.' - Address to the Canadian Club of Montreal by Eugene R. Black, President of the World Bank Januarz 1&, 1956 READIM1 COPY Your invitation for me to sneak here today was a mo st welcorne one . The relat i ons between the World Bank and Canada -- your financ i al com~un i ty and you r government _- - have 1 on g been cl~ e and cord i al . This onnortun i ty to sneak to the Canad i an Club of ~ontreal i n i ts Golden Jub i lee year allows me to make a token repayment on the debt of grat i tude which the Bank owes to the ~eople of Canada . . The Bank has now been operat i ng for nearly 10 years . Our a i m has been three - fold : to help the peoples of the free world to increa~e the i r out~ut of useful goods and serv i ces; to nromote a h i gher volume and better balance of world trade ; and to ra i se the standards of l i v i ng 1n our membe r countr i es. I n nursu i t of - 2 - I n p u r s u i t o f t he s e a i rr s , th e Ba nk h a s now len t, for pro duct i ve nroject s and nro gr ams , the equiv ale nt of som e 2t b i ll i on · dolla r s . About two - th i r ds of th i s a mo un t has been lent in what a re calle d the underdeveloped a re as of the wo rl d . If the glob e c ons iste d of 60 or 70 nations li ~e Can ada , there would be no ne ed for a World Bank . You have great r esou rc es and an enormously prod uctive economy he re, a co nf i de n ce that i nsp i re s you to i nv es t i n your ov.,n future , a way of doing th in g~ that attr ac ts la r ge am ounts of inve stment f r om o th Ar c ou nt r i e s . The wa y i n wh i ch yo u are d e v e 1 op i n g yo ur c nun t r y p ro v i de s a mod el wh ic h many other nat io ns mi gh t observe to the ir own be nefit. There 1s , howe ver, - 3 - There 1s , however , only one Canada . And , apart from North Amer i ca and Western Eu rope . our free or 1 d i s a n 1 a c e whe re poverty 1s the rule rather than the except i on , where oerhaps two human be i ngs out of every th r ee a r e just beg i nn i ng to g 1 i mp s e wh at h as be en d o ne e 1 s e u,h er e b y modern methods of production . by modern sc i ence and modern med i c i ne . The conditions of the underdeveloped peoples , the frustrat i ons some of them feel wi th the i r present way of l i fe , a re sources of i nternal and i nternat i onal tens i on . They are one reason why world politics i s so d i s turbed today , and why parts of the world offer 8U ch fert i le so i 1 for the seeds of v i olence and subvers i on . The state of the - 4 - Th e st a t e of th e p o ~ t w ~ r w or 1 d h aR b e e n s u ch th at i t h a s b e en n e c es s a r y f or f r e e co u n t r i es t o r1 s ~ o c i ate t h ems e1 v e s I n common d e fence. But , if we are to get at s o me of th e u n de r 1 y i n g c a u s e s o f o u r postwar d i ff i cul t i es , there must also be i nternat i onal cooner~t i on i n the f i eld of econom. i c s and f i nance . Cana.da h ~s already g i ven le~dersh i p i n th i s f i eld , f i r~t with an extens i ve program of ovA r seas a i d -dur i ng thA n er i ad of recon~tructi on i n Eu r o p e ; s e co n d , w i t h t h A f u n d ~he i s ma k i n g ava i lable to the Commonwealth countr i es of s o u th As i a .u n de r th e Co 1 om b o P 1 an ; an d th i rd , wi th the substant i al and res ected pa r t she i s play in g i n i nternat i onal org3.n i zat i ans . Canada 1s a v i gorous - 5 - Canada 1s R v igor ous oa r tner i n th e Wo r 1 d 8 a nk . I n fact , i f I WA re to s PA a k of oe r sonal i t ies only , and not off inance at all , the Bank would st i ll have a con~ i derable debt to acknowledge . Through a success i on of d i st i ngu i shed c i t i zens , Canada has had an i nfluAnt i al vo i ce in our affa i rs f r om the beg i nn i ng -~ f i rst , R. B. Br yce, Se cr etary of the Cab i net 1n Ottawa , then Gr aham Towe r s and Donald Go r don , and now , fo r the past s i x yAar~ , Lou i s Rasm in sky , have bee n on ou r Board of Di rectors . The Secr etary of the Bank , who i s a sort of comb i ned ch i ef of nrotocol a n d ma n of a 11 ..,o r k , i s a Ca nad i a n . An d , i n fa c t , of our ~taff of 475 men and women i n Wash i ngton , one out of every ni ne i s a Can ad i an . Among ou r 58 membe r - 6 -· Among our 58 member countries, Canada 1s g e o g r a[\ h i_ ca 11 y th e b i g g e st , a n d f r o rn a f i nancial and industrial noi nt of v 1 e , 1s one of thA ~o~t i mnortant . When the Bank ' s ch art er was wr itten in 1944 , it was clear that ~ome members expected to be borrowers for many yea rs to come . Others expected , at least ultimately, to assume the posit ion of creditors and , t h r ou gh th e 8 a n k , to r., r o v i de th e f un d s necessary for progress toward objectives 1n wh i ch t he y be 1 i ev e d . Th i s th e y c OU 1 d do In two ways : by letting the Bank make 1 oa n s f r o m th e i r su b s c r i n t i o ns t o i t~ canital, and by lett in g u~ raise ad d i t i onal money by selling bonds ,n the ir caoital markets . From the f irst, - 1 - From the f i rst , Canada was a country to whom the Bank could look for m~.tAr i al as well as moral suonort . \Vhe n Can~da jo i ned the Bank , she na i d i n 65 mi ll i on Un i ted States and Canad i an dollars as her subscr i otion to our can ital Rtock . Of th i s amount , 58! mi ll i on was i n Canad i an dollar~ , ~nd could be l~nt by the Bank o n1 y w i th th e c on s e n t of t he Ca na d i an Gav e r nm e n t . Beg i nn i ng 1n 1948 , Canada was one o f t he f i rs t co u n t r i e s t o r e 1 e a s e a n y cons i derable amount of i ts own currency to the Bank far 1 end i ng . Si n ce May 1952 , we have had the ent i re or i g i nal Canad i an - dollar subscr i nt i on ava i lable for lo~ns , i n any of our mernber countr ies and on a convert i ble bas i s . Wh i le ~any of ou r Euro ean membArs have now - 8 - Eu r opean membe r s have now made relAases to u s on var I o us con d i t i on s , i t was th e Un i ted States and Canada on wh i ch we r el i ed almost ent i rely for ~ubscr i bed ca~ i tal dur i ng our f i rst f i vei yea r s of l i fe; and these are st i ll the only two members whose currency we have on a comoletely convert i ble bas i s . The Can ad i an ca o it a 1 market has a 1 so been a valuable s ource of f i nance to the oank . We ha ve floated three i ssues of bonds i n your market -- i n 1952 , 1n 1954 and i n Ma rch of last year . Last ~umme r, at the nrem i um callAd for i n the ~ale agreement , we ret i red the f i rst of t~se i ssues , seven years i n advance of matur i ty . Vi e now have a ·balance - 9 - We now have a balan ce of $40 mil l ion worth of Canadi?n - dollar bondc st ill outstanding, and these secur itie s are ·· e 11 known i n your rna r k et . Can ad i an inve sto r s have also bought our United States dollar bonds . All in all , from cap it a 1 su bscr i pt i on and fr om b o rd s st i 11 outstanding in Canada, we have had in the neighborhood of $130 mi ll ion of loan f und s fro m Ca na d i an ro u re e s . Now this money was made ava ila ble as a matter of enlightened Relf -i nterest made ava i lable , I nresume to think, because you r bus ine~s community and your government bel i eve that the Bank i s a b u s i n es s - 1 i k e i n st i t u t i on , an d on e whos e act i v itie s in the world will be a constructive force br in g in g a general benef it to Canada as well as to the other me.,.,bers of ou r - 10 - me mb er s of our i n ~t i tut i on . Ne v e r t h e1 e s s , i t ,~,a s no t to b e exnected that your v i rtue would go wi thout any snec i fic reward . The Cana d i an in du st rial and export i ng com~un i ty has , 1n fact , d i rec t 1 y ben ef i t e d from the 1 o ans of the Bank . Up to now , our borrowers have c hos en to buy I n Canada mo re th an $100 mi ll i on worth of goods and serv i ces they need for nrojects we are hel pi ng t o f i na n c e . The v a r i e t y o f wh at Ca n ad a has sunnl i ed g i ve~ remarkable test i mony to the versa t i l i ty of Canc1_ d i ~.n r,roduct i on . I t has ranged ~11 the way from ra i lway loco mot i ves and i nd ustr i al enu i nment to a sh i pment of 300 oed i gree cattle wh i ch just a couple of months ago left the nort of Montreal on i ts way to Peru . The Bank has made - 11 - The Bank has made 140 loans. Canadian supnl ier s have sh i nned good~ under more than 40 of them , and Canadian equ io ment has done yeoman se rvice on Bank - f in anced projects around the wo rld . It has helped the bottlenecks in the railway systema that were strangl ing the e cono my of I nd i a f i v e ye a r s ago ; i t h as helped solve t r ansp art at i on p r oblems i n Aust r al i a and South Afr ic a ; it has helped incre ase suppl ies of electr ic powe r in Mex ico and Br az il; and i t i s today work ing in 20 d if ferent count ri es . One of the largest contracts eve r 8Wa r ded for the pu r pose of a Bank - f in anced n roject 1s even now be in g filled by the Dom inion Steel & Coal Comnany here in Mont re al -- a contract for the suonly of some 175,000 tons of r a il fo r the 1 , 000 - mile long Pac i f ic Ra i lway of Mex ico. - 12 - Pac i f i c Ra i lway of Mex i co . Some Canad i an exports under Bank loans have been f inanced with funds that or i g i nated i n the United States , and some •f 1 h &'1 A ,ce pa ar ti. have been financed by the dollars th~t have been made ava i lable from Canada . But , i n any case , of the br ead you have cast on the water~, a cons i derable amount has corm back . And i t wi ll keep on com i ng back . Mr . Cha i rman , J hore that you and the members of the Canad i an Club of ~ont r Aal wi ll forg i ve mA for dwell i ng at th i s length on the relat i onsh i ps between Canada and the Bank . But i t i s a construct i ve story , and one that don ' t have the opnortun i ty to tell as often as I would l i ke . Now , with your i ndulgence , • - 13 - Now , wi th your i ndulgence , I should l i ke to turn qu i te br i efly to the way 1n wh i c h t h e \Y o r 1d 8a n k d oe s i ts j o b., a nd to those broader benef i ts th at I th i nk may accrue to Canada from econom. i c progress 1n the less developed are.as of the \AJO rld . Fi r st of all , let me tell you that the Bank is a bus i ness inst i tution . We make loans for wh i ch or i vate ca~ ital i s not ava i lable , but we do not court unreasonable r i sks . The best ev i dence of th at are these: fi r~t , our loans , wi thout except i on , are being rep ai d as due -- i n fact , more than $100 mi ll i on worth have been r epa i d well i n advance . Second , ou r r eserves , built up from P-~rnings and comm i ss i ons , are now over ~200 mi ll i on . Our nr i nc i pal ta~k , - 14 - Our n r i nc i r.,al ta~k , i n the underdeveloped countr ieR , haR beAn to help bu i ld up -the k i nd of econorn i c· base w· i ch . w i 11 ma k e p o s s i b1 e rr. o re P rod uct i on , more earn i ngs and sav i ngs , and more capac i ty a n d o p p o rt u n i t y t o i n vest . He r e i n Ca n ad a , you r t r anscont i nental ra i lway system and your extens iv e u~e of hyd r oelectr i c powe r r e s o u r c es h ave b e en v i ta 1 to e c on om i ·c growth . I t should comA as no sur~rise to you , then , to learn that the Bank ' s b i ggeRt i nvestments -- amount i ng to wAll over $1 b i ll i on , have been prAc i sAly i n these two f i elds , of elActr i c powe r and t r ansportat i on serv i ces . We hav~ lent about a quarter of a b i ll i on dolla r s for industr i es bas i c to the development of part i cular countr i es as i n the case , - 15 - as 1n the c ase , fo r i nstan ce , of ou r 31 - mi ll i on - dollar loan fo r the nr i vate ~roduct i on of i ron and steel i n l nd i a . We have lent ~nothe r nuarter of a b i ll i on for ag ri cultu r al development . Fi nally , we have lent $140 mill i on for development programs embrac i ng s everal or all of these different k i nds of development . The Bank lAnd~ . i n the norm~l cou r se , for . ~rec i f i c project s. We ~ i ck ~nd tAst out those projects wi th a gr eat deal of care . Both nr i vate ,nd gove r n""Al"ltal ap~l i cants have co111e to know that they must show us some spec i f i c nroject or prog r am of demonst r able usefulness . To f i nd out how th i ngs stand , we v i s i t the f i eld and get our appl i cants to demonst r ate to us how the p r oject f i ts i n wi th the rest of the economy , - 16 - of the economy , how urgently i t i s needed r i ght now , whether i t wi ll sat i ~fy a 1 a s t i ng n e ed , o r u, he th e r th er e a r e 111 o re imnor tan t th i ng ~ on wh i ch outs i de c ~ o it a 1 could be u~ed . We send our eng i neers and other techn i cal people to see whether the p roject wi ll actually work, to check ~pac i f i cations , construct i on plans , product i on costs , market prospects and any other matters th at may affect the p r o j ec t . I f n ec e s s a r y , as i s no t i nfreauAntly the ca8e , we recommend changes in the project before we agree to go ahAad . From the f i rst , the Bank had to be concerned with a good deal more than e ng i n e er i n g de s i g n s . \Ve are h e1 n i n g to f i nance undertak i ngs of a k i nd or on a scale never before attempted 1n many of our member countr i es . ... - 17 - membe r countr i es . These , i n the i r tu r n , often r equ ir e not only new m~ch i nery and new sk i lls , but also new k i nds of or gan i zat i on and new fo r mul~t i ons of rol i cy . So the Bank , at the s~me t i me th~t i t has lent fo r equ i nment , ha~ g i ven adv i ce on thA or g~n i zRt i on of author i t i es to adm i n i ster ~orts and m~ i nt~ i n h i ghways ; i t . has helped create new cr ed i t . i nst i tut i ons , both publ i c and pr i vate ; i t has asR i sted i n the de velopment of cap it al markets ; i t has ass i sted i n the developme nt of h i ghe r standards i n the publ ic adm i n i st r at i on of econom i c and f i seal a ffa i rs . The - Bank , a b o ve a 11 , h a s t r i ed - - an d w i th so rn e success -- to i ns til l the con cept that gove r nmental i nvestment mu t be budgeted and d irected tow~rd real i st i c go~ls , and i n ~uch a may aR to - 18 - i n such a way as to supnort rather than obstruct pr i vate i n i t i ative and i nvestment . (Egypt) One of the Bank ' s ch ief a i m~ 1s to st i mulate nr ivate i nvestment , and we are one of the ch i ef veh i cles for carry i ng or i vate funds abroad . The sale of our bonds i s one i nstrument for do i ng that; and at oresent , we have $860 mi ll i on worth outstand i ng , i n Canada , the Un i ted States and 25 other countr i es 1n both hem i spheres . Another i nstrument 1~ the sale of parts of our loans to othe r i nve ~tors , who e i ther buy from ou r portfol i o or part i c i pate i n the loans when they are made . These s a le~ , which for so~e years past have been made . wi thout our guarantee , now a~ount to $225 mi ll i on . Finally , we have on three occas i ons - 19 have on th r ee occas i ons i n the ~~~t 14 ~onth~ comb i ned wi th the can ital market i n the Un i ted States to make loans for econom i c development . I n the cases of Belg i um , No r wa y an d the Un i o n o f So u t h Afr i ca , we have made loa ns at the same t i me that these countr i es were sell i ng publ i c bond i ssues i n the Amer i can ma r ket . The total of these t r a n s a c t i on s i s $14 0 mi 11 i on , d i v i de d ab o u t equally between the m.arket and the Bank . So , i n a 11 , the Ba nk h as mu t ere d ~ o me t h i ng more than one b i ll i on dollars of n.r i vate cao i tal for i nternat i onal i nvestment . As many of you kno , we are now establ i sh i ng a new aff i l i ate of the Bank , called the I nternat i onal Fi nan c e Co r ro r at i on, to work d i rectly wi th pr i vate i nvestors to st i mulate the growth of nroduct i ve pr i vate e n t Ar r i se , - 20 - ente r pr i ~A , part i cul~rly 1n the less developed area~ of the world . I FC wi 11 come i nto be i ng when 30 countr i es , wi th cap i tal subsc ri nt i ons of ~t least $75 mi ll i on , have ac cented i t8 charter . - As you would have exnected and a~ we exnected , Canada -- whose subsc ri nt i on to th e Co r norat i on ' s can i tal wi ll be 3 , 6 0 0 , 0 0 O U. S . d o 11 a r s - - ., a s t h e f i rs t major subsc ri be r to comnlete the act i on ne c essary to membersh i p i n I FC . I FC wi ll do two th i ngs the Bank does not do : Fir st , i t wi ll make loans wi thout go ve r nment gu ;:i r antee . Second , i t wi 11 not only make f i xed -i nterest loans , as does the Bank; but it. wi ll alR q i nves t i n mo r e flex i ble tyoep of secur i t i es d~R i aned to meet the needs of new or exnand i ng bus i nesseR . - 21 - businesses . Naturally , I FC wi 11 try to sell off i t~ holdings a~ ~oon a~ it can , i n order to revolve its funds among as many projects as poss i ble . The Corporat i on vi 11 not own common stock , nor wi 11 i t take the respons i bi l i ty for manag i ng the enterpr i ses i n which i t i nvests . What i t wi ll look for i s exner i enced partnerR i nterestAd i n develop i ng new enter~r i se e overseas , and prepared to i nvest i n them the i r money and the i r Rk i lls . We hope very much to find some of those partners am o n g Ca n ad i a n f i rm s wit h new· o r ex n and i ng overseas .i nterest~ . I nternat i onal i nvestment has oroved prof i table to the Bank , and i t i s orov i ng prof i table to our member countr i es . Rather than talk to you i n mi ll i on - dollar f i gur es and global terms , - 22 - and global terms , let me draw you one small b u t s ymb o1 i c p i ct u r A o f h o "' t h e Pr oc es s works . One of the smalle~t of more than 50 projects financed by -the Bank as part of both publ ic and pr iv ate power development prog r ams in Mex ico was to put 600 - k ilo watts of gene r at in g capacity in to the town of Tecuala, near Mex ico' s west coast . The i nstall a t i on began operating in 1951 . At about the same t i me , a paved road arr iv ed to g ive Tecuala a bette r connection wit h the surround in g farm country . The sequel to these two events was l i ttlA short of exnlosive. I n the next thr ee yearR , the populat i on of the town rose from 5 , 000 to 13 , 000 . The number of children - 23 - The number of c h i ldren in s chool multiol ie d s e v e n - f o1 d ; an d f o r th e f i r s t t i rn e , th e - adults of Tecualr, many of them illitArate, Were able to have a night echool . TherA 1s p owe r n o,~ f o·r th e h os n i ta 1 an d i ts f ir st fluoro6cope. The new Alectr i city i s powe rin g two mov ie theaters , the town's f : rs t rad i o stat i on and the p res s es of i ts firat ne wspaper. The .number of small factories and pro ce ss in g plants has grown fro m three to mo re than 30.. A.mong other th i ngs , Tecuala now makes ice, corn mea+ , shoe s and fu rnit ure. The community is mak i ng mo re, earn in g mo r e , and i s mu ch bette r able to sat i sfy it s hunger for p r o d u ct s f r om th e o·u t s i d e wor 1d . To c i t e only one in stan ce, the re a r e today mo re than a dozen sto re s As another project in the development of electric power in Mexico, we financed generating equipment for an electric plant of 2700 kilowatts in the town of Ciudad del Carmen, a shrimp-fishing port of the (hlf of Mexico. This was Carmen's first dependable, 24-hour-a-day electric supply, and presented the first opportunity to make enough ice to fully' protect the shrimp catch from spoiling. Hine deep freezing and ice manufacturing plants have now gone up in Carmen. A large shrimp canning factory has been built and is operating at a substantial profit. Seven snaal.l yards have come into operation to build more fishing boats. Two years ago, only an occasional tramp steamer called at Carmen to pick up shrimp -- today, :modern refrigerator ships pro- vide regular service from Cannen to Texas ports. Furniture plants and other small indu.i,tries have begun to spring up. This town, which three ;years ago was al!lk>st literally in danger of drying up and blowing away, is now a bus:, and growing eom'llunity. That is what a little electric power and a lot of private initiati ve have been able to do in Carm~. 24 - than a dozen stores sell i ng electr i cal appl i ances , as comp ared to none f ive years ago ; and Tecuala i s now a market for e 1 e ctr i c fan s , e 1 AC tr i c i r on s , r ad i o s and r e f r i g e r a t o rs • The i mpl i cat i·ons of th i s story of econom i c development are , I am sure , t r ans~a r ently clear to th i s aud i ence of Canad i ans . I n thA exner i ence of -the Bank , th e ex amp 1 e o f Te cu a 1 a , wi th i t s bA t t e r l i fe and i ts grow i ng market , can be mult i plAd thousands of t im es over , and 1n many d i fferent countries . - Up to now , the Bank has helped to f i nance enough power- generat i ng canac i ty to serve an industr i al and commerc i al complex as b i g as that of greater New Yo r k Ci ty . We have helped out new enu i pment on Ano ugh r a i 1 ''a y s • - 25 - enough ra i lways and have helped bu i ld or rehab i litate enough highway and railway mi 1 ea g e to g i rd 1 e th e g 1 ob e . The ob v i· o u s effect of these and other projects i s that i n our member countr i es , there are mo r e p r o du ct i o n , mo r e e a r n i n gs , an d a. n ab i l i ty to SAll more and to buy more 1n world trade . Now , as you well know , Canada engages 1n more internat i onal trade oer head than any other country in thA world - - ~nd I cannot i ma g i ne any country that in an econom i c ~ense has a bigger stake i n th i s process of econom i c development and grow i ng markets . That 1s why I th i nk Canada ' s part i c i pat i on i n the World Bank i s i n the i nterests of all Canadians . But beyond the sphere - 26 - But beyond the sphere of econom i cs , th i nk that Canada has broader and AQually compell i ng reasons to be concerned wi th econom i c prog r ess i n the r est of the world . For econom i cs also relate to the quest i on of peace or war . Throughout the unde r developed countr i es -- wh ich i s to say most of the world -- the r e 1s an i ntense yea r n i ng for better l iv i ng . . ' The pauper peoples are no longer content to live i n poverty , for i n th i s day of modern commun i cat i ans , they know ha t l ife_ 1s l i ke elsewhere . The cond i t i on i n wh i ch many of these t the i r ex i stence i s one of people ekA ou_ the ch i ef threats to our otvn , ecur i ty . I t is for i nte rn at i onal commun i sm a source of supoo rt . > - . - 27 - of support ~ It i s for the free world a source of weakness , because i t i s one of the factors beh i nd the v i olent quarrels that have broken out , and cont i nue to break out , between nat i ons that l i e out~ i de the Sov i et orb i t . I t i s some th i ng mo r e than co i nc i dence , th i nk , that the trouble spots of recent years -- parts of the Far East , of the Mi ddle East and of Afr i ca -- are also a r eas where actual standards of l i ving a r e i n sharpest contrast wi th the standards to wh i ch people asr, ire . I do not mean to say t h at th e c au s e s o f i n t e rn at i on a 1 t ens i o n , of b i g wa r s and l i ttle ars , beg i n and end w i t h e c o n om i c s • 8 u t I d o de ep 1 y do u b t t hat we can have a olit i cally stable world unless i t i s also one i n wh i ch econom i c progress i s be i ng made . - 28 - i s be i n g made . To help the underdeveloped countr i es l i ft themselves to new ways of work i ng and liv i ng , the n, i s also to i ncrea.se our own chances of l i v i ng our own l i ves i n peace . The World B~nk i s one i nstrument , among many , that i s attem~t i ng to orod the pace of econom i c development . In terms of the world scene , the operat i ons of the Bank are of close concern to you as Canad i ans wi th a stake in the future of you r c o u nt r y . I b e 1 i e v e t hat wh a t t h e Ba nk I s do i ng and help i ng the underdeveloped countr i es to do can truly be seen as a vital nart of one of the most urgent ta~ks of today -- the ta~k of rooting out the poisons of ooverty and war , and of sowing the seeds from which stabil i ty and order 1n world affa i rs can grow -- - 29 - 1 n w or 1 d a f fa i rs ca n g r ow - - a nd I th i nk Canadians can take or i de from their assoc i ation wit h the Bank in th i s task. # # # # # # #