151. Current Economic Developments1
[Here follows discussion of new legislation affecting foreign economic policy and Arab attitudes on oil.]
NAC Decision on IBRD–Eximbank Relationship
The National Advisory Council on International Monetary and Financial Problems adopted on June 26 a new policy guidance statement which clarifies the relationship of the Eximbank and the IBRD and redefines and enlarges the area in which the former may operate.2 Under this new policy countries are permitted to approach [Page 393] either the Eximbank or the IBRD for development loans, according to the country’s preference, in contrast to the previous requirement that they approach the IBRD first. The NAC policy statement points out that the activities of the two banks are essentially complementary, and that borrowers seeking to finance US goods and services normally may look to the Eximbank as the source of financing, while member countries of the IBRD seeking to purchase goods on the basis of international competitive bidding normally may look to that institution.
The decision, while effective on a world-wide basis, stems primarily from the Eximbank’s inability, under its previous operating instructions, to meet the legitimate economic development needs of Latin America, where it operates principally and where it is presently endeavoring to increase the scope of its operations in order to fulfill US commitments made at the 1954 Rio Conference.3 (See p. 14, issue No. 493, May 15, 1956.)4
Previous Policy Under the previous NAC policy decision of January 1954,5 which governed the relationship of the two banks, the IBRD was determined to be the normal source of loans for development projects involving direct financial obligations of another government or government agency, or its guarantee of the obligations of other borrowers. The Eximbank was not to make loans within the purview of the IBRD, as defined, except in special cases such as those in which important interests of the US warranted departure from the general principle. These included instances where an additional credit was required to continue a project initially financed by the Eximbank or where a loan was for the development of strategic material for US import. Under the terms of the 1954 decision the Eximbank could consider: 1) loans to private US business or their affiliates without governmental guarantee; 2) US exporter credits in IBRD countries at the instance of US suppliers if the transactions would [Page 394] not fit into the normal pattern of the IBRD project lending; and 3) short-term commodity loans to finance export of US commodities. Loans made by the Eximbank in countries which were members of the IBRD were required to be co-ordinated with the IBRD’s lending program by consultation, between the banks with due weight given to whether such loans would endanger the repayment of IBRD loans, unduly limit the IBRD’s future in the member country or were counter to governmental programs or priorities on which the IBRD was planning its lending activities.
New Policy A country may now approach either the Eximbank or the IBRD for development loans according to its preference. However, it should be noted that the use of Eximbank loans is generally restricted to dollar purchases in the US, and that such loans are made in dollars and repayment in dollars is required. On the other hand, purchases financed by IBRD loans are not limited to the US but, except in unusual circumstances, are made on the basis of international competitive bidding. Purchases under IBRD loans may be made in any of the fifty-eight member countries and in Switzerland and may be denominated in dollars or in other currencies depending on the requirements of the borrowers and the availability of such currencies to the International Bank.
The two banks are expected to maintain close liaison in order to avoid duplication of effort and to preserve the integrity of the loans of both. This is particularly important since both Banks may be operating in a given country and even in a particular field in that country with no fixed requirements of precedence.
The NAC action does not affect the Eximbank’s activity with respect to loans to finance the export of US commodities commonly known as exporter credits.
[Here follow sections on Eximbank credits to Brazil and an OEEC ministers meeting in Paris.]
- Source: Department of State, Current Economic Developments: Lot 70 D 467. Official Use Only.↩
Action No. 897, June 26, “Statement Regarding the Relationship Between
the Activities of the Export-Import Bank and of the International Bank
for Reconstruction and Development.” The statement reads:
“1. The activities of the Export-Import Bank and of the International Bank are essentially complementary. Borrowers seeking to finance U.S. goods and services normally may look to the Export-Import Bank as the source of financing. Member countries of the International Bank seeking to purchase goods on the basis of international competitive bidding normally may look to that institution.
“2. In order to assist in avoiding duplication of effort, to preserve the integrity of loans of both Banks, and to insure the most effective utilization of funds by borrowing countries, it is essential that the Banks should maintain close liaison.
“3. The NAC will, of course, continue its statutory responsibilities of coordinating lending activities.” (Ibid., NAC Files: Lot 6 D 132, NAC Actions)↩
- The Inter-American Meeting of Ministers of Finance or Economy held at Quitandinha, Brazil, November 22-December 2, 1954. For documentation, see Foreign Relations, 1952–1954, vol. iv, pp. 313 ff.↩
- Not printed.↩
- NAC Action No. 673, January 22, 1954. (Department of State, NAC Files: Lot 60 D 137, NAC Actions)↩