ETA–18. Memorandum from the Officer in Charge of Economic Development, Office of Inter-American Regional Economic Affairs (Rosenson) to the Assistant Secretary of State for Inter-American Affairs (Rubottom)1
SUBJECT
- Inter-American Bank: Issues
A second informal and “off the record” meeting was held on the evening of February 2 in the home of Mr. Rafael Glower to continue the discussions which took place several nights before at Mr. Upton’s home.2
It will be recalled that at the previous informal meeting the Latins asked for four concessions from the United States proposals. These related to: 1) increase in U.S. subscription to callable capital, 2) reduced Latin American dollar-subscriptions, 3) stretch-out payments, and 4) voting power.
At the meeting of February 2 the discussion narrowed down to essentially two issues, i.e. the nature of the soft-loan department of the institution, and the amount of callable capital in the hard-loan department.
Several of the Latins present thought that the soft operations of the Bank ought to be separated from the hard loans even more sharply than contemplated in the United States proposal which called for two separate departments within a single bank. It was suggested that there should be a special “Fund”, organizationally entirely separate from the Bank but administered by the latter as a trust. This idea had been put forward earlier in a session of Subcommittee I by representatives of Venezuela and [Typeset Page 56] Ecuador. The idea of a “Fund” has also been urged consistently by the Brazilians. Mr. Herrera said that he contemplated a Fund in which the original subscription would be compulsory and more or less in the proportions suggested by us. Thereafter the Fund would depend on voluntary subscriptions.
It seems clear that the notion of a Fund which would receive large repetitive allocations from the United States but only a nominal original subscriptions from the Latin American countries has a double appeal. There are a few countries, notably Brazil, which would hope to receive massive loans from this source on what would be a virtually grant basis. On the other hand, the convertible currency countries (Central America, Mexico, Venezuela, etc.) would be relieved of contributing currencies equivalent to dollars and getting little or nothing in return. The latter point of view was frankly set forth by Mr. Montealegre who said that the Central American countries were already getting their soft loans free the DLF and therefore had no interest in a “B” Department in the Bank and could not afford, with their extremely low standards of living, to lend money for development to the big countries.
[Facsimile Page 2]Mr. Upton indicated firmly that the United States could not entertain the idea of a Fund constituted on a basis of voluntary contributions. Thereafter the subject was not pursued much further. I gained the impression that only a very few countries are likely to make an all-out effort to obtain our agreement to a Fund. On the other hand, many if not most of the Latin American countries may push for a Fund at least temporarily for tactical reasons.
Mr. Herrera inquired whether we had given any further thought to the question of voting power. Mr. Upton explained our position on weighted voting but hinted that this is an area in which we may have some flexibility.
The Latins then returned to the question of an increase in callable capital. Mr. Upton explained the great difficulties he would encounter, both in the Executive Branch and on the Hill, in any attempt to increase the United States commitment to the Bank over on a contingent basis. However, the Latins seemed to have their hearts set very strongly on this point and refused to take “no” for an answer. They argued that with the small initial paid-in capital it was important to have a substantial guarantee backlog to permit the Bank to grow; they argued that for domestic political reasons in their own countries they cannot go back without some concession from the original United States positions, etc. etc.
Mr. Upton pleaded the impossibility of going beyond the present position of the United States Government. He suggested that the main thing to do at the present time is to keep working on the [Typeset Page 57] articles of agreement and “keep things moving” so that differences could be narrowed down. The Latins tried to get him to say that his position on callable capital was the United States position as of the present moment, but this he refused to do. Nevertheless, I believe he succeeded in leaving the impression with the Latins that if they were reasonable on other parts of our proposal (and in particular as regards the B Department), we would not be absolutely adamant on the matter of the callable capital.
- Source: Department of State, Rubottom Files, Lot 61 D 279, “Inter-American Development Bank 1959.” Official Use Only. The source text is an uninitiated carbon copy.↩
- Apparent reference to the meeting held on January 29; the memorandum of conversation of the meeting is Document ETA–17.↩