximbank will be free to deny particular loan applications if they are inconsistent with the policies and practices of the Bank.” (812.10/8–2850)

    The Board of the Export-Import Bank approved the line of credit on August 31, and it was first announced publicly by President Alemán in an address of September 1.

    On December 15 the Bank authorized under this credit amounts of $12.5, $1, and $17.5 million for the Falcón Dam and power plant, Anzalduas Dam, and Yaqui Alto Canal projects, respectively. The Bank’s only other loan to Mexico during 1950 was $2.74 million authorized April 5 for coal mine development.