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

ETA–46. Memorandum from the President of the Export-Import Bank (Waugh) to the Secretary of the Treasury (Anderson) and the Under Secretary of State (Dillon)¹

Washington, August 4, 1960

SUBJECT

• Prepared new Program for Latin America

The announcement made by President Eisenhower on July 11 for an increased economic program [for] Latin America has been read with interest by the Directors of the Export-Import Bank. The purpose of this memorandum is to consider the manner in which Eximbank may contribute to the success of the program.

Eximbank during the past twenty-six years has authorized in excess of $4 billion of loans in Latin America and at the present time has outstanding loans and commitments of approximately $2 billion.

It is assumed that there is no intention to displace Eximbank in its historic activity in Latin America. It is further assumed that it would be advantageous to the realization of the ultimate goals of the new program that uncommitted funds now available to Eximbank be utilized directly in the program in situations in which loans repayable in dollars for United States equipment, materials and services may be justified from an economic and banking point of view.

For the purposes of this memorandum we are assuming that an appropriation for the new program would be made to the President and thereafter allocations would be made in each case to the agency best suited to carry out the particular purpose of the allocation.

It is the suggestion of the Directors of the Export-Import Bank that in those instances in which foreign equipment and services are required for a project in Latin America and a credit to acquire the same can be appropriately authorized out of funds of Eximbank, any monies to be loaned for local costs in connection with the same project be allocated to and administrated by Eximbank. An example of such type of project would be a highway or access road construction where as much as 30 or 40 percent of the cost may be in foreign purchases and where the United States is prepared to make a loan on a soft basis to defray at least a portion of the local cost involved. On the other hand, in the case of a project—such as one for housing or for educational purposes—involving solely soft loan arrangements, the funds would be allocated to an agency normally operating in such a field.

The suggested procedure offers a number of benefits:

1. The lone experience and success of Eximbank in Latin America and particularly its experience in road construction which appears to be an important part of any program for the opening up and settling of new areas. Eximbank has financed road construction in nearly every country of Latin America. It has also financed flood control and irrigation projects and other similar programs requiring substantial amounts of equipment, materials and technical services from abroad.

2. Eximbank has broad powers under its legislative charter.² Furthermore, its record of operations has acquired for it the support of the Congress and, particularly, the Banking and Currency Committees, to the extent that it has been permitted to operate with a minimum of restrictions relative to the establishment and implementation of credits. These facts have enabled Eximbank on many occasions over the years to act promptly in situations involving issues important in our foreign political and economic relations. On the other hand, agencies created as a part of our foreign aid programs have become restricted to the extent that in many instances they are not as free as is Eximbank to act promptly and with a flexibility of methods.
Only this week it was necessary to look to Eximbank to obtain promptly a credit which, according to the Department of State, was highly important to meet a serious political situation in Guatemala. Fortunately, Eximbank was able to find reasonable assurance of repayment in dollars and can meet the situation insofar as the dollar portion of the credit is concerned. It appears, however, that procedural problems and others resulting from legislative requirements for documentation may delay the availability from other sources of credits required in connection with the local expenditures for the projects proposed for Guatemala.
Delays and the effort involved in compiling new studies and documents required by other agencies to support the establishment of credits often result in irritations and ill will that are counterproductive in an assistance program. Such problems can be avoided in those cases in which the entire transaction can be handled by Eximbank because it can usually proceed on the basis of its years of experience in Latin America and through the use of procedures which are well established and generally understood. Funds allocated to Eximbank to finance the local costs of projects in which it is involved would make it possible for Eximbank, as an agency of the United States, to operate in the manner contemplated for the IBRD with the establishment of the proposed IDA.

3. It is self-evident that it would be preferable—both from the standpoint of the borrower and the lender—to have a specific project handled by a single agency where feasible so to do. It is recognized that this cannot be accomplished in every situation.

On the basis of the foregoing, it is suggested:

1. That funds appropriated for a program of soft loan assistance in Latin America be allocated to a particular agency—either national or international—after determination is made as to the specific purposes for which the funds will be utilized.

2. That in instances in which credits for local currency expenditures are required in connection with loans which may he made out of uncommitted funds of Eximbank, funds be allocated to Eximbank to enable it to make and administer also the soft loan component.³

Samuel C. Waugh
President

1. Source: Department of State, ARA/REA Files, Lot 63 D 210, “Latin American Social Economic Development Program July–Sept 1960.”
2. Apparent reference to the Export-Import Bank Act (Public Law 173), approved July 31, 1945; for text, see 59 State 526.
3. According to a covering note from the Executive Secretariat, dated August 9, 1960, the Bureau of Economic Affairs was tasked with the preparation of a memorandum in reply to Waugh’s memorandum by August 12, but no copy of the reply was found in Department of State files.