INTERNATIONAL ('tEcoP'7!BANK FOR RECONSTRUCTION AND DEVELOPMENT FIFTH ANNUAIJ IR1I'PORT- I194 9-I95() FIFTH ANNUAL REPORT TO THE BOARD OF GOVERNORS 1 949-1 950 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT WASHINGTON, D. C. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT September 6, 1950 My dear Mr. Chairman: In accordance with Section 10 of the By-Laws of the International Bank for Reconstruction and Development, I have been authorized by the Executive Directors to submit to the Board of Governors this Fifth Annual Report of the Bank. The report includes financial statements as of June 30, 1950, based on an audit of the accounts of the Bank made pursuant to Section 19 of the By-Laws. It also incorporates, pursuant to Section 19 of the By-Laws, an administrative budget for the fiscal year ending June 30, 1951. While the financial statements cover the fiscal year ended June 30, 1950, the remainder of the report reflects the activities of the Bank for the period from August 20, 1949 to August 1, 1950. Sincerely yours, EUGENE R. BLACK, President. Chairman, Board of Governors, International Bank for Reconstruction and Development. TABLE OF CONTENTS Page INTRODUCrION . .......................................................... S THE MAJOR OPERATIONAL POLICIES OF THE BANK ........................ 7 The Character of Bank Lending ............................................... 7 The Specific Project Provision ............................................. 7 Determination of Projects to be Financed .................................. 8 Loans for Local Currency Expenditures .................................... 10 The Character of Bank Investigations ........................................... 11 Loan Charges . ............................................................. 13 Currency Problems ......................................................... 14 Loans to Private Enterprise .................. 15 Continuing Relationship With Borrowers ....................................... 16 Technical Assistance ........................................ 17 The Bank's Lending Standards . .......................................... 1 OPERATIONAL ACTIVITIES ................... ....................... 19 Latin America ........................................ 20 Asia, Africa and the Middle East .......................................... 27 Europe ........................................ 32 FINANCIAL RESULTS AND RESOURCES ........................................ 38 Results of Operations and Disbursement of Loans ............. ................. 3s Funds Available for Lending ........................ .... 39 Issue and Sale of Securities ........................ 40 Market for the Bank's Obligations ........................ I . 40 MISCELLANEOUS ....................... 41 Management and Organization ........................ 41 Relations with Other International Organizations ............ ............ 42 Advisory Council ....................... 43 Training Program ........................ 43 Membership, Subscriptions and Voting Power ........ ............... 43 Duties and Remuneration of Executive Directors ............ ............ 43 Financial Statements and Reports ........................ 43 Administrative Budget ....................... 43 Additional Reports to Board of Governors ............ ............ 43 Appendices A. Balance Sheet-June 30, 1950 ........................ 46-47 B. Comparative Statement of Income and Expenses for the Fiscal Years Ended June 30, 1949 and June 30, 1950 .48 C. Statement of Loans-June 30, 1950 .................................. 50-51 D. Statement of Currencies Held by the Bank-June 30, 1950 ...... ............ 52 E. Statement of Subscriptions to Capital Stock and Voting Power-lJne 30, 1950.. 54-55 F. Notes to Financial Statements-June 30, 1950 .......................... 56-57 G. Opinion of Independent Auditor ...................................... 58 H. Administrative Budget for the Fiscal Year Ending June 30, 1951 .... ........ 59 I. Voting Power and Subscriptions of Member Countries as of August 1, 1950 .... 60 J. Governors and Alternates as of August 1, 1950 ........................... 61 K. Executive Directors and Alternates and Their Voting Power as of August 1, 1950 .. 62-63 L Principal Officers of the Bank as of August 1, 1950 ....................... 64 INTRODUCTION During the past fiscal year, the Bank granted 12 loans aggregating $166.3 million, compared with ten loans, aggregating $137.1 million during the previous fiscal year. Since June 30, 1950 two additional loans have been made, aggregating $16.4 million. This brings the total of loans granted to date to $832.8 million, of which $614.1 million had been disbursed up to the close of the fiscal year. As the Report indicates, the Bank is engaged in discussions with many of its member countries concerning possible future financing of additional projects. The year under review witnessed a marked increase in the Bank's technical assistance activities. The report of the comprehensive survey mission to Colombia, the first such mission undertaken by the Bank, has been submitted to the Colombian Government and is now under consideration. In the spring and summer of 1950, similar missions were sent to Turkey, Guatemala and Cuba at the request of the governments of those countries. Other comparable missions are at various stages of planning or discussion. It is the Bank's hope that its activities in the two complementary fields of financial and technical assistance will reinforce each other to the mutual advantage of the Bank and its member countries. Since the Bank's total financial resources have been more than adequate for the loans made during the past year or envisaged for the immediate future, rno recourse has been had to the United States market for additional funds. In January 1950 a $100 million issue of 10-year serial bonds was sold, but this was a refunding operation through which a previous issue of bonds of the same amount was retired. The terms on which the Bank was able to sell the new issue represented a considerable annual interest saving. There have been significant additions to the Bank's loanable resources during the past year from sources outside the United States. A number of member countries have recently agreed in principle to the use for lending purposes of all or part of their 18%o subscriptions to the Bank's capital. In addition, the Bank sold in Switzerland, in March 1950, a second issue of Swiss franc bonds in the amount of 28,500,000 francs. The market for the Bank's dollar bonds has also been broadened as a result of arrangements whereby the bonds have been made eligible investments for certain insti- tutions in various countries other than the United States or have been permnitted to be traded on local stock exchanges. These arrangements have already resulted in substantial purchases of the Bank's bonds by investors outside the United States. Since this is the Bank's Fifth Annual Report, it has been considered appropriate to include in the Report not only an account of the activities of the Bank during the past year but also a review of its major operational policies. The Bank is by most standards a young institution, but its experience in international investment has now been sufficient to permit the statement of certain general con- clusions about the problems that it faces and the policies it has adopted to meet them. These policies cannot in the nature of things be regarded as fixed but are constantly subject to evolution in the light of experience. E 5l I THE MAJOR OPERATIONAL POLICIES OF THE BANK With the publication of this Fifth Annual Re- long-range function. Nonetheless, a review of port, the Bank is able to look back upon a period the Bank's major operational policies, as they of active operation, the chief characteristics of have developed to date, appears useful, both to which have been the great stress and rapid provide a basis for informed discussion of the change in economic and political conditions Bank's appropriate role and to reduce as far as throughout the world. In many ways it has been possible the chances of misunderstanding or mis- a difficult period for the Bank, conceived as it interpretation. was in the expectation of quite different circum- For purposes of this Report, the aspects of the stances. The Bank has necessarily had to keep Bank's work relating to the increase of its loan- its policies flexible, in order that it might meet able resources are treated separately from its other the needs of the present without prejudicing its operational activities. THE CHARACTER OF BANK LENDING The basic character of Bank lending is, of it imposes is that, before a loan is granted, there course, governed by the Artides of Agreement, shall be a clear agreement both as to the types of particularly the provisions requiring that, except goods and services for which the proceeds of the in special circumstances, Bank loans be for spe- loan are to be expended and of the uses to which cific projects of reconstruction or development; those goods and -services are to be put. Without that the projects initially selected for financing be such specification it would be impossible for the those most useful and urgent for increasing the Bank to judge whether or to what extent a loan productive resources of members; and that, again would be effective in raising the level of produc- except in exceptional circumstances, Bank financ- tion. ing be designed to meet foreign exchange rather There has been considerable criticism of the than local currency expenditures. These provi- specific project approach, but the criticism has sions, however, are necessarily general in char- almost always been based on the assumption that acter; they have posed practical operating prob- the Bank examines the merits of particular proj- lems as they have been applied to specific ects in isolation, without reference to their rela- situations. Each of them, therefore, merits exam- tion to the over-all development needs of the ination. borrowing country. In fact the Bank does pre- cisely the opposite. As is more fully explained The Specific Project Provision below, the Bank seeks in the case of each borrow- ing country to determine what are the appropriate Underlying many of the Bank's lending pol- investment priorities and then to adapt its pro- icies is the provision of the Artides of Agreement gram of financial assistance to meet the priority requiring that "loans made or guaranteed by the needs. Consistently with this approach the Bank Bank shall, except in special circumstances, be for has encouraged its members to formulate long- the purpose of specific projects of reconstruction term development programs and is providing sev- or development." eral of them with substantial technical assistance The objective of this provision is simply to as- for this purpose. The existence of such a program sure that Bank loans will be used for productive greatly facilitates the task of determining which purposes. In effect, the only requirement which projects are of the highest priority in the light of [71 their prospective contribution to the program as because it was so urgent to assist ini meeting the a whole. needs in order to prevent a disastrous decline irn Once a determination has been made as to the production and because the Bank had satisfied most urgent needs of any member country, the itself that the goods financed by the loans were only safeguard by which the Bank can assure that to be used for essential and productive purposes, its resources are in fact used to meet those needs the Bank was willing to make the necessary financ is to require, before granting a loan, that an agree- ing available without detailed examination of the ment be reached with the borrower on the precise specific projects in connection with which the goods purposes of the loan. This is essentially all that were to be employed. As these loans indicate, the the specific project provision implies. If the Bank specific project provision is not interpreted as com-- were to make loans for unspecified purposes or mitting the Bank to a single inflexible lending for vague development programs which have not technique to be applied without regard to the been worked out in terms of the specific projects actual needs of a given situation. It is rather a by which the objectives of the program are to be lending policy which, in the opinion of the Bank, achieved, there would be danger that the Bank's is desirable in the vast majority of cases to assure resources would be used either for projects which that member countries use their limited capacity are economically or technically unsound or are of for foreign indebtedness to the best advantage. a low priority nature, or for economically unjus- Ihe proposal has sometimes been advanceet tified consumer goods imports. that the Bank should make loans for 'general This danger is by no means hypothetical. Few development purposes." It is difficult to discas! projects have thus far been presented to the Bank the merits of this proposal without a more precise in wholly satisfactory form. In many cases there definition of "general develo;mer , u i " have been inadequate or incorrect cost estimates; all that is meant is that the Bank should not con- there have also frequently been deficiencies in the fine its assistance to individual projects but shouldc technical plans or proposed financial or adminis- rather seek to finance groups of inter-related proj- trative arrangements. During the course of discus- ects, the proposal merely reflects existing Bank sions between the Bank and the borrower, it has policy. Indeed, as has already been indicated, the often been possible to work out modifications of Bank would prefer to go further, wherever that is a project to reduce its cost, to increase its technical feasible, and base its financing on a national devel- efficiency or to improve its financial or organiza- opment program, provided that it is properly tional features. Occasionally a substitute project worked out in terms of the projects by which the has been found to be more useful or mnore eco- objectives of the program are to be attained. But nomic than the one originally proposed. The Bankc the proposal has a different aspect if it is intended is convinced that this work has been of real value to urge that loans should be made for programs to its borrowers. consisting only of general aspirations. In the ex- There are special cases, of course, where de- perience of the Bank, such programs provide no . ' ~~~adequate basis for judging whether financial in- tatled project investigations are neither necessary adqaebssfrjdig hte iaiil11 tailedoproject feasinvhesgati areoneitheruc necessa t vestment will in fact be translated effectively into nor feasible. The early reconstruction loans to tecnrt usac fdvlpet France, Denmark and the Netherlands, for ex- the concrete substance of development. ample, were designed to meet emergency needs Determination of Projects to be Financed of those countries for foreign funds to finance a large variety of imports essential to the continued The available resources of every country, in- running of their industries. Because those needs cluding its capacity to borrow abroad, are limited. affected so many different sectors of the economy, To the extent that those resources are devored to [ 8 ] particular investment projects, other projects may tion, workers' housing and similar projects will have to be abandoned or delayed. To be of maxi- be required before other investments in more im- mum effectiveness, therefore, Bank investment mediately profitable activities can be undertaken. must be devoted to those undertakings which will The indirect benefits properly attributable to these contribute most to strengthening the economy of basic investments may be very great even though the borrowing country. the direct earnings of the activities, at least in In practice, the Bank seeks to accomplish this the short run, are not high or may even be non- objective by investigating the over-all economic existent. For example, a highway system, unless position of the borrowing country, with particular it involves toll roads, will yield no direct revenue reference to its investment expenditures and the but it may foster all kinds of industrial and relation of individual projects to the country's agricultural activity. Similarly, irrigatinri or land actual development needs. This investigation may reclamation projects may often be among the most reveal, first, that some projects which have not useful and most urgent investments to be under- been submitted to the Bank nevertheless merit taken, even though, if their cost is paid out of a high priority; and, second, that a number of general tax revenue rather than from water charges those submitted to the Bank, while worthy of con- or other direct assessments, they provide no direct sideration, are of relatively low priority. The return. Bank expresses its views accordingly in its discus- The Bank recognizes, of course, that, by financ- sions with the authorities of the country concerned, ing one particular investment project, it may be emphasizing its preference for financing the proj- releasing resources already available to the ects that seem most urgently required and advis- borrower for some other investment activity. This ing postponement of those that appear less imme- is a principal reason why the Bank seeks to con- diately important to the country's development. suit with its member countries not only concern- The Bank has found that there is no single ing the merits of projects for which a loan is test by which the relative urgency and productivity requested but concerning the country's projected of various alternative projects can be judged. The investment expenditures as a whole. The fact situation in each country must be considered on its that the ultimate effect of its loans may be to own merits. In every case, however, the Bank's release resources for other uses is not, however, general approach to the problem is the same: it regarded by the Bank as in any way relieving it seeks first to determine what are or should be the from the obligation of satisfying itself that the important goals of a proper investment program particular projects it finances are economically and then to gauge the relative productivity of the and technically sound and are of a high priority various projects by the extent of their contribution nature. As has already been noted, the Bank's to those goals. project investigations have frequently resulted in Where the project under consideration is one more effective utilization of the resources both of which is intended to be self-liquidating in terms the Bank and of its borrowers. Furthermore, it of local currency, the Bank will of course wish may reasonably be hoped that, as the under- to satisfy itself, before granting a loan, that the developed countries become more generally famil- enterprise is soundly conceived to achieve that iar with the Bank's method of investigating proj- objective. But the relative profitability of different ects and with the criteria it applies to their projects will rarely be a proper test of their relative suitability for finance, they may tend gradually to contribution to a country's development. In many apply the same standards to the investment proj- cases, certain basic investments in public utilities, ects which they finance from their own resources. transportation and ports, reclamation and irriga- This -may well prove in the long run to be a most [9 ] valuable by-product of the Bank's lending tech- and that, where financing foreign exchange re- nique. quirements indirectly resulting from local currency expenditure mnight in effect encourage the post- Loans for Local Currency Expenditures ponement of such measures, the financing should The Articles of Agreement make a distinction not be undertaken. Thus, where it is reasonably between two types of foreign exchange expenditure possible for a country to defray the local currency which may be incurred in the execution of an in- part of its investment program from its own re- vestment project: one, the direct cost of imported sources without inflationary effects, the Bank be- equipment or services used on the project; the lieves that it should do so; indeed, the Bank is other, the indirect foreign exchange expenditure prepared to aid its member countries in the organ- resulting from the fact that local expenditure on ization of their capital markets and their financial labor or domestically produced equipment will institutions to this end. The Government of El usually give rise to an increased demand for im- Salvador, for example, was recently given assist- ported consumer goods or raw materials. The ance by the Bank in the flotation of bonds by the Articles contemplate that the Bank should nor- Rio Lempa Commission to finance the local cur- mally make loans to meet the first type of foreign rency expenditure of a hydroelectric project for expenditure, but they permit loans for the latter which the Bank haa granted a loan to cover the type "in exceptional circumstances." This second foreign expenditure. type of loan is often referred to as a loan to meet The Bank recognizes that a country may be in local currency expenditures although, strictly a position where its domestic savings are reason- speaking, it is a loan in foreign exchange needed ably fully employed in productive investment and because of foreign exchange requirements indi- where the most advantageous kind of additional rectly resulting from expenditures in local cur- investment for it to make would be in such projects rency. as roads, irrigation or housirig which call princi- The restriction on loans for local expenditures pally for expenditure in domestic currency. If this has been the subject of much discussion. It is investment is likely to lead in a few years to a argued that, to the extent that local expenditure correspondingly higher level of domestic savings, on investment projects gives rise to additional the provision of foreign exchange to finance the demand for imports of consumer goods or raw indirect foreign exchange requirements would materials, there can be no logical reason for mak- serve to tide the country over the period of ex- ing this expenditure less eligible for loans than the pansion without inflation. Provided that the ex- direct foreign expenditure required for the import pansion of investment activity is in line with the of capital equipment. This argument undoubt- natural growth of the country and does not cause edly has considerable validity in principle, but in undue strain in particular sectors of its economy, practical application it requires qualification. a loan for this purpose would generally be justifi- The statement has often been made-and the able. Bank's experience confirms it-that one of the The Bank, in other words, regards the local most essential tasks facing the less developed currency provision not as an encumbrance but as countries is to take more effective measures to a useful warning. It is a signal of the need for in- channel their limited domestic savings into the quiry and justification whenever an application most productive investment projects. The Bank is made for a local currency loan, but there is accordingly feels that a major objective of its nothing in the provision to prevent such an appli- efforts should be to persuade and help its member cation being approved if the circumstances war- countries to carry out these necessary measures, rant- it. It should be noted, however, that it is [ 10 1 the general policy of the Bank not to finance the urgency that the country's ability to undertake whole cost of any undertaking, because it believes foreign borrowing-which is more or less limited that its borrowers' best interests are served if they in all cases-is better utilized in financing this have a tangible financial stake in the preparation project than in financing the direct foreign ex- and execution of their investment projects. change costs of alternative projects; (b) if the local The Bank is already discussing with certain currency costs of the project cannot reasonably be of its member countries projects which may be met out of available domestic resources; and (c) suitable for the financing of local expenditures. if it is apparent that, unless foreign exchange is An example is the Italian Government's program made available to the borrowing country to be for the development of Southern Italy. This pro- employed for the import of either consumer goods gram would probably be beyond the capacity of or raw materials, the local currency expenditures Italy to finance entirely out of its own resources. involved in the project will lead to inflationary The Government hopes that, if it can secure Bank pressures. financing for a relatively small part of the total It should be noted that the term "local cur- investment cost, it can carry through the program rency loan" is sometimes used to mean a loan without inflationary effects. Since most of the pursuant to which the currency of the borrower is capital equipment can and should be provided provided to cover the local expenses of a project, from domestic sources, the only way in which the regardless of their effect upon foreign exchange Bank could effectively aid in the execution of the requirements. The Bank's Articles of Agreement program would be by financing the indirect as permit this type of loan in exceptional circum- well as the direct foreign exchange requirements. stances when the local currency cannot be raised In general, the Bank's policy may be sum- by the borrower on reasonable terms. However, marized by saying that local expenditures may be the Bank has not yet been presented with a case financed if the following conditions are satisfied: where financing of this nature would be appropri- (a) if the project to be financed is of such economic ate. THIE CHARACTER OF BANK INVESTIGATIONS The procedures followed by the Bank in in- borrowers before any formal loan request is filed. vestigating the merits of loan requests necessarily These discussions enable the Bank to determine vary considerably from case to case. The char- whether the projects to be financed are, in principle, acter of the investigation depends upon many of a type which the Bank can consider and, if so, different factors, including the extent to which the to indicate to the prospective borrower what kinds Bank has become familiar with economic condi- of information the Bank will wish to have con- tions in the country concerned through earlier cerning the project and the economic conditions operations, the type of project for which financ- in the borrowing country. If the prospective ing is sought, and the care with which plans for borrower is not a memnber government, the Bank the project have already been worked out by the requires, before starting any serious investigation, prospective borrower. Nevertheless, while the that an appropriate indication be given by the exact procedure will never be the same in any two government that it will guarantee a loan for the cases, a general pattern of handling loan requests project. has been developed, which it may be of value to The actual process of investigation usually summarize briefly. falls into two general stages, although in some Wherever possible, the Bank prefers to hold cases both may proceed more or less concurrently. informal exploratory discussions with prospective The first stage is a general examination of the [ it I economy of the borrowing country with a view to orities, the Bank usually attempts to indicate at determining (a) the approximate amount of addi- this stage which of the projects it believes should tional external debt the country can afford to be given precedence. service and the rate at which it can effectively Once a decision is reached in principle as to absorb such debt, (b) the general order of priority the appropriate size and purposes of a loan, the of the projects under consideration from the Bank proceeds, in the second phase of its investi- standpoint of their contribution to the country's gation, with a detailed examination of the partic- development, and (c) the appropriateness of the ular project or projects selected for financing. If government's economic and financial policies to important technical problems are involved, staff further the development process. Where the pro- engineers or outside engineering consultants are posed project is in a country to which the Bank called upon to make a thorough technical examina- has not previously made a loan, this first stage tion of the plans for the enterprise. If a market- frequently requires intensive study of the country's ing problem is involved, it may be necessary to agricultural, industrial and mineral resources, of check the market survey made by the borrower or, its manpower, transport and power situation, of if no such survey has been made, to assist the the state of its external trade and balance of pay- borrower in making one. Similarly, it often ments, and of the condition of its internal finances, proves necessary to examine in detail the financial particularly its budget and currency position. and administrative arrangements proposed by the Where, however, such an investigation has already borrower to carry out a particular project. Much been made by the Bank, the inquiry will normally of this work can be done on the basis of informa- be confined to developments occurring since the tion submitted by the borrower, but at least part earlier examination. of the technical investigation must usually be In conducting this general type of inquiry, the conducted in the field. Bank initially studies at its home office all avail- If the second phase of the investigation results able information about the country in question in a favorable report on the project or projects, and, where necessary, requests the government either as originally submitted or as modified in to supplement this information by the latest offi- consultation with the Bank's technicians, the Bank cial data. In almost every case, the Bank then advises the borrower that it is ready to enter into dispatches a mission of staff members to the coun- formal negotiations for a loan. As the Bank's try to familiarize themselves with conditions on members have gained greater familiarity with the the spot. Frequently outside consultants in partic- provisions of the Bank's loan and guarantee agree- ular fields known to be of major importance to ments, it has often been possible to complete the the country, such as irrigation or transportation, formal negotiations quite quickly. are also attached to the mission. These lending procedures are subject to an On the basis of the mission's report, the Bank important qualification. It happens not infre- can usually form at least a provisional judgment quently that the Bank's examination of general as to the amount of additional foreign debt the economic conditions in the borrowing country country can safely assume and effectively use and, reveals the existence of economic or financial if only one or two projects have been presented practices or policies which so adversely affect the for financing, whether those projects have prop- financial and monetary stability of the country erly been assigned a position of priority. In the that, if continued, they would endanger both the many instances where member governments have productive purposes and the repayment prospects submitted a list of projects to the Bank and re- of any Bank loan. In such cases, it is the policy quested assistance in the establishment of pri- of the Bank to require, as a condition precedent [ 12 ] to Bank financing, that the borrowing country in- of a still unsettled default on their outstanding stitute measures designed to restore stability to its foreign obligations. The Bank is obligated, under economy. The Bank does not, of course, insist its Articles of Agreement, to encourage interna- that all remedial measures which may appear tional investment for the development of the necessary in the case of any given country be com- productive resources of its members. It has, pleted before that country may qualify for a loan. therefore, a direct interest in the creation and On the other hand, the Bank is not normally will- maintenance of satisfactory relations between its ing to rely simply on a representation by the gov- member countries and their external creditors. ernment that such remedial measures will in due The mere existence of a default will not deter the course be taken. The Bank's position is midway Bank from granting a loan if the Bank is con- between these extremes; it requires concrete evi- vinced that there are no reasonable grounds for dence that the government is actually taking ap- regarding the debtor's attitude as unsatisfactory. propriate steps to establish stability, but, once On the other hand, the Bank does consider it im- given such evidence, it is usually willing to make portant that the countries concerned should give a loan concurrently with the execution of the dclear evidence of their willingness to reach a fair measulo sandconurren and equitable settlement of their debts. In the absence of such evidence, the granting of a Bank A similar qualification applies in the case of loan might properly be regarded as, in the long those few remaining member countries of the run, hindering rather than promoting the flow of Bank whose credit is impaired by the existence international capital. LOAN CHARGES In establishing its system of loan charges, the allocated to a special reserve for the purpose of Bank holds to the well-established principle of a meeting the liabilities of the Bank on its borrow- cooperative institution that it must consider equally ings and guarantees. The Articles of Agreement the interests of all its members. The Bank there- require that, during the first 10 years of its opera- fore lends at the lowest rates that it considers con- tion, the Bank impose such a commission of not sistent with reasonable prudence to safeguard those less than 1%c and not more than 11½2%o per an- who supply its funds and those who guarantee num on all guarantees of loans and on all loans their repayment. It is also the Bank's policy to made out of borrowed funds. The current policy make no distinction among its members in deter- is to charge a uniform commission of 17o per an- mining the charges on loans. num on the outstanding amounts of all loans, The two principal charges are interest and com- regardless of the source of funds. mission. The main element in the interest rate The Bank has made efforts to effect a progres- is the cost at which the Bank can borrow in the sive reduction of its charges. The first public market for a comparable period. The Bank's in- issues of the Bank's bonds, totalling $250 million, terest rate is calculated to exceed this cost by a were floated some time before the funds so raised small margin sufficient, together with the income were actually required. Although by so doing from its capital, to cover the Bank's operating ex- the Bank incurred substantial expense, this policy penses and to yield a modest amount that can be was fully justified in the event. As investors be- put to reserve against future contingencies. The came more familiar with the Bank's operations Bank is able to keep its interest rate down to and the character of its obligations, the market little more than cost because, in addition, it for these bonds became stronger not only in it- charges a commission, the proceeds of which are self but even more significantly in comparison [ 13 ] with the bond market in general. Consequently The combined interest and commission charges early this year the Bank was able to refund one on typical long-term loans made by the Bank issue at a considerable interest saving. during 1950 are illustrated by the following ex- The Bank does not normally charge the full amples: 33/47a on a 15-year loan to Iraq; 4% interest rate on its loans until the proceeds are on a 20-year loan to India; and 41/47o on a 25- actually disbursed. Beginning on the effective year loan to the Companhia Hidro Eletrica do date of the loan, however, a commitment charge Sao Francisco of Brazil. These rates compare is made on the undisbursed portion of the loan favorably with the current yield on most foreign calculated to compensate the Bank, at least in dollar bonds; they are also more favorable than part, for the cost of holding funds at the bor- the domestic interest rates prevailing today in rower's disposal. most member countries. CURRENCY PROBLEMS The Bank is precluded by its Articles of Agree- sterling with United States dollars, the borrower's ment from making "tied" loans-that is, from obligation would be in United States dollars. imposing any condition in its loan contracts that As of June 30, 1950 the Bank had disbursed the proceeds of the loan must be spent in the the equivalent of $614.1 million under its loans. territories of any particular member or members. of this sum, the equivalent of $17.9 million was The imnpression has, however, gained some ac- drawn from the Bank's resources of currencies ceptance that, although the Bank may impose no other than United States dollars, specifically the contractual conditions which cause its loans to 18%o subscriptions of Canada, Belgium and the be "tied", its policy and procedures tend in effect United Kingdom and the proceeds of Bank bond to have this result. Some explanation of the issues in Switzerland. The remainder, $596.2 mil- Bank's methods in this connection may therefore lion, was drawn from the Bank's United States be of value. dollar assets. Of this sum $452.3 million, or Although for accounting purposes the Bank's about three quarters, was spent in the United loans are ordinarily expressed in terms of United States, In view of the types of goods required by States dollars, the Bank has the option, under its the Bank's borrowers and the supply situation of usual loan agreements, to provide the borrower such goods during the last few years, and in view with either dollars or such other currencies as of the fact that most of the Bank's members have may be needed to carry out the project. The cur- confined their loan requests primarily to their rencies in which the borrower is obligated to make dollar needs, this proportion should occasion no repayment to the Bank are determined by the cur- surprise. On the contrary, the fact that, of the rencies which the Bank itself must disburse in United States dollars disbursed, so large a pro- order to provide the borrower with the currencies portion as one quarter was spent outside the it needs. For example, if a borrower should re- United States is a clear indication that the Bank's quire a certain amount of sterling and the Bank loans have not been tied either in form or in sub- should be able to provide the borrower with that stance. amount of sterling either from its own holdings In the case of most of its borrowers, the Bank or from the proceeds of the sale of sterling obli- cannot be indifferent to the currencies in which gations, the borrower would then incur an obliga- they incur obligations. When, for example, a bor- tion to repay that amount in sterling. If, on the rowing country's total dollar debt is already near other hand, the Bank should have to purchase the the prudent limit that it can be expected to bear, [ 14 ] the Bank advises it to explore all practical means sary, convert to other currencies interest and com- of avoiding an addition to that dollar debt. If mission payments on loans out of 18% funds. As the borrowing country might be able to achieve noted in a subsequent section of this Report, the its purpose by using its own resources in another Bank's efforts in this direction have recently met currency or by incurring a debt in that currency, with an encouraging degree of success. In view the Bank encourages and helps the government of the increasing availability of goods in Western to canvass these possible alternatives. Europe at prices competitive with those of com- In order to meet situations of this kind, the parable United States products, this matter is Bank has made efforts to increase its available becoming progressively more important. Indeed, lending resources in currencies other than United so long as conditions of non-convertibility con- States dollars by obtaining the permission of its tinue, the extent to which the Bank is enabled to members for the use for loans of part or all of utilize its non-dollar capital or the proceeds of the 18%o portion of their capital subscriptions. In non-dollar bond issues for lending purposes will order to facilitate the giving of such consents, the inevitably have a substantial effect upon the Bank has decided that it will not, unless neces- volume of Bank lending. LOANS TO PRIVATE ENTERPRISE The Articles of Agreement provide that loans companies which are already subject to substantial to borrowers other than member governments government regulation. Whether the fear is jus- must be guaranteed by "the member or the cen- tified or not, however, the significant fact is that tral bank or some comparable agency of the mem- it exists. ber which is acceptable to the Bank". This pro- The Bank has tried various techniques to over- vision is a principal reason why a majority of the come these difficulties, for it is convinced that in Bank's loans to date have been to governments or many situations it can make an effective con- governmental agencies and why loans to private tribution to the development of its member coun- enterprises have been infrequent. tries by financing private undertakings. Despite Governments are frequently reluctant, for en- wide divergence of opinion as to the proper scope tirely understandable political reasons, to guar- of governmental activities, it is generally agreed antee loans to private enterprises. If a govern- that there are broad sectors of any economy where ment extends its guarantee to a particular private private enterprise, domestic or foreign, is the most company, it lays itself open to charges of favor- suitable and efficient instrument of development. ing that enterprise over its competitors and, what One type of solution to the problem is exem- is often more important, over various public plified by the Bank's loan to the Netherlands projects. Such criticism is likely to be made how- Herstelbank (Reconstruction Bank). The purpose ever well-advised the government's choice may be. of this financing was to enable the Herstelbank to Furthermore, the requirement of a government extend credits to more than 20 private enterprises guarantee tends to discourage private enterprises in a variety of industries to be used for the import from seeking Bank financing because they fear of equipment from hard currency areas. By having that it may lead to demands for government par- a government guarantee a loan made to a respon- ticipation in or control over management. Al- sible intermediary such as the Herstelbank, it is though this fear has not been justified by the possible both to minimize the danger of political Bank's experience to date, that experience may not intervention in the affairs of the private enter- be wholly reliable, since the Bank's loans to pri- prises which are the ultimate beneficiaries of the vate enterprises have been mainly to public utility loan and also to insulate the government from El,' the political difficulties involved in guaranteeing efforts of the International Bank to contribute to a loan to any particular private enterprise. this development. Similar considerations entered into the Bank's Although the Bank hopes that useful lessons decision to assist in the establishment of the will be learnt from the progress of the Turkish new Turkish Industrial Development Bank, a Industrial Development Bank and that this expe- detailed account of which will be found on page rience may provide some guidance in tackling 33. This institution was developed with the help similar problems in other underdeveloped coun- of a consultant employed by the International Bank tries, it is unlikely that the Turkish model can in response to a request by the Turkish Govern- simply be taken as a pattern to be repeated with- ment and Turkish private interests for assistance in out modification. The Bank continues to study the problem as it is confronted with it in the tiemuchandeforeign askof investmint othe dntern- various member countries. One possibility is the tlCan fregnprivate acsmnt h Itra tic nd orein pivat inestient TheIntma- acceptance bv the Bank in suitable circumstances tional Bank has agreed to work out a loan to the c DevetopmentBank, with an understan. of the guarantee of the local central bank or com- Development Bankc, with an understandingz that o use of the proceeds of the loan for particular parable institution; this technique would appear private projects is to be subject to International appropriate for small loans to private enterprises which corlstiti-te onily a rrLnor portion of the total Bank review. It is expected that the existence of i expecteu i~~~~nvestment which it iS antcipated the Bank will the Development Bank, which will carry out its inv the country. At is the eactmenty make it, the coutr. Another is the enactent by own financial and technical investigations, will not member countries of legislation enabling officials only give greater confidence to Turkish investors or institutions to give the guarantee of the govern- who wish to establish or expand private industrial ment for Bank loans not exceeding a certain size, enterprises but will also greatly facilitate the individually or in the aggregate. CONTINUING RELATIONSHIP WITH BORROWERS It is the Bank's practice to maintain a close re- Since rio two projects have the same characteris- lationship with its borrowers throughou t the life tics, the Bank works out with each borrower of each loan. There are two main aspects to this the kind of information best designed to keep the continuing relationship. First, the Bank checks Barnk abreast of developments, the minimum to assure that loan funds are expended onry for arnount of such information which can serve this authorized goods or services and arranges to keep purpose, and an appropriate system for reporting itself informed of the uses to which Bank-financed such information regularly. The information re- goods are devoted. Second, the Bank keeps in quested by the Bank is no more, and is usually touch during the entire life of the loan with eco- much less, than that required by the borrower it- nonic and financial developments in the bor- self for the efficient control of its own operations. rowing country through information submitted The Bank supplements its study of this data by by the government, periodic visits to the country occasional field investigations by members of its by Bank officials, and consultation and exchange staff. of views with the government's representatives. The objective of this aspect of the Bank's work Disbursements are, in general, controlled by is to bring to light at the earliest possible moment procedures similar to those applied by commercial those difficulties, both technical and financial, banks. In addition, the Bank arranges in the case which frequently arise, particularly in the execu- of every loan to receive a flow of information tion of large scale construction programs, and about the progress of the execution of the project. which cannot be foreseen at the time a loan is f 16 J granted. Early knowledge of the existence or the those countries, through observation and through prospect of such difficulties puts the Bank in a discussions with government officials and other position to discuss the best solution with the bor- interested elements of the community. rower in good time. In this manner, difficulties One objective is, of course, to ensure that the which might have hindered the successful accom- maintenance of service on Bank loans is not jeop- plishment of a project can often be overcome or ardized by the emergence of conditions which averted. might reasonably be prevented. But the Bank As has already been noted, in addition to fol- also has a broader objective in view. By keeping lowing the progress of the project, the Bank gives dosely in touch with the progress of its members, continuing attention throughout the life of each the Bank hopes that it may be able to be of some loan to the general economic and financial condi- assistance to them in meeting important economic tions in the borrowing country by studying statis- problems. The member countries, in turn, are tical and other information obtained both from the able to discuss their plans for investment well in borrower and from other sources. In addition the advance and to obtain an early indication of the Bank from time to time sends staff missions to Bank's opinion. On both sides this tends to facili- visit member countries in order that they may fa- tate subsequent financing from the Bank or, in the miliarize themselves with the course of events in long run, from any other source. TECHNICAL ASSISTANCE In the normal course of its loan operations, the advice or the adviser requested from its own Bank renders a wide variety of technical assistance staff; in most cases, however, the Bank has em- to its member countries. This may take the form ployed or recommended that the government con- of suggesting technical modifications to projects cerned should employ outside consultants. In submitted for financing, of advising on marketing order to comply with these requests efficiently, the or managerial problems, or of assisting with the Bank is steadily building up a roster of experts in financial aspects of the undertaking, including the the various fields in which technical advice is raising of local capital. In a number of cases, likely to be required. In this task the Bank has too, as has already been noted, the Bank has been been fortunate in enlisting the cooperation of requested to aid the borrowing country in deter- many organizations, international, national and mining which among various projects in its in- private. vestment program should initially be selected for Although advice on particular aspects of a coun- Bank financing. The provision of all these types try's investment activities can be of real value, the of assistance is an integral part of the Bank's lend- Bank is convinced that many of its less developed ing function; its essential purpose is to ensure that member countries need assistance of a broader the Bank's resources will be used with maximum nature. As a result of discussions with the Bank, effectiveness. several countries have asked it to organize a mis- There have been an increasing number of cases, sion to make a comprehensive survey of their however, where member countries have asked the economies. The precise terms of reference of these Bank for advice on particular projects or industries missions vary in each case, but broadly their ob- without reference to any financial operation. A jective is to help the country formulate a program few countries, too, have requested the Bank to of investment which will indicate priorities among recommend to them economic or financial experts the important sectors of the economy and among to serve as advisers to the government. In some types of undertakings within each such sector; to instances, the Bank has been able to provide the suggest methods and measures, other than invest- [ 17 1 ment, to improve productive efficiency in existing is gratifying to be able to make recommendations enterprises; and to recommend improvements in which have a ready chance of adoption, the scope the government's economic and financial policies of a useful and conscientious mission can hardly and organization in order to facilitate and encour- be so confined; in almost every case, at least some age further development. These missions are of the mission's recommendations are likely to be staffed primarily with consultants recruited from unpalatable to certain groups. They may call for outside the Bank on an international basis, al- changes in taxation, for far-reaching land re- though in each case one or more members of the forms, or for the postponement of projects likely Bank's staff are attached to the mission. to benefit some particular district. For this reason The expenses of these missions are shared by it is a prerequisite to the success of a comprehen- the Bank and the country concerned. It is clearly sive advisory mission that the country concerned desirable that the government requesting tech- should sincerely desire its advice and arrange for nical help should assume a substantial part of serious, non-partisan consideration of the recom- the cost, both in fairness to the other share- mendations made. holders of the Bank and as an earnest of the gov- The Bank believes it appropriate that it should ernment's desire to use the assistance effectively. provide this type of assistance to its member coun- As a general rule the Bank has undertaken to pay tries. As a cooperative international institution the salaries of its own staff assigned to these mis- it maintains a continuing and close association sions, while the salaries of specially employed con- with its members. This promotes mutual under- sultants are paid half by the Bank and half by the standing and frees the Bank from the suspicion of recipient country. All travel, subsistence and being influenced by political or commercial mo- other costs, incurred within the country, are paid tives. In addition, membeL countries are aware by the government, and similar expenses outside that, by the very nature of its activities, the Bank the country are borne by the Bank. is unlikely to make or to sponsor recommenda- It is too early to draw any definite con- tions that are unrealistic or beyond their capabili- clusions as to this aspect of the Bank's work. The ties. They know, too, that if they formulate a well- first mission, to Colombia, visited that country balanced development program based on the mis- from July to November 1949; its report and rec- sion's recommendations, the Bank will stand ready ommendations have only recently been completed to help them carry out tne program by financing and submitted to the Bank and to the Colombian appropriate projects. Government. The three subsequent missions sent In executing this task the Bank has the ad- by the Bank to Turkey, Guatemala and Cuba are vantage of being able to provide continuity. The still~~~~ innag thos countreies.ole onlnlt h still in those countries. mission goes to a country, spends several months Even at this early stage of the Bank's experience, there, prepares a report, and then disperses. But however, it is clear that the need for technical even before the mission leaves, the Bank is able assistance of this type is very real and that the ful- to prepare basic information on the country for filment of that need up to the point of implemen- the mission's benefit and to impart to it the gist tation of the advice given is far from a simple task. of its previous experience. After the mission re- As the experience of the Colombian mission turns, the Bank is in a position to follow up its showed, there will normally be a number of recommendations by giving advice to the member changes of a comparatively simple and non-con- country on such subsequent steps as are recom- troversial nature which can be recommended and mended and, since there will normally be several which, if carried out, would add greatly to the members of the Bank's staff on each such mission, well-being of the country at little cost. 'While it retains the experience of the mission in a real and [ 18 ] intimate way that it could hardly do from the mere basis for current financial relations between the reading of a report. Bank and its member countries. In the long run These broad activities in the field of technical their impact is likely to be more profound, since assistance are not in the first instance oriented by they should contribute to the formation of a cli- the Bank's financial operations. Nevertheless, the mate conducive to productive investment from all surveys made will certainly form a useful working sources. THE BANK'S LENDING STANDARDS As the foregoing discussion discloses, the Bank bers is assembled, as well-conceived development has set high standards for its lending operations. programs take shape, and as the technique of plan- That does not mean that its loans are without ning individual projects becomes more generally risk; the very essence of the Bank's task is to take understood, the pace of the Bank's financing will risks that private investors are unwilling to as- accelerate and it will be able to grant a consider- sume. Nor does it mean that the selection of ably larger annual volume of loans. projects to be financed is dictated by commercial The Bank is convinced, however, that an in- considerations. It means rather that the Bank will crease in the volume of loans achieved at a sacri- lend only on the basis of an informed judgment fice of the productive character of those loans as to the productivity of the proposed investment. would be of no real benefit to its members. Noth- This judgment rests on the answers to two basic ing can be more harmful to a country's economic questions: first, whether the purposes for which future than a faulty assessment of its real oppor- the loan is granted can be accomplished efficiently tunities. Nor can anything make the burden of a by the means selected and with the funds at the debt so difficult to bear as waste and inefficiency in borrower's disposal; and second, whether the ac- the use of borrowed funds. Hasty investment in complishment of those purposes will make a sig- inadequately prepared projects will frequently nificant contribution to the country's economy in necessitate heavy expenditure to eradicate techni- relation to the resources invested. cal difficulties which could with due care have The gathering of information necessary to form been foreseen; and, in the end, the cost of the such a judgment takes time, particularly when, as projects may be out of all proportion to their often happens, it involves a series of inquiries. effect on productive output. It is the Bank's firm There is no doubt that, in the early years of the intention, therefore, to continue its efforts to Bank's operations, this process has tended to re- choose the right projects for investment and to tard the pace of the Bank's lending. But there is help bring those projects to a high pitch of tech- no reason for this tendency to continue once a nical proficiency. Only by so doing can the Bank steady flow of projects proposed for financing has discharge its responsibility to assure effective use developed. The Bank hopes and expects that, as of its resources in raising the standard of living in more information about the economies of its mem- its member countries. OPERATIONAL ACTIVITIES A list of all the loans made by the Bank up to aggregating $166,345,000, for projects in Brazil, the close of the fiscal year ended June 30, 1950, Colombia, El Salvador, Finland, India, Iraq, Mexi- together with an indication of their general pur- co, the Netherlands and Yugoslavia. Since the poses, appears in Appendix C. As this list shows, close of the fiscal year, the Bank has made two the Bank made 12 loans during the last fiscal year, additional loans, aggregating $16,400,000, to the r 19I Republic of Turkey for port development and for of the Bank's operational activities. In the nature grain storage facilities. of things this account cannot be comprehensive; it is intended rather to provide a general indication A more detailed description of the loans granted of the nature of the Bank's activities in its various since the date of the last Annual Report is in- member countries and of the economic background cluded in the following country-by-country account against which those activities have taken place. LATIN AMERICA Mexico of six months. The reorganization plan was ap- The Fourth Annual Report described the cir- proved by the security holders in February 1950 cumstances in which the Bank made a loan of $10 and was sanctioned by the Supreme Court of million to the Comisi6n Federal de Electricdad Ontario, Canada, on April 12. On April 28, 1950 (Federal Electricity Commission), a Mexican the Bank made a loan to the Company of $26 million, of which $10 million was used to refund Government agency charged with the develop- thprvoshr-emlan Tenwla, ment of electric power facilities, and to Nacional wh ich Financiera, an official financing institution, to en- which is guaranteed by the Mexican Government able those bodies to make a loan in correspond- is for a term of 25 years and carries an interest ing amount to the Mexican Light and Power rate of 31/2%, plus the usual ITo commission Company, Limited. This was a short-term loan charge. Amortization payments begin in the maturing on December 31, 1949; its purpose was fourth year. to enable the Company to carry on its expansion This loan will enable the Company to continue of electric generating and distribution facilities, with its share of a long-range program, under- pending a larger loan to the Company itself which taken jointly by the Company and the Federal the Bank considered could be made only after a Electricity Commission, to increase the supply of reorganization of the Company's financial struc- electric power to Mexico City and the surround- ture and the approval by the Mexican authorities ing districts. This area, with a population of of a new power rate structure affording reasonable three million, has undergone rapid industrial and earnings prospects for the recapitalized company. agricultural development so that the extension of The framing of a Plan of Arrangement to meet generating, transmission and distribution facilities the needs of the Company, with its elaborate capi- is now urgently necessary. Under the program tal structure and wide international distribution of the Company will have added 155,000 kw to its securities, proved laborious and complex. A fur- generating capacity by 1953 and the Federal ther complication arose from the devaluation of Electricity Commission will have added 170,000 sterling and other currencies, which made it neces- kw. Distribution of the whole of the additional sary to revise certain provisions of the Plan affect- power within the Federal District will be carried ing the exchange of the existing sterling and out by the Company. Canadian dollar securities for new United States As stated in the Fourth Annual Report, the dollar securities. Furthermore, the new rate struc- Federal Electricity Commission received a loan ture was not approved until December 1949. As from the Bank of $24.1 million in January 1949 a consequence, the reorganization of the Company to assist it in carrying out its share of this pro- and the negotiations for a long-term loan were gram. There have been some revisions in the not completed by the end of the year and the $10 proposed use of this loan, of which the principal million loan was therefore extended for a period one, made after consultation with the Bank, was [ 20 ] a reduction from $3 million to $500,000 of the hydroelectric power at Paulo Afonso Falls on the amount allotted to rural electrification, in order Sao Francisco River in northeast Brazil. The loan, to allow for the estimated increased cost of other which is guaranteed by the Government of Brazil, projects. is for a term of 25 years and carries an interest The Mexican Government recently approached rate of 31/4¼o, plus the normal 1% commission the Bank with a proposal for a loan of moderate charge. Amortization begins on September 15, size to finance small projects undertaken by private 1954. enterprises. The Bank has expressed its interest The total capital cost of the Paulo Afonso in principle in this proposal and is now awaiting project is estimated at $56,000,000. The Bank's submission of detailed plans. loan of $15,000,000 will be used to finance almost The President of the Bank visited Mexico in all the foreign exchange costs, including the pur- January 1950 and in March-April the Economic chase of construction equipment, generating equip- Director and other representatives of the Bank ment, transformers and other substation equip- paid a further visit in order to review develop- ment, and high tension transmission lines. CHESF, ments in Mexico's general economic condition. a semi-autonomous agency controlled by the Gov- They concluded that there have been substantial ernment but financed partly with private capital, improvements in the situation during the past two will meet the local currency costs out of its own years. Production has continued to increase both resources. in manufacturing industries and in agriculture. The Paulo Afonso power station, which will There has been a decline in the production and have an initial installed capacity of 120,000 kw, export of non-ferrous metals, due to world market is situated in an area where lack of power has conditions, but the adverse effect on the balance of been a major obstacle to development. It will payments has been offset by the increase in agricul- serve the ports of Recife and Salvador through tural exports. Cotton has now become the largest two primary transmission lines, each approximate- single export. Sugar was exported in 1949 to a ly 400 kilometerse long. Recife, a city of some total value of $10 million, whereas Mexico was 500,000 people with many small industries, is the a net importer of sugar before 1948. There was most important port in northern Brazil and is the also a considerable increase in the value of ex- center of the principal sugar-producing area in the ports of rice. country. Salvador, with a population of 300,000, The stabilization of the peso in June 1949 and is the center of the tobacco and cocoa industries. the maintenance of a policy of a balanced budget About 40 small towns will be served by secondary and credit restrictions, have been followed by a transmission lines. The project will also make marked improvement in the balance of payments electric power available for the development of position and a substantial increase in the mone- the hinterland of Recife and Salvador and of the tary reserves of the Banco de Mexico. Within a area in the vicinity of Paulo Afonso Falls, which few years annual service payments on Mexico's are at present almost entirely undeveloped. Pro- presently outstanding debt will begin to decline vision has been made for the installation of sub- rapidly, which should facilitate the future financ- stantial additional capacity if it should be required. ing of development projects. This is the second Bank loan to Brazil. Pre- viously, on January 27, 1949, the Bank had made a Brazil loan of $75,000,000 to the Brazilian Traction, On May 26, 1950 the Bank made a loan of Light and Power Company, Ltd., for the ex- $15,000,000 to the Companhia Hidro Eletrica do pansion of hydroelectric power facilities in the Sao Francisco (CHESF) for the development of Rio de Janeiro and Sao Paulo areas, and of tele- [ 21 l phone facilities over a wider area in the central coffee, which in 1949 accounted for 577% of the part of Brazil. By the fall of 1949 it had be- value of Brazilian exports. The foreign exchange come clear that the actual foreign exchange outlook, for the near term at least, appears favor- costs of this program would be somewhat lower able, primarily because of present good prospects than estimated. As a result of these and other for coffee exports; in addition, there has been a savings, the Company and the Bank agreed to marked increase in the domestic production of modify the loan agreement by adding a number of wheat, which was the largest single item among new items, including the purchase of the floating Brazil's imports in 1949. On the other hand, as steam plant "Sea Power," to be used first at Rio economic activity expands, especially transporta- and then at Santos, as an additional source of tion, imports of fuel will press increasingly hard power pending the completion of the Company's on the available foreign exchange, unless the large expansion program. petroleum resources believed to exist in Brazil In October 1949 the Bank dispatched a mis- can be developed. Industrial production con- sion to Brazil to study the country's capacity to tinues to increase in many different fields, and the assume additional external debt, the policies be- recent adoption by the Brazilian Congress of the ing followed to promote development and the SALTE Plan, a comprehensive five-year develop- priorities of various development projects includ- ment program, should accelerate the growth of ing Paulo Afonso. Subsequently, the Bank ad- both industrial and agricultural output. However, vised the Government that it was willing to 1949 witnessed a renewed expansioni in credit and proceed with discussion of the Paulo Afonso currency and the reappearance of a budgetary project and also to investigate the electrification deficit in place of the small surpluses of 1947 program of the State of Rio Grande do Sul, which and 1.948. The budgetary deficit was generated the Government regarded as having the highest primarily by capital expenditures for government priority after Paulo Afonso. The Bank also stated account and increased civil service salaries. Infla- that it was prepared to investigate promptly the tionary influences are thus still present in the merits of any other productive projects which the Brazilian economy and could become, unless cau- Brazilian Government regarded as having a high tion is exercised, a seriously disruptive influence priority. A staff engineer was thereafter sent to in the orderly economic development of the Rio Grande do Sul to study the state electrifica- country. tion program and to assist the state authorities in preparing the program for submission to the Bank. Colombia The technical and financial aspects of the program Last year's Annual Report described the loan have not yet been fully worked out and are still of $5 million made to the Caja de Cr6dito Agrario, under investigation by the Bank. A number of Industrial y Minero in August 1949 for the pur- other projects in Brazil have been brought to the chase of agricultural machinery. As of June 30, attention of the Bank, but the Federal Government 1950 the Bank had disbursed $2,680,840 for the has not yet indicated that it would be willing to purchase of equipment, which included 70 bull- guarantee a loan from the Bank for any of them. dozers, some 600 heavy, medium and light tractors, During the past year Brazil's external exchange and ploughs, harrows and other auxiliary equip- position has been considerably strengthened and ment. Most of this equipment has been dis- its backlog of short-term commercial liabilities has tributed through normal business channels in been largely liquidated as a result of energetic Colombia and is already in operation. Since the import control measures on the part of the Brazil- loan was made, representatives of the Bank have ian authorities and the sharp rise in the price of visited Colombia to observe progress generally [ 22 3 and to review the procedures used in distributing the Bank sending representatives to Uruguay in the machinery. March 1950 to begin final negotiations for a loan, During the past year the Bank has been discus- amounting to the equivalent of about $33 million, sing proposed additional loans aggregating ap- for a project for augmenting the generating and proximately $8 million. The loans would finance distribution facilities for electric power, and for part of the foreign exchange costs of three new the expansion of telephone services. The total hydroelectric projects with a total generating ca- costs of the project would be the equivalent of pacity of 41,600 kw. to serve the cities of Mani- approximately $45 million. The borrower would zales, Bucaramanga and Cali. Various technical, be the Administraci6n General de las Usinas E16c- financial and organizational difficulties which have tricas y los Telefonos del Estado, an autonomous hitherto impeded progress are now being resolved Government agency. Loan negotiations have con- and the Bank hopes that the discussions can be tinued in Washington but, up to now, final agree- brought to an early conclusion. ment with the Government of Uruguay has not The consideration of other development projects yet been reached with respect to certain provisions in Colombia has awaited submission to the Bank of the proposed guarantee agreement. and to the Colombian Government of the report In the course of the discussions in Montevideo of the comprehensive survey mission headed by Dr. in March 1950, the Uruguayan Government Lauchlin Currie, to which reference has already asked the Bank to assist in arranging for tech- been made. This mission remained in Colombia nical studies on the development of certain sectors from July to November 1949. Its report and of the country's economy. Two consultants, whose recommendations have recently been completed services were obtained through the cooperation and will be published in both Spanish and English. and assistance of The Borden Company and The The Colombian Government is appointing a non- General Foods Corporation, were engaged by the partisan commission to study the report and to Government on the recommendation of the Bank; formulate a development program based on the they paid brief visits to Montevideo to study analyses and recommendations in the report. plans for expansion and modernization in the This technical assistance mission was the first of milk and fishing industries. The Government its kind sponsored by the Bank at the request of a also asked the Bank to assist in the organization member government. It marks a new approach of a technical assistance mission to survey the that will serve, quite apart from its usefulness to country's agricultural economy and to recommend Colombia, as valuable experience in the conduct of means for increasing agricultural output. In future Bank operations. Owing to the breadth cooperation with the Food and Agriculture Or- and diversity of the subject matter treated in the ganization of the United Nations, which has mission's report, no attempt is made here to sum- agreed to be joint sponsor of the requested mis- marize the document itself. sion, the Bank arranged for three agricultural technicians to make a preliminary study of the * Uruguay problem, on which the terms of reference and The Fourth Annual Report mentioned that a the composition of the mission might be based. Bank mission (including engineering consultants) The economic and financial situation in Uruguay visited Montevideo in February-March 1949 to in. remains favorable. The Government has followed vestigate the financial and technical aspects of conservative monetary and fiscal policies, which several development projects presented to the have controlled inflationary pressures. During the Bank by the Uruguayan Government. These year 1949 Uruguay had a surplus on her trade studies and preliminary negotiations resulted in account as a whole. The greater availability of [ 23 ] goods from Europe made it possible to shift the de Fomento de la Producci6n; and the other, in procurement of imports away from dollar sources March 1950, to review recent fiscal and monetary of supply into those markets where the bulk of developments. Uruguay's meat is sold. In addition, exports to In 1948 Chile had a budget surplus and its in- the dollar area increased. The balance of trade ternational payments were about in balance. Al- with the dollar area consequently showed substan- though it then appeared that the two problems of tial improvement. Wool, the principal dollar inflation and foreign exchange stringency were earner, maintains a satisfactory position in the about to be overcome, this prospect was unfor- United States market, although labor disputes de- tunately not realized in the following year. Chile's layed the shipment of the 1949-50 clip. The pur- foreign exchange position was adversely affected chase of certain foreign-owned properties in the by dedines in the price and the volume of sales country with blocked balances caused total foreign of copper and in the price of natural nitrates, the exchange reserves to fall. Gold and dollar re- country's two principal exports. Recently, how- serves, however, have risen. In general, therefore, ever, the market for copper has shown some im- the balance of payments position has strength- provement. Efforts have been made to eliminate ened non-essential imports and to utilize non-dollar cur- rencies wherever possible. The development of Chile the oil fields in Magellanes and the recent com- In the Bank's Fourth Annual Report details pletion of the steel mill at Concepci6n should help were given of two loans to Chile, one for $13.5 to improve the foreign exchange position. million to finance the foreign exchange require- The problem of inflation has been aggravated ments for the construction of two new power by the need to tighten control of imports and by plants and for additions to two existing power renewed pressure- for wage increases. The Gov- plants and incidental irrigation, and the other for ermnent of Chile has stated its intention of fol- $2.5 million to finance the purchase of agricultural lowing policies designed to check inflation and to machinery. The latter loan had been fully dis- this end has secured advice from the International bursed by the end of 1949 and the machinery Monetary Fund and from an economic mission purchased has now all been shipped to Chile. organized by the United Nations. The peso proceeds of the sale of this equipment The Bank has discussed a number of projects are being used in the promotion of additional for possible financing when the present stabiliza- agricultural development, including part of the tion program shows satisfactory progress. These cost of an investigation of large-scale irrigation include a pulp mill and newsprint plant, the mod- possibilities. The larger loan, for the purchase of ernization and re-equipping of the coal mines south power generating and distribution equipment, is of Concepcion, which supply almost all of Chile's being disbursed more slowly; about 22% had solid fuels, and several irrigation and other agri- been withdrawn by June 30, 1950. The new cultural development projects. Engineers em- facilities, when completed, will add 81,000 kw to ployed by the Bank have visited Chile to make a the existing generating capacity and will be of technical examination of the coal mine projects. substantial assistance in relieving the power short- age, especially in the Santiago area. El Salvtador Bank representatives made two visits to Chile As foreshadowed in the Fourth Annual Report, during the past year: one, in November-December negotiations for a loan for hydroelectric develop- 1949, to review the general economic situation ment in El Salvador took place in the fall of 1949, and also the development plans of the Corporaci6n and on December 14, 1949 the Bank made a loan f 24 3 of $12,545,000 to the Comisi6n Ejecutiva Hidro- the current balance of payments. The country's electrica del Rio Lempa, an autonomous govern- economy would, however, benefit from greater di- ment agency, to finance the import requirements versification; it is at present too dependent on the for the construction of a 30,000 kw power station sale in a single foreign market, the United States, at Chorrera del Guayabo on the Lempa River. of a single product, coffee, which accounts for The loan was guaranteed by the Government of over 80%o of all exports. Moreover, there are El Salvador but the guarantee agreement could well established industries such as textiles, coffee not be ratified at the time because El Salvador milling, mining and food processing, the expan- had no legislative assembly. However, in order sion of which has been hampered by a lack of suf- to establish a firm basis of public support for the ficient power. This will be remedied by the addi- loan, the Government set up an ad hoc committee tional supply to be made available by the Rio of three Government representatives and six in- Lempa hydroelectric project. It is also hoped that dependent businessmen, bankers and lawyers, who the availability of power from the project will thoroughly reviewed all aspects of the project and encourage the introduction of new industries. the loan and guarantee agreements and then gave Other expected benefits include more efficient the plan their unanimous support. The loan was distribution of water and an improvement in ag- ratified on June 12, 1950 by the National Constit- ricultural production through the use of power for uent Assembly elected to draft a new constitution. irrigation. An interesting feature of this loan was the financing of local currency costs of the project. Guatemala While there was reason to believe that ample capi- Discussions with representatives of the Guate- tal funds were available in El Salvador, the malan Development Institute and of the Central limited local capital market did not provide the Bank during the Fourth Annual Meeting of the means of readily mobilizing the funds for invest- Board of Governors led to visits by Bank repre- ment. At the request of the Salvadorean au- sentatives to Guatemala in November 1949 and thorities the Bank made available the services of in March 1950 to discuss the organization by the its Director of Marketing to advise and assist in Bank of an economic survey mission to that coun- the creation and distribution of a local bond issue try. A mission, headed by Dr. George E. Britnell, in the amount of 13,100,000 colones ($5,240,- head of the Department of Economics and Politi- 000). The issue was fully subscribed within a few cal Science at Saskatchewan University, Canada days. Investors included financial institutions, arrived in Guatemala in June and will complete business enterprises and individuals. A broad dis- its work there in the middle of August. The mis- tribution of the bonds among individual investors sion includes economists and experts in the fields was facilitated by a group of local commercial of agriculture, transportation, and industry and banks who underwrote a portion of the issue for power. On the recommendation of the Food and redistribution to their clients. Agriculture Organization of the United Nations, The public finances of El Salvador are sound the agricultural part of the mission's work is be- and its budget has been balanced for almost ing undertaken by the Inter-American Institute of all the past fifteen years; there is no direct Agricultural Sciences at Turrialba, Costa Rica, as government internal debt and the foreign debt is a project of that Institute. small. The Central Bank and the commercial The mission is studying Guatemala's resources banks have maintained a conservative credit pol- and potentialities with a view to making recom- icy and prices have not risen as much as in other mendations as to the general directions in which Latin American countries. There is a surplus in the country's development can most fruitfully be [25] undertaken and the conditions required for its tices and procedures whicb is being carried out at success. Specifically, its terms of reference pro. the request of the Cuban Government by Price, vide for the submission of recommendations as to Waterhouse and Company. the scale, timing and order of investment in the various fields of the economy, considering Guate- Nicaragua mala's domestic resources and its capacity to as- In August 1949 the Nicaraguan Government sume new foreign obligations. The mission's re- asked the Bank to arrange for experts to study port will also serve as a basis for the Bank to con- projects in the fields of agriculture, power, trans- sider the extent and purpose of the financial as- portation and industry. Bank representatives vis- sistance which it may be able to provide. ited Nicaragua in October and November of that year to make a preliminary survey of the develop- Cuba ment possibilities of the country. They concluded Early in 1950 the Government of Cuba asked that the most effective results were likely to be ob- the Bank to organize a mission to undertake a tained from the expansion and improvement of study of that country's economic problems and agricultural production (including storage and development potentialities. The Bank accordingly processing), animal husbandry and transportation organized a mission under the leadership of Mr. facilities. Attention was, however, drawn to cer- Francis Adams Truslow, a prominent lawyer and tain immediate financial and fiscal problems which President of the New York Curb Exchange. The need to be resolved if satisfactory and lasting re- mission includes economists and specialists in the sults are to be obtained from any development fields of agriculture, industry, transportation and program. It was agreed with the Nicaraguan power, mining and finance. The Bank arranged Government that without the adoption of certain with the Armour Research Foundation, the South- remedial measures in these fields, expenditures for west Research Institute and the Stanford Research development might aggravate the economic diffi- Institute to supply jointly most of the technicians culties confronting the country. Since then the for this mission, and expects to take full advan- Government has indicated its intention of seeking tage of the extensive resources of technical knowl- technical assistance in carrying through the neces- edge and experience possessed by these institu- sary measures. tions. The technicians supplied by the three re- search institutes will, however, work under the di- Other Countries rection of the chief of mission, who will be re- The severe earthquake in Ecuador in August sponsible for the mission's conclusions and recom- last year caused serious loss of life and great dam- mendations. age to buildings, factories, irrigation works, rail This mission arrived in Cuba at the end of July. lines and highways. Funds for reconstruction and It will study both the operational efficiency of exist- relief were provided by several foreign countries. ing enterprises and the requirements and prospects During the past year the Bank has had under con- for additional investment, including the priorities sideration several development projects suggested of different types of projects, the amount of capital by the Government of Ecuador, but it has not yet required and the financial resources that can be been able to work out a loan. The Bank has ex- made available. In particular it will examine how pressed concern at the continuing default in the present obstades to domestic or foreign private service of Ecuador's external bonds and hopes that investment can be overcome. The mission will an equitable solution of this problem may be have at its disposal the findings of an indepen- found during the coming year. dent study of the Cuban Government's fiscal prac- Bank representatives visited Costa Rica in No- [ 26 ] vember 1949, on the occasion of the inauguration ment Bank. At the request of the Honduran au- of the new President, and discussions were held thorities, the International Bank has assigned a with the President and with members of the new member of its economic staff for a period of about Government. The Government decided to defer eight months to assist in the formulation of the the appointment of an economic adviser and a re- policies and programs of the Development Bank. quest for Bank financing of certain agricultural projects, both of which had been the subject of dPer has under study a numnber of agricultural discussion with Bank representatives during a pre- and iustria lopn prjcts whi may b *iu visi . A Coni.fEoomcAvsr a the subject of a loan application to the Bank. A ViOUS visit. A Council of Economic Advisers has since b aoemission visited Peru in July 1950 to obtain first- hand information on the general economic situa- Government a survey of the development possi- bilities of the country has been undertaken by the thon adojmake somerelsoinarexamato of Twnit* etr ud fNwYr.TeBn these projects. Inquiries were also made as to the Twentieth Century Fund of New York. The Bank popcso etrn aifcoyrltosi hopes that action will soon be taken to effect a set- pects of r oring a stisfxtory r ondsh tiemnt o thedefalt n Cota Rca'sextenal between Peru and holders of its external bonds. tlement of the default on Costa Rica's external obligations. The Bank has also had informal discussions The Government of Honduras, with the advice with representatives of the Dominican Republic and assistance of the International Monetary about possible Bank financial and technical assist- Fund, has set up a Central Bank and a Develop- ance. ASIA, AFRICA AND THE MIDDLE EAST India mation of agricultural land. The second was made Last year's Annual Report recorded a loan of on April 18, 1950 in the amount of $18.5 mil- $34 million to India to finance equipment imports lion to finance part of the cost of the first stage of for the railway system which had deteriorated a long-range scheme to develop the resources of during the war owing to heavy military use and the Damodar Valley. lack of maintenance. The deficiencies in the rail- The first loan is for seven years and carries an way system, which had greatly impeded the dis- interest rate of 21/2½ plus the usual commission tribution and the export of goods, have been of 1%; amortization will begin in 1952. This largely overcome during the past year, and it has loan is being used to purchase part of the heavy been possible to remove the controls which had equipment needed to clear some three million been imposed on the movement of freight. This acres of land infested with a weed known as kans improvement has been due not only to the addi- grass and for a pilot program to clear about tion of rolling stock, boilers and spare parts pur- 100,000 acres of jungle land. The restoration to chased partly with the aid of the Bank's loan, but cultivation of the land infested by kans grass is also to administrative and operational measures expected at the end of seven years to add about a taken by the Indian Railway authorities. At the million tons to India's total annual production of request of the Indian Government, an unused food grains. Owing to organizational and man- balance of $1.2 million of the Bank's loan has agerial difficulties and delays in the initial delivery been cancelled. of equipment, land reclamation in the 1949-50 Two further loans have been made to India dur- season started six weeks behind schedule and the ing the year under review. The first was made on rate of reclamation was lower than originally September 29, 1949 in the amount of $10 million planned. The Indian Government has decided to to finance the import of equipment for the recla- postpone the purchase of some of the remaining f 27] equipment in order to allow time for correcting impedes economic development and makes the the administrative difficulties. It is hoped, how- budget problem more difficult. Moreover, the In- ever, that through a readjustment of the work dian Government has not found it possible to re- schedule the original objective of reclaiming the duce military expenditures which still weigh heav- land within seven years can be attained. The ily on the economy. India's economic stability clearance of jungle land will contribute a small would be seriously threatened by a continuation addition to India's food supply and also enable the of the trade deadlock with Pakistan. Recent steps Government to assess the feasibility of the clear- towards improved economic relations between In- ance of jungle lands on a larger scale. dia and Pakistan are, however, encouraging and, if they are followed by a lasting understanding The second loan is for a term of 20 years and in eyoare foowedaby a lasting un end carries an interest rate of 3%o plus the usual com- and econormic cooperatlon, a way wll be opened mission of 17%; amortization will begin in 1955. f The loan will be used to pay for generating and Thailand construction equipment for the Bokaro steam plant and the Konar dam, as well as for trans- In Septem the Governmen,,to Thai- miso line an susttin. land invited the Bank to send a mISSion1 to investi- mission lines and substations. egate certain projects as a basis for possible Bank The Damodar Valley, extending northwest loans and to study the economic and financial sit- from Calcutta about 200 miles, lies in the richest uation. The principal projects were railway re- mineral and the most highly developed industrial habilitation, improvernent of the port of Bangkok, region in India. It accounts for over three-quar- rice irrigation and hydroelectric power. Consult- ters of India's total known coal deposits and prac- ants in these four fields were attached to the mis- tically all of her present coal production. In and sion which arrived in Thailand at the end of De- near this area are India's rich iron ores, large de- cember 1949 and remained there for two months. posits of bauxite, and high quality mica. The com- Thailand's railways suffered from bombing dur- pletion of the Bokaro-Konar project will provide, ing the war. Important bridges and workshops at reasonable rates, urgently needed electrical en- were demolished and locomotives and rolling ergy for the expansion and development of indus- stock rendered unserviceable. The Bank's assist- try. The project will also supply water for irri- ance has been sought i their rehabilitation and gation in the lower valley. possible expansion. A Bank mission visited India in March 1950 The proposed improvement of the port of Bang- to review developments ir the economic and fi- kok calls for facilities at the terminal to reduce nancial situation during 1949. Since the middle turn-round time and for the dredging of the chan- of 1949 India's external payments position has nel through the bar at the mouth of the river Chao shown improvement, chiefly through a sharp cut Phya to accommodate ships of 10,000 tons. At in imports and a post-devaluation upswing in ex- present, because ships of over 5,000 tons cannot ports. Inflationary pressures have been kept within cross the bar, expensive lighterage and trans-ship- bounds and the internal financial situation has re- ment charges have to be incurred and the expan- mained relatively stable. Production has followed sion of foreign trade is retarded. an upward trend, with the important exceptions Rice exports are of vital importance to Thai- of the jute and cotton textile industries. But in- land, as they provide not only substantial amounts flation remains a constant threat as budget deficits of foreign exchange but also considerable revenue continue, although at reduced levels, as the scar- in local currency for the Treasury through the city of foodstuffs persists, and as real import needs operations of the Rice Monopoly. However, the are restricted. The lethargy in the capital market present export surplus may decline if the popula- [ 28 ] tion continues to grow at the present rate and if of railway rehabilitation, the development of the there is no corresponding increase in production. port at Bangkok and the Chao Phya irrigation The Government proposes to build a barrage at project, including the installation of penstocks and Chainat on the Chao Phya river about 100 miles the necessary extension to the barrage with a view above Bangkok. This barrage with accompany- to later installation of hydroelectric generating fa- ing irrigation canals would assure the supply of cilities. water to 21/4 million acres of cultivated land in the Central Plain and should make possible increased The Philippines exports of rice. It would also permit navigation In October 1949 the Bank received the techni- along waterways in areas which now have poor cal reports on the proposed hydroelectric projects communications. on the island of Luzon, for which the Philippine There is a severe shortage of power in Thai- Government had submitted a formal loan applica- land. The two existing thermal stations in Bang- tion in August 1948. While examination of these kok were seriously damaged during the war. The technical reports was proceeding in Washington, Thai authorities are making plans for their repair, a Bank mission was sent to the Philippines to re- but even when these facilities have been restored, view the general economic situation on the spot. the output of power will still be insufficient to An assessment of economic developments during meet the growing demand, particularly for indus- 1949 revealed a serious deterioration in the coun- trial development. Plans are therefore also being try's financial position. The trade deficit had reached record heights, foreign exchange reserves made to construct the Chainat barrage in such a hdbe osatydand' pt fetari way that hydroelectric facilities can later be in- I I stalled there to supplement the existing thermal nary payments from the United States, and an capacity in Bangkok. unbalanced internal financial position had con- tinued to maintain import demand at high levels. In spite of dislocation and destruction caused Steps to improve this situation, including the in- by the war, the financial position of Thailand is troduction of more stringent import controls, im- strong. Gold and foreign exchange holdings port credit restrictions, and a comprehensive ex- have greatly increased and the external debt is change control, were taken early in December small. Trade surpluses have been steadily main- 1949; at the same time the Government under- tained, principally as a result of large exports of took a review of its internal financial policies and rice at high prices, and of rubber exports at twice of its economic development program. their pre-war volume. It is expected that Thai In these circumstances it was decided in De- rice will command good prices for some time. A cember 1949 that consideration of the loan appli- conservative budget policy has kept the internal cation should be deferred until the economic de- debt at a moderate level. Among countries in the velopment program and the measures proposed to Far East, Thailand has a number of comparative implement it had been studied by the Bank. At the advantages, notably a lower density of population, end of January 1950, however, the Government a higher income per head and a more adequate informed the Bank that, owing to difficulties ex- supply of food. Thailand's major problem in perienced in the preparation of this program, it carrying out its development program is likely to was discussing with the United States Government be the limited availability of domestic capital re- the establishment of an expert commission to sources. study Philippine economic problems. Adequate The Bank has invited the Thai Government to measures to solve these problems have not yet been send representatives to Washington to negotiate adopted and no development program has yet loans for Bank participation in financing the costs been submitted to the Bank. The Bank has ac- f 29 1 cordingly not been in a position to take action on to permit, at a later stage, the storage of water the loan application. for irrigation. Irrigation is of vital importance to the economic Iraq development of Iraq. Agriculture, the occupa- On J 5 0tion of over 80% of the population, is primarily $12,, to the Kigo of raq frte on- dependent on irrigation which, in turn, depends struction to the Wadi T rar flood cont upon control of the country's rivers, the Tigris, the ptrouctio on the T aigrisRi. Ther floan ifontro Euphrates and their tributaries. Land that could termect of 15e yearis and rcarrieoan inest forat o be cultivated under irrigation is plentiful and the term2 of pu te ald commissin; amor possibilities for further agricultural production ti34on payens wilusual begi inmmiss1956. and exports are, therefore, considerable. tion payments wil begin in 1956.The oil resources of Iraq afe, of course, one of The project, which is designed to prevent recur- ith mosl resurceassotIa Re, ofco one ro rent floding f larg areas f cultvated and an its most valuable assets. Receipts from oil royal- urbn property,o wll° ioeas tof talcapialo ties were much reduced when the pipeline to Haifa .pe w i v of which the was dosed, but they have steadily increased since equivalent to about $29 million, of . then and may be expected to rise further when the Bank's loan will cover the estimated foreign ex- n p cost. Thse re epectd t incude ur- new pipeline to the Mediterranean is completed in change . 1953. Under a recentlv enacted law all oil royal- chases in the United States, the sterling area and t possibly elsewhere, of equipment and materials to ties will be placed at the disposal of a new Devel- be used in excavation and in the construction of opment Board, which will have responsibility for levees a hd kplanning and executing development projects in levees and headworks. The loan iS secured by an Iraq. assignment of oil royalties and the loan arrange- Iraq. ments provide that Iraq will set aside from these royalties sufficient funds to meet the domestlic favorable outlook for economic development. In recent years, however, there have been a series of costs of the project. The Wadi Tharthar flood control project is part budget deficits, and an unfavorable balance of trade has caused a substantial contraction of Iraq's of~~~~ a.oecmrhniepa,wihwl vnu foreign exchange reserves. MSeasures have recently ally provide, in addition, for water storage, iegula- foegexhnersesMauesavreetl been taken by the Government to remedy this sit- tion of water supply and irrigation. The initial project calls for the construction of a dam across thovr the Tigris River at a point about 50 miles above iTe Govsubmit fhe proects fcnsidha- Baghdad, which will direct excess flood waters into it includin irrition, grain stora tobsdac tion, including irrigatiori grain storage, tobacco an uninhabited and barren depression, known as storage and agricultural machinery. The Bank the Wadi Tharthar, situated between the Euphrates has agreed to send technicians to Iraq in the au- and the Tigris northwest of Baghdad. It is ex- tumn to investigate these projects. pected that the project will result in improvements in health and sanitation and in increased agricul- Iran tural production, both by protecting against floods As stated in last year's Annual Report, the Vice- and by preventing dust storms from the Wadi President of the Bank visited Iran in March 1949, Tharthar. It will also enable the Government to and in June Bank representatives paid a further save substantial sums now spent on levee mainte- short visit to Teheran. Later in 1949 the Bank nance and control and on flood relief measures for suggested that a schedule of projects for the first the population. Although this project is limited to years of the Seven-Year Plan, based on a survey flood control, the dam is being so constructed as made by a consortium of engineering firms re- [ 30 ] tained in 1948 by the Iranian Goverrunment, be ment bank. The successful execution of these submitted to the Bank for study. projects would be expected not only to increase At the invitation of the Iranian Government, a the productivity of undertakings already in hand Bank mission visited Iran in April and May, 1950 but also to attract private capital to finance some to make a survey of the economic and financial of the industrial projects submitted to the Bank. situation. This mission investigated the progress The Bank has advised Ethiopia of its willingness made in the initial period of the Plan's operations, to enter into negotiations for loans to finance the especially in connection with the establishment of foreign exchange costs of these three projects, appropriate administrative machinery, and exam- estimated at about $8 million, provided suitable ined the future program, particularly the proposed arrangements are made to ensure competent financing of projects induded in the second year management and subject, in the case of the tele- of the Plan and the measures to be taken to limit communications project, to a detailed examination its inflationary impact. The Bank mission also of its technical features. studied the proposals for a reduction in the note cover requirements and for a new contract pro- Unon of South Africa viding for increased oil revenues, which are being The Vice-President of the Bank visited the considered by the Government as means of ob- Union of South Africa in March 1950 to gain first- taining substantial amounts of foreign exchange hand information about conditions in that area. and local currency for the Plan Organization, the The development of the Orange Free State gold Government agency which has been entrusted with fields will call for considerable private capital over execution of the Plan. Technical and financial the next few years and other development proj- aspects of three specific projects which are in an ects will need substantial additionai sums. Apart advanced stage of preparation, namely, two ce- from the major fields of industrial effort such as ment plants and a plan for the rehabilitation and power, coal, steel and chemicals, plans exist for expansion of the Port of Khorramshahr, were dis- the development of secondary industries on a sub- cussed with a view to possible Bank financing. The stantial scale. The Industrial Development Cor- Bank mission's report and recommendations are poration of South Af-ric'a wa set up i-940 to now under consideration. assist in providing medium- and long-term capital for such industries bv direci investment and also Ethiopia to endeavor to attract to them local and overseas In November 1949 the Ethiopian Government capital. Transportation and soil conservation will applied to the Bank for a loan of $25 million for also call for important effort L the Union's econ- the financing of 15 projects. They included trans- omy is to be built upon a solid basis. portation, communications, agricultural develop- The South African Govemnt seouently ment, improvement of water supplies, and a invited the Bank to send a missiori to 4r} Union number of industrial enterprises, such as meat to make a survey of its economy and ihnvestment packing, textiles, chemicals, leather and ceramics. opportunities, The mission is at present in In March 1950 a Bank mission was dispatched to field. Ethiopia to study the projects and to survey the economy of the country. British Overseas Territories The mission concluded that Ethiopian economic Following their visit to the Union of South development would be best served at this stage Africa, the Vire-President snd parez visited by a program of highway improvement, the de- both Northem and Southern Rhodesia in order to velopment of telecommunications, and the estab- become famiKiar with the economrc problems and lishment of an industrial and agricultural develop- potentialities of those territories. At the time of the last Annual Report dis- been in abeyance this year pending investigation cussions had taken place with representatives of by the Egyptian Government of the possibility of the Colonial Development Corporation regarding obtaining the necessary equipment by use of its a possible loan of about $5 million for the pur- own non-dollar resources. The Government has chase of dollar equipment to be utilized in various informed the Bank that, in the meantime, the development undertakings of the Corporation in Ministry of Public Works intends to experiment the dependent overseas territories of the United with the irrigation of a small area in order to test Kingdom. In October 1949 representatives of the the effects of tube well operations on the under- Corporation came to Washington to negotiate ground water-table. the terms and conditions of a loan agreement. The preliminary discussions between the Bank The negotiations were protracted but, at their and the Government of the Lebanon referred to conclusion, it was the Bank's belief that a basis in last year's Annual Report were inconclusive. of agreement had been reached which would be In September 1949 the Lebanese Government in- acceptable to both organizations. However, on formed the Bank that studies on a comprehensive December 1, 1949 the Chairman of the Corpo- water development program (including drinking ration informed the Bank that the terms of the water, irrigation and hydroelectric power) were loan, as worked out with his negotiators in being carried out and that these studies should be Washington, were not acceptable to the Corpo- far enough advanced to justify an application to ration. Although expressing his appreciation that the Bank for a loan in the latter part of 1950. the Bank had exerted every effort to meet the Pakiftan joined the Bank on July 1i, 1950. In Corporation's point of view, he stated that the anticipation of this event the Government of Corporation did not desire to proceed further with Pakistan asked the Bank to include Pakistan in the loan because "the Bank's requirements, espe- the itinerary of its mission which was visiting cially the proposed non-financial covenants, are member countries in Asia earlv in 1950. Accord- not reconcilable with the principles and methods ingly, the Bank mission visited Paikistan in Febru- by which this Corporation operates." ary-March of this year and discussed the economic situation and some of the development projects Other Countries which the Government had been studying. Data The negotiations with the Government of on several of these projects were recently pre Egypt for a possible Bank loan for the irrigation sented to the Bank and are now being examnined of about 250,000 acres in Qena Province have by the Bank's staff. EUROPE Turkey silos and steel storage sheds, the mechanization of On July 7, 1950 the Bank made two loans to existing warehouses and the acquisition of tar- :he Republic of Turkey: one of $3,900,000 for paulins for use where warehouse space will not grain storage facilities and the other of $12,500,- be available. The total cost of this project will be 00 for port development. about $10,000,000. The first loan is for a term of 18 years and Turkey is essentially an agricultural country :arries an interest rate of 27/8%7, plus the usual and grain is its largest crop. The area devoted [% commission; amortization begins in 1954. It to grain production has increased in recent years will be used to finance the foreign exchange costs and the possibilities for further increase are con- of the construction of a number of concrete grain sidered good. However, there are at present stor- f 32] age facilities for only about half the average an- key joined in asking the assistance of the Bank in nual purchases, handling methods are prirnitive working out a program to stimulate the productive and expensive, and losses through spillage, infes- investment of private capital. A Bank consultant tation and exposure are high. The project is de- held discussions with Turkish businessmen and signed to enlarge storage capacity, improve han- government officials in late 1949 and again early dling facilities and reduce unnecessary losses. this year. As a result the Industrial Development The second loan is for a term of 25 years and Bank of Turkey was formed in April 1950. carries an interest rate of 31/4%, plus the usual The Industrial Bank will assist in the estab- 1% commission; amortization begins in 1956. lishment of new private enterprises, the expansion This loan of $12,500,000 will be used to finance and modernization of existing private undertak- the foreign exchange costs of a program of port ings, the encouragement of private capital invest- improvement and construction projects, the total ment, both domestic and foreign, in Turkish in- cost of which is estimated at $38,600,000. dustry, and the promotion of a securities market. Turkey's sea-borne foreign and coastal trade For these purposes, the Industrial Bank will grant is at present impeded by the inadequacy of its medium- and long-terms loans, take equity partic- ports. Cargo-handling facilities are generally ipations and, in exceptional cases, may itself estab- obsolete and many harbors are either overcrowded lish new enterprises. or unprotected. The program provides for the The entire equity capital of the Industrial construction of new berthing and handling facil- Bank, amounting to T.L. 12.5 million ($4.5 mil- ities in the major Turkish ports; part of these lion), has been subscribed by private interests. improvements is designed to service new grain The Central Bank of Turkey has undertaken to elevators which are to be built under the grain furnish additional capital on a loan basis up to storage project. On the Black Sea, where Turkey an amount equal to the paid-in capital of the has no natural harbor, a new port will be con- Industrial Bank. Moreover, the International structed at Samsun to open up the potentially Bank has indicated its willingness to negotiate a rich hinterland. loan of up to $9 million, provided that the organi- A third project examined by the Bank was the zation and management of the Industrial Develop- construction of a multi-purpose dam on the Seyhan ment Bank are established along lines satisfactory River. The investigation indicated that the cost to the International Bank. of the project would probably be several times As noted in the Fourth Annual Report, the greater than the original estimate and that fur- Turkish Government requested the Bank to send ther work would have to be carried out at the an economic survey mission to Turkey to help the dam site to ascertain the cost more accurately. Government formulate a comprehensive devel- During the past year the Bank has also actively opment program. Mr. James M. Barker, a promi- assisted in the formation of Turkey's new Indus- nent American businessman, was selected to head trial Development Bank. Hitherto, Turkish pri- the mission, and he made a preliminary trip to vate capital has not participated on a substantial Turkey in November 1949. Thereafter, terms of scale in long-term industrial investment. On the reference for the mission were agreed between the other hand, the Turkish Government has estab- Government and the Bank, providing that the lished and operated a number of industrial, com- mission's report should contain recommendations mercial and financial enterprises. Recently, how- concerning (a) the directions in which investment ever, the Government has indicated a desire to might best be channeled in the Turkish economy, encourage private enterprises. Accordingly, last (b) other means of increasing Turkey's agricul- fall the Government and private interests in Tur- tural and industrial production and of improving [331 the efficiency of its distribution system, and (c) The machinery being obtained by Finland desirable changes in economic and financial and Yugoslavia as a result of the Bank's loas policies and public administration to accelerate and of purchases from European suppliers shousld the rate of Turkey's development. This mission enable those countries -to increase considerably is now in Turkey. It consists of 14 persons, in- their annual production and exports of timbcr. cluding two members of the Bank's staff, a mem- The timber importing countries of Europe should ber of the staff of the Food and Agriculture likewise derive benefits, both from the availability Organization of the United Nations and a public of increased supplies of much needed timber and health specialist recruited for the mission by the also from their reduced dependence upon imports World Health Organization. The remainder of of timber which must be paid for in hard currency. the mission comprises economists and specialists in transportation, industry, power and public ad- France ministration. The Bank has maintained close contac Timber Loans throughout the year with the French Government. Members of the Bank's engineering staff visited On October 17, 1949 the Bank made two France last winter to observe the progress of two loans to finance the purchase of timber equipment: steel projects partly financed with a portion of the one of $2.3 million to the Republic of Finland proceeds of the Bank's $250 miillion loan of May and one of $2.7 million to the Federal People's 1947 to Credit National. The construction of the Republic of Yugoslavia. The loans carry interest continuous cold rolling mill at Montataire was at 2% plus the usual commission of 1%, and are completed in January 1950 and test operations to be repaid in full by September 30, 1951. started in the same month. Tne continuous hot These loans were part of a cooperative project strip mill at Denain, which will produce steel in which a number of timber exporting and im- strips to be rerolled at Montataire, is expected to porting countries in Europe participated, and be completed at the beginning of 1951. which was worked out with the aid of represent- The past year has been one of marked im- atives of the Bank, the Economic Commission for provement generally in the overall economic posi- Europe and the Food and Agriculture Organiza- tion of France. Industrial production rose during tion of the United Nations. This project, which 1949 to a level exceeding that of 1929, the pre- was described in some detail in the Fourth Annual war peak year. Agricultural production also Report of the Bank, is designed to increase the reached pre-war levels although recently there production of sawn soft-wood and pitprops by the have been indications that the rate of improvement European timber exporting countries and to aug- may not be maintained. The post-war inflation ment the supplies of these products available to has been checked, but internal monetary equilib- the importing countries. It was originally con- rium is still precarious. Furthermore, the overall templated that similar loans would be made to current deficit in the 1949 balance of payments Austria, Czechoslovakia and Poland, but Austria of the franc area was still about $700 million and and Poland advised the Bank that they did not the deficit in the current dollar account amounted need loans for the purpose, and Czechoslovakia to nearly $900 million, financed mainly by ECA withdrew its application because of difficulties in grants. The Bank is fully aware of the implica- working out timber payments agreements with the tions of a continuing dollar gap of this size and is importing countries. therefore carefully following all economic and [ 34 l political developments that affect the solution of and the latent inflation of the post-war years has this problem. now been practically absorbed; to an important extent this has been made possible through ECA Netherlands aid. The financial position of the Government Close contact has been maintained throughout improved in 1949 and a small Treasury cash sur- the year with the Government of the Netherlands plus was recorded. This, however, was due in regarding the Bank loans, aggregating $222 mil- large part to non-recurrent factors. lion, which were made to or with the guarantee of There were also favorable developments in the the Government and which were described in balance of payments. Exports covered 72% of previous Annual Reports. At the request of the imports in 1949 compared with 55% in the pre- borrower, the Bank cancelled on March 17, 1950 vious year and shipping earnings increased sub- $6.2 million of the $15 million loan made in July, stantially. The current deficit in the overall 1949 to the Herstelbank. The basic character of balance of payments for 1949 is provisionally the loan was unchanged by the cancellation, al- estimated at the equivalent of over $200 million though some of the original 24 industrial projects compared with over $400 million in the previous to be financed under the loan were eliminated and year. The dollar deficit at over $300 million was allocations for a number of other projects were roughly $100 million less than in 1948. Since it reduced. was more than offset by ECA aid and other capital The cancellation reflected the development of movements, the Netherlands gold and dollar re- Holland's trade relations in 1949, particularly serves increased considerably. after the devaluation of the guilder. As a result of the conclusion of a new trade agreement with Belgium Germany, considerable German mark balances In February 1950 Bank engineers visited accumulated in the hands of Dutch exporters Belgium to observe the work on the projects which made it possible for Dutch industrial con- financed under the $16 million loan made in 1949. cerns to finance imports of equipment from Ger- The cold rolling and tin plating mills of the many without recourse to the loan from the Bank. Compagnie des Fers Blancs et T6les a Froid Procurement of industrial equipment in Belgium (Ferblatil) at Tilleur are being completed and was financed with the help of ECA drawing rights the entire plant should be ready for operation at and this also reduced the need for aid from the the beginning of 1951. The Ougree-Marihaye Bank. Moreover, some of the projects became too project at Ougr6e near Liege, consisting of the expensive after the devaluation of the guilder be- construction of a new reversing slabbing and cause of the higher cost of imported dollar goods. blooming mill, the re-arrangement of ingot cast- Economic activity in the Netherlands has con- ing facilities and the installation of new cranes, tinued to expand. Agricultural output as a whole was completed in May 1950. It is expected that has reached its prewar volume and industrial the erection by the Union des Centrales Electriques production, in which there was a marked increase de Liege-Namur-Luxembourg (Linalux) of a during the past year, is now well above the pre- thermal power plant at Awirs will be completed war level. During the past year domestic con- by the middle of 1951. Total disbursements un- sumption showed a tendency to decline and the der the loan amounted to $10,372,934 as of June increase in production has been used to maintain 30, 1950. domestic investment and to reduce the country's In the summer of 1949 discussions took place dependence on foreign assistance. Progress to- in Washington and Brussels regarding the financ- wards internal monetary equilibrium continued ing of the public works program of the Belgian [35 1 Government. Railway electrification and mod- $4.3 million of the loan was utilized for the ac- ernization of ports were mentioned as possible quisition of locomotives, diesel auto cars, diesel fields for investment and a Bank mission made a trailers and flat freight cars by the Luxembourg survey of the Belgian transport system. However, Railways. This new equipment replaced rolling the easing of the internal capital market and the stock destroyed or worn out during the war. issues floated in Switzerland by the National Rail- ways and the Societe Nationale de Credit a l'In- Denmark dustrie enabled the Belgian Government to start Disbursement of the loan of $40,000,000 work on the projects without recourse to the Bank. which was made to the Kingdom of Denmark in After a period of unusual prosperity a recession 1947 was completed by March 31, 1949. The occurred in the Belgian heavy industries in the loan assisted in financing the reconstruction of middle of 1949. By the spring of 1950, however, the productive facilities and resources of Denmark the position in these industries had improved, and and the goods financed covered a wide range of as the textile and construction industries were industrial raw materials, machinery and finished operating at or near capacity, industrial produc- goods. tion as a whole recovered to about the level reached Danish agricultural and industrial production a year earlier. Nevertheless, unemployment has has now largely recovered from the destruction remained a significant problem. Partly as a con- and dislocation of the war. There were good sequence, a deficit appeared in the ordinary budget harvests in 1948 and 1949 and investment has in 1949 and an enlarged program of public in- been maintained at a high level. Political sta- vestment was undertaken, financed by public issues bility and sound government fnancial policy have in the domestic market. The 1950 estimates, provided a basis for the effective utilization of the however, show ordinary receipts and expenditures Bank's loan and other external financial aid. balanced. The balance of payments of the Belgo- However, there is a deficit in both the dollar and Luxembourg Economic Union showed an overall the overall balance of payments. Denmark tradi- surplus on current account in 1949 as a whole. tionally imports grains and oil-seeds to supply its The dollar deficit, provisionally estimated at over highly organized dairy industry, the products of $200 million, or about the same as in 1948, was which form the bulk of its exports and are sold financed mainly by ECA conditional aid. mainly to European industrial countries. As these and other essential imports such as cotton and Luxembourg petroleum must for the most part be obtained The disbursement of the $12 million loan of from dollar sources, Denmark will have great 1947 was completed on December 31, 1949, difficulty in balancing its dollar payments as long shortly after the Luxembourg Government had as European currencies, especially sterling, remain cancelled some $238,000 of the loan. The major inconvertible. Furthermore, the 1949 devalua- part of the loan, $7.5 million, helped to finance tions, in which Denmark participated, have seri- the hot and cold rolling mills of the ARBED ously affected the terms of trade. After the de- company at Dudelange. Members of the Bank's valuations, the prices of Denmark's imports rose, engineering staff visited Luxembourg last winter while the prices of exports to the United Kingdom, to survey the progress of the project. It is expected its principal customer, did not increase since they that the hot mill will be completed in November are governed by long term agreements. These 1950 and the cold mill in March 1951, but a furth- difficulties are not likely to be speedily or easily er three months will be needed for tests before the overcome. The Bank has continued to follow plant can start commercial operations. About dosely developments in the Danish economy and 36 frequent exchanges of views have taken place be- the Finnish markka in terms of United States tween representatives of the Bank and of the dollars was reduced by 40%. In spite of the Danish Government. resulting deterioration in Finland's terms of trade, both the overall and the dollar balance of pay- Italy ments position improved during the year and Rnrospects for the future are good. Reparation Reference was made in the Fourth Annual " p g Report to the possibility of Bank assistance in the deliveries to the U.S.S.R., due to be completed by financing of the Italian Government's program of ptember 1952, have been made promptly. The economic development for Southern Italy. This conclusion of a trade agreement with the U.S.S.R. program involves public investment of 1,000 bil- in June 1950, which provides for an exchange of lion le$ blo oy goods equivalent to $352 million in each direc- lion lirc ($1.6 billion) over ten years mainly in tio ovrtepro 915,sol nbeFn tion over the period 1951-55, should enable Fin- irrigation and land reclamation and improvement, land to continue to export the output of the metal In February 1950, after the preparation of the and engineering industries which were developed program had reached a sufficiently advanced stage, l . . . - representatives of the Bank went to Italy to ex- largly to meet aeparain oigatin tera amine varius economc and admnistrativ nally, there has been a marked rise in the stand- amine various economic and adn-minstrative.. ard of living, but the present minorit,y coalition aspects of the program. When the President of ao ving,bt the present dinoity ioalitio the Bank visited Rome in April, he announced °goenmentill probablys hver dcult in keep- that the Bank had made a preliminary examina- lag infaionary pressurstunder cnrl icr - tion of the development program and of the larly in view of the substantial wage increases Italian economic outlook, and would be prepared granted in 1950. to discuss possible financial assistance for the pro- Reconstruction and development in the two sectors of the economy to which the greater part gram when the formation of the necessary ad- ofteBnslanibigdvtdhveme ministrative agency, the Cassa per il Mezzogiorno, go poess, alto is too sovon fr the had been completed. The Bank is now reviewing loan tohaehan appreciable fect tEe the information which its representatives have . '' power output is now above the pre-war level and restrictions on the supply of power to the wood- Finland working industries have been lifted. Output in 1949 in most branches of the woodworking in- A Bank mission visited Finland in March dustries was considerably above the 1948 level. 1950 to review the utilization of the proceeds of The Government is taking measures to stimulate the loan of $12.5 million which had been made to the use of limestone powder in agriculture and the the Bank of Finland on August 1, 1949, the prog- additional output made possible by the Bank's ress of the power, woodworking and limestone loan should perform a useful purpose in increas- powder projects being financed under that loan, ing soil fertility. and economic and financial developments occur- ring since the loan was made. Yugoslavia Finland's external position was adversely af- As mentioned in the Fourth Annual Report, fected in 1949 by a marked setback in the export a Bank mission was in Yugoslavia in the fall of market for pulp and paper, principally in the 1949 to obtain information which might provide United States, but by the spring of 1950 a strong the basis for a loan to that country. The discus- recovery had been made. As a result of devalua- sions thus initiated were continued in Washington tions in July and September, 1949, the value of between the Bank and representatives of the 1 37 1 Yugoslav Government, and progress has been which a loan from the Bank might be spent, and made in the examination of Yugoslavia's economic in working out tentative plans for a loan, partly position and prospects, in appraising the require- in U.S. dollars and partly in European currencies. ments of the principal sectors of the economy in These discussions are still going on. FINANCIAL RESULTS AND RESOURCES RESULTS OF OPERATIONS AND DISBURSEMENT OF LOANS During the past fiscal year the Bank received the Executive Directors or the Board of Gover- the full amount due as interest, commission and nors. The Executive Directors are presenting a other charges on its loans; such charges accruing separate report to the Board of Governors regard- during the year amounted to $25,966,479. In ad- ing the establishment of such reserve and the dition, repayments of principal of Bank loans ag- disposition of the Bank's surplus as of June 30, gregated $552,136. 1949. As shown in the Statement of Income and Ex- Total disbursements made on the Bank's loans penses which appears as Appendix B to this re- up to June 30, 1950 amounted to the equivalent port, the Bank's operations for the twelve months of $614,162,160. Of the disbursements made dur- ended June 30, 1950 resulted in a net income ing the fiscal year ended June 30, 1950 approxi- amounting to $13,698,398, exclusive of loan mately 40% was spent outside the United States commissions credited to the Special Reserve. The as against approximately 20% in the previous total net income for the entire period of the Bank's year. The geographical distribution of total ex- operations up to June 30, 1950 amounted to penditures financed by the Bank up to June 30, $27,339,492. In addition to this net income, 1950, in round numbers by groups of countries, $5,663,064 was set aside in the Special Reserve was as follows: during the year ended June 30, 1950; the total amount in the Special Reserve was thereby in- Amount creased to $13,737,205. Area of Expenditures (in millions The Executive Directors on July 27, 1950 es- of U. S. dollar') tablished a reserve against losses on loans and United States ....... 452.3 guarantees made by the Bank and allocated to Latin America. .55 5 such reserve the net income of the Bank for the Europe .... .. 66.7 fiscal year ended June 30, 1950 (after making pro- Near East .... 2.5 vision for any amount payable in respect thereof Africa ...................... 2.2 on repurchase of Poland's shares) and the net Far East .. . .1 income accruing thereafter until further action by Total .... 614.1 [38 ] FUNDS AVAILABLE FOR LENDING The status of funds available to the Bank for or part of their 18%o currencies available in spe- loans on June 30, 1950 may be summarized in cific instances. The following authorizations have round numbers in terms of United States dollars been received by the Bank: Ecuador has agreed as follows: to the use of the full amount of its 187% subscrip- Amount (in millions tion except for the export of a few specific items; of U.S. S) Honduras has informed the Bank that after Jan- 2 % paid-in portion of subscriptions uary 1, 1951 the Bank could use the full amount of all members ............. $ 162.0 of its 18% subscription; Costa Rica, Finland, 18% portion of subscription of the United States ............. 5.. 71.5 France, Italy and the Netherlands have agreed in 18% portion of subscriptions of other principle to the use of their 18%o subscriptions for members made available 16.4 loans, subject to the approval of the government Total Available Capital in specific cases as they arise; Colombia has simi- Subscriptions ............... 749.9 larly consented in principle to the use of one Net available funds resulting from operations ................. 27.8 half of its 18% subscription. The Unted King- Net proceeds from sale of bonds- dom has agreed to arrangements whereby, in cer- excluding premium .......... 260.6 tain approved cases, the Bank may use up to £50,- Gross Total Available Funds ..... $1,038.3 000 in any one such case to meet borrowers' re- Total loans committed ...... $816.4 quirements, of which they may not be aware when Less cancellations, loans sold and principal repayments the loan agreement is concluded. To June 30, available for reloaning. . 45.6 770.8 1950 a total of £10,768 has been so used and is in- Net available funds June 30, 1950. 267.5 cluded in the above table. The United King- dom also agreed in principle to the use of a fur- ther £1,000,000 up to the summer of 1951, of This table reflects only those funds which have which £250,000 has been specifically approved for been utilized by the Bank or may be utilized with- use in the loan to Brazilian Traction, Light and out further approval of members. The 18%o por- Power Company and is included in the above tion of the United States subscription was made table. In the case of a number of countries, the available for lending to the Bank in 1947. The use of 18% subscriptions thus made available to 18% portion of the subscription of members other the Bank for lending, either in principle or with- than the United States, which is contained in the out further approval of members, is restricted to above table, includes the entire 18% portion of expenditure on goods and services coming from the subscription of El Salvador and the following the respective countries. sums from other countries: the equivalent of The Bank realizes that many of its members $2,000,000 from Belgium; the equivalent of remain unable to give unconditional consent at 8,000,000 U.S. dollars and an additional 2,000,- this time to large quantities of unrequited exports. 000 Canadian dollars from Canada; the equivalent However, it feels that most members can make at of $125,000 from Denmark; 17,300,000 pesos least small amounts of their 18%70 subscriptions from Mexico; the equivalent of $126,000 from available for loans. The Bank has been greatly Paraguay; and 760,768 pounds sterling from the encouraged by the increasing amounts of such United Kingdom. funds that have been made available during the In addition to those funds which are included past year and by the evidence that there are likely in the table, the Bank has had a gratifying degree to be substantial further additions to its loanable of success in its efforts to obtain further assurance resources as a result of additional consents in the that, as funds are needed, members will make all future. 1391 ISSUE AND SALE OF SECURITIES On January 25, 1950 the Bank made the second to a broader market in the United States for the public offering of its bonds in the United States Bank's obligations. market. $100,000,000 2% Serial Bonds of 1950 On March 1, 1950 the Bank sold, to a group due 1953-1962 were sold. The net proceeds from of leading Swiss banks and the Bank for Interna- the sale of these bonds, together with such other tional Settlements, a new issue of 21/2%o Swiss funds as were needed, were used for the redemp- Franc SeriaL Bonds of 1950 in the aggregate prin- tion on February 17, 1950 of $100,000,000 of the cipal amount of 28,500,000 Swiss francs, the Bank's Ten Year 21/4To Bonds due July 15, 1957 equivalent of approximately $6,600,000. The at 101%o of their principal amount and accrued bonds were sold at 100 and accrued interest and interest. mature in semi-annual installments from March 1, This was the first time that an issue of Bank 1953 to March 1, 1956. bonds was sold by competitive bidding to under- No other sales of direct or guaranteed obliga- writers. The method proved successful. Bids tions were made, since the funds available for were submitted by four syndicates with an aggre- lending were ample for inmmediate needs. gate membership of 393 institutions, of which 63 On June 30, 1950 the Bank had outstanding were commercial banks and 330 investment bank- approximately $260,600,000 of direct obligations ing firms. The highest bid was submitted by a payable as follows: syndicate headed by Halsey, Stuart & Co., Inc., Payable in U.S. Dollars and the First National Bank of Chicago, which $100,000,000 2% Serial Bonds of 1950 due included 37 banks and 99 investment banking 195 3-1962. $150,ooo,000 Twenty-five Year 3%o Bonds due firms located in 25 states and the District of Co- July 15, 1972. lumbia. As a result of their bid the average net Payable in Sviis Francs interst cst o the ssueto te Ban is .937 perSw. Fr. 17,000,000 21/2%o Serial Bonds of 1948, interest cost of the issue to the Bank is 1.93% per due 1953-54 (equivalent to approximately annum, which represents a substantial net interest $4,000,000). saving. Sw. Fr. 28,500,000 2½/2% Serial Bonds of 1950, due 1953-56 (equivalent to approximately The participation of commercial banks in the $6,600,000). underwriting of the Bank's obligations was a di- There were also outstanding, payable in United rect result of legislation enacted by the United States dollars and bearing the Bank's uncondition- States Congress in 1949, which authorized na- al guarantee of principal and interest, $16 million tional banks and state member banks of the Fed- Kingdom of Belgium 37% Sinking Fund Bonds due eral Reserve System to deal in and underwrite ob- March 1, 1969 and $10,200,000 (net after repay- ligations issued by the Bank, and made securities ment of $1,800,000) 21/27% Guaranteed Serial issued or fully guaranteed by the Bank exempted Mortgage Notes of Netherlands shipping com- securities under the securities acts of the United panies, due semi-annually July 15, 1950 through States. This legislation has materially contributed July 15, 1958. MARKET FOR THE BANK'S OBLIGATIONS At present the principal investors in the Bank's the Bank is continuing its efforts to broaden bonds are United States savings banks, life insur- their market itn the United States. Activities in ance companies and commercial banks, in the or- this direction include frequent personal calls on der named. Although the Bank's obligations are investment institutions, attendance at meetings now generally considered seasoned investments, of investment groups, and periodic information 40] conferences at the Bank's headquarters in Wash- made in the American market for the account of ington, all designed to acquaint investors with the Netherlands clients, who exchange the bonds for Bank's policies and operations and the security Trustee Certificates. behind its obligations. To facilitate this program, The Bank's outstanding dollar obligations have a branch of the Marketing Department was estab- been listed on the Mexico City Stock Exchange lished for six months in the Middle West with and have been ruled eligible as investments for headquarters in the Federal Reserve Bank Build- banks, insurance companies and other credit in- ing, Chicago, Illinois. stitutions. The Central Bank of Mexico has also The Bank is also giving increasing attention authorized domestic and foreign banks operating to the development of markets for the Bank's ob- in Mexico to use part of their foreign exchange ligations outside the United States. Achievement reserve deposits maintained with the Central Bank of success in that field is handicapped by the con- for the acquisition of International Bank bonds. tinuing difficulty in obtaining exact information on Mexican banks are required to maintain a 25%o the status of the Bank's obligations under the in- reserve with the Central Bank against all dollar vestment laws of member countries and the equal- deposits and other foreign exchange liabilities; ly difficult problem of initiating applicable legisla- under the new ruling one-fifth of this reserve may tion for the classification of Bank securities as now be held in the form of International Bank eligible investments for banks, insurance compa- obligations. To implement this ruling the Central nies and similar institutions. Some encouraging Bank of Mexico purchased International Bank progress, however, has been made. The instances bonds in the open market for resale to banks in known to the Bank where its member govern- Mexico. ments have taken action during the past year to The Chilean authorities have ruled that foreign broaden the market for the Bank's securities are as and domestic banks in Chile may invest up to 25%o follows: of their capital and surplus in bonds delivered The Netherlands Government has facilitated to the Bank pursuant to Chilean loan agreements the introduction of International Bank bonds in with the Bank. the Amsterdam market by exempting from requi- The Central Bank of Cuba has ruled that the sitioning Netherlands Trustee Certificates issued obligations of the Bank payable in dollars or in against the 25-year 3%o bonds due 1972 owned any currency convertible into gold are eligible by Dutch nationals up to a maximum amount of investments for banks in Cuba, and, pursuant to $5,000,000. As a result, the Netherlands Trustee such ruling, the bonds so held are exempt from Certificates have been listed on the Amsterdam the Cuban tax on the exportation of money and Stock Exchange and purchases of bonds have been the holding of balances abroad. MISCELLANEOUS Management and Organization 1949. Mr. Knapp was formerly Director of the Mr. William L. Ayers, who had been a Con- Office of Financial and Development Policy, sultant to the Bank since February 1, 1948, was United States Department of State. appointed Director of Public Relations as of Mr. Walter Hill was appointed Special Repre- November 1, 1949. He succeeded Mr. Drew sentative of the Bank in Paris on October 17, Dudley who was appointed Director of Public 1949, succeeding Mr. J. Grant Forbes who retired Relations for Europe. on December 31, 1949. Mr. Royall Tyler, senior Mr. J. Burke Knapp became Assistant Director representative of the Bank's Treasurer in Europe, of the Economic Department on December 12, retired on September 28, 1949. The Bank wishes [ 41 ] to record its appreciation of the valuable services Council of the United Nations with responsibility performed by Mr. Forbes and Mr. Tyler. for directing and coordinating the expanded pro- Mr. G. M. Ventimiglia was appointed Mar- gram of technical assistance approved by the keting Representative of the Bank for Europe and Council at its Ninth Session. The Bank will not will take up his duties at the Paris office early in receive any of the funds which are being made August. Mr. George L. Martin, President of available to the United Nations and other spe- the investrnent banking firm of Martin, Burns & cialized agencies for this program; consequently Corbett, Inc., Chicago, took leave of absence from it is not a full member of the Technical Assistance his firm from January through July, 1950 to head Board. However, Bank representatives partic- the temporary Middle Western branch office of ipate in all meetings of the Board and arrange- the Marketing Department. The Bank wishes to ments have been made for full coordination of the express its appreciation of the valuable contribu- technical assistance activities of the Bank with tion rendered by Mr. Martin during this period, those being undertaken by the United Nations On October 21 and December 31, 1949, respec- and other specialized agencies under the expanded tively, the Bank closed two small offices which program. had been maintained in The Hague and Copen- The Bank was also represented at meetings hagen to supervise the end-use of loans made of the United Nations General Assembly, the to the Netherlands and Denmark. Their func- Economic and Social Council of the United Na- tions were transferred to the Paris Office. tions and its subsidiary bodies. the partiipation The only change made during the past year in of the Bank in the work of the Fourth Session of the functions of the Bank's various departments, the BaComin on onomic Developmen as outlined in previous Annual Reports, has been othe Sunite Nations of particu interent the assignment to the Staff Office of the responsi- . t bility to coordinate activities related to technical During the couse of the meeting the members of the Sub-Commission were invited to Washington assistance and to pnas and arra.ge for technical to discuss informally with the staff of the Bank assisofnce Agstio 1, 1950 the Stff of theBk problems related to economic development. This was the first time that members of a United Na- consisted of 410 regular members of 29 nation- tions body have come to the Bank for the purpose alities. of discussing subjects of cormmon interest in the Relations with Other International international field. Bank representatives attended various meet- Organizations ings of the specialized agencies and other inter- During the year under review the Bank has national organizations, including FAO, ILO, continued to maintain close relations with the UNESCO, the Organization of American States International Monetary Fund, the United Nations and the Bank for International Settlements. FAO and other international organizations. and WHO have given the Bank valuable coopera- The President of the Bank attended several tion by seconding or nominating experts for vari- meetings of the Administrative Committee on ous Bank missions. As has already been noted, Coordination (ACC) and representatives of the the FAO has agreed to join with the Bank in Bank attended meetings of various committees sponsoring and staffing a mission to Uruguay to and subcommittees of the ACC. The most im- survey its agricultural development needs. portant task undertaken by the ACC was the The Bank is sponsoring jointly with FAO, the establishment of the Technical Assistance Board, United Nations and the Government of Pakistan, which was charged by the Economic and Social a Training Institute on Economic Appraisal of [ 42 ] Development Projects (Asian Center on Agricul- tions for membership have also been received tural and Allied Projects), which is to be held from Indonesia, Jordan and Sweden. in Lahore during the latter part of 1950. A mem- ber of the Bank's staff will serve as an instructor Duties and Remuneration of Executive at the Center for several weeks. Directors The first report, dated September 13, 1949, of Advisory Council the Ad Hoc Committee of the Board of Governors Pursuant to Resolution No. 45 of the Board of to Consider Provisions Relating to Duties and Governors, adopted at the Fourth Annual Meet- Remuneration of Executive Directors, as amended ing, the Executive Directors have studied the or- by the Committee's Second Report, dated Janu- ganization, selection, duties and other matters ary 27, 1950, was approved by the Board of Gov- relating to the Advisory Council. Their report ernors by mail vote on March 30, 1950, and the and recommendations are being submitted as a Committee dissolved. The amendments to the separate report to the Board of Governors. By-Laws of the Bank recommended by this Com- mittee will be in effect on and after the date of Training Program the Fifth Annual Meeting. The Bank has continued the training program Financial Statements and Reports which was inaugurated in 1949. For the second course under this program, beginning in January Attached as Appendices A to G, inclusive, are 1950, eight persons were selected, one each from a Balance Sheet showing the financial position of the following member countries: Ecuador, India, the Bank as of June 30, 1950, a Comparative Iran, Italy, Lebanon, Norway, United Kingdom Statement of Income and Expenses for the Fiscal and United States. The Bank plans to continue Years ended June 30, 1949 and June 30, 1950, an this program and is now in process of selecting a Opinion of Independent Auditor, and a number third group to begin training in January 1951. of schedules giving further details concerning the Five of the seven trainees who participated in the assets and liabilities, capital and financial opera- first course have remained with the Bank and are tions of the Bank. now on the permanent staff. Administrative Budget Membership, Subscriptions and Voting Power There is attached as Appendix H the Ad- Poland withdrew from the Bank on March 14 rministrative Budget of the Bank for the fiscal year 1950. With the adsmission of Pakistan on July ending June 30, 1951. This budget has been 11, 1950 membership in the Bank has remained prepared by the President and approved by the at 48. The Bank's total subscribed capital has Executive Directors in accordance with Section 19 been increased from $8,348.5 million as of Au- of the By-Laws of the Bank. A special report gust 20, 1949 to $8,448.5 million as of August on the Budget is being submitted to the Board 1, 1950, subject to a reduction of $125 million of Governors at the Fifth Annual Meeting. when the shares subscribed by Poland are re- purchased by the Bank. The period in which Additional Reports to Board of Governors Liberia and Haiti may accept membership was In addition to this Annual Report, the follow- extended by the Executive Directors to September ing reports are being submitted for consideration 30, 1950. The application for membership by of the Board of Governors at the Fifth Annual Ceylon was approved on July 31, 1950. Applica- Meeting: [43] 1) Report on Establishment of Reserve and has already been made, there are included in this Disposition of Surplus; report for the information of the Board of Gov- 2) Report on the Advisory Council; ernors the following appendices: 3) Report on Third Regular Election of Execu- Appendix I-Voting Power and Subscriptions tive Directors; of Member Countries as of Au- 4) Report on the Administrative Budget; and gust 1, 1950. 5) Report on Decisions of Executive Directors AppendixJ-Governors and Alternates as of Interpreting Artiles of Agreemnent. August 1, 1950. Appendix K-Executive Directors and Alter- Appendices nates and their Voting Power In addition to the appendices containing the as of August 1, 1950. financial statements and reports and the adminis- Appendix L-Principal Officers of the Bank as trative budget of the Bank, to which reference of August 1, 1950. [44] I £ II II APPENDRX A Balance Sheet-June 30, 1950 EXPRESSED IN UNITED STATES CURRENCY (See Notes to Financia Statements) ASSETS Due from Banks and Otber Depositories (APPENDIX D) -NOTE A Member currency-United States ................... 4,458,168 Member currency-other than United States ........... 113,836,979 Non-member currency ....... ..................... 6,170,061 $ 124,465,208 Investment Securities United States Government obligations ($434,924,900 face amnount at cost) . ............ 434,600,782 Accrued interest ............... ................. 2,278,298 436,879,080 Receivable on Account of Subscribed Capital (APPEN- DIX E) Payable in member currency-United States Calls on subscription to capital stock-Payment de- ferred ..................................... 4,915,000 Payable in member currency-other than United States Non-negotiable, non-interest-bearing, demand notes... $ 777,940,114 Amounts required to maintain value of currency hold- ings-NOTE B ................ ............. 3,300,468 781,240,582 Payable in non-member currency Non-negotiable, non-interest-bearing, demand notes ... 22,275,000 808,430,582 Loans Outstanding Held by Bank-(APPENDIX C)- NOTES C and D 711,409,847 Accrued Interest, Commitment and Service Charges on Loans-NOTE D 5,422,147 Miscellaneous Receivables and Other Assets 333,453 Special Reserve Fund Assets-NOTE E Due from Banks-member currency-United States .... $ 47,052 Investment securities-United States Government obliga- tions ($12,210,900 face amount at cost) ........... 12,210,900 Accrued loan commissions-NOTE D ................ 1,479,253 13,737,205 Staff Retirement Plan Assets (Segregated and Held In Trust) 1,082,507 Total Assets ......................... $2,101,760,029 1 46 APPENDIX A Balance Sheet-June 30, 1950 EXPRESSED IN UNITED STATES CURRENCY (See Notes to Financial Statementr) LIABILITIES, RESERVES AND CAPITAL Liabilities Accounts payable and accrued expenses, induding $2,900,063 bond interest ....................... 3,273,280 * Collections on loans in advance of due dates ........... 240,171 Undisbursed balance of loans On loans held by Bank .......................... $ 120,172,757 On loans represented by obligations of borrowers sold under guarantee ........... ................. 5,627,066 125,799,823 Bonds outstanding Payable in United States Dollars-NOTE F 2%o Serial Bonds of 1950, due 1953-62 .$ 100,000,000 Twenty-Five Year 3%o Bonds, due July 15, 1972. . 150,000,000 $ 250,000,000 Payable in Swiss Francs 21/2 go Swiss Franc Serial Bonds of 1948, due 1953- 54 (Swiss Francs 17,000,000) .$ 3,955,788 21/2 % Swiss Franc Serial Bonds of 1950, due 1953- 56 (Swiss Francs 28,500,000) .6,631,763 10,587,551 260,587,551 Bonds called for redemption not presented $ 260,692 Less funds on deposit with Fiscal Agent therefor ... 260,692 Special Reserve-NoTE E 13,737,205 Staff Retirement Plan Reserve 1,082,507 Capital (APPENDIX E)-NOTE G Capital stock Authorized 100,000 shares of $100,000 par value each Subscribed 83,485 shares .$8,348,500,000 Less-Uncanled portion of subscriptions-NOTE H. 6,678,800,000 $1,669,700,000 Accumulated net income-NOTE L At June 30, 1949-Allocated to surplus .$ 13,641,094 The twelve months ended June 30, 1950-Unallocated 13,698,398 27,339,492 1,697,039,492 Contingent Liability-Obligations of Borrowers Out- standing Sold under Guarantee-NOTE C $20,572,934 Total Liabilities, Reserves and Capital... $2,101,760,029 147 1 KPPENDIX B Comparative Statement of Income and Expenses for the Fiscal Years Ended June 30, 1949 and June 30, 1930 EXPRESSED IN UNITED STATES CURRENCY (See Notes to Phu,widJ Stwtments) Jody 1-1*.e 50 1948-1949 1949-1950 Income Interest earned on investments .............................................. $ 4,893,360 $ 5,152,517 Income from loans: Interest ............................................................. 15,850,003 17,670,427 Commitment charges . .................................................. 757,110 2,491,707 Commissions . ......................................................... 4,989,210 5,663,064 Service charges ............... ........................................ 73,323 141,281 Other income . ......................................................... 4,617 8,133 Gross Income .................................................. $26,567,623 $31,127,129 Deduct-Amount equivalent to commission appropriated to Special Reserve (NOTE E). 4,989,210 5,663,064 Gross Income Less Reserve Deduction ............................. $21,578,413 $25,464,065 Expenses Administrative expenses: Personal services ....................................................... 2,667,476 3 2,672,630 Expense allowance-Executive Directors and Alternates ........................ 12,504 12,194 Fees and compensation ................ ................................. 160,542 334,958 Representation . ....................................................... 31,187 46,713 Travel ............ 332,670 437,257 Supplies and material ............. ............. 26,884 26,954 Rents and utility services ................. .............................. 330,151 336,466 Communication services . ............................................... 80,030 89,522 Furniture and equipment .. I . ........................................... 33,105 28,540 Motor vehides ....................................................... 6,649 5,335 Books and library services ................. .............................. 63,821 59,707 Printing and binding .............-........ 34,115 36,764 Contributions to staff benefits ............ ................................ 270,577 266,126 Insurance ............................................................ 11,312 14,644 Handling and storage of gold ............ ............................... 7,046 Other expenses ........................................................ 538 2,201 Total Administrative Expenses ......... ............................ 4,068,607 $ 4,370,011 Interest on bonds ........................................................ 6,848,895 6,811,798 Bond registration, issuance and other financial expenses including redemption premium less premium on sale of bonds ............. .............................. 50,664 583,858 Gross Expenses . ................................................. $10,968,166 $11,765,667 Net Income ............................................................. $10,610,247 $13,698,398 [48 ] APPENDIX C Statement of Loans-fune 30, 1950 EXPRESED IN UNTED STATES CURENCY (See Notes to Financial Statements) Date of Borrower and Guarantor P.rogram or Project Loax Agrueem Loans Granted and Egective Kingdom of Belgimm Equipment for steel an,d power industries Mar. 1, 1949 Loan Guaranteed by United States of Brazil Brazilian Traction, Light and Power Company, Ltd. Electric power development and telephone equipment Jan. 27, 1949 Loans Guaranteed by Republic of Chile Fomento and Endesa Electric powe. di½nyelonmmt Mar. 25, 1948 Fomento Agricultural cdneiry Mbr. 25, 1948 Loan Guaranteed by Republic of Colombia Caja de Credito Ag'riŽc* tu_ 19 949 Kingdom of Denmark Ea,oument and Ž fcf icotae=ctLion and de ve1ro'5 meAug. 22, 1947 Republic of Finland Equipment: fz _rZ1 _ &uCUo U Oct i . 949 Loan Guaranteed by Republic of Finland Bank of Finland Elec. -c 5 e 'c"ment and ec 'pment fo wood- k 1g t - erte p>ovder prod-tion Aug. 1, 1949 Loan GuaFanteed by Republic of France Credit National E qzaia' Mai; i . scn ead de- -7£,-w c Mcy 9, 194 Republic of India Raiva7 e AU.. 18, 1949 Agricultu,a, d. ery Sept. 29. 1949 Grand-Duchy of Luxembourg Equipmeat _'0- stUai m-"" cd c' r.ilroads Aug. 28, 1947 Loans Guaranteed by United Mexican Stales Financiera and Comision E--an. 6, 1949 Financiera and Comision E ec 'eleomw an.. 6, 1949 Mexican Light and Power Company, Ltd. Elec.rc otn,- t-. . 28, 1950 Kingdom of the Netherlands Equipmeintr McrruCtc d de- veloprneo Aug. 7, 1947 Equipm-e and matcrias ifor reconstruction and de- velaonmd ieana Loan Agreement) May 25, 1948 Loans Guaranteed by Kingdom of the Netherlands N. V. Stoomvaart Mij. "Nederland" Purchase cS,S Raki amd SS. Eoebiah July 15, 1948 N. V. Vereenigde Schvrt. Mij. Purchase of S.S fec Julv 15, 1948 N. V. Ned.-Amer. Stoomvaart-Mij. "Holland-Amerika Lijn" Purchase of. S.. ' Albiassezdi; July 15. 1948 N. V. Rotterdamsche Lloyd PRrchase of S.S. 7- isiand and S.S. Drente luly 15, 1948 Herstelbank Equipment lo: -c,'tzuction and modernizatior. of ,;Dsnlcu -a la- i.ant 3y 26, 194- Federal Peopie' Republic of Yugoslavia ir.q,s -'P-,-'- Oc 7 1949. Sub-Totals-Effective Loans Loans Granted-Not Yet Effective Loan Guaranteed by United States of Brazil Sao Francisco Hidro Eiec Co. i- aV 26. 1950 Loan Guaranteed by Republic of El Salvador Comision del Rio Lemnpa Electric /ek:7ce.or. ent Dec. 14, 1949 Republic of India >zz -V i .Apr. is, 1950 Kingdom of Iraq ""-'-'-'-"'- ^ June 159 1950 Sub-Total-Loans Not Effective Total Loans Granted-NOTES C and D 150 1 APPENDIX C Statement of Loans-June 30, 1950 ESPRESSED IN UNI STATES CURNCY (See Notes to Financidl Statements) Obligations of Borrower Sold ns erest Pri,cipId Witb Banks Rase Payments Gurawnee Less Loamns Pricipa Undisbmsd (Incladidg Principal and Cancellation Principal Oxtstanding Amout Blaee of MdArities Commission) Amount by Borrowers Paymets Held by Bank Disbursed Loas 1953-1969 4-1/4%s $ 16,000,000 S - $16,000,000 $ - $ 10,372,934 $ 5,627,066 1953-1974 4-1/2%s 75,000,000 - - 75,000,000 36,827,367 38,172,633 1953-1968 4-1/29% 13,500,000 - - 13,500,000 3,017,049 10,482,951 1950-1955 3-3/4% 2,500,000 - - 2,500,000 2,500,000 - 1952-1956 3-1/2%o 5,000,000 - - 5,000,000 2,680,840 2,319,160 195-3-1972 4-1/4% 40,000,000 - - 40,000,000 40,000,000 - 1950-1951 3% 2,300,000 153,132 - 2,146,868 301,594 1,998,406 1953-1964 4%7 12,500,000 - - 12,500,000 2,145,106 10,354,894 1952-1977 4-1/4%7 250,000,000 - - 250,000,000 250,000,000 - 1950-1964 4%9 34,000,000 1,200,000 - 32,800,000 27,960,755 4,839,245 1952-1956 3-1/2% 10,000,000 - - 10,000,000 3,197,827 6,802,173 1949-1972 4-1/4% 12,000,000 337,021 - 11,662,979 11,761,983 - 1953-1973 4-1/2%7 24,100,000 - - 24,100,000 7,196,976 16,903,024 July 1, 1950 4-1/2% 10,000,000 10,000,000 - - - - 1953-1975 4-1/2% 26,000,000 - - 26,000,000 5,542,741 20,457,259 1954-1972 4-1/4%7 191,044,212 - - 191,044,212 191,044,212 - 1953-1954 4-1/4%o 3,955,788 - - 3,955,788 3,955,788 - - 1949-1958 3-9/16% 4,000,000 600,000 3,400,000 - 4,000,000 - 1949-1958 3-9/16% 2,000,000 300,000 1,700,000 - 2,000,000 - 1949-1958 3-9/167% 2,000,000 300,000 1,700,000 - 2,000,000 - 1949-1958 3-91169% 4,000,000 600,000 3,400,000 - 4,000,000 - 1952-1964 4% 15,000,000 6,200,000 - 8,800,000 1,271,348 7,528,652 1950-1951 3% 2,700,000 300,000 - 2,400,000 2,385,640 314,360 $757,600,000 $19,990,153 $26,200,000 $711,409,847 $614,162,160 $125,799,823 1954-1975 4-1/4% $ 15,000,000 a954-1975 4-1/4% 12,545,000 1955-1970 4%7 18,500,000 1956-1965 3-3/4% 12,800,000 $ 58,845,000 $816,445,000 r S1 1 APPENDIX D Statement of Currencies Held by the Bansk-une 30, 1950 (See Notes to Financial Statements) Total Amouxt Expressed Expressed is Unit of In Member Currency Rat of Exchange United States Cu-rrency (Restricted) (Note A) Dollars Members' Currencies: Australia Pound 160,839 $ = 0.446428 S 360,280 Austria Schilling 1,293,408 $ = 14.40 89,820 Belgium Franc 17,623,226 $ = 50.00 352,465 Bolivia Boliviano 516,200 $ = 60.00 8,603 Brazil Cruzeiro 349,481,654 t = 18.50 18,890,900 Canada DoLlar 43,498 $ = 1.10 39,544 Chile Peso 195,071,196 $ = 31.00 6,292,619 China Gold Yuan 21,581,589 $ = 20.00 1,079,080 Colombia Peso 12,277,707 $ = 1.949981 6,296,321 Costa Rica Colon 2,014,453 $ 5.615 358,763 Cuba Peso 62,975 $ = 1.00 62,975 Czechoslovakia Koruna 11,068,733 $ 50.00 221,375 Denmark Krone 947,178 $ 6.90714 137,130 Dominican Republic Peso 3,191 $ 1.00 3,191 Ecuador Sucre 7,759,986 $ = 13.50 574,814 Egypt Pound 766,363 $= 0.3482427 2,200,658 El Salvador Colon 439,789 $ 2.50 175,916 Ethiopia Dollar 1,323,271 $ 2.48447 532,617 Finland Markka 929,725,054 $ 136.00 6,836,214 France Franc 178,075,133 $ 214.392 830,605 Greece Drachma 22,500,000,000 $ 5,000.00 4,500,000 Guatemala Quetzal 354,817 $ 1.00 354,817 Honduras Lempira - $ - 2.00 Iceland Krona 2,914,030 $ 16.2857 178,932 India Rupee 3,292,112 $ = 4.761904 691,343 Iran Rial 1,795,439 $ = 32.25 55,673 Iraq Dinar 2,729 $ 0.357143 7,642 Italy Lira 7,286,819,669 $ 225.00 32,385,865 Lebanon Pound 1,769,679 $_ 2.19148 807,527 Luxembourg Franc 770,635 $ = 50.00 15,413 Mexico Peso 101,145,392 $ = 8.65 11,693,109 Netherlands Guilder 1,895,939 3 = 3.80 498,931 Nicaragua Cordoba 720,000 $ = 5.00 144,000 Norway Krone 6267268 $ 7.14286 87,678 Panama Balboa 35,995 $ = 1.00 35,995 Paraguay Guarani 773,109 $ 3.09 250,197 Peru Sol 161.150 $ = 6.50 24,792 Philippine Republic Peso 2,387,797 $ 2.00 1,193,898 Syria Pound 24,893 $ 2.19148 11,359 Thailand Baht 28,005,747 S 12.50 2,240,460 Turkey Lira 140,511 $ = 2.80 50,182 Union- of South Africa Pound 63,320 $ = 0.357143 177,295 United Kingdom Pound 912,718 $ = 0.357143 2,555,610 United States Dollar 780,476 None 780,476 Uruguay Peso 2,857,648 $ 1.5190495 1,881,208 Venezuela Bolivar 4,568,251 $ = 3.35 1,363,657 Yugoslavia Dinar 359,504,777 $ 50.00 7,190,096 Restricted Currency (NOTE 1) ......... $114,520,045 Unrestricted Currency (United States, United Kingdom, Belgiurn, Canada) .................................................. 3,775,102 Non-Members' Currencies: $118,295,147 Swiss Francs ................. $5,950,132 Polish Zlotys (NOTE G) ................ 219,929 6,170,061 Total (Nori J) .$124,465,208 f52] i I I I I I I * APPENDDI B Statement of Subscriptions to Capital Stock and Voting Power-June 30, 1950 BXPRESSED IN UNITED STATES CURRENCY (See Notes to Financial Statements) Amounts Paid In Subscriptions (Note A) In Currency of Member Otber Amount Unitd States Than United Member Shares (Notes G & K) Dollars States Dollars 1 Australia 2,000 $ 200,000,000 $ 4,000,000 S 360,368 2 Austria 500 50,000,000 1,000,000 90,000 3 Belgium 2,250 225,000,000 4,500,000 2,344,422 4 Bolivia 70 7,000,000 140,000 8,913 S Brazil 1,050 105,000,000 2,100,000 18,900,000 6 Canada 3,250 325,000,000 6,500,000 9,857,727 7, Chile 350 35,000,000 700,000 6,300,000 8 China 6,000 600,000,000 9,000,000 1,080,000 9 Colombia 350 35,000,000 700,000 6,300,000 10 Costa Rica 20 2,000,000 40,000 360,000 11 Cuba 350 35,000,000 700,000 63,000 12 Czechoslovakia 1,250 125,000,000 1,875,000 225,000 13 Denmark 680 68,000,000 1,020,000 158,595 14 Dominican Republic 20 2,000,000 40,000 3,600 15 Ecuador 32 3,200,000 64,000 576,000 16 ERypt 533 53,300,000 1,066,000 2,228,963 17 ElSalvador 10 1,000,000 20,000 180,000 18 Ethiopia 30 3,000,000 60,000 540,000 19 Finland 380 38,000,000 760,000 6,840,000 20 France 5,250 525,000,000 10,500,000 979,719 21 Greece 250 25,000,000 375,000 4,500,000 22 Guatemala 20 2,000,000 40,000 360,000 23 Honduras 10 1,000,000 20,000 1,800 24 Iceland 10 1,000,000 20,000 180,000 25 India 4,000 400,000,000 8,000,000 721,800 26 Iran 336 33,600,000 672,000 60,480 27 Iraq 60 6,000,000 120,000 10,800 28 Italy 1,800 180,000,000 3,600,000 32,400,000 29 Lebanon 45 4,500,000 90,000 810,000 30 Luxembourg 100 10,000,000 200,000 18,000 31 Mexico 650 65,000,000 1,300,000 11,700,000 32 Netherlands 2,750 275,000,000 5,500,000 552,631 33 Nicaragua 8 800,000 16,000 144,000 34 Norway 500 50,000,000 1,000,000 90,000 35 Panama 2 200,000 4,000 36,000 36 Paraguay 14 1,400,000 28,000 252,000 37 Peru 175 17,500,000 350,000 31,500 38 Philippine Republic 150 15,000,000 300,000 1,200,000 39 Poland (NOTE G) 1,250 125,000,000 1,875,000 225,000 40 Syria 65 6,500,000 130,000 11,700 41 Thailand 125 12,500,000 250,000 2,250,000 42 Turkey 430 43,000,000 860,000 77,400 43 Union of South Africa 1,000 100,000,000 2,000,000 180,000 44 United Kingdom 13,000 1,300,000,000 26,000,000 4,050,000 45 United States 31,750 3,175,000,000 635,000,000 46 Uruguay 105 10,500,000 210,000 1,890,000 47 Venezuela 105 10,500,000 210,000 1,365,000 48 Yugoslavia 400 40,000,000 600,000 7,200,000 83,485 $8,348,500,000 t733,555,000 $127,714.418 [54] APPENDIX E Statement of Subscriptions to Capital Stock and Voting Power-June 30, 1950 EXPRESED IN UNTElD STATES CURBENCY (See Notes to Financia Statements) AmaunsA PAd la Amevnts (Net* A) Required to Amounts MaNntain Poypent of Non-l terest- Value of Wbich is Subject to Cau Bearing, Non- Currency Postponed to Meet Obliga- Number Negotsiable Holdings Until dons of Bank of Demand Notes (Note B) June 1951 (Note H) Votes $ 35,639,632 $ - S - $ 160,000,000 2,250 1 8,910,000 - 40,000,000 750 2 38,155,578 - 180,000,000 2,500 3 873,180 377,907 5,600,000 320 4 - - - 84,000,000 1,300 5 48,642,273 260,000,000 3,500 6 - - - 28,000,000 600 7 106,920,000 3,000,000 480,000,000 6,250 8 - - - 28,000,000 600 9 ^ - - - 1,600,000 270 10 6,237,000 - - 28,000,000 600 11 22,275,000 - 625,000 100,000,000 1,500 12 12,081,405 - 340,000 54,400,000 930 13 356,400 - - 1,600,000 270 14 - - - 2,560,000 282 15 4,442,476 2,922,561 - 42,640,000 783 16 _ - - 800,000 260 17 - - 2,400,000 280 18 - -30,400,000 630 19 93,520,281 - 420,000,000 5,500 20 - 125,000 20,000,000 500 21 = - - - 1,600,000 270 22 178,200 - - 800,000 260 23 3 _ - 800,000 260 24 71,278,200 - - 320,000,000 4,250 25 5,987,520 - - 26,880,000 586 26 1,069,200 - - 4,800,000 310 27 _ - - 144,000,000 2,050 28 _ _ _ 3,600,000 295 29 1,782,000 - - 8,000,000 350 30 - - - 52,000,000 900 31 48,947,369 - - 220,000,000 3,000 32 _ _ _ 640,000 258 33 8,910,000 _ _ 40,000,000 750 34 _ _ _ 160,000 252 35 _ _ _ 1,120,000 264 36 3,118,500 - - 14,000,000 425 37 1,500,000 - - 12,000,000 400 38 22,275,000 - 625,000 100,000,000 0 39 1,158,300 - - 5,200,000 315 40 _ _ _ 10,000,000 375 41 7,662,600 - - 34,400,000 680 42 17,820,000 - - 80,000,000 1,250 43 229,950,000 - - 1,040,000,000 13,250 44 _ _ _ 2,540,000,000 32,000 45 _ _ _ 8,400,000 355 46 525,000 _ _ 8,400,000 355 47 - - 200,000 32,000,000 650 48 *800,215,114 $3,300,468 4,915,000 $6,678,800,000 93,985 [ 55 ] APPENDIX F Notes to Financial Statements-June 30, 1950 NOTE A its own currency sufficient to maintain the value, as Amounts in currencies other than United States dollars of the time of initial subscription, of the amount of have been translated into United States dollars: the currency of such member which is held by the (i) In the cases of 38 members, at the par values Bank and derived from currency originally paid in to (i) unde the Intemational Monetar Fund the Bank by the member uader Artide II, Section 7(i), established under the International Monetary Fund from currency referred to in Artide IV, Section 2(b), Agreement as specified in the Jule 1950 issue of or from any additional currency furnished under the "International Financial Statistics" published by the provisions of the present paragraph, and which has not International Monetary Fund; and been repurchased by the member for gold or for the (ii) In the cases of the remaining 9 members (Aus- currency of any member which is acceptable to the tria, China, Finland, France, Greece, Italy, Peru, Thai- Bank. land and Uruguay), the par values of whose currencies (b) Whenever the par value of a member's currency are not so specified, at the rates used by such members is increased, the Bank shall return to such member in making capital payments. within a reasonable time an amount of that member's (iii) In the cases of non-members, at the official currency equal to the inctease in the value of the rates announced by such governments. amount of such currency described in (a) above. No representation is made that any of such currencies (c) The provisions of the preceding paragraphs is convertible into any other of such currencies at any may be waived by the Bank when a uniform propor- rate or rates. See also Note B. tionate change in the par values of the currencies of all its members is made by the Intemational Monetary NOTE B Fund. Payment due within a reasonable time under Artide II, Section 9(a) from Bolivia and Egypt by reason of a NOTE C reduction in the established par values of such members' The Bank has -sold under its guarantee $12,000,000 currencies. This Section provides as follows: of 2¼% serial notes and $16,000,000 of 3% sinking (a) Whenever (i) the par value of a member's fund bonds received by the Bank in connection with its currency is reduced, or (ii) the foreign exchange value loan operations of which amounts a total of $1,800,000 of a member's currency has, in the opinion of the has been retired. Of the total of $26,200,000 of obli. Bank, depreciated to a significant extent within that gations outstanding under guarantee $5,627,066 is re- member's territories, the member shall pay to the flected in the balance sheet as a direct liability subject Bank within a reasonable time an additional amount of to withdrawal. NOTE D The prinapal outstanding on loans disbursed, and the accrued charges for interest, commitment fee, service charge and loan commission are payable in United States dollars except the following amounts for which the dollar equivalent is shown: Cur7eucy Payable Swiss Belgiax Canadia PoVds Francs PFfgus DoUars Sterling Totd Principal Outstanding ....... $ 4,667,587 $ 1,997,769 $ 9,818,182 $ 1,363,617 $ 17,847,155 Accrued Interest, Commitment and Service Charges ...... 33,993 19,867 118,411 - 172,271 Accrued Loan Commissions 10,484 6,113 37,116 - 53,713 Totals ............... 4,712,064 $ 2,023,749 $ 9,973,709 $ 1,363,617 $ 18,073,139 The provisions referred to under Note B above are applicable to principal amounts outstanding on portions of loans disbursed in the currencies there mentioned. Payment by the member or the Bank of any amount re- quired to be paid by reason of a change in par value or foreign exchange value will become due within a rea- sonable time after repayment of each installment of principal is received by the Bank. [ 56 ] NOTE E the Bank's liabilities with respect to contractual payments The amount of commissions received by the Bank on on loans guaranteed by it. The United States and El loans made or guaranteed by it is required under Salvador have consented to loans in respect of all their Article IV, Section 6 to be set aside as a special reserve 18%o. Belgium, Canada, Denrmark, Mexico, Paraguay to be kept available for meeting obligations of the Baak and the United Kingdom have so consented in respect created by borrowing or by guaranteeing loans. On all of a portion of their 18%o. Honduras has consented loans granted to date the effective rate of commission is to loans in respect of all its 187% after January 1, 1951. 1% per annum. Costa Rica, Finland, France, Italy and Netherlands have agreed in principle to loans in respect of their 18%0. NOTE F (Article IV, Section 2(a) and (b)) As a sinking fund for the Twenty-Five Year Bonds, TE the Bank has agreed to purchase and retire or redeem NO J bonds of said issue commencing July 15, 1958, in varying The currencies of the several members and the notes amounts calculated to retire 50%o of the total issue by substituted for any part of such currencies are held on maturity. deposit with designated depositories in the territories of the respective members. NOTE G On March 14, 1950 Poland withdrew from mem- NOTE K bership in the Bank. Under Artide VI, Section 4, the In terrns of United States dollars of the weight and Bank is obligated, as part of the settlement of accounts fineness in effect on July 1, 1944. with Poland, to repurchase the 1,250 shares of Poland NOTE L at the value shown by the books of the Bank on the date of withdrawal. No payment may be made to Po- On July 27, 1950 the Executive Directors adopted land until six months after the date of withdrawal. the following resolution: Although Poland's accounts will not be finally settled "RESOLVED, that the net income of the Bank for until after September 14, 1950, it is anticipated that the the fiscal year ended June 30, 1950, after making amount to be paid Poland for its shares will be less than provision for any amount that shall be payable in $25,000,000. The zloty currency and amounts due on respect thereof on account of the repurchase by the account of Poland's subscription will be applied in Bank of the shares of Poland, and the net income settlement. Poland is no longer entitled to exercise of the Bank accruing thereafter and until further any voting power on its shares. action by the Executive Directors or the Board of Governors shall be allocated to a reserve against losses NOTE H on loans or guarantees made by the Bank. Such re- Subject to call by the Bank only when required to serve shall be established on the books of account of meet the obligations of the Bank creatr d by borrowing the Bank and shall be separate from the special reserve or guaranteeing loans. established under Section 6 of Article IV of the Articles of Agreement." NOTE I and further recommended to the Board of Governors These currencies are derived from the 18% of the that similar action be taken by the Board with respect subscriptions to the capital stock of the Bank which is to net income previously allocated to surplus account. payable in the currendes of the respective members. Such 18%o may be loaned by the Bank, and funds re- GENERAL ceived by the Bank on account of principal of loans made On July 11, 1950, Pakistan becamne a member of the by the Bank out of such currencies may be exchanged for Bank with a share subscription of $100,000,000. Haiti other currencies or reloaned, only with the approval in and Liberia have until September 30, 1950 to comply each case of the member whose currency is involved; with the terms and conditions of the respective resolu- provided, however, that, if necessary, after the Bank's tions of the Board of Governors authorizing admission subscribed capital is entirely called, such currencies may, to membership in the Bank with share subscriptions of without restriction by the members whose currencies are $2,000,000 and $500,000 respectively. Formal applica- offered, be used or exchanged for the currencies required tions for membership have been received from Ceylon, to meet contractual payments of interest, other charges Jordan and Sweden but final action on these applications or amortization on the Bank's own borrowings or to meet has not yet been taken by the Board of Governors. f 57] APPENDIX G Opinion of Independent Auditor PRICE, WATERHOUSE & CO. 1000 VERMONT AVENUE. N.W. WASHINGTON 5, D.C. August 7, 1950 To INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT, Washington, D. C. We have examined the financial statements listed below of Inter- national Bank for Reconstruction and Development as of June 30, 1950. Our examination was made in accordance with generally accepted audit- ing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, such financal staternents, with the notes thereto, present fairly the financial position of the Bank at June 30, 1950, expressed in United States currency, and the results of its operations for the twelve months then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. PRICE, WATERHOUSE & CO. Financial Statements Covered by the Foregoing Opinion Balance Sheet-June 30, 1950 APPENDIC A Comparative Statement of Income and Expenses for the Fiscal Years Ended June 30, 1949 and June 30, 1950 APPENDIX B Statement of Loans-June 30, 1950 APPENDIX C Statement of Currencies Held by the Bank-June 30, 1950 APPENDIX D Statement of Subscriptions to Capital Stock and Voting Power-June 30, 1950 APPENDIX B Notes to Financial Statements APPENDix F [ 58 ] APPENDIX H Administrative Budget for the Fiscal Year Ending June 30, 1951 There is outlined below the Administrative Budget for the fiscal year ending June 30, 1951, as prepared by the President and approved by the Executive Directors in accordance with Section 19 of the By-Laws. For purposes of comparison there are also outlined below the administrative expenses incurred during the fiscal years ended June 30, 1948, 1949 and 1950. Actual Expenses 1948 1949 1950 1951 BANK STAFF Personal Services ..........$......... 2,069,443 $2,377,602 $2,396,389 $2,605,997 Fees and Compensation ....... ....... 106,855 159,694 20,273 30,000 Special Technical Services ............ - - 313,500 350,000 Representation ..................... 24,015 20,739 38,534 42,500 Travel ............................ 231,746 243,810 326,130 350,000 Supplies and Materials ....... ........ 63,512 25,531 26,320 30,000 Rents and Utilities ......... ......... 364,206 327,860 335,093 343,000 Communications .......... ......... 84,150 78,733 88,564 94,000 Furniture and Equipment ...... ...... 90,389 31,302 26,097 29,000 Motor Vehicles ........... ......... 10,376 6,486 5,335 9,324 Books and Library Service ...... ...... 47,795 63,821 59,707 60,750 Printing .......................... 72,715 32,638 35,436 40,000 Contributions to Staff Benefits ........ 315,785 270,577 266,126 298,000 Insurance ......................... 37,417 11,312 14,644 29,100 Handling and Storage of Gold ........ 25,662 7,046 - - Other Expenses .................... - 538 2,201 - Contingencies ........ . . . - - - 100,000 Total .$3,544,066 $3,657,689 $3,954,349 $4,411,671 Office of Executive Directors .328,814 325,336 322,804 287,500 Board of Governors and Advisory Council. . 176,002 85,582 92,858 227,000 Total Administrative Expenses . $4,048,882 $4,068,607 $4,370,011 $4,926,171 The initial Administrative Budget for the fiscal year 1950, excluding bond registration and isssuance expense, was $4,125,369; an increase in this amount to $4,390,369 was approved by the Executive Directors on May 23, 1950. Expenses for this period amounted to $4,370,011. In addition, $583,858 was expended during the year in paymeat of bond registration, issuance and other financial expense. Expenses for bond registration, issuance and other similar financial transactions have not been estimated for the fiscal year ending June 30, 1951, as the extent to which the Bank may borrow during this year is not known. Experience during previous years indicates that these expenses, exdusive of commissions and premiums, will aver- age about $125,000 for each $100 million of bonds which the Bank may issue and, also, that commnissions incident to the sale of securities from the Bank's portfolio will average $2,500 for each million dollars of securities which the Baatk may sell. [ 59] APPENDIX I Voting Power and Subscriptions of Member Countries * As of August 1, 1950 VotiNg Power Subs c sPtons Number Perceu AswOxt (i)n Percent of of Million of MEMBER COUNTRIES Votes Totd of Dollars) Totl Australia ................................. 2,250 2.36 200.0 2.40 Austria .................................. 750 .79 50.0 .60 Belgium ................................. 2,500 2.63 225.0 2.71 Bolivia .............................. 320 .34 7.0 .08 Brazil .................................. 1,300 1.37 105.0 1.26 Canada .................................. 3,500 3.68 325.0 3.91 Chile .................................... 600 .63 35.0 .42 China .................................. 6,2S0 6.56 600.0 7.21 Colombia ................................. 600 .63 35.0 .42 Costa Rica ........................ 270 .28 2.0 .02 Cuba ...... .......................600....... .63 35.0 .42 Czechoslovakia .................. .......... 1,500 1.58 125.0 1.50 Denmark .... ......................... 930 .98 68.0 .82 Dominican Republic ........................ 270 .28 2.0 .02 Ecuador ...... . .............. ...... 282 .30 3.2 .04 Egypt .................................. 783 .82 53.3 .64 El Salvador ......................... . 260 .27 1.0 .01 Ethiopia ........................ ........ 280 .29 3.0 .04 Finland .................................. 630 .66 38.0 .46 France .. ................... 5,500 5.78 525.0 6.31 Greece ................................... 500 .53 25.0 .30 Guatemala ...... .................... 270 .28 2.0 .02 Honduras ................................ 260 .27 1.0 .01 Iceland .................................. 260 .27 1.0 .01 India .................................. 4,250 4.46 400.0 4.81 Iran ................................... 586 .62 33.6 .40 Iraq ................................... 310 .33 6.0 .07 Italy ............................. 2,050 2.15 180.0 2.16 lebanon ............................... 295 .31 4.5 .05 Luxembourg ....... ................. 350 .37 10.0 .12 Mexico ................... .......... 900 .95 65.0 .78 Netherlands . ............................. 3,000 3.15 275.0 3.30 Nicaragua ................................ 258 .27 .8 .01 Norway .................................. 750 .79 50.0 .60 Pakistan .... ....................... 1,250 1.31 100.0 1.20 Panama .... ........................ 252 .26 .2 Paraguay ................................. 264 .28 1.4 .02 Peru .................................... 425 .45 17.5 .21 Philippine Republic .......... .............. 400 .42 15.0 .18 Syria .................................. 315 .33 6.5 .08 ITailand .................. .............. 375 .39 12.5 .15 Turkey .................................. 680 .71 43.0 .52 Union of South Africa ....................... 1,250 1.31 100.0 1.20 United Kingdom ......................... 13,250 13.91 1,300.0 15.62 United States .............................. 32,000 33.60 3,175.0 38.15 Uruguay ................................. 355 .37 10.5 .13 Venezuela ................................ 355 .37 10.5 .13 Yugoslavia ............................ 650 .68 40.0 .48 Total ............................... 95,235 100.00 8,323.5 100.00 = . _ * On March 14, 1950 Poland withdrew from membersh in the Bank and is therefore not entitled to any vote. The 1,250 shares subsiribed by Poland to the capital stock of the arUe to be repurchaed by the Bank in accordance with Artcie vi, Section 4 of the Artices of Agreement ** Less than .005 percent. [60 ] APPENDIX J Governors and Alternates As of August 1, 1950 COUNTRY GOVERNOR ALTERNATE AUSTRALIA Arthur William Fadden N. J. 0. Makin AusTmiA Eugen Margaretha Assen Hartenau BELGIUM Jean van Houtte Maurice Frere BOLIVIA Hector Ormachea Zalles Jaime Gutierrez Guerra BRAZIL Francisco Alves dos Santos-Filho Octavio Paranagua CANADA D. C. Abbott R. B. Bryce CHRE Arturo Maschke Fernando Illanes CHINA Chia Kan Yen T. L. Soong COLOMBIA Emilio Toro Diego Mejia COSTA RICA Angel Coronas Mario Fernandez CUBA Luis Machado Joaquin E. Meyer CZECHOSLOVAKIA Ladislav Biel Zikmund Konecny DENMARK Holger Koed Hakon Jespersen DOmiNICAN REPUBLIC Jesus Maria Troncoso A. Alvarez Aybar ECUADOR Luis Ernesto Borja Simon Canarte Barbero EGYPT Ahmed Zaki Bey Saad A. Nazry Abdel Hamid EL SALVADOR Catalino Herrera Manuel Melendez Valle ETHIOPIA Jack Bennett FINLAND J. A. Nykopp Ralf Torngren FRANCE Maurice Petsche Pierre Mendes-France GREECE George Mavros Grigorios Zarifopoulos GUATEMALA Manuel Noriega Morales Carlos Leonidas Acevedo HONDURAS Rafael Heliodoro Valle Guillermo Lopez Rodezno ICELAND Jon Arnason Thor Thors INDIA Chintaman D. Deshmukh * B. Rama Rau * IRAN A. H. Ebtehaj Mocharraf NasEcy IRAQ Abdullah Ibrahim Bakr Abdul-Ghani Al-Dalli ITALY Donato Menichella Giorgio Cigliana-Piazza LEBANON Charles Malik Raja Himadeh LUXEMBOURG Pierre Dupong Pierre Werner MEXICO Ramon Beteta Antonio Carrillo Flores NEYHERLANDS P. Iieftinck A. M. d: Jong NICARAGUA Guillermo Sevilla-Sacasa Enrique Delgado NORWAY Gunnar Jahri Ole Colbjornser PAKISTAN Ghulam Mohammed Anwar Ali PANAMA Rodolfo F. Herbmger Julio E. Heurtematte PARAGUAY Juan R. Chaves Victor A. Pane PERU Emilio Pereyra Fernando Berckemeyer PHILIPPINE REPUBLIC Miguel Cuaderno Emilio Abello SYRA Faiz Ei-Khouri Husni A. Sawwaf THAILAND Prince Viwat Ka,it Kasemsri TURKEY Nurullah Esat Sumer Nahit Alpar UNION OF SOUTH AFrUCA N. C. Havenga M. H. de Kock UNITED KINGDOM Sir Stafford Cripps &r en-= V.7ilson-Smith UNITED STATES John W. Snyder James E. Webb URUGUAY Carlos Quijano Nilo Berchesi VENEZUELA Manuel Reyna Carlos P.. Loilet C. YUGOSLAVIA Tavoslav Dolinsek Dragoslav Avramovic * Appointment effective August 2, 1950. 61 APPENDIX K Executive Directors and Alternates and Tbeir Voting Power As of August 1, 19S0 VOTES BY TOTAL DIRECTORS ALTERNATES CASTING VOTES OF COUNTRY VOTES Appointed Wm. McC. Martin, Jr. John S. Hooker United States 32,000 32,000 Sir Ernest Rowe-Dutton Sir Sydney Caine United Kingdom 13,250 13,250 Yueh-Lien Ching Kuo-Hwa Yu China 6,250 6,250 Roger Hoppenot France 5,500 5,500 B. K. Nehru D. S. Savkar India 4,250 4,250 IUeead Jose Barreda-MoSler Fernando Schwalb Brizil 1,300 (pef,) (ptrir) Cuba 600 Per 425 Philippine Republic 400 Uruguay 320 4,186 Bolivia 320 Dominican Republic 270 Paraguay 264 Panama 252 Emilio Toro Esteban F. Carbo Mexico 900 (Colombia) (Ecuador) Chile 600 Colombia 600 Venezuela 355 Ecuador 282 Costa Rica 270 4,055 Guatemala 270 El Salvador 260 Honduras 260 Nicaragua 258 Thomas Basyn Ernest de Selliers Belgium 2,500) (Belgium) (Belgiiem) Denmark 930 3,780 Luxembourg 350 Louis Rasminsky J. F. Parkinson Canada 3,5003 (Canada) (Canada) Iceland 260J 3,760 J. W. Beyen Gunnar Kjolstad Netherlands 3,0001 (Netherlands) (Norway) Norway 750)' 3,750 S. G. McFarlane J. M. Garlaad Australia 2,2501 (Australia) (Australta) Union of South Aftics 1,250)t 3,500 Costantino Francesco Giordani Italy 2,050) Bresciani-Turroni (Italy) Austria 750). 3,300 (Italy) Greece 50o Mekin H. Onaran Taghi Nasr Egypt 7831 (Tarkey) (Iran) Turkey 680 Iran 586 Syria 315 3,249 Iraq 310 Lebanon 295 Ethiopia 280 Bohumil Sucharda Czechoslovakia i,Soo) (Czecboslovakia) Y oslavia 650 0 2,780 Member Countries unrepresented by an Executive Director: Pslistan 1,250 votes Thailand 375 votes 62] APPE-NDIX K In addition to the Exective Directors and Alternates shown on the foregoing list, the following sened as Executive Directors or Altemates since the date of the Fourth Annual Report: EXECUrTIVE DIRECTORS Date ot Resigotatiox N. Sundaresan (India) October 13, 1949 Sir Gordon Munro (United Kingdom) November 15, 1949 Donald Gordon (Canada) Januay 21, 1950 Leon Baranski (Poland) June 22, 1950 ALTERNATES Mohammad Nemazee (Iran) September 22, 1949 G. H. Tansley (United Kingdom) November 30, 1949 Alf Eriksen (Norway) December 31, 1949 Emmanuel Lamy (Prance) December 31, 1949 Ignacio Copete-Lizarralde (Colombia) March 31, 1950 Javier Salazar (Peru) may 1, 1950 Amost Polak (Czecboslovakia) May 17, 1950 (deceased) Edgar Jones (United Kingdom) July 15, 1950 [63] APPENDIX L Principal Officers of tbe Bank As of Axgust 1, 1950 Eugene R. Black ............. Precident Robert L. Garner ............. Vice President William A. B. Iliff ............. Loan Director D. Crena de Iongh ..............Treasurer Leonard B. Rist ............. Economic Director Davidson Sonrners ............. Genetrl Counsel Morton M. Mendels ............. Secretary Norman M. Tucker ............ Director of Marketing Chauncey G. Parker ............ Director of Administration William L. Ayers ......... Director of Public Relations Richard H. Demuth..s................ Assistant to the Vice President [641