Office of the Historian

ETA–17. Memorandum of Conversation, by the Officer in Charge of Economic Development, Office of Inter-American Regional Economic Affairs (Rosenson)1

Washington, January 30, 1959

SUBJECT

  • Inter-American Bank

PARTICIPANTS

  • Asst. Secr. Upton
  • Mr. Willis
  • Mr. Rosenson
  • Mr. Mario Mendivil, Argentina (Chairman of Conference)
  • Mr. Ignacio Copete, Colombia (Chairman, Subcommittee I)
  • Mr. Felipe Herrera, Chile (Chairman, Subcommittee II)
  • Mr. Rafael Glower, El Salvador (Chairman, IA/ECOSOC)

This conversation took place at a dinner in Mr. Upton’s residence on January 29th. Mr. Upton encouraged his Latin American visitors to give him their views on our proposals regarding the Bank, which they did quite readily. Each one spoke only for himself but there was considerable agreement among them, and they expressed the belief at various times that the majority of the other delegations held views similar to theirs. They of course made an exception for Brazil, which they regarded as a special problem in the current negotiations. They expressed the hope that the U.S. would undertake the task of bringing the Brazilians into line, but received no encouragement on this score.

The conversation revolved almost entirely around the capital structure of the “A”, or hard-loan, department (the subject of the “B” department was touched on only at the end). It will be recalled that the U.S. has proposed the following capitalization for the “A” department.

Paid-In
U.S. 150
L.A. in dollars 150
in local currency 100 250
400
Callable
U.S. 150
L.A. 150 300
Total “A” capital 700
[Typeset Page 54] [Facsimile Page 2]

The concessions sought by the Latin Americans, according to those present at this conversation, may be summarized as follows:

1. Increase in U.S. Subscription to Callable Capital

It was suggested that the U.S. should increase its callable (i.e., guarantee) capital subscription from 150 to 225 or 250. Mr. Upton asked whether, if the U.S. did increase its subscription to this type of capital by some amount, the Latin American countries would be willing to make a similar increase. The answer was in the affirmative, and Mr. Herrera said that they would expect to match our increase in full.

It was clear that of all the points raised by the Latin Americans, they placed the greatest emphasis on this matter of an increase in callable capital. They indicated that they had no complaint whatever over the size of the U.S. cash subscription.

2. Reduced Latin American Dollar Subscription

Mr. Copete proposed that instead of Latin America and the U.S. each putting up one-half of the paid-in dollar subscription to the “A” department, the U.S. should put up 60 percent and Latin America 40 percent. The reduction in the Latin Americans’ dollar subscription would be compensated by an increase in their local currency subscription. This would have the effect of lowering the Latin Americans’ dollar contribution from 150 to 100 and increasing their local currency contribution from 100 to 150. The U.S. dollar subscription would remain unaffected.

3. Stretch-out of Payments

Copete, supported by Mendivil, felt that the Latin American dollar subscription should be stretched out to five or six installments, with the U.S. still required to pay up in three installments. Herrera demurred, saying he thought the installments would be small enough anyway. He thought that (2) and (3) might be considered as alternatives.

4. Voting Power

The Latins agreed that there should be a direct relation between size of subscription and voting power, but they felt that a straight proportional relation would give the U.S. too dominant a voice. It was suggested that possibly we could accept 33–1/3 percent or 35 percent of the vote in the “A” department instead of the 42–1/2 percent to which we would be entitled on a proportional basis. This view was defended on grounds of “psychology” and the tradition of juridical equality of countries in the American system. The Latins left the definite impression that they attach much importance to this point.

Mr. Upton, while not committing himself on any part of the foregoing, made clear that we regard our suggestions for the structure of [Typeset Page 55] the “B” department as [Facsimile Page 3] an integral part of our proposals on the Bank. He accordingly invited the Latins to give him the benefit of their views on this question also. However, because of the lateness of the hour it was agreed to defer this part of the discussion to another early occasion.

  1. Source: Department of State, Central Files, 820.14/1–3059. Confidential.↩