INCREASE IN IDB RESOURCES

Proposals for increasing the loan resources of the Bank, initiated by the Board of Governors in April 1962, became effective on January 28, 1964. The authorized callable capital stock of the Bank was increased by $1 billion; a 50-percent increase ($73.2 million) was approved in the existing members' quotas in the Fund for Special Operations (FSO); and an additional increase of $300 million in the Bank's authorized capital (both paid in and callable) was approved to provide for the admission of possible new members. Of the $300 million increase, $75 million is to be paid-in capital and $225 million callable.

One-half of the members' increase in the callable capital is to be subscribed on or before December 31, 1964, and the remainder by December 31, 1965. Increases in quota contributions to the FSO were payable within 90 days. The vote of the U.S. Governor and U.S. participation in the callable capital ($411,760,000) and in the increase in quotas in the FSO ($50 million) were authorized by the Congress on January 22, 1964 (Public Law 88-259).

The initial authorized Ordinary Capital resources of the Bank totaled $850 million, of which $400 million is paid-in capital and $450 million callable capital. The latter form of capital is subject to call only when required to meet obligations of the Bank created by borrowing for, or by guaranteeing loans from, the Bank's Ordinary Resources. The increase in the callable capital is intended to strengthen the Bank's guarantee funds, thereby increasing its borrowing capacity and enabling it to raise sufficient capital to assist in fulfilling the basic objectives of the Alliance for Progress. As a result of the foregoing changes, the present authorized capital stock of the Bank consists of $475 million in paid-in capital and $1,675 million in callable capital, or a total of $2,150 million.

As noted above, Secretary Dillon, at the Annual Meeting of the IDB Governors at Panama in April, indicated that although the increased authorized capital provided assurance for some time to come of adequate resources for financing on conventional terms, there was no such assurance with respect to the adequacy of funds for loans on easy repayment terms which are a necessary supplement to those made on ordinary banking terms. To continue to maintain an adequate rate of lending on easy repayment terms, as well as to enhance the effectiveness of the Bank, Secretary Dillon supported the proposal calling for an increase of $300 million per annum in the resources of the FSO over a 3-year period. The United States would contribute $250 million per annum, and no further contributions would be made to the Social Progress Trust Fund.

The Board of Governors at the Panama meeting accepted this proposal and recommended that member governments take appropriate action to increase the Fund for Special Operations by $900

Since Cuba did not become a member of the IDB, total subscriptions amounted to $813.2 million rather than $850 million, and consisted of a paid-in portion of $381.6 million and a callable portion of $431.6 million. [Footnote in source text.]

million through contributions in three equal annual installments. It was further recommended that the Bank in the future include in the operations of the FSO financing for social development purposes, including those previously financed through the Social Progress Trust Fund.43

The U.S. Executive Director of the Inter-American Development Bank, or his Alternate, acting on the advice of the Council, supported the decisions taken with respect to the foregoing matters.

Document III-83

"The Alliance for Progress Is . . . a Collective and Not a Bilateral Program": ADDRESS BY THE UNITED STATES MEMBER OF THE INTER-AMERICAN COMMITTEE ON THE ALLIANCE FOR PROGRESS (ROSTOW), WEST POINT, NEW YORK, AUGUST 7, 1964 (EXCERPT)**

Behind the creation of CIAP lay these fundamental perceptions shared by our governments.

First, the Alliance for Progress cannot and should not be viewed as a bilateral aid program between individual Latin American countries and the United States. It is, as I said earlier, a common commitment by the governments to their peoples that this is the decade in which we shall all work together to bring about in this hemisphere sustained economic growth under conditions of increasing social justice and political democracy. The Alliance for Progress is, in its essence, therefore, a collective and not a bilateral program.

Νο

Second, the primary responsibility for conducting the alliance must lie with the nations and peoples of Latin America themselves. outside power or international institution can bring about the transformations required to yield sustained economic growth, along the social and political lines desired by a nation. Only the human beings within a nation, working together toward a common goal, building and improving their own institutions, can do the job. Moreover, more than 80 percent of the material resources now being invested in Latin America are the resources of the Latin American nations themselves. President Johnson has made it quite clear that the commitment of the United States to the Alliance for Progress has never been stronger than it is today. And I am confident that this is also true of the international institutions-notably the World Bank, led by Mr. George

"See Special Report of the Council on U.S. Participation in an Increase in the Resources of the Fund for Special Operations of the Inter-American Development Bank (H. Doc. No. 316, 88th Cong., 2d sess.). [Footnote in source text.] "Department of State Bulletin, Aug. 31, 1964, pp. 306–311. The address was made before the 1964 Conference of American Armies at the U.S. Military Academy, West Point. Mr. Rostow was also Chairman of the Policy Planning Council, Department of State.

Woods, and the Inter-American Bank, led by Dr. Felipe Herrera, who contributed so much to the CLAP meetings in Mexico City last month. But all of us working to generate and contribute resources from outside Latin America can only be junior partners in the enterprises. The heart of the task lies in the nations of Latin America themselves.

45

Third, the Alliance for Progress is a multilateral effort in a different sense. There is a strong impulse in Latin America to break out of the traditional national approaches to development, which have marked the last generation, and to work toward increased economic unity in Latin America. That impulse takes many forms, among them efforts to organize the Central American Common Market, the Latin American Free Trade Area, and to carry forward a growing list of development projects which involve more than one country and which would bind the nations of Latin America closer together. There is a desire among the Latin American nations and peoples to give increasing economic substance to the elements of common history, common tradition, and common culture of the region; and there are good technical and economic reasons which support this powerful sentiment.

Finally, those who met at São Paulo and created CIAP" also perceived that the Alliance for Progress must be multilateral in the sense that all the agencies committed to assist Latin American development should concert their efforts on a team basis in support of the national and multinational plans, programs, and projects which are its substance.

All these insights and judgments lay behind the decision to multilateralize the Alliance for Progress and to create CIAP as an instrument for this purpose.

There was a second strand of thought present at the São Paulo meetings. Taking stock after some 3 years of practical experience with the Alliance for Progress, our governments had every reason to reaffirm the goals and principles of the Punta del Este Charter. But they felt it was time to identify the specific problems that were delaying forward movement and to attack those problems on a practical basis with great energy. They judged that what was required was machinery to move the whole enterprise forward at a faster pace.

Thus, as the members of CIAP gathered in Mexico City last month at our first meeting, we were inspired and guided by these two principles: first, by the desire of our governments to reaffirm the alliance. as a multilateral enterprise and to build it in a framework of true hemispheric partnership; and, second, by the need to get on with the job at an accelerated pace. It was in this collective and pragmatic spirit that we worked and wrote our report.“

49

I believe you will find our report a somewhat unusual international document. It does not consist of resolutions. It is a statement of a

45

See American Foreign Policy: Current Documents, 1960, pp. 193–194.

46 See ibid., 1961, pp. 358–372.

47 See ibid., 1963, pp. 342–347.

48 Text ibid., 1961, pp. 395-409.

"The first meeting of the Inter-American Committee on the Alliance for Progress was held in Mexico from July 10-21, 1964.

OAS doc. OEA/Ser.H/XIII; CIAP/74, Rev. 2.

For the Final Report, see

series of problems, followed by specific assignments of responsibility for dealing with them. It is strictly an action document.

The tasks of the alliance are broken down under four major headings: the domestic effort of the Latin American nations; foreign trade; problems of external assistance to Latin America; and Latin American economic integration. Under each heading we tried to isolate quite specific problems which have to be solved if the alliance is to reach its targets. We considered how these problems might be tackled; and we assigned action to those elements, within the whole machinery of the Alliance for Progress, which are most capable of bringing about solutions.

As a result of this method I can tell you we made a lot of work for ourselves, for our governments, and for the various institutions committed to the Alliance for Progress.

50

Between now and the next meeting of CIAP in October of this year we shall have to address ourselves to more than 20 specific tasks, including an intensive country-by-country review of the state of Alliance for Progress plans and programs. A good many of the problems we posed will, of course, not be finally solved between now and October; but, in the wake of this CIAP meeting, I can report to you that, throughout the hemisphere, in the international institutions of the alliance connected with it, and in the Government of the United States, there is not merely great activity but a fresh determination to grapple with these problems and to get on with the job.

Let me briefly list some of these tasks.

We agreed that we must accelerate the formulation of national development plans and programs. Nine countries of the hemisphere have already completed such plans. It is our hope that in the year ahead all the others will do so. As we indicated in our report, we do not believe that such national programing is a panacea for economic development. We need national plans because they offer a useful and essential method for establishing priorities, for achieving balance in the process of economic growth, for identifying critical bottlenecks, and for providing a clear and rational basis for the allocation of external aid.

We agreed that it was necessary to launch a concerted program in Latin America designed to break down the market barriers between the cities and the countryside. Inefficient marketing arrangements not merely make agricultural products in the cities more expensive than they should be, but they also inhibit that expansion and diversification of agriculture which Latin America urgently requires. Moreover, the sluggishness of Latin American agriculture limits the size of industrial markets and prevents more rapid industrial development. We agreed that the governments of Latin America should urgently seek greater efficiency in government-owned corporations. Large

50

The Second Meeting of the CIAP was held in Washington from Oct. 26-31, 1964. The Final Report is OAS doc. OEA/Ser. H/XIII; CIAP/178, Nov. 25, 1964.

deficits in certain of these corporations in certain countries are not merely a drain on public revenues but also a major cause of inflation. We agreed that, quite aside from the work going forward in the United Nations and other international bodies to expand Latin American trade, CIAP should take a hand, especially, in ironing out trade problems within the hemisphere and, if possible, in helping our colleagues in LAFTA get on with their mission.

We agreed that a major effort should be made to generate more projects for external financing in Latin America; and that both Latin American resources and the resources of the governments and agencies engaged in external assistance should be mobilized for that purpose, since it is a fact that there are more resources available, particularly in the international banking institutions, than are now being fully exploited for the financing of projects.

We examined candidly what all the governments of the hemisphere, including the United States Government, could do to speed the flow of external assistance and streamline the methods for granting such assistance.

We launched a new effort to establish guidelines for the role of foreign private investment in Latin America that would reconcile the legitimate interests of the investor and the country concerned.

We examined a catalog of multinational projects now on the drawing boards, or further advanced, which, if completed, would tend to bind Latin America closer together; and we set up machinery to help push these along.

We made arrangements to refine and complete by October an overall review of Latin American economic requirements and the availability of external resources to meet them for the years 1956-65.

We made arrangements to try to help Costa Rica and Honduras, where, as you know, natural phenomena-the eruption of Irazu in Costa Rica 51 and the forestry plague in Honduras-bear heavily on the economic life of these two nations.

The first CIAP action list is even longer than this. But we are under no illusion that defining problems and assigning men and institutions to work on them automatically insures success. CIAP will be judged by the governments and peoples of the hemisphere-and it should be judged by the concrete results achieved in the months and years ahead.

What I can tell you now is simply this: Working together as brothers, we approached our task, not as representatives of nations engaged in negotiation or bargaining, but as the board of directors of a great common enterprise. To carry forward that enterprise will require the highest degree of cooperation, not only among the governments of the hemisphere but among the various agencies seeking to assist in Latin American development. Both at the meeting in Mexico City and subsequently there has been heartening evidence of the willingness of all to work together on that team basis to a large common

end.

As I said on a public occasion at the end of the CIAP meeting, I See footnote 5 to doc. III-8, ante.