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we are acquiring bear interest at an average annual rate of 8 percent. The funds used to purchase these notes will come out of our insurance reserve which now stands at $202.2 million. In turn, the payments of principal and interest which are made by Chile to OPIC over the next 13 years, totaling $58 million will go back into our reserve.

OPIC press release TS/313, Jan. 7 ,1975. For ruling of Nov. 4, 1974, by the commercial arbitration tribunal of the American Arbitration Association, see 13, International Legal Materials 1307 (1974).

On July 17, 1975, a panel of the American Arbitration Association announced its decision that the Overseas Private Investment Corporation (OPIC) was liable to pay an amount to be determined to The Anaconda Company on claims filed in connection with the expropriation in 1971 of two of its Chilean mining properties. Anaconda's claims were for $154 million, but the amount of compensation due under the ruling was not determined by the arbitrators because the parties had agreed to reserve a number of complex issues bearing on this question for a second stage of the arbitration proceedings.

The claims had been denied by OPIC on the ground that Anaconda's investments in the Chuquicamata and El Salvador copper mines were nationalized in mid-1969 when Anaconda's insurance coverage was not in effect. Under the threat of nationalization legislation, Anaconda had sold the two mines to Chile in 1969, transferring 51 percent ownership immediately and agreeing to a subsequent transfer of the remaining 49 percent. At the time of the sale, Anaconda had no current insurance coverage, but only reduced-premium standby insurance, which allowed the investor the option to activate full current coverage at an anniversary date, but did not provide protection in the interim. OPIC has stated that present contracts do not permit this type of interim election.

Following OPIC's denial of Anaconda's claims in September 1972, Anaconda submitted the case to arbitration, as provided for in all OPIC insurance contracts in the event of a dispute between OPIC and the insured. The arbitration hearings began in January 1975, and were conducted in accordance with the rules of the American Arbitration Association.

The arbitrators ruled against OPIC's contention that Anaconda had suffered expropriation action in 1969 when it had no current coverage at the time of the forced sale and that the insurance contracts did not apply to the new and fundamentally different interests, namely: Chilean agency notes and a minority stock interest subject to a contract of sale. The arbitrators determined that Anaconda continued to exercise day-to-day operational control under advisory contracts and therefore did not lose "effective control” within the meaning of the definition of expropriatory action. The opinion found that coverage continued after 1969 because of the continuity of the project and Anaconda's financial and operational involvement in it.

The decision of the American Arbitration Association provides that if the parties are unable to come to an agreement on the amount to be recovered and on any open issues concerning apportionment of the costs and fees of the arbitration, the arbitrators will consider those questions at a later stage.

In October 1975, OPIC filed with the U.S. District Court for the District of Columbia a motion to vacate the decision of the American Arbitration Association, alleging an appearance of impropriety in the proceedings. It filed a similar motion with the American Arbitration Association.

OPIC press release TS/329, July 17, 1975; OPIC Topics, Vol. 4, No. 4, Sept. 1975, pp. 3, 7. For the text of the opinion of July 17, 1975, of the American Arbitration Association, see 14 International Legal Materials 1210–1245 (1975).

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On January 15, 1975, the Department of the Treasury issued a formal policy statement entitled "Policy Statement of the United States on Development Bank Lending to Oil Producing Countries." The statement refers to the increased revenues and foreign exchange earnings enjoyed by oil exporting countries as a result of the increase in the price of oil and the serious economic problems resulting for developing countries. It recommends that the international development banks adjust their programs to the changed economic situation by withholding soft loans to oil exporting countries and limiting financial support through ordinary capital loans to only those among the poorest of the oil exporting nations which have pressing foreign exchange requirements for development projects.

The statement reads in part as follows:

The increase in the price of oil has greatly increased the incomes and foreign exchange earnings of oil exporting countries. At the same time the increase in oil prices, and in prices of other products associated with energy, has created serious economic problems for many developing countries.

We believe the development banks of which we are a member, the World Bank, the Inter-American Bank and the Asian Development Bank, should adjust their programs appropriately to this new situation. In our view, there is no justification at this time for soft loans to any oil exporting country. Financial support through ordinary capital loans should be very strictly limited in total amount, and should be restricted to only those among the poorest of the oil exporting nations who have pressing foreign exchange requirements for development projects.

We have not come to this conclusion because of any desire to hinder the development efforts of oil exporting nations; on the contrary, we support such efforts. However, the basic purpose of the World Bank today is to assist developing countries in need of financial support. It is for this reason that the United States Government, along with other members of the Bank, guarantees the obligations of the Bank and enables it to raise money economically in the world's capital markets.

We recognize that some oil exporting countries may wish to have the benefit of continued technical and management assistance from the Bank in their development program and projects even though they have no pressing need for Bank financial support. Limited assistance to meet this desire could appropriately be made available through a number of alternative proce dures, provided the Bank's ability to support other countries with financial requirements is not restricted whether through the encumbrance of Bank capital or the diversion of scarce Bank management and technical services, and provided that the full costs of such assistance are charged.

We would welcome increased participation in the established development Banks by the major surplus countries through the purchase of additional shares in their ordinary capital provided such share purchases are accompanied by commensurate increased contributions to the concessional funding mechanisms. The greatest and most urgent need of the poorer developing countries is for increased assistance on the low interest, long term basis provided by these institutions from their special funds.

We believe it would be appropriate for the oil exporting countries with substantial surpluses available for international investment to provide additional concessional assistance to the poorer developing countries through contributions to the development banks' soft loan funds such as the International Development Association. It would also be appropriate for the major oil exporting countries to repay promptly their outstanding loans from the development banks so that these resources could be used for additional loans to the poorer developing countries.

Dept. of the Treasury News, Jan. 15, 1975.

International Monetary System

At the opening of the Seventh Special Session of the U.N. General Assembly on September 1, 1975, the United States put forward a proposal for establishment within the International Monetary Fund (IMF) of a development security facility to stabilize overall export earnings of developing countries from commodities and manufactured goods. The proposal was made in an address entitled "Global Consensus and Economic Development,” delivered for Secretary of State Kissinger by Ambassador Daniel P. Moynihan, U.S. Representative to the United Nations. The United States also proposed the creation of an International Investment Trust to attract capital for investment in developing countries by safeguarding against major losses. The Trust was to be managed by the International Finance Corporation (IFC). The Secretary's speech promised that the United States would contribute actively to the work of the IMF-World Bank Development Committee. The following are excerpts from the Secretary's address:

The United States proposes creation in the International Monetary Fund (IMF) of a new development security facility to stabilize overall export earnings.

-The facility would give loans to sustain development programs in the face of export fluctuations; up to $2.5 billion, and possibly more, in a single year and a potential total of $10 billion in outstanding loans.

-Assistance would be available to all developing countries which need to finance shortfalls in export earnings, unless the shortfalls are caused by their own acts of policy.

-The poorest countries would be permitted to convert their loans into grants under prescribed conditions. These grants would be financed by the proceeds of sales of IMF gold channeled through the proposed $2 billion Trust Fund now under negotiation.

-Eligible countries could draw most, or under certain conditions all, of their IMF quotas in addition to their normal drawing rights. Much of that could be drawn in a single year, if necessary; part automatically, part subject to balance-of-payments conditions, and part reserved for cases of particularly violent swings in commodity earnings.

-Shortfalls would be calculated according to a formula geared to future growth as well as current and past exports. In this way the facility helps countries protect their development plans.

-This facility would replace the IMF's compensatory finance facility; it would not be available for industrial countries.

We must now find new ways to enhance the opportunities of developing countries in the competition for capital. And we need to match in new ways potential sources of capital with the investment needs of developing countries.

Several courses of action offer promise.

First, the United States will support a major expansion of the resources of the World Bank's International Finance Corporation, the investment banker with the broadest experience in supporting private enterprise in developing countries. We propose a large increase in the IFC's capital, from the present $100 million to at least $400 million.

Second, the United States proposes creation of an International Investment Trust to mobilize portfolio capital for invest

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