Memorandum of Conversation, by the Assistant Chief of the Investment and Economic Development Staff (Gorlitz)
Subject: Eximbank Loan Application of Textilera Dominicana
|Participants:||Messrs. Rowntree, Jordan and Walker, Eximbank|
|ARA—Messrs. Hoover1 and Hauch, Mrs. Hood2|
At the Eximbank Board meeting of December 27, it was decided to have the staffs of the Bank and the Department discuss a revision of the Bank staff’s memorandum3 on the loan application of Textilera Dominicana. In accordance with that decision, the above group met to exchange views.
The Department representatives indicated that, as Mr. Thorp has said at the last Board meeting, that the Department was not pressing for either approval or denial of this application. Rather it was interested in having the record show clearly the reasons for either approval or denial. There was a general feeling that the latest version of the Bank staff’s memorandum did not hang together internally and that its conclusions were not supported by the factual data in the memorandum.
The Bank representatives admitted that the memorandum left much to be desired. They asked, however, for specific suggestions from the Department.[Page 1393]
Mrs. Hood of MID, then pointed out several misinterpretations of fact and errors in the text. For example, she mentioned that the tariff had not been increased in 1949. She also questioned whether an average ad valorem equivalent of the Dominican tariff could easily be figured out, whether judging by the table of U.S. and Dominican prices the tariff average could be as high as 75 percent. In addition, she mentioned that the temporary closing of Textilera Dominicana was not simply because of its inability to compete with imported textiles. Also involved were its large unsold inventories of cotton goods, large stocks held by drygoods’ merchants and increasing unemployment and depressed state of business in general. She also indicated that many textile mills in the U.S. shut down in 1949 because of large inventories and consumer resistance to high prices. The Bank representatives were glad to receive these and several other points Mrs. Hood raised and said that they would take them into account when revising their memorandum.
In discussing further the reasons which lay behind the recommendation to turn down this application, it developed that the inability of Textilera Dominicana to compete with imported textiles without some degree of tariff protection was only a subsidiary argument. Even the argument that private capital was available as shown by the establishment of two other textile plants in the Dominican Republic did not appear to be the central one. The Bank representatives felt rather that the Board’s opposition to the granting of this credit was based upon its general belief that the textile industry, especially in Latin America, was one eminently suited for exploitation by private capital and that only in special instances was it justifiable to invest U.S. Government funds in such enterprise.
The group then agreed that that general argument appeared to be the most defensible basis for denial of the credit if the Bank intended to turn it down. Everyone agreed that the staff memorandum should be completely revised to stress the policy reasons for the Bank action, while mentioning briefly subsidiary arguments such as the probable availability of private capital, the need for tariff protection and Bank suspicion of manipulation of cost and profit data by the applicant to show the most favorable prospect.
There was no misunderstanding of the position of the Department representatives in discussing this matter with the Bank staff. They were simply discussing the Bank staff memorandum and were not committing the Department to support any position the memorandum might recommend.4