106. Memorandum From President Nixon to Secretary of State Rogers 1

The International Private Investment Advisory Council has proposed the creation of a federally chartered corporation for the purpose of promoting private capital investment in the developing nations. (See item XVIII-2 in the report from Arthur Burns’ group)2

I will need your analysis of this proposal by March 12, 1969. In preparing your report, you should consult Mr. Kennedy regarding the budgetary and balance-of-payments implications of the plan.

When you submit your report to me, please send a copy to Arthur Burns.

RN

Attachment3

2. Foreign Aid

During the course of the campaign you urged that “we ought to turn our foreign aid programs more in the direction of stimulating private [Page 254]ise, less in the direction of financing government enterprise.” One possible means of accomplishing this has just been suggested by the International Private Investment Advisory Council.4 This Council was created under the terms of the Foreign Assistance Act of 1966 to advise the Agency for International Development.

The Council has proposed a new federally-chartered corporation for the purpose of promoting private capital investment in the less developed countries. Newspaper accounts indicate that a number of Republican legislators are favorably inclined toward the proposal, and it thus seems likely that you will be asked to support it.

The proposed corporation would take over AID’s present investment-guarantee program, which insures investors in developing countries against loss from certain risks of a political and business nature. Besides its investment-guarantee activities, the corporation would have authority to make loans to private parties either in dollars or in local currencies. The corporation could issue its own securities with principle and interest guaranteed by the U.S. government, and it would also have the right to borrow directly from the Treasury.

Some features of the proposal are soundly conceived. Importantly, the principle of co-insurance is honored and safeguards are provided against direct loans that would compete with wholly private financing. There are numerous features which need to be clarified, however, and it would seem advisable for you to ask the Secretary of the Treasury and the new head of the Agency for International Development to explore the proposal.

Whatever its technical merits, there are both budgetary and balance-of-payments reasons for moving cautiously toward the establishment of the proposed corporation.

The proposal does not contemplate a substitution of private capital investment in underdeveloped countries for present government-to-government foreign aid. Instead, the new corporation would complement foreign-aid programs, and it would be specifically aimed at an expansion of total private investment activities. This would not be a desirable development at a time such as the present, when the resources available for use in this country are under strain and when our balance-of-payments position is precarious. Moreover, the corporation’s authority to borrow directly from the Treasury may constitute an additional burden on the Federal budget.

  1. Source: National Archives, RG 59, S/S Files: Lot 73 D 288, NSC/Misc. No classification marking. Attached to an undated memorandum from Secretary Rogers to AID Administrator Hannah and Assistant Secretary Greenwald asking that they prepare the analysis requested by the President.
  2. Arthur Burns, in his capacity as Chairman of the Program Coordination Group, sent the President-elect the Group’s report under cover of a January 18 letter. Entitled “Recommendations for Early Action or Consideration,” the 117-page report dealt primarily with domestic issues, but Section XVIII, the final section, is entitled “International Economic Relations.” In his January 18 letter Burns noted that the report was an enlarged version of “the tentative report” that he had submitted to the President-elect on January 6. The letter is on the stationery of the Office of President-elect Richard M. Nixon with a New York address. (Ford Library, Arthur Burns Papers, Box A18, Report to President Elect Nixon)
  3. No classification marking. The attachment comprises pages 109 110 of the Burns Group report.
  4. The Council’s report, entitled “The Case for a U.S. Overseas Private Enterprise Development Corporation,” is dated December 1968. A copy is attached to a January 8 memorandum from AID Deputy Administrator Poats to Salzman apprising him of a January 7 meeting at which the report was discussed. (Washington National Records Center, Agency for International Development, AID Administrator Files: FRC 286 73 A 518, LGP 3 Private Enterprise FY1969)