83. Memorandum of a Conversation, Department of State, Washington, January 27, 19561


  • Intensification of Activities of Export-Import Bank


  • Mr. Walter Sauer—Export-Import Bank
  • Mr. TurkelARA
  • Mr. Rosenson
  • Mr. Corliss
  • Mr. CorbettE

Mr. Turkel started by outlining briefly the Department’s interest in expansion of the activities of the Export-Import Bank, and referred to the three approaches the Department had in mind, namely (1) obtaining the assistance of our Embassies in Latin American countries in forwarding this general objective; (2) the use of PL 480 local currency for lending to enterprises borrowing dollars from the Bank; and (3) making Bank funds available to central banks or similar institutions for re-lending to small industry and agriculture. Practically the entire discussion revolved around the last named subject.

Mr. Turkel cited Export-Import Bank statistics which showed that the amount of exporter credits utilized up to the present had been very small. Since it was fairly obvious that this method was not meeting the needs of the little fellow in Latin America, there was need for a new approach. One method, which had proven successful elsewhere, would be to establish a line of credit in favor of some central institution which would then re-lend to local industry and agriculture.

Mr. Sauer thought that the disappointing showing made by the exporter credit (and line-of-credit) program so far was due to these causes: (a) the boom in the U.S., which makes American exporters less interested in foreign sales; (b) the great difficulty in getting information on small local borrowers in foreign countries; (c) the fact that the Bank will not consider exporter credits for such countries as Chile and Bolivia whose general payments position has ruled out credits in any form; and (d) the difficulty from a banking viewpoint of making loans to an unknown “Juan Cruz” without some one’s guarantee.

Mr. Turkel pointed out that it is precisely because of the difficulty connected with “Juan Cruz” that a program of lending [Page 374] through a local central institution is attractive. Such an institution can get the necessary credit information on “Juan Cruz”.

Mr. Sauer said that the Bank had been giving very careful attention to the possibility of a program of lending through local central banks but has decided against it, at least for the present. They feel that if such program were started in one country in Latin America it would have to be extended to others in that area and thereafter to other areas. The effect would be to jettison the whole exporter credit program, something which the Bank was not willing to do, at least not until they have given this program a fair trial. Mr. Sauer mentioned several objections to operating through foreign central banks. First it would distort the trade pattern. The central bank (or other institution) would channel orders for equipment in the way it saw fit and not necessarily to the supplier from whom the borrower has been accustomed to buy. Secondly, such an arrangement would make it difficult, if not impossible, to work out participations by the American exporter. The result would be that the central bank—and in turn the Export-Import Bank—would have to take 100% of the paper. Thirdly, in general the Bank does not like to abdicate its powers to some foreign institution.

Mr. Sauer said that the Bank is willing to operate through the intermediary of the Banco Central or the Banco Agricola provided the Export-Import Bank knows who the U.S. exporter is and the borrower willing to pay 20% down. Then Deere and Company, for example, can sell the Banco’s note to the Export-Import Bank. The main thing the Export-Import Bank is interested in is in getting a bank guarantee. Of course it would prefer a central bank guarantee but that is not essential; it is willing to take a commercial bank guarantee. The Bank is having “a hell of a time” getting such guarantees now, even in terms of local currencies.

Mr. Sauer added that the Bank might eventually be driven to the “central bank” approach but they are not yet ready to admit that the export credit line program is a failure.

Sauer said that the contemplated circular instruction to the Embassies should stress the role of the local commercial bank in obtaining small loans from the Export-Import Bank for local industry and agriculture. He said he would have Mr. Cady prepare the draft of such a circular which would then be discussed with the Department.

The question of whether to include Bolivia, Chile and Argentina in the lists of posts to receive the circular was discussed briefly but no decision was reached. Mr. Sauer mentioned incidentally that the Bank is receiving about as many applications for exporter credits from Chile as from all other Latin American countries combined. He [Page 375] thought the reason was that U.S. exporters have not been selling down there for the last year and a half or so.

As regards PL 480 funds to complement Export-Import Bank loans, he reiterated his approval.

  1. Source: Department of State, Central Files, 103–XMB/1–2756. Official Use Only. Drafted by Rosenson.