CONFIDENTIAL




                                                      66955
         INTERNATIONAL BANX FOR :R:HCONSTRUCTION AND DEVELOPMmr




               A REVI:EW OF THE ABBINK IlI.m?ORr UPON BRAZIL




ECONOMI C DEPARl"MJiNT
Prepared by: Dr. Harold Larsen                            April 26,   1949
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                   It
                                                              of     teehni~:l~l                            1''111<1    !C(lvice ot\.

                                                                   it i"" not            tH~                d()~ent             ~   the

   '!ort   01' th,o     Joint t'ht11,'

           ;i8;t}1.·t   is not      ell}    r'!co'nol'llic




c-!)ntil'll1OUt, thr


of "lccHlomlc


                 :,;a.:mJ.n:;tion     ("l     the    :c4;l'   'ort    rfu~:,'E',~t'l'\    th,t, thl'S! mny             h'Y~         Ilul')

to tyO     m~, in :f"ct\):r:~.       1n the f 1rs t                  7,1~c~. r::Tuc.h          cnY!:!::'lromlse in



                                                                                                    ,~V!:,11,t'blf~)(~ra('tnE eOhl-


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            to i.;en. tify •




                                                                                               polley




II   'l'h"!l"" 115, of' cour!$e.ihetH~i';1('tfl both of thFt ,;;,;'l1t 'f J'nd ,11"ntit;r
           lro"bor. :~'1vtnt: rhe to S"'\.\gi?;ution~         1llt'c,             0,'111;;:· tlon
     ~n<l Mi!':t"~Uon.       ther~ 1", Hhf.' ,";        i;lv~n         u""tion.al ineome.
      8n\~ ~n est1Jn,:"h !rv,ir.!o of n"",t. dome~Uc r'lru~ncl.'",l '!'j'v1n(~'g.     l!ut the
      t'(~lev0r,,,~ 01: th rI'i'! fmltor~ for eeonoroic 1aV'elOPln~nt 1 not Dl"OW:,ht
     out.
               one of



                                           •
_____       ._'IO(.~,-,.   __,_.___
11          th", 'i'l'f.n~as in ,,,hieh. they }·i~j'le' l" to ' h e ,                  "ficonol'ilios
     "mule} b~ unl)nl;'lllJ~d. ?or ex.,         .....m'pl,~. tlll'" fol1o'1ll#~ "'m~llefl\ (.L         to
     UnHe1 'Jtt,\.ee:                 'II!d~ v~:r1:' t.'ton.~" of pt"OhJ.cUrt t:' "':rt f1 of lncom~' ill
     d lff~l:"'i1 t ri"~iDn~ ~n(l in Ii 1ff~1"'rnt ~ct:l '11'1 UCl!. tl; '~;hit'h "If!! !r.r-?ve ref'~l'r'e(l,
     fJ;,r~ in thE:f~!!!e1ve~ th~ t.ru.8St <wirlence of <" 1"014:: of economic                            1n
     !b:'dl'l. \7>. 2) AnothtSr con~1{ternUon t:'dVHnee~ h "th", fiifficulty
     hj\lilJ o(,en e'X~Jer1I!"neeil in the y)"C'"'t tw" Y!':'·t' '" in ~!~~e1:;lns~            • i'I brrnorts
               h~)rd currency ,,,r~~~1>'l \~1th1n th,.,. 11rll!h of f'.r."dl t           cOlrv~:rUble ctU"-
     rene;,' r",~ource,,\.1f b~ .• :d 1'.rl't?l.l1 iiJ cfJrt.:',:l.nly not "lone in !'ritieri~11eln?,
     t!lt                   of «~hort ... tel"Ul:) unblii.li~nee.
         -4_




1

                            '::1truet,1l'f of c:'t"Ch1uc-

               exoent for o;rqort""



    in
                                                               -5-




In",ofhil''    {iii;    th~l st1mtl;,t~         thh                     11ct}                        ~l'(,!\~th.      It         not

~lli'   ' inim'tt tt'r                 r~ov('!rnJll!'Htt'?;   to   ~"nCt)"!'tl.r;~f~~   (1 <Iljrt,',in   p.ctb/i           s     fisc:"l




                       "Hl'tMilll        on ()f:c."sion                                            140,            '.nil         {FK'
          kilo~"1!!th il!li14       y'<gr,r. 'I'll€!. 'l)ropo~.l tic,           tnnr~~E'l 1n1}t'!'ill~                         t~,'
          :~tJO.      kilO'jn~tt~ ,nl?t' yt~n,l" (foJ{ ~1,' Y!:1 )l'S) 1s 1:1-0\, t.herr~ror€t out
                                                                                 f


          of line ",lth )~~dl '1J l,tUst eT;1r.lrlMc~. ptll"ticl.l.lft rly in "1",,,,, ~t the
          i".t;ct th' t ~n;v of th!:'l en-g\.lng,"}ower !l'cilltic!. ",1"0 overloaded $nd
          tr"t :w')l"~            p~re~nt t?"" t.h"" !lIN CJ)'H"elty h          t"           f'l ex-
          tanl';1I:'tlltl.l "1'.:   :'H.Uon!.'i to 'l):.l:1;;iilV 'ry t~ms."
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                                               be u:::c:plel"ed of o'btfiinin,\; ~'ort ,')'X' !"l"!dlM-
term ere,Ii h                     to fiu,n,nae        ');~rt of Ii,->:,;.!:!l' 3 ear,en H:d tm;?Ort~
;1'tlt'!J¥l' 19 I1r9.       '!.hili'! Vli';Y   !l!C't'Ctfl   of    th~ tund!!l obt~'line~i    from currfflli;
export:~,      llhich ",,)'\.111] ,o,therwille               h:~ve   to ba U15&rl for      e~U;f~nt1fil
                                                                                                      1m-
"ort t1 •                                  tCH' UfiJ8             In. l"&p,",ylll('" overdue trade              •
:tnl;l   lIl~v6ri       oftn'lJ   1~ol't   reg1ir1cUon$ neoedad t{) oleilr Un the
!!'b.9cklof;'· would thu~          be Ni ti.!tHtf'!!l, nl t.hn~h t.he"e :re1'lt:rictio'U$
wOtU ~ h;:ive to      retNin"Jtt lonr, +mO'O€'h to                          ~fla"ble   Brr!z'l.l to 'reYll'l1
the er~(lHe obtl:nOtl'l.lt qbl~.t p.           .}
                                          .s.




               'l't.ha :3.AVr:: ?b.n      {'.:iv~~    !en   aT.h:~.U~.~tive   !".n'\ly~h   ()t~h·~'··1.l'g
      {!lf~rlc'll tul',,,l pl'obl!~nli;         ith   :\$~'eeif1e $U{';,:~'.!l tlon~ $.'l(l to;:rof!:rl!lm~
                                                                                                       of
       flolution.        'J.'h1a ·;:rr(');·Jos~d. t,lt~' i<:; :c, iiot1::worthy cont::-H:ution ;',l'Hl
      'pl"OTi(\e~ lit: b$.9h for t:.h~ 11evelo;;!"!I?:T1t or ::~l9.n.15 for : j\\1r,~.du1'lly '!1'.f.-
      T):7(nI11l'l-~ e"eonomy t.h,!t \<fill ~N.n:1 ~m fI.n,h.'lrin~~ u,tion of h!'!T'T'Y. ;Iro\l-
      't.H~rou~ 1l'Elo"11t1'f.   H01ll!'~Ver. it 11' f el t i,h- t J'tlUCh mort-! ''It til   i ~ needi\<d



11   11;{igCl"OUl! I>u!millistrt·tion of ex.ch· n{~e (m''l Im~ort control", d:u:ring.::
     thtl eomint: ¥(!)""r i~ f.ll blperattvEI nee(!J~~ity. if th!': orEiflit or
     Jh'l'1zil 1'l- t·:) 1)e",L"ced on H flrfJ bf"l1it.                   '"r().Lre~'% h    ti:;l be '1i!!:::.lie
     :11'1 th", economic d~velo')m~nt of the cmmt1'7. 'the fTI<"'Olu.tiou of n
     dt'tl,\tion in w'h1(!h ir)l~;ort 'nd sxc;"'w;e controls arm 1}'t; "'(1.$00 ~!.M,
     1'H';.\rlv",''J ~11rnin~·(t~r!t 'tn(m.lrI bE' on~ of t,h:". ;xt:hl'l of n b~.l,:me.ed,
     ·1evalo~)!1I'~nt;.l:ro{l"nm.           ''iu,ch cl'm1;rol,,; m13t 'h~ SU};f,lleil.fmte,{ by
     stronr ef.tort~ (l) tobrmtden ',nd im'.l:!"ove l'rlldl'f[ e>t!::orts,
     (2) to ,leve1 O'!' efficl~nt1t~ment1e vr(}t!uc,~t.1on o:f " mmber of in..
     (luutrb.l 'prod.u.ch i'J1d ~M1 UOI'Wl ,1~Hl'H,:\1ttiC. ~ou.:rees of ftl-els. the
     iIlt;:;.ort,', of ,."h1e'h nO~1 weit,'h he;f!.vUy (,n .Ilrridl.~ 1nt~:rnd1cMl
     b,>!'>,l!2ne~ of '~)£1:ym~nt'-!. ,~\n:' ()) to attr~et !ol"'~1f.:;n ~(l{Jl k,l~nd
     tech..   ..tlc1nn% 1;" iI\!!I~1,~t in tht'll!~e "~Telo')ml-';nb. :~'it,h~t nn inflow
     of ~ueh c r:'lt,l t';d. thlB .:~moltnh Clf :tm'e1f~n e.z(ib.".nt,~e whtch ~1Ul !)e
     ~:¥d.l<hl~ fot' th!' '\ureh:'!\$~ of l'l"teent,t:<l. '!ul)'111iH~ tn,d e(uiiJIn~:nt
     are 1i>::"l17 to 'Of!' tlO lilnitflA duri.tij: thfl' ne:tt *H~vq!'£'l y4!?~r. (I.e
     ~~r1oudy to r;")t~.rd lira.dl t s 1nr!'U~tri.".1 l!ln<1 ,~en~ri'l.l economic
     (ll'!"I)'f'lo:·,)11!;mt." 'l',lJ.f\. . : ) ' n . ''.4-?S; ()rlf:1n~1 tm(~ltr.l tn~iJ.)
      to provide ."l,daqu.:;\tl'iJ coorflinr':tion of v.rioll!!\
      relf',.U~   to ;f!tgrieul \WA.. Such         ~t"!l.dY!l~~imt hirJ11;r               ..
                 ~;looh.l t.~.l~H·~:ry tf"Ch"'li{~1tl Gon:'l1"1"ionll! of 'Mel! itut,11-
      fled~:l":r~OM.l. t..aoluH.ll{'t. if d~flItllI!i.!d necetu;,;I,l'Y. (JIlHJC1~)lhh
      irm:l other caunt.rl~$,              ~e                 t:-:- deh.'M1h'F' thR 1'!lO!Jt
      vr~',ctie'11 ;k,.nd r8~il1$t1~:: nolut.il.'ms."




o th..,




11        Vi~\--l of tllv: C'Wi'l:Ul:.'ti ve r"clproc~%l l'lt; tur"" ej"              oUt;1I1t of
     deml'ln'l fot'               tlU"tll nn f : in1.u!"!,tl'i f l?ro'u,,t?:!. 'i.'he         itl'l!'tlf
     ;~.()es not u.n;h;l:r"~j"'!t1l""' . t~ .'-'G'd.cultural      for ex"',i1pl~, "the 1mprovet1t'!nt
     of !i~r1eult\lral protlucUon and                     tlv; trml~~orti1t1!H'1 ;011. eo-mi~IE\J'ehl
     d:!..etri 1!U.ti(.tll of foo~",t'J.ff".l h on~ of :g1"'''f'11'~ l::rad.e!l1t ;)f.'oblr;'m1')."
     (!bi-flu n. ,5.)
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                   tion   0 1'
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a:t'ii!             t            H;)   l1I11t te'l   'urine" th" ne:'!t        ~ev~r(,l   ':/ t:, '" r~,   :1 "I        !C1:t'iou;"ly   4",
                                                                                                                                        ",'
r@t~t:N'.                'ry. i,n'~'ll'!itri
                                                                                                                              • ':1b-25)
                                               ~                                                                   II
                                               J,    111   '~n   t":"l   (10
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                                                                                                                                              :nk



          11
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               .1       . .. .
                                                            '.i'he

interaat Of           instttQtlo~sf   0~C\!& th~   Inte

tl());l




t;'nee to       .\1"'.'1': il,

          ir()n !'liu':>1>;

     t. t¥J     l;>ov1·rle




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f)                                ].
                     ~t;)r';:{~:'J
       In'i",stri'.·l




         llt;   pl'{'~

       ,tslVr"tf-:       i

                             C;:";i L tl<ll' -J..   !r{)d-~           t             ~•.d    1      :~i\..   vt
                                                              th,: in t(-!:rf.>l"unce- of
                                                                           !.',,;"·t~J ih(',rr    'tt,'-,,; ,i~l
                                                                                'tinn
                                                                           '~pnnt on food.
                                                                     for     increJ·.l".ud           'K{f:.:'.
                                                                                 LiJ"~t'o
                                                                                                 CFi!lti.    r:,.
                                                                                       tiCrtlf'.
                                                           - 15 -



              I.J'n.der aucb cirCW<l$tp.-nce~. t~~3 pre$~nt !'$l tUJ~t1on in Af~ricuJ.­
htr,;.l ,;;nd            urodu.ct1on ?'fOuld fJiilf·hf:$.l.J1a tna' ,riGa incr'liM'i •·....nn ..." . " "
                c::~.,tt.ll:';
ir~       cms\~ of Il ;ievelor.~nt expiinsion loovefl:;~nt ~bich               not tGke
                     :nrl       'tiOX"E~ clifficul t Ilny ste1jti t,qken to combat



                It    i~ fllrtil!~r C.lenrl'l i>.:J\)lfl'l in the             :NOOn
                      COUtlt.ry t g d!"'velo)~''V-lnt 1 to in f.". lp;r~ar


                     tl,Jndency of ilr,id 1 '8 internr.,t.ion;.d tr:¥i,e n.:!                   :...n
                         tl.<' ilrst J-'::l"t of the rt1poTt t   shows the necessity of con-
                       s         hal!:irlCe Q.!ii\yai,,;nl;.iJ dlfflc.:ultlf:HI t"lxint. '.::00
Int,nntll" 1.u roplnce tilt,!lIt it by producing COullilOdiUea whioh eM b~ ol)t:
                         t~l~d tory tiS suhs1ii1.ut'S's for blportl ttlat increase ;:.'t b
rut<-:           ' :ro:port.,ion to th£' inGr")i':I.!:)('~    !lrob~l"lt;1 E-~xpol'ta.

                III                   I     of Part i. teutton 111;          to fi:nfucii~:'"
                           prt:lr~ruisito  to eCOrtomiJ d&v~l()rJment..          IJ(mt1nu..~tiou.
                      crl~di t 1'0li.c;( is nl~lO recoL,;,ended, fOl', if on the OllJ:'>
                              ~i t.u~      in 'f;rlcm;    bet tUI' in        t.ru . l1 it. t\';t.H itl
                    utf.lt::;r h~Dij the redu(:tion in ,,.vpj,lRbl~              bacuu.stl of
                      l~e'i\lcti.m in L.ticlQrts in 1;14:;,        trw !ncr-eft_eli> ill
                              cert.tlin rie1d1ty in credit controle.
                                          a.celi\. 1$ recC):;L.an.ual,
                 'c'ithout st.huL;.ting the                        of


                                  the;' 1;m.d~r.~t,:;;J.·'y -,,1 tU!'lt.iml fot·
                                  hk-ert by the l"rt:£\i{ient of
                                 rumlts ~,hicht to 1,.                      in

                         tecl'ul1c#;il f;spec:ts of th", vr. .t'iou,s eooooUllc \lecture               ti.x:}
                    c\:Jndtmsed in PfilJ"t           n.
                                                Th if:; 'i\T(Jl'k WI:iS f.eu::iU htQlj hec~'\use          Lh(~
                           1;no tbte wU'ious Stlbc()mwll?>don~ he,d helel'f; th!S'ftI the
                           for the SiU;:"~: 1)lm1.

                        po ssibil1 ty of           inerer~u1~:; 1ZJgrlCul. t.urt~l ;~~roa.u.ction ttu·Ol~.i
                  )f fertilit,f!'l'S. c{m$t.1"'.~tion i.,r            of ,,~eMU~~f,'Z ,::\ltti
                   ai' tiICmiq,ues by ,. ~ider u",~ of equipment. str.,uds out. 1'1;.
                      l'eco:r.tJUen~\ed that the explot't1tion of pho}'lvh~,te ,iepo~li t~
                   produ.ct1on be etli1Ulktt:Ki 'l/1h~rover          is tn'i:1 ponsihHi tit 0f
                                                                              to r: t..'1r;,; +,":~\::':l()l"::­
                                                                                      • ;;nrl finMr,cii'~
                                                                                      in foroi;i1l   Gl)l,.i.n-';'j.J.(;:~;I
for :.
                         I"Jport recQi~ni ~£;s thl,t flU"t.her                           l'P-»l u.i~, 'i,~n.t
                         i g. tell ~~GnthJ. elcwmt in t~ $Collo!'£ic r"'&r~ss uf ik,,%il.
1':"nd                [). nUllli>(:lI' of 111J.iu stri:J. cOd!'liOdl tl(j9 in the production (I f
fur\;                              ~.:l:p~~fU'n t:J b~ 1-ilI::'.!sl')1~               t)no ::moh (;Oi:r
    i                    i ron which mif',ht be J,rodllced.
                                                                               - 16-



                            In :respect to iron or(;,                          a~.rt!lil1    ditflo.11ties for Hll
                               ex!X'rt':'J.1ol1 E~.t"'~                                           ).JO/Juibil1 tl of
ure'~sin,,;            tiro quall~1tleQ 1'!:l:)r.rooif11,ly. onco                           ?tIt    e.;>;port polioy
1i ·~)hl(:'{   t   i   '3


                                         !~t~:~,:ng~n?1,:l~,   ::jtt r 1T3J(                                ttl                 i
                                        Increl.:tse in tM '.1xport.l;rtion of                           tai~.i           miner::'!
                                          :cn1i thn dStllr,lhlllty of                                                  it .ll'vrr.

                                      ltU'Pl'Ovfl<;l}ent of tr;:;'J1Eport~tiGn. fr(.dLi ti~s de'P~lds
ext€nt Urtm I'ntroleu.l'l. alwUld it be           gSti h;.~~. '!{ti thin :!, ahort ti,"l(,~,
tdn     troh"lU.m lntlrl;zH. it \'IiOulct         ~dv1sHbl.e to aooUnu.e
f    iXl!lSt.ruct.ion of        hi,ghwt.w- netl'lOrk. the 0Ver-.inCreRsing .-",·,!X·.~u~ ...
      :t.:linf:i$.      to :pl~e hms i:l'l.!f"OI"t!dlCe on the aleotr1fic~t.ion
        ,;ih~Juld tile polley of intendfied pE~t:r(,)l~ reB~ArCh not bo
        , ~h~~ tl"~n~rt proHer2 mu,r,t b~ consVi.fi'retj frolii xenothel"
            f;lec~l"1fleT:ltion of r~*11Yt\Ys t\9~u.n'linjg .9. decls1 Ve role.

                                      Ct1)QA~tltlj    on              report of th{; Sl.lboot!.UIJ1.s1ol'l on                                          '1.,41;'<$

                   i   5.;:.;f'ctu               interest in tl.t.e              }.'ro;~tl.ction rethi industrlf~li                                   of
                             l.'11e     cl~1Pter re~J'di.i'l€: fO~$t:r1                         is nlso worth;( of                    ~1Ot'::·.       It lit.
                                       tl:';?t    Li:,etufl     /Ii.':;;         gi vEIn   to                ttxPOlt~t1on            of
tk\f.:/5 I:iD~.    In th!il: ehF.;:!tur ".m:w>!l:;O"'ier.                                 cel"t~kin   recolflueJldn.tionE>
;;;: t~lc.h.t\lc~11 :.n ..~d1et in 1n~t.H,>trb,:,;.                                               ion to obse.rYl,ticiflS


                        ""~)rt         1.1 h
                                           to JJOint out                       follo~in,'$.



           . I', .'                            .;,'; r c:                      J.. n                    i ',Jll.C..    N tL"e                               ..
                            f;t>t'J    11m. t~ to the              ~:'l:tMt.           to which     ~~            on.e    ~Qr        seetor       O;:"tl,
                               ()thlt<Ta 0.!"d 1             £h::riou"~ly..      Jut;J. '-m.L
           r.b'Ydopment will oot be                                   of th,)            urge!lt requi.l'~-
                .t. t            01ll 1kl.'2rOTed          enlarge(l tr(:,nirJ(Jl...t,)t!OIl r£~ilitlf.4s.
            hr~l~ fu(':!l l1!\U:p'p11fj~ il.t re,)$Ouabl.f) price~.                   fd,.~q:.w,.to f'.Il~ ,lil}ll.;n.i.·"
                    ~1,;,.:;y:}11~; ()f '11tlCtrt       1)o~l'\1lill CtuJ.           ..,ery 1~"l"tl1;) l.nv~£;t-
           'a,.;;uts of oaplttU. th;:~ pro\litlifir1 of                         will pr1iU'Ient ~"1
                         in vi>Si'.li> of t1l0 POOl' firu.u(d.J',l (!o!.lJJi i:.lon 0.1 lrl<4JV of thf$
                                      U.!.Jiteu O;')rlOit,l.;:iti,::!s rot' :;n'..)£H in iIl,QlAt! }:l.lhlic
                                                             r1~. .l iniit;l"t>,llt in Vet.rolswl fU;:fJlol':;-
                           rrodllction.                            ot.l!o ....c     iei,n.t :'lld.                    vt.>
                                              til!')' nrrtion' s ~"l"O~ing; food Nq.u1re~t! ~111l1 f;:.,)
                                                                    export li.fQducl.:l is likely to
                                                                                                O'~.;!.l·             ct)n$ider~~ble


                               b~fJlCWl,JerlYiJll'~ !:'Ai r;:trc~')oMhle
                   i~u,bs.t!<enti~'?;l .;Jro~rt,n~e: in tnt'"         develo'PIne1'lt of
                          1J~!trii~nt'1}.1 b~tt.~r l i                      oo(l.ration~
                          ii.1. vf ,:;\.}l.UliH~, incNn9t~dlf'Q!iuctivlt:t. ! .l1I.c;:Jur n~d
                                                                      - 17 -


    fli.:Lia to incX'$aae t.heprodur.:tlv1ty of' the ~orltel' is ndu.it
    ,::"')i t"l i n~r~!'\til'lent tn111 t hi!": qt rl!~ngth by the "'7'TiUc~,t i<~l"t
    of m~~~~.l po~r fln,i 1.0                nim ~ith nora efflcient tool~
    .~·\fld       :·..~~H.~til f'lBry' •   (~ut          ~~~                        'ttS~,i of $1l.ch C;)Tti t:'J~l 1'1-
    ¥,~"I;~t.t                   akilled.         iDan,illgelGimt.             Eidequate education Rftd t:r1J!in-
                                            in.: r(,;,~<'.            :::v'il~\hij. ity e,f :',~.n~c·~~r thr:'1tl<;;h
    i;;Ld",.r~              tion arc Ji'lfllO nOOEH,~$J ,ry.

                                                                                             !'    CJ'.i'(J!",:::h<J';f::Pli V'e
                                                                                             t    h. fi nn<>::ini" 0 f
    t,<w:'':JS /ihrutt{1 for                                                                       3upnlins, but i'l1S0                        :~s
    t"o        \:.~.~c fln:'Hci~j~         of                                         tUl·e~~.         fu1.d     ti1'l   1 ..... ,...,,"'...
                             (o.1 sClJ.s!1liun                             :tI'o in l)rU"t Ill) is not.i;;ne:


                      '\ .;iI"ili;;;l                   l,l::.llj L-.:)ort;,nt . ;u,:';£t.iJn i~              t..twt
    ..            \;..M:J l;:;,oor nni,l        9ilJ.lrllitH~                               ::..attu:icla tr..:?t will
          .,ir.:,~.           In viv, v            t:~\;.,                                   i       nri.c~it:nll;;              no
    ;.l"~:J.li; lJl Hrarl.l i"Jll.i              11 t    for producing the
                                                        tl~     surplus       Ct.l{j,;..c,:i t3
      ;:;L, '.('1. .1 ~ th. t .::T'.        n,,('1cC:' •  "bUtt ~i   t!1f"
    t~U        v'rry out development projects pl'esumnbl¥ "'ill be
         .~                           •                          i'                                            Gri:'.l         (_;
    ~,;."j.J,..L\~\.1i/; r;6 '1'I€Ill) tbl;:,t Cr:J;l ba d1v!:.!rted troID less 8!iU\wtisl .'1cuvi-
                         ",     Hill
              ..:'0 v;c;lvl';ucut.
                        ~




    e.t·,;·rt
              ,;{ ·,:;:',ie;1,   'fill


                       "iil viaK of'        t
              ': c ,    :;,1'(; 1i>:-,ly    to nt:                              Ln· be;. .;.i;'u ip"., bl}~JBVt'H'.
                                                                           (~"\..                                      i "~
    0;" i~:>;; ;lt~ihH~t: i;Ulortn,nct~                                       initial nX'Ogl'BlU be l'C'S11 .bpJ., n(.)t~l
    :,~          '~n:-~:t                  ~ ir~                                           on ::et'lin,; l"il'€It ",'1
    V;),·:,.O':;\' u.r~fmt                                                          r:cuJ..i bit of lit Uf';
    L:.'01"t l::r>\f..c ;1ml0unts
     l;::r,; nut .;-~vr:il(1.blo. or
    h~
    ":'.",. .;:                                   to




                                                                                                  '~\0L r:!l ef~p-.y ili~~l{.                        t   ~~s
                                                                                                     "
                                                                                                     . J.it"'fic:,tLtif;;:;        Cr.~Il n.~~ t}V~;l"""



                                                                                      t.:;::t 1,n~H"'\ 1,'01.t(,' of
f                                                                                   bfjC::,·... 8~; c!' t.bls ~;L
                                                                                      ·,;:\~..unu..\.g·.;i(.,n
ploco ~ the flxpense of li. lower ~ti!jnd~'Il"d. of 11v.1ng for Pi wl,jo:r1ty of the
poople. Social conditions no longx:;r peI"udt thl'!lt imX:H~les remf;in out 0/'\170-
portion to l'ettll;)rl(.:t~'" nn:l h.()Udin;, coS!tu.

                        It, is of the utlOOst iInportt>l1ce. r..herefo.l.'I2I, th'l1:. economic
lftoot Of'!             p[:;)\ced by non-inflFlJionrry rowurces.

               In t!1O m:;jorl try of c'COnomic deVt;;lopment progl'<'';:;ll.a consU~r(~;l l;y
tl.e .Joiut whmss1ou, the :finaneinl problelU of l'asw.rcel$ in cru.,..eiros
in f'H'dl[;l1 cu.rrency att·nd'S out. IIIf,ny tiiaes the itrm,s of finf1nc1r~f~ in (;r.1-
         1<1'(, hl.ri~el' th~",tl 1'.hooo in :fore1~ cu.rrenc16s.


                       0'l the other l'lO.1'lllt reoou.rceg in n:'.tioru;l C'.lI'I't:Hl},             &-t'11   not   fs0
smrlill      [t~,    is       v~t*ln      InsuranCft and c~pitnliBatton CtlJU}lf;Jlias ,.;flU
                                          reported.
sod       S:'~':;'lri ty in12: titut tens nre fltle to 5,t'ovldl\; net l"eS(HJl"C€;H ffJr i UVf::i\1,-
ment:;; av,;;;,r~).ng two bl1U.on crllzeiros yearly. l}rlvate corporat.ions aad
ir.dl              81'8 gencl"[>lly in f;, position te, intlsE>t from ""ight to te;nhilllon
cruzcil'oa j'Hr,rly. '!beso fliOOunt, (;\.N not very l;(rge. but t.Ml are sufficient
to                         three or f,:".'x             u!ld.~.rt        of    tti.8     of Yoltu:iedoOOp.                 S1;
of' ii1l.1.ch       8.1'tV1n.2{B        are now .invested in l.'1rge part in u.rban res! estate.
                               Joint Co;qU aslon ,~oes not              invest!!lents in .re"d
1 ts                        l)()int out the dl~'roportl(m~ltQ rnte of such invtJstm~t. and ti£6
ne€'l~ct                   bq:>ort,~t sect.ors ot the econ::.')iii.V of    cQ\l.lltry ~hich nrc"
nant or in (ut:t:·icuLties.

              :t'he Joint Comrdssion beliavea tn""t • wi8e goTe:rnment budgetary
polic.)' ..md. a vigilicnt credit policy, r6f'erredto in fart It Cftn pu.t M
to t.lliG     atortion of investments. 'rho reorgani zlltion ot the soouri t.i~tS
          1 olao vit.::2·11y lIlportant. To accoUipli$h this end t tM diacontiru&.-
tion       forced l;j,'Owmroont lOf,lllo would     eA.r to be necessary. CompuJ. sory
purclmsf'ls of trsQsu1.')' billtt coul·:l be r(lplaced by issa.as of ordina17 trea-
sllry bUls, [.,n:1 though i.n the beg1nrdng it might be nec.~SclTY to mtJke use
certdn tJl.lpport !acil1tiEHl. it ":I"J()uld ll~ 'iJorthwhil.,. to m~~ke til(e sttOI,. . Pt in
order       contrirr.lt,! to the strengthening of the !JIElrket.
                       ';.,']:;'(;1   nee(i for   I'l   Oentrr::l .sank: 1 s   e'~~$Jl zerl.   to provide for tha
e.f'r~t.lv<~ n~l,t1on                        ot ered1 t.. r,8 well ~JS 1:.0 help too Govel'tti.lEmt in
restorlrl{; tl.U} m.~i.
                      ..rket                 tor its bonds. J. ilmu Dr,t.nk 13 also of groat impel'-
'Ii nne,).                    Joint C'or..li.l:l, sslon bellows an increaAle in rerEel credit to be
ur6en~.                       1a of the opinion tb.at becaU2El the immediate eatabllsbment
~1 iJ:ur:'ll                   is .r~~hel' ooll.;plO~t ••1 p:rovl~ionf!l st6'P ml.bht be t,~ by
iner~;~,;'l;1rI.J."       the facilities of the Indc.l.str:i.al                        Njricultur·nl Cl'edit.1.'·l..-
mOillt                          of Brf:~zJ.l.

                 Joint UoJUI;;J. aden is iU.so of the opinion t~t t'J,S Ii mer-trl13
ttu:r:;r ',~,j    the pOQf:i;ibili ty of public lODus. the ao1i'e.t"rAent :i. $ ill f;ii.
podtiun to loorefi~e ita; tiU: revemeA. It doe£ not su.r;;gest f1. ~~nifjr,:l tag
i:iC~,'.~cc, but ratht,r !1iOl'e, ,'1ppropri  collection met.houfr. ~p~ciill¥ of till)
inCO",tl tax.       Joint Oo::J1U sdon i IS f:l'Wrll'e of the difficulties of t.hel5s
         iun          but 1t bEli~yes tl~"'!.t it . ./111 he worthwhile to fooe
                                                                        - 19 -



                          I!"   l'eorgoo1.l:',ation           Qr   thtiJ sto("..k \;.;{Chart.ges will ~ ~ be vnlil.~hle
to $t1uW.nt~ tbe 9tiJ.e of private ~ties. Tr10 foll~1n,:s: steps, "'1ith
reg,.rd. to thi~ w"tter, are ~sted for cO!lsldQrfttloru

                          1)          'rhe establishment ot n oonalfJ81on to e.Y:1mill<$ tt..,,, bRlnnee
             l!o:aU'!HI"fl      t)f     OOlllpt,ninl prior to ie~nce ot their ~ecuri ties.

                                      1.'0    w.low cOlllpJ?ftif':Fi to' i ljGtV~ l':orger flrounts of 11I:1b~nturE:st
             .... z-   vl;.Lj\'~t' mortgf:~e        secu.rit1cs, $baTt} their IJIJ.bscrib8U c.'lpitJ.:,l.



                          4)          To r'1llo~ the use of rto-~:\r                     Sbti.nlll.

                          5)          l.\!O   faeili t&te     tm     aill.Sfi~UillYl1t t)f      artiole'S ,j! 1noor-$'J{)r~t1(Jn
             ~;ii:'Q:n                             sIlflr9~   ar0 1;0          issuei:L.

                                                                    are r:~lso ot' the utROst ilfl:POr-
                          ,£ilr.i{:mcic~. rC90UECEUJ froUi '1hrt'H!ni
                                   t s dfivelopment l)rogl"gm.        :iQhcommitt'*'; for Genel'!'.l ,;i\;,u,ii :'i>
                             first-rf,tt.e invAst!llfJnt progrnl't for foreign cflPitHl. It. conditiml1~
thi'\'!                        ~,tlon of th~ trMtlfAr of f:Hmings flnd e:llptttria:ttlon of C,qlJitMl.
to                            'PO sslbili ti~s.

             "£11.).1 "foia1~ 00l00l1s!1l1on points nut. oo..ver. t   too crer:tion iJf
favol"[;tbie cokldi tiona b:; tb" flo~r of inVeQtlllf:!fits Il'Om one country to Ml'.oth~l"
~1llOt          hone-sided underkJdng. It is not only Dmzil ths~t mst pave
the          for ,raeeh1.ng Ot:lpltal from abrorcid. but f~~ countries '1l'ith (!;,¥;1t.!l.!.l
:reso;,:trces, 11ka the Unltad Sta.tas. l'Itdch mlebt -proaot'3 lilei;~,m.u:'aS It;hlch
$ UlJuli;" t f~ the fl ow .0 f clt'lpi ti',l lnt 0 FJ1~U:;1l.


                   1~1n obstacle to thi"% flow of capitrl1 from t.oo United ;Jtatea
to rl.r;:i,;dl b unaou.bteal,y that reh\~l         the ~'YFtll!:!bllity ot torel~J::n ~-
              If tha Lnited St~,tes Govemuent and tb(~ Dmtili~:.n C'JOwmment ~ze
              ~o enter int-(} :n 8Qeem;;;nt "'l"OviillOf' for the enc~emant ~
prot~c~ion oi in'ftstatents. it lJi,rJY be i'1XpectfMi th&t the ft!J"r of excMnge
1"1 $~~;;;                 h€ redaced.•

                          ll!11CHileI' ~LlgJEt'tstlon          is    th;~t   of    ;'1    tax    ~;:re"''lI18nt bet~f::len   }3:rt1.zil      ~;:.ncl
                           Stf",t.e~l,
                        aimilll1 not only at, avoidini€ f!l. dupllc;;ltion of taxfls, hat
              going to tJlt~ ene;n,t of reflJJ.Cing ttJt.xe~ lf~v1fld upon       it'.i!O,}ij'~
u£ {;,~i 11 iuvt-3litell in certain und~rtp'Jdngs in Braldl.

                    ~l:<b.e orgMi:la>t.ion of u(.ultmr1 tlEls'* hn$ p~ro be<;;!n ~ated 1ntat:::
Joint                 :q:~:d.vn·)j! .ruTx,.rt.. ;:)u.ch fut,bodties 'f'IOuld be charge,l with
tecl'lI"licrol              finr:ncit,l plims in Vl~ioue fi'i111.ir,:, inclu.(l1n{~ those htrvl~~ it.
1         rli..tl1ibtllr of' ~ll entarpritles. to :f~;,ciJ.i.tate                        provision of capitl-il
reCOH': (::~].{ .( or €l.;tp~!n.don. ":xc\tuple£ w01.u.ii be ~u.thori ties for eltt:ctric J)O~r
proJ\!.Ct.s                         ow::!!'      interior ot~ tnt': country. ~!ld for the ~ll-
                                                in ,P',lr!iInA. B.'rl.t ~n.nt:\ C"·t::>:rin:t. M.ot;,er ,",'.IW~ u                        ......


wouLl lH,                                       of ;;0 Duthori t~ c:l1',zged "'i1th integ{ . .tintr~ 1'711
ele;:i:~'nts nooe91iUU"y for the grHater pl'CYJUCtiOIl of iron ore for export,
incl"llil4:~ tr'~mlllOrta;.tlant 1JiIln1n.'S port ¥1)rielS.   0nl.1't.hro'llt$ #In unir\-
tarl'uL;ttXl flow of ore can ltrge eont>Wl1ini";, lll~crk~}tg bf! satisfied.
              '.Luese are, Youri;":XCelleucy I     !U1,in :m.ggestiou:l         ?lith
particular awpbE"si$ in th~ Joint Oo . .:r;iiHJiou.'s generiu, l<eport.       It is
peI'diil V~ (lOTi,]; to poinT. out tnfl vrlooble rmo plJ.nltltaking ~rk           by
Vari()l;~:; :iub':;OI_Iii~ions.


            In case thQ ~ugga3tlons iJ.~ the Joint CokLroittee report are
deemed m\.t1sfE£tory by both the Brtu:iliM Md the Unit ed 5tntes Govern-
m.nt~:;. it l'"ould 00 f.ll)propririto to consider the estabUshment of a mncrulli~l
to                2·~cJ:d.ev~m'.il1t ·:Jf  tnOFS'~reSt l'i141("j1 rill contribute at~."'
bility fUld. half<I\C6d econDmic dovelopment to BrMU.