Foreign Relations of the United States, 1981–1988, Volume XXXVIII, International Economic Development; International Debt; Foreign Assistance

391. Action Memorandum From the Acting Assistant Secretary of State for Economic and Business Affairs (Larson) to Secretary of State Shultz¹

Washington, March 21, 1988

SUBJECT

• U.S. Acceptance of the Convention Establishing the Multilateral Investment Guarantee Agency

ISSUE FOR DECISION

Whether to concur in U.S. membership in the Multilateral Investment Guarantee Agency (“MIGA”) and sign an Instrument of Acceptance for the Convention Establishing the Multilateral Investment Guarantee Agency.

ESSENTIAL FACTORS

On June 18, 1986, you approved a Full Power authorizing the signing of the MIGA Convention.² The Agreement was signed on behalf of the United States the same day. Subsequently, the Congress enacted P.L. 100–202, the fiscal year 1988 continuing resolution, which inter alia authorizes the President to accept membership for the United States in MIGA, and to subscribe to 20,519 shares of the capital stock of MIGA. Funds for MIGA were appropriated in the Foreign Operations (International Financial Institution) portion of the Continuing Resolution.

MIGA is an international institution affiliated with the World Bank designed to encourage the flow of direct investment to developing countries. It will issue guarantees against non-commercial investment risks, carry out a wide range of activities to promote direct investments, and encourage sound investment policies in member countries. MIGA will promote productive investment and strengthen the private sector in developing countries, thereby encouraging long-term sustainable economic growth and development. Most importantly, MIGA will be the first multilateral institution with a clear mandate to persuade developing countries to accept the fundamental principles of an open investment climate.

The Department of the Treasury, which has the lead role in matters relating to the multilateral development banks, also will be taking the lead role with respect to U.S. participation in the MIGA. Under the authorizing legislation, Treasury Secretary Baker will be U.S. Governor of the Agency, and Under Secretary of State Wallis will be the Alternate U.S. Governor. The United States will have a seat on the MIGA Board of Directors to ensure the MIGA focuses on policy reform and economically sound investments.

Public Law 100–102 imposes certain conditions on U.S. participation in MIGA. The U.S. Director on the MIGA Board must propose and seek adoption of policies and procedures limiting support for projects in countries not according internationally recognized workers’ rights, which are subject to trade distorting performance requirements, or which will increase productive capacity in an industry facing excess worldwide capacity. No U.S. contribution to MIGA may be made before April 30, and then not unless the Secretary of the Treasury certifies and reports to the Congress either (1) that the MIGA Board has adopted such policies and procedures or (2) that the U.S. Director on the Board will continue to seek such policies and procedures until they are adopted and failure to make the U.S. contribution will make it more difficult to achieve such policies and procedures. As indicated in the accompanying Memorandum of Law, these conditions do not operate as a bar to acceptance of membership.³

Treasury is already consulting with the World Bank on the clarifications and rule changes needed to address this statutory requirement.⁴ The MIGA Board of Directors must approve any rule changes, and the Board cannot be established until MIGA has been accepted by countries representing at least 33% of total contributions. Currently MIGA has been accepted by 26 countries contributing approximately 28 percent of the total. Participation by the United States, with a 20 percent share, will permit MIGA to commence operations and the Board to be established.

At an appropriate time this Department, in consultation with Treasury, will seek an Executive order under the International Organizations Immunities Act, as amended, designating the MIGA as an international organization entitled to enjoy the privileges, exemptions and immunities provided for by that Act.

Our standard practice requires that Instruments of Acceptance be signed by the President, the Secretary of State, or the Acting Secretary of State.

RECOMMENDATION

That you approve acceptance of membership in MIGA, and sign the Instrument of Acceptance at Tab 1.⁵

1. Source: Department of State, Executive Secretariat, S/S Files, 1988–1989 Official Office Files for (E) Economic Affairs Allen Wallis, Lot 89D154: Through Memoranda March 1988. No classification marking. Sent through Wallis. Drafted by Russell Munk (Treasury) and Sharon Villarosa (EB/IFD/OIA) on March 7; cleared in L/EBC, EB/IFD, EB/IFD/OIA, M/COMP, L/UNA, L/T, Treasury, and L. Villarosa initialed for all clearing officials. A stamped notation reading “GPS” appears on the memorandum, indicating Shultz saw it. Klosson initialed the memorandum and wrote “3/22.”
2. See footnote 2, Document 386.
3. Attached at Tab 2 but not printed.
4. In a July 7 memorandum to Baker, Berger described the final steps required to join the MIGA and the strategy adopted by Treasury, after consultations with the management of the World Bank, to build consensus in favor of policies that would be similar to those in the legislation. (National Archives, RG 56, Records of the Office of the Secretary of the Treasury, Congressional Correspondence, 1988, UD–10, 56–10–1, Box 34, Group Letters s/88, Membership in the MIGA 66981)
5. Tab 1, the Instrument of Acceptance, signed by Shultz, is attached but not printed. Under the recommendation is the stamped date: “Mar 24 1988.” Attached at Tab 3 but not printed is the cover page of the convention, dated October 11, 1985.