398.14/2–1053
Memorandum of Conversation, by the Director of the Office of Financial and Development Policy (Corbett)
- Subject:
- IBRD–Export-Import Bank–State Department Relations
- Participants: Mr. Eugene Black—President, International Bank for Reconstruction and Development
- E—Mr. Linder
- OFD—Mr. Corbett
Mr. Linder thanked Mr. Black for his courtesy in coming to his office to discuss International Bank relations with the Department and the Export-Import Bank. Mr. Linder said he had no particular matters to take up but because of his position on the Board of the Export-Import Bank and the Department’s interest in the operations of the IBRD, he thought the meeting would be a most useful one to him.
Mr. Black immediately launched a discussion of the Turkish approach to the Eximbank for a $90 million loan and the Brazilian failure to carry through on the railroad reorganization. Mr. Black felt that the U.S. Government had to make up its mind concerning the role of the IBRD if that institution was to be successful in its mission. He felt that so long as the opportunity and the invitation existed for countries to go around the IBRD to the Eximbank it would be impossible for the IBRD to secure the type of action and attitude conducive to their development, and he felt this was particularly the case with Brazil. He had no objections to a Brazilian back-log loan but he had strong objections to Eximbank loans to Brazil for railroad and other developmental type projects. He found particularly offensive the reception by the Eximbank of the Turkish approach for $90 million. He believed that the International Bank had been very considerate and constructive in its dealings with Turkey and there was no excuse for the Turks going to the [Page 266] Eximbank. Loans of this magnitude to Turkey would imperil the investment that the International Bank already has in that country.
Mr. Linder addressed himself to Mr. Black’s general proposition that the IBRD must do all developmental lending to its member countries. He thought this was a generally sound position but he wished to point out that the political interests of the U.S. were such that complete rigidity or inflexibility on this point might not be workable. He illustrated this point by reference to Iran where a loan operation might be necessary for reasons of national interest. Mr. Linder admitted that the Turkish matter was extremely unfortunate but that the Turks had received no encouragement from the Department or the Eximbank to make this approach and the Department had no objection to the Turks being told that their application would not be considered. (I understand the Turks have assured Mr. Black that their informal application to the Eximbank will be withdrawn.)
Mr. Linder asked Mr. Black how he felt about Export-Import Bank development lending without Government guarantees and exporter credits. Mr. Black was somewhat evasive in his response but later remarks indicated that he hoped the I.F.C. would circumscribe this Eximbank activity. Mr. Linder pointed out that too great a restriction in Eximbank’s scope of operations would tend to give encouragement to those seeking to establish as a permanent feature of our foreign economic policy the “fuzzy” loan concept. To the extent that all appropriate public lending activities can be covered by the two Banks, there will be no justifiable case for other types of loans.
Mr. Black reverted to his main point that the U.S. Government had to make up its mind concerning the International Bank operations because each time the issue was confused by the Eximbank participation in developmental lending, he would certainly recommend that the International Bank wash its hands of that country. Mr. Black did concede that the present NAC policy regarding the operations of the two Banks was not in and of itself defective but it had not been carried out. He agreed that had the Eximbank fully accepted all the implications of the NAC decision that many of the difficulties to which he referred might not have arisen. He said that he had been asked to recommend new people to put on the Eximbank Board but would not do so until he was assured that the U.S. Government would support a clear-cut policy reserving developmental lending to the IBRD. Mr. Black admitted that there were many areas of the world where the Eximbank–IBRD difficulties had not arisen and that the only major problem outstanding was Brazil.