108. Memorandum From the Under Secretary of State (Richardson) to President Nixon 1

SUBJECT

  • Proposal for Corporation to Promote Private Investment in Developing Nations

In response to your memorandum of February 13 to Secretary Rogers,2 there is enclosed the State/AID analysis of the International Private Investment Advisory Council proposal to establish a specialized U.S. Government Corporation to promote U.S. private investment in the growth of private enterprise in developing nations.3

Our conclusions are that adopting the IPIAC proposal, modified to provide for more effective policy coordination and to limit balance-of-payments and budgetary costs, accompanied by a strong new emphasis in official aid programs on developing local private enterprise, has several strong advantages:

  • —The concept of such a corporation is strongly supported by prominent business interests and members of Congress, including both supporters and critics of foreign aid.
  • —A corporation could operate investment insurance, guaranty and promotion programs in a more business-like way than is possible under present arrangements. [Page 257]Against These advantages could largely be realized even if, for balance-of-payments and budgetary reasons, the corporation were not now given significant new authority to provide financial assistance to investors.

Against these advantages you will have to weigh the following disadvantages:

  • —The possibility that a more visible U.S. investment promotion effort, even though accompanied by a new emphasis in official aid on local private enterprise will increase host country fears of economic domination by the U.S., adversely affecting our political relations (particularly with Latin America).
  • —The risk that the Congress and the public will conclude—wrongly—that doing more for private investment means we can now do less in development aid.
  • —A balance-of-payments cost, up to $40 million annually.

We have consulted with the Treasury Department regarding the budgetary and balance-of-payments implications of the proposal and Secretary Kennedy believes these considerations can be adequately taken care of if it is decided to go forward with such a corporation.

There is enclosed an outline of the proposal prepared by AID, which has been revised to reflect the modifications which we believe to be desirable.4

Your final decision can best be made in the context of your decisions on the aid program in general, following the overall review of aid policy now being prepared for the National Security Council. Dr. Hannah and Secretary Rogers will have recommendations for you at that time. Secretary Kennedy may have broader comments as well.

Elliot L. Richardson
  1. Source: National Archives, RG 59, S/S Files: Lot 73 D 288, NSC/Misc. No classification marking.
  2. Document 106.
  3. Not printed; entitled “State/AID Analysis of IPIAC Proposal for a U.S. Overseas Private Investment Corporation,” dated March 14.
  4. Not printed; entitled “Outline for a U.S. Overseas Private Investment Corporation,” undated.