2.03 The Fund for Special Operations (FSO) is available to make loans on terms and conditions appropriate for dealing with special circumstances arising in specific countries or with respect to specific projects. Thus loans from the Fund may be on terms which minimize the impact of the debt on the balance of payments of the country of the borrower, such as repayment in local currency, longer maturities, and lower interest rates than for ordinary loans.

2.04 The Social Progress Trust Fund (SPTF) was created pursuant to an agreement entered into between the United States and the Bank on June 19, 1961. The Agreement authorized the Bank to make loans in the fields of land settlement and improved land use, housing for low income groups, community water supply and sanitation facilities, and supplementary financing of facilities for advanced education and training related to economic and social development and to provide technical assistance related to these fields and to the mobilization of domestic resources. The bank accepted the administration of the Fund for these purposes, deeming it to be consistent with the provisions of the Agreement Establishing the Bank and to strengthen the efforts of the Bank to foster balanced economic growth and greater social progress in the member countries. In 1964 it was concluded that new capital should not be sought thereafter for the SPTF, and the Board of Governors decided that in the future the Bank should include in the operations of the FSO financing for social development purposes, including those previously financed through the SPTF.

2.05 Initially the available capital of the Bank consisted of (a) the equivalent of US$381,580,000 paid in by the member countries as follows: 20% by September 30, 1960; 40% by October 31, 1961; and the final 40% by October 31, 1962, and, (b) the callable capital, equivalent to US$431,580,000, which was subscribed by the members at the outset. The initial resources of the Fund for Special Operations, equivalent to US$146,316,000, were contributed by the members in two equal installments due on September 30, 1960 and October 31, 1961, respectively. A resolution authorizing a US$1 billion increase in the callable capital stock of the Bank was approved by the Board of Governors on January 28, 1964, which provided for subscription by the member countries in two equal installments not later than December 31, 1964, and 1965, respectively. Under a second resolution, increased contributions of the members to the Fund for Special Operations equivalent to US$73,158,000, also became effective on January 28, 1964 and were contributed by the members by April 28, 1964. A further increase of the equivalent of US$900 million in the Fund for Special Operations was approved by the Governors on March 31, 1965, with payment in three installments due not later than June 30, 1965, December 31, 1965 and December 31, 1966.

2.06 The initial assets of the Social Progress Trust Fund were US$394 million. In February 1964, the United States provided an additional US$131 million for the Fund.

2.07 Since the beginning of its activities, the Bank has been operating at an active and increasing pace. On December 31, 1966, the total amount committed by the Bank in loans from its own resources and the Social Progress Trust Fund it administers, amounted to US$1,905.3 million.

The distribution of the Bank's loans by types of resources utilized is as follows:
Ordinary capital resources: 139 loans for a total of US$747.2 million.
Fund for Special Operations: 130 loans for US$656.9 million.

Social Progress Trust Fund: 117 loans for US$501.2 million.

The total cost of the projects financed is estimated approximately at US$5 billion. Thus, the Bank is helping to mobilize approximately US$3,100 million from other sources, primarily those of the borrowing countries, representing almost two thirds of the total investment.

The disbursement of the Bank's loans has also proceeded rapidly. As of December 31, 1966, the cumulative amount disbursed totaled US$798.3 million, or about 42 percent of the amount committed.

2.08 One of the fundamental characteristics of the Bank's operations has been the wide variety and scope of the fields covered. In the area of economic development, attention has been given not only to the traditional infrastructure sectors, such as power and transportation, but also to agriculture, industry, and mining. In the social field, the Bank has financed housing projects for low-income groups, water supply and sewerage projects, improvements in land use and tenure, and education projects. The following table shows the distribution of the Bank's loans, by fields of activity.

Millions of dollars

Figure 1

ANNEX C

CUMULATIVE LOAN AUTHORIZATIONS 1/

BANK'S OWN RESOURCES AND SOCIAL PROGRESS TRUST FUND
(As of December 31, 1966)

1/ Does not include seven loans for the equivalent of US$8.1 million
from the Canadian Fund which the Bank administers

TABLE 1.-Sectoral distribution of IDB loans, 1961-66

1966

2.09 This varied lending activity has been made possible by the operating flexibility afforded by the Bank's financial structure. The Bank has endeavored to strike an appropriate balance between hard and soft loans, as well as between loans to the public sector and the private sector, taking into account not only the financial requirements of the various economic and social development fields, but also the earning capacity of the projects and the payment capacity of the member countries.

2.10 As part of its operations, the Bank has supplied a substantial volume of resources for technical assistance activities in the member countries. Up to December 31, 1966, it had approved nearly 560 technical assistance operations to

taling US$78.5 million, of which US$63.0 million is reimbursable1 and US$15.5 million is non-reimbursable.

The primary aim of the Bank in such operations is to ensure the most effective use of the funds allocated for investment and to increase the member countries' capacity to absorb external resources. These activities have ranged from aid in the preparation of specific projects to the establishment and reorganization of development institutions and the training of personnel in different fields.

2.11 The Bank's loans in Latin America are being translated into physical accomplishments of growing dimensions. Thus, the projects which the Bank is helping to carry out with the loans which it authorized through December 31, 1966 are resulting in :

The bringing into production or improvement of some 4,813,508 acres of farm land. As of December 31, 1966, some 1,569,050 had already been brought into production. In addition, agricultural production and productivity in Latin America benefitted from 278,251 credits relent from Bank loans extended to development institutions.

The construction, expansion or improvement of 48 industrial plants, of which 29 have already been finished. In addition, some 2,415 credits have been extended to small and medium-scale industrial enterprises from loans made by the Bank to development institutions.

The expansion of electric generating capacity by 2,710,000 kilowatts; the installation of 7,886 miles of transmission lines, and the construction or improvement of distribution systems in 120 communities with a population of 3 million. As of December 31, 1966, units generating 81,500 kilowatts were in operation; 2,248 miles of transmission lines had been installed and distribution networks in 10 communities with a population of 1 million had been completed.

The construction or improvement of about 1,545 miles of 10 main highways and 7,870 miles of 124 access and farm-to-market roads. As of December 31, 1966, 1,096 miles had been completed. In addition, Bank loans were helping to improve five major Latin American ports: Paranaguá in Brazil, Cartagena, Barranquilla, Santa Marta and Buenaventura in Colombia (in addition, improvement of the port of Acajutla in El Salvador was being financed with Canadian funds).

1 This figure is composed of the amount shown for preinvestment in Table 1, substantial technical assistance allocations provided as part of loans included under other headings in that table, and a relatively small amount of technical assistance financed on a reimbursable basis but not included in the loan operations of the Bank.

The construction, expansion or improvement of 2,340 water supply systems and 253 sewage systems which will benefit a population of 36,700,000 persons. As of December 31, 1966, some 897 water systems and 72 sewage systems had been finished and substantial work had been done on another 367 water and 84 sewage systems.

The construction of about 297,200 housing units for low-income families which will benefit some 1.8 million persons. As of December 31, 1966, some 149,688 had been finished and 29,450 were under construction. Some 56,474 were built in 1966.

The modernization or expansion of 73 centers of higher education and advanced training. The projects include the construction of buildings at 29 centers, the acquisition of equipment for 70, library improvements at 25, and technical assistance for 23 centers. The total enrollment of the centers which are benefitting from the Bank's loans is expected to be 244,000 by 1970.

As of December 31, 1966, construction at 6 projects had been completed; 26 per cent of the construction funds had been invested at another 16 centers; about 15 per cent of the equipment had been made available to 30 centers; 12 per cent of the technical assistance had been extended at 8 centers and about 12 per cent of the funds for library material had been invested.

In the preinvestment field, the Bank's loans are contributing to the establishment of 8 national and 1 regional preinvestment funds designed to provide a continuing flow of prepared development projects suitable for financing. In addition, some 27 other loans are being devoted to specific preinvestment projects. 2.12 In accordance with the provisions of its Charter, the Bank has extended financial and technical assistance to all Latin American member countries. Nevertheless, taking into account the necessity of achieving balanced development of the region, the Bank has endeavored to give preferential attention to the relatively less developed countries. This is confirmed by the fact that of the total value of loans granted by the Bank as of December 31, 1966, ten of the member countries, which by reason of their per capita income could be considered in the latter category, have received the equivalent of US$12.73 financing per capita, while for the other countries the ratio is US$7.43 per capita. The Bank proposes to maintain in the future this policy of special attention to the relatively less developed countries.

2.13 The average commitment rate for the years 1961-66 was approximately US$125 million per year in ordinary capital operations and US$193 million from the FSO and SPTF combined. The total resources available to the Bank under its own Agreement and from the Social Progress Trust Fund, and the corresponding loan commitments are as follows:

TABLE 2.-Available resources and approved loan authorizations from the Bank's own resources and from the Social Progress Trust Fund as of Dec. 31, 1966.1 [In thousands of dollars or the equivalent]

Paid-in capital plus amounts received from borrowings.

Based on callable capital subscription of the United States. Also reflects reduction in available callable capital by reasons of sale of US$383,334 in guaranteed participations to the Instituto Español de Moneda Extranjera (Spain).

No participations have been sold in SPTF loans.

Excludes US$27,694 of capital expended for technical assistance and for operating expenses during early years of the Fund. It is contemplated that a substantial part of the remaining balance will be used for technical assistance.

2.14 Operations authorized in 1966 with ordinary capital resources were US$100.9 million, that is slightly below the yearly average of US$129 million while the US$291.3 million of operations financed from the FSO were substantially above the average of US$174 million for the FSO and SPTF taken together before. It is anticipated that in each of the years 1967 and 1968, the Bank will process operations in somewhat greater amounts.

2.15 The estimated program of ordinary capital loans to be processed in 1967 and 1968 represents commitments averaging about US$175 million annually. The 1967 estimate is based on the loan already authorized and on the substantial number of applications presently in various stages of processing in the Bank. The projection for 1968 is deemed to be realistic in the light of past experience and the administrative capacity of the Bank.

2.16 The operations of the Fund for Special Operations and the Social Prog. ress Trust Fund are dealt with together, as the dollar resources of the SPTF are substantially exhausted, and the expanded resources of the FSO are intended to cover the lending fields previously financed with SPTF resources.

2.17. The 1966 commitment for the FSO totaled US$291 million. The 1967 and 1968 projections for the FSO operations represent commitments totaling in the order of US$400 million per year.

2.18 From the beginning the Bank has made every effort to create and expand a market for its bonds in the financial markets of the world. As shown in Table 3, it has placed long-term obligations not only in the United States, but also in six non-member countries: Italy, Germany, the United Kingdom, Spain, Japan and Switzerland. A short-term issue was placed with the central banks or other financial institutions of 15 Latin American member countries of the Bank and of two non-members. The amounts of debt placed in the non-member countries as of December 31, 1966, are summarized in Table 4.

The Bank has sold substantial amounts of participations in its loans, both from the ordinary resources and from the Fund for Special Operations. As of December 31, 1966, these participations amounted to an original sum of US$28,667,474 and US$1,645,058, respectively (Table 3).