CONTENTS Statement of: Insertions for the record: Text of S. 1688.. Answers prepared by the Department of the Treasury to questions of Report giving examples of self-help in Latin America... Memorandum on planning for multinational projects, Inter-American Memorandum on examples of recent FSO projects, loans approved Table showing ordinary callable capital borrowings, as of March 31, 1967 Table showing selected lending activities, all windows, December 31, Memorandum on relending terms in the FSO.. Explanation of the proposed modification of the provisions for the election of executive directors.. 68 Letter to Senator Fulbright from George O. Gray, International Economic Policy Association, May 24, 1967....... Text of the special report of the National Advisory Council on International Monetary and Financial Policies, April 1967 83 III Appendix: Text of the Declaration of the Presidents of America___ INTER-AMERICAN DEVELOPMENT BANK ACT AMENDMENT THURSDAY, MAY 18, 1967 UNITED STATES SENATE, Washington, D.C. The committee met, pursuant to notice, at 10 a.m., in room 4221, New Senate Office Building, Senator J. W. Fulbright (chairman) presiding. Present: Senators Fulbright, Lausche, Symington, Aiken, and Cooper. The CHAIRMAN. The committee will come to order. The Committee on Foreign Relations this morning is holding a public hearing on S. 1688, a bill to amend the Inter-American Development Bank Act to authorize the United States to participate in an increase in the resources of the Fund for Special Operations of the Bank. The proposed legislation would authorize appropriation of $900 million without fiscal year limitation, and it is understood that this sum would be paid in three equal annual installments with the first such payment to be made by the end of this calendar year. (The text of S. 1688 follows:) [S. 1688, 90th Cong., first sess.] A BILL To amend the Inter-American Development Bank Act to authorize the United States to participate in an increase in the resources of the Fund for Special Operations of the Inter-American Development Bank, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Inter-American Development Bank Act (22 U.S.C. 283-283k) is amended by adding at the end thereof the following new section: "SEC. 15. (a) The United States Governor of the Bank is hereby authorized to vote in favor of the resolution entitled 'Increase of $1,200,000,000 in Resources of Fund for Special Operations' proposed by the Governors at their annual meeting in April 1967 and now pending before the Board of Governors of the Bank. Upon the adoption of such resolution, the United States Governor is authorized to agree, on behalf of the United States, to pay to the Fund for Special Operations of the Bank the sum of $900,000,000, in accordance with and subject to the terms and conditions of such resolution. The United States Governor is also authorized to vote in favor of the amendment to Annex C of the agreement, now pending before the Board of Governors of the Bank, to modify the procedure employed in the election of Executive Directors. (b) There is hereby authorized to be appropriated without fiscal year limitation, for the United States share in the increase in the resources of the Fund for Special Operations of the Bank, the sum of $900,000,000.” The first witness today is Under Secretary of the Treasury Joseph W. Barr, who is substituting for Secretary Fowler. Also appearing are Mr. Lincoln Gordon, Assistant Secretary of State for Inter-American Affairs, and Mr. W. True Davis, Assistant Secretary of the Treasury and United States Executive Director of the Inter-American Bank. Secretary Barr, we are glad to have you with us this morning. Will you proceed with your testimony, please? STATEMENT OF HON. JOSEPH W. BARR, UNDER SECRETARY OF THE TREASURY, ACCOMPANIED BY RALPH HIRSCHTRITT, DEPUTY TO ASSISTANT SECRETARY FOR INTERNATIONAL FINANCIAL AND ECONOMIC AFFAIRS, TREASURY DEPARTMENT Mr. BARR. Thank you, sir. Mr. Chairman, it is a real pleasure to appear before you today, representing Secretary Fowler, in support of a proposal to increase the resources of the Fund for Special Operations, the FSO, of the Inter-American Development Bank. The proposed legislation on this matter was transmitted to Congress on April 28. There has also been submitted to the President and to the Congress a special report of the National Advisory Council on International Monetary and Financial Policies, which described the background and the details of the proposal, and recommends its enactment. (For report see appendix, p. 83.) The Inter-American Development Bank was established in 1959 as a regional hemispheric agency of the 20 nations the United States and 19 Latin American countries-members of the Organization of American States. In its 7 years of existence, the Bank has shown itself to be a valuable instrument of multilateral inter-American cooperation. The Bank has made an outstanding contribution to the development of Latin America, including assistance in the critical area of social development. By the end of 1966, the Bank had made 393 loans in the amount of almost $2 billion to finance projects whose estimated total cost exceeds $5 billion. THE BANK'S TWO SEPARATE LENDING WINDOWS Following the pattern already set by the World Bank and the International Development Association-IDA-the Inter-American Bank was established with two separate lending "windows." The "ordinary capital" window provided for loans on conventional banking terms-in much the same manner as the operations of the World Bank. The Fund for Special Operations was designed to make loans on the concessional terms required at least in part by the developing countries. As in the case of IDA and in our own bilateral AID programs, there are no private sources of funds on the soft terms required. The funds required to support FSO lending activities can therefore be obtained only from member contributions. Until 1964 the United States also participated in concessional lending by the Inter-American Development Bank through another facility-the Social Progress Trust Fund. The SPTF is a U.S. trust fund administered by the Bank, to which the United States contributed a total of $525 million. In 1965, however, it was decided not to make any further contributions to the SPTF, to assign its functions to the FSO, and to increase the U.S. contribution to the FSO as the sole remaining |