Under title I of the Agricultural Trade Development and Assistance Act of 1954, as amended," the United States is authorized to sell agricultural commodities to friendly countries, with payment in the currency of the recipient country. Section 104(e) provides that title I sales proceeds, to the maximum usable extent, may be loaned to (1) U.S. firms or their branches, subsidiaries, or affiliates for business development and trade expansion in the foreign country, or (2) to either U.S. firms or firms of the local country for expanding markets for, and consumption of, U.S. agricultural products abroad.

Loans under this section of Public Law 480 (Cooley loans) may not be made for the manufacture of products which would be exported to the United States in competition with U.S.-made products, or for the production of commodities which would be marketed in competition with U.S. agricultural products. These loans usually carry interest rates comparable to those charged for similar loans by local development banks in the country where the loan is to be used, and maturities are related to the purposes of

447 U.S.C. § 1704(e). 45 7 U.S.C. §§ 1691-1736.

the financing. As indicated in table 24, the equivalent of approximately $43 million in Cooley loans to private business firms was approved in fiscal year 1966. Since the beginning of the Cooley loan program through June 30, 1966, loans to private business firms amounted to the equivalent of over $300 million.

Section 104(g) loans to foreign governments*

Section 104(g) of title I provides that foreign currencies received from sales of agricultural products may be used for loans to finance economic development in the host country. Title I sales agreements specify the amounts of currencies to be made available for economic development loans, and these loans are coordinated to the maximum extent possible with other forms of assistance. However, the currency is not generated until commodity shipments are made and local currency is deposited. The loan agreement is usually negotiated simultaneously with the sales agreement. Loan agreements signed during fiscal year 1966 with 16 countries totaled the equivalent of $200 million (see table 25).

Loans under sections 104(e) and (g) of title I are authorized by the Agency for International Development subject to general coordination

40 7 U.S.C. § 1704(g).

prove individual investments before AID guarantees can be issued.

Under the Foreign Assistance Act of 1961, as amended, three types of programs have been authorized: (1) specific (political) risk guarantees against (a) inconvertibility of foreign currency, (b) loss through expropriation or confiscation, and (c) loss due to war, revolution, or insurrection: (2) extended risk and housing guarantees which cover up to 75 percent of both political and business risks; and (3) housing guarantees which cover up to 100 percent of losses on certain guaranteed projects.

Specific (political) risk guarantees

These Government guarantees offer protection for private U.S. investment against the political risks of nonconvertibility of local currencies, loss from expropriation and damage from war, revolution, and insurrection.

Two new developments concerning this program became effective on March 15, 1966:

Fees for guarantees were reduced, for existing as well as for future guarantee contracts. The fee for current convertibility coverage was cut from one-half percent to onefourth percent of the amount at risk in the current year. The fee for the amount on "standby" (the maximum risk covered less the current year risk) was reduced from onefourth percent to one-tenth percent for all guaranty coverages.

A new guarantee contract was made available to investors which combines coverage on losses due to expropriation with those due to war, revolution and insurrection. The cost for the combined coverage is seven-eighths percent of the face value; singly the two coverages cost one-half percent each.

In the fiscal year under review, 601 separate guarantee coverages were issued for a total dollar value of $990.5 million, thereby increasing to $3,523 million the value of all guarantees written to date under the program (see table 26). Guarantees still outstanding on June 30, 1966, totaled $2,861 million (including $54.5 million of DLF guarantees). The projects protected under guarantees issued this year were located in 41 different

47 Development Loan Fund.