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As an individual country, and operating bilaterally with these countries, we are constantly-speaking now of the Department of Stateendeavoring to eliminate these various restrictions.

It has been my thought, and perhaps I should say my hope, that an international organization of this type would have more effect in the elimination of certain restrictions than would one country operating individually. There is no question in my mind but that the restrictions that are found in the various countries that need capital represent the greatest deterrent from capital going in there.

The problem is, How are you going to improve the investment climate in these countries? One, we are trying to do it through our friendship, commerce, and navigation treaties constantly; we are trying to do it in our various tax treaties with the countries, but in addition to that I have the feeling—and, again, I say I have the hope that an international body can be more effective in the elimination of certain restrictions than can an individual country, and as powerful as our own country is, with the capital that we are loaning.

I don't know whether I have covered your question,
Mr. DAVIDSON. I think you have very well.

If I understand you correctly-might this be a fair statement: That if, by virtue of this Corporation, we can decrease the area of these restrictions, or if, by virtue of the activities of this International Finance Corporation we can lessen some of those restrictions, that in and of itself would be a consummation so devoutly to be wished for we would probably be willing to spend $35 million for it?

Secretary Waugh. I tried to cover that point, but not as completely as I should have in my statement.

I agree with you, sir. We have spent a great deal of thought, time, and money discussing the flow of investment from this country to foreign countries. I have used this expression before. It may be a homely one, and it may not be accurate. I think we have spent 75 percent of our time discussing what we could do in this country to get foreign investment into other fields—private investment into foreign fields—and 25 percent as to what the other countries should do. I think we have it reversed. I think we should spend 75 percent of our time trying to improve the climate in these other countries, and if we improve the climate the investment will naturally follow.

The approach to this problem has been a little out of balance.

Mr. DAVIDSON. Do you think this will act as a pilot for private investment going abroad, and will stimulate that, and we can see how we work out on these investments ?

Secretary Waugh. It should be a catalyst. This Corporation, if it works out, and both Mr. Humphrey and I repeat it is an experiment, will be a catalyst to attract private capital into these countries. If private capital will go into these countries where an international organization has a 25-percent holding, for example, they know they will be treated better, because if they are not treated right this international body will examine the reasons why they weren't properly treated in that country.

I think that, in itself, sir, is worth more than the investment we are making in it if we can do it.

Mr. DAVIDSON. Frequently these investments in foreign countries will involve a local investment, by a local merchant or local business

man, producer, etc., an international corporation investment, and perhaps, in part, some private investment from people in this country who are investing abroad.

Secretary Waugh. And sometimes all three. Mr. DAVIDSON. All three together? Secretary Waugh. Yes, sir. In other words, I can conceive of a situation in an underdeveloped country where the local people would put up a third of the money, the United States capital would come in and put up a third of the money, and the International Finance Corporation might put up a third of the money. United States management would come in and show these people how to operate, and could develop a better standard of living for a great many people in an underdeveloped area.

Mr. DAVIDSON. Of course, private investors in this country would have to understand that the International Finance Corporation doesn't change these restrictions, and that the investments of the International Corporation are in nowise immune to these restrictions that these territories and countries might set up, nor is the investment in any way guaranteed by the Corporation or by the United States Government in anywise at all?

Secretary Waugh. That is correct, Mr. Davidson. It has been my experience over a great many years that the capital in this country is highly intelligent of all of the risks involved when they go out of the country.

The CHAIRMAN. Mr. Brown.

Mr. Brown. Mr. Secretary, I am very much disturbed by this bill. Why can't you do, through the Export-Import Bank, what you

desire to do under this bill? It is hard to keep up with these lending agencies. The Secretary of the Treasury said this morning that it is just an experiment. Why can't you do it through the Export-Import Bank?

Secretary Waugh. Let me ask if I heard you correctly. You said you were greatly disturbed about this bill because of the fact we could do this through the Export-Import Bank? I wasn't sure I heard your question.

Mr. BROWN. That is right. You could amend the Export-Import Act. You have too many lending agencies now.

Secretary WAUGH. I would like to subscribe to the fact that I think the Export-Import Bank has done a magnificent job over the 19-year period. I personally would dislike to see the Export-Import Bank go into the field of equity financing. I think that the Export-Import Bank would be supplemented and complemented by an international finance corporation. I think it would be very helpful to the ExportImport Bank because it would get private capital into fields where the Export-Import Bank might be called upon to operate.

Then, too, I would go back to my statement made for Mr. Davidson. I think an international organization of this kind, Mr. Brown, can be very helpful in improving the investment climate in countries where the investment climate needs to be improved.

Mr. Brown. I gather from the testimony of Secretary Humphrey that is is purely an experiment. You couldn't guarantee what it will do? That is the way I understood the testimony. I think you are just going into this thing too fast. I think we ought to have a little more time to study it. I think it is wrong to proceed like this.

Secretary Waugh. Mr. Brown, I have talked to Mr. Humphrey about this in times past, and when he uses the word "experiment,” I think it means experiment in the same form that we would have considered the International Bank an experiment a few years ago. don't think he means an experiment in any other way. He thinks of any new corporation that starts being dependent upon its management, and to that extent, this being a new idea, if it has proper management, proper sponsorship, we think that there is a very good chance that it will succeed. Otherwise, we wouldn't be here recommending it.

Mr. Brown. Any bill that encompasses the field that this does deserves more than 1 day's hearing.

Secretary WAUGH. Did you ask a question or make a statement ?
Mr. BROWN. I made a statement.
Secretary WAUGH. That is what I thought.
Mr. PATMAN. Mr. Chairman, I would like to ask a question.

The CHAIRMAN. I would like to say that the last administration endeavored to attain these same objectives and Mr. Truman wrote a message to Congress asking for technical assistance and financial help to the underdeveloped countries and expressed great interest in something being done along that line. I think the objectives stated in his message are about the same as the objectives sought in this legislation.

Mr. Brown. We never had any hearing on this bill or a similar bill before.

The CHAIRMAN. We are having it now, though.

Mr. Brown. I know. When legislation of this magnitude is rushed through without adequate and extensive hearings, it is wrong. We shouldn't push it through. We are almost at the close of the session.

The CHAIRMAN. We have heard from most people who have knowledge on the subject.

Mr. Brown. Nobody has said anything about it except these few people.

The CHAIRMAN. We are going to have the Chairman of the ExportImport Bank here in a few minutes to get his views about it.

Mr. Brown. We haven't had any opportunity at all, outside of 3 or 4 witnesses, to know anything about it.

Mr. PaTMAN. Will we have, Mr. Chairman, the officer of the International Bank who will be president of this IFC as a witness!

Mr. MULTER. Is that Chairman available to testify?

Secretary WAUGH. We don't know who the President will be. It hasn't been announced.

Mr. MULTER. Mr. Patman is asking about the Chairman of the International Bank. There is something in this proposed bill which will indicate the Chairman of the International Bank will be Chairman of this Corporation. Who is that?

Secretary WAUGH. Mr. Black; Eugene Black.

Mr. PATMAN. Mr. Chairman, I would like to ask the witness 2 or 3 questions.

How many agencies of our Government now make loans to foreign countries, directly or indirectly, to the governments or to the people and concerns within those governments?

Secretary Waugh. I do not believe that I could say. I think I could name the principal agencies.

Mr. PATMAN. International Bank is one, Export-Import Bank is another.

Secretary Waugh. The FOA.
Mr. PATMAN. How much lending power do they have ?

Secretary Waugh. They have lending power in accordance with the mutual security bill.

Mr. PATMAN. About $3 billion, I think, is proposed in the bill on the floor this afternoon. What else?

What else?

Secretary Waugh. Those are the principal agencies that I am familiar with, Mr. Patman.

Mr. PATMAN. Which ones deal more with this point 4 program, or have dealt with it in the past?

Secretary WAUGH. The Mutual Security Agency.
Mr. PaTMAN. Deals directly with that; doesn't it?
Secretary WAUGH. Yes, sir.
Mr. PATMAN. That is the objective; isn't it?
Secretary Waugh. Yes, sir.

Mr. PATMAN. So there is no reason to pass this bill predicated upon the theory that it is to carry out point 4, because we have an agency that is carrying out point 4.

Secretary WAUGH. No. There was no thought in anyone's mind that I have heard expressed that this bill was to carry out point 4. It was hopeful that if this bill passed, and we could develop enough private capital in the underdeveloped countries, that there would be less and less need for the point 4 program coming through the Government agencies.

Mr. PATMAN. That is more of an indirect approach on it. This bill was never intended and is not now intended to carry out the point 4 program?

Secretary WaUGH. As it is today; no, sir. Mr. PATMAN. These 56 countries that will be subscribers to this fund, if the same ones come in that went into the International Bank. it is contemplated that the people in all those countries will have what you might term “equality of opportunity to obtain loans." The people in one country will not have any better chance or opportunity to obtain a loan than people in another country under similar like circumstances; is that right?

Secretary WAUGH. I would assume that would be a basic concept; yes, sir.

Mr. PATMAN. In other words, the people in the United States, if they qualify, would be just as eligible as the people in any other country?

Secretary Waugh. Yes, sir; but it is a little difficult for me, and in answering this question, Mr. Patman, I certainly do not want you to think that I am in any way flippant, but this conception—the purpose of this Corporation, is to further economic development by encouraging the growth of productive private enterprise in member countries, particularly in the less developed areas.

Mr. PATMAN. That is what I say—in member countries. We are a member country and we have some less developed areas.

Secretary WAUGH. Yes, sir.

Mr. PATMAN. If we qualify, we would be just as eligible as people in the other countries; wouldn't we?

Secretary WaUGH. Legally, I would say yes.
Mr. PATMAN. That is all.
Mr. MULTER. Mr. Chairman?
The CHAIRMAN. Mr. Multer.

Mr. MULTER. Let's see if we can't clear up some of the confusion that may be attendant upon this entire problem. The Export-Import Bank is making loans and using entirely American funds; that is, our own funds. I think there is an authorization of some $5 billion appropriated by the United States Government to the Export-Import Bank. That operates under the limitations of the law setting it up. Am I not right?

Secretary Waugh. That is right; yes, sir.

Mr. MULTER. The International Bank for Reconstruction and Development, on the other hand, is set up by the various participating governments, and has a limited amount contributed to that corporation by each of the participating governments, and in addition, has the right to sell bonds to the public

by which they raise additional moneys, which they in turn lend.

Am I right?
Secretary Waugh. Yes, sir.

Mr. MULTER. The limitation of the International Bank on their lending powers is that they may lend only to foreign governments, or to enterprises, private enterprises within the foreign countries where the foreign government will guarantee the repayment of the loan?

Secretary WĂugh. That is correct.

Mr. MULTER. What we are doing here, however, is setting up another agency which will not interfere with Export-Import Bank, but each of the participating countries will contribute its proportionate share, as agreed, up to $100 million. It will be authorized to sell bonds to the public and raise additional money for lending if the public will buy those bonds, and those loans then will be made directly to private enterprise in the various countries that are participating. Am I right?

Secretary Waugh. That is correct.

Mr. MULTER. It is intended that those loans will not be guarantied by the governments?

Secretary Waugh. That is correct.

Mr. MULTER. And to that extent these loans will carry much greater risks—this lending program is an experiment—am I not right?

Secretary Waugh. Yes, sir.

Mr. MULTER. And if we set something up like this, and do it on this basis, if the experiment should turn sour, you certainly don't want one of the other agencies, either the Export-Import Bank or International Bank, sustaining any part of the loss. You want to keep them separate and apart in their lending facilities, separate and apart from this, which is somewhat experimental and may or may not work out. Am I not right?

Secretary Waugh. Yes, sir. Speaking as an Alternate Governor of the International Bank, I don't speak with quite as much experience there as I do as a representative of the State Department speaking as to our relations with the Export-Import Bank. I would dislike to see the Export-Import Bank get into this field at this time.

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