' ' IUTERNATIOMAL BANK FOR RECONSTRuCT+OM AND DEVELOPMENT .:?OR THE PRESS FOR JIIMEDIATE RELEASE Press Release No. 172 February 16, 1950 S~ATEMENT OF MR.·. EUGENE R. BLACX, PRESlDEHT OF THE INTEPJTAT!ONAL BAlTK FOR RECONSTRUCTION AND DEVELOHIENT BEFORE THE ECONOMIC AND SOCIAL COUNCIL AT LAKE SUCCESS, H. Y., ON F:rJ3RUARY 16, 1950 Er. President and Members of the Council: I am very happy to be with you here today and to be Permitted to narti- cipate in your discussion of the Bank's Fourth Annual Report. I regard this de- ba.te as valuable for at least two reasons: first, because it ena.bles us to get the benefit of your vie,,.,s anq. opinion$ about the ,:ny the Bank's business is being conducted; and sec~nd,1 becaus~ it "!lrovides us with the opportunity of discussing with you some of the problems connected with our operations, some of the reasons behind the nolictes we have e~tablished, and some ot our plans for the future. The activi tie·s of th,e Bank: over the past year are set forth in consider~ able detail in our annual report and in the sunu;J.emen.tal statem~nt to that report ,~,hich you have before yo-u.. They shoF what the Bank has done and is doing--:- that today, for example, ,~re are in active disc~ssion with no less than 23 of our members. It is not my intention, however, to repeat what is written in the doc\Ullents you already ha.ve. What I wo~d like to dQ, instead, is tQ underline a fe1., essential features of the Bank 1 s operatione -- ::>articularly in the field of economic develop.. ment - which may -orovide a useful backgrou11d for the Committee's discussions. First, I would like to noint out briefly the scope of tlle Bank's lend.i11g activities. During the three and a half yeo,rs of our active life, th~ Bank has made 24 loans fQr Projects tn 13 different cotu1tries, aggregating about $750 million. Most of these 108.fl.S he.ve necessarily been in doll~.rs - '\Ulfort1,1p.a tely we haven• t had other. currenchs to lend except in q\l.i te small amounts ~.., ~;ut tll,e 1i doll.ars h~ve °Qeen expended in many different co1,U1tries. Of the total disburse,., ment$ of $567 million made on :Ban..'lt loane up to December 31, 1949, abo'"t $5 million wa.s spent in Asia anq. Africa, $27 million i;n Canada, $51 million in ;Latin America, and S63 million 1n Eu.rope, ip. ad.dition tQ the a.pprcxJma;'tely $4ZO milUon spent in the United States. .....2,. •• OUr first loans, in 1947, Europe~.n reconstruction. were,· as • ~ But s:lnce the beginning yoU· know,. for purposes " ~r . ot 1948, our princ:t'pal 1_1 ,, b~$in~ss .has beef!. the' D\aking or development loans. J)t,J~ing the last two ~ars ~ have made ·1oans for electric; power development in Chile, Mexico., ijrazil, BelgiUIJl, Finliand and El Salvador; for . agricult~ral machi~ry'ln . Chile~' Colomb!~ and India·; for timber production in fugQslavia .. an'11~ be rented by small farmers. A$ for the· eleQ.tric ·power prQJect~, they ~ange .all the way from a central pow~r ~tation,· usins low~grad1;3 coa:i, . int~.. peart of i~dustr:Le.l BelgiUJn, to a hydroe~ectric project 111, tropical. and ;agriculti.Jral El Salvador. Slll':Prisingly few people appreciate the 8lllQJ.lllt of work which ha~ necessa.rily ~one into the ~king or these loans. It .is e~~y en.o~h to <;,pen up -~ lj.ne of credit for a -country ~ but it is only th~ prod1J.ctiv~ use ot credit, not its mere ~xistence, which helps a c;ountey to develQp, In tact,. • the grant r;,t credtts which are unproductively '1$8d may be rqo:re of a detrimeJ?l,t ' ' th$n a be~efit~ 13.efore we agree to make a loan, the"ft>r.e, we t17 to make a . .. •• to service additional foreign indebtedness: .second, the -priority of the type of oroject or projects tor which Bank financing· is requested; and third,· the financial and technical merits of the parti~ular projeots presented to the Bank. That means, genE;!rally that we have to make a pret tiy thprough · appraisal ot the econo~ of the borrowing qountry, as well as or the specJ.fio enterprises which the country wishes to unqertake:. Examinations of this type talce time ... but i,n my jy.dgment it is ·time '\' well spent. I eniphasize that, not only from the etandpoint of protecting the Bank's resources, but, even more important, .from the staQdpoint of assuring effectj,ve util:Lzation of our members' resources. If' we can relp oµr members to concentrate on the most urgent and productive projects - to do the first • things first and to st~rt only t~ose things that they ca~ qar,ry through -- the false steps saved and the waste elin;iinated m,ay be worth far more than the financial assistance we can provide. The same is true of the t~ohnical examination ot particular proJacts • . The advice of our engineers as to matters which to us f a$ laymen; may seem details~ the 61';,ight or a dapi, the loo&tion of a powe~ station, the app~op~iate type or tracte>~ - may mean t'he diff~rence between. an efficient, t.>ro;t."itable operation .and one wnioh is faulty and ineffective. This ~ind or work I by our engineers ts "technical a.sai:3tanoe'' in its most intensely pra~tical for•.• But it is equallf an india.penaable part of our lending operations, aasµming ~lwiys that the Bank•s function is not just to make ~oney avail~ble, but is t·athe1• to ~e poij~iQle sot.ind a.nc;l productive develop?D.$nt. 'l'lle l3al.lk 1 s resoonsib;i.lities were well summe~ up at BrettQll Woods b7 tor4 Keyn~s. in wo~s which I h$ve quoted. l;)e:f'c;,ra, but which J~-~a~ :repetitioti!( He1 saj,.d thtAt th~ Banlc 1a. money "will be ~xpend~ct-d1~iy fol;,pro1Jex- p\i:rpo~e'S \: -4- -- and in proper ways; after due enquiry by expert~ and technicians, so that there will be safeguards again.st sq1,1.anc.ering and~ ·waste and extravaga,1ce, whi·ch were not present with ma?J.y of the ui-fateq. loans ma.de between the w~rs,t' There, siµiply put, you have the ca~re. for the marriage of technical and finan- cial assistance. It is the thesis ,~rhich the :Bal'~ has always tried to follow. There are, I k;now, those who decry th~ Bank 1 s insistence on high lending sta~da,rds an:d sug~est that, beeau,.se those standard.s restrain to some extent the interna.tional !low of cari tal, they Ahould be dh1c~rd.ed, This ide~ springs largely, I believe, fr-cm a. preoccupation with the current d.iseqnili~ brium in international accounts. ~o,~ever, the present need to b~lance these ", ~· accounts by large transf e1·s of ca.pi tal sho-q.],.d not, I sug$est, be a.lloFed to obscure the need to remove t,hq. ba$ic c:;:e,uses of this disequilibrium a.p.d to create a sound and lasting bn.s-is for Drod.uctive international investp1ent~ •• Recently we have seen advocated an extension of the :Be.nk·' s functions so tha,t it can make loans for f1general development purnoses. 11 I ~m not at al.1 clear wha.t thc'1.t means. As i hav~ already noted, the J3ank has mPde L~) a numbe:r . of·loans for nower l)rojects and has several more under active conside:ration,. Some of them a.re of a mul ti'"':'pur1.-,ose cha.racter, including facilities for irrigation or flood~g_,oP·~::J:>l. ?hese projects certainly seem to me projects f.or c_::_~/ general d~velopment purposes, if a11ything is. B'\lt p~rhaps a loan for gen.eral development purpoees really meane a loan for a purpose or purposes unknown~ o.' If ~hat is the ca$e, I thj.nJc the making of sucb a loan would, in general, be bad lending practice. And even a grant on this basis might, in my judgment, be a bad grant. Nevertheleu, U is true - r~grettably t:r1,1e ~ that the a.i"T.ou~,t of loans m~de by the Ba.pk has· so fa.r oeen. U.mited.. The principal reason fo;r this, o, ,,as we point out in. our ;report, has not b~en t.he laok of money o{i t the :iack of f":,' well-pre:pared and well-pl~lllled _projects ready for immediate execution. I 0 hope, h,wever, that no one will get the ~dee! th~t we at the Bank are a.t all .~ content with this situation~ -· 5 - On the contrary, it has often given us a feeling of eQnsiderab1e·frustratfon; it 1 s only human tnat we should want the sati~ faction which wouli) come from being able to m·ake a much larger, volume of lo~s. :But for the Ban.le -t~·o lro1••er its· standards to a.~hieve this end would, in my judgment, be a disservice to our mernbe·rs and would i,.mpair our ultimate effectiveness. I do have high hopes, however, that the exieting obstA.cles to a greater volume of Bank financi:pg will, over the next few years, be progressively removed as a result of the technical assistance which is being provided to many underq.eve.loped countries by· the Bank itself, as well as by other international agencies. I don• t want to take the time to'' review in vernment to fo,rmulate a long-term .~ i, r -. 6 - to administrative m~asures a~d· economic and. fina,ricial policies essential to the)~success of the program. This mission, ,>rhich' was headed by. Dr. Lauchlin Currie, has not yet complete~ its report $P that I am ~ot in a position to d.iscuss with yo-u the suostan~e of t4e recommendations to be made. 13t1t I ~do -~,~ \\ wan t t o say th a t • i.ri\IDY . J1,1.dgrnent, t h e provis 1 on of th i s t ype; of assis~anc·e is a logical step in the development of th.e part~ei,rsh(p rel~ftionship which the Ban!-: has sQught to establish wt th its member countries. We have alread.y received requests t~ send somewhat similar survey missions:,to severa.l other co1.mtries and are even no,ftr in the process of organizing such missions for Turkey and Guatemala. 1-fe will have to wait for some years.~ I belie.ve, before ,~\e ca.n know with any certainty the real value of' this type of work. \'le all kno~,., that the • report of a mi$sion, however ~l.11.i:a.nt ~t may be as an intellecti:n~. exercise, is only of real "Q.se a~ its recol'Ilmep.dations a.re aq.o:pted and p1.1t into practice,. lfonetheless, in my ju<;l.gment, there are ,grounds for being optimistic about the effects of a miseion s~ch as ours tQ Colombia ,...... both bece.u.$e of the continuing relationship which exhts between the Bank and tn.e ·member country ,./i ,1 concerr.1.ed, and bec~'\l$e, Jf the GOuri.try\1loes ih sha:re in cari:ri~~ out the mission~~ recommendations, the Bank is in a position tQ s~.1pplement its efforts with fip.a.ncial a.id. l woµld like to conclude this statement by reiterating ,,rhat we have alrea(].y sa..id in the int:rod-u.cti •