Foreign Relations of the United States, 1958–1960, Volume V, Microfiche Supplement, American Republics

ETA–21. Circular Telegram from the Acting Secretary of State to all Diplomatic Posts in the Other American Republics¹

Washington, March 7, 1959

1024. PERSONAL ATTENTION CHIEF OF MISSION

REF DEPCIRTEL 793 December 21²

Following is summary of statement made Friday March 6 by U.S. to Specialized Committee considering establishment Inter-American Banking Institution:

U.S. has considered carefully all suggestions expressed by other delegations Specialized Committee. In light these views and to conclude successfully deliberations U.S. wishes submit certain important amendments to its original proposal. It is stressed these amendments have been discussed highest level in our government and are presented as integral unit.

U.S. urges draft charter be completed ASAP permit presentation U.S. Congress. Proposed that final act of conference be signed before end March by representatives all governments at closing session Washington. Alternatively, final act could be initialed in Washington and signed at BA conference Committee 21 convening April 14.³ Latter case final act open for signature at BA but without change or further negotiation. U.S. will wish make immediate legislative preparations basis initialled text. If should prove impossible do this by nearly April U.S. feels would not be possible obtain Congressional approval funds during current session. In such case U.S. subscription to capital could not be expected before second half calendar year 60.

1. Total Capital

U.S. agrees increase initial capital institution from $850 million to $1 billion. Additionally charter would indicate intent participating governments increase total capital to $1.5 billion if Board Governors approves by qualified majority already provided for U.S. draft charter (i.e., three-fourths total voting power) after payment all installments initial subscriptions paid-in capital.

Initial paid-in capital for ordinary loans (Class A) to be subscribed three installments, total $150 million by U.S., $250 million by Latin Americans, sixty percent of this in gold or dollars and forty percent in national currency.

Callable capital U.S. $200 million, Latin America $250 million.

2. Class B Capital.

U.S. prepared subscribe $100 million to Class B capital provided Latins subscribe $50 million. All subscriptions fifty percent gold or dollars and fifty percent national currency. Payment in two installments.

U.S. prepared agree Class B voting to be based on weighted votes under Class A provided two-thirds majority required for decision.

If Latins prefer, U.S. prepared agree to substitute QUOTE Fund UNQUOTE for Class B capital with subscriptions and voting described above.

If Latins prefer, U.S. prepared eliminate special loan operations and transfer corresponding subscriptions both U.S. and Latins to Class A.

FYI We indicated in presentation present proposal thought this matter largely overtaken by events in view Subcommittee 1 report day before favorable to $150 million QUOTE Fund UNQUOTE. End FYI

3. Deferred Class A Callable Capital

As indicated 1. above U.S. prepared add provision in Charter specifying increase in callable Class A capital of $500 million thus raising total capital resources to $1.5 billion if approved Board Governors by qualified majority provided in U.S. draft (i.e. three-fourths total voting power) after payment of all installments Class A paid-in capital. Purpose would be indicate clear intention member governments effect such an increase with final decision reserved to time specified. U.S. share would be forty percent or $200 million and Latins 60 percent or $300 million.

4. Use of National Currency

Currency any member country held by Bank however acquired would be usable for payments in territory of member without restriction.

5. Weighted Voting

Decisions within Board Governors and Board Directors based on weighted vote proportionate subscriptions with limited adjustment to provide some unit votes each country. These adjustments would reduce U.S. vote to approximately forty percent. Provisions in draft charter requiring special majorities or some questions to be retained.

6. Management and Board of Governors

U.S. believes able strong management essential successful borrowing in capital markets under callable provision. Normally sound practice that applications be reviewed by management and presented to the Directors by management. However recognize Latins wish assurance Board of Directors will be active, and hence U.S. would agree in special circumstances Board of Directors by majority vote might request management bring any pending application to Board for its decision.

7. Relationship to Availability Funds From Private Investment Sources

U.S. feels essential include in Charter provision similar IBRD QUOTE in considering requests for loan or guarantee Bank shall take into account ability borrower obtain loan from private sources on terms which in opinion Bank are reasonable for borrower UNQUOTE. U.S. could accept additional phrase QUOTE bearing in mind all pertinent factors UNQUOTE but could go no further.

8. Limitation on Area of Expenditure of Funds

U.S. could not accept any provision which would prevent Bank from exercising right restrict or prevent expenditure of its funds in areas not considered appropriate in terms their relationship with free world.

FYI Delegations have not had opportunity react officially to foregoing proposal though several informally expressed warm approval. On the other hand Brazilian indicated some disappointment and stated would have to cable home for instructions End FYI.

Requested Action

You are requested discuss this proposal ASAP at highest appropriate levels host government and urge government to instruct its delegation to Specialized Committee to accept and support this new U.S. proposal in order we may successfully establish and begin operation this institution we all so much desire at earliest practicable moment. You should stress U.S. has made strongest effort meet position Latin American delegations and these very real concessions were very difficult to make in light pending and accomplished increases in IBRD, IMF and Eximbank resources. Reiterate U.S. proposal is an integral one cleared at highest level repeat highest level U.S. Government and early action essential. Treasury Secretary Anderson and Rubottom personally spoke to Latin leaders prior presentation in Specialized Committee. Please report host government reaction soonest.

Herter
Acting

1. Source: Department of State, Central Files, 810.10/3–759. Official Use Only; Priority. Drafted and signed by James A. Lynn, Assistant Chief of the Economic Development Division; cleared with W and ARA in the State Department, and with the Treasury Department.
2. See Document ETA–14.
3. Apparent reference to the Second Sessions of the Committee of 21, held in Buenos Aires, April 27-May 8, 1959; for conditional information, see instruction CA-2131, September 2, 1960, Document ETA–55.