Memorandum by Mr. Phil R. Atterberry of the Office of Financial and Development Policy to the Director of That Office (Stinebower)
Subject: Agenda for Meeting of Board of Directors, Eximbank, December 27, 1951.
- Minutes of Regular Meeting of December 19, 1951. To be received.
- Minutes of Regular Meeting of December 14, 1951. To be approved.
[Here follows discussion of a matter unrelated to the Dominican Republic]
4. Dominican Republic—Textile Mill. Textilera Dominicana, C por A, a privately-owned corporation, organized under the laws of the Dominican Republic, has submitted a request for Eximbank participation with Conferation Life Association, Toronto, Canada, for a credit of $900,000 to finance the expansion and modernization of the applicant’s cotton mill located in Ciudad Trujillo. The insurance company is willing to participate in this project on a 50–50 basis with the Eximbank. The total cost of the pending program is estimated at $1,330,000. Capital required in addition to the requested loan is to be raised by the sale of stock to the present stock holders.
The Eximbank staff committee recommends that the application be denied inasmuch as the project appears to be uneconomic in the absence of protective duties.
The Department is divided in its position on this question. ARA holds that an application for Eximbank assistance in financing the expansion of an industry should not be denied on the grounds that the industry cannot be operated at a profit without a protective tariff. That is to say, the denial of Eximbank funds to beneficiary of protective duties would seriously interfere with U.S. assistance in the promotion of industrial development in Latin America.1
On the other hand, ED believes that if an industrial enterprise cannot produce profitably without excessive tariff protection after the modernization program is completed, its expansion should not be encouraged. The Dominican Republic import duties on cotton textiles, [Page 1392] which are reported to average more than 75% of the cost of the foreign product, appear excessive in comparison with, for example, Cuban duties of 25 to 40% and U.S. average of 25%. ED believes that the extent of protection needed, after the modernization program is completed, should be clearly established before action is taken on this application.
Recommendation: Although this is listed for action, the Department has not yet received a report of the Eximbank staff committee’s review of the protective tariff question, which the members of the Board requested at last week’s meeting.
[Here follows discussion of other matters.]
- In a memorandum to Assistant Secretary Thorp, drafted by the Deputy Director of the Office of Middle American Affairs, Roy R. Rubottom, Jr., and Mr. Wellman, dated December 18, 1951, Assistant Secretary Miller stated that ARA had no objections on political grounds to the Export-Import Bank’s consideration of the loan application, and that rejection of the loan might have an unwanted effect on the Dominican Government’s attitude toward compliance with its part of the LRPG Agreement (103–XMB/12–1851).↩