D I• /'?/ . Hold f o~ Release !!2,ld 'I ro~ Release INTElWl'rIOi'JAL BANK FOR RECONSTRUCTION /\.NO Dli!VELOPMENT Washington FOR THE PRESS FOR RELEASE 12: 15 P .M. Press Release No. 171 February 8, 1950 The International Bank for Recqnstruction and Developmant today released a statement of the principal acti,vities or the International Bank • since September 1, 1949, supplenienting the Fourth Annual Rep0.rt or the Bank, which was furnished the Vniteq Nations r~r the ~se or the Economic and Social Council in connection with-its consideration of the Bank's Annual Report. (Statement attached) • ., . • INTERNATIONAL BANK FOR RECONSTRUCTION AW DEVELOPMENT 1 February 6, 19~0 ·Statement.,of 'Principal • I Aptivities IL Since September I !,, 1949 . . · Thi's statement supplement~g · the .F.pur.th Annual Report of the Internati·onal ·Bank .for Reconstruction _and. peve·lopment, has been prepar~d fc;,r the use Of the' EconomiQ and Social Couricil ·-1n connection with its consider.. .··ation· of t~~ Bank•s Annu~l Report. It sUllllna:ri~e;f the loap~ granted by ,~he · · Bank since ·the issuance of the Fourth Annual Report and :tts- other activities ··during this period. · ,'LCJANS GRANTED • India . On Septembe~ 29, 1949., ~he·.Bank :1ent $10million to- the Gov:ernment of India for the improyement of ~~icultural prod1,1ction.; l'he pro~eed$ of the . l:oan are ·being 1:1sed· tQ finario.e the· dollar component of the ·cost ot. agricul- t~al equipment'and spa:rE;3 .parts needed for ·the reQlaniati~n of lends infe~:t,ed with a we~d known as kans .~ass., ~nd for the clearing of· j~le lan<;ls. ').'he .1()8ll was for a term ct seyen ·years· &t;ld carried an,interes.t ;-$te .of 2. l/2%, plus colDJllission ~t the ,;-ate or 1%, whtQP/ in ~cco:rda}lQe: with~ the Ban~' s ·Arti.cle s of Agree~ent, ·:.te1. al,lacated to its speci.al ·r,.serve .fupd. · . Am9i9ti.za- t.ion: payments,· calculated til retire the ·10~ by maturity, ~11.i .s~t on·· J:une l) 1952. . . . $8,750,000 will be devoted to ·tbQjlifani)ra~· pr9j,ect, .ror 'th~ purchase of 345 heavy tractors, 8'1Cilla17 equipment, 8DQ· spare 1", .,}S• ": Out Of fin area of 10 million acres in Cent:ral India wlu.,ch are known t~. infested -"4tti kans grass, the GovernD1ent·ha~ surveyed 3 million aQres which will b~ :re,,. claimed over a seven-year ·period with the .hel:p ot the aank•s.. loan~ +he meth-od of rl,250 1 000. The Bank's 3% bonds due in 1972, wh~ch were originally offered on July 15, 1947, are presently quoted 103 9/32-11/32 where they yield approximately 2.80% to maturity~ \) lt sho~9, be noted, however, that these bonds are callable at any time on 45 days notice (the. present redemption price being '102t) so that the c~rrent sellirig pr:i.c'e is slightly less than 1% above the call price. The Director of Nar~eting or the Bapk is visiting Swit~erland for the purpose of cxr1 ~r·h,e the possibilities of borrowing Swiss francs to be used in connection wj.th certain of t ne loans tha·t have been approved by the Bank. The United States has consented to the ·use of its paid up subscrip- tion for lending purposes. Belgium, Canada and Denmark had consented to the use of their c.u~ncies totaling the equivalent of ~)10 1125,000 and the IJni~ Kingdom had consented to the 'U~e of t50D1 000 at Decembe~ 31, l949, The funds which have become available for lendiQg up to December 31, 1949 expressed in round numbers in terms of Un;l ted St~tes dollars consist of: • 20% paid-in portion of United States subscript,:t,on • ~ •••••••••• ~~635,ooo,ooo 2% portion ·of subscr1,ption~ of other cowitries .'. . . paid in gold or dollars , ••••••••••.••••.• , •••• , • • • • • • • • • Part or i8% portion of subscription ·or . . ·, . · · . . . BelgiUin, Canada, D~n?nqrk and· Uni~ed Kingdom· ~ ~ ••••••• :, ~. 9S, 555,000 11,525,000 Proeeeda or two bond.issues in the United State~ •••••••••••• 250,000,000 Sale of Swtss Franc Bonds to th~ B.:i;.s .............. --"... •.• .. • 4,000,000 Ne~ available funds resulting from·Qperatio~s .. ~, ••••••••••••• · ~0,764,000· ,:;c Of' this stUn, approximately $304 ndll~on. rema~na available for laming~ The" Bank hopes to obtain further authorizations for the use of some ~rt of the 1~ loc~l Qttrrency ~µbseriptions of other members,: both 1n· orqer· to ~cre$se the amoupt and flexi'bil.ity of: its loana'ble· re~ourqes and .to strengthe.n the international oharacter·.of its ope~ations. ; • .. · i (\ INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Washington FOR THE PRESS FOR RELEASE 12:15 P.M. Press ReleaGe No. 171 February 8, 1950 The International,Bank for Reconstruction and Development today released a statement of the principal activities of the International Bank since September 1, 1949, supplementing the Fourth Annual Report of the • 1 Bank, which was furnished the U~ ited Nations for the use of the \\Economic ( and Social Council in connection with its consideration of the Bank.' s Annual Report • .• \ , . . . ·· • INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT February 6, 1950 Statement of Principal Activities Since September 1. 1949 This statement supplementing the Fourth Annual Report of the International Bank for Reconstruction and Development, has been prepared for the use of the Economic and Social Council in connection with its consider- ation of the Bank's Annual Report. It summarizes the loans granted by the Bank since the issuance of the Fourth Annual Report and its other activities during this period. LOANS GRANTED India On September 29, 1949, the Bank lent $10 million to the Government of India for the improvement of agricultural production. The proceeds of the • loan are being used to finance the dollar component of the coat of agricul- tural equipment and spare parts naeded for the reclamation of lands infested with a weed lqlown as kans grass, and for the clearing of jungle lands. The loan was for a tenn of seven years and carried an interest rate of 2 1/'cl,, plus commission at the rate of 1i, which, in accordance with the Bank's Articles of Agreement, is allocated to its special reserve fund. Amortiza- tion payments, calculated to retire the loan by maturity, will start on June 1, 1952. $8,750,000 will be devoted to the kans grass project, for the purchase of 34 5 heavy tractors, ancillary equipment, and spare parts. Out of an area 1 of 10 million acres in Central India which are known to be infested with kans grass, the Government has surveyed 3 million, acres which ".iill be re- claj.med over a seven-year period with the help of the Bank's loan. The i method of reclamation involves deep p!owing with heavy tractors, plows, and anci,,llary equipment. The total capital outlay for reclamation r,d subsequent cultivation of these lands, the major part of which will be financed by India out of her own rupee and sterling resources, wnounts to the equivalent of $24,900,000. It is expected that substantial quantities of grain from the reclaimed area~ will be available to the domestic markets. Because of the high yields from reclaimed land, a total of about 4 million tone is expected to be avail- able to the market, in addition to the faf:n consumption in the reclaimed • V \)..J - 2 - •• areas, over the seven-year period, and about 1 million tons annually yhere- after. This will make a substantial contribution to India's food req~irements, which even on the basis of the present low average of grain rations are currently increasing at a rate of one-half million tons per annmn·through population growth alone. To meet the need for increasing India's acreage of arable land, the Government has carried out experiments in jungle clearance. The clearance of jungle lands involves removing of trees, elimination of brush, plowing and harrowing. The balance of the Bank's loan, amounting to $1,250,000,, will help finance a pilot program for clearing about 100,000 acres of' jungle lands in northern India. The loan will finance the dollar cost of heavy tractors, ancillary equipment, and spare parts. The Government of the United Provinces, where jungle lands will be cleared, will meet the costs of the c::onstruction ·of roads, housing and control of malaria, and. other incidental expenses, the total of wM,ph cannot at this time be determined. This pilot program will enable the Indian Government to gauge the practicability and the cost of large-scale clearance of jungle lands with modern equipment. It will also make some contribution to India's food supply. Timber Equipment Loan On October 17, 1949, the Bank lent the Republic of Finland $2,300,000 and the Federal People's Republic of Yugoslavia $2,700,000, for the develop- •• ment of the timber resources of those countries. The loans will be used to finance the purchase of timber-producing equipment. Both loans are for terms of two years and carry interest rates of 2!fo, plus the usual commission of 1%. Amortization payments begin on June 30, 1950, and are calculated to retire the loans by their maturity, September 30, 1951. These loans were two of a series of loans considered in connection with a Timber Eq·uipment Project developed by the Food and Agriculture Organization of the United Nations, the Timber Committee of the United Nations Economic Commission for Europe, and the International Bank, with a view to alleviating the current and prospective shortage of timber in Eur~pe by expanding pro- duction in certain timber-exporting countries. The pr\?Ject had its origin in the findings by the F.A.O. and the Timber Co:mmittee of the E.C.E. that the production and export 0f timber by the timber-exporting countries could be substantially increased if lumbering and sawmill equipment could b~ obtained by them from Europe and the United States. Discussions were then held among those agencies, the International Bank, and representatives of the important timber-importing and timber-exporting countries of Europe • . As was st~ted in the Bank's Fourth Amlual Report, these discussions resulted in the formulation of a plan, the salient features of which were ae follows: The Bank would make loans to the timber-exporting countries of amounts necessary to finance the dollar purchases of equipment; other timber- producing equipment in approximately the same amount would be obtained from European suppliers without financial assistance from the Bank; the timber- exporting countries would agree to export at reasonable market prices specified quantities of timber: and finally, the principal timber-importing countries of Europe would enter into Tiirber Payments Agreements with the.borrowers under - 3 ... which these countries would pay dollars to the Bank for a sufficient part of the timber to be imported by them to ensure repayment of the Bank's loans. , It had originally been contemplated that similar loans would also be made to Austria, Czechoslovakia and Pole.nd, but Austria and Poland did not request such loans and Czechoslovakia withdrew its application in view of 'difficulties • encollll.tered in working out Timber Payments Ag~eements. Finland entered into Timber Payments Agreements with Belgium, Denmark and the United Kingdom and the loan became effective December 16, 1949. Yugoslavia entered into Timber Pal1Jllents Agreements with the United Kingdom, the Netherlands, France and Italy, and the loan became effective January 24, 1950. Best available estimates indicate that the machinery to be obtained by Finland and Yugoslavia as a result of the Bank's loans and of purchaaes from European suppliers will enable those countries to increase their annual production and exports of timber by amounts having a value several times as large as the amounts of the loans. These increased levels should be main- tained long after the loans are repaid. The timber-importing countries of Europe will likewise derive subijtantial benefit, both from the availability of increased supplie,s of timber needed for the reconstruction and development of their productive facilities, and also from their reduced dependence upon imports of timber from Jorth America, which must be paid for in dollars. El Salvador On December 14, 1949, the Bank made a loan of $12,545,000 to the Rio Lempa Hydroelectric Conunission to finance imports of materials and equipment required for the construction of a 30,000 KW hydroelectric pJ.ant. The loan, which is guaranteed by the Government of El Salvador, is for a term of 25 • years and carries an .interest rate of 3 1/4%, plus the usual ii commission charge. Amortization payments begin in 1954. The Rio Lempa Hydroelectric Commission is a. non-profit agency c,f the Government of El Salvador, created in 1946. Lack of electric power has >handicapped the development of-El Salvador, and the a9-di(lqpal supply generated by the new plant will satisfy a backlog of.'demand on tlle-··pa'rt of urban, agricultural and industrial consumers, and provide for some future. expansion.. In order to meet the local currency cost;.~ of the project, the Rio Lempa Commission plans to make a. public issue of colones bonds in El Salvador. The Director of Marketing of the Bank will. advise and assist the Commission in the sale of these bonds. The Loan Agreement will not become effective until the Guarantee Agreement is ratified by an elected Constituent or Legislative Assembly in El Salvador. The present Government is provisional, but elections for a Constituent Assembly are expected to be held this year. ,1··· \\ - 4 - • Latin America OTHER OPERATIONAL ACTIVITIES Brazil - A Bank mission visited Brazil in October and November 1949 for the purpose of: 1. studying general economic and financial conditions, with special reference to Brazil's capacity to· assume addittonal external debt; 2. considering what priority various proposed development projects should receive; 3. surveying Brazil's government policies for promoting the develop- ment of the country's economic resources. The mission's repoi'.t is now under consideration. A survey has also been made by a Bank representative' of the electric power market in connection with the Pa-u.:}c:_~%~nso hydro-electric project which is under consideration. >~, \~ Chile - A Bank mission visited Chile in November and December 1949 for a r~:ri 1ow of Chile's economic and financial situation, with special reference • to ce~.,~ain development projects which have been submitted to the Bank . /r Colombia - The large-scale mission under the direction of Dr. Lauchlin Currie, referred to in the Bank's Fourth Annual Report, remained in Colombia from July to November 1949, making a study of the country and its development potentialities. Its reports are in the final stages of preparation. The Bank is currently considering three hydro-electric projects in Colombia. Costa-Rica - Bank repr~sentatives paid a short visit to Costa Rica in November 1949, for preliminary conversations with the new Government, which had just taken office. Cuba - The Vice-President of the Bank visited Cuba in November 1949, for inf'oriiial discussion of development plans. A Bank mission may soon visit Cuba to make a more detailed study. Ecuador - A study of the textile industry has been completed and is currently under consideration. Conversations are continuing concerning several proje.cts proposed for Bank financing. Guatemala - Representatives of the Bank visited Guatemala in mid-November for preliminary exploratory discussions on Guatemala's development program. • Guatemala has requested that the Bank organize a mission to study certain as- pects of the Guatemalan economy and to assist the Government in formulating its development program. - 5 - Mexico - Negotiations have continued towards the granting of a long- term loan of $26 million to the Mexican Light and Power Company, Ltd. The Bank has ma.de the completion of the reorganization of the capital structure of the Company a principal condition pf such a loan. A reorganization plan was issued by the Company in December 1949 to its security holders, who will • meet to vote on it in February 1950. The maturity of the interim loan of $10 million granted by the Bank in January 1949, originally set at December 31, 1949, has been extended until JuLy 1, 1950 in order to allow time for the reorganization to be completed. 'Nicaragua - Bank representatives visited Nicaragua in October 1949, for exploratory discussion of the country's development possibilities. Uruguay - Negotiations for a loan of approximately $31 million for im:Jtrovement of electric power and telephone facilities are entering their final stage. In response to a request by the Government of Uruguay, a representative of the Bank is visiting Uruguay in February 1950 fpr discussions concerning the loan and Uruguayan technical assistance requirements with respect to certain sectors of her economy. Europe Turkey - Technical studies of the grain'storage project, the port construction and improvement project and tha project for a m"4lti-purpose dam on the Seyhan river are in progress and will be completed shortly. The Bank has agreed to send a mission to Turkey to help the Turkish Government prepare a coordinated investment program for the development of • the Turkish economy as a whole. Preliminary studies for this purpose have been made. A Bank consultant, who was in Turkey in October and November 1949, investigating the means by which private investment in Turkish industry can be stimulated, has returned to Turkey after consultation with the Bank con- cerning proposals for this purpose. Yugoslavia - The mission referred to in the Fourth Annual Report has now returned and the economic, financial, and other data it obtained are being studied. Discussions with representatives of the Yugoslav Government /')) 1tare now under way. \jl ){ \\\I \:~:/Asia, Africa and Middle Fast ~ Egypt - The Egyptian Government has requested that consideration of \the Quena project by the Bank be postponed pending further explorations by ' the Egyptian Government as to the possibility of obtaining the necess\13.ry equipment in soft currency areas without financial assistance. i future. Ethiopia - The Bank is examining certain projects recently submitted by the Ethiopian Government. A Bank mission may visit Ethiopia in the near • - 6 - • • • ' India - Negotiations have \\een entered into for a loan to finance the dollar component of the cost of the Bokaro-Konar project. This project involves the construction of a therm.al electric plant, a hydro-electric plant and a transmission system, and represents the first stage of a ·broader development program for the Da.modar River Valley. A Bank mission is visiting India early in 1950 for a furthe1(/review of its economic and financial position. Iran - The Bank expects to send a mission to Iran in the spring or early suiiimer of 1950 to examine high priority projects under the country's seven-year development plan. Iraq - A Bank mission visited Iraq in November-December 1949 for discussions concerning the possible financing of the Wadi Tharthar flood control project. This project would divert the flood waters of the Tigris River, in order to prevent destructive inundations downstream, and may make possible their later use for irrigation purposes. Pakistan - The Bank mission which is visiting other countries in the Far East will visit Pakistan early in 1950 for preliminary conversations concerning the economic and financial problems of the country. Philippines - A Bank mission visited the Philippines in December 1949 • for the purpose of reviewing the economic and financial position of the country. Thailand - A Bank mission arrived in Thailand December 29, 1949 for a study of the Economic and financial situation of the country and its development program and possibilities. U.K. Colonies - The Bank and the Colonial Develo:pment Corporation have announced that it has not been possible to bring to a successful con- clusion the negotiations that had been underway with respect to a loan for the purchase of equipment to be used in development undertakings promoted by the Corporation in the dependent overseas territories of the United Kingdom. MARKETING OPERATIONS No borrowing has been necessary since September 1, 1949, for the purpose of raising "new money" to be used in the Bank's lending operations. as available funds on hand were adequate to meet its needs during the period. Howev~r, a refunding operation was mi&ertaken, in the United States market, which involved calling for redemption the outstanding issue of $100,COO,OOO Ten Year 21:1, bonds, due July 15, 1957, for payment at 101 and accr~ed i~ter- est on February 17, 1950. A new issue of the Bank's Serial Bonds of 1950, due 1953-1962, in like principal amount, was sold at competitive sale on January 25, 1950. Four syndicates submitted bids for the bonds, with the aggregate number of bidders totalling 393 commercial banks and investment :e banking firms, located in 33 states and the District of Columbia. The winning group, which was headed by Halsey, Stuart & Co., Inc. and the First ()- - 7 - National Bank of Chicago and was composed of 37 commercial banks and 99 investment banking firms, submitted a bid with net interest cost to the Bank of $14,441,000 or 1.9254 per cent. It is calculated that this , refund'ing operation will :result in a net interest saving to the Bank of approximately $1,250,000. The Bank's Jfo bonds due in 1972, which were originally offered on July 15, 1947, are presently quo~ed 103 9/32~11/32 where they yield approximately 2.801, to maturity/ It should be noted, however, that these bonds are callable at any time on 45 days notice (the present redemption price being 10~) so that the current selling price is slightly less than )) 6 1i above the call price. The Director of Marketing of the ~nk is visiting Switzerland for the purpose of' exploring the p:ossibilities of borrowing Swiss francs to be used in connection with certain of the loans that have been approved by 1 , tf~ Bank. The United States has consented to the use of its paid up subscrip- tion for lending purposes. Belgium, Canada and Denmark had consented to the use of their currencies totaling the equivalent of $10,125,00Q and the United Kingdom had consented to the use of 1:.500,000 at December 3i', 1949. The funds which have become available for lending up to December 31, 1949 expressed in round numbers in terms of United States dollars consist of: 2CPJ, paid-in portion of United States subscription •••••••••••• $635,000,000 'c'/, portion of subscriptions of other countries , paid in gold or dollars ••••••••••••••••••••••••.•••.••• ' . Part of 18% portion of subscription of, Belgium, Canada, Denmark and United Kingdom •••••••••••• 98,555,000 11,525,000 • Proceeds of two bond issues in the United States ••••••••••••• 250,000,000 Sale of Swiss Franc Bonds to the B.I.S. ··················~••• 4,000,000 Net l':l.Vailable funds resulting from operations •••••••••••••••• 20,764,000 $1,019,844,000 Of this sum, approximately $304 million remains available for lending. The Bank hopes to obtain further authorizations for the use of some part of the 1~ local currency subscriptions of other members, both in order to increase the amount and flexibility of its loanable resources and to strengthen the international character of its operations. ••