80. Letter From the President of the Export-Import Bank (Waugh) to the Under Secretary of State (Hoover)1
Dear Herb: Yesterday during our contest you asked me two questions: first, what were the Bank’s profits last year, and later, the second question, how many branch offices or men do we have stationed in Latin America at this time.
Thinking the matter over at home last evening, I wondered if you were of the impression that possibly the Bank was making too much money and that we might spend some of the profits in greater activity in Latin America.
The audit report of the Comptroller General just came in this morning and it indicates that the net income of the Bank for the year ending June 30, 1955, was $59,000,000. The report also comments that although the Bank was not required to pay interest costs to the Treasury on its capital stock, a dividend of $22,500,000 was paid. This follows the established policy for the past several years.
The remaining income of $36,500,000 was transferred to the reserve for future contingencies. You, being a sound businessman, would not feel, I am sure, that this is an unusual amount to add to the reserves in view of outstanding loans and undisbursed authorizations amounting to $3,500,000,000 on December 31, 1955.
Then too, with reference to the Bank’s activity for the year just closed, December 31st, I believe the following figures will be of interest to you. In 1954 the Bank authorized 34 credits for $346,000,000. In the corresponding 12 months of 1955 there were 113 credits for $372,000,000. Perhaps I should add that the 1954 figure includes the $100,000,000 Southern Peru Copper loan, which is just now coming into being. The 1955 figure includes the authorization of $60,000,000 for the Argentine steel mill, as yet unsigned.
During the past six months the Bank authorized in Latin America 22 general credits totalling $49,600,000, and in addition, 31 actual allocations under exporter credit lines for $2,800,000. In other words, in the past six months there were 53 individual credits authorized in [Page 363]Latin America totalling in excess of $50,000,000. During the first six months of the past calendar year the Bank authorized 23 credits in 12 Latin American countries totalling $166,900,000. When adding these 23 credits to the 53 in the last six months, you get a total operation in Latin American of $217,000,000 authorized credits in the calendar year 1955. (See P.S.)
You may or may not realize, but I am sure the “E” and “ARA” areas both do, that we have pending loans in excess of $100,000,000 in Latin America that are being held up at least in part for reasons beyond our immediate control. For example, Brazil—there are two sizable credits pending, one railroad and one steel mill loan, where State has requested the holding action. In Argentina the $60,000,000 steel mill commitment is as yet unsigned, although the Bank is ready and willing to sign as soon as it is assured that the additional foreign credit for the completion of an integrated mill is forthcoming. In Chile we have two applications pending for the development of the nitrate operations, one from the Chilean corporation and a second from the United States corporation. These are held at the request of the applicants, pending a decision on legislation now pending before the senate of Chile. Then too, we are processing a modest-size loan for an addition to the steel mill, which has been one of that country’s most successful operations largely financed by the Bank. In Colombia we are still waiting word from the mission of the International Bank before making a definite decision on pending financing, here again a steel mill. We also have under consideration at the request of the President of Peru2 some road financing.
In addition to these larger credits, Herb, we have numerous requests for exporter credits to countries where neither we nor many of the exporters feel the time is ripe for favorable consideration. In other words, where countries are today delinquent for several months in the payment of their current exporter credits, we feel it would be most unwise to complicate further their financial problems by granting still further credit. You are familiar with the past history of Brazil in this regard, and the same situation prevails today on a more modest scale in Chile.
This brings us to my answer to your second question; namely, we in the Bank believe that it is far better to work through the embassies in the respective countries than it is to attempt to set up branch offices throughout the area. What is more important, I believe today that there is not a single application in the Bank that is not being given prompt and thoughtful consideration. The crux of the problem is the ability of the countries and the individual borrowers to generate sufficient dollars to liquidate their indebtedness. [Page 364]This of course is where the question of the volume and value of their exports to the United States play such an important and fundamental role.
The Export-Import Bank legislation and the accompanying Committee Report approved by the Congress in mid-summer of 1954 emphasized that the Export-Import Bank should “constitute an independent agency of the United States.” Since the first of the year, Secretary Humphrey has called this to my attention in reminding me that he did not want the Bank to be under domination of the Treasury or any other department or agency of the government. Let me hasten to add my own thoughts in this connection.
There always has been the closest kind of working relationship between the Bank and the Departments of State and Treasury. It is my earnest hope that this will endure for all times to come.
The point I think that the Congress and Secretary Humphrey wanted to make is that the final responsibility for making the decisions must rest with the directors of the Bank, but I am hopeful, and here I repeat, that the Bank and the Executive Branch will always maintain the closest of working relationships, for after all, we do have the same broad objectives.
Forgive me, my friend, for the length of this letter, which does not call for any acknowledgment.
P.S.—These figures do not include any portion of the 130 individual exporter credit lines which total $173,085,000 except that portion totalling in excess of $6,000,000 under which transactions have actually been consummated.