95. Memorandum for the Files1

In accordance with prior conversations with Secretary Dillon and Secretary Ball, I called George Woods yesterday to respond to his request for informal advice on this proposal for the IBRD to take leadership in debt-rescheduling negotiations regarding developing countries. His request was made at a luncheon a few weeks ago2 at which he indicated that he would be willing to see the Bank take leadership in such situations, if requested to do so by the country concerned, if it could be generally understood by creditor and debtor nations alike that the IBRD’s own participation in a rescheduling situation would be governed by a simple formula: namely, that the Bank would take steps to avoid receiving any net payments from the debtor country during the rescheduling period.

I reported to Woods the informal concurrence of the U.S. Government in such an initiative on his part. I pointed out to him that this formula might require him in some cases to make the equivalent of a program loan in order to achieve the objective of no net transfers during a given time period. George agreed with this conclusion, and went a step further to say that this proposed formula might require the Bank, if neither project loans nor program loans could be effectuated on the [Page 265] appropriate time schedule, to participate directly in the rescheduling agreement.

Woods expressed his pleasure to know that the United States will support him on this matter. He did not indicate what his next step would be.

In the course of the conversation, reference was made to India and to Chile as illustrations of countries for which the Bank might take this type of leadership.

  1. Source: Washington National Records Center, RG 286, AID Administrator Files: FRC 68 A 2148, PRM 7–1, Development Assistance Committee, FY 1965. Confidential. An attached note from A. Adams to the Executive Secretariat, December 4, indicates that copies were hand carried to Trued (Treasury) and Bator (White House) and requested that copies be sent to Solomon and Chenery.
  2. See footnote 2, Document 94.